The entertainment and tech worlds became increasingly intertwined in 2005, as the major Hollywood film studios made overtures toward new technologies in their perpetual attempts to diversify their revenue streams. Of course, companies must adapt to the changing times or die, and that’s just what many of the local studios did when forced to confront the much discussed box office slump of 2005, not to mention the gnawing reality that studios’ might not be able to count on double digit percentage increases in the DVD market for the foreseeable future. Disney was one of the studios leading the pack, confronting the new technological world head-on. In fact, Robert Iger, the new company’s new chairman and CEO who took office last fall, went on the record to state that his goal was to capitalize on new multimedia technologies. Though the studio had been making strides towards having a major multimedia presence in past years, perhaps 2005 was the year in which these lofty goals first began to become clear. In April, the company’s Buena Vista Games division snatched up Salt Lake City-based video game production house, Avalanche Software. Additionally, the company announced plans to open a new video game development studio In Vancouver, British Columbia, that will operate as a wholly-owned subsidiary. These moves undoubtedly pointed toward the strategy of the new Hollywood: creating intellectual properties to leverage in a variety of forms. Studios aren’t just expecting their films to make $200 million at the box office, they expect them to be licensed for toys, video games, cell phone, rings and in the future, downloads for the new video iPod. In 2005, Disney also began making its programs available for download for the video iPod, as almost immediately after the new technology was introduced, Robert Iger and Steve Jobs appeared publicly together to announce that episodes from “Desperate Housewives,” and “Lost,” would immediately become available for download. And as technologies such as TiVo make the advertising market shaky for broadcast television, look for the media oligarchs to turn to alternative sources of revenue, as they might not be able to count on lucrative advertising dollars, as more and more funds get shifted towards the Internet. Additionally, Disney took strides towards becoming a major player in the mobile phone market, creating a program with Sprint, called Disney Mobile that would offer mobile service that includes wireless voice service, exclusive cell phone options and a range of entertainment content for the family. The program is slated to debut next year and could make Disney a major player in the wireless game. The firm also further tried to penetrate the wireless market with the November purchase of European mobile video game company Living Mobile. But Disney wasn’t the only Valley studio making waves this year, as Warner Bros. Entertainment, also had an eventful year, releasing a string of blockbusters like “Batman Begins,” “The Dukes of Hazzard,” “Harry Potter and the Goblet of Fire,” and the unexpected hit from Warner Independent, “The March of the Penguins.” But Warner Bros. box office successes didn’t stop it from shedding jobs as it laid off hundreds of employees this fall, across its home video and television divisions. While the company didn’t clearly state specific reasons for the layoffs, many thought that the gradual slow-down of the DVD market might have had something to do with it. And it certainly seemed like 2005 was a year of consolidation across the entertainment industry, as the entertainment industry’s main independent studio, Glendale-based Dreamworks SKG, was purchased by Paramount last month for the whopping price tag of $1.6 billion in cash and debt. The company had been foundering in recent years, having jettisoned plans to build a massive Playa Vista headquarters and run a successful record label (DreamWorks Records was sold in October 2003 to the Universal Music Group). Additionally, the only part of the company that had been successful, DreamWorks Animation, spun off and became a publicly traded company in October of 2004. And while the animation unit’s movies were mostly hits, even the company’s stock hasn’t yet performed up to expectations. The ultimate reason why the company was sold? It’s practically impossible to be an independent in Hollywood in the 21st century. This truth has also collided with the plans of Chatsworth-based DVD distributor and nascent film studio Image Entertainment and the Studio City-based Hallmark Channel as both received buyout bids in 2005. As one of the more successful DVD companies around, Image had carved a niche for itself as an industry player, scooping up as many film libraries as it could and reaping hefty dividends from the still-large DVD market. But this success didn’t go unnoticed by Lion’s Gate Entertainment which made an unsolicited bid to purchase Image. A deal was never realized, as Image felt that Lion’s Gate did not properly valuate its true worth, but don’t be surprised if Image is eventually snatched up by one of the major studios in the coming years. The Hallmark Channel also felt the pains of being a stand-alone cable company, as it put itself on the market this fall. Though it did receive bids from various multimedia giants, the company also did not find a suitor willing to ante up enough dollars. Though most analysts agree that it is nearly impossible to be profitable as a stand-alone cable channel, as such firms lack the leverage to negotiate with the cable providers. And in 2006, look for many of these trends to continue. Expect a further consolidation of the industry, expect a further diversification of revenue streams among the entertainment powerhouses and expect to see technology changing the way the firms look at their bottom line.
