Comprehensive Exam Research Paper

Jennifer Lee
Annenberg School for Communication, USC
M.A. Comprehensive Exam Research Paper
May 1998

How will the Internet affect the marketing and distribution of movies?

The Internet's interactive and far-reaching nature offers many opportunities for enhancing the marketing and distribution of movies in the digital age. Hollywood is now at the cusp of harnessing this new medium's potential for revolutionizing how the entertainment industry promotes and delivers feature films. In terms of marketing, studios have already accepted the World Wide Web as another promotional vehicle. Major Hollywood studios—including Disney, MGM, Universal, Sony, 20th Century Fox, Paramount and Warner Bros.—now have promotional movie Web sites. However, current movie Web sites do not take full advantage of this medium's unique interactive qualities (Chowdhury, Bluestein and Davis 1997). As for distribution, integrated broadband networks can provide a channel for faster, more cost-effective delivery of movies to theaters and homes. Yet, the current technology and infrastructure are not mature enough to support total digital distribution (Hooper 1996, Thomas 1997). Electronic cinema is still in its testing phase as companies like Sony and Pacific Bell attempt to finesse the network technologies and terminal equipment (Marx 1995).
Certain social, technical and economic factors are currently hindering Hollywood's full adoption of these emerging technologies. Nevertheless, both movie marketing and distribution have opportunities to leverage the Internet in new and exciting ways throughout the years to come. First, we will first examine the potential for more engaging movie marketing on the Internet. Next, we will look at the feasibility of delivering motion pictures to the box office and home via satellite and high-speed networks. Finally, we will briefly explore how the continuing convergence of traditional media and new technology may enhance the synergy between movie marketing and distribution in the near future.

Internet Movie Marketing

The World Wide Web's hypermedia and interactive qualities offer a robust forum for promoting movies in cyberspace. Studios can take advantage of the Web's ability to create interactive, vivid and personalized online environments that engage users and provide a sense of community. Despite efforts to create an online presence for their movies, studios have yet to reap the full benefits of the Internet's ability to create engaging promotional Web sites. According to a Forrester Report, "Current Web strategies do not exploit the interactive nature of the new medium, and sites are poorly integrated into existing promotional schemes" (Chowdhury, Bluestein and Davis 1997).

Targeted Online Marketing

The Internet allows for more targeted and customized dialogue with the consumer audience (Foskett 1996, Hoffman and Novak 1996) as well as a forum for people with similar interests to congregate (Hagel and Armstrong 1997, Rubenstein 1997). According to Ira Rubenstein, marketing director at Columbia TriStar Interactive, the Web is "just another medium to market in like print, radio, theater and TV" (1997). However he makes the key distinction that the Internet allows studios to build a community of moviegoers based on like interests and provides a "one-to-one market" which can be tailored toward users. Movie studios can create a database of moviegoers by collecting information about users through online profiles. Hence, the studios can maintain an ongoing relationship with the moviegoers. They can remind users via targeted e-mail when the movie opens in theaters or, depending on the user profiles, telll them about some of the studio's other movies that may be of interest to them.
Another invaluable facet of the Internet that studios can leverage in their online marketing initiatives is free publicity through word of mouth. According to Hagel and Armstrong, authors of Net Gain, "Communities can be highly effective at stimulating word of mouth" and "can also serve as free PR" (1997, p. 192). Columbia TriStar Interactive is at the forefront of this approach to feature film online marketing (Kirsner 1997). Their promotional site for the Sony sci-fi action flick Starship Troopers (www.starshiptroopers.com) encourages a sense of community by allowing users to join the "Mobile Infantry" in a battle against giant alien bugs. In doing so, users are invited to download free graphical elements and other assets to build their own "Trooper ID Screen" (Kirsner 1997). Since March 1997, more than 30,000 visitors to the site have since built their own personal Starship Troopers Web pages with information about themselves along with the movie's official look and branding (Kirsner 1997). The Starship Troopers site links to these individual Web pages so that users can learn about each other and see how many other people have "joined the fight." Thus, visitors to the Web site can sign up to become part of the infantry and in doing so they help build an online community of movie fans which could provide free marketing through word of mouth.
Sony's approach serves as an exemplary marketing model on the Internet because it involves influence theories such as Cialdini's social proof and Newcomb's reference groups that may help create affiliation with the movie site. According to Cialdini, when people are uncertain about a situation, they will model behavior after the action of others, especially those whom they feel are similar to them (1993, p. 133). Thus, if visitors to the site don't necessarily have an opinion about the movie, they may notice that many other people have shown their support by creating their own Starship Troopers Web page. They may follow suit and may subsequently feel like part of the community. Furthermore, now that they are part of a group, Newcomb would argue that these people may continue to look to each other for making decisions about persuasive messages (Bettinghaus and Cody 1994, p. 182). As Rubenstein states, "We're recruiting people to join. We're asking them to go out and recruit their friends" (CNN 1997). In this sense, the site targets users by creating a reference group of people with similar interests which, in turn, may draw other like-minded movie fans to the site who will influence each other through their community.

