News | July 18, 2000

ITS Forum: Digital redefines post industry

ITS Forum: Digital redefines post industry
While revenues are up and new markets for digital content abound, the post production industry continues to feel threatened by forces beyond its control.

By Tom Butts

‘Second most pessimistic industry'
Industry affected by outside forces
Opportunities? Don't look to DTV

LOS ANGELES – As the post production industry held their annual forum in Beverly Hills last week, the luxurious and peaceful atmosphere of the Beverly Hilton could not belie the fact that this is a community in a constant state of flux – and digital technology is creating more uncertainty than ever before while offering unique opportunities.

Everyone is familiar with how the new digital technologies are revolutionizing the way entertainment is created these days, but not everyone is certain about how these new tools are affecting the very way business is done and how it affects existing facilities as well as the development of new enterprises. These are important issues that the industry must meet head on, if it is to thrive in a new world of DTV, digital cinema and streaming media.

‘Second most pessimistic industry' (Back to top)
Matt Peterson, president of Scenic Wonders, is one person with his finger on the pulse of the industry. For six years, his Madison, WI-based research firm has conducted an annual post production survey and despite his assertion that post is the "second most pessimistic" industry he's ever worked with," (cable being the first), the latest survey results leave room for optimism.

"This is a healthy industry," Peterson declared in his keynote address to the forum. Estimating a worldwide entertainment industry valued at $100 billion, Peterson noted that Hollywood could have another record revenue-setting year and with the Olympics and US presidential elections, the television industry could as well.

Despite these predictions, pessimism abounds in the post community, Peterson noted. For one thing, despite the increase in ad revenues and box office receipts, the entertainment industry as a whole is going through what Peterson describes as "deflation of content."

Production costs peaked in 1997 – the year of Titanic – but since then the industry has gone to great lengths to suppress those costs, giving more attention to the distribution of content rather than the creation process.

"In the new entertainment economy, there are some very definite ideas of where money ought to be spent and content creation is increasingly being regarded as an expense and what do you want to do with any business – you want to cut expenses." Driving home the point, Peterson notes that quality may not be as important to producers anymore. "Quality is no longer absolute," he says.

Industry affected by outside forces (Back to top)
Outside forces are shaping the industry as well – as Peterson notes, "the macroforces that are shaping the industry determine the state of the industry – unfortunately – more than our individual actions as facility owners." International barriers are being removed, bringing in a potential flood of media from overseas that compete with domestic product.

Nowhere though has the industry been more affected than in the development of the Internet and the new distribution paradigms it introduces; and more importantly, the "democratization of tools" that new low cost digital technologies bring to the post community.

The Internet has helped introduce the concept of "disintermediation" – a term Peterson uses to describe the elimination of the middleman and there's a strong trend in this industry towards that end. But Peterson says the post industry's traditional ways of doing business are contradictory to this concept.

Quoting a recent magazine article, Peterson said "it's the inefficiencies where we make our money – the entertainment industries focus on everyone kind of getting between something inside and making money off it. As long as that works, we're all very rich.

"There's tremendous pressure to let go of that because of this ‘deflation of content,'" Peterson continued. "And you have to ask yourself, in every service you provide, ‘am I really getting value or am I just an intermediary somewhere that someone figures they can eliminate in order to drive costs down."

Moore's Law has brought tremendous capability to low-cost media tools, allowing almost anyone to be their own editor these days, and Peterson notes that this has also had a great effect on an industry used to controlling the technology.

"We've gone from a world where we were in control of technology, but in the digital world, it's out of our hands," Peterson said. "The costs of displays, memory, etc., have nothing to do with us. And that also is a key thing that's driving people's perceptions – that with costs going down all around them, they expect to see costs being wrung out of this system too."

Opportunities? Don't look to DTV (Back to top)
Despite such concerns, Peterson says opportunities abound in this industry – just don't look to DTV as a savior anytime soon. Referring to the monthly reports on DTV sales in the US, Peterson noted that these numbers are insignificant to the industry – "if you can't count the units in millions, don't even count – otherwise it's just wasted breath."

HDTV production is stalled and he doesn't see much to change the picture in the immediate future. "Even in the billion-plus facilities, less than 20 percent plan to have an uncompressed HDTV infrastructure by year's end," Peterson reported. "There's not a huge economic driver in terms of capitol equipment yet – most people are holding back."

Look elsewhere for new business, Peterson said, noting the growth in the corporate video market, which comprises about a quarter of the revenues and continues to rise. Despite his assertion that no one can prove that they've made any money from streaming media yet (a "$0 billion industry," he says), the coming explosion of bandwidth will make the new technology a force to be reckoned with.

To read more, see ITS looks to new sectors to increase membership.