This is not a happy time to be an entertainment industry executive.
If you work for a movie studio, a television network or a cable provider, the question that keeps you awake at night is, will we be the next domino to fall?
The first two dominoes were the music industry and the newspaper industry, and the tap that tumbled them was digital technology. Whatever the Internet, broadband and wireless brought to the party, they were accompanied by a catastrophic plunge in album sales and ad revenues that decimated the music and newspaper businesses. Now movies at TV are wondering whether they're next.
If you listen to entertainment executives, there are three causes for their concern, from which they have gleaned three purported lessons.
The first is piracy. Whether it's the DVDs that you can buy for a couple of bucks on streets from Lahore to Los Angeles, or the movies and series that anyone can download for free, the top reason they believe their businesses are on the brink is the theft of their intellectual property. As they read it, the recording industry was too slow to shut down Napster and to nail consumers for stealing. The scorched-earth lesson learned: this time, take no prisoners.
The second cause for industry insomnia is how handily technology can defeat advertising. Digital video recorders, now on their way to being ubiquitous, make it a snap to zap commercials; there's even a simple hack for TiVo remotes that programs a button to fast-forward 30 seconds at a time. Lesson learned: if you depend on ads, force viewers to watch them, whether they want to or not.
The third nightmare is the consumer belief that content ought to be free. By putting newspapers online without charging subscriptions or metering usage, publishers devalued journalism. They gambled that they could build a new business model on Web advertising: more readers, more ad revenues. Instead, search engines and aggregators make it easy to decouple the ads from the articles, and the articles from the newspapers' brands. The lesson? Forget free. That's why Comcast is backing a "TV Everywhere" strategy that forces online viewers to buy a cable subscription. No wonder Comcast's purchase of NBC-Universal has been called a "Hulu killer": the free TV that hulu.com offers, including NBC programming, is now on the endangered species list.
The problem with these lessons is that they ignore how digital technology has transformed the people formerly known as the audience. Today's consumers refuse to be passive targets of top-down marketing and distribution, and they bridle at corporate definitions of choice, convenience and fair pricing. If movies and TV want to avoid the epic collapse of music and print, they need to transform their business models as radically as digital technology has transformed the way that their customers interact with entertainment.
Illegal file sharing and piracy hurt artists, workers, businesses and national economies. So why is it so pervasive? Did honest people become lawbreakers overnight because digital technology put a dangerous tool in their hands?
Maybe piracy is a symptom, not a cause. Maybe the root problem is illustrated by how the music industry tried to ram its business model of $17 CDs down the throats of its customers, despite their clamor for a convenient way to buy individual songs at a fair price. The industry couldn't have come up with a more effective plan to drive those customers into the arms of Napster. No wonder Apple wiped the floor with the music labels when it introduced the iPod and iTunes: it gave people what they wanted, and it invented a business model for doing it.
The movie industry could learn something from that experience. Hollywood clings to its "windows" system of distribution, which dictates to consumers when they can see movies, on what media platform, and at what price. The result has been a disastrous reliance by the studios on DVD sales, and a burgeoning resentment by consumers who are fed up with being pawns in Hollywood's dying business model. If the studios don't want to keep losing customers to BitTorrent and LimeWire, perhaps they should come up with a distribution strategy that doesn't depend on frustrating, inconveniencing and infantilizing their customers.
TV is no less hobbled by a failing business model. People loathe advertising, and they'll do anything to avoid it. They also loathe cable companies for their monopolies, their soaring pricing and their indivisible program bundling. Networks and cablers have been terrified to discover that the same generation that grew up assuming that content like journalism and YouTube is supposed to be free is now insisting on an equivalent arrangement from TV. The Internet emboldens and empowers the audience to demand that. No wonder the TV industry is madly scrambling to prevent broadband from untethering their customers from coaxial.
None of these rear-guard actions is working very well. That's why the entertainment industry is threatening the audience with the nuclear option: pay up, or else. Or else what? Or else the kind of content we're hooked on will become prohibitive for them to keep producing. The suits just can't imagine a world where executives, stars, directors and agents don't make gazillion-dollar salaries, and where skyrocketing special effects budgets aren't the only way to win audiences. Nor can they imagine that social media and smart phones are mortal threats to their power to monetize our attention. The studios, networks and cable companies are betting that we'll do anything to save the old business models in order to keep the old content coming. Looking at what's happened to music and newspapers, I'm not sure it's such a shrewd bet to place.
This is my column from The Jewish Journal of Greater Los Angeles. You can read more of my columns here, and e-mail me there if you'd like.