Immersive Online Environments

The Web's ability to bring together hypertext, images, audio and video makes it an ideal medium for creating immersive online environments. In fact, as part of their literature review in a study of computer-mediated marketing, Hoffman and Novak cited the importance of vividness and interactivity in engaging users in a hypermedia online environment (1996). By using multimedia to create what Csikszentmihalyi describes as flow, "Being completely involved in an activity for its own sake," (Geirland 1996) Hoffman and Novak argue that online marketing can grab people's attention and make them feel like an active participant rather than a passive observer.
Movie studios can develop vivid Web sites which capture the look and feel of the film to "mesmerize" users and attract their attention. These intensive sites, which Forrester labels "entertainment destinations," provide immersive experiences with features such as "full-function online games, synchronized soundtracks, wide-ranging chat sessions, actively managed bulletin boards, original content like newsletters, or online magazines" (Chowdhury, Bluestein and Davis 1997). Hoffman and Novak would posit that such immersive online environments leverage the promotional dynamics of the Web in an unprecedented way (1996).
Building on the earlier example, the Starship Troopers Web site also demonstrates this effective use of interactivity and vividness. The site emulates the look and feel of the motion picture with an overall hi-tech sheen and several movie stills, sound and video clips interspersed throughout. Furthermore, users delve into the film's backdrop as they are invited to enlist in boot camp, read through an interactive training manual and undergo several challenging and graphic Shockwave games that test their skill against the alien enemy. The site successfully incorporates the atmosphere and themes of the movie into the Web site, thus giving the users an engaging experience to help draw their attention and perhaps help them retain information about the movie.
At present, Forrester Research states that more than 40% of movie sites that they reviewed have some form of interactivity such as games or quizzes. Whereas, less than 30% provide community features such as discussion boards or chat rooms" (Chowdhury, Bluestein and Davis 1997). With the popularity of movie sites such as the Starship Trooper "entertainment destination" it's likely that those percentages will increase as studios realize the power of providing more interactivity and community in their online marketing efforts.

Industry Challenges

Certain social, technical and economic factors may be preventing Hollywood studios from investing more resources in online marketing. For one, some studios may feel that the technology has not reached a critical mass or that these type of immersive environments demand users with high-end machines on high-speed networks. Hence, they may not feel justified in spending money on a medium that may have a limited audience. Additionally, Forrester Research found that the entertainment industry's infrastructure itself does not fully support the online marketing efforts. Studios are not allocating enough of their marketing budget to online endeavors and they lack a focused Internet strategy because they do not yet see value in marketing on the Web. They suggest that Hollywood needs to restructure the show-biz industry to include an online division of labor that will "synchronize" marketing initiatives on the Web with other promotions (Chowdhury, Bluestein and Davis 1997).
This need for restructuring illustrates social scientist Christopher Freeman's point that change will not occur until there is a shift in the business' "techno-economic paradigm" (1996). According to Freeman, a technology's mere existence and use within an organization does not guarantee that the business will reap the technology's full benefits. Instead the use of technology needs to have reinforcement from the business structure and procedure. As Freeman states, "The potential of the ICT paradigm will be realized only when there is a good match between the technology and the institutional framework—when ICT has clearly become the dominant technological regime and when the organizational barriers and social rigidities have been transcended" (1996, p. 139-140.). Thus, only until studios recognize the value of online marketing and build it into their institution, will they be able to take full advantage of the Web's ability to be a powerful promotional tool. Within the years to come, Tinseltown may develop the appropriate infrastructure to support more sophisticated online marketing plans. Then most online promotions will evolve into "full-fledged immersive destinations" which exploit the Internet's potential to be an engaging and persuasive marketing vehicle.

