Business pressure drives technology: Revolution in the entertainment industry

Chris Cookson, president of Sony Pictures Technologies, has been a participant in and observer of entertainment technology advances over the past 20 years. In a speech at the Economic Club of Phoenix, the W. P. Carey Alumni Hall of Fame inductee told a series of stories to illustrate his point.

The fundamentals of movie making — putting film in a camera, capturing a sequence of stills, editing them and playing them back so fast that the human mind blurs them into motion – was established by the turn of the 20th century and remained a constant for almost 100 years. But about 15 years ago, the process began to change fundamentally, to the point that today, almost all movie production is digital.

Change, in fact, is not the right word. According to Chris Cookson, president of Sony Pictures Technologies, it’s been a revolution. Cookson, whose career has spanned television and motion pictures, holds more than 30 U.S. patents, including several involving DVDs. Winner of two Emmy Awards, Cookson was recently honored with induction into the W. P. Carey School’s Alumni Hall of Fame. He holds two ASU degrees: a bachelor of science in engineering and the W. P. Carey MBA.

As both a participant in and observer in the development of entertainment media over the past 20 years, Cookson is especially well qualified to assess the role technology has played in this revolution. Technology enabled creative improvement, but the driver for change has been business pressure, Cookson says. In a speech at the Economic Club of Phoenix recently, he told a series of stories to illustrate his point.

Labor pressure

One of the first big changes to that fundamental process was the switch to electronic editing. About 20 years ago, movie makers began to scan film, rendering the images as electronic files, and editing them on computers. The change, Cookson said, was pushed by CFOs who thought that movies could be edited faster with fewer people

That’s not the way it turned out, however. “I don’t know that anyone who uses electronic editing to assemble motion pictures or prime time television has saved any money,” he said. Editors fell in love right away, though. Electronic files can be manipulated any number of times, whereas cutting and splicing physical film is practical only to a point. The upshot is the editor is free to tinker until he’s satisfied. In fact, editing now takes longer, and editors have more assistants than ever before, Cookson said

The move to digital cameras also was driven by business issues, he said. The most recent “Star Wars” trilogy were among the first films to be shot digitally. At the time, most directors still preferred film, but George Lucas’ story included scenes that required computer generation. So he used what was available — the same kind of digital camera used for television news and sports.

About five years ago, Cookson said, digital cameras capable of matching the performance of film cameras came to market, and TV began to move slowly in that direction

Then a business issue intervened

Cookson explained that two labor organizations represent the talent who work in the movies and on TV: the Screen Actors Guild, which represents actors who work in movies and a percentage who work on TV; and the American Federation of Television and Radio Artists (AFTRA), which represents TV actors. The industry rule, Cookson said, was that if the show was shot on film, the Screen Actors Guild presided; if it was shot electronically, AFTRA represented the actors.

“There was a lot of unrest in the industry and there was the threat of a strike. People were very uncertain about what was going to happen,” Cookson said. “So at the beginning of the season about two years ago, almost every new show that started said we’re going to shoot electronically so we can work with AFTRA.” The biggest boon to the electronic camera, Cookson said, was union unrest and the measures taken by the business side of the industry to keep making shows. Today almost every show is shot electronically

Shocks to the supply chain

Those digital recordings were predominantly made on videotape, he added, until earlier this year when once again a business reality intervened.

Virtually all of the videotape used in movie making was manufactured at one plant — a Sony factory in Sendai, Japan. On March 11, the tsunami that devastated northern Japan muscled through the factory at depths of two stories, wiping out the manufacturing facility. The staff was safe on the third floor, Cookson said, but the worldwide supply chain for the tape was broken. The remaining tape, in the holds of ships en route to customers, would last only two months.

“The industry radically changed its direction in response,” Cookson said. Instead of tape “people went to a system of using digital memory and hard drives to record.” Ironically, he noted, the supply chain for digital memory originates in Taiwan, which was flooded recently.

As a result, movies that might once have been delivered on a number of bulky reels can now be distributed on hard drives. Eventually, as bandwidth improves, that distribution will transition to networks. The cost to store a movie on a hard drive, he said, is small, especially compared to the cost of making prints of movies.

But digitized media is expensive if you are a theater owner. Cookson said it costs $60,000 to $100,000 to fit a theater for digital movies. “The industry has addressed this with a ‘virtual print fee’,” Cookson explained. Money formerly spent to make prints of movies goes into a fund to finance the equipment needed to convert theaters to digital projection.

Like electronic editing, “nobody is saving money by doing digital cinema,” he said. But, when the 10-12 year amortization is complete, going forward distribution will be more efficient – and greener.

Compressing the story

Cookson explained that compression technology carried the next several waves of change in the business. Developed in the early ‘90s, compression reduced the amount of data required for high-quality video by 99 percent. The technology allowed Time Warner executive Barry Levin to build out and test his idea for a “full-service network” on cable, giving customers access to a library of movies. His idea evolved into what we now know as video on demand.

“Certainly the ability to sit at home and control a movie from your seat is what drives Netflix today, and cable and satellite now offer on-demand services,” he said. “They all trace back to that one inspiration and that one test.”

At the same time, Cookson said, Warren Lieberfarb was in charge of Time Warner’s home video business, and he saw that Levin’s “full service network” would be the end of the VHS rental industry. He pushed for the development of the DVD – an endeavor to which Cookson himself contributed — which could store compressed data on a disk.

People are “pack rats,” Cookson said, and Lieberfarb expected that fans would want to collect copies of their favorites. Movies could be copied onto DVDs quickly, enabling the business to respond to consumer demand. In contrast, VHS copies had to be made in real time: a two hour movies takes two hours to copy. Plus the DVDs were inexpensive to make. It was only a matter of advancing the technology to produce Blu-ray.

Eventually these technological developments led to the “station in a box,” which allowed Fox and other newer networks to expand their markets through automated programming.

“In all of these cases the technology was there to fulfill the need, but the need was not identified based on the technology. The need was identified based on the business,” he said.

Cookson looked back on his decision to pursue an MBA after completing his engineering degree, and drew parallels to the industry where he spent his career. As an undergrad realized that the engineers don’t decide what the business is going to do. They figure out how to do something, and often they originate new technologies with business potential, but “the decision to go forward and actually create something, do something, deploy something – to go into business – is a business decision.”

“It’s exciting to look at the two in concert.”

Listen to his keynote presentation: