Hollywood's Quest for Innovation

As talks between screenwriters and producers reach a stalemate, there's a lot more to worry about than finding ways to monetize content

I'm not a screenwriter or a studio bigwig. So when you're talking about the writer's strike, I don't have a dog in this fight. But as an expert in innovation, I can say with authority that Hollywood is desperate for a little innovation.

Six weeks and counting into the strike and with no end in sight, a big chunk of the quarter of a million people who depend on the entertainment industry for their livelihoods are getting pretty well acquainted with desperation. Still, I expect many will say, "Innovation? That's what got us into this mess in the first place."

But in the long term, the challenges facing the entertainment industry are not about finding new ways to monetize content. The challenges I am talking about won't dissipate with a new Writers Guild of America contract. There are much bigger changes to come.

Even in an all-digital world, we'll always have writers. And we'll always have content. The Hollywood studios, however, will only be around as long as they can innovate and deliver the kind of entertainment the public wants.

Keeping It in L.A.

Consider the auto industry in Detroit, which lost the innovation sweepstakes to Asian car companies. Or New England, which snubbed PCs to stick with the minicomputer. In many ways, the internecine warfare between the Unix operating systems for minicomputers during the PC revolution is chillingly similar to the WGA negotiations.

If past is prologue, innovation will change how we live, work, and play—in ways we can't even imagine today. This will happen with or without the Hollywood studios. The center of the entertainment industry today is unquestionably Los Angeles, with more than 250,000 local employees and countless others depending on the industry in other ways for their business. There's no reason it shouldn't stay that way, but if we're not vigilant, it could just as easily move somewhere else.

There are already plenty of places ready to claim production as their own (Vancouver, anyone?), but L.A. without the entertainment industry would be like L.A. without the mountain views from the palm-lined beaches. It has the talent, diversity, entrepreneurial spirit, creative culture, and growing high-tech industry needed to maintain the lead. So it may benefit studio executives to consider a few guidelines for innovation, as they continue negotiations.

Innovators can be irritants. Innovators are rebels. They disrupt the status quo, threaten existing models, and frankly, put some people out of business. Innovators are like sand in an oyster. But don't banish the irritant. Listen. Because in the end, they might produce a pearl.

Embrace failure. There's no road map for how the entertainment business will succeed in a digital world. Embrace risk-taking and opportunity to allow new models to emerge. Ultimately, learning from mistakes is just as important to the innovation process as developing the business model.

No star system. We love the myth of the "lone innovator" who has a stroke of genius in the shower. But big innovations—the kind that seismically affect our lives—almost never come from one person alone. Consider biotech, the Internet, or even democracy. Hollywood is one of the few industries where teams are core to the model. Let's build on our existing infrastructure and value every contributor as we lead the way.

Innovation doesn't always mean immediate profit. Sir Tim Berners-Lee, the key developer behind the World Wide Web, is no mogul. And Sean Fanning, who single-handedly turned the music industry upside down, didn't create Napster to make money. But these innovations changed the game and opened up revenue streams unimaginable even a decade ago.

You don't have to be first, but you do have to adapt. Even if you're not first, it's not too late to come out on top. The concept for a Windows interface on PCs didn't come from Microsoft (MSFT) or Apple (AAPL). It came from Xerox PARC (XRX). Be receptive to new ideas, even if it may seem at first as if they will put you out of business.

Small is the new big. High-growth startups often unleash the most radical innovations. They don't worry too much about traditional models. MySpace (NWS) is a perfect example. Fortunately, venture investing has been robust in Southern California. If we want L.A. to remain the center of the entertainment universe, we should encourage a strong ecosystem where established corporations and the "creatives" collaborate with entrepreneurs.

I hope the writers' strike ends soon, and fairly. Not just so people can get back to work and continue supporting their families, but because the studios have bigger worries on the horizon, like how to embrace the ideas that might threaten business models today but will keep entertainment in business tomorrow. The good news is that it's our fight to lose. So whatever the entertainment industry landscape ends up looking like, I hope it features mountain views from palm-lined beaches.

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