Digital Movie Distribution

The proliferation of computer networks combined with the convergence of digital media and the improvements in video compression all lead to opportunities for providing Hollywood with alternative distribution channels to movie houses and domestic homes alike. Several media and entertainment companies have already dabbled with the digital delivery of movies to theaters and homes via the Internet. For example, Time Warner has conducted a lackluster video-on-demand study in Orlando, Florida, using the existing co-axial cable network to homes (Burstein and Kline 1996, p. 134). While companies like Sony, Qualcomm and IBM have conducted tests on the transfer of video via satellite or fiber-optic cables to theaters and the showing of electronic movies with special digital projectors (Thomas 1997).
Such studies indicate that there is potential for the Internet to provide a quicker and more cost-effective means of distributing movies. There are various ways in which digital movies might be distributed, however the favored one is via satellite (Statler 1997). "Under that scenario, distributors would upload digitized motion pictures to a satellite link. Exhibitors would download that information, and would use some type of digital storage device to cache the data. Alternately, the compressed motion pictures could be sent over high-speed phone lines or on an optical disc" (Statler 1997). However, there are social and economic factors that are currently impeding the adoption of this technology. In spite of the much-touted potential benefits of electronic cinema, the entertainment industry has been hesitant to abandon its archaic, yet proven, distribution method for a more cutting-edge digital system (Hooper 1996, Thomas 1997).

Benefits of Electronic Cinema

With a digital distribution system, movie studios can save an estimated $400-$500 million per year on expensive copying and shipping costs (Marx 1995, Goldberg 1996). Presently, thousands of copies of each movie must be made at around $2,000 each and the physical reels of celluloid film must then be shipped to exhibitors worldwide (Magid 1997, Thomas 1997). Tom Pollock, former CEO of Universal Studios, illustrates how electronic cinema will help streamline this costly and cumbersome process. According to Pollock, "[Distributors] won't have to worry about the cost of printing and shipping ... about picking up a print, sending it to regional locations, then sending it to another location, then destroying it properly. Distribution will be much easier and much cheaper" (Goldberg 1996).
Electronic cinema has benefits for theater owners as well. Since the digital transmission happens almost instantaneously, exhibitors can be more responsive to consumer's demands. For instance, depending on ticket sales, multiplex theaters can shuffle around their movies or they can screen the more popular films in additional auditoriums (Stalter and Hindes 1997, Thomas 1997). Furthermore, electronic cinema can help exhibitors keep more precise tracking records when the distribution system is tied to the ticketing system. Gerald Nash at Sigma Designs explains, "distributors would know instantly how many seats were sold and exactly how much of the film had screened" (Stalter and Hindes 1997). Theater owners can feed this information back to the studios in order to give them a more accurate idea about how their films have fared at the box-office. These points illustrate that, despite initial costs of upgrading from $40,000 film projectors to $80,000 digital projectors, exhibitors do have something to gain from the new technology. In fact, some industry leaders suggest that movie studios might give theaters incentives to help pay off the cost for the necessary equipment (Goldberg 1996, Stalter and Hindes 1997). Such cooperation might help facilitate the roll out of a brand new system. As with the marketing discussion earlier, Freeman's point regarding the need for the business' infrastructure to support the use of technology applies here, too (1996).

