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Darcy Antonellis: The Business of Digital Movies

Darcy Antonellis is president of Technical Operations at Warner Bros. Entertainment, a position she has held since January 2008. In this position, she develops, adapts, and leverages new technologies to support Warner Bros.’ various businesses. The scope of her assignment covers production, sales, and accelerating the movement of products from production to the marketplace. She leads Warner Bros.’ activities in defining the technical standards for the secure digital distribution of Warner Bros.’ intellectual property as well as managing their attendant copyright issues. She is also responsible for worldwide supply chain management from sourcing, procurement, conversion, and logistics management to coordination and collaboration with partners and retailers.

In her assignment, she works closely with parent company Time Warner and its domestic and international global public policy offices on the wide array of policy issues connected to technology.

Antonellis served as executive vice president for Distribution & Technology Operations of Warner Bros. from 2003 to 2008 where she was responsible for overseeing areas directly related to the Studio’s technical strategic planning and implementation related to worldwide distribution of all the studio’s content, protection of content (film, television, and video), asset management and distribution through traditional, new and emerging outlets. In her antipiracy role, she was responsible for the coordination and facilitation of the studio’s day-to-day intellectual property protection activities and initiatives on a global basis.

Prior to joining Warner Bros. Technical Operations, Antonellis was vice president for Technical and Olympic Operations for CBS Inc., having also served as vice president for Technical Operations in New York and director for Washington Operations for the CBS News Bureau in Washington, D.C. She also served as vice president of operations and engineering for WTTG-TV, the Fox affiliate in Washington, D.C.

A veteran of three Olympics, she last headed up operations and engineering for CBS Sports’ coverage of the 1998 Winter Olympics in Nagano, Japan. She also worked as director of operations stationed in Saudi Arabia and Kuwait during the Gulf War. She has received two Emmy Awards for technical production work on the Olympics and honors for work in the field of engineering from her undergraduate alma mater, Temple University. In November 2003, she was named a fellow of the Society of Motion Picture and Television Engineers.

She has an undergraduate degree in electrical engineering from Temple University and an M.B.A. in finance from Fordham University. She has two patents, one related to motion picture distribution and one to data compression.

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This Conversation took place in San Francisco February 22, 2011, and included Darcy Antonellis, David Gautschi (dean, Graduate School of Business, Fordham University), and Al Erisman. It was updated in September 2011.

Ethix: The digital age is changing businesses. Content-rich businesses like newspapers, music, movies, and television have been especially affected. How are you learning from other industries to navigate the challenges for movies and TV?

Darcy Antonellis: We have certainly tried to take a few pages, not from their strategies since they are still struggling to find a business model for this new world, but from the dilemma they have been in. We must make changes to respond to the culture, to the way people want to access content today. We have to be willing to take risks, to try things that just aren’t going to work. But the world is changing in a way that requires us to be able to adapt quickly.

Challenges for a Content Business

We are spending much of our time today working on our business models going forward.

When I interviewed Lew Platt, while he was chairman at HP, he told me that 75 percent of their revenue came from products that didn’t exist 18 months before. They had to constantly kill their own products, even though they were successful, in order to keep going, It sounds like you’ve got a similar environment.

Absolutely. The elegance in what we do is just that. When a part of the business is trending, we must recognize that trend and respond to it. We have had a wonderful record for the last dozen years or so with significant sales of movies through DVDs but industry financials show that DVDs are in decline. It will be a hard record to maintain going forward. Now we overlay Blu-ray and you recapture some, but not all of it. Steady state is not an option, so we look at the options to grow in this digital world. Gaming is becoming a much bigger part of our world today, for example, as is global distribution. We have to fundamentally change what we do rather than staying with what we did yesterday.

How does gaming fit into the ecosystem of your movie products?

Putting the gaming and film experience together into an ecosystem requires us to think differently about the different demographics of our consumers. Gaming is a big piece of the lives of our younger consumers, and we want to participate there. We must respond to the needs of this market, recognizing as they age they will become a part of the mainstream market. This means we have to be very careful to think about our changing customer base while recognizing that when they spend time on one area they will give up time in another area.

