A few months ago, a dinner companion informed me that Google was in Hollywood trying to secure exclusive distribution rights to films and TV. Intrigued, I poked around with some folks-in-the-know and, sure enough, Google is wheeling-n-dealing for exclusives. That being the case, I have a suggestion for Google. Go all out and acquire an actual movie/TV studio… and the one to go after is Lions Gate Entertainment Corp.
Lions Gate is one of the last remaining independent studios in Hollywood and a deal would be relatively inexpensive for Google… LGF’s market cap currently stands at approximately $950 million, which is about the same as its annual revenues. Its vast library includes more than 5,500 film and TV titles, including the viral-hit “The Blair Witch Project”, last year’s Oscar-winner “Crash”, and Showtime cable channel’s hit show “Weeds”.
Google should acquire LGF with the direct intention of disrupting the Hollywood business model at every level. For instance, it should go through the arduous process of renegotiating, and securing, full digital distribution rights for all the titles in the library, making them exclusively available via Google Video.
Consumers should be given the choice to either pay to download & own, or to stream it free with ads. And the pay option should be priced substantially below existing home video/DVD alternatives (e.g. $3.00 for sell-through/ownership), to reflect the lower cost basis of digital distribution. Moreover, if the consumer buys the title, they should be able to do whatever they want with it for personal use… burn it to DVD, copy it to an unlimited number of machines, etc. In other words, no DRM (or one that is far less restrictive than anything out in the market).
The market window has finally arrived for digital distribution for film and TV products, and Google has the opportunity to leap-frog all competitors by packaging a service that gives consumers what they want. All other efforts recently announced (which deals I won’t name) are all sub-standard and user-unfriendly… the terms of nearly every service reflect the fear and hostility that Hollywood harbors for digital media distribution. By buying and operating its own studio and library, Google can pursue a path free of the legacy barriers that prevent all the others from being able to offer the market a solution with massive consumer appeal.
Google should also go into this with the full expectation that it will upset existing media distribution channels, particular for theatrical exhibition and DVD sales (e.g. Wal-Mart). Consequently, Google should prepare for the fallout… little to no theatrical support for new releases, a material decline in DVD revenues of library products, etc. But that’s OK… in fact, that’s the point. Google should set aside the old metrics and establish new parameters for success. You don’t win in Hollywood by making friends and convincing them to change their ways… you win by changing the game and out-flanking the incumbents.
The fact is that Hollywood will continue to fear Google no matter how lightly it treads. Given that, Google might as well throw out its sheepish disguise and act openly like the wolf that it is. Acquiring Lions Gate is probably the most efficient way to make a substantive, bold move without taking on too much risk. And if millions of consumers start to rely on them as a viable alternative for film and TV products, Google will not only have disrupted Hollywood, it will lead it into the future.
After all, Rupert Murdoch acquired his way into the Internet and installed himself as the first “social media mogul”. So why shouldn’t Google buy its way into Hollywood and go after the emperor’s throne?
(originally posted at http://gigaom.com/2006/07/19/maybe-google-should-buy-a-movie-studio/)