Crude oil was first drilled in 1859 in northwestern Pennsylvania (not in the desert of the Middle East). It was not long before oil lamps became ubiquitous, lengthening the productive day for millions beyond daylight hours. Just fifty or sixty years later, as electricity was beginning to replace the lamps, Ford’s mass-produced automobile was taking off, providing an alternative use of crude oil. For those of us alive in the early decades of the twenty-first century, electric lighting indoors and cars on paved roads have been around as long as we can remember. As a result, we tend to assume that things will go on pretty much as they “always” have. Other than for computer technology, the end of the first decade of the 21st century looks nearly indistinguishable from the last thirty or forty years of the last century. As the second decade of the 21st century began, applications based on computer technology were reaching a critical mass in terms of triggering shifts in some industries that had seemingly “always” been there. Books, music and movies were certainly among the fastest moving, perhaps like the dramatic change in lighting and cars beginning a century and a half before with the discovery of crude oil.
Part I: Publishing and Book-Selling
Borders, a chain of book stores that branched out into DVDs and music CDs, was at ground zero in terms of the major changes beginning to affect industry by 2010. All three of the company’s product areas were in decline due to applications of computer technology being harnessed by new companies more so than the old guard predominantly based in brick and mortar. Indeed, it was precisely the brick and mortar foundation of retail that was undergoing such dramatic transformation. Part I of this essay discusses the book publishing and sales aspect, while part II covers DVDs and CDs.
Even as established institutions such as Lehman Brothers can have tremendous inertia and thus seem nearly immortal, discovery or invention can act with relative haste in transforming industries—though after the vested interests with power have put up their last defense against the all-but-inevitable onslaught of the future piercing into the present. The invention of securitized mortgage-backed bonds brought the world's financial system to its knees in September 2008 after years of posturing in a housing bubble. Lawrence McDonald, who had been a trader at Lehman Brothers, subsequently wrote of his father's bearishness on the housing bubble.
In 1999, the elder McDonald had read a report that claimed that brick and mortar shopping malls were nearly obsolete--that within two years everyone would be doing their shopping on-line. Yet this prediction was too hasty. The prospect of even such far-reaching and transformative invention requires some time. "The retail world will hit back," Larry's dad said. "I guess people like picking up books and holding 'em, checking 'em out. There'll still be bookstores. They've been there for hundreds of years, and they'll still be there in the next century"[1] Yet in going so far beyond the inevitable hitting back, the elder McDonald sounds antiquarian. Even such inertia protected by name, wealth and real estate was bound to succumb after a threshold point at a speed that would take many in the older generation by surprise. For once a threshold point between the status quo defenses and the application of a new technology is reached, it is inevitable that change shall come cascading down like a waterfall over a dam then realized to be mud rather than gold.
In mid-April 2011, the number of e-book sales surpassed paper books in the U.S. for the first time. This could be taken as such a threshold of sorts. The digital book market had reached $1 billion. Amazon.com had the vast majority of the e-book market and e-readers, with Barnes & Noble's Nook reader running second. Borders had waited too late with the Kobe reader, and was thus left depending largely on its declining paper book sales. Launched in November 2007, there were already 7.5 million Kindle readers sold by Amazon by 2011. The company was taking advantage of the revenue from its e-book sales to move its color e-readers closer to ipods by adding applications such as the ability to check email, hence integrating applications and facilitating the shift from paper to digital books.
Furthermore, Amazon’s Kindle Direct Publishing was fundamentally changing the self-publishing business, with major implications for publishers, established writers, and bookstores. With self-published writers selling their books for $1 on Kindle, downward price pressure was being felt even by bestsellers, who found that they had to compete on Kindle at $10 a book, rather than merely sell for higher amounts at the brick and mortar bookstores. In The Wall Street Journal, Jeffrey Trachtenberg quotes a senior publishing executive who observed that Amazon was “training their customers away from brand name authors . . . instead creating visibility for self-published titles. Trachtenberg explains that the low cost of digital publishing, plus the ability to use twitter, facebook and a blog to market a self-published book “enabled previously unknown writers to make a splash.”[2] The rise of digital and self-publishing was prompting more people to question their next trip to the bookstore. Indeed, the book itself was being fundamentally changed with the readers like Kindle and Nook. Such changes naturally take some time for particularly older people to adjust to, but the young, having been raised with computers, slipped right into the new way of buying and reading books (and newspapers, for that matter).
