Solving Hollywood’s Problems (While Giving Me What I Want)

I’ve been very critical of the entertainment industry over the past few months. (See here and here and here and here and here.) But it strikes me that being critical isn’t the same thing as being constructive. So instead I am going to focus on being constructive.

Let’s start with the expectation: I expect to watch all television programs, movies and documentaries when I want to and where I want to.

From my perspective Hollywood has two problems: they are not taking care of their customers by giving them what they expect and, mostly because of this, their movies, TV shows and documentaries are being pirated.

So let’s start by taking a look at the current model. The current model of revenue generation is time-based. Let’s take movies, for example. First run movies appear in the theater, a few months later they go to DVD for purchase, then they go to Netflix for rental. The money falls off for each tier, too. A first run movie is $11-14 per person per view, a DVD starts at $20 for all viewers who can watch it as many times as they’d like, that eventually drops to $5 or $10, and then Netflix costs $8/month for all the movies you can swallow.

Let’s also say that a family of four might, on average, see five movies in the theater per year. That means 20 movies for a family of four in some combination, which would gross the movie makers about $350 per year. Let’s also assume that the average family buys five movies per year at $20 per and another five movies per year at $10 per. That’s an additional $150 per year per family. And we already know what the rental model is worth: about $15/month per Netflix subscription (DVD by-mail and streaming) or roughly $200 per year [1].

Now it seems to me, sticking with our movie situation, that we can easily figure out our price and value tiers:

  1. All movies the day they are launched: $700/ year or $65/month
  2. All movies three months after launch: $350/year or $35/month
  3. All movies six months after launch: $200/year or $20/month

Apparently the movie industry grossed $10 billion last year. That’s only 14 million customers at the $65/month tier. As a comparison, there are 104 million cable subscribers. Given the price range for cable — $30 to $90 per month — it would seem that a $20 to $65 price range to get access to all movies on demand, where I want them and when I want them, would fit right in. I know I’d consider one of the higher tiers. And at a minimum, I now have a few choices to do what I want legally and it still doesn’t preclude me from opting for a lower tier, going to see a movie every once in a while or buying a disc.

Obviously, we add in television shows and documentaries and the price per month goes up. But that’s fine. The point is I get the choice and various ways to see the content I want, when I want it, where I want it.

Hollywood, that’s all I’m asking.

[1] My numbers could be off. That’s not the point. The point is to have a basis for discussion and I believe these numbers get us close.

[2] For the record, I worked this up before I saw Albert Wenger’s post from yesterday. It, too, is worth a read.