The movie industry has very little choice but to adapt its current business model due to the invent of new technologies. The video rental sector has experienced significant remodeling due to digitization. In reference to video-on-demand the author states, "not since the introduction of the videocassette recorder has a disruptive technology so threatened the very heart of Hollywood." Blockbuster and Hollywood see these innovations as a threat to their rental revenues. The article focuses on how the Internet will affect the value chain of the motion picture industry. The author cites broadband Internet connection, digital file compression, streaming media, and encryption as the new technologies that have made these new online and VOD capabilities possible. He continues first by explaining how digital cable network and VOD systems work and then breaks down the logistics of the movie industry's production and distribution models.
The article goes on to describe how the industry will change from digitization. In production, digitally produced movies will cost less by eliminating the need for expensive film stocks. Computers can be used to edit and assemble digital movies rather than "splicing together the actual film stock." In distribution, digital projection systems will be installed in theater and online streaming videos will become the popular channel for distribution and duplication costs will be nearly obsolete. As for the middlemen, film manufacturers, processors, and duplicators will be reduced and distributors and video rental stores may be eliminated. Movie theaters will also be affected because VOD systems will entice viewers to stay at home. Theaters will be force to add "valuable social experience" and show only movies they know will be profitable. As of now video rental stores aren't afraid of VOD, but the author suggests down the road they may have to "partner with a firm that owns distribution technologies but lacks customer base.
These hypotheses have sufficient data to support them and may be realistic adaptions to the industry. Although not in current practice, it is important to think about the future of the industry. My paper will examine how many of these sectors have changed and how they will continue to evolve.