8.5 The Influence of New Technology
Learning Objectives
- Identify the impact of home-entertainment technology on the motion picture industry.
- Recognize the role the DVD market plays in the economics of moviemaking.
- Describe the impact of digital cinematography on the film industry.
New technologies have a profound impact, not only on the way films get made, but also on the economic structure of the film industry. When VCR technology made on-demand home movie viewing possible for the first time, filmmakers had to adapt to a changing market. The recent switch to digital technology also represents a turning point for film. This section will discuss how these and other technologies have changed the face of cinema.
Effects of Home Entertainment Technology
The first technology for home video recording, Sony’s Betamax cassettes, hit the market in 1975. The device, a combined television set and videocassette recorder (VCR), came with a high price tag of $2,495, making it a luxury still too expensive for the average American home. Two years later, RCA released the vertical helical scan (VHS) system of recording, which would eventually outsell Betamax, though neither device had garnered the consumer’s support yet. Within several years, however, the concept of home movie recording and viewing began to catch on. In 1979, Columbia Pictures released 20 films for home viewing, and a year later Disney entered the market with the first authorized video rental plan for retail stores. By 1983, VCRs had not gained much traction, found in just 10 percent of American homes, but within two years the device had found a place in nearly one-third of U.S. households (Entertainment Merchant Association).
At the same time, video rental stores began to spring up across the country. In 1985, three major video rental chains—Blockbuster, Hastings, and Movie Gallery—opened their doors. The video rental market took off between 1983 and 1986, reaching $3.37 billion in 1986. Video sales that year came to $1 billion, for total revenue of more than $4 billion, marking the first time in history that video would eclipse box-office revenues ($3.78 billion that year) (Entertainment Merchant Association).
Video sales and rentals opened a new mass market in the entertainment industry—the home movie viewer—and offered Hollywood an extended source of income from its films. On the other hand, the VCR also exasperated the problem of piracy.
VCRs Legal, Just Barely
In an age when Hollywood already struggled financially because of increased production costs, Sony’s release of home video recording technology became a major source of anxiety for Hollywood studios. If people could watch movies in their own homes, would they stop going to the movies altogether? In the 1976 case, Sony Corp. of America v. Universal City Studios, Universal Studios, and the Walt Disney Company sued Sony in the U.S. District Court for the Central District of California. The suit argued that Sony manufactured a technology that could potentially break copyright law, and the company assumed liability for any copyright infringement committed by VCR purchasers. The District Court struggled with the case, eventually ruling against Sony. However, Sony appealed to the Supreme Court, where the debate continued. The case’s outcome had wide implications: Does a device with recording capabilities conflict with copyright law? Is an individual guilty of copyright infringement if she records a single movie in her own home for her private use?
Eventually, the Supreme Court ruled that Sony and other VCR manufacturers did not hold liability for copyright infringement. This case represented an important milestone for two reasons. It opened up a new market in the entertainment sector, enabling video rental and home movie sales. Additionally, the case set a standard for determining whether a device with copying or recording capability violated copyright law. The court ruled that because nonprofit, noncommercial home recording did not constitute a copyright violation, VCR technology did have legitimate legal uses, and the courts could not hold Sony and other companies liable for any misuse of their devices. Movie studios may have initially lamented the ruling, but the decision opened up the home video market, which would become one of the most profitable aspects of the industry. Five years after the ruling, home market sales amounted to $2.5 billion, or about 22% of the $11.5 billion video market (Nichols, 1990).
This case has posed interpretive challenges in legal battles and debates over file sharing through the Internet (Spruill & Adler, 2009). Cases involving Napster, Grokster, Morpheus, and BitTorrent all demonstrate the ongoing debate over the extent to which the Sony ruling applies to modern file-sharing technologies and the challenges of balancing copyright protection with the promotion of innovation and fair use.
The Optical Disc System
In 1980, around the time when consumers just started purchasing VCRs for home use, Pioneer Electronics introduced another technology, the LaserDisc, an optical storage disc that produced higher-quality images than VHS tapes. Nonetheless, because of its large size (12 inches in diameter) and lack of recording capabilities, this early disc system never became popular in the U.S. market. However, the LaserDisc’s successor, the digital versatile disc (DVD) achieved far greater success. Like LaserDisc, the DVD stores encoded information that follows a spiral pattern on the disc’s surface that devices can read when illuminated by a laser diode. However, unlike the analog-formatted LaserDisc, the entirely digital DVD permits a smaller, lighter, more compressed medium.
