IMAX theaters have become an increasingly important part of the movie business's continuing success over the past few years, as theaters have realized that (1) you can't "pirate" the IMAX experience and (2) people are often willing to pay more for it. But, it appears that at least one theater began to wonder why it had to pay IMAX so much for such an offering, and decided to set out on its own to build a competitor. The only problem is that this theater, Cinemark, has been a customer of IMAX, so now IMAX is suing Cinemark for trade secret violations and breach of contract (sent in by Eric Goldman).
The details of the case certainly look like a business deal gone bad, and also involve Cinemark preemptively going to Texas (of course) to file a patent action against IMAX, asking the court to make clear that it does not infringe on IMAX's patents. There may very well be breach of contract issues involved here, so IMAX may have a decent case on that front. But what's more interesting is the question of whether or not there are trade secret violations here. We don't talk about trade secret protections as much around here, because they really don't come up that often. But IMAX is claiming that it shared proprietary trade secret info with Cinemark as part of their relationship, and that info was used by Cinemark to build its competing service.
Perhaps much more interesting, however, is the fact that, at least according to the IMAX lawsuit, the Cinemark XD quality has been reviewed poorly compared to IMAX (I looked around and actually found the reviews to be mixed, with many saying that the two are comparable in terms of experience). Cinemark is a much bigger company than IMAX, and had direct access to all of their technology -- and, even so, at least some are saying that the end result doesn't measure up. I'm reminded again of how silly it is to claim that big companies can always "steal" good ideas from smaller ones. It's simply not that easy. Beyond just the basic quality issues, IMAX really has built up a great brand name, and many people do think specifically about going to see "IMAX films." Cinemark can chip into that, but it's going to take a lot of marketing effort. And, really, what's wrong with a bit of competition? IMAX has had the market to itself for years, and some competition between two different methods of "immersive" movie-going experiences seems like it should only create a better situation for consumers.
I'm beginning to sense a trend. Just last month, we talked about a top exec at Paramount claiming that his "real worry" about movie piracy online was how it was going to harm indie films, since, as a big company, Paramount could take it. Then, just a week or so later, Sony Pictures' boss, Michael Lynton, also started talking about how fewer movies were being made due to piracy. Unfortunately, he was wrong. In the past five years the number of films being released has more than doubled and the major studios are making more money than ever at the box office. And yet... they keep trying. Dark Helmet points us to the news that the CEO of Fox Films, Jim Gianopulos, is the latest to claim that movie "piracy" is harming independent films the most (while saying it's harming everyone in the movie business, despite no evidence to support that claim). He made this statement while suggesting that the US needs to follow France in kicking people off the internet for file sharing accusations (not convictions).
It looks like the heads of the studios have all received their talking points from the same source (MPAA?) on this one. They're going to talk up the supposed harm to indie films, even as the indie film market appears to be figuring stuff out on its own (in part due to smart indie film producers embracing file sharing as a better means of distribution and promotion). My guess is that the strategy is a response to the realization that those massive box office returns don't look good when the major studios argue for more draconian copyright laws, so just as the RIAA makes up stories about "protecting the up-and-coming artist," the major studios and the MPAA are now using a bogus PR strategy of "protecting the indie filmmaker," when all they really want are more laws to offer additional protectionist policies for the next blockbuster.
Sony Pictures' CEO is Michael Lynton, the guy who recently claimed that "nothing good" has come from the internet, and that piracy is killing the movie business. He made that statement less than a month ago. And yet, as Dave Title points out, Sony Pictures just announced that its international box office results have already set a new record for the year, hitting $1.63 billion. The company is bragging about this new record -- as it should. But it does seem a bit disingenuous to brag about revenue records just weeks after claiming that piracy was destroying your business and asking for government help to protect the business model. Someone might notice that these two things do not seem to agree.
