TCS Daily


The Internet Goes Hollywood

By Dominic Basulto - May 10, 2004 12:00 AM

With the winners of the 8th annual Webby Awards -- the Internet awards show dubbed the "online Oscars" by Time Magazine - slated to be announced on May 12, there is perhaps no better time to contemplate the growing relationship between Hollywood and Silicon Valley. As the recent buzz surrounding the blockbuster $2.7 billion Google IPO shows, the online world has its share of megawatt celebrities and Red Carpet Royalty as dazzling as any A-list celebrities on Oscar Night. The only question was whether Hollywood studios could ever accept the Internet as a legitimate tool for boosting revenue and profitability. Now, as Silicon Valley technology companies like Apple, Intel and HP rush to embrace digital entertainment for the consumer, the Internet is emerging as a distribution platform for Hollywood content and the centerpiece of many digital entertainment strategies.

The business of the Internet, of course, has always been entertainment. However, the relatively recent appearance of Hollywood moguls like Terry Semel and Barry Diller at the helm of companies like Yahoo and InterActiveCorp is further proof that the Internet has entered a new phase, as companies compete to serve up digital entertainment with a dash of Hollywood-style flair. While major intellectual property and bandwidth issues still need to be hashed out, the stage is set for a convergence of sorts between Hollywood and Silicon Valley. This convergence has not gone unnoticed: in April, after Hewlett-Packard announced new IT deals with Warner Bros. and DreamWorks, the New York Times reported that technology companies and the show business world plan to "kiss and make up." Moreover, the Digital Hollywood conference in late March highlighted some of the issues that are front-of-mind for Hollywood studios as they begin to dip their toes in the Internet waters.

A look at the current nominees and recent winners of the Webby Awards is instructive. Sites like RottenTomatoes.com (a Webby Award winner in 2003) are now being supplanted by sites like NetFlix.com (a Webby Award nominee in 2004), which has already worked out the details of an online DVD rental empire. Moreover, Netflix has already announced ambitious plans for a move into digital movie downloads as a way to squeeze out postage and distribution costs. It is a natural progression of sorts -- from sites like Internet Movie Database (a Webby Award winner in "Film" for 1997, 1998 & 1999) to Atom Films (a winner in 2000) to IFILM (a winner in 2002) to NetFlix. The next winner in "Film," no doubt, will come from the ranks of the new Web movie services, such as CinemaNow or Movielink.

Moreover, traditional TV and film studios are exploring the use of the Internet as a source of competitive advantage. At this year's Webby Awards, BBC-affiliated Web sites (i.e. BBC News) and PBS-affiliated Web sites (i.e. PBS.org) garnered a record number of nominations (six apiece) -- more than the juggernauts of the online world like Google (2 nominations) and Apple iTunes Music Store (3 nominations). In fact, BBC recently announced plans for a new pilot project that would offer a TV on-demand service to PC users, who will be able to download shows to the PC screen or save them on DVD. In a somewhat surprising move, Turner Classic Movies is a nominee for this year's "Best Practices" award, handed out annually to the one Web site that "serves as a model of excellence." Turner Classic Movies uses the Web to offer multimedia downloads of trailers and scenes, build community, and distribute Buddy Icons and eCards.

There are a number of trends creating this Hollywood romance between Internet companies and traditional content providers. The first and most obvious trend, of course, is the embrace of consumer digital entertainment by technology companies stung by the sharp downturn in corporate IT spending. Companies like Microsoft, HP, Apple, Intel, Dell and Gateway continue to roll out new consumer electronics gadgets or explore new untapped growth areas in digital entertainment. Intel, for its part, has launched a new campaign around the Digital Home, while Microsoft and HP continue to push forward the idea of the Media Center PC. Apple, of course, already has a winner in its iTunes Music Store, which has spawned a wave of copycat imitators (including Sony) hoping to replicate the company's success in digital entertainment.

The second factor, no doubt, has been the greater penetration and proliferation of technologies that facilitate interactive digital entertainment, such as faster chips, enhanced data storage capacity and faster broadband Internet connections. The end result has been bigger, fatter pipes into the home -- and fat pipes mean faster download times. As a result, Internet-based companies are now able to reinvent themselves around interactive entertainment, while Web sites like NetFlix.com can move forward with the goal of digital movie downloads. This trend will only accelerate, according to the researchers at places like the USC Entertainment Technology Center, which is exploring ways that major movie studios can invest in digital cinema.

There is a caveat, of course, about this growing relationship between Silicon Valley and Hollywood. The danger is that tech companies will begin to make unsustainable assumptions about the future growth of digital entertainment and the possible synergies between the online and offline worlds. Anyone remember the much-ballyhooed deal between AOL and Time Warner? The Web will continue to gain in popularity and reach, but if rumors begin to circulate that a big-name Internet company plans to buy a traditional entertainment company, it's time to run for the Hollywood hills.

A frequent TCS contributor, Dominic Basulto recently wrote about using the Internet to make over established brands.


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