Sep

11

the rivoliI'm far from an expert on Hollywood, but I believe that air-conditioning (yes, air-conditioning!) was as disruptive to the Hollywood statu quo as "talkies." It's also been a better investment.

A quick Google on this subject reveals that the Carrier Corporation pursuaded Paramount to install a/c in the Rivoli Theatre (supposedly their "flagship" movie house under construction in Times Square) in 1925. Over the next five years, Carrier installed a/c in 300 movie theaters across the country and transformed the summer months from a financial write-off for Hollywood to its most profitable season of the year.

A/C technology required large capital expenditures and was a competitive disadvantage for any theatre (or other business) which failed to install it. It's also easy to see that after everyone installed a/c, there was no further competitive advantage, but unit ticket sales did remain at a higher level. (In 2010, it's amusing to imagine theatres charging extra for "air conditioning" as they just did for the 3-D version of Avatar.)

This is just another example of how technology causes (1) an initial (but not lasting) competitive advantage and (2) increases revenues. Profitability and revenues are very different, and picking the winners from a new technology is awfully difficult (as the 1995-2005 internet period demonstrates.)

So, who's the big winner in this a/c story? Answer: The Carrier Corporation has survived and prospered, and is the world's largest HVAC company, part of United Technologies. No Hollywood studio has provided an investor similar returns over this period.

Which brings me to the old joke: What's the greatest invention of all time? Answer: Thermos Bottle. Why? Because it keeps hot things hot, and cold things cold. Question: What's so great about that, you ask?

It can tell the difference!!!


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