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Browsing posts in: Entertainment industry

Competing with piracy: Streaming services can be even better

Slowly media companies are migrating to more digital savvy strategies, however much kicking and screaming may be occurring. Most movies and tv shows are available for download and music streaming is becoming the new standard for music consumption. Models are moving to subscription from a la carte, and this is better for consumers.

However, media and technology companies still forget who their top competitor is: piracy. Online piracy remains cheaper and more flexible than any official option. Technology companies eager to convert pirates to paying customers need to recognize the features pirates value and find ways to offer alternatives.

For streaming services, they should want to remove any reason to leave their system. Netflix encourages keeping track of videos to watch and remembers where you left off, even if you stop mid-show. In music streaming, Spotify and Rdio have excellent selection, fair prices, and flexible options for mobile and off-line usage.  They solve many of the issues a streaming service may present. But for some power music users, features available in iTunes and other music management software are not replicated within streaming services.  Personally, I still prefer MP3s so I can track my play counts and ratings for songs I like. This way, I can always find or re-find music I like, which can be challenging in a large collection. Additionally, I’m picky with how my music gets tagged, again to help with my discovery of old music in my collection. Music streaming, while excellent for discovering new music, fails to make it easy to keep track and rediscover that same music.

Research shows pirates spend more on media content, like music, and may already subscribe to streaming services to help with discovery. But to fully capture these users and deter them from pirating content, ensuring streaming services replicate the non-streaming experience can be vital to making streaming as ubiquitous as phone service.

Netflix’s Innovation: Giving Viewers Control Over Content

netflix-logoNetflix’s stock has soared this week on news of excellent earnings and growing subscribers.  More significant is the release of Netflix’s new original series “House of Cards.” The $100 million prestige soaked series, from Academy Award winners David Fincher and Kevin Spacey, launches its full 12 episode season in all markets on February 12th. Also important, “House of Cards” will be available on every platform Netflix supports.  Any Netflix subscriber can watch every episode of the season by Saturday morning.

Compared to legacy media models, this is revolutionary, while at the same time, so simple and obvious about how consumers want to consume media.

Between time-shifting DVRs and online piracy, viewers already have pretty significant control over their viewing experience. International viewers still have to choose between piracy or waiting months to watch foreign shows. American “Downton Abbey” fans waited for almost six months for season 3, even needing to avoid major plot spoilers because of the long delay. Legacy television continues relying on windows and restrictions, something consumers are less willing to accept.

Netflix’s model has long been about enablement.  “House of Cards” screenwriter Beau Willimon explained Netflix considered several ways to release the episodes:

Should we do a traditional [one episode per week]? Should we do it in chunks, like four episodes, then five episodes, then four episodes? And we eventually arrived at [offering] 13 all at once because that speaks to what Netflix has to offer that really no other network does. Its subscribers watch content when they want to watch it, how they want to watch it, in what chunks they want to watch it. And so it puts the decision in their hands.

Let consumers choose how they watch their shows. It’s a revolutionary idea. Remove restrictions and enable users.  It’s empowering and value-enhancing.  These sound like great ways to build a business.

Pandora Radio versus Music Labels, Again

Pandora Radio entertains 60 million users a month with doubling revenue, yet this success is marred by oppressive royalty fees that make its growth a financial burden.

Pandora pays royalty rates for music played based on overall revenue, not profits, and pays higher rates than terrestrial radio stations.  Pandora is lobbying Congress to lower its rates so that it can stay in business.  Some in Congress believe terrestrial radio should instead pay the same higher rates that Pandora and internet streaming companies currently pay.

Artists and labels are fighting back against any decrease in the rates paid.  They claim the rates per stream are already fractions of a cent providing them with little income.

Laura Balance, co-founder of Merge Records, representing Arcade Fire and Spoon, told the Huffington Post "[Rates] should be higher. It doesn’t make me feel badly for [Pandora] at all that they should be paying out half of their revenue or more to artists – that is entirely how their revenue is generated."

But this is, of course, not true. Pandora generates revenue by providing a service that adds value to consumers. Not simply a radio station, Pandora creates custom playlists for listeners based on their interests, and adapts the playlist based on what the listener likes and dislikes.  The result is listeners might discover new music they never knew about. 