Gaming is a big piece of the lives of our younger consumers, and we want to participate there.On the positive side and completely unexpected, we’ve learned there is a fairly broad subset of females ages 18 to 34 on the gaming side. Even females above 35 are placing demand on these products. This is different from the common knowledge that gaming is dominated by young males. On the other hand as we have tried to leverage gaming from the movie side, we have found that you can’t assume that branded titles that you port to a gaming equivalent will perform. Each has to be evaluated discreetly.

How do you deal with the constant adaptation and change — maintaining the innovative edge while continuing to destroy products that have been successful for you in the past?

It’s frightening to get out of that comfort zone, especially that comfort zone that happens to be successful. I have an offsite coming up with our team and the topic is innovation. We must be able to improve our ability to churn very rapidly. We do have support for this within the highest levels of the company. It’s about taking some calculated risks, adapting versus analyzing, and generating yet another plan on the plan.
We must be able to improve our ability to churn very rapidly.
One of the challenges of the digital age is the way people are wanting to segment content. They don’t want to buy a music album, they want a song. For TV, they may not want a premium channel, but they want a particular program. How is this affecting your business?

I was recently on a panel where that question came up. Here’s how the cable side answers this. They still see a broad desire in the market for specific packages, though over time it is thought that other options will emerge.

But the competitive pressures may lead to changes in keeping all of the programming together, and it is starting to happen now. People can choose particular programs and content over the Internet through a whole host of channels, which means you don’t necessarily need a complete package subscription. College students are doing more of this today. It does drive the question of who owns what.

Scope of Warner Bros.

To establish a context, perhaps you could tell us the scope of what Warner Bros. is doing today, and your responsibility in that work.

I am responsible for the technology strategy for Warner Brothers. I work across Time/Warner with people in the various parts of the company to develop policy and strategy for the company.

Our company has gone through some significant changes. We have narrowed our focus by selling off cable and AOL. This makes us a content creation and distribution company. The companies that make up our portfolio are Warner Brothers, the Turner networks including CNN, Time Inc., and HBO. Warner Brothers represents about 30 percent of the portfolio. We spend a lot of our time figuring out how to deal with the technology enablers and the disruptive components affecting our traditional businesses.

We spend a lot of our time figuring out how to deal with the technology enablers and the disruptive components affecting our traditional businesses.
We have existed as an industry making good margins and big revenues from a half dozen traditional business areas. There was a very careful model for how we produced and distributed content, whether film or television. You get an idea of scale by looking at the industry. We are the largest producer of content of the six major studios. Our theatrical slate in a typical year is about 24 films, where four to six of them are what we call tent-pole titles, such as a Harry Potter film.

On the television side, we have some 50-plus series in distribution throughout the world through various syndication outlets. We also generate from 15 to 25 pilots for new titles per year, trying out new themes and shows. We have about 7,100 films and about 60,000 hours of television product in our library.

Our legacy businesses are in six or seven areas. We make the film, we We are the largest producer of content of the six major studios.release it theatrically, it then goes to the airlines for distribution on airplanes, it goes through a series of distribution mechanisms for the home entertainment world, and ultimately makes it onto television. Introduction of digital channels, transactional offers, and subscription have been added as well as efforts within the direct-to-consumer front. These are all intended to bolster the long-tail of content beyond existing channels and to reflect access that consumers want.

We have recently added a huge gaming component to our portfolio. We acquired eight companies from around the world with about 1,800 game developers. In a couple of years we have become the eighth largest game company in the world, and we are proud of that. Not unexpectedly, there is a lot of focus on online gaming and its opportunities within what has been a console gaming industry.

As entertainment is shifting from in home to the person, how are you responding?

I call this portability. Our work with ultraviolet is intended to address some of the forms of consumer frustration, making content available in a variety of ways. On the gaming side, people have a fixed amount of time. Even kids have limited time, though it sometimes doesn’t seem that way. One of the reasons we got into gaming is that we saw a lot of time shifting to this kind of content. Now it is shifting away from consoles to PCs and portable devices. We are working to own pieces of that whole online experience, whether consuming content or gaming. And the social aspects of all of these activities can’t be underestimated.

The Role of Technology

What is the role of technology in all of this?

