Ted's Ramblings - Are we in the “perfect storm?”

Are we in the “perfect storm?” When this climatic event did occur, which spawned the movie The Perfect Storm,  a sequence of weather conditions all occurred at the same time and came together causing a mega storm that effected a huge part of the USA and other parts of the world. Are we seeing a similar scenario, a sequence of events and conditions all occurring at or about the same time causing a perfect storm in the entertainment, especially movie, industry?

On the brick & mortar retail side we find Hollywood Video and Movie Gallery no longer a part of the business. Blockbuster very well could be but a memory by year’s end. There are still a significant number of independent video retailers but far less then 10 years ago. We have far fewer grocery retailers in the business, especially rental, and mass market has cut their involvement dramatically. Kiosk operators such as Redbox are now struggling to satisfy customers demand. Their numbers are falling and they are also feeling the effects of devaluing the products that we offer (movies) that they are a part of.

Cable and satellite operators over the last couple of years have seen record numbers of subscriber and/or premium channel cancellations. Their cost for content is escalating and we have seen battles between operators and providers occur that left customers without some of their programming for prolonged periods of time. There will be increases in subscription fees that many customers feel are already to costly. The Internet continues to spawn cheap forms of entertainment and streaming of movies that adds to their competition. They too deal with the issue of advertising dollars that continue to decline.

The Internet is not limitless in its ability to handle the increases in demand. Issues abound in how to best allocate usage, pay for new technology to ensure the future as well as usage demands of today. Streaming eats up tremendous amounts of bandwidth. Internet providers are prioritizing and charging via toll booths many of the businesses that generated money that now must pay for heavier usage such as Netflix. Digital sales of movies and many other forms of entertainment, to include music, are not generating enough revenues, profits or cash flow needed by studios and other content providers. There are some analysts that actually believe round two of a dot-com bust will occur in the not too distant future.
Studios find themselves struggling with a fragmented industry and consumers who are  demanding that their entertainment be both mobile and cheap. Production cost of movies, TV series and other content continues to increase while overall cash flow and profits tend to be declining. They struggle to keep “windows” from collapsing or to develop new windowing that doesn’t take away from other windows that generate revenues.

The final climatic condition that factors into this is a recession, the like of which we haven’t seen since the “Great Depression,” that continues to drag on. Its effect goes well beyond the borders of the USA and does not look to be ending anytime soon.

There is more than enough occurrences, conditions and sequences of events to make a strong argument that the entertainment (especially movie) industry really is in the midst of the “perfect storm.” Is it changing the landscape? Absolutely, on all levels and we can plainly see much of the damage such as Blockbuster, Hollywood Video, Movie Gallery, Circuit City and many more. However there are many who are weathering this storm. One could say they have been preparing for it for years. Examples can be found on all levels such as independent video retailers. Many are experienced in dealing with large storms. They have diversified their offerings, they still make it fun and an event to frequent a video store especially when new releases come out. They take care of their customers. They live in the community they service and care about it. They do what others such as the large chains can’t or won’t do. They have been singled out and called such things as obsolete, soon to be extinguished and overlooked by many in the industry, yet they are still here. For years the echoes of “physical media will soon be a thing of the past and so will video retailers,” yet both are still here. They are still working really hard to continue to evolve, adopt to the changing landscape and their numbers are still significant in the business. They may not be the squeaky wheel that make the most noise but then again often times it’s the squeaky wheel that has the biggest problem