{"id":1889,"date":"2017-04-20T20:06:23","date_gmt":"2017-04-20T20:06:23","guid":{"rendered":"http:\/\/endcrawl.com\/blog\/?p=1889"},"modified":"2022-05-25T19:54:08","modified_gmt":"2022-05-25T19:54:08","slug":"film-industry-disruption-smiling-curve","status":"publish","type":"post","link":"http:\/\/endcrawl.com\/blog\/film-industry-disruption-smiling-curve\/","title":{"rendered":"The Film Industry and the Smiling Curve"},"content":{"rendered":"<p><strong>\u201cPliny. Pliny. Look. There\u2019s two things:&nbsp;Development and Distribution. Everything in between is just process.\u201d<\/strong><\/p>\n<p>It was Supersphere CEO Lucas Wilson who said this to me, more or less verbatim, several years ago. We were enjoying a dessert of shaved milk ice in Sawtelle and the conversation had turned, predictably, to disruption in the film industry.<\/p>\n<p>Lucas&#8217; words were&nbsp;dead-on. He was expressing two ideas&nbsp;here. First, he was describing the way that the old media film industry does (and does not) work.<\/p>\n<p>But more importantly, he was describing a <em>smiling curve<\/em>. And the smiling curve is critical in understanding both how films are made today, and where the industry is&nbsp;most vulnerable.<\/p>\n<h3>The Smiling Curve in Tech<\/h3>\n<p>The concept of the smiling curve was first proposed by Acer co-founder <a href=\"https:\/\/chaitravi.wordpress.com\/2010\/02\/10\/the-smiling-curve-stan-shih\/\">Stan Shih<\/a>. The idea is straightforward: when looking at his entire production chain, Shih observed:<\/p>\n<ul>\n<li>large potential value capture in the early design and R&amp;D phases;<\/li>\n<li>far less value capture in the physical manufacturing phase; and<\/li>\n<li>again a large value capture potential in the sales and marketing phases.<\/li>\n<\/ul>\n<div id=\"attachment_1906\" style=\"width: 650px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/smiling-curve-03.png\"><img decoding=\"async\" loading=\"lazy\" aria-describedby=\"caption-attachment-1906\" class=\"wp-image-1906 size-full\" src=\"http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/smiling-curve-03.png\" alt=\"smiling-curve-03\" width=\"640\" height=\"518\" srcset=\"http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/smiling-curve-03.png 640w, http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/smiling-curve-03-200x162.png 200w, http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/smiling-curve-03-300x243.png 300w, http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/smiling-curve-03-400x324.png 400w, http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/smiling-curve-03-50x40.png 50w\" sizes=\"(max-width: 640px) 100vw, 640px\" \/><\/a><\/p>\n<p id=\"caption-attachment-1906\" class=\"wp-caption-text\">Source: <a href=\"https:\/\/en.wikipedia.org\/wiki\/Smiling_curve#\/media\/File:Smiling_Curve.svg\" target=\"_blank\" rel=\"noopener noreferrer\">Rico Shen<\/a> \/ <a href=\"https:\/\/creativecommons.org\/licenses\/by-sa\/4.0\/\" target=\"_blank\" rel=\"noopener noreferrer\">CC BY-SA 4.0<\/a><\/p>\n<\/div>\n<p>The left side of the smiling curve requires design talent, R&amp;D budgets, and time.&nbsp;The&nbsp;right side needs&nbsp;established sales and distribution channels and large marketing budgets. In other words, both the left and right ends have big moats. That means fewer players\u2014and higher margins.<\/p>\n<p>The middle of the smiling curve, by comparison, has lower barriers&nbsp;to entry. But it&nbsp;also has far less&nbsp;opportunity for differentiation. \u201cManufacturing\u201d skills are simply easier to acquire. As Samsung <a href=\"https:\/\/stratechery.com\/2014\/samsungs-disappearing-differentiation\/\">has learned repeatedly<\/a>, being a mere component supplier&nbsp;is your one-way ticket to commodification. And breaking out of the gravity well is no small trick.<\/p>\n<p>This dynamic should be familiar to any Apple customer: we know that both design\/R&amp;D (left side) and sales\/marketing (right side) are based&nbsp;in&nbsp;Cupertino. That is the heart of what Apple does. Manufacturing, meanwhile, is&nbsp;safely outsourced to Asia.<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">7\/ Those co\u2019s sit at the bottom of a smiling curve with &quot;development&quot; (packaging, financing) to the left, and sales\/distro to the right.<\/p>\n<p>&mdash; Pliny (@iampliny) <a href=\"https:\/\/twitter.com\/iampliny\/status\/711908503997251584?ref_src=twsrc%5Etfw\">March 21, 2016<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<h3>The Smiling Curve in Film Production<\/h3>\n<p>Film studios and television networks behave in much the same way. In fact, their pipelines closely mimic the waterfall production models of companies that manufacture physical products.