When we look at the disruptive elements of technology, we see them as both risks and opportunities. Here are some data points. The whole notion of device innovation is changing our world. Consider the iPad, smartphones, and connected TVs. At the consumer electronics show, we saw a sea change this year. This was the first year where it was about devices ready to be sold in mass quantities to the general market at price points that were accessible, not prototypes that may or may not make it to the market.

These devices, coupled with improved networks, are two key enablers for a different future. The U.S. still ranks in the low teens compared with some of the nations of Western Europe and parts of Asia Pacific in terms of network connectivity. But this still represents a huge enabler for the U.S.
The U.S. still ranks in the low teens compared with some of the nations of Western Europe and parts of Asia Pacific in terms of network connectivity.
The last piece for us is the notion of a more impactful experience. Many people today have a high-definition home theater, including access to 3D. They are highly social when it comes to entertainment and interaction. Even the whole introduction and growth of digital games can really dramatically change the nature of what our business is.

So it seems there’s this dichotomy between protecting your old business and moving to a different environment where the problems will be different. How do you do those two things at the same time?

That’s the best part of my job right now. We have colleagues across theatrical and home entertainment and television. There are new things for new partnerships they’d like to create and new services that they’d like to try. As I was coming here in the car, we were talking about the new home premiere service – theatrical content available to the home in an HD presentation, eight weeks after theatrical release. We’re interested in trying it out.

To do so, we have to be able to deliver that service to the home in a protected fashion because piracy is fundamental to our business. Getting access to high-quality copies early in the sales window sets off a supply chain for pirated material like none other. A roughly 2.6 billion disc manufacturing capacity exists across the whole of Asia Pacific, much of which is used for pirate copies. These discs are then shipped across Western Europe — typically a title is available in hard copy within two to three days. It’s big business.
A roughly 2.6 billion disc manufacturing capacity exists across the whole of Asia Pacific, much of which is used for pirate copies.

Intellectual Property Protection

It’s not just a few hackers on the corner.

No, it is real money, and it’s the reason for our anti-piracy group. We leave it to the Department of Justice where professional crime syndicates are involved like in places like Russia. We need protection to secure the content in the high-value window. At the same time, are we willing to test business models without having everything we need in place at the time of launch? The change for us has been to say “yes.” In the past, we had to have absolutely everything in place before we would try a new service. The market is just changing too dynamically. If we wait for every “t” to be crossed and “i” to be dotted, we’ll miss it. That’s the piece that I have to balance.

The opening chapter of Chris Anderson’s book Free, he describes a model for protection of information. He said the Monty Python group got tired of all their stuff being pirated, so what they did was put it all out in high-definition content for free, beating the pirates at their own game with higher quality content. But they also promoted the sales of their products on the same sites, and found their sales exploded. Does that model make sense to you?

I definitely agree with the quality of service, premium offer. Consumers have told us that. That’s why they’re willing to pay on iTunes. Monty Python is an interesting property and that probably has lent itself to that approach. But putting a blockbuster, tent-pole title out there for free, for a title that doesn’t need any real marketing, is just cannibalistic. So I don’t subscribe to the idea of just putting anything out there for free to see if it’s going to drive sales, because that doesn’t work for every type of product. That said, there is a changing world of marketing today, and a right role for free stuff is a part of that world.
We also need to compete with our content against free.
We also need to compete with our content against free. Interestingly, in the 17- 65-year-old demographic, and that’s a pretty big sample size, we have learned that people are willing to pay for content. But the expectation of the user is that this access must be easy — easy access, easy user interface, with the right price point. This is not a Saturday Night Live script where you measure revenue by the number of viewers. We need to maintain a market share with a revenue model that makes the business work, and that means resetting the price points in our market. But for a quality experience, people will in fact pay.

Larry Lessig argues in his book Remix that we need a new way to handle the intellectual protection for media. We have the concept of “fair use” in text, where a writer is free to quote from a copyrighted text, building such a quote into her argument. But there is no such “fair use” concept for music and video, requiring advanced approval before using a small cut from protected media. Even kids are liable when they create mash ups, putting video and sound from various sources together. Any thoughts on this?

