Tuesday, December 18, 2007

Why Studios Already Lost the Internet Battle

While the Writers Guild keeps saying its strike against the studios is about the future, one need only look back to the 1988 strike to see that it's really about the past. Nearly 20 years ago, the writers asked for a bigger slice-of-the-pie, the studios shrugged, and Hollywood sank into a malaise, exacerbating divisions in the community and ultimately generating new ways of doing business.

During the 1988 strike, writers worked independently on “spec scripts” (written on the speculation that they would eventually sell them) and in subsequent years a pipeline-dry system snapped up the completed material. Television producers sought alternatives to traditional, high-cost programming. The strike resulted in the spec script boom of the 1990s and reality television – in fact, new business models.

Therefore it’s not the demands, but the work stoppage itself, that creates a new paradigm. By fighting the writers over the new media issues today, the studios are effectively creating what they fear most: a major tectonic shift that will reduce the role of the studios even further.

Generally speaking, prior to 1988 in the feature-film world, the studios - then housed with genuinely creative executives - used to “develop” movies starting from source material - a book, play, life story, or pitch - and hire a writer to nurture it into a screenplay. They would pay the writer usually a five-figure sum, maybe more, and both sides saw the project through.

In the decade following the strike, studios more often bought fully written “specs,” and millions of dollars were thrown at ready-to-shoot scripts. The role of the executive was less and less creative, and more business. The prices for specs escalated to obscene amounts, even as studios, in essence, discovered they were buying only “an idea” and then hiring even more writers to rewrite it. The process was often financially wasteful, and has ushered in the era of concept-driven amusement-park-ride movies. Audiences aren’t as intellectually or emotionally engaged as they were pre-strike, and while the money’s been good, studios largely relinquished the creation of heartfelt, character-driven films to the independent art-house world.

Flash forward to the current debate, where studios claim that new media is “too new to develop any realistic business model.” Their response is based on the fear of that dreaded D-word that’s haunted them since the arrival of the Internet: disintermediation. This is cyber-speak for cutting out the middleman. In such an environment, the studios’ role (as managers of content) is lessened into non-existence. Sound a bit like what happened to the music industry?

In their hubris, the studios balked at writers’ requests for a sliver of the digital media pie (2.5% to be exact), and the current strike began. Immediately, many writers emigrated to the Internet, at first generating short videos to virally market their messages, and now finding more creative outlets to show their talents. The studios have misguidedly maintained their “talk to the hand” strategy, and thus the sensible reaction for writers has been to pick up their toys and go play somewhere else.

While there is a wide gulf between artists’ abilities to monetize user-generated content (where anybody with a computer connection can author an overnight YouTube sensation) and to utilize the Internet as a distribution system (where Google, Microsoft, Yahoo, Apple and telephone companies can compete with traditional networks, piping broadband content into homes), the creative genie is now out of the bottle. And so is the new paradigm. What the studios feared, the WGA strike has brought to life. Even before the strike began, many writers were wondering, “Why are we fighting for only 2.5% of a studio process that’s so inevitably inefficient?”

The evolution is progressing with the creation of every Break, Heavy, FunnyOrDie, and MyDamnChannel – sites that give writers total creative control and up to 50% of revenue. Of course these distribution outlets are tiny compared to the networks’ reach – and nobody thinks the studios will disappear - but it’s a start. And one day soon we’ll have a whole new entertainment model.

There will likely be a deal with the WGA in the coming months, since all-reality-all-the-time is a losing proposition. (Remember when ABC ran “Who Wants to Be a Millionaire?” every night and destroyed its viewership?) So eventually an agreement will be reached and traditional writers will go back to work. And if the deal is as bad for writers as the studios originally proposed, the studios will feel that they have won the war – but the writers will have effectively won the most important battle: their role as the center of the creative process is confirmed.

The studios could have learned a lesson from the U.S. auto industry, which didn’t adapt when it faced more efficient Japanese competitors. The car companies forgot that it all starts with innovation. Somehow the studios have forgotten that it all starts with the word.