Someone once told me that Viacom's top lawyer, Michael Fricklas, has been known to read Techdirt on occasion. I have no idea if this is true, but it still is interesting to watch him give a lecture to some Yale law students where he offers a somewhat nuanced position on copyright issues (thanks to JJ for being the first of many to forward the video to us), but which repeatedly seems to leave out certain pertinent facts:
He starts out by saying that he's a strong supporter of fair use, and doesn't like the idea of having to get licenses for creating new works -- but is concerned about the "exact copy" problem. So, basically he's in favor of fair use for creating new works, but not direct distribution.
He discusses copyright vs. free speech -- and insists that there's no "tension" between the two (despite many recent studies suggesting the exact opposite). Of course, he does a bit of a twist there, by saying that copyright is pro-free speech because it creates incentive for speech. The problem with this statement is that while that's the theory, the evidence for it is somewhat lacking. However, there is tremendous evidence of cases where copyright is used to stifle speech -- and of all the massive extensions and changes in copyright laws over the past 200 years, almost all have served to stifle more speech than they have encouraged.
He then trots out the industry's own numbers claiming how much copyright contributes to the economy, even though those numbers are based on a variety of questionable assumptions, including the idea that all content covered by copyright is only created because of copyright. Along those lines, he also credits copyright for things like the iPod and the Kindle, saying that no one's buying those devices just to look at them. This is correct -- but note the trick. He did not say that it was content that drove the iPod and the Kindle, but copyright. He's wrong. It's content. Not copyright.
He notes that some say that "unlicensed IP" might drive this innovation, but he favors "sustainable innovation" (as if anyone doesn't). And then he makes this odd statement:
"A more sustainable innovation is one where, if you make an investment, you have the opportunity to make a return."
Now, that's a great (by which we mean, useless) statement, because it's obviously true. Who would ever deny that? But it's a sneaky and disingenuous statement, because it implies something that's simply not true: that without copyright or without restrictive licensing, the investors do not have an opportunity to make a return. As we've shown over and over again, plenty of content creators who "free" their IP have not only made a return, but have made a better return than they did under older models that relied on copyright. But it's a sneaky trick that's often used by folks in this debate. You set up this strawman argument and then knock it down, despite the fact that no one ever made the argument, and you argue that something is fact (that you can't make a return) when it's empirically false. It's frustrating that this argument still gets made and people should really start calling the folks who make it out whenever they state such falsehoods.
Later, he talks about the "losses" from piracy, insisting that the findings come from a "sophisticated" analysis, not just from counting all downloads as lost sales. Of course, these numbers came from the same study process that led to some results that even the MPAA (of which Viacom is a major member) had to later admit were bogus. This is also the same "sophisticated analysis" that includes ripple effects in one direction only, so it's actually double, triple, quadruple, quintuple counting some numbers, while totally ignoring how those numbers actually help the industry in other ways. So, sorry if I don't take those loss numbers seriously, no matter how "sophisticated" he thinks they are. They're not. They're only "sophisticated" in how misleading they are.
He does have a short discussion on RealNetworks' RealDVD offering, which he implies enables piracy -- even as he admits he wants the functionality, where he could move a copy of a legally purchased DVD to his hard drive for backup or other viewing, but says his "concern" is that people would do this with Netflix DVDs. He believes that the problem with this is that RealNetworks had to break the encryption put in place by the studios. Notice, again, what Fricklas conveniently leaves out. First, he leaves out the fact that it is already legal for people to make backup copies of content they legally own -- but, thanks in part to Hollywood lobbying, Hollywood itself can block that right, simply by putting encryption on something and then saying that you can't circumvent it without breaking the law (thank you, DMCA anti-circumvention clause). He also leaves out (conveniently) the fact that RealDVD doesn't actually "break" the encryption and that the resulting copy still includes DRM that prevents copies. The fact that he's "concerned" about the Netflix model is of no consequence whatsoever. McDonalds is "concerned" about Burger King, but that doesn't give them a legal right to block them from being in business.
