Dinosaurs Never See It Coming: Are the Gatekeepers Clueless?

Buzz Potamkin introduces us to disintermediation, the process of squeezing out the middleman and asks how much longer will the Internet be classified as "new" media before it becomes "the" media.

Months ago, when I first approached AWM about this article, the idea of a simple summation of my experiences in the world of the Web enticed me into believing that the words would flow with the usual rapidity and the piece would be short and sweet. Instead I've found myself struggling and sweating (the East Coast heat wave hasn't helped), throwing away far too many drafts, attempting to delineate what at first appears to be obvious, but on closer examination turns out to be far more subtle, not to mention complex. (Along the way I discarded the "this is what it is and here's how you do it" mode, so if you want that, go over to the Macromedia site for a complete rundown, free demos and downloads, and links to other sites.) It is easy to say that the Web (or the Net, if you prefer) is the communications medium of the future, and no one will argue. It is also easy to say that other media will have to adjust to this new reality, and again no one will challenge the statement. However, it is not easy to predict the scope of the transformation, the speed of the change, or the degree to which the status quo ante will be destroyed. And, you may ask, how the hell does all this relate to animation? Well, at least that answer is simple: disintermediation, and its consequences.

But before we get to disintermediation, let me digress for a personal note: the basis of the original idea for this article. When, aided by the 1994 Northridge earthquake, the siren call of New York became too great, we (my wife and I) decamped from the sybaritic hills of Los Angeles to return to the wilds of Greenwich Village. At that time I felt that the TV animation world was in the midst of a convulsion of disintegration, a process that had begun earlier in the late `80s and was going to continue through the `90s. Quite simply, there was an explosion of supply (more to the point, leading to over-supply) that would eventually drive the price paid down to levels that for the most part would turn the production of episodic TV into a cost center for vertically integrated media conglomerates. That's exactly where it is today, putting aside the massive support paid by governments around the world to keep local animation workers (and voters) happily employed. The outlets for the independent producer were shrinking, almost to the point of disappearance, as DreamWorks later discovered to its dismay. The only bright spot left in TV was direct-to-video, and yours truly (along with a raft of others) anchored in this safe harbor while the storm raged. Even there, however, you don't need a weatherman to know which way the wild blows, and (to mix metaphors) the handwriting was already on the wall.

In the past, I had been an "early adopter" (as they say in market speak) of various new technologies: my first computer use was in 1957; my first use of video editing was before the invention of electronic editing (don't ask -- it was rough); my first use of CGI was in the Neanderthal days; my first work in cable was before cable was cool; and my first PC was an Osborne. So where was the world going - and how was animation going there? It's hard to believe now that it's only a few years since I first saw Mosaic. (For those of you who don't know geek history, Marc Andreessen wrote Mosaic over the Christmas break in 1992, while he was at NCSA/UIUC. A little bit over a year later he was part of the team that left NCSA and formed a small company to develop Mosaic further. This little company soon thereafter changed its name to Netscape. If you haven't guessed yet, Mosaic is the DNA of the browser - Netscape or Internet Explorer or AOL -- you're using to read this.) I'd like to say that my first glimpse struck me like a lightening bolt, that I immediately saw the future laid out before me, but I can't, because I didn't.

My response was positive but muted, and I didn't even pay close attention to the Web for about a year - I was still in L.A., and more consumed by the immediate problems of creating and producing shows at a large studio. From that viewpoint, I could foresee how Mosaic (or any other browser) would change how we made cartoons. I could also see how it would change the flow of information in the studio, and in the larger world between businesses, but I didn't foresee that it would change the whole future of the biz - that took some time. (Although I did mention to the suits at the studio that I could imagine a future in which we became just a repository for materials that the consumer utilized to create his/her own show. They didn't like the idea - it meant a loss of control.)

It happened a year or so later. I had left the studio and, more importantly, I had seen Flash (which has become the de facto standard for downloadable 2D animation on the Web). Like a mystic in the desert, I saw The Vision: the World Wide Web would come to dominate the media in what others have called (I'm too conservative to do so) the greatest advance in communication since Gutenberg. Or at least it would change the more mundane concern closer to my heart: the distribution of what we call "TV animation" to the mass of consumers.