Our IP: DMCA [Intellectual Property: Digital Millennium Copyright Act] lawyers don’t agree with him. We would argue there’s absolutely a framework for fair use and no evidence of legal challenges here. The content industry has generally taken a very light touch to such use. YouTube applications, where clips are used in mash ups, are out there without challenge. That isn’t the big issue. The big issue for us is when you have films being used as the masters to be virally distributed for free on rogue sites. These are used to support websites that generate massive amounts of revenue from advertising illegally, or to kick start the physical supply chain.

Do you think the law is clear there? That the industry takes a light touch is one thing, but do you believe the law is clear here?

Lessig has his view that the law is not clear. Our view is that there’s a clear framework and that our behavior and reactions support that.

Is there pressure to change the law?

Absolutely. At the end of the day, what we seek to retain is not just about media and entertainment. I’m a patent holder so I feel very strongly about the notion of protection. We aren’t a service-based country anymore. We are an IP country. To protect our ideas, our innovation, my personal view is that it has to be one of the top priorities for the administration. IP is what we use to generate jobs and stimulate the economy. It’s what we use to engage other countries. Our particular business is roughly 80 percent of the market share, and we’re the only industry in the U.S. that has a positive balance of trade in every country. Whether it’s our industry, aerospace, or any other industry, protection of our ideas and innovations is at the very heart of what we do. There is a growing recognition from the policy side, up to and including the White House and President Obama, that this is an increasingly important issue.
I’m a patent holder so I feel very strongly about the notion of protection.

Business Trends

In addition to the challenges from technology, Warner Brothers operates in a changing context of business as well, from the management of people to outsourcing and globalization. Let’s start with how you manage a modern group of technology-savvy workers.

The difference right now is managing “20 somethings” technical people. If you take Millennials and Gen Yers, their whole view about how they want to participate is completely different from the standards and practices that were set when I was in school. There’s a fabulous book called Nurture Shock that talks about that. We have done a disturbing thing for a good portion of the Gen Y generation. Everyone gets a trophy regardless of performance. I spend my time creating an environment that enables them to thrive, but at the same time overlays a level of responsibility. It involves channeling that fabulous talent, saying “This is great, but there’s got to be a deliverable on the other side.”

We’re working on a couple of projects and its challenging to figure out who your partners are and how safe your idea and concepts are going to be. At some point you must make decisions and take risks, and hope you don’t end up with lots of derivative works kicking around.
It’s challenging to figure out who your partners are and how safe your idea and concepts are going to be.

Technology and Education

As we’ve watched the jobless recovery, it occurs to me that perhaps this is due in part to technology. Jobs that used to be there are being more and more automated. The recession demonstrated that you can get by without as many people to do what you did before. What is your take on this?

It’s frightening to me, because I agree with you. I think that the recession created an immense wake-up call, an opportunity for lots of companies to retool and reset how they do business. Our industry did it as well.

It also blatantly exposed how bad our K-12 educational system is. I don’t even know how these kids are going to compete later on. In emerging markets there are students who are being funded to come here to study or work at the university level, and take what they learn back to their home country and compete quite well against their American counterparts. They can do this because of the quality of education they bring with them. It’s not just math and science, it is also geography and writing skills.

We have always had technology substitution. When the automobile came in it displaced all of the ecosystem that supported former transportation systems. There was a bit more accomplished at the high school level than there is today so people could be reoriented and assimilated into the new industries. It’s really hard now.

Take, for example, clean energy. We had some of the best technology, and we had a window where we were far ahead of competitors in the development side. We do little in the area of retraining people whose jobs have gone away. Maybe they aren’t the designers but could in fact be the implementers and the technicians, but now that work goes offshore.

We do a significant amount of our development offshore because the incentives aren’t there to do it here. This gets back to the protection of IP. For us, all of the key design work, particularly the highly specialized user interface work, is done here. We do a significant amount of our development offshore because the incentives aren’t there to do it here.Some of the development that is offshore could be done here. Why couldn’t we be doing more in places, communities with incentives provided to keep the work local?

We were talking about 3D before. Much of the rendering for 3D involves the equivalent of a visual artist roto-scoping images for creating those layers, because none of that is automated yet. All of these developers are in Mumbai.