Then he pulls out the ever popular "$200 million movie" myth, which I thought was a favorite of NBC Universal, but I guess Viacom is going with it now as well. It's not a myth that there are movies that cost $200 million. The myth is that people want movies that cost that much. No one watching a movie cares how much it costs. They want good movies, no matter how much they cost. I'm sure people would like some $1 billion or $100 billion movies as well, but that doesn't mean we need to grant Viacom extra special legal privileges to make sure it can make a $1 billion or $100 billion movie profitably. People like good movies. Viacom wants to make profitable movies. We agree. But the $200 million number is meaningless. There are ways to make good movies for both less and more than $200 million and there are ways to make profitable movies even in the face of piracy. The claim that piracy undermines the $200 million movie, which is some sort of "necessity," is simply not supported.
On top of that, he tosses out the debunked claim that if something is "free" it means it's devalued. That's simply not true, no matter how many times people repeat it. If it were true, and the content had no value, no one would want it. Value and price are two separate things.
Then, he discusses the "Kanye West" MTV Video Awards "Imma let you finish..." example, by talking about how Viacom used various filtering tools to pull that clip off of various "unlicensed" user uploaded video sites. But he also talks about how they drove people to use the official Viacom clip, which allowed them to "participate in the benefit" of the video. Now, that's interesting, and it's great that they put their own clips up and made them embeddable. But, again, it's important to note what he left out. In forcing everyone to view the content through Viacom directly, it also increased Viacom's own cost in terms of bandwidth. The advantage of letting others help host and distribute the content is that it actually eases that cost.
His discussion on kicking people off the internet via a "three strikes" mechanism is getting much of the attention on other sites, because he mentions, totally in passing, that suing users "feels like bullying." This may sound like a big deal -- and certainly some other sites (and industry lawyers) are making it out like a big revelation, but it's not. The movie industry has never sued individuals for such things -- only the recording industry has. And even way back in the Jack Valenti days, he talked about why he didn't like the idea of suing individuals. So, this isn't a shift in positioning at all. Rather, it's a repeat of the new silly strategy of some in the industry to try to pretend that kicking people off the internet is "consumer relief." Not quite. Shooting someone in the leg instead of the head is certainly "better," but I doubt that the person shot in the leg considers it "relief."
Towards the end of that discussion, though, he makes another interesting statement, saying that: "there's no way to deal with this problem other than to move viewing into licensed contexts." Except, that's not true. There are other ways. It's called setting up a business model where people actually do have a reason to buy things, whether they view the content in a licensed or unlicensed manner. I recognize he's on the legal side, rather than the business side, but the idea that the "only" way to deal with piracy is to attack it, rather than embrace it, is a position that the industry long ago should have learned was a mistake.
His final point is discussing how DRM "enables new business models," and he more or less dismisses criticism of DRM as really just being criticism of "bad" DRM (of which there is plenty). However, what struck me, was how none of the "new business models" he described actually required DRM at all. You could do them all in some way entirely without DRM. All the DRM does is add restrictions. Of course, rather than adding restrictions, why doesn't the industry focus on employing new business models that give users more and make them want to buy, rather than trying to enforce artificial limitations?
On the whole, it is an interesting video, and well worth watching, but it conveniently misstates or leaves out important facts throughout. Unfortunately, the Q&A session that follows the presentation wasn't included, so I have no idea if any of the students challenged some of his assertions or pointed out some of the points that he left out. Anyway, maybe we can hope that Fricklas is, in fact, an occasional reader here and can stop by to address those questions and omissions.
We were just talking about some indie filmmakers who were happy with the extra attention they've been getting from having their movie "leaked" on BitTorrent, and ChurchHatesTucker alerts us to another story of filmmakers embracing file sharing. This one is actually from a few weeks ago, but a Swedish filmmaker made a low budget indie film called Nasty Old People and released it under a Creative Commons license, along with a request for donations. The link is to Metafilter where there's an interesting discussion about whether or not the experiment is a "success" or a "failure." It's a bit of a mixed bag, as at the time of the discussion, the filmmaker had made back 20% of the film's budget and there were questions if it would get much higher. Thus, it was easy for some to quickly call it a clear failure.
