The recent dust-up between the Hollywood studios and Internet companies reveals how out of touch Hollywood has become with its own customers. The idea of punishing consumers for ignoring Hollywood's business model is a futile strategy, as the music companies have learned over the past decade.
As Chris Anderson points out in his book Free, any product or service that can be delivered digitally will ultimately be available for free, or close to it. But that doesn't mean Hollywood movies have no value, it simply means that old Hollywood has to transform its business model -- along with newspapers, the music industry and virtually all other sectors of the economy.
One startling observation in Anderson's book is that Hollywood might even increase its profits by offering more of its products for free or nearly free. China is a case in point. For years, Hollywood has been trying to stamp out piracy in China, with little success. But what has actually happened is that widespread piracy has actually increased the appetite for movies in that nation of a billion people. As a Chinese middle class has emerged, consumers in China are buying more DVDs and other Hollywood products than ever, since they recognize the superior quality -- and even the status value -- of legitimately branded products. (Authentic Apple 4GS phones are now selling at three times retail price in China, when they are available).
So why does Hollywood continue its futile quest to protect an outdated business model, even when that strategy jeopardizes its long-term future? The answer is that the Hollywood lobbying effort is directed by a dinosaur-like organization called the Motion Picture Association of America (MPAA), which does not represent Hollywood at all, but only the narrow interests of its six member studios. Some of the most important filmmakers and film companies in America -- including Steven Spielberg and the Weinstein Company, Lions Gate and a host others -- have no say in the MPAA's direction or policy.
To say that the MPAA and its members are living in the past is an understatement. With the digital revolution and globalization of culture, the Hollywood studios can no longer completely dominate the global film market. In many countries, at least 50 percent of movies are locally made, and international co-productions are much more common. Still, the MPAA and the big six studios act as if they can dictate to the world market, and rather than adjusting their business practices to new market conditions. In fact, MPAA Chairman Chris Dodd is quoted as threatening to cut off "support" from politicians who don't tow the MPAA line.
Instead of trying to shut down popular websites and punish their opponents -- and their own customers -- Hollywood should take an entirely different approach to the digital revolution. And that should begin with forming a truly representative organization to promote Hollywood films. Ideally, the United States should have a National Film Commission that would represent not just the big studios, but also independent producers and filmmakers, along with labor unions, theater owners and distributors.
Virtually all nations except the United States have film commissions, which not only promote their film industries, but also provide a global network for filmmakers to create and promote their films. These need not be governmental organizations -- they are often a combination of public and private entities -- but they do serve the interests of each country in the global marketplace. Since Hollywood has never needed help before, a national film commission was never considered necessary.
But now that Hollywood is facing twin threats from the digital revolution and the growth of homegrown films in many major markets, it should join the international film community and form a national organization to meet the challenges of the new century. It is long past time when an elite and outmoded organization like the MPAA should be left to make policy for the entire American film industry.
Hoyt Hilsman is the author of Idonomics: How the Pleasure Principle is Destroying the American Dream, and 19 Angels, a political thriller.