As part of the grand opening of the Interactive Media building at the USC School of Cinematic Arts, filmmakers George Lucas and Steven Spielberg spoke on a panel regarding the future of entertainment. During the discussion, the inevitable landscape of entertainment media was characterized as grim for the majors with rising movie ticket prices and theatrical releases becoming a niche market, as content continues its vast migration to online video-on-demand.

The two veterans were joined by Don Mattrick of Microsoft. Julia Boorstin of CNBC moderated.

“They’re going for the gold,” said Lucas of the Hollywood studios. “But that isn’t going to work forever. And as a result they’re getting narrower and narrower in their focus. People are going to get tired of it. They’re not going to know how to do anything else.”

“There’s eventually going to be a big meltdown,” suggested Spielberg, noting that the studios are pressured by competition with other media to spend big on individual films in lieu of producing more personal, quirky projects. “There’s going to be an implosion where three or four or maybe even a half-dozen of these mega-budgeted movies go crashing into the ground and that’s going to change the paradigm again.”

“You’re going to end up with fewer theaters, bigger theaters with a lot of nice things,” predicted Lucas. “Going to the movies will cost 50 bucks or 100 or 150 bucks, like what Broadway costs today, or a football game… (The movies) will sit in the theaters for a year, like a Broadway show does. That will be called the ‘movie’ business.”

In regards to video games, Spielberg said game characters do not yet create the same empathy that results from onscreen characters common to narratives. “The second you get the controller something turns off in the heart, and it becomes a sport,” he noted.

Lucas suggested that the game industry will eventually create empathetic characters. “The big game of the next five years will be a game where you empathize very strongly with the characters and it’s aimed at women and girls,” he said. “They like empathetic games. That will be a huge hit and as a result that will be the ‘Titanic’ of the game industry… Because you’ve got actual relationships instead of shooting people.”

“But Spielberg, looking farther ahead, said he thinks the real shift will come when game controllers are obsolete and games are controlled by Kinect-like devices that completely immerse the player in the story,” reports Variety.

“We’re never going to be totally immersive as long as we’re looking at a square, whether it’s a movie screen or whether it’s a computer screen,” Spielberg said. “We’ve got to get rid of that and we’ve got to put the player inside the experience, where no matter where you look you’re surrounded by a three-dimensional experience. That’s the future.”