Our MOD Systems team just returned from the Entertainment Supply Chain Academy (ESCA) Edge conference and came away with a strong sense of how the entertainment industry has evolved their packaged and digital entertainment distribution strategies. It was encouraging to hear the highest-level executives in operations and supply chain management for the major studios discuss their efforts to streamline their supply chains, adopt industry standards that benefit all studios individually, and develop processes that might still enable competitive advantage. These executives are some of the most respected operations chiefs in Hollywood, all executive or senior vice presidents at Lionsgate, Disney, Universal, Fox, Warner and Sony. All wearing suits and ties, all professional and respectful of one another, and all strategic in their discussion of the issues facing their business, inroads achieved over the past two years, and expectations for the coming years. In a word: Impressive.
And then came the digital executives, sharing insights into the digital supply chain and how to drive digital forward. Again, a seasoned crew with directors, COOs or senior VPs at Sony, Warner, Amazon, Rovi, and Technicolor. However, the contrast with the previous panel was stark. None were in suits, all sitting quite casually and interrupting each other frequently. Since I’ve spent my career in technology, these personalities are familiar, and I love their energy and passion for the road ahead. I also know that the digital guys are often prepped by their respective PR pros to own the panel (one said PR pro sitting next to me admitted as such. “I told him to own the panel,” she said. “Which one’s yours?” Um, none. I’m hear to learn from these guys.) At one point a simultaneous discussion had three gentleman vying for the point, each raising his voice in an effort to secure sole stage, neither backing down until the volume and annoyance factor was so great the audience erupted with laughter.
But it wasn’t just about bravado. There is an obvious contrast in the efforts, focus and collaboration that exists in traditional content distribution versus that from the digital regimes. Of course the businesses are vastly different, but not so much that we shouldn’t have standards in place that demand that the product — film, trailers, bonus material, subtitles, format, DRM, etc. — be aligned across the industry. Instead, the entertainment industry has pushed many of these decisions onto retailers in an effort to share distribution costs. It might make good business sense in the short run, but it’s created an environment where each etailer has its own strategy for delivering digital content to their customers, in different formats, through different platforms, to different devices. This complexity has hurt the industry overall: 1) high costs of digital platform development and distribution technologies have driven many away from the game altogether, 2) consumers pay for far less than 1% of the total video consumed online, and 3) digital sales represent just 3% of the total entertainment industry revenues nearly a decade in.
It was fascinating for me to hear the differing views held by traditional and new media execs in Hollywood. I forgive the digital guys a bit because it’s still a nascent business comparatively, and technology provides easy opportunity for experimentation. Unfortunately, we’re experimenting individually and competitively, rather than as a united industry with shared goals that can still leave room for competitive differentiation and advantage. There is hope, as most of these companies are members of the DECE who’s mission is to help establish these standards and processes for collaboration.
When you’re laying the foundation, don’t blaze a new trail. There are plenty of other areas for creativity and innovation, we’ll just never get there without structure and standards. I hope the digital execs will look across the office at their colleagues in the packaged media supply chain and see that collaboration and respect will present a more effective roadmap forward.