Talk to filmmakers and media executives about the Internet -- the biggest tectonic shift in the entertainment industry since the advent of cable -- and they typically gripe about two things. Consumers, they say, predominantly seem to want to watch short video clips, and the economic models for earning a decent return on Internet content are still hazy.
About 15 years after Americans started exploring the Web, there's still anxiety about the business potential of digital entertainment and a reluctance to explore new creative possibilities. NBC Universal Chief Executive Jeff Zucker is fond of expressing his fear that the media conglomerate will have to swap the "analog dollars" it earns from broadcast television for "digital dimes."
But like it or not, consumption of video on the Internet is growing much faster than movie ticket sales or TV viewing: As of April, the average Web surfer in the U.S. was watching more than six hours of online video every month, according to comScore, a tracking firm.
Hollywood faced a similar crisis in the 1950s, when a new technology began showing up in American living rooms offering hours of content -- for free -- every night. Television seemed like a serious competitive threat to most studio executives, who were accustomed to re-releasing their movies in theaters every few years; they worried that putting their pictures on TV would gut that lucrative business. Dore Schary, an MGM executive, complained that television broadcasters "just can't pay enough" for the rights to show the studio's product.
There were also, though, a few pioneers who saw potential in the new medium. In the early days of television, such entrepreneurs as Walt Disney believed that if consumers liked the tube so much, there must be a way of building a business from it. Disney didn't abandon making high-priced movies. But he also created content for television that had lower production costs than his movies, and he used TV as a platform to promote his theatrical releases and his new theme park. Others followed Disney's lead, and by the 1960s, Hollywood's studios were making more content for television than for theatrical release. The TV programming relied on different stars, lower production values and a new business model based on advertising and sponsorship.
Many in Hollywood still deride the wacky, user-generated videos that occasionally turn into viral hits on YouTube, the top website for video viewing. And it's true that one of the most-watched videos ever uploaded to the site is titled "Charlie bit my finger -- again!"
But a number of young creators -- many of them working outside of Hollywood's orbit -- have been feverishly experimenting with new ways to tell stories and generate revenue. An office worker in Connecticut created the catty entertainment commentary show "What the Buck" on YouTube, and suddenly found he was making more from the site's "partner program," which offers creators a cut of ad revenue, than he was at his desk job, which he promptly quit. Lance Weiler accents his suspense films with cellphone and Web-based "alternate reality games" that enable players to explore the story and interact with characters after they've left the theater. Robert Greenwald, a Culver City-based documentarian, has raised hundreds of thousands of dollars online to support his left-leaning films and Internet videos on such topics as the mortgage crisis and the war in Afghanistan. And Gregg and Evan Spiridellis are building a new kind of animation studio in Venice, where they produce a series of viral videos about current events and politics, and sell subscriptions to a vast collection of customizable digital greeting cards. This month, they'll debut their latest video for President Obama at the Radio and TV Correspondents Assn. Dinner in Washington.
Business models for content on the Internet are still evolving. But it's already becoming clear that $100-million movies like "Land of the Lost," or even $10-million independent films, may not represent the future of the industry. And new technologies like YouTube, the iPhone and next-generation gaming consoles are opening up all sorts of new, creative possibilities. The artists and business people who will succeed in this new environment are those who are paying attention to the changing behaviors and tastes of this new digital audience -- rather than trying to ignore them or, worse, explaining why they are wrong.