THR: There are definitely some dynamics that are changing the economics of the business. What do you think of Mark Cuban's idea of releasing films simultaneously at home and in theaters?
Lucas: I think it'll happen -- it'll have to happen.
THR: Really? Because of the economics?
Lucas: Because of piracy. It's the only way you can stop piracy; there is no other way. You have to get a very, very aggressive enforcement program so that people do have consequences to stealing, but you also have to be able to offer it to them (in the home) for the same price they can get it on the street. It won't be DVDs -- DVDs aren't going to be around too much longer. If you can get it at home for $2, then why would you go on the street and get a bad version?
THR: What do you think will replace DVD?
Lucas: Pay-per-view.
THR: Something that streams in, not prerecorded media?
Lucas: It's the way kids do it today. It's how you do it on your iPod: They just download it. You pay 99 cents for music, and movies will be like two bucks. That will definitely change the economics of the business because (studios) are losing money now.
THR: Somebody was telling me that the studios' profit margins are only about 10%.
Lucas: I don't even think it's that: If you look at the (theatrical) divisions, I don't think they make any money. I don't think they've made money for five or six years.
THR: So it's basically a loss leader for DVD, television, etc.?
Lucas: Yup, all of the ancillary markets. For studios, the fact is that the theatrical film market is less than 10% of their business -- it's very, very small. I mean, you could chop that off in a second, and it wouldn't even bother them -- they're just doing it as a promotional thing.
THR: Do you think the industry will survive that way?
Lucas: I don't think the theatrical exhibition business will go away because I think people will always want to go to the movies, just as they go to the opera, they go to the ballet, and they go to football games. Football is a perfect example, where you can stay at home and watch it in the comfort of your own home and see a much better presentation, but people still sit out in the cold and cheer on (their teams) ... and you can't see anything because it's all distant. And now they have giant screens so you can watch it on television right there -- but they still fill up 100,000-seat (stadiums). We'll end up with fewer theaters with bigger screens and better presentations, and the theater owners will work very hard to make the whole thing an event.
Good analogy and I think Lucas is right on target. Interestingly, the movie industry and television broadcast industry seem to be embracing the new technologies faster and more willingly than the stinky pots over at the RIAA.
