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Interview with George Gilder

How will the distribution model evolve for these products? The key thing that computer networking does to any business is change vertical systems into horizontal systems. It eliminates middlemen, middle executives, of all descriptions. And the heart of Hollywood today is intermediation. About 70 percent of the cost of making a movie is in areas such as distribution and advertising, and about 30 percent goes to the people involved in making the movie. Most of that 70 percent will be collapsed by a truly pervasive fiber-optic network system. It will collapse when you can make it available to the entire world, and you don't need to attract some miscellaneous audience to theaters in Des Moines, San Jose, Seattle and Pittsfield [Mass.] at once. That 70 percent cost of the film drops to 5 percent, or even less for some. Meanwhile, the remaining 30 percent of the cost of a film is getting these people whose star properties come from their lowest common denominator appeal and from their monopoly position of being able to finance these 70 percent costs. Those costs can be drastically reduced.

Although there will still be stars, in the same way that James Clavell can sell 10 million books. And Stephen King. Sure, there will be people like that. But they won't dominate the market and the choices that people have. I mean, that's all you get in movies today. You get the James Clavells and the Stephen Kings. The book business has those kinds of superstars and big successes. But the movie business doesn't have anything else. And that's the difference. The heart of the movie still is the screenplay, and there are scores of thousands of those written every year in the United States, and 500 are produced, or something like that. And the 500 that are produced depend on the caprice of what Jack Nicholson or Kevin Costner likes that week.

But if you look at the book or magazine business, while there are lots of different titles, the industry remains dominated by a few large publishing houses. Do you think that will be true in video of the future? There will be big studios. Movies will change to be more like novels. We'll have lots more of them and a lot more available at a much lower cost. But people still like to go out to theaters, and theaters will have to give you an enhanced experience of some sort. My idea of the precursors of the ultimately dominant mode of theaters are the ride films. The ones that Douglas Trumbull does, including "Back To The Future . . . The Ride," which was made a few miles from here by Berkshire Motion Picture. "Back To The Future" is the leading-edge ride film. It's just a terrific experience; it's overwhelming. You spend 4-1/2 minutes and you're satisfied, virtually as satisfied as if you'd seen a two-hour film. There will be a lot of thrilling theatrical innovations, and they will make a lot of money and will be the Hollywood staple. And they will be digital. That will be a big arena for Silicon Graphics if it continues its edge in that area.

So there are two different developments. One will be lots of movies produced like books, in the scores of thousands rather than the hundreds. And then there will be hundreds of these ride films, mega experiences, which will correspond more to the Hollywood model with the big costs and probably the big publicity demands. But in general, when one comes home at night after work, there will be a lot less watching the evening news or the set of prime-time shows that are currently dominant. The computer will offer all the visual rewards of a news program, plus the timeliness and as much depth as you want. You can call up archives that relate to the story that interests you. The newspaper is not going to die. The newspaper fits perfectly in the computer form factor and will succeed as a supplier to computer networks.

On the Internet today, almost anybody can post things for other people to access. But the on-line services control what is on there. Will one of those two models win, or will they both proceed in parallel? They will go in parallel. The telephone proceeds in parallel with the computer and the television set. I don't think one or the other experience will completely usurp and dominate. The bulletin board experience is very special and unique. It's launched this period as a golden age of text communications. It's a return to epistolary exchanges, but it's different because of the instant response. That will encroach to some extent on the time that people currently spend poring through TV programs or real crime stories. At the same time, people will want to have—amid this mad cornucopia of information products—places to go where they are comfortable and know what to expect.

You don't always want to be out there exploring. That's right. It seems to me that local newspapers can supply that, as well as magazines and other such familiar vehicles that can move on-line pretty effectively. As a matter of fact, they will benefit more from higher-resolution screens than will the video people. The current computer screen is equivalent to 72 dots per inch, and you really need 300 dots per inch to read readily. In the next few years screens will routinely have that kind of resolution and contrast, and all sorts of different news panels and other such technologies will emerge that will allow you to read from a screen.

