In Part Two of our Four-Part series on New Hollywood, we bridge the gap between the game and film worlds to reveal how game engine-powered virtual production can transform how value is delivered in Hollywood.
“It is the framework which changes with each new technology and not just the picture within the frame.”
Marshall McLuhan, Philosopher & Media Theorist
2019 was a banner year for the global entertainment industry (defined as film, TV, and streaming). For the first time ever, it surpassed the $100B threshold in total revenue.
Meanwhile, the global gaming market in 2020 is set to exceed $174B in total revenue, making it about the same size as both the global entertainment industry and North American professional sports markets combined. This occurred at the same time Hollywood lost 80% of its box office revenue due to the pandemic.
In fact, the pace at which the gaming industry is eclipsing traditional forms of entertainment is an old story. One neatly captured early last year in tweet form by venture capitalist Gavin Baker when he noted how gaming is “the only kind of entertainment riding Moore’s law” and the only one “taking revenue and engagement share from all other forms of entertainment for the last 40 years.”
Unfortunately, misalignment in Hollywood between digital SVOD platforms and the mainly analog content that populates them limits the potential of these platforms. Digital gaming platforms, by contrast, are composed exclusively of content created using both digital assets and digital workflows. Put another way, gaming is a digital form of entertainment built for digital distribution.
This more efficient and seamless alignment between inputs and outputs leads to a more reliable product-market fit feedback loop in the gaming world. Is it any wonder, then, why engagement share is flowing away from traditional forms of entertainment to gaming for the last 40 years? It’s not simply a function of the immersive nature of games, there’s something deeper at play here: the UX itself.
Some industries have made the pivot from analog to digital quickly, others, not so much. Hollywood falls into the latter category. It has been slow to adjust not only to how it distributes content but also how it creates content in a digital platform world. Netflix and the pandemic accelerated the adjustment period on the distribution end of the Hollywood supply chain but there’s still a lot of work to be done on the content creation end.
What lessons can Hollywood learn from both the gaming and software worlds as it completes its slow transition from an analog era to a digital one?
GaaS (Games as a Service): The Birth of Living Games
Games used to be sold like movies. Many still do. Big release dates meant big marketing spends meant bit hits or big misses.
But over the last decade or so a revolution has quietly taken root within the gaming industry that is upending the underlying hit-driven structure of the industry itself. Games have been moving away from a pure sales-driven model (games as a product) to a free-to-play (FTP) recurring revenue model, or GaaS (Games as a Service). This is very similar to the disruption that occurred in the software industry with the advent of SaaS (Software as a Service).
Like SaaS, FTP/GaaS games are iterated and improved upon over time via regular updates. These updates usually include monetizable new content that keeps players engaged from one iteration to the next for years after first release. This is why these games are sometimes referred to as Living Games. The GaaS model leads to a sort of platform-ification of these FTP games (hello, Metaverse), one that monetizes micro-transactions, expansion packs, and/or season passes within the games themselves (hello, Fortnite).
So, what does Hollywood have to do with this? After all, movies and TV shows aren't games and certainly aren't SaaS-like platforms.
Game Engine-Powered Virtual Production: Bridging Two Worlds
Today, thanks to major efforts by Epic Games and Unity, virtual production now lives between the game and film worlds. Harnessing the same tools used for game design, filmmakers are able to not only virtualize traditional filmmaking tools but also experience a large portion of their computer generated production in real-time. And while we are still a few years away from delivering a completely photoreal final rendered frame in real-time, filmmakers can get much closer to mimicking the experience of a live-action production with less cost and fewer restrictions.
In the meantime, filmmakers are still able to take advantage of all that game engines have to offer. Beyond the real-time experience of virtual production, filmmakers can take advantage of real-time physics, lighting, effects, and more. Even VR, AR, and XR are built right into the game engine.
This combination of technologies (game engines + virtual production tools) means that the digital assets and content created using game engine-powered virtual production can be leveraged to far more powerful and flexible effects than simply producing a new photo realistic version of The Lion King.
Game engine-powered virtual production allows for a similar transformation of value to occur in Hollywood to what occurred in software and gaming. Virtually produced content distributed on digital platforms can now be iterated, updated, and improved upon for audiences over the lifecycle of that IP based largely on audience feedback, inventing what would be, in effect, Content as a Service or CaaS.
