M+E Daily

Speaking at an investor conference in New York yesterday, Viacom CEO Philippe Dauman acknowledged what should be obvious: The revenue windfall the studios enjoyed from successive packaged media formats (VHS, DVD, Blu-ray) is largely over and is not coming back.

Previous assumptions regarding packaged-media sales of movie, , have changed to the point that when greenlighting a film, Paramount has restructured deals made with actors, producers and directors to better reflect a “partnership” relationship on the economics of the film rather than a high upfront cost.

“We don’t mind sharing the upside [of a movie with talent] as long as we don’t have a downside, or we have a sharing of that risk,” he said, as reported by Home Media Magazine.

While the movie industry’s transition to the post-DVD world is still very much a work in progress, the music industry may present an instructive model. Like the movie studios, the record labels enjoyed a windfall profits with the introduction of the CD, which drove a massive library replacement cycle among consumers and which carried much higher prices and margins than LPs or cassettes. Also like the movie industry, the whole structure and economics of the business, whether by design or simple inertia, came to reflect those windfall profits, from executive salaries, to the value of artists’ contracts, to the number and type of service vendors the industry relied on.

With the loss of those windfall profits, however, first from piracy and later by the disaggregation of the traditional album in favor of single-track downloads, the music industry has been forced to adjust its revenue assumptions, its corporate structure and the basic relationship between artist and label.

One of the more promising innovations along those lines has been the so-called “360 deal,” in which artist and label share both the risks and rewards from all aspects of the artist’s career, including record sales, performance earnings, merchandise sales, sponsorship income, etc.

Like the music industry, the movie industry is confronting a future in which revenue comes in smaller chunks but from a greater number of sources. In the case of movies, that likely means new release windows, fewer exclusive distribution arrangements and longer ROI horizons. That’s not a formula that lends itself to big, guaranteed, upfront payments before the revenue starts to come in.

But it might some day lend itself to something like a 360 deal between a studio and the talent.