Even the traditional brick-and-mortar library was being forced to adjust. In April 2011, Woo and Trachtenberg reported that Amazon had announced that it would add a public-library feature to its e-reader, Kindle.[3] For Amazon, library borrowing mean more Kindle readers sold and e-book sales. Barnes & Noble's Nook reader had begun with a library-reader ability, so Amazon was making the feature universal. Rather than being able to save to a hard-drive, library-card holders can temporarily download a digital book they have checked out, typically for 14 or 21 days. Publishers that sell digital books to libraries realized that such books do not wear out, so the arrangements typically require a re-purchase after so many check-outs. HarperCollins, for instance, requires repurchase after twenty-six.
Not surprisingly, libraries tend to question the need to repurchase a product that they have already purchased. It might be that traditional publishers were still not “getting it.” That is to say, they had not yet understood the impact of the new technology—the repurchase requirements being essentially a manifestation of insecurity. The traditional publishers may have been sensing that they were suddenly on borrowed time, and were instinctively grasping at whatever was closest to them in the water.
At the time, I found myself grappling with e-books and readers. At the same time, I would find myself in Borders sometimes thinking all this will be gone and yet no one here—even the staff!—seems to realize it. It was as though the world of brick and mortar bookstores I had known would “always” be had already gone; it was like seeing something as already a ghost even as other people were still taking it as real. It is perhaps like looking back on one’s childhood home as distant and already gone even while it still exists and one is in it. That is to say, it is to sense the present as already historical because one can see that it too shall pass. From such a perspective, the present takes on the appearance of being its own world because one is no longer completely in it; rather, a part of one’s perspective is like a time-traveller already stepping back in time to that world.
As a writer, I was grappling with making the leap to digital and self-publishing even as I was frustrated with the traditional route, as having published an academic book had not made it any easier to broaden out into novels and screenplays. I can understand why digital and self-publishing has taken off at the expense of the traditional publishers. Whereas formerly new writers had to find a literary agent and a New York publisher, the changing technology has brought with it new decisions, suck as whether to go with Kindle or put one’s first book on one’s blog for free downloading in hopes of viral marketing albeit without revenue on the project. In other words, the technology opening has pushed writers more into the publishing business. Future writers might feel they need an MBA—perhaps taken on-line (university education being impacted by the new technology as well).
Part II: Movie Theaters, On Demand, and DVDs
The effects of computer technology on the sales of movies and on film-making itself were notable as the second decade of the twenty-first century was getting underway. Stopping inside a Blockbuster store to rent a DVD, which itself was short-lived in the process of technological development, was going by the wayside; even buying a DVD at a Borders or Barnes & Noble was fading. As dramatic as these changes seem, the impact on film-making and, moreover, in what a film is hinted at even greater transformation.
In early 2011, Borders closed 200 stores in the United States. Although e-books sold by Amazon.com were giving Borders a run for its money, the chain was also being pummelled by the increasing file-sharing of music and movies as well as DVD rentals by mail and online movie-streaming sold by Netflix, which was rushing to ride the wave from DVD to on-line streaming.
In April 2011, Netflix posted an 86% jump in quarterly profits as its online movie streaming service clicked with consumers. According to The Wall Street Journal, “In the letter to shareholders, signed by Netflix Chief Executive Reed Hastings and Chief Financial Officer David Wells, … the two executives said in the letter that its DVD offerings will be a ‘fading differentiator’ for the service, which last year began letting people subscribe to a streaming only service for $7.99. Already the company has begun to discourage people from choosing rental plans that offer consumers the option of also renting DVDs. In its letter to shareholders, the company said the sign-up page on its website for non-members is now ‘all about streaming’.”[4] The executives wanted to see the postal costs associated with the company’s DVD rental service drop with the decreasing volume as customers switch over to online streaming to make room for the rising costs of licensing content. In other words, the company was riding the technological wave from DVDs to online viewing, leaving brick-and-mortar based DVD companies such as Borders in the dirt.
(The Wall Street Journal)
The eclipse of DVD sales by on-line streaming effected not only companies like Borders and Blockbuster that had remained primarily Brick-and-mortar enterprises; the change was also putting more pressure on studios to get their films On Demand sooner—at the notable and rather vocal expense of movie theaters.