CaaS (Content as a Service): A New Value Delivery System
CaaS creates, for the first time ever, a true product-market fit scenario in Hollywood and fundamentally alters the underlying value proposition of IP itself for SVOD platforms such as Netflix.
Platforms like Netflix are recurring revenue companies, which means retaining subscribers is as important to their business models as gaining subscribers. Therefore, IP that can be regularly updated, improved, and iterated upon encourages rewatchability, which increases audience retention. All of which means CaaS content is inherently more valuable than the rigid analog forms of content we’re used to seeing.
And what would these updates look like? Well, they could be as simple as updating the quality of virtually produced content from one season of a show to the next so that Season One always looks as good as, say, Season Five (think of how antiquated Toy Story looks compared to Toy Story IV). More complex uses include retroactively augmenting the narrative (e.g. adding additional story elements to earlier seasons and/or planting narrative Easter Eggs) to better reflect how a storyline is currently unfolding. Even personalizing the story itself by creating different identities for the same show is possible in the not-too-distant future. For instance, characters and environments could change based on geography and personal affinity.
What is important for content creators to understand here isn’t so much the specific use cases of CaaS at this early juncture but the potential feedback loop that can be nurtured between creators and audiences. Successful storytelling relies on a clever balance between fulfilling and subverting audience expectations. Currently in Hollywood, content lives in a black box until exhibition and usually never changes after release. With CaaS-driven content on digital platforms, showrunners and other creatives have the opportunity to manipulate story structure and digital assets in a much more strategic manner.
[A note of caution for SVOD streamers: as Moore’s Law continues its inexorable march, digital content created using game engine-powered virtual production has the potential to bypass current Hollywood distribution modalities, including SVOD. Think TikTok, YouTube, Twitch, game platforms, etc. YouTube alone gets 500 hours of new content uploaded every minute of every day, and is the second most used search engine on the internet]
The Future of Transmedia: A Unified Experience
Of course, there is an inherent difference between games and TV & film. Games are, by their very nature, immersive. Filmed content is not. This makes it easier for games to evolve into true platforms, like Fortnite.
However, stories and characters are what people fall in love with, not immersive worlds alone. This is what Hollywood excels in and what game developers are getting better at. As we mentioned in Part One of our series on New Hollywood, the most valuable properties in all of media are stories set in expansive and immersive fantasy worlds. These are the worlds the gaming industry almost exclusively deals in and Hollywood blockbusters are centered around. And at least since the Greeks audiences have wanted to immerse themselves in their favorite stories. We are now at a point where they can.
It would make sense then for Hollywood studios of the future to create both games and serialized content at the same time to mutually reinforce the other - stories that hook the heart so audiences stay to play. In fact, many games do this already, to a degree. For instance, games like The Last of Us thread narrative scenes throughout gameplay to propel the inner tension and action of the gameplay forward. In this context, The Last of Us is as much a playable story as it is a narrative game. Studios of the future built from the ground up around game engines and virtual production could do this on steroids.
With game engines, it’s now possible to develop digital assets once and deploy them across platforms: games, TV & films, and digital media. Each medium has different cadences, different constraints, and different technical requirements but the foundational digital assets created using game engines to cross pollinate these ecosystems would generate a truly unified Transmedia experience for fans.
Currently, most Transmedia is balkanized across ecosystems with key underlying rights licensed across different media stakeholders (film, gaming, merchandising, publishing, etc.). This means that when you experience an IP in game form it doesn’t really feel like the world you encountered in film form. With game engines and virtual production, the walls between these worlds collapse.
The moral of this story is that the game and film worlds are not mutually exclusive mediums but mutually reinforcing ones (we can see this positive reinforcement dynamic at play in the graphic below even when content is balkanized). In this context then, Content as a Service can be leveraged to reinforce Games as a Service (and vice versa), creating Living Stories that can be watched and played.
Source: Parrot Analytics
Of course, to compete in a digital platform world, Hollywood studios of the future require a level of operational flexibility current studios simply don’t possess. Hollywood finally has to learn what the tech industry has known for decades: The waterfall approach doesn’t work in a software-driven world. In other words, it’s time for Hollywood to get Agile.
In Part Three of our Four-Part Series on New Hollywood we show how Agile Principles can be harnessed to create a virtuous feedback loop with audiences and why Hollywood’s antiquated Waterfall Workflow doesn’t work in a game engine world.