George Lucas and Steven Spielberg think the film industry is heading towards a cliff. The pair behind some of the most successful franchises in movie history think that conservative programming choices and rapidly evolving distribution schemes have set the stage for a massive upheaval — and internet-based services may become the dominant medium when moviegoing as we know it crashes and burns.

The duo were joined during a panel at the University of Southern California by Microsoft's president of interactive entertainment Don Mattrick, who played backup with the occasional Xbox reference as Lucas and Spielberg took center stage. While the focus was ostensibly on the future of the entertainment medium — USC just opened a new building for the school's Interactive Media department — the topic quickly pivoted to the state of film distribution in a world where everything from games to television are competing for consumers' attention.

"A studio would rather invest $250 million in one film for a real shot at the brass ring."

People simply have a limited amount of time, said Spielberg. "We can't expand the week. We can't expand the 24-hour cycle. So we're stuck with so many choices." The enormous amount of available content has pushed movie studios to be more conservative, banking on the power of event films to break through the white noise of a crowded marketplace. "You're at the point right now where a studio would rather invest $250 million in one film for a real shot at the brass ring," he said, "than make a whole bunch of really interesting, deeply personal — and even maybe historical — projects that may get lost in the shuffle because there's only 24 hours."

"There's going to be an implosion where three or four or maybe even half a dozen of these mega-budgeted movies are going to go crashing into the ground," Spielberg said, "and that's going to change the paradigm again."

Moviegoing will be more like a sporting event

Barreling from opinion to opinion throughout the discussion, Lucas presented a clear vision of this post-crash entertainment landscape: a world where going to the movies is no longer a casual outing, but a high-end experience more in line with Broadway. "What you're going to end up with is fewer theaters," he said. "Bigger theaters, with a lot of nice things. Going to the movies is going to cost you 50 bucks, maybe 100. Maybe 150." It will be more in line with sporting events, with films playing in these high-end cinemas for as long as a year. "And that's going to be what we call ‘the movie business.' But everything else is going to look more like cable television on TiVo."

"It's not going to have cable or broadcast," Lucas said. "It's going to be the internet television."

As Lucas painted it, the shift will present new opportunities both for consumers and filmmakers. Viewers will have access to a wide variety of programming, "usually more interesting than what you're going to see in the movie theater. And you can get it whenever you want, and it's going to be niche-marketed, which means you can really take chances and do things if you can figure out there's a small group of people that will kind of react to it."

Cable networks are leading the way

That kind of niche focus has already paid dividends for cable networks like HBO, he said, which have lower thresholds for success than a movie studio or traditional network — and are able to produce less-conventional programming as a result. "All you need is a million people," Lucas said. "Which in the aggregate of the world is not very many people. And you can actually make a living at this. Where before you couldn't."

Spielberg offered a softer touch — even turning wistful when discussing the increasingly narrow theatrical window movies have to deal with today. "It used to be, when I first started making movies it was really cool, my movies stayed in theaters for one year," he said. "If it was a hit, it was a year long. Raiders [of the Lost Ark] was in theaters for a year. E.T. was in a theater for a year and four months... That was an amazing situation, back then."

Today's movies are in hotels two weeks after they hit theaters, he said. "There's going to be eventually day and date with movies" — when films are available on demand at home the same day they hit theaters — "and eventually there's going to be a price variance. You're going to have to pay $25 to see the next Iron Man. And you're probably only going to have to pay $7 to see Lincoln."

"You're going to have to pay $25 to see the next 'Iron Man.'"

Lucas jumped in: "I think eventually the Lincolns are going to go away and they're going to be on television."

Spielberg smiled, saying, "And mine almost was! This close. Ask HBO — this close!"

Despite the chaos, both men see the changes as something the industry will overcome, with Lucas taking particular relish in the opportunities the disruption is providing — adamantly stating that "now is the best time we can possibly have."

Comparing the industry's panic over fleeting DVD sales and crumbling business models to the 2008 economic crash, he stressed that now is the time to look forward. "It's a mess. It's total chaos," Lucas said. "But out of that chaos will come some really amazing things. And right now there are amazing opportunities for young people coming into the industry to say, ‘Hey, I think I'm going to do this and there's nobody to stop me.'"

"It's because all the gatekeepers have been killed!"

Lucas and Spielberg also had thoughts on the convergence of storytelling and videogames — and whether such a mix is even possible.