Why is Hollywood in so much trouble?
A point I made over the past couple years is based upon technology. There are two factors that are in play:
- disruption of distribution
- disruption of content creation
So far, we have really only seen the first. There two moats, to use a Warren Buffett concept, that we see being obliterated.
This means that the situation we see with movie and television industry is a lagging indicator. We are presently witnessing the damage started a few decades ago.
What happens when the next wave of disruption hits? This is what we will be delve into with this article.
Entertainment Disruption: Moore's Law And Content Creation
We covered the first disruption repeatedly. The Internet caused the fragmentation of media. This started with print publications (newspaper and magazines), spread to audio (music and podcasts) and is finally hitting video.
No longer are the majority turning to traditional broadcast channels for their news or entertainment. A host of options arose, diluting the attention.
Naturally, this has economic impacts as seen by the struggles of Hollywood (film and television) studios.
But what does the next wave look like?
Here is where things get very interesting. We cannot delve into all the possibilities with regards to outcome. That said, we can establish a framework which to operate.
Most have heard of Moore's Law. This is a central premise in the computing world, pertaining to the number of transistors on a semiconductor.
It is the reason why we saw a massive drop in computing costs. This is something that held mostly steady for 60 years. The cost per performance of computing has plummeted as prices dropped while capabilities increased.
What has not dropped in price is labor. People get more expensive as time passes. When we graph it out, this is what it looks like.
Do you see where the divergence is going to change everything? In other words, what happens when Moore's Law comes to content creation?
Acceleration of the Disruption
The last disruption, in distribution, took decades to reach this industry. Newspapers and magazines took it on the lip quickly simply due to the fact we it was the easiest media to deal with. Broadband or high speed Internet was not required. The same is not true for video.
What this means is it took years of infrastructure development. It was a massive undertaking on a global scale. We would not be discussing this without advancements in things such as telecommunications and mobile phones.
In spite of the delay, we can see how the damage that fragmentation is causing.
It is about to get a lot worse and very quickly. We do not have to focus upon the same infrastructure buildout. While that is ongoing, as companies look to enhance the capabilities, we have the ability to interact globally in nanoseconds.
The impact upon the entertainment industry is abundance. To put it in perspective, let's apply a few numbers.
One reason is just simply internet scale. As I mentioned before, Hollywood put out 15,000 hours of content last year, and there were 300 million hours uploaded to YouTube. What that means is that only a very small percentage of that needs to be competitive with Hollywood. I'm not saying comparable, just competitive for time, to be really impactful. Consider that if just 0.01% of that 300 million hours is considered competitive with Hollywood, that's 30,000 hours a year. That's twice Hollywood's annual output.
People often focus upon the lack of quality and the fact that most of what is produced is garbage. As we see here, this is missing the point.
The above numbers are presuming 99.99% of what is created by "non-professionals" is worthless. Yet, we see the amount of high quality content doubling what Hollywood puts out each year.
Of course, this is based upon today's numbers.
What happens when Moore's Law comes to content creation?
Like anything, we see abundance. The 300 million hours is only going to grow. At the same time, it is likely the percentage, since video creation will be augmented (or done) by computer, will increase. What happens if the "non-professionals" are generating 150K hours of comparable content?
The numbers spell it out. This becomes a game of digital platforms which capture most of the value. This is what Big Tech realizes and exemplifies.
One final point: AI is presently moving ahead at a pace much greater than Moore's Law. Hence, any comparison will overstate the time of impact.
If you think things are bad for Hollywood now, wait until the second wave really starts to take off.