Of course, it's not really that simple. First, I've said for years that I'm no fan of "give it away and pray" business models, which really aren't business models at all. While it works sometimes, it's pretty much a crapshoot, and never strikes me as a real business model. So, on the whole, I'm not too surprised that it didn't bring in much more than 20% of its budget in 2 weeks (though some compare it to blockbuster movies that can often make about the same % of their budgets in the early going.
However, if we compare this situation to what would have happened otherwise (i.e., if the movie were not released this way) the situation becomes a little more interesting. This was a very low budget indie film that likely would not have received any distribution at all. At best, the filmmaker perhaps could have self-printed DVDs, and would have been lucky to have sold a dozen or two. She could have tried to enter it into various film festivals, but that's quite difficult, and even then there's a pretty good chance that the movie doesn't end up actually making any money. Yet, in this case, she not only made money from donations, but the film is getting picked up and shown in theaters around the world. So, compared to that situation, things actually look better than the alternative.
On top of that, while this particular movie may have been a net loss, she could use it for marketing herself. She can go around and show the movie to others, and perhaps use that to get funding for a larger scale project or another film that's released with a bit more of a complete business model. Nasty Old People becomes marketing and a promotion for Hanna Skold. It has to be better resume filler for a filmmaker to talk about tens of thousands of people downloading and watching your film than just going in cold saying you want to make a film. And, in fact, she's already hard at work on a new film script, with many people who became fans of Nasty Old People following along and interested in seeing what the new script is like. So, as a marketing tool, it sure seems like giving this movie away has been quite useful.
Charles Vestal alerts us to the news that Zombieland writer/director Rhett Reese has apparently be using Twitter to shame people who were mentioning that they were watching unauthorized copies of Zombieland at home, declaring to each one: "You realize we do what we do for money, right? Same as you." This comes soon after we highlighted some directors and moviemakers have found success by embracing those who were downloading their movie, recognizing that it was leading to more sales.
And, in fact, at least some of the people that Reese called out complained that they had actually seen the film multiple times in the theater and planning to buy the official DVD once it came out as well. In other words, the reason the movie is downloaded so much is because people like it, and yes, they still are supporting the moviemakers.
So, what made Reese lash out at these fans? You guessed it. He claimed he had just watched the 60 Minutes episode on movie piracy -- the one that we debunked for being factually incorrect, and it resulted in him getting angry at these fans, without thinking through the fact that the download might not be a substitute. But, even after the fans told him they had seen the film multiple times in the theaters, he's complaining that this decreases the chances of a sequel getting made. Given the massive popularity of the film -- both in the theater and online -- that seems highly unlikely. As we've seen before, the popularity of a movie in unauthorized downloads closely correlates with its box office take in many instances. It's rarely a sign of "lost revenue," and quite often a good indicator of actual revenue. In fact, the details show that Zombieland has done amazingly well, already earning back much more than it cost. Reese has a strong and loyal fanbase who want to support him and a very successful movie on his hands. Rather than attacking them, he should look for ways to embrace them and give them more real reasons to buy.
For years, Hollywood has pushed a totally ridiculous claim that Canada is somehow a den of copyright thieves, and it needs to make its copyright laws much more strict. This fantasy has worked on journalists and politicians, who insist that the movie industry is dying in Canada due to rampant piracy. Except someone forgot to inform the real world. An anonymous reader sends over the news that the owners of Cineplex in Canada are reporting record box office sales and revenue, even with the current economic downturn. Once again (and yes, we've been pointing this out for a decade), it appears that it's the actual experience that gets people to go to the movies. The folks at Cineplex note that a growing number of highly experiential films -- such as those using IMAX or 3D technology -- has really helped in getting more people into the theater and in getting them to pay more.
Oh, and as a special note to NBC Universal's General Counsel, Rick Cotton, who seemed so worried about those poor corn farmers who would be decimated by piracy, you can rest easy:
Concession revenues did well due to a film slate that catered to family audiences, who tend to be higher concession spenders.
