Thursday, May 03, 2012

What's the Matter With Hollywood, Part 13: Who's Afraid of DVDs?

I explored one way stock prices are killing Hollywood here, now heres a ridiculous update: 
If you’ve read any public pronouncement from Netflix or the studios recently about discs (DVDs and Blu-Rays), you’ve probably noticed a mounting frustration.  They keep lecturing us about how discs are a dead business model and we shouldn’t like them anymore.  There’s just one problem: we do.  We want to pay them our money for their physical product, no matter how much that upsets them. 

Netflix and the studios, like most American businesses, don’t really want to sell goods or services to consumers anymore—they’d much rather sell their expanding value to investors. The DVD problem illustrates the difference.  If they have a big chunk of their business (such as selling or renting discs) that will continue to make them a lot of profit for a very long time but will make slightly less profit every year, then they see that as a liability, not an asset.  This is insane. 

Why would they want to walk away from the millions of dollars that are still to be made in the disc business?  Because they’re terrified that stock analysts will yell at them for putting effort into a “dying” business model.  They would much rather latch onto tiny NEW revenue streams that are getting slightly bigger.  Even if they know these streams will never them make as much money as they could make by continuing to rent or sell discs, they can at least tell Wall Street that they’ve got an expanding business model that could conceivably be the next big thing, rather than a (slightly) contracting business model. 

Our unregulated stock market makes lots of money off businesses that are going up, and almost as much off businesses that are going down, but it can’t make much money off those in between—business that are slowly and steadily providing consistent value to their customers, so it tries to force them to change their business model: throwing away actual value in favor of potential value, and pissing off actual customers in favor of theoretical customers.   Either this will pay off and the business will shoot up in value, or, it will fail and the business will die.  Wall Street will make money either way.

And either way, America will suffer.  Our national economy needs businesses that slowly and steadily provide consistent value to their customers, so we can’t afford to have predatory forces that intentionally attack and destroy those companies.  Clearly, we have find some way to bring companies interests more in line with their customers than with their investors.

In the meantime, Netflix and the studios need to admit to themselves that their customers still want DVDs.  Sorry, guys, just hold your nose and take our money.  

1 comment:

j.s. said...

Well, I don't know. If a company like Criterion could deliver me a file (with the right to reclaim an uncorrupted version of it, should I lose my data, just like Amazon does with Kindle files) that was like one of their Blu-rays, at the same resolution and complete with supplements and all, I'd go for that.

What's irksome is that studios seem like they are shifting everything to low-quality high-priced MOD and limited-window streaming or less-than-Blu-ray quality HD files from places like iTunes, but without any of the supplements.

Some of this fear of physical media isn't related to stock prices at all but to a crucial yet obscure Supreme Court decision from the 1970s about how business are to value their unsold inventory for tax purposes. After that, it became much more difficult for book publishing companies to write off their loses, so they had smaller initial print runs, sold off their remaining inventory to bargain book sellers and were less motivated to keep slow sellers in print on their back lists. The same kind of model has taken hold in the home video divisions of major studios. Just try to find copies of some of Paramount's greatest movies on DVD, even a recent film like ZODIAC, and you'll see. A ridiculous number of their titles are out of print.