Finally, Hollywood Begins to "Get" It -- The "Ex" Factor -- Experimentation & Experiences

Much like their music label brethren before them who resisted online distribution to their peril, most Hollywood execs have acted like deer in headlights with respect to the reality that consumers now primarily want to access movies and television on demand and online rather than via discs. Put simply, now that network conditions and viewing devices (smart TVs, tablets, smart phones) are "right," consumers expect to get what they want, when they want it (which is an instant gratification "now"), where they want it, and how they want it. They can't get that with physical media. And, here's the thing -- consumers ultimately get what they want.

Well, finally, it appears that Hollywood execs are beginning to "get" the message due for two simple reasons. First, on the negative side, DVD sales continue to plummet and physical DVD rental stores continue to vanish. But, on the positive and more interesting side, studio execs are beginning to see gold in them thar hills. In a recent example, Netflix -- desperate for a win after a series of recent losses -- just outbid HBO for first rights to distribute Dreamworks movies during the traditional pay TV window. That's right, Netflix KOs HBO and will stream Dreamworks movies before they hit pay TV. How did they do it? Pure hard cash, that's how. Netflix will pay Dreamworks a whopping $30 million for each Dreamworks movie -- $10 million more than HBO currently pays. For you math majors out there, that's a whopping 50% windfall.

Streaming ahead of pay TV distribution? That's a watershed moment for Hollywood. And, that's price and distribution experimentation (the first of two "Ex's) that will lead Hollywood to the monetization mother-lode. More flexibility, more devices, more consumer choice -- those will ultimately lead to more profits for king-makers of content.

The second "Ex" that will help lead Hollywood to the promised land is "Experience." Although DVDs increasingly featured rudimentary consumer interaction, online distribution opens the door to a whole new level of consumer experiences. Online movie and television viewing will be increasingly social -- as an example, consumers will be able to view with a friend on Facebook and elsewhere (much like music lovers on Facebook can now listen with a friend). Consumers will shell out more bucks for unique experiences.

"Ex" marks the spot (well, two "ex's" that is) -- pricing/business model experimentation, and content consumptive experiences. If Hollywood embraces this reality and builds it -- which they are finally beginning to do -- then consumers (and hefty profits) will ultimately come.

Have faith young Skywalker ....