How Hollywood can out-apple Apple

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Johnny Knoxville in a scene from Jackass 2.5.

Hollywood need not let Apple make all of the profit. If Apple is effectively using content as a loss-leader (or at least break-even leader), then Hollywood should similarly leverage content to promote sales of its flagship products. The latter must simply employ a different strategy.

Rather than asking "How much money can we make on portable content?" the question should be "How can portable content help me make money?"

Hollywood studios should strive to use portable platforms to generate revenues directly (through the sale of content) and also indirectly by promoting consumption via more traditional channels.

The free distribution of scenes, clips and made-for-mobile content will encourage ticket sales and DVD purchases. Highlighting the top car chase scenes of all time, to give an example, can draw attention to both new and existing titles. Content distributed to portable devices thus need not always generate revenue directly as long as it generates revenues elsewhere for the studios.

Initially, content producers can simply re-purpose existing previews and clips as a low-cost way to promote viewing in theatres and DVDs. Ideally, however, such efforts will be followed up with content that specifically takes into account the unique attributes of portable platforms.

Fast-paced clips, rapid cuts and panoramic scenes are just a few examples of film techniques that do not adapt well to the current generation of portable devices.

‘Made for mobile' programming will moreover increase the appeal by offering unique content not available elsewhere. In the end, ‘advertainment' becomes content in and of itself and a profitable way to provide consumers something to watch when they find themselves in situations where a little diversion is welcomed.

Such a strategy can take advantage of the service providers' desires to distribute value-added content, as well as Podcasting infrastructure, which could well become a significant distribution vehicle for free or advertising-supported content.

Such an approach takes advantage of the current market landscape. For one, it leverages the consumer's ongoing preference to watch movies in the cinema and on DVD.

Consumers also show a limited willingness to pay for portable video content. Parks Associates Digital Media Habits study, for example, found less than 10 percent of internet users would be willing to purchase a digital movie download (from a site such as iTunes) at prevailing price points.

Demand for portable content will grow as consumers become more accustomed to it but their appetite must be whetted with free content. Consumers have not yet established a habit of portable video consumption and cannot be expected to sign up for paid subscriptions right out of the gate.

Using portable content as a free, promotion of more traditional channels will help ready the market for the emergence of direct revenue generation from optimised-for-mobile content (whether original or "re-purposed" content).

The consumption of free previews and advertainment via portable devices will educate consumers on the potential of viewing premium content, once business and technical obstacles have been overcome.

At the same time, consumers will have a greater tolerance for a less pleasing, small screen experience if they did not directly pay for the content i.e. expectations for free movie previews will be lower than for paid, feature length films.

While growing, the market for selling movies through portable devices and cellphones is not yet ripe. Business and technical obstacles have not yet been overcome and consumers show a low interest in buying and viewing.

At the same time, using mobile content as a marketing tool for traditional consumption channels offers Hollywood an opportunity for immediate success in the mobile content space.

Moreover, freely distributed, marketing-minded content will prime the pump for premium content offerings further down the road, once technological and business challenges have been addressed. Studios can aggressively pave the way for future profitable mobile distribution models by immediately leveraging early consumer interest.

John Barrett analyses technology-driven products and services for Parks Associates, a digital home research firm and consultancy.

David Wertheimer is the former president of Paramount Digital Entertainment and is now the executive director of the Entertainment Technology Center @ USC (University of Southern California), a consortium/think-tank sponsored by top film entertainment companies, leading technology, consumer electronics and service providers. Additional research by KC Blake and Bryan Gonzalez at the ETC@USC.

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