Current Limitations of Electronic Cinema

Although electronic cinema would save money on prints, shipping and screening, opponents argue that there are hidden costs in the digital distribution process. For example, electronic cinema would require theaters to retrofit their venues (Magid 1997). Rooms must be darker because the digital image is duller than celluloid and they must also be narrower because the audience must be at a certain angle to the screen for optimal viewing (Stalter 1997). "You may save money in one area, but you pay in another," says Joerg Agin, president of Kodak's Professional Motion Imaging unit, referring to the often overlooked expenses of retrofitting rooms, installing satellite feeds, transmitting and storing data, and maintaining the hi-tech equipment (Stalter and Hindes 1997).
There are also some technological limitations to the electronic movie distribution such as cost of storage space for digitized video. "A single frame of film contains at least 40 megabytes' worth of information. To store an average feature-length movie digitally—say it's 100 minutes long—you would need almost 6 terabytes of computer-disk space" (Hooper 1996). Furthermore, many cinema purists argue that electronic projection is not as crisp and vivid as traditional celluloid illumination (Magid 1997, Thomas 1997). According to a Price Waterhouse survey, "Hollywood won't sacrifice quality. Although most entertainment production will be digital, motion picture will continue to use celluloid film because of its high degree of control over images" (1995). Digital movies, however, do have the advantage that they do not diminish in quality over time like celluloid film does (Cinema of the Future 1995). Other unresolved issues include the prevention of piracy and the reliability of encryption (Magid 1997). Some believe that encryption will help save studios money by halting piracy, while others are still concerned that encryption is not a fool-proof safeguard for protecting the digital transmission of movies via satellite (Stalter and Hindes 1997).

Video-on-Demand: Digital Distribution to the Home

Another way the Internet may affect the distribution of movies is through the digital delivery of movies to residential homes. This use of the Internet to transmit movies seems logical to technology giant Bill Gates. "Because consumers already understand the value of movies and are used to paying to watch them, video-on-demand is an obvious development," says Gates (1996, p. 72). With video-on-demand, time is no longer a constraint because consumers can access programming from a server whenever they wanted. Additionally, the stock of movies will never "run out" like it would at the local video store because the films are stored electronically (Burstein and Kline 1996, p. 137).

Current Limitations of VOD

Despite the hype of having access to an expansive movie library at the touch of a button, there are certain social and economic implications for video-on-demand. For example, Macaraeg argues that we may be "loosing a public rite" if video-on-demand home-viewing replaces the collective experience of going to the movies (1996). Thus, VOD may not be culturally accepted by those who enjoy moviegoing as a social activity. Also, in terms of home delivery, the equipment and transfer charges will probably remain high. This may increase the gap between the haves and have-nots. The reasons why Time Warner pulled the plug on the Orlando project further illustrate the challenges of implementing VOD. They cited the monstrous expense of deploying a two-way cable system and the lackluster reaction to services provided as the culprits (Krantz 1997).
Forrester Researchers ask, "What part of the convergence theory is wrong?" They suggest that it's, "The assumption that unifying infrastructure also merges device function ... The future of home technology products depends not only on advances in components, but also how people's expectations for them evolve." (Bernoff, Green, VanBoshkirk and Gerber 1997). This argument parallels social scientist Nicholas Garnham's point that the social factor is key in technology adoption. People must find value in new technology that they cannot find elsewhere. As Garnham puts it, "Even if technological problems are surmountable, economic and cultural barriers to convergence will remain significant" (1996, p. 110). Thus, even if the network and hardware components were in place for the commercial digital delivery of movies, the service must be affordable and people must see value in the technology order for it to reach a critical mass.

Conclusion

Over the past few years, the growth of the Internet has sparked much interest in finding a synergy between the high-tech and show-biz industries. As evidenced by the strides already made by leaders in entertainment, the Internet can bolster movie marketing campaigns and can possibly streamline the production and distribution process. Once the entertainment industry addresses the social and economic factors influencing the adoption of this emerging technology, Hollywood will be able to take advantage of the Internet's full potential. If the industry understands and addresses these challenges, then the much-hyped marriage of Silicon Valley and Hollywood may soon be a reality.
Perhaps once this marriage occurs, we'll see increased integration of movie marketing and distribution via the converging traditional media and new technology. Although we've covered some ways in which the Internet can enhance Hollywood's promotional and distribution initiatives individually, the future is sure to hold even more for the entertainment industry as a whole. True digital convergence might offer opportunities to combine the marketing and direct delivery of movies to consumers in a seamless online environment where the Web, video-on-demand and online theater ticket purchasing are packaged together. Whether or not such a service becomes a blockbuster hit, from the looks of things, the Internet clearly has a starring role in the future of entertainment.

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