Is tech taking a jackhammer to Hollywood's middle class?

A recent piece in The New York Times paints a bleak picture for the nongentry of entertainment. Don't expect things to improve soon.

Greg Sandoval/CNET

Foreclosures, bankruptcies, eviction notices, and tears.

That's the picture painted Thursday in a New York Times op-ed piece about a Hollywood film industry that is supposedly "contracting."

Hilary De Vries, a screenwriter and book author, writes about how Hollywood's middle class is hurting. We're not talking Brad and Angelina or Martin Scorsese. We're talking about the guy you might remember from a soap opera or the writing team for a lesser-known sitcom. De Vries offered anecdotes about how her neighbors--several cash-strapped actors and screenwriters--have lost homes to foreclosure. She described how popular eateries are deserted. Work is drying up. One of her neighbors laments becoming a statistic, just one of the millions across the country losing their home.

De Vries offers several reasons for Hollywood's troubles, including the ailing California economy. She also mentions falling DVD sales and the rise of Internet streaming services. That's probably closer to the nut. The California economy booms and busts, but new technology can have a lasting and (unfortunately for some) financially ruinous impact.

That's why I don't believe this is a lull that the film business will pull out of soon.

I'm not trying to spread fear, uncertainty, and doubt. I grew up in Los Angeles. I have family and friends who make their living in the film sector. I've also covered tech for more than a decade, and what's happening to the film industry now is something I've seen happen to media before. Two years ago I wrote a piece titled " The end of the world as Hollywood knows it. " My message was this: Not one of the media sectors restructured by the Internet or digital technology has managed to rebuild itself to its previous size. Not recorded music, radio, or newspapers.

More and more it looks like it's Hollywood's turn to get a haircut.

The above chart illustrates the revenue generated by overall music sales for the years 1996 through 2010. Is the film sector headed the same direction? Recording Industry Association of America

Back then, I wrote about how Internet piracy and the popularity of Netflix had permanently reshaped the film industry. The arduous and time-consuming process of downloading movie files had begun to give way to convenient and instantaneous streaming via cyberlockers. That opened the floodgates. In the two years since, the public's appetite for pirating movies, or acquiring streaming video on the cheap (thanks to Netflix and its $8-per-month fees) has mushroomed. Over the past two years, the number of Netflix's subscribers has risen from 16 million to 24 million, or by about 50 percent.

In addition, other revenue streams are ailing. Cable subscribers are more dissatisfied. Movie fans are even less interested in collecting DVDs.

So where does Hollywood turn? De Vries and her neighbors shouldn't expect much help from the government. In the battle for hearts and minds, Hollywood is losing.

The studios find themselves warring with their audience. To many consumers, the film industry is awash in cash (true or not) and greedy. They take to Twitter and Facebook to rip the studios' about their reluctance to license popular titles to Netflix or about police crackdowns on file-sharing services, such as the arrest last month of MegaUpload founder Kim DotCom .

Don't overlook the significance of what happened with the Stop Online Piracy Act and the Protect IP Act. The film industry had enlisted support for the antipiracy bills from both major political parties and in both houses of Congress. President Obama was supposed to be a big supporter.

Pow. The tech sector fought back, rallied grassroots opposition, and quickly crushed any chance of the bills getting passed. Even the president turned his back on the legislation.

Despite everything, the film sector holds out hope. In what reads as a rebuttal to De Vries' opinion piece, the Times published a giddy story yesterday about how Hollywood is "euphoric" about the Internet and the rising number of digital opportunities. Certainly, studio bosses are trying to make the Web work for them.

Critics once scolded them for not making their product more accessible and less expensive. So, they started distributing through Netflix and Hulu. They have lots of other opportunities coming.

But the studios have also saved the latest and most popular titles for their traditional distribution partners: theaters, pay-TV services, cable, and broadcast. Those outlets pay more than Web distributors.

Many experts, however, doubt that the studios and networks have come close to satisfying the public's hunger for Internet access to cheap movies and TV shows. There's a lot of skepticism that consumers will ever collect movies again. Piracy sites and Netflix's rental model have given the masses a taste for what Web distribution can be. Skeptics question why consumers would accept anything less now.

Of course, there will always be TV shows and feature films. Americans have been buying movie tickets for more than a century. Following a down year in ticket sales, theater owners are said to be seeing a rebound in the first quarter. But over the long term, all the signs indicate that the money that once surged into the industry will slow to a trickle.

There's no making up that lost DVD revenue anytime soon.

Do your own research. Start by looking at what happened to the music industry. The big record companies have fought file sharing for over a decade, ever since the emergence of Napster. They stopped one form of piracy; a new one cropped up. Last year, overall music sales rose slightly after seven consecutive years of declines. Revenue is now half of what it once was.

Maybe the digital efforts and antipiracy programs will eventually have an impact, but nothing is sure. If you're connected to the film business, you have to be willing to bet the studio chiefs can succeed where everyone else has failed. Be safe and sock money away.

I don't want anyone else to lose their homes or become a statistic.

 

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