Music labels still seem to believe their content is the sole value generated by any music related technology company.  There’s a reason music labels have spend the past half century illegally paying radio stations to play their artists – because the radio stations have influence over their audience and are valuable promotional resources for artists.  Pandora, through all its algorithms, software interfaces, and community building, offers incredible value to consumers and back to music labels.   Music labels should consider what happens if their demands put Pandora and other streaming services out of business. Do they expect consumers will just start buying the music they tell them to? Or will consumers move to more piracy and music sources that provide no revenue.  Eventually, I hope, music labels will start recognizing the value they gain from embracing new music services rather than trying to drain them out of existence. Music labels might discover they are on the loosing side of that regime.

Midnight in Paris film sued over line from Faulkner novel – Updated

Woody Allen film Midnight in Paris has been sued for copyright infringement over a single line in the movie. Faulkner Literary Rights, the company that owns the copyright to author William Faulkner’s writings, including novel The Sound and the Fury, says the line from Requiem For a Nun was used without permission and is seeking unspecified damages.

In the film, the line said is: "The past is not dead! Actually, it’s not even past. You know who said that? Faulkner. And he was right. And I met him, too. I ran into him at a dinner party." The only appropriation from the book is  ten words: "The past is never dead! Actually, it’s not even past.”

This is certainly a case of fair use.  The line, which is cited to Faulkner in the script (even though that is not a requirement for fair use), is few words from a 286 page novel, far from threating the commercial value of the book. Rather, Allen citing the line can increase the commercial value of the book, introducing people to a new Faulkner book.

Unfortunately, fair use is a defense that must be made in court. This means significant court costs for Sony Picture Classics, the studio behind Midnight in Paris, just to prove they did nothing wrong.  Faulkner Literary Rights, further, does not need to prove their commercial value has been hurt. Simply the act of copyright infringement, even if it was to the holder’s benefit, can cost hundred of thousands of dollars in damages.  The result, most likely, is Sony will settle, paying a settlement in order to save on court costs.  All over ten words.

Updated 10-26-12 1:01pm – Clarified that the quote in the film was actually slightly different from the book, changing never to not.  It’s not necessarily a transformative change, but still, shows how silly this lawsuit is.

Don’t worry entertainment industry: United Kingdom here to save you

With almost no debate and minor opposition, the United Kingdom passed the Digital Economy Bill which is pretty much a wish list from the entertainment industry looking to trample over individual’s rights in order to prop up their obsolete business models.

The Digital Economy Bill includes a “three-strikes” type provision to ban copyright infringers from the internet, based on accusations from copyright holders, not the courts. This will also make open wireless networks impossible as the law holds the owner of the signal responsible for any infringement.  Let’s ignore the research that shows the costs of forcing ISPs to police their uses costs more than the already inflated lost revenue from the entertainment industry.

The law was pushed though the UK Parliament using a system called wash-up that avoided most of the debate and scrutiny a law would normally receive. Of course, let’s not forget Lord Peter Mandelson personally helped orchestra this law after having a ritzy dinner with the head of the MPAA (that hasn’t stopped Mandelson from infringing on others’ copyrights).

So ISPs are now legally forced to basically subsided entertainment companies who are unwilling to recognize changes in the marketplace.  Nothing in this bill reveals why people will suddenly start paying for content.  Rather, these laws only push file-sharing and piracy into more fragmented and underground areas making them even harder to track.

DVD rentals make more money at lower price

Even as DVD sales plummet, DVD rentals rose 4.1 percent to $6.5 billion in 2009.  This rise happened even though 3.2 percent fewer rentals happened in video stores. Rather, the increase is most likely attributed to the 94 percent increase at rental kiosks like Redbox, which has been under attack by movie companies for siphoning their business with cheap $1 rentals. Those $1 rentals (and low-priced used DVD sales) added up to $1 billion in revenue for Redbox. So lower price, more money. Maybe movie companies will recognize the basic economics at work and stop fighting successful business models for people willing to spend money on their movies.

Evidence mounting that file-sharing and movies can live happily together

…but movie companies certainly don’t see that. Paramount Pictures released its study of the five million IP addresses it tracked who downloaded camcorded copies of Star Trek.  Writing to the FCC, Paramount says:

Just five years ago, one had to be computer literate and exceedingly patient to pirate movies. Today, literally anyone with an internet connection can do it. Clunky websites are being replaced by legitimate looking and legitimate feeling pirate movie websites, a perception enhanced by the presence of premium advertisers and subscription fees processed by major financial institutions.

So after years of suing and spending millions in lobbying, spying, and prevention, Paramount agrees it is easier than ever to download movies. Downloading movies “has advanced from geek to sleek” they say.