<\/p>\n<p>Following the dynamics described above, the \u201cmanufacturing\u201d aspect of filmmaking\u2014that is, shooting, editing, VFX, and finishing\u2014are all modularized and outsourced. Kinda like&nbsp;Foxconn. There&#8217;s a reason Apple doesn&#8217;t insource this work.&nbsp;Just like there&#8217;s a reason studios don&#8217;t have DPs or writers on their payroll. They don&#8217;t need to.<\/p>\n<p>So if you work in production&nbsp;or post, and have ever wondered why economic life feels like a never-ending race to the bottom, here is why:<\/p>\n<p><a href=\"http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/you-live-here-03.png\"><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter size-full wp-image-1907\" src=\"http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/you-live-here-03.png\" alt=\"you-live-here-03\" width=\"640\" height=\"518\" srcset=\"http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/you-live-here-03.png 640w, http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/you-live-here-03-200x162.png 200w, http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/you-live-here-03-300x243.png 300w, http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/you-live-here-03-400x324.png 400w, http:\/\/endcrawl.com\/blog\/wp-content\/uploads\/2017\/04\/you-live-here-03-50x40.png 50w\" sizes=\"(max-width: 640px) 100vw, 640px\" \/><\/a><\/p>\n<p>This doesn&#8217;t mean that what you do as an artisan has no value. Far from it. But know that your&nbsp;work is priced accordingly.<\/p>\n<p>(As an aside: this has&nbsp;led me to speculate&nbsp;that <a href=\"https:\/\/variety.com\/2017\/digital\/news\/apple-disney-acquisition-rumor-1202029827\/\" target=\"_blank\" rel=\"noopener noreferrer\">buying&nbsp;a traditional studio like Disney or Netflix<\/a> might in fact&nbsp;be an excellent fit for Apple.&nbsp;Like legacy media studios, Apple operates on tightly controlled, high-risk, one-shot waterfall models. The same culture that makes Apple somewhat <a href=\"https:\/\/stratechery.com\/2016\/the-curse-of-culture\/\" target=\"_blank\" rel=\"noopener noreferrer\">lousy<\/a> at developing software services also makes them outstanding at manufacturing physical devices. And that, in turn, could be a strong cultural fit, if the goal is to produce classic waterfall entertainment products like the venerable<em>&nbsp;feature film<\/em>.)<\/p>\n<h3>Disrupting the Smiling Curve<\/h3>\n<p>To be sure, democratizing the tools of \u201cphysical manufacture\u201d (shooting, editing, etc.) is important. But we&nbsp;might reasonably conclude that&nbsp;disrupting film and television won&#8217;t&nbsp;happen by attacking the bottom of the smiling curve.<\/p>\n<p>That is why I&nbsp;previously noted, for example, that <a href=\"http:\/\/endcrawl.com\/blog\/film-not-disrupted-yet-part-2\/\" target=\"_blank\" rel=\"noopener noreferrer\">technologists are focusing on all of the wrong areas<\/a>; and why I made a similar point when proposing&nbsp;that RED Digital Cinema, for all of its brilliance, disrupted the <em>camera<\/em> industry. But <a href=\"http:\/\/endcrawl.com\/blog\/red-camera-was-not-disruptive-innovation\/\" target=\"_blank\" rel=\"noopener noreferrer\">not the film industry<\/a> itself.<\/p>\n<p>Far more interesting, then, are new companies and challengers who are focused&nbsp;less on &#8220;maker tools&#8221;&nbsp;and more on the left and right sides of the smiling curve. Let&#8217;s&nbsp;call them Left-side Disruptors and Right-side Disruptors. And let&#8217;s&nbsp;start paying a lot more attention to them.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the film industry, you have two things: Development and Distribution. Everything else is just process.<\/p>\n","protected":false},"author":1,"featured_media":1899,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[17,9,3],"tags":[],"_links":{"self":[{"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/posts\/1889"}],"collection":[{"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/comments?post=1889"}],"version-history":[{"count":23,"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/posts\/1889\/revisions"}],"predecessor-version":[{"id":3262,"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/posts\/1889\/revisions\/3262"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/media\/1899"}],"wp:attachment":[{"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/media?parent=1889"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/categories?post=1889"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/endcrawl.com\/blog\/wp-json\/wp\/v2\/tags?post=1889"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}