UPDATE: Corrected to fix dumb error re P2P clients.
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Not all artists believe that free content is a bad thing. Mainly only the studios think that because that is how they make THEIR money - controlling the content. The artists make practically nothing from each CD sold. They make their money from concerts and merchandise sales. So artists are more than happy to give their music for free on the net if it gains popular support in other more profitable ways. Look at Nine Inch Nails recently. they've seen a major revival of support by being totally open source.
Media is the same problem. They have profited because they controlled information that they don't actually own. Now that there is the internet, people can get the same information for free and not deal with crap that the media REALLY wants to sell because it is cheaper and makes them more money.
Editted for truth: Illegal file sharing and piracy hurt RICH artists, RICH workers, RICH businesses and developed-world economies.
As Tim O'Reilly (the world's biggest tech book publisher) said, Piracy is Progressive Taxation. Metallica loses money to illegal file sharing, but a thousand indie bands found an audience this decade because of it. Maybe Sony BMG isn't growing like they did in the 90s, but a hundred new labels use free online distribution as advertising.
The moment my band's EP came back from mastering the first thing I did was put it on a dozen bittorrent trackers. What do I care if a bunch of people that have never heard of my band download it for free? Those aren't lost sales, those are potential new fans. The vast majority of artist's don't worry about piracy, they worry about obscurity. If no one has ever heard of me, why would they bother to steal my content? How would they even know that my content exists?
For Hollywood examples, look at Ink, a low budget sci-fi film that found an audience on bittorrent forums (500k downloads the week of release). Maybe X-Men Origins lost money on its pre-release leak (debatable), but Ink, with no real theatrical release, has banked on DVD sales deals with Netflix and Hulu.
Let us know if you have a change of heart after you've made it big.
It is also true that the music industry continues to sell hundreds of millions of cd's worldwide. They are not hurting unless the execs bemoan that the fact that people are using ITunes to buy the one tune on an overpriced album that is worth anything and forsaking the ten other crappy songs on said cd, and it will eat into their budget for coke and hookers. Poor babies.
One thing driving people away from movies is the cost of going to the theater now. $20 for a ticket? And the ridiculous charges for refreshments? Really? Better to wait until it's on Netflix.
Look, the market, as you indicated, is changing. Record and music execs either change with it or their outfits will perish. Being able to do business is a privilege allowed by the public through their purchases and not the entitlement that too many entertainment bigwigs seem to believe it is.
I am down from at least 15 movies a year in the theater to about 2 for the last 12 months and I don't think I will be going any time soon due to the last experience.
If theater owners worked harder to stop the talkers more of us would go back.
Wait for Netflix? I haven't figured out the bit torrent downloads yet but trust me everyone under 30 has and they download films on the same day they are in the theaters.
Lose the bloated salaries - the ridiculous perks - and actually try to keep your customers by producing better movies and the film industry may survive this.
With the quickly dropping price of HDTVs, Hd movie players, etc. Why would I pay $11 per person, plus another $20 for food, for a movie only to have a terrible experience provided by a company who couldn't care less? I don't need to see the movie right away that badly and will happily wait to rent or buy the Blu-ray version where I can watch it in just as good a visuals and sound but with less annoyance?
Companies USED to care about competing. However, now that they are losing profits from technology, they don't know what to do. The concept of providing a better, more cost-competitive product is alien to them. Their corporate structure will not allow them to make LESS money in the short term, even if it helps them in the long term.
No, but technology has allowed people to simply outmanuever industry. Unless said industries can figure out a different way to function and market and sell their products, they may have to accept that even with aggressive legal crackdowns, there will always be a segment that illegally obtain their products, but the success of movies like "Avatar" and "The Dark Knight" indicate that there are more than enough movie goers who prefer the full legal cinematic and DVD experience to generate ample profits, and their losses through piracy by comparison will be relatively low.
1. Using a file sharing program to find music that is out of print.
2. Using file sharing as "try before you buy" (cd's are too expensive to impulse purchase now and the record industry is to blame for that). Not only that, but research has shown that people who do this BUY more cd's than fans who don't.
3. Using file sharing to find live recordings that aren't available through normal channels.
4. Using file sharing to get mp3s of material you already own so that you don't have to make your own mp3s to load on your IPod.
5. Taking material you bought legitimately and burning a copy for a friend. To those of you who remember the RIAA's lame "home taping is killing music" campaign this will sound familiar.