I interpret this as a sign that the movie companies’ campaign against piracy has not worked. It is easier than ever to download any movie, song, or game you want and it will only get faster and easier. More people are doing it and aren’t embarrassed by it. For all the propaganda (see last Sunday’s 60 minutes), file-sharing is what the market wants.

Paramount, of course, sees the opposite.  The spreading of file-sharing means movie companies need more laws to stop file-sharing, while never showing how these laws, assuming they worked (which they won’t), would encourage customers to go back to their former purchasing practices.

That’s why Big Champagne, a company that tracks online piracy, is urging movie companies to rethink their piracy strategies, claiming their own practices are encouraging file-sharing, especially in European countries where they might wait weeks or months for a TV show or movie to air. CEO Eric Garland tells CNET:

In the digital world, we don’t want to wait three months, six months. We’re just not accepting that anymore…we want it all, we want it right now and even Mom and Pa Kettle are getting to the point where they say if it’s not on, let’s just fire up the computer and watch it. If they want me to wait six months, I’ve got other options. And people don’t really have a conscious [sic] or qualms about that.

So we know waiting hurts (why wait when you don’t have to). But instead of searching for alternatives, movie companies want more windows, or at least maintain the ones they have. This goes against what customers are demanding. Instead of offering customers a compelling product, movie companies just want the government to pass laws supporting their obsolete business models.

For all the increases in file-sharing, movie production and revenue has risen (ignore the blatant lies in the aformentioned 60 Minutes segment), from 567 movies released in 2004 to 1177 movies scheduled for release this year.  Total revenue rose by about $300 million from 2004-2008 (this year hasn’t ended, and for reference 1037 movies came out in 2008).  So more movies, more money. I wish file-sharing would hurt my industry the same way.

Fighting technology: A history of futility

Ars Technica’s Nate Anderson has written an excellent history of how the content industry has fought against pretty much every technological advancement over the past 100 years for fear it would end creative expression forever. As we know this isn’t true. Rather, technology helps increase the market for these creative works (and other industries) by decreasing costs and increasing efficiency. It is much cheaper and easier to create and distribute music than it was 10 years ago, let alone 100 years ago.

Anderson profiles the content industry’s fight against the gramophone and player piano. John Philip Sousa campaigned to Congress to ban these evil machines for replacing live performances, not recognizing that home recordings might increase the demand for those live performances. This gave birth to the compulsory license system, where the government set rates sheet music must pay to songwriters, we have still to this day, though it has been vastly expanded.

Photocopiers spelled doom for the print industry, with UCLA law professor Melville Nimmer saying “the day may not be far off when no one need purchase books.” While the U.S. and its courts upheld a fair use right to copying, Canada and other countries must pay royalties to collection agencies for every copy. Canada pays the same tax on rewritable CDs and iPods because they might be used for pirated content.

Movie companies famously referred to the VCR as the “Boston strangler” as it killed the movie industry. Universal sued Sony over Betamax all the way to the Supreme Court to ban the use of home recording. Once found legal, movie companies decided to sell copies of their own movies to home viewers, a revolutionary practice that led to the multi-billion dollar home video and rental market.

Pretty much every expansion into digital media has been fought tooth-and-nail by the content industry, from Napster to DVR to the iPod.

Anderson also left out some other highlights. Cable TV, when originally introduced, featured almost exclusively pirated content from network television. This allowed cable television to expand far enough that it could afford its own programming. Even the movie industry began by fleeing New York to Hollywood to escape enforcement of Thomas Edison’s patents and the high prices he charged to anyone wanting to make movies.

Presently, the DMCA makes sure technological innovations are few and far between to help the content industry.  While CDs were released without DRM and thus able to be ripped onto computers and people’s iPods, DVDs are copy-protected and thus illegal to copy in anyway. Even though it is easy to do so, no software or hardware can be released that can take advantage of people’s massive DVD collections.  Even though the content industry claims it would never sue to ban innovation, the industry has done so several times, and won these cases, holding back technology and innovation that consumers want and could do more to help expand the content market.

How Lily Allen showed copyright affects more than just artists

Musicians in the U.K. have been staking out positions for and against a proposed 3-strikes law where after 3-strikes, file-sharers of copyrighted material would be banned from the internet. Lily Allen (a personal favorite of mine) launched a blog in support of the 3-strikes law, but resulted more in a lesson to strong copyright supporters that no longer is copyright just an issue for those creating content.