A few weeks back, I noted that the low-budget (but highly-profitable) Paranormal Activity movie might teach Paramount a thing or two about how the business of making movies could succeed without spending millions on big stars and overly-expensive sets. However, it doesn't look like that was the lesson learned here. Paramount's CEO Philippe Dauman was recently interviewed about the success of the movie and talked about plans to make a sequel that he said would require the right marketing to ensure a benefit to Paramount. There's also the following insight into Dauman's strategy:
Asked by an analyst if the "Paranormal" model of a low-cost, high-box office film could be easily replicated with other releases, he said no, pointing to how much time passed between similar surprise hit "The Blair Witch Project" and "Paranormal."
So apparently, the decade that passed between Blair Witch and Paranormal makes for some kind of justification that low-budget movies can't be made profitably at will. Um. But couldn't that decade also be interpreted to mean that a studio should want to try more low-budget productions, more frequently? I can certainly understand that Paramount might not want to adopt a "throw everything at the wall to see what sticks" kind of business model for its movies. However, the existence of two huge box office hits that were produced for a pittance sounds more like proof that such a business model could work -- not a "lightning sometimes strikes twice" argument against making low-cost movies. But on the other hand, looking at the returns from the $15 million sequel Book of Shadows: Blair Witch 2, that release grossed almost $48 million worldwide... and there's talk of another sequel for Blair Witch on the way. The scary ending to this story appears to be an endless cycle of horror movie sequels.
Never let it be said that the folks in Hollywood aren't good at coming up with a totally fictional horror story. I just have a problem when they use it not to entertain, but to create a moral panic to push the government to pass laws in their favor. In discussing the recent 60 Minutes piece that was really nothing more than an MPAA scare tactic, some suggested that it was really just a first step in the process of getting the government to make sure net neutrality rules had a special Hollywood exception. So, it's interesting to note that just before that 60 Minutes episode aired (and just before Halloween), the MPAA sent a "scary" filing to the FCC warning it how the US would always be a broadband laggard if it didn't stomp out piracy. The full filing (warning:pdf) claims, repeatedly, that piracy is sucking up all our bandwidth and getting rid of that would somehow make it cheaper to install faster internet connections.
The
Commission has projected that it could cost $350 billion to ubiquitously deploy
broadband networks capable of delivering 100 Mbps, which is rapidly becoming the
international standard. The Commission, however, should not ignore that illegal content
accounts for a vast amount of online traffic. Thus, it could generate substantial savings
in this tremendous build-out cost -- to be borne by both government and private sector
investment -- by encouraging construction of networks that are designed not on the basis
of accommodating capacity-hogging transmissions of unlawful content but rather with
the goal of providing consumers a rich broadband experience.
And, of course, it pushes for kicking file sharers off the internet (it hides this by calling it "graduated response," of course, rather than the more common term "three strikes"). The filing also goes on about how the MPAA is just so sure that ISPs can stamp out piracy, and because of that, it thinks the government should force them to get on it.
The MPAA wastes little time mocking those who disagree with its position, and suggesting that the FCC "pay no heed" to consumer concerns:
[The] Commission should pay no heed to assertions by some
members of the advocacy community that the problem of content theft can be ignored because some amount of legitimate e-commerce already occurs through vendors such as
iTunes.... The same holds true for the preposterous notion that
the law should be ignored unless a property owner can demonstrate that a thief, in the
absence of stealing, otherwise would have legitimately purchased a stolen product. A
shoplifter who steals a DVD from a store in a mall is not immune from security
intervention, let alone prosecution, simply because he might not have planned to buy the
product that he attempted to steal.
Except, of course, there's a huge difference there. If someone steals a DVD it's no longer there for someone else to buy. If someone who never would have purchased the movie views it online there's no loss. it's difficult to see how the MPAA can simply ignore this while assuming that FCC commissioners are too stupid to grasp this rather simple economic concept.
