How tech shapes entertainment's future

Experts gathering at the Stanford Graduate School of Business examine what technology's growing effect on the entertainment industry may mean for the creative process.

May 21, 2003 2:33 p.m. PT

3 min read

Entertainment is big business. That's hardly news. But in an age of digital production and global distribution, the economic rewards--as well as the risks--of producing popular culture have never been greater.

Major studio blockbusters now debut on 3,000 screens and rake in more than $100 million in one weekend--while a few, like "Spider-Man" did, ultimately become billion-dollar franchises with a web of distribution and ancillary rights and products spread over much of the globe.

How can the creative process survive in such an intensely commercial environment? And how will digital technology continue to shape the entertainment industry? Those were among the questions addressed recently by entertainment industry leaders and rising Hollywood stars who gathered at Stanford's Graduate School of Business.

"The Internet is the greatest vehicle for the distribution of entertainment ever invented," said Yair Landau, vice chairman of Sony Pictures Entertainment and president of Sony Pictures Digital, as he opened the "Future of Content" conference.

The Web, the rapid advance of processor-driven, digital technology, and the rise of a global economy already have sparked revolutions in the music, electronic gaming and movie industries. But since the mass networking of entertainment content--unlike data content--is still in its infancy, the full effect of that revolution has yet to be felt, said Landau.

Consider "The Terminator," a series of three movies produced in the United States. Released in 1984, the first film in the series cost between $5 million and $6 million to make and grossed about $38 million. Seven years later, "Terminator 2: Judgment Day" cost close to $100 million to produce and grossed $52 million the first weekend it was released. So far, the movie has grossed $204 million in the United States alone, according to the Internet Movie Database.

How did the numbers get so big? On the production side, crowd-pleasing but enormously expensive special effects not available for the original movie quickly ran up the bill, said Landau. Additionally, the computer-aided manipulation of images allows for nonlinear editing, a technique that dramatically increases the number of shots and the pace of the movie. Previously, movies were edited by physically splicing snippets of film.

Then there's the globalization of sourcing and distribution. Whatever his failings (or virtues) as an actor, Arnold Schwarzenegger was arguably the first international action star; he recognized the power of an international brand and traveled extensively to build it.

Meanwhile, Hollywood had deepened its penetration of foreign markets with a sophisticated web of distribution partnerships. As a result, "Terminator 2" has made even more money abroad--$310 million--than it has in the United States. That brings the total box office gross to about $514 million, not including sales and rentals of videotapes and now DVDs. "Terminator 3," set for release in July, cost nearly $200 million to produce, said Landau.

Here are a few more key points made at the conference:

• The music industry--under severe pressure from people who download, burn, and distribute free, albeit illegal, copies of copyrighted songs--will recover but will be less profitable, said Landau. A likely price point: $1 a song. Despite the hype, no major artist has become a star without the marketing power of a major label, he asserted.

• Digital distribution and projection of films is coming but is being slowed by high costs (about $100,000 per screen) and concerns about piracy, said Carl Rosendahl, founder of Pacific Data Images and a 1979 graduate of the Stanford School of Engineering. TiVo and other similar hard-drive-based recording technologies worry the television industry but won't put an end to commercials.

• Expect networks to experiment with new ways to support advertisers, such as sponsored concerts or even sporting events that contain unzappable commercial content, several speakers said.

• Top-tier video games now cost as much as $13 million to develop and market but can generate $100 million in gross revenue, said Bing Gordon, co-founder of game publisher Electronic Arts. By 2010, costs may have to triple to keep pace with a growing demand for realism.

Click here for the Stanford Graduate School of Business information portal.