To summarize the more than week long back-and-forth, Lily Allen began her blog, It’s Not Alright, a few weeks ago arguing file-sharing was stealing and hurting new artists writing “File sharing eats away at opportunity for new artists: by cutting off income at the most crucial, cash-strapped point in their careers and by limiting A&R’s ability to sign new acts outside of the mainstream.”

Allen’s blog quickly gathered a large community of copyleft and copyrighters debating Allen’s arguments and the merits of the laws she endorsed. TorrentFreak pointed out Allen copied an entire post from (another personal favorite) Techdirt without citation or a link. Techdirt’s Michael Masnick explained he didn’t care about the copying, but pointed to how hypocritical Allen’s was being.

A few days later it was revealed that Allen, while a new musician herself, released mixtapes online of her and other artists’ music, music which she did not have the copyright to. These mixtapes were still available on her website – entire songs. Allen defended this as her not understanding copyright law when she made them and that the songs were just excerpts.

Hundred of people commented on her blog and many bloggers posed questions for Allen to justify her position on file-sharing while she herself had no problem copying blog posts and file-sharing songs herself. Further, she used free services like Blogger, MySpace, and Twitter to share her music and connect with fans, turning her from a new artist to a famous artist. And she didn’t respond to questions from Masnick and others asking how Allen balanced her belief that file-sharing was harming music when the U.K.’s music industry’s own study showed the music industry was growing.

Allen discontinued her blog claiming Masnick and other copylefters were bullying and attacking her (one person said Masnick of “leading” his “internet army” to attack her while being angry.

But all this really teaches us that copyright affects more than just musicians. There is a growing fervor among consumers that copyright and the content industry are expanding too far onto individuals and their civil rights. Recording companies keep increasing the penalties for file-sharing, yet file-sharing keeps growing because that’s what technology and the market demands. No amount of government intervention will force people to buy CDs again.

Because Allen stopped blogging and has ended her career does not mean copyright isn’t working. The music industry in the U.K. has significantly grown as technology has made it easier and cheaper to make and share music. Allen herself took advantage of these free and cheap tools to make herself famous, and only when famous does she change her tune (see what I did there) on copyright. While I’ll be very sad to not have any more of her music, there are thousands of new artists eager for space on my iPod.

Movie studios and three more reasons to ignore them

Not content to learn from the 10 plus years of mistakes by the recording industry, the movie industry is stampeding its way to obsolescence.

First, Fox and Warner Bros. have joined Universal in its battle with Redbox, the successful rental kiosks found outside supermarkets and fast food joints. Redbox rents movies for $1 a day, legally purchasing the movies from wholesalers. Redbox will even sell used DVDs for about $7.

Fox, Warner Bros. and Universal have sued claiming Redbox is infringing on their copyrights and are ordering wholesalers to refuse to sell their movies to Redbox before several weeks. The studios are demanding revenue sharing from the kiosks.

Redbox is countersuing for antitrust and abuse of their copyrights.

Redbox, while relying on the movie studios, is in a stronger position. Sony and Lions Gate are backing the kiosks with their movies, recognizing that movie fans love the price and convenience. DVD sales are down 13 percent while rentals are up 8 percent.

Next, the movie studios recently won two important court cases, both likely to cause more damage to the industry rather than help.  The first was the studio’s win over Real’s DVD copying software.  This copier circumvented the DVD’s DRM, which is illegal under the DMCA, but then put new DRM in its place so users couldn’t share their movies.

Now, copying for personal use or backup is considered legal and a fair use of a copyrighted work. But because of the DMCA’s anti-circumvention laws, you can’t backup the DVD you legally purchased.

What’s silly, is Real’s copier cost $20 and used DRM making it a somewhat worthless copier, especially when there are dozens of free DVD copiers without any DRM. So by suing, the movie studios 1) promoted that people could copy movies and 2) sent them to free, DRM-less alternatives.

For their other lawsuit, movie studios won their appeal against Kaleidescape, which is basically an iPod for movies (or a DVD jukebox, if you will), but costs $10,000.  Movie studios of course feared this system would be a haven for piracy, but again, it’s $10,000. It’s for high-end movie fans with lots of DVDs who don’t want to keep switching discs. They backup their discs on Kaleidescape and then watch them on their TV. But because of the DMCA’s anti-circumvention laws, users can’t do what they are otherwise legally allowed to do. And the movie industry gets to stamp out innovation and technology that is trying to help make DVDs and movies more valuable.

How are legal remedies helping here? The movie studios are trying to crush three different companies who are trying to help make DVDs more valuable at a time when consumers are showing DVDs are less worth purchasing.