But where the filing really comes into its own in being laughably funny is where it tries to claim that if the FCC doesn't do this, the internet will effectively die. How does it get there? Well, first, it claims that the reason people use the internet is to view content from Hollywood. And, if file sharing keeps up, there won't be any of that content left, and then why would anyone use the internet? Think that's an exaggeration? How else do you interpret this:
Quite clearly, it is the promise of access to the content flowing over the
Internet's network architecture that motivates Americans to adopt broadband. The
Internet without content would be nothing more than a collection of hardware; a series of
computer links and protocols with great capacity to communicate but nothing to say. Television once was unfairly derided as little more than a toaster with pictures. In the
absence of compelling content, the Internet would offer consumers even less value than
that proverbial toaster. It is the content that flows over and through the Internet that
makes the breakthrough technology so potentially powerful.
Yes, because even though the internet existed for decades before the folks at the movie studios had even heard of it, they had nothing to say, at all, until people could start sharing the latest camcorded blockbuster. Do they really think people are this stupid? Sorry, Hollywood, but it's not "the content" that you're thinking about that makes the internet so powerful. It's the ability to communicate. Sure, the content is a nice-to-have, but the internet grew and grew because it let people talk to each other, not because it was another broadcast medium. This fantasy story by the MPAA also leaves out the fact that more content than ever before is being produced today, even as "piracy" numbers have gone up. And, oh yes, once again, the movie business is hitting record highs at the box office. Funny that the MPAA seems to spend so much time insisting that its industry is dying, while leaving out the record revenue bit. Instead, it just keeps jumping out and yelling that piracy will kill the movie business...
And then it gets into rewriting history, by insisting that every new technology is only successful if the big media companies support it:
Throughout history,
whenever transformative communications technologies have captured the imagination of
consumers, compelling content has been the vehicle for forward progress.
Apparently, the MPAA is unfamiliar with the telephone. Hopefully, the FCC is a bit more familiar with that particular technology.
The filing goes on and on like this, designed to "scare" the folks at the FCC with a bit of a moral panic, but only inducing laughter (good show, Hollywood) from anyone with any actual understanding of technology, history and copyright. Another favorite tidbit is the MPAA's demand that the FCC not pay attention to how incredibly screwed up every single attempt at using technological measures to stop piracy has been in the past:
MPAA does not want the Commission's consideration of the important overarching issue of unlawful
online conduct to be derailed by backward-looking debates about the pros and cons of
any given technology, particularly those that already have been surpassed by new
innovations. MPAA firmly believes that future developments will yield an entirely new
generation of ever-more-sophisticated online protection technologies.
In other words, please ignore how badly we've screwed up in the past. Don't worry about things like rootkits and security vulnerabilities we've created. Also, ignore the fact that DRM doesn't work and only punishes our legitimate customers while driving more people to piracy. That would be a waste of time. Really.
And finally, I leave you with the most stunning statement of all, along those lines. One that I'm amazed the MPAA lawyers let go through in this filing, because it absolutely has to come back to haunt the MPAA in the future. In responding to concerns from lots of different people, including consumer advocates and consumer electronics firms that the various technological protection measures the MPAA wants to force on ISPs will harm, the MPAA states:
That a tool intended to stop unlawful conduct could be put to ill use, however, is not an argument for
prohibiting the use of the tool....
Wait... isn't that exactly the argument that the MPAA has used for years against every new file sharing technology out there? Wasn't it the crux of the Grokster lawsuits? That because the tool could be put to ill use, it needed to be prohibited? Yet, now, suddenly it doesn't want its own technologies prohibited just because they can be put to "ill use." Double standard, much?
This is nothing but a typical moral panic from Hollywood. They are storytellers out there, and they know how to craft a horror story. Hopefully, though, the FCC reviewers of this particular fantasy will give it the thumbs down for simply being totally unbelievable.
