The Broken Windows Theory
Who suffers when the DVD is released before the movie has left theaters?
The window between a movie's theatrical and DVD releases is getting narrower. It has dropped from six months to three months and now may shrink to almost nothing. Later this month, the new Steven Soderbergh film Bubble will debut simultaneously in theaters and on HDNet television; it will go on sale as a DVD four days later. Bubble is the first of six pictures Soderbergh is making with backing from Mark Cuban, founder of Broadcast.com, owner of the Dallas Mavericks, blogger, and new-media entrepreneur.
Throughout the sprawling mediasphere, content windows are getting smashed, broken, and kicked in. Consumers, enabled by technology, are demanding to wolf down their media the way they want it, and when they want it. Established content distributors generally look askance at the trend because it disrupts traditional modes of doing business and raises uncomfortable questions: Will anybody buy hardcovers if the book comes out simultaneously in paperback? Will people go see a movie in the theater if they can just watch it on HDNet? Will people pay to see a play on Broadway if it debuts simultaneously on the boob tube and the Great White Way? Indeed, movie theaters seem to be boycotting Bubble, and it will air only in Landmark Theatres, a 215-screen theater chain that Cuban owns.
Such broken windows may be bad news for the distributors and packagers of content. Slate's "Hollywood Economist" Edward J. Epstein has written vividly about how closing the window may cause "Hollywood's Death Spiral." Still, the breaking windows are unambiguously great news for consumers. Forget all the carping about insipid Top 40 radio, unfunny sitcoms, and unending cacophonous blockbuster movies. With content windows shattering all over the place, we're entering a golden age of media consumption where people everywhere no longer have to wait—or pay through the nose—to see, read, and hear interesting stuff right away.
The trend of collapsing windows signifies that the media industry has finally entered the 1980s: It's finally starting seriously to think about efficiency. Big media is wedded to enormously inefficient methods of production and distribution. Imprinting songs on CDs, wrapping them in plastic, and shipping them around the globe is hugely wasteful compared with digital distribution. And it carries the risk of creating unsold inventory. Would you A) rather make 50,000 CDs, sell 40,000 of them for $15 each, earning a $3 profit per unit, and wind up destroying or selling off the remainder for pennies on the dollar; or B) sell 400,000 copies of a 99-cent single and earn 30 cents on each one? The answer is clearly B. Studios spend tons of money to promote films in the movie theaters, where they may last for only a few weeks. When the DVD comes out several months later, they have to crank up the promotional spending again. After all, sales of DVDs dwarf box-office receipts. In December Disney CEO Robert Iger told the Wall Street Journal that by compressing the movie-DVD window, "We could spend less money pushing the box office and get to the next window sooner where a movie has more perceived value to the consumer because it's more fresh."
The new efficiency is even starting to penetrate one of the least efficient industries this side of the Soviet bloc: book publishing. Peter Osnos, the founder of PublicAffairs, has started a nonprofit venture to shatter content windows in publishing. Backed by the MacArthur Foundation, he's working with a group of university presses to publish books in five formats simultaneously—hardcover, print on demand, digital, audio, and by the chapter. Osnos is trying to ensure that serious nonfiction books are available at different price points. But he's also bringing some of the insights of Frederick Winslow Taylor to an industry that still works half-days on Fridays in the summer. "The problem with publishing is that you print 10 hardcover books and only sell six," Osnos said. By moving closer to a system of just-in-time publishing, "we can significantly improve the business and margins by getting rid of the problem of excess inventory."
These window-shattering efforts are occurring primarily at the fringes of the industry. Today, too many media executives regard their businesses as zero-sum games. And in their worldview, every person who watches a new movie on television for free is one less person who won't pay $9.50 to see it in a theater. But that's clearly not the case. As with many other products—airline flights, clothes, hotels—different consumers seeking different experiences will come in at different price points. Just because content is available for free doesn't mean somebody won't pay for it.
Osnos said this was driven home to him in 1998, when Independent Counsel Kenneth Starr wrote his report on the Clinton-Lewinsky affair. PublicAffairs, reasoning that plenty of people would pay $10 to read the whole thing, made a deal to publish it as an instant book with the Washington Post'sfirst-day coverage. But there was no window. The government put the whole report up on the Web, which meant anybody with Internet access could read it for free. The New York Times ran the whole thing inside the paper, which meant it was available in newsprint for $1. And yet 200,000 people plunked down an Alexander Hamilton to buy the PublicAffairs paperback, making it a best seller. "What I realized is that some people like it round and some people like it square," Osnos said. "And in the world in which we live, you have to give it to them the way they want it."
Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at email@example.com and follow him on Twitter. His latest book, Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation, has just been published in paperback.
Illustration by Mark Alan Stamaty.