You say local newspapers will thrive, but won't small ones have a tough time financing the move to the new technology? I think they can. It will be cheaper and cheaper to do it. It will be a much more effective way to deliver a readership than a current newspaper is, so you'll be able to charge more for advertising. The advertisers will get so much greater yield that you'll be able to share in the yield that the ads generate. Small newspapers will be able to gain from this. Local newspapers do have a specialty and a virtual monopoly on news that affects their particular locality.

Today, local newspapers have some local stories, but also a lot of wire service stories. Soon all the wire stories will be available to the reader directly. It depends on how good they are at meeting the needs of people in their local area. My local paper has, counting sports, hundreds of local stories. I don't think your assumption is right about the typical local paper that is well-engaged in the fabric of the community. That's a real niche. That's a defensible business proposition, to deliver that local readership with its local ties and connections and interests. And deliver advertising to them. And actually allow those local people to transact business with both local and remote businesses.

The newspaper will succeed because we already control the newspaper. It's more like a computer than the TV. When you buy a newspaper, you read what you want when you want it. It's not like TV. The two models that are basic here are the railroad system and the automobile system. When you use the railroad, you have to go to the station at the times they prescribe and go to the destinations that are prescribed by the railroad and travel with the people who happen to be aboard. With the automobile you go out, get in the car and go where you want to, when you want to. You're in command. The television set is very much like the railroad model, and the newspaper is very much like the automobile. The newspaper model will prevail, because the only thing it lacks is digital magic. Its delivery system is archaic. Its delivery system depends on the Teamsters Union, plus a 10-year-old kid on a bike. It's just terrible distribution. And that's what the computer and networks can supply: a much better distribution system.

What role do you think editors will play? The same role they play now. They have to commission the reporters to write their stories, cover their beats. Bill Gates sort of dismissed my article on this subject [which appeared in the October 1993 issue of Forbes ASAP], because he said that the reporters and the columnists and everybody will be able to contract directly with the reader. But the newspaper is more than a group of autonomous writers. It's an editorial organization that defines stories, decides who will cover what and how much time they will spend, and supports their efforts. It's not simply the spontaneous contributions of a bunch of entrepreneurial writers. Now, the big entrepreneurial writers of today already syndicate themselves, and in the future they'll be able to make much more money than they do today because they'll be able to charge for each use through new encryption technologies.

Newsletters are like that as well. That's right. But still, the Computer Letter is an excellent newsletter, and you get a real sense of editorial leadership. It's no longer Dick Shaffer writing the thing. It's a whole staff that covers the field. And they are assigned to different beats, and you really get a sense of an ongoing enterprise that is covering the computer and communications realm with a guiding intelligence behind it. I don't think these people could scatter to the winds and all do their own separate newsletters and be as effective as they are now.

I saw an article the other day saying that American Spectator was going on-line and would allow their writers to post stories directly without any intervening editing. They are timely and animated and have a lot of good writers in their group, so I think it will be interesting. But ultimately, they will find themselves wanting to do more editing. They're going to find that all these writers' first drafts are not what their readers really want. I've seen a lot of first drafts in my time and written a lot of first drafts, and I know very well that I don't want to read my first draft or a lot of people's first drafts. [American Spectator's] effort will succeed to the extent that they do supply editorial guidance to these writers and survey the material before they put it out. They can put out more material and people will pay for it. They won't be so dependent on the advertising. But in general I want them to edit. They will do better if they edit more, not less. The new arena is not as different from the old arena as it may seem. They can have all their archives on-line. Now that's a big asset. If you find some writer you like who you haven't read before, you can go back and find previous things they contributed. That will be the big difference if American Spectator goes on-line—or Upside, for that matter. You get the archives as well as the new information.

Is it clear to you yet whether advertising is going to be viable over these new kinds of networks? If people can control what they're receiving, aren't they likely to zap through the ads? It will radically change advertising. You'll no longer be able to trick the viewers into watching your ad. You'll have to create advertising that the viewers want to see. And you'll have to supply it to them at the time they want it. Whenever you want to purchase anything, you want to know what's available, what it costs, what its virtues are and what its flaws are.

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