The first DVDs appeared in stores in 1997, impressing consumers and distributors with their numerous advantages over the VHS tape: sharper-resolution images, compactness, higher durability, interactive special features, and better copy protection. In only a few years, sales of DVD players and discs surpassed those of VCRs and videos, making the DVD the most rapidly adopted consumer electronics product of all time (Entertainment Merchant Association).
In 1999, Netflix revolutionized the movie rental market. Netflix began in 1997 as a video rental store in California. In 1999, the company began offering a subscription service online. Subscribers would select movies that they wanted to see on Netflix’s website, and the movies would arrive in their mailbox a few days later, along with a prepaid return envelope. This allowed users to select from thousands of movies and television shows in the privacy of their own home.
The Blu-ray Disc format intended for storing and producing high-definition video eventually surpassed DVD technology. Released in 2006, the Blu-ray Disc technology has the same physical dimensions as DVDs, but the discs have more than five times the storage capacity of the DVD (Blu Ray). By 2009 there were 10.9 million Blu-ray Disc players in U.S. homes (Molbaek, 2009). 4K discs appeared a couple of years later, however, the increasing popularity of streaming platforms like Netflix, Hulu, and Amazon Prime Video have left many consumers opting for digital content rather than physical media.
DVD Decline and Growth of Streaming
DVD rentals and sales once made up a major source of revenue for the movie industry, accounting for nearly half of the returns on feature films. In fact, for some time the industry had exploited the profitability of releasing some films directly to DVD without ever premiering them in theaters or of releasing films on DVD simultaneously with their theater releases. According to one estimate, for every movie that appeared in theaters, three went straight to DVD (Court, 2006). The economic downturn that began in 2007, along with the concurrent release of Blu-ray Disc technology and online digital downloads, have brought about a decline in DVD sales among U.S. consumers (Garrett, 2008). With the rise in digital downloads, Netflix broadened its appeal in 2007 by offering subscribers live-streaming movies and TV shows. This allowed viewers to watch programs on their computers, handheld devices, the Nintendo Wii game system, the Sony PlayStation 3 game system, and the Microsoft Xbox 360 game system without ever having the disc itself.
Hollywood has also suffered major losses from online piracy. Since 2007, studios have teamed up to turn this potential threat into a source of income. Now, instead of illegally downloading their favorite movies from file-sharing sites, fans can go to legal, commercial-supported sites like Hulu.com, where they can access a selected variety of popular movies and TV shows for the same price as accessing NBC, ABC, and CBS—free. In April 2010, Hulu announced it had already launched a fee-based service, Hulu Plus, in addition to its free service, for users who want access to even more programs, such as Glee (Reuters, 2010). Hulu doesn’t allow viewers to download the films to their home computers, but it does provide a home-viewing experience through online streaming of content (Hulu, 2010).
The Industry Goes Digital
In an industry where technological innovations can transform production or distribution methods over a few years, until the 2010s most movies used the same material that Thomas Edison used to capture his kinetoscope images well over a century ago: celluloid film. In 2002, George Lucas’s Star Wars Episode II: Attack of the Clones became the first major Hollywood movie filmed on high-definition digital video. However, the move to digitally filmed movies had occurred gradually; much of the movie industry—including directors, producers, studios, and major movie theater chains—slowly embraced this major change in filming technology. At the time that Lucas filmed Attack of the Clones, only 18 theaters in the country had digital projectors (Kirsner, 2006).
However, digital cinematography has become an increasingly attractive and increasingly popular option for many reasons. For one thing, during production, it eliminates the need to reload film. A director filming a scene in the traditional method, requiring multiple takes, can now film in one continuous take instead because of the lack of raw material used in the process (Kirsner, 2006). The digital format streamlines the editing process as well. Rather than scanning the images into a computer before adding digital special effects and color adjustments, companies with digitally filmed material can send it electronically to the editing suite. Additionally, digital film files tend not to scratch or wear over time, and they can produce crystal-clear, high-resolution images (Taub, 2009).
For distributors and production companies, digitally recorded images eliminate the costs of purchasing, developing, and printing film. Studios spend around $800 million each year making prints of the films they distribute to theaters and additional money on top of that to ship the heavy reels (Burr, 2002). For a film like Attack of the Clones, widely released in 3,000 theaters, printing and shipping costs for the 35-mm film would total around $20 million (Burr, 2002). On the other hand, with a digital format, which requires no printing and studios can send to theaters on a single hard drive, or, as the system develops, over cable or satellite, these costs virtually disappear, saving the industry millions (Carvajal, 2005; Burr).
