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Digital disruption has been felt in Hollywood, and even if it's not all doom and gloom as some old media skeptics suggest, there's no doubt that Hollywood firms have been forced to rethink how they create and sell their content.

But some of the latest moves Hollywood players are reportedly considering as they address the changing media landscape beg the question: is Hollywood totally missing the plot?

Take the major Hollywood movie studios. They are reportedly planning to create premium video-on-demand offerings that would allow consumers to watch major motion pictures at home within 45 days of their theatrical releases. In some cases, films would be available to watch at home within weeks of appearing in theaters.

There is a catch, however: the studios are reportedly planning to charge $30 to $50 a pop for the privilege.

To be sure, there are consumers who are not attached to the Big Screen experience. Going to the movies can be an expensive proposition, especially when you throw in a couple of kids and food. Thanks to growing ownership of large, flat-screen televisions and high-end audio systems, watching a movie at home isn't so bad.

But will consumers shell out $30 to $50 to watch a new movie at home when, for as little as $8 a month, they have access to thousands of movies on a service like Netflix? 

Lest movie studios fall into the trap of believing that comparing Netflix's catalog to new releases is an apples-to-oranges comparison, consider that Netflix is said to be investing $6bn this year alone on more than 70 original shows. And its original content push isn't just targeting content that would traditionally be distributed on television and cable networks. 

The company recently struck a deal for a $100m Martin Scorsese-directed gangster flick starring Robert De Niro. The film was originally slated to be produced by Paramount Pictures, but according to a source that spoke to IndieWire, "Scorsese’s movie is a risky deal, and Paramount is not in the position to take risks."

Netflix has also extended its deal with Adam Sandler's Happy Madison Productions that will see the funny man produce four additional comedy films that will debut exclusively on Netflix. While Sandler's first Netflix movies have not received rave reviews, the company says that his last two were the most-watched Netflix originals ever.

netflix adam sandler

Given the plethora of original content of all kinds that Netflix is adding and making available to subscribers for a monthly fee that is a fraction of the cost of the Hollywood studio's price point for a single video-on-demand purchase, there's a real question as to just how sensible it is for Hollywood studios to risk upending the theater-first model that it has employed for so long.

While that model might not be built to last, the seemingly expensive video-on-demand model it's contemplating would appear to be anything but a sure bet and there are substantial risks.

Interestingly but perhaps not surprisingly, movie studios aren't the only Hollywood players reportedly considering head-scratching plans. Take for example cable network AMC, which is evaluating the possibility of offering a new subscription service that will allow consumers the ability to stream its content.

Other cable networks such as HBO are pursuing direct-to-consumer offerings in response to the phenomenon of cord-cutting, but there's a huge caveat with AMC's: to purchase a subscription, consumers would reportedly need to have access to AMC through an existing cable plan and shell out an extra $5 to $7 a month to stream.

As one observer put it, "this could be the dumbest idea the network has had since it canceled Rubicon back in 2010."

Disruption isn't just about distribution

It's hard to blame Hollywood for taking action to deal with the ongoing disruption wrought by the rise of the internet. But the ways that Hollywood seems to be responding to disruption suggests that it's still in denial about an inconvenient truth: the disruption it faces isn't just about distribution.

Yes, consumers are demanding the ability to consume content whenever, wherever and however they like, and video-on-demand and streaming services address this demand. But $30 to $50 video-on-demand offerings and streaming services that require subscribers to pay extra on top of an existing paid cable package ignore the fact that consumer expectations around what and how they pay for content have also changed.

In other words, Hollywood can't expect to effectively deal with disruption by addressing distribution but ignoring economics. However, that seems to be precisely what it is doing.

Not only is this crazy, it's doomed to disappoint.

Patricio Robles

Published 31 March, 2017 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (1)

Pete Austin

Pete Austin, CINO at Fresh Relevance

They are fighting over a shrinking pie. In 50 years, nobody will be watching TV, based on the declining audience reported here. How's that for an elephant in the room!
https://www.statista.com/statistics/186833/average-television-use-per-person-in-the-us-since-2002/

21 days ago

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