Outsourcing

If the rendering for 3D is taking place offshore and if other critical technical stages, content, and even distribution take place offshore, then others are learning. At some point they will be able to replicate or even advance what we initiated.

Absolutely.

This creates a whole new IP problem. What is the product, who owns what, and are U.S. ideas going to be ones that are transportable around the world.

Industry Challenges

What do you consider the biggest challenges facing your industry?

First is the notion of piracy and what that means. We created our piracy organization about six years ago, just after the challenges that arose in the music industry. We benefitted from the delays in network capability, since downloading movies required much more capability than text, pictures, or music. This limited the ease with which people could pirate our content until recently. We have used these last six years as a time to get ourselves organized around a number of initiatives that have slowed the progression. All of this raises the question: What is our future business going to look like?

We benefitted from the delays in network capability, since downloading movies required much more capability than text, pictures, or music.

I mentioned the content that we manage. It is the amount and value of this content that brings into focus the importance of piracy. To the six MPAA member companies, the latest survey showed about a $7 billion dollar revenue impact in a year from piracy. This is from an approximate $90 billion dollar overall industry revenue, so piracy is significant. This varies significantly by market. In the U.S., we have a single digit issue, 7 to 8 percent. In emerging markets, those numbers are more like 93 percent. China happens to be one of these. To break into those markets is very difficult, and we have decided to forgo our traditional home-entertainment markets and go right to digital. You can’t rationalize an investment in the physical distribution of disks in those markets. The margins are much better on our digital distribution business, and because of their network connectivity, where even in the emerging markets they are among the best, we can make a business of this.The latest survey showed about a $7 billion dollar revenue impact in a year from piracy.

Technology also disrupts our business model. We need to increase the accessibility of our content, to all of the new devices. Consumers have been very clear about that. There used to be a few and now there are dozens. What is challenging here is to try to maintain or improve our margins on some of the new devices and not completely obliterate our profitable legacy channels.

We often are asked, why don’t you make it all digital? But the home video market, particularly in the transition to Blu-ray, still does quite well with the disks. So that transition is both challenging and fascinating.

In general we will work with a diverse set of partners that provide a platform of technology and deliver high quality, reliable service. I will watch a movie on my iPad and it’s fabulous. I will use a smartphone as a hub to get to the television in my living room. These examples represent a whole host of partners we are now working with. If we had this conversation five years ago, it would have been very different.

I mentioned that 50 percent of the growth of our business is international, and these new delivery mechanisms drive that growth.

What do you do with all of your older content?

One thing that we have done with some of our older games is to rework them to provide AIDS prevention and education for children in Africa. We did it through a government program called PEPFAR, using a game platform that resonates with kids to educate them in the process.
Initiatives

What are you doing to prepare for these trends and challenges?

To deal with some of these challenges, we have a handful of initiatives we are focusing on. This may be different than the perspective you would get from someone who comes from a different studio. Some studios offer a slate of pictures with a few tent-poles — major pictures designed to bring in lots of revenue. Other studios look to produce a slate of 10 to12 pictures per year with less emphasis on tent poles. Different strategies.

Our first initiative is “direct to the consumer.” Digital technology has enabled that. There is a role for the aggregators, but we now have the ability to interact directly with the end consumer.

“TV Everywhere” is another area where we are working. That allows the user to access TV on a host of devices. With a cable subscription, you can access that package from wherever you are. By virtue of a method of authentication, we can tell that it is you and that you would like to access certain premium services in another place. There is lots of data that traverses those networks to both inform who you are and what you are authorized to access.

With a cable subscription, you can access that package from wherever you are.

Another big initiative is called “Home Premiere” (though the name has changed a lot). You may hear of this as premium video on demand. It offers you a title, delivered to you in a secure way to your home via cable or satellite, ultimately via the web. It is secure, high definition, and the new aspect is that it is available during the theatrical window. With participating providers, the title can be made available eight weeks after the theatrical release, but well in advance of the traditional home entertainment window.

Some may want to have a group of people in to their home and make a social event out of it during the theatrical release. This is a fabulous option, certainly worth testing.

What is magic about eight weeks?

