Immediately after the director yells “Cut!” on a film set, someone else yells, “Check the gates!” 

The “gates” are the part of the camera where the film slides behind the shutter. When you check the gates, you’re looking for something like a single hair or a speck of dust lodged somewhere in the tiny moving parts, something that might have come between the shutter and the unexposed film.

You won’t know whether it’s there until the film is processed and you see a fluttery image appearing in the frame, by which time it will be too late—and too expensive—to go back and reshoot the sequence. So before the company moves on to the next scene: “Check the gates!”

These days, of course, everything is digital, so there really isn’t a “gate.” There’s a chip, or a disk drive or something. But “Check the digital video-capture quality!” has zero romance to it, so we still shout “Check the gates!” instead.

And there’s an ancillary benefit to using the old lingo, too: It’s a good way to remember that the essentials of the movie and television business haven’t changed much over 100 years. A business doesn’t change just because the technology changes. A business changes only when the customer changes. And the motion-picture business has had the same two customers since forever.

Show business used to be an all-cash business. A performer would do a show, look out at the audience and see how many seats were full, and then at the end of the night would demand his or her cut from the theater owner, who was probably a lying cheating SOB but couldn’t get away with saying, “Hey, it was an empty house” because the performer was right there onstage. When you’re singing or dancing or telling jokes, you know if people are in their seats.

Then came the movie business, which solved one problem but created another. The movie studios, run by mostly lying cheating SOBs, paid the performers up front (which took care of that issue) but split the gate with the theater owners, who were also lying cheating SOBs but could get away with saying, “Hey, it was an empty house” because there were a lot of movie theaters and it was impossible to check them all.

So the movie studios did a smart thing. They would identify theaters or theater chains they thought might be skimming, and they’d send private detectives—actual real-life Pinkerton detectives—to find out. For the seven o’clock show, the Pinkerton would buy a ticket at, say, 6:15. And then another one at 7:15. Since all tickets were numbered, it was an easy thing to figure out roughly how many people attended that showing and compare that to the reported box-office take for that showing. 

Of course, human nature is what it is, so there was nearly always a difference between the reported take and the actual take. Piles of cash sitting in a movie-theater box office in some Depression-era location created an irresistible temptation. But the studio bosses knew that—they recognized the moral profile of the theater owners the way house burglars recognize highwaymen—and as long as the skim was roughly within an acceptable range, no one made a fuss.

So from the very start, movies were a leaky business.

Leaky businesses aren’t efficient, in the traditional, bloodless sense of the word, but their inefficiencies mean there are lots of stakeholders and lots of people with skin in the game. In a leaky business like entertainment, agents and lawyers and managers and fixers of all kinds get a little taste of the cash flow; costume designers and property masters get some (under the table) considerations from their vendors; and theater owners get a little cash bump here and there. We’re all in this together, is the thinking, and we’re all invested in the healthy going concern of the entertainment business as a whole.  

For nearly half a century, the movie business had one single customer: the ticket buyer. And then came television, and a second customer appeared—advertisers.

Movie studios sold their old libraries to television, which ran them with big, national commercials. Later, television studios sold their old shows to local networks, which ran them with local commercials, and everyone got rich as a leaky business got even leakier.

In the 1970s, cable television appeared, which launched nearly three decades of explosive profit. Customers paid for cable service, and they watched advertisements on broadcast networks, and they paid for premium channels such as HBO and Showtime. But it was still basically the same business, making money from individual ticket sales (at the box office or for HBO) and making money from advertisers.

The beaks getting wet from show business during the Golden Years (roughly 1975 to the blanket use of the Internet) included actors, studios, Century City lawyers, local newscasters, CAA agents, and the guy driving the cable-company van who would come to hook up your cable and who, if you slipped him $20, would get you free HBO.

None of it was efficient; all of it was glorious. Show business had evolved into its complicated web of revenue streams, like the Amazonian rain forest evolved into a tangle of trees and vines and snakes and insects. It might look like a mess, but everything is thriving.

And then streaming video appeared, and the new gang from Silicon Valley tried to plug up the leaks and clear out the brush by eliminating advertising and introducing an all-inclusive monthly price. Despite their supercharged, tech-bubble jargon—“Algorithms! Disruptions! On-Demand Disintermediation!”—they essentially tried to turn the entertainment business back a century, to the single-customer days of the 1920s and 1930s.

After a few unhappy quarterly earnings calls this year, the Netflix leadership suddenly discovered what the entertainment business had known for seven decades: The business works best when you have an inefficient interplay between two customers, the ticket buyer and the advertisers.

Stung, Netflix has announced that it will implement something it’s calling an “advertising membership tier,” but that isn’t fooling anyone. Netflix is going to have ads and subscriber fees, just like old-time cable.

Also: Netflix announced that it’s planning to crack down on subscribers allowing dozens of family and friends to use a single login. The company wants to make sure it’s getting paid for each viewer. It was impossible not to hear that without thinking, Maybe you need to hire some Pinkertons.

In other words, things aren’t really changing in the entertainment business. If anything, they’re changing back.

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