How digital technology disrupts the perceived value of location-based entertainment

During the first half of the 20th Century the only practical option for watching a movie was at the local cinema.

Then, in the early 1940s, television made its appearance in the U.S. Television usage skyrocketed after World War II and by 1954, 56% of U.S. households had a television set. That increased to 90% by 1962.

With televisions threatening the cinema industry, by the 1950’s the practice of producing color motion pictures moved into full swing. At the same time, both film producers and the movie theaters widened the movie screens to provide a more spectacular image.

With the introduction of affordable color televisions and over half of all network prime time programming being broadcast in color in 1965, color television became the standard by the late 1960s, early 1970s. Then in the late 1970s, it became possible to rent VHS tapes of movies to play on televisions. That led to the proliferation of video rental stores including the largest chain, Blockbuster.

It was also during this time period that cable television systems first started spreading throughout the U.S. along with the growth of cable channels and digital-on-demand content.

Digital HDTV came to the U.S. in the 1990’s along with DVD’s capability of recording movies in high definition. Online DVD rental by mail was offered by Netflix starting in 1997, followed by on-line digital distribution in 1999. Then in 2006, high definition Blu-ray discs became available. Finally, in the past few years, improved quality and 60” and larger HDTVs have become very affordable.

Again, the technological advances with the quality of the TV viewing experience, its increasing affordability and the ease and low cost of obtaining movies to watch at home has pushed the movie theatre industry to improve the quality of their out-of-home movie going experience. We saw the widespread growth of stadium seating, the growth of IMAX screens, improved in-theatre sound systems, modern 3-D and 4K digital projection. Many movie houses have even added bars and in-theater dining.  

What was happening throughout this brief tour of movie viewing history is that the advances in digital technology, which reduced the cost, improved the quality and improved the ease of obtaining content for the at-home viewing experience caused the cinema industry to improve the out-of-home movie going experience in order to stay competitive. The at-home viewing experience was increasing in what we call Convenience – the ease of access in time, effort and money – disrupting the perceived value of the movie going experience, causing the cinema industry to have to raise its Fidelity– the total quality of the experience including all its sensory aspects.

It’s not necessarily intuitive, but the increased Convenience at one end of the Fidelity-Convenience continuum means you have to raise the bar, the Fidelity, at the other end or that end is no longer perceived as being a good value and a competitive alternative. When the Convenient activity becomes cheaper in time and money and accessibility, the Fidelity experience decreases in appeal. The more Convenient options become, the better the quality of the High Fidelity location-based entertainment options has to become to continue to attract consumers.

There is a fortunate paradox to this phenomenon, as when an experience increases in Fidelity, in it overall quality, people are willing to pay a higher price for it. That is why people are willing to pay a premium price for a ticket to a rock concert while they hardly have to invest any cost into listening to the same music on their mp3 digital device. Both of these music experiences are winners, as the one is Super-Fidelity and the other is Super-Convenience.

And when both the Convenience and the Fidelity alternative choices get better, more activities get left in the middle, what is called the Fidelity Belly, and fall out of favor. That is exactly what happened to CDs although their music quality is far superior to mp3 music reproduction.

It’s technological advancements, especially digital ones, which push improvements in both Fidelity and Convenience and disrupt the perceived value of the status quo at the Fidelity end of the spectrum. If a product, service or type of experience is the highest Fidelity or Convenience today, technology and innovation will soon make it possible to create something that is higher Fidelity and higher Convenience tomorrow. It will happen, and often at a very rapid pace. The outer boundaries of each move outward over time. That is exactly what was happening throughout the history of the cinema and television industries. Consumers constantly had the choice of staying home and watching the tube or going out to the movie. So the more Convenient the television experience was becoming, the better movie going had to become to stay in the ballgame.

The challenge for most community-based entertainment (CBE) venues is that they are getting trapped in the Fidelity Belly as they have not been increasing their Fidelity as fast as the Convenience of both at-home and mobile device alternative entertainment and leisure experiences have. Although the CBEs may have at one time offered Super-Fidelity experiences, today those experiences are no longer perceived as high Fidelity and as attractive, so they are sliding into the Fidelity Belly.

One new category in the CBE industry that has captured the High Fidelity out-of-home entertainment market is the new upscale bowling lounges and some of the hybrid bowling centers. In fact, in a sense they are creating an entirely new Super Fidelity category of an entertainment-restaurant-bar venue that as part of its Fidelity incorporates a social cachet of just being there. Meanwhile, all the old bowling alleys have fallen deep into the Fidelity Belly.

The take away of all this is very simple. If you have an existing CBE business, and you aren’t increasing its Fidelity constantly, the increasing Convenience of alternative digital entertainment and social media means customers are now viewing you as a less attractive option. And if you are planning a new LBE venue, you need to design for the High Fidelity sweet spot, which by the time you open will be different than it is today.