According to The Wall Street Journal, technology was putting pressure on the old “windowing” system, which “staggers a movie’s release through avenues like theaters, DVD and television, to maximize the profitability of each.”[5] Theaters were concerned about DirecTV’s plan to add movies sixty days after they hit theaters to premium video on demand—cutting the time in half. The studios pointed out that most films earned the bulk of their profits within the first few weeks of release. Filmmakers, including James Cameron of “Titanic” and “Avatar,” wrote that theaters are “the optimum, and most profitable, exhibition area” of the art form.
To be sure, films such as “Titanic” and “Avatar” are particularly striking on the big screen. By the time “Titanic” got to TBS on television, the relatively tiny screen was encumbered by the network’s programming graphics even during the film. Imagine, if you will, a cartoon figure dancing around the bottom left of the screen while “TBS” is shown on the bottom right as the hero and heroine “fly” at the front of the ship in a beautiful sunset. The “windowing” process can be viewed as a trajectory of increasing decadence as well as inferiority in terms of picture.
However, even with the decadence of commercial television cannibalizing even its own programing, the size of the screen makes less difference for some films than others. Furthermore, to claim that earlier availability on television (or computer) reduces the incentive to see a film in a theater is to manipulate customers rather than trust in us to choose the means of delivery. Todd Phillips, director of “Hangover,” argued that the new science would dissuade would-be movie goers from going to the theaters because the sense of urgency would be removed. If that sense is constructed rather than real, DirecTV may have been doing the customers a favor.
Were directors such as James Cameron truly concerned to protect the optimality of their art form, the fact that films do not benefit equally from being on a big screen relative to a television wide-screen would suggest that customers could benefit from a system in which films are ranked in terms of the importance of the big screen. Directors could issue a recommended score, say from 1 to 10, and film critics could proffer their own recommendations. This would systematize the tendency of critics to urge “see it at home” versus “go to the theater.” Of course, in viewing previews advertised on a computer or on television, consumers make their own decisions, rather than feeling an artificial urgency that is in the interest of the theater owners.
As salient as computer technology is to changing how (and where) movies are being watched, the impact of such technology on filmmaking itself and how films may be viewed in the future is perhaps even more dramatic. Cameron’s “Avatar,” for example, involved new digital motion-detection technology in 3-D. More significant still would be a merger of virtual reality and movies (perhaps via video game technology), such that one day a viewer may be in a scene rather than looking in on a narrow range of one on a rectangular screen. Such a development would probably reverse the tendency of scenes to get shorter and shorter (in line with decreasing attention-spans?) because the viewer would be more invested in a given scene. “Shots” would not make sense; rather, the question for the director would be whether to control the viewer’s vantage point, and if so, how often to change it in a given scene. Furthermore, an editor would have to make the scene changes such that the viewer would not disoriented—“jumping” from one “world” suddenly into another.
Of course, movie theaters would not exist were virtual reality the predominant means, unless the traditional showing would also be sought, and even then, the economics might not support the brick and mortar venues. In fact, if Cameron and the theater owners were correct, the theaters might not survive DirecTV and the internet.
Like the brick-and-mortar bookstore and library, the movie theater might not be as permanent as their history in the twentieth century might suggest. Indeed, what we take for a book and a movie may be on the brink of fundamental change not only in delivery, but also in terms of content. In both cases, novices with a passion are able to try their hand (or camera) and gain some market share from the “professionals.” Even the latter are being forced to adapt or become antiquated. As the second decade proceeds, these industries are on the cusp of changes perhaps on the order of those that occurred in lighting and transportation from the 1850s to the advent of commercial air travel. It is difficult to compare the two periods in terms of their respective transformations because the industries differ and the same people were not alive for both. Even so, I suspect that the hope and optimism that came with electricity and the automobile are in the air concerning what is possible as computer technology continues to develop and be applied.
1. Lawrence McDonald, A Colossal Failure of Common Sense (New York: Crown Business, 2009), p. 63.
2. Jeffrey A. Tracktenberg, “Cheapist E-Books Upend the Charts,” The Wall Street Journal, April 21, 2011, B1, B4.
3. Stu Woo and Jeffrey A. Trachtenberg, “Amazon’s Kindle Will Offer E-Books from Libraries,” The Wall Street Journal, April 21, 2011, B4.
5. Michelle Kung and Ethan Smith, “Filmmakers Pan DirecTV Plan,” The Wall Street Journal, April 21, 2011, B2.
