Lecture 13: Early Hollywood Sets the Stage for Modern VideoEarly video evolved from technologyThe technology is key to this marketEarly power was vested in the inventors and manufacturersFilm patent trust vs. the piratesPiratesEuropeans came over and couldn’t enter the industry and there were some Americans that wanted to do their own thingFled to LA bc it was close to Mexican borderFilm patent trust dissolved in 1915Broke antitrust laws by doing the followingNo importsLimited lengthsNo star actorsAll filming and exhibition must pay a license feeFilm supplies and results were price fixedClaimed they had the right to do it because they had the patent stillThe Pirates Transform Themselves“the studios” were borntried to get risk factors eliminatedgreatest example of vertical integrationbrought production, distribution, and exhibition togetherbought up everything to minimize risk factorswhy vertically integrate?Gives you more profit in the endProfits from each and every system along the wayDon’t have to waste time negotiating or pay transaction costsEarly production in the studio systemIssue of financing and return on investmentStudios and studio heads were the ones in charge of making the moviesBelieved that people needed to stick to the mold made for youHad to comply with what studios were wantingMultiple films per year for multiple yearsSupply side leverageBundling, book blocking, and theater chainsTheaters were forced to book/buy a block of moviesCouldn’t choose what movies you gotHad to buy crappy movies to get good moviesCouldn’t show movies from other studios when they bought certain bundlesEntered in exclusivity agreementsWhat roles do the studios now perform?Instead of vertical integration, they participate in so many different markets and become an economy of scopeGives them leverage in all of those marketsNow they have blockbusters and some genre filmsSpend a lot more money but make the same amount as in the pastStudios makes most of its money by international sales and by exporting our intellectual propertyCommonalities of blockbustersSpecial effectsBig star actorsAdsAction filmsCan translate across culturesPre-existing intellectual property and sequelsLecture 14: MoviesGatekeepers for the industryIn houseOwn range of optionsFirst look contractsIndependent producersVery open-end possibilitiesNegative pick-up dealsEven more open accessThe processDevelopmentPitch/ideaScriptRetainer agreements with lawyers and agentsPre-productionSign “above the line” individualsCompletion bond agreements5% of budget is insurance for if you cant complete the movieerrors and omissions insuranceworkers’ comp insurancefilm insurancelocation releases and permitsunion and guild agreementsfinancing agreementsat each stage options contractdon’t pay for full contract until all pieces are theresecure rights to a scriptbuy something in advance for cheaperif it doesn’t work out, they’ve only lost some of the options contractpost-productiondistribution agreementsmusic permissionsvideo clip permissionsexhibition agreementswindows of releaserefer to the points in time at which films, TV, and other media are release in certain distribution channels and not othersback in the daybest theaters in the best citynext best “pre-release” theaters in the city’s downtown area and maybe the best theaters in the next best citiesbroader urban coverageneighborhood theaters in bigger metro areasonly after it runs in larger cities did more places get itmovies were distributed in this way because of the pricehigher at first and gets cheaper over timeprice discrimination for consumersget as much money out of people as you canas tv technology improves, it will begin to a bigger and bigger threat for movie theatersmovie has to really be appealing to make you want to pay for it and leave your home theatertechnology greatly affects thisallows for internet for downloading and Netflixondemand technologybetter home theatersat the same time, movie theaters are doing incentives to bring you inmore interactive viewing3D experiencemaking the experience more like homeLecture 15: Television and the turning point3 dominant strategies from the master switchconglomeratizationintellectual property developmentcontent, technology, and portfoliosspotting niches and serving them betterother dominant strategiesfinding distribution ‘workarounds’developing new and clear contenttreating your network like a gardenhave to grow your garden and know how to harvest your gardenwhat is powernetworks used control to exclude people and other businessesthey acquired properties to horizontally and vertically integratethey developed technology, networks, and content that gave them exclusivity of business models and or contentcompanies use their market power to set up and dominate single networksa few firms could grow and crush competitorspower is access to the optionsLecture 16: Television continuedTV in 1939RCA dominates from its powerful manipulationThere were 16 stations in 1948 and by 1950 were nearly 100 stationsAudience expanded by 4000%In 1948 the FCC froze new filings for TV licensesIn 1952, FCC issued the “Sixth Report and Order”Reallocation of the 12 VHF SpectrumCreated 20 new channels in the UHF spectrum (shorter range)Reserve sections for non-commercial broadcast TVThere were still interference problemsWith the combo of rules there was a technological limit to national networksIn addition to spectrum allocation there was a battle for a new standardNew standards destroy previous technologiesColor TVCBS v. NBC/RCAResolved mostly in RCA’s favorFeatured backward compatibility5 years after the standard was adopted, only NBC was broadcasting in colorbackward compatibility: when you get new technology but can still use the oldearly playersnbcabccbsDumont tv networkThe way that these networks distributed nationally was by using AT&T long linesNetworks made money by advertisingBecause of lack of ability to exclude people no way to have paid subscriptionsLocal stations can’t compete with content of nationalFox, wb, and upn depend upon the UHF spectrumNew networksTv signals were difficult to send beyond electromagnetic frequency rangesOne of the most underappreciated technological inventions was coaxial cableNow have ability to exclude people using this way of broadcastEarly cable systemsRural areas developed a way of receiving broadcastsBroadcast networks didn’t view this as a problem yetMicrowave towersAmplified