I’m a boomer, and for my generation going to the movies was a primary pastime.  With only 3 channels of TV, we looked forward to the movies as an alternative.  We also enjoyed the big screens, the color, and the immersion experience that the theatre provided.  And all of it was available for as little as $.25 for a matinee or just a dollar or two for a weekend feature with your date.

My how times have changed.  As demonstrated at the recent Consumer Electronics Show, one of the hottest items is home theatre.  We now have huge screens, crystal sharp images, bone jarring audio systems and even the ability to put in place theatre seating to give viewers the "movie experience" right in our homes.

Yet, most movie producers still release movies to the theatres.  Maybe that’s why movie viewership, revenues and profits were down in 2005.  They are still following an outdated distribution model. For many of us, going to the movies means a trip to our family room.  And the movie itself might come from the video store, or from the video showing up in our mail, or via a download from the cable or satellite TV company – or maybe even a download to our PC. 

USA Today ran an article about changes in the wind.  Small producers are starting to distribute their films straight to video (on-demand or on DVD) the same day they go to theatres.  Why fight (and pay big bucks) for distribution to theatres if the majority of viewers are waiting for home release?  While the big studios aren’t doing this yet, the appeal to most consumers is clear.

This is the way markets shift.  Slowly, but following definitely, in an evolutionary road toward the needs of customers.  Who fights this?  Those most invested in the old ways and are Locked-in to them.  Just like the music industry largely missed the shift from CD to MP3, the theatre operators and the large studios run the risk of missing this shift in movie viewership.  The studios’ largest customers are the theatre operators, and they will trumpet their superior environments and the rare viewer that will watch a movie multiple times there.  The risk to studios is they listen to these customers, who are ignoring the Challenges, and they too miss the shift until its too late.

The opportunity exists for the small player.  The companies that can move quickly to meet customer needs with equipment (hardware and software) to augment the trend, and the new producers who aren’t vested in the old system of distribution. 

For investors, the threats are real.  Investing in theatres is very risky going forward.  And investing in studios that don’t recognize the shift, and take advantage of it, has risks as well.  The opportunity, likewise, exists for investing in those who will be leading this shift by offering the products that consumers want when they want them.

Today each of my 3 teenage sons has a home theatre audio systems, with those thumping subwoofers, that make the house shake.  Their auto systems rival the ones in their rooms – and we have video in at least one car.  They are acquiring better monitors all the time.  They still like an occasional movie on a date, but 90%+ of their movie viewership is at home.  What do you think movie viewership will be like in 10 years when they are in their own homes and starting their own families?  Are you positioned for the shift – or are you planning on an extension of the past?

When markets shift, you can’t Defend and Extend your old Success Formula. And you can’t count on participants in your distribution channel to point out the shifts of end users – because they are busy defending their own business.  You have to be very wary of emerging new competitors.  And it is critical to create White Space to explore and learn about new ways to compete.  The Challenge today is very real for Disney and other large existing players.  Look for effective White Space in those companies – or find the new players who offer better opportunities for growth.