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Global CIO: Will Cisco's Revolutionary Router Torpedo Tinseltown?

Technology is roiling short-sighted Hollywood, and the business-model implications and opportunities for CIOs in every industry are enormous.
"The major film companies have historically controlled the market via their funding, packaging, and distribution power," Uphoff said. "As the potential for filmmakers to go 'direct' and create their own distribution by leveraging digital networks changes this dynamic dramatically.

"We've seen this play out in the music business as technology companies like Apple stepped in and actually organized the industry and market. Interesting to note that Steve Jobs is on the board of directors at Disney and is that company's largest individual shareholder. So then just consider iTunes with film-purchase capabilities and rental titles, and Apple TV, and then the iPad. Is all that a coincidence? No—it might be a lot of things, but it is not a coincidence.

"So what can we assume? My sense is that we will see 'studios' invest in and leverage some of this technology themselves. We are already seeing some examples like Hulu and others. Given their long tradition of a 'channel model,' the studios don’t think or act like a direct business. Some own theaters but most don’t.

"The challenge is most of these efforts are consortium-like, which are very hard to scale. On the other hand, for the first time in a very long time, we're seeing innovation in movie theaters: 3D is one step, and Imax is another. You're also seeing theater owners innovate with the experience—with food, drink and service options that are way outside the traditional movie-going experience.

"In other words, if you already have the option of getting first-run movies streamed to your home, then the motivation for getting you to go to a theater has to be a really cool experience, and that is something that the studios or theater owners or some combination will have to pay a whole lot more attention to than they have in the past."

Scary stuff in a lot of ways, but it's also where the real fun and innovation can come in, so it all boils down to this: do you define your job as helping your company preserve what it has, or as helping it transform itself into what it needs to become to continue exciting and delighting customers? Look at these ideas from Tony and see if some wouldn't translate to your business as well:

“ 'Downstream' revenues in Hollywood have historically worked in this order: Theatrical, Pay Per View, DVD, Commercial Television. Repeat. Managing those different 'windows' has been the main concern for the industry. As in, when do you light up the next window?

"Piracy has been a major concern here as well. One theory is that Disney will be the first company to go to a 'universal release,' which could be very cool. Universal release means they will hit all of the paid windows at once, with varied pricing.

"You want to see Avatar in your home theater the first week of release, you will pay $59.99, about the same as a pay-per-view prize fight. And if you want the DVD that early you will also pay a huge premium.

"For Disney, given their relationship with Apple, I would imagine they're thinking through some really interesting models. Connected to the challenge for Hollywood to change business models is that each of the windows has a different revenue- and profit-sharing structure. Each talent group is watching this carefully.

"Let’s say as a big-name, 'front-of-camera' star, you have a strong deal for theatrical release revenue participation. Accordingly, you'd then have a far smaller stake in 'downstream' revenue, and much less interest in it. Historically you and your agents didn’t really worry about that because, other than DVD sales, there really weren’t material revenues via digital.

"But there sure are now," Uphoff says, "and that's the huge opportunity."

And it's impossible to overstate the message that that same "huge opportunity" isn't limited to Hollywood.

Rather, it's limited only by your imagination.


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GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

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