If you look at our exhibitors’ revenue stream, they make the bulk of their money in the first four weeks. No one thought we would get to the idea of releasing a film to consumers at home in just eight weeks. But in light of the revenue model, we thought that while there is still a buzz around the film, and for those folks who can’t get to the theater, this would offer a nice alternative without cannibalizing the theatrical experience.

“Digital copy” is another initiative. Today you may have purchased a Blu-ray disc, or even a standard disc, and stored the physical disk in a library. We want to create a digital library. That goes to our biggest initiative, which is create value around ownership. About four years ago we saw an active “sea change” in the UK. Essentially the sell-though market collapsed and we couldn’t figure out why, so we did a robust study. What we were concerned about was this automatic attitude to increase availability and reduce price. We had a number of initiatives that were fighting against each other to do just that. When you look at that model, you move the pieces around, but you don’t grow overall revenue. When we introduced new digital channels, the good news was, we could grow the pie, grow overall revenue. It was single digits, but on a big number, that was material.

What we were concerned about was this automatic attitude to increase availability and reduce price.

Another initiative is “ultraviolet,” which I mentioned earlier. This technology is being worked by content and delivery companies. You will start to see an ultraviolet monitor that will tell you that products are interoperable across a whole host of devices. Your rights to content that you purchase or rent will be kept in “the cloud.” Accessing the content with various devices happens transparently.

And another initiative is being able to store and capture content on non-optical media. This will allow you to store high-definition content in a way that allows you to think about your content locker differently.

All of this will come under an umbrella of attaching a social aspect to anything we produce. An interaction with Twitter or Facebook will be a part of the content we deliver. This is simply expected today.

An interaction with Twitter or Facebook will be a part of the content we deliver. This is simply expected today.

Partnerships

Proctor and Gamble used to be the king of consumer product creation, and yet today it must work through a mediator such as Wal-Mart, which can dictate much of what Proctor and Gamble does. Is there an equivalent broker for your business? And as you go global, what impact will national governments have on the distribution?

Fifty percent of our revenues are generated internationally. The U.S. market is mature in a number of ways yet opportunities are being vetted constantly that involve new, diverse partners.

Who are the movers and shakers that we will be working with in the future that maybe we aren’t working with today? Those companies that are most associated with the social aspect of what people do, because that aggregates the audience.

We will work with companies that have the ability to deliver a high quality of service. We have found there is a very low tolerance for a bad experience. You can pirate something, but the poor experience that comes from this works against it. This all helps us. Those companies who work with search are also clear candidates as we move more toward an a la carte menu of offerings.

Industry and Social Responsibility

What is your responsibility for growing violence and sexuality in films and video content? Do you think about what that does to society? Or is that not a part of your job?

It’s probably easier for me to think about this from a parents’ perspective first. And my attitudes have changed. Part of that is how we’ve evolved culturally.

And the Europeans seem to be the opposite.

I wonder if we have such a high tolerance for violence because we’ve been so blessed. My kids are from Bogota. Their reference is incredibly different from my friends’ kids. How they behave and what they view as potential threats is directly related to the realities of where they were born and the circumstances they grew up in as young children. My son has a very different attitude about guns — he is just not interested. He just wants to play soccer. The book How Soccer Defined the World is about globalization, and it links entire economies and country politics to how soccer is played. It was interesting to come to understand these links.

Video of Darcy Antonellis

Do you see your industry as culture responders or culture makers?

This country is built on freedom, allowing people to create and innovate content or technology.

We take our responsibilities very seriously. For any piece of content we release, we examine whether it is appropriate and who it’s appropriate for. We have to be responsible to ensure that we were clear about the content that we distribute and the messaging about that content. We have other responsibilities as well.What we produce supports our creative community. We never want to see the day where there are imposed restrictions on creativity.

We never want to see the day where there are imposed restrictions on creativity.

Psychologists have shown that some people live in cyber space with a distorted view of reality. Do you, as a content provider, have any social, ethical, and moral responsibility in this trend?

