The long tail in a very comfortable chair

If you haven’t noticed, I’m on fire today….. 🙂

There are some people who, for fun, like to write screenplays. They don’t do anything with them, they just write them and stick them in a drawer. I like to work on business plans.

I don’t do much with them either. The venture climate in Minnesota is as cold as the climate climate. To take the term literally, I don’t think there actually is a “venture” capital community in Minnesota. There is captial, but no venture.

Anyway….

I get a lot of ideas for new businesses. Some are pretty bad ideas, and I can recgonize that a few seconds after thinking about it. Some are good enough that they stay alive for a few years.

One of my favorite memes is the idea of the Long Tail (see the title of the post below). The idea is a pretty simple one, and if you spend enough time online, its probably a no brainer. As content becomes more digital and easier to create, there was be a greater fractionization of tastes. Blockbusters and hits will become less and less important. More and more money will be made off selling the bottom 10,000 movies/songs/books than will be made on the top 10. With network television in decline, there is less and less of a uniform culture where we are all consuming the same media. We end up having very individualized tastes and consuming patterns in media.

This is huge implications for the media business. It means fewer newspaper sales, fewer blockbuster movies, fewer platinum records, but more overall choice in music/film/books.

One business which has been widely considered to be in decline is the motion picture industry. People are seeing fewer movies in theaters, in lieu of renting DVDs and there are fewer big movies.

This is bad for theaters because they are built around the idea of the big picture and the big opening weekend. The theater near my house is really a nice theater. I’d argue its the nicest, or one of, in the Twin Cities. It’s an AMC theater in a mall. The seats are comfortable, stadium seating, and very big screens. The problem is, it’s totally overkill for 90% of the screenings they show. They might fill up and auditorium on a Saturday night for a first run movie, but for the rest of the week there are far more empty seats than people in front of each screen.

This is a problem. Building a new theater in a mall is not cheap. They have to amortize the cost of the buildout over a long time. Most of that cost goes completely unused 90% of the time. They make the vast majority of their money off of concession sales. They have to have an infrastructure to handle the busy weekends, but it too goes unused most days.

To top it all off, they are dependent on Hollywood on what they can show. If they put out crap, they have to show crap.

I think the answer to the problem the theater industry is facing is to embrace the long tail.

Here is what I’d do in the Gary theater:

– Most screenings of a movie will have 20-50 people. Build a theater to that size. Have very intimate theaters that are more akin to a large screening room than a traditional theater. Keep the comfortable seating and make the proportional screen size the same as a big auditorium. The experience of any given person shouldn’t be too different. It can actually be much better given the brightness used for most projectors, and the distance most people are from speakers.

– Remove all film projectors and use 100% digital. With smaller screens, you can get projection equipment which is very good, but a fraction of the price you’d pay for a projector for a large auditorium. The cost doesn’t scale linearly. You can get a good projector for a 200″ screen for $5-10k. A big auditorium projector can go 10-20x that.

– Remove yourself from the big studio distribution system. Once you go digital, your flexibility increases dramatically. In fact, you can show films directly off DVD and still have great quality. You can show old movies, foreign films, indie films, and if necessary main stream releases too. Because its all digital, you don’t need week(s) long runs for a film. You can easily run it one or two evenings without the overhead of shipping film reels.

– Aim for niche markets. When someone shows the Lord of the Rings trilogy back to back to back, you can be sure they theater will sell out. Same with Star Wars. There are foreign communities which might not have enough people to justify a big theater, but could easily have enough people to have a small auditorium for an evening.

– Serve yourself popcorn and soda.

Not only would you reduce your costs across the board (often dramatically), but you’d increase your margins on each ticket sale because your not playing first run films. You could sell concessions for 50-75% of the cost of a regular theater, give people a deal, and still have higher margins. At my local AMC, I usually try to count the number of people working at any given time. I usually count between 15-30 depening on the night of the week, and that’s just the people I can see. I figure you could have 8 small screens, run by 2-3 people and serve as many people as a large theater most nights of the week.

And you can also put this type of theater in small towns and other non-traditional locations.

The cost of getting this idea off the ground could be done with only a few $100k. Its a matter of working with the studios.