In part, the change has proceeded gradually because, for theaters, the high costs of making the digital switch (at around $125,000 for a high-quality digital projector) (Reuters, 2003) offers them fewer short-term incentives than it does for distributors, who could save a significant amount of money with digital technology. Furthermore, theaters have already heavily invested in their current projection equipment for 35-mm film (Carvajal).
Digital film has another financial pitfall: the cost of storage once the film leaves major circulation. For major studios, a significant portion of revenues—around one-third—comes from the rerelease of old films. Studios invest an annual budget of just over $1,000 per film to keep their 35-millimeter masters in archival storage (Cieply, 2007). Keeping the film stock at controlled temperature and moisture levels prevents degradation, so they often store masters in mines, where they can control the conditions most optimally (Cieply, 2007).
Digital data, however, for all of its sophistication, actually has more durability issues than traditional film; DVDs can degrade rapidly, with only a 50 percent chance of lasting up to 15 years (Cieply, 2007), while hard drives require occasional operation to prevent them from locking up. As a result, the storage cost for digital originals comes closer to $12,500 per film per year (Cieply, 2007). Moreover, as one generation of digital technology gives way to another, studios will need to migrate files to newer formats to prevent the originals from becoming unreadable.
The Resurgence of 3-D
After World War II, as movie attendance began to decline, the motion picture industry experimented with new technologies to entice audiences back into increasingly empty theaters. One such gimmick, the 3-D picture, offered the novel experience of increased audience “participation” as monsters, flying objects, and obstacles appeared to invade the theater space, threatening to collide with spectators. They achieved this effect by manipulating filming equipment to work like a pair of human eyes, mimicking the depth of field produced through binocular vision. By joining two cameras together and spacing them slightly apart with their lenses angled fractionally toward one another, filmmakers could achieve an effect similar to that created by the overlapping fields of vision of the right and left eye. In theaters, the resulting images were played simultaneously on two separate projectors. The 3-D glasses spectators wore were polarized to filter the images so that the left eye received only “left eye” projections and the right eye received only “right eye” projections (Buchanan, 2008).
3-D became an instant sensation. House of Wax, the first big-budget 3-D movie, released in 1953, brought in over $1 million during its first three weeks in theaters, making it one of the most successful films of the year. Best of all for investors, they could create 3-D films with fairly inexpensive equipment. For this reason, a boom in 3-D development soon occurred nationwide as studios churned out 46 of the films in two years. However, 3-D’s popularity already began to wane by the end of 1953 (Hayes, 2009).
3-D soon migrated from the realm of common popular entertainment to novelty attraction, appearing in IMAX cinemas, as an occasional marketing draw for kids’ movies, and in theme-park classics like Captain Eo and Honey, I Shrunk the Audience. Captain Eo, a Disneyland attraction from 1986 to 1993, featured pop sensation Michael Jackson in his heyday. Following Jackson’s death, Disney released the film for a limited time in 2010 (Rivera, 2009).
Despite the marginal role 3-D has played since the midcentury fad died out, new technologies have brought about a resurgence in the trend, and the contemporary 3-D experience seems less like a gimmick and more like a serious development in the industry. DreamWorks animation CEO Jeffrey Katzenberg, for one, likened the new 3-D to the introduction of color (McCarthy). One of the downfalls that led to the decline of 3-D in the 1950s was the “3-D headache” phenomenon audiences began to experience as a result of technical problems with filming (Hayes). To create the 3-D effect, filmmakers need to calculate the point where the overlapping images converge, an alignment that had to be performed by hand in those early years. And for the resulting image to come through clearly, the parallel cameras must run in perfect sync with one another—another impossibility with 35-millimeter film, which causes some distortion by the very fact of its motion through the filming camera.
Today, computerized calibration makes perfect camera alignment a reality and the digital recording format eliminates the celluloid-produced distortion. Finally, a single digital projector equipped with a photo-optical device can now perform the work of the two synchronized projectors of the past. For the theater chains, 3-D provides the first real incentive to make the conversion to digital. Not only do audiences turn out in greater numbers for an experience they cannot reproduce at home, even on most HD television sets, but theaters can charge more for tickets to see 3-D films. In 2008, for example, Journey to the Center of the Earth, which grossed $102 million, earned 60 percent of that money through 3-D ticket sales, even though it played in 3-D on only 30 percent of its screens (McCarthy). Two of the top-grossing movies of all time, Avatar (2009) and Alice in Wonderland (2010), saw releases in the 3-D format.