I have a 17-year-old and a 13-year-old, and will start there. There are a number of responsibilities. First, let’s start with the parents. If you let your kid play video games for 10 hours per day, and not read a book (and I don’t care if it an electronic book or traditional), the media and entertainment business is not going to change that. We do have a responsibility to make sure we have enough variety in access and quality in the things we produce. That is an interesting social discussion.

This is one of the reasons why we hold such value in the theatrical experience. That is an in- person, be there, social experience, something that as an industry, we want to preserve. Getting people together, doing date night, meeting at the theater, is still really enjoyable and important.

To your broader question, we talk a lot about this. Technology has enabled so much. But you really have to say, just because you could do something, should you? People today are grumbling about the invasion of their privacy, and yet say they have 1,000 friends on Facebook and no time for personal relationships? How do we deal with this when, at the end of the day, these kids are not socially adjusted? I think you must start at home.People today are grumbling about the invasion of their privacy, and yet say they have 1,000 friends on Facebook and no time for personal relationships?

This is a longer conversation and I have my own personal views about these issues of social responsibility and how this may evolve over time.

Looking to the Future

Let’s switch gears and talk about technology and future movies. We have seen the emergence of 3D in films recently, including home display. Is this now a part of the future?

We think 3D finally exists as an alternative method of exhibition. It will also be a part of home display. The early adopters are buying now. In this coming holiday season, we’re actively working on conversion of library titles that lend themselves to the 3D experience. Certainly for the big screen, 3D is a reality. We’re reaching a point for kids 8 to 14 where the percentage of titles they see in 3D is greater than non-3D. Their whole reference has shifted. I see the difference in my own kids. The13-year-old expects 3D and the 17-year-old less so.

Does this extend into games?

Yes. I was just talking with a friend and colleague, a professor at Stanford, about this. On the gaming side you’ll see a broader set of skews just in 3D. You’ll see more smartphones with the extra processor to handle 3D as well.

Studies have shown that some people get headaches from watching 3D TV. How does that impact your production in 3D?

Our decision to produce in 3D always starts with how a presentation in 3D could enhance storytelling. I think the entire industry from creative to equipment manufacturer strives to create a terrific 3D experience. The art of 3D production and exhibition — theatrically and home video — continues to evolve in terrific ways. All with the goal of creating a terrific experience. We continue to monitor the research done in this area.

What about the use of holographic images, putting the person right in the middle of the action?

It is a little more challenging to make the math work for holographic images. We could show you a terrific holographic experience. We use them in CNN for elections coverage, but that is far from a consumer product. I asked the technical experts the very same question. They showed me the math and said it will take awhile before the price is right for broader roll out.

Let’s push technology a bit further. How else might technology change the experience? When do we get smell and touch incorporated into the digital media experience?

The first thing for the theater is motion simulation. You can sit in a D-Box seat and have that experience. We own theaters internationally, and we’re doing more and more of that in our premier theaters. But there’s not a lot that’s programmed to correlate scene by scene. I’m sure it could play well for action films.

I remember seeing the Polar Express with my grandson, where some of those scenes were challenging for him in 2D. Adding 3D and motion simulation would have changed the whole experience.

I’m a good tester for 3D, since I have a low, poor 3D tolerance. They always use me as the test case to see if I can sit through it. You’ll see more of the immersive experience in the theater, but I don’t know how soon.

As to smell and touch, I am just not sure. I would just say we haven’t spent a lot of time on incorporating smell into the experience.

We’re going to be able to do a lot more in the home environment, especially as more and more people have their home theaters. Let’s make an analogy to 3D. I am not a big fan of what I call hokey 3D, where objects come flying out into the audience but it has little meaning for the story line. But 3D done in a subtle way can be an enjoyable experience. So with smell and touch we have to be careful not just to include something because it can be done, but to add to the storyline experience.

Personal Career Path

Tell us how you got to Warner Brothers. Did you envision this career when you went to college?

Like so many people entering college, I did not have a clear idea about what I would study or what I would ultimately do. My dad was a real math brain, working at places like Westinghouse and RCA, so that represented one influence. But I also had interests in media and started my freshman year as a journalism major. I soon realized I was absolutely horrible at writing. By that time, my father’s career had moved toward the media entertainment business, and he began to get more into the broadcast side. I would attend the National Association of Broadcasters conventions and he gave me the opportunity to play with the production switchers in broadcast equipment. I thought that was really intriguing. The technical side of the media just caused me to make a big change and I began to pursue engineering and the sciences.