Which brings us to disintermediation. Disintermediation is the process whereby an intermediary is removed from an economic equation. In other words, how the middleman is squeezed out of a transaction, whether it be a tangible purchase (downloading software on the Net directly from the publisher, instead of going to a store to buy it) or the provision of a service (reading this magazine on the Net, once again directly from the publisher). Elsewhere on the Web you can find discussions of disintermediation with regard to the effect it has on the freer flow of information, which is the aspect of the Web that brings from media mavens the analogy with Gutenberg. The concern here is more with how it will change the patterns of commerce that have come to dominate our industry over the last 50 years. Disintermediation as a major economic force was first documented 25 years ago or so, when the process of corporate finance borrowing moved away from the banks (middlemen). Prior to then, banks would hold excess institutional funds, paying a lower interest rate to the owner of the funds than the banks received from the eventual borrower. (It's called the spread.) Borrowers found they could raise money at a lower cost by directly selling debt obligations (corporate notes) to the very same institutions, while the institutions found they could receive a higher return on their funds. These transactions eliminated the intermediary (the bank), and thereby avoided the cost of the spread to both the borrower and lender. The process revolutionized the banking industry, and in some ways led to all the banking crises since, as banks no longer had (or have) the highest quality loan customers and therefore have been playing in riskier arenas, like loans to Russia and investments in Internet start-ups.

In TV, the middlemen are broadcasters, cable and broadcast networks, and syndicators, and a process, not unlike what the banks suffered, is now squeezing them out. In the old days we called them "gatekeepers" (among other names not to be used in a family publication), and they controlled the medium while skimming the cream off the top. Simply put, they paid a set license fee to the producer (who did at least keep other rights) and derived all the income from the transmission of the shows. With the fragmentation of the audience since the early `80s, which has been noted previously in Animation World Magazine, audience size has diminished to the point that most straight license fee deals are no longer feasible for producers. As a result, the gatekeepers have found it harder and harder to source shows in the former fashion.

Many of our friendly vertically integrated media empires have spent the last decade doing their best to avoid the negative results of disintermediation. The standard corporate answer to this squeeze is vertical integration, whereby a media conglomerate controls all the steps from creation through final delivery. Time Warner is perhaps the best example: one division creates the show, another distributes it, yet another exhibits it, and still another delivers the show to the consumer through a cable into the house. Simple solution - an adaptation of the old model. And while it's working for the time being, it may not work so well in the future.

With the advent of Flash, and other means of delivering animation over the Web, the traditional form of distribution is under attack. The number of sites offering animation entertainment already outnumber the cable and broadcast networks, and it is only a matter of time before their audience size grows exponentially and speeds the erosion of the "old media" dominance. Aiding this trend is the oft noted fact that youthful audiences are early adopters of new media. On the Net, the highest penetration figures are for the age group under 24 (over 80% of teens regularly use the Net), and TV claims that Net users were previously "light TV users" does little to alter the reality that there is a seismic shift in entertainment patterns.

Even more frightening to the old media, the Web has the power to change the relationship between creator and viewer in ways we are just beginning to understand. The time frame between initial development and eventual distribution has been compressed, and feedback from the audience is now immediate. It's not only possible that a single artist working in a garret can create a web site seen by millions in a short period of time, it's already happening. Hamster Dance (while not using Flash) is not only constantly sold out of merchandise, it has also fostered literally hundreds of imitators - there's even a web site devoted to listing over 200 other dancing sites ( Animated Dancing Pages ).

Disintermediation is rampant: the consumer can see nearly anything she wants, virtually whenever she wants it. My "create it yourself" whim from a few years ago is now a reality - see WhirlGirl - and the number of animation projects out there on the Web is astounding, from weirdly interactive ( Spumco ) to pure scatological not-for-the-kids entertainment (Eggtoons). It is now evident even to the naysayers that the Web is far more efficient at delivering a multitude of choices than any distribution medium in use up to this time. This process has just started; in an analogy using TV terms, and despite the plethora of sites out there on the Web, we're still in the early 1950s. For those of you who don't remember, that was a time of small black & white screens, limited choices, and bad reception. Compare that with where TV is now, and you'll have an idea of the scope of changes to come in the new media. Buzz Potamkin is an award-winning independent producer, best known for The Berenstain Bears and Dr. Seuss. Before he escaped L.A. for New York, he had been President of Southern Star Prods. and also Executive Vice President of a major cartoon studio. In the Internet world, he is on the Board of Directors of Visionary Media, the creators of WhirlGirl.