6. Any store that plays music on the radio through its PA system.
The loss to the record industry in all the above is minimal. Yet, these are the kinds of people who often find themselves fingered in the RIAA's invasive snooping and lawsuits. Instead, they should be spending that money scrutinizing swap meets, where a tremendous amount of real and flagrant piracy goes on, especially with regard to the Latin music market. But they don't. Instead, if you are a regular consumer and music fan, you are automatically seen by the RIAA as a criminal suspect. Great way to win friends among the public RIAA. Or not.
This is BS. Luckily the only locations that really new about (or cared) were the places that also hosted live music acts or other live shows. If you are just renting a local hall, or in our case, a small seasonal restaurant, they may not know or care about this possible issue. So in the end it worked out. But I feel truly sorry for anyone else who wanted to have an event somewhere and had to pay a fee in order to play their own music, which they bought, for their friends/relatives.
And there seems to be no relevance or resonance to any of the films at all. They are just taking any idea they think will sell to teenagers, no matter how lowbrow it is, and throwing it against the wall with no rhyme or reason to it. There is no equivalent in the 21st century to a film such as Easy Rider or A Clockwork Orange.
Consequently, artistically, the movie industry is completely out of gas. I haven't been to a movie since the mid-80's. And today's young stars also just seem to have no real heft, either. They mostly seem like overgrown children to me. I mean, Lindsay Lohan? Are they for real?
So the movie industry, much like the record companies, has been its own worst enemy.
Last I checked, movies either needs sets built or they don't. The NEED for set builders, sound engineers, etc exists NO MATTER WHAT. If you want to make a movie, you need these people and can't make your movie without them. So to say piracy hurts them is wrong. They are needed and valued regardless of whether the movie makes $1 of $1 billion. To say these people are hurt is to say movies will be made cheaper without sets, sound, music, etc. I don't believe this.
The people who ARE hurt by piracy? CEOs, executives and yes, those actors making $20 million (possibly more than double that if you include a cut of profits, etc) because less ticket sales means they are losing "draw" and therefore they have to work for less. Piracy hurts the studio because they can't charge you $30 for a new DVD/BR which costs them pennies to make. At no point does piracy hurt the real workers who build the sets or do the many other small things that don't get the attention.
That point, specifically, being that we, their customers, aren't stupid. If the industry wants to abuse us like we were resources to be tapped for cash, rather than as consumers looking for a product, we'll be more than happy to take the extra steps to ensure that they stop getting our money.
I already don't buy DVDs and recommend my friends not to buy them. I highlight to others the abuses media industries make so that they can be aware and take appropriate action.
And I show solidarity with the other people who don't like being scammed.
- Insert DVD
- Wait for the machine to load and index it
- Get to the main screen
- Wait for the FBI warning that can't be fast-forwarded through
- Play the movie. Get stuck with previews. Fast forward through those.
Now, suppose I only get halfway through and I need to play something else. Go through it all again - both for the new one and the one I was originally watching.
End result: I don't buy, rent, or watch DVDs.
At least with VHS it starts out where I left it.
We also have to substantually reduce the costs of high end talent, to end the gross revenue model for top stars, they don't need to live in $20 Million or more mansions or have their own airplanes.
Still, the revenue losses due to technology is changing 'Hollywood'. They survived the introduction of TV, they will find a way to survive this digital revolution.
As long as you want to cut star salaries, though, how about trimming the salaries and perks of studio execs? Oh wait, that's socialism. Excuse me.
So the item was stolen but revenues were not really lost because of it.
You mean, like taping it off the radio? Or do you define that as piracy, too?
If I tape a concert off of PBS am I a pirate?
Radio personality Tom Leykis once had as a topic how low should cd prices go before people would stop using Kazaa to download music? The answer was consistent, $10. But the RIAA insists on an all or nothing strategy where they will try to ignore free market conditions and continue to to try to move a cd that costs them an average of $3 per unit to produce, replicate and distribute it to stores for a wholesale price of over $10, which translates to about $16-17 retail. To get $10 retail, that would be about $6 per wholesale unit, still a 100% profit. And that profit is further protected and enhanced by a sharecropping arrangement with the artist known as cross collateralization. So in that way, the RIAA is ripping off both customers and its artists. And make no mistake about it, they don't give a crap about the artists.
Plus MP3s sound like crap compared to regular cd's.
The average age of the ITunes customer is 40 years old. Young people still find ways to download music for free -- music is free to them as an age group. Itunes has made money for Apple, not the recording industry and movies will have the same fate. The largest retailer in music today is Verizon. The same people who can't pay one dollar for a download will pay three dollars for a ring tone, why? Because they can't readily steal it, and if they could, they would. The future for all digital technology and commerce is tethered downloads and trade specific players. If itunes is the model, the movie industry is done.
Cite?