In my junior year of college, now studying engineering, I had an internship for CBS in New York, working as an engineering intern for Joe Flaherty [developer of electronic news gathering (ENG) technology and father of high-definition television], who’s still a friend. After college I was hired by CBS for satellite systems because at the time, all the networks were putting in their satellite infrastructure. In one of my first jobs I was able to work on satellite designs, and spent a lot of time learning about encoders and decoders.

While working at CBS, I had a big break. I was sent me to Washington, D.C., to do operations and engineering. That was at a time of turmoil for CBS. There had been lots of turnover there, and they sent me down to the bureau to keep things running. I was young then, and did that for several years, and it exposed me to the business of news. In that time I got to witness history. I was in war zones and met fascinating people, and it also taught me the fabulous discipline of execution. When you go live on the air, you must get things right under strong time constraints. So from a problem-solving perspective, it really helped me hone my skills around what’s the end game, what do we have to get done, what’s extraneous to that process?

When you go live on the air, you must get things right under strong time constraints.
I think if there’s one thing we could teach kids coming out of school, or while they’re in school, is how to do that. What is material and impactful and what’s a waste of time.

After the three years, they brought me back up to New York to run all the network operations. In that position, I was deeply involved with all the business, financial, and strategic aspects of running what was then CBS. It became clear I didn’t have the breadth and depth of knowledge I needed in specific areas. So that’s when I did my master’s work at Fordham University, going to school at night and running the operations during the day.

One of the reasons it took so long was while I was in New York, I got involved with sports. CBS had responsibility for the Olympic Games operations and engineering coverage. That was a fabulous experience. We had a core team of 20 people who worked and practically lived together. All of their work culminated in bringing over another 1,700 or so staff to televise the games across 20 or so venues.

Meanwhile, Chris Cookson, my boss who had worked at CBS and had given me these great opportunities, had moved out to the West Coast. When I got back from the Olympics, the phone rang and he said, “So, what are you doing?” I decided I didn’t know the film business and thought that would be interesting to learn.

It sounds like you stayed with the technical aspects of media, were able to combine your interests in engineering and journalism, and made the most of some great opportunities.

It is important to be challenged, and that is something I have always enjoyed. And as technology finds its way into the heart of business, it is no longer just about the geeks in the back room. It is critical to bring this knowledge into the strategy and the development of business.

How do you adapt to technology yourself? I see you have an iPad now.

I do everything on my iPad. My notes for a presentation are there. There’s a courtship with it. Mine lasted about three weeks. I love it and can’t get along without it, but I fought with it all through the courtship. I can use the keypad because I have small hands. It would be harder for those with big hands. I spend a ridiculous amount on apps for it.

Personal Challenges

What keeps you awake at night?

What keeps me awake at night is the uncertainty around being able to transform our business culture. You made a film, you produced a television show. We need to be more like the Silicon Valley company. You say that on a studio lot that’s 88 years old and in some places still uses film. It’s a big change and it’s a huge opportunity, it’s a huge challenge but that’s the single most thing that keeps me up at night.

What are your passions? What is your motivation that makes you want to get up in the morning and go to work?

From my early days sitting at a production switch hitting buttons, I have loved this business. I’ve been completely blessed. I’ve worked on the live side of television. I’ve worked in the event side of television. I have been to some fascinating places and experienced some history making It has to do with that whole notion of being creatively responsible and at the same time performing in the best interest of the shareholders.events. I work for an amazing company and it starts at the top of our company and throughout. Each executive is a quality human being so they help to set the tone for the organization. It has to do with that whole notion of being creatively responsible and at the same time performing in the best interest of the shareholders. That’s a tough balancing act.

It’s always gratifying because people from other studios talk about wanting to work at Warner Brothers, so there’s a lot of pride there. It’s an amazing time in our business, from a technological strategy perspective. I look at this fabulous studio that’s part of a terrific set of companies and now we get to inject a new form of innovation from “up north” into what we create. That’s pretty cool.

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