A number of industry onlookers think the traditional media industry - especially the studios - don't get what the new digital age means; and in the beginning that was true, as they resisted the transformation going on right before their eyes. That's understandable, as it's human nature to resist change in the beginning.
But they definitely get it now, but still face major challenges on that front, which aren't understood by those not familiar with the inner workings of the industry.
As Thomas Lesinski, President of Paramount Digital Entertainment said, "The trickiest part of it is that a lot of these distribution windows make a lot of money for the studios and a lot of them are tied to long term agreements.'
He's talking about sequential distribution, which includes the release of a film; retail video distribution four months later; download-to-own; and about a month later pay-per-view. Then you add the DVD release to that as well.
This business model has worked well for the industry, and has bee extremely lucrative. The problem they've had, especially at the beginning of the digital explosion, was resisting it because they wanted to be able to make the same amount of money from the new distribution model as the old. That almost cost them as much as it costed the music industry, which still hasn't recovered.
They are now putting up tons of content at a quick pace in order to offer the products to consumers in the way they want to consume it. While it's not as lucrative as the old model at this time, it is starting to generate significant income.
The other thing sometimes misunderstood is the existing agreements which limit what can be done until they run their course.
Internet companies continue to look at the YouTube model, although there really isn't a business model there, as Google (GOOG) isn't able to generate a profit. So that will eventually be dropped. I mean by that as a business model, not as a service.
Google is starting to get into its own content is struggling to land deals with professional content providers in order to monetize their video initiatives. The dirty little secret is Google is struggling mightily in this area, where costs of running the user-generated YouTube site is escalating, with no way to generate the type of income that would not only pay for the service, but turn a profit.
We'll see increasing pressure from shareholders for Google to do something to justify the huge price they paid for YouTube.
Add all this up, include the current economic challenges, and it's still going to take some time for the new distribution models to take hold and become profitable in a meaningful way.
This is just a quick look at how it's not always as simple as resisting change. I do agree the traditional media companies have made mistakes by basing decisions to enter the digital age agressively on making the same type of money they did through old models.
That is meaningless because it was a mature system built over decades. There's no way they will be able to do reproduce that in a few short years.
In other words, we're in a period of moving from one point to another point, and that's always disruptive and not as lucrative as when we're working with a proven model. It's still going to take a few years to work it all out.
Even consumers will take time to adjust to the new way of doing things, and media companies will have to make it extremely easy to use in order to make it appeal to the masses.
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