Im not generally the kind of person to say, I told you so , but my recent comments in Audio Media regarding the Internet have certainly come to fruition. It is now official - the Internet is not going to replace shopping malls, corner shops or mail-order catalogues. How could anyone have thought that these kinds of business, when operated via the Internet, could be worth many times more than their long established bricks and mortar, or paper and phone call, equivalents? Commentators now focus on the burn rate of Internet companies - a measure of how fast they get through cash. Since the vast majority of Internet businesses do not make any profit (and many make hardly any income), dividing burn rate into cash holding gives a good indication of the life span of the business. When the cash has all turned to ashes, the company folds. Not until the majority of today's Internet businesses have gone bust or sold out will there be any consolidation when the few that are left can indeed make a profit. Whether the scale of the profit will match shareholders current expectations is very much open to question.
The finger of doubt currently points across the board of Internet businesses (it must be a broad finger). But as I said back in the February issue, the Internet is the ideal medium for video. Imagine a world where bandwidth doesnt have to be rationed, where it can grow to any scale to meet demand. In this world there can be limitless channels; global channels that reach into every possible market. Reality may be biting into Internet business, but in the long term the real winners are going to be those who back the Internet as a broadcasting medium. This is where success lies. Ring your stockbroker now (or go trade online!).
Broadcasting today is a game for big players. Relatively few companies control the airwaves and therefore our viewing. Governments recognize the hold these companies have and regulate what we are allowed to watch, to a variable extent depending upon the country in which you live. An enormous number of production companies chase outlets for their work. It is true that satellite and cable have opened up many more possibilities than there were when conventional terrestrial broadcast was the only means of distribution, but there is a feeling that there is still a bottleneck in the system. Below the top echelon of undoubtedly high-quality production, production companies chase a lowest common denominator market, dumbing down in quality to broaden the appeal. The depth of content typical of TV is extraordinarily shallow compared to that which can be found in newspaper, magazine and book publishing.
Finding an outlet for programming is one problem, the cost of production is another. A motion picture budget can be anything up to $200 million at the outside edge but, curiously, studios are still prepared to take chances. They know if they play the odds, one out of every ten movies will be a blockbuster and pay for all the rest. Creative minds have the opportunity to prosper, and creativity is actively sought out in film festivals the world over. (It has to be said though that only a fraction of films that are made ever get shown outside of a festival). Television broadcasters have a tendency to be more conservative and not produce or back anything that industry diehards dont think will turn a profit. The TV equivalent of a movie blockbuster tends to spring unexpectedly from what was only intended to be viewer fodder, rather than from a risk taking enterprise in creativity.
In short, the market for film and television is currently like a bottle of vigorously effervescent champagne trapped by a tightly wired cork. Production costs are a barrier to creative people who are full of ideas but dont yet have the ability to coax money out of potential backers. Even when the production is in the can, nobody wants to show it! Enter
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