31 years ago, in 1978, the television program 60 Minutes put on an episode about the awful threat of "video piracy" to the movie industry. Featuring the MPAA's Jack Valenti, the episode focused on how the VCR was going to destroy the movie business because anyone could copy and watch a movie in the privacy of their own home. Of course, in retrospect, that episode is hilariously wrong. You would think that, given how wrong they got it thirty years ago on this particular subject, 60 Minutes would be a bit more careful taking on the same subject again.
No such luck.
CBS's 60 Minutes has made itself out to be more of a laughingstock than usual when it comes to "investigative reporting," putting on an episode about "video piracy" that is basically 100% MPAA propaganda, without any fact checking or any attempt to challenge the (all MPAA connected) speakers, or to include anyone (anyone!) who would present a counterpoint. The episode is funny in that it contradicts itself at times (with no one noticing it) and gets important (and easily checked) facts wrong. And, of course, it basically mimics that old episode that history has shown to have been totally (laughably) false.
The report opens with the claim that counterfeit movies is where organized crime is making its money these days. Fascinating. Except they don't show any proof whatsoever that organized crime has anything to do with movie piracy at all. They just claim it, talk about Mexican gangs, and then assume it must be true. But, of course, most of the report actually focuses on the internet and file sharing of movies -- which completely goes against the claim that organized crime is "making its money" off of video piracy. After all, reports have shown that online file sharing has actually been putting DVD counterfeiters out of business. You would think that the "journalists" at 60 Minutes might have noticed this contradiction.
A big chunk of the episode is taken up by director Steven Soderbergh, who has come out in the past touting the MPAA's line before, so it's no surprise that he does so again. He claims that "piracy is costing Hollywood $6 billion a year at the box office." Does he mention that Hollywood has been making more and more and more at the box office every year the past few years? Oops. No. Did the reporters at 60 Minutes look into this fact and bring it up? Of course not. The entire story appears to be an MPAA press release, so you don't want to cloud it with pesky facts that prove they don't know what they're talking about.
Next up, Soderbergh claims that fewer movies are getting made thanks to movie piracy. Uh huh. Another checkable fact. Another one wrong. It was recently summarized, according to the movie industry's own numbers:
2004 Total Movies Released: 567 Total Combined Gross: $9,327,315,935 2005 Total Movies Released: 594 Total Combined Gross: $8,825,324,278 2006 Total Movies Released: 808 Total Combined Gross: $9,225,689,414 2007 Total Movies Released: 1022 Total Combined Gross: $9,665,661,126 2008 Total Movies Released: 1037 Total Combined Gross: $9,705,677,862 2009 Total Movies Released: 1177 Total Combined Gross: $7,596,626,766
(2009 figures incomplete, total movies scheduled to be released, gross to date)
So, actually, more than double the number of movies are being made today than just five years ago. Hmm. That's the sort of thing that a real journalist at a show like 60 Minutes might bring up to a biased director like Steven Soderberg, right? Nope.
The article mentions how to go to the movies these days, some people have to go through "airport-like security. Their bags are searched for cameras and they have to check their cell phones." Does it point out that this might be a pretty serious reason why people might not want to go to the movies? A reason why people might actually give less money to the industry? Nope. Why bother with details like that?
And then, 60 Minutes brings on our favorite industry spokesperson: Rick Cotton, NBC Universal's general counsel, the guy who warned that movie piracy put corn farmers at risk because people watching pirated movies eat less popcorn (never mind the fact that the corn industry is thriving, that people watching pirated movies still eat popcorn, and "popcorn" represents an infinitesimal part of the market...). Cotton was also the guy who thought it was a good idea to push people who wanted to watch the Olympics to pirate it rather than watch the crappy official online channel. Cotton is asked how many movies are released in the US:
"Ballpark, 400 to 500 movies are released in the United States."
Except, as we noted above, he's off by about 600 or 700 movies. Again, this is the sort of "fact" that a reporter, such as those employed by CBS and working on a television program like 60 Minutes might be expected to check, right? I would guess that most viewers of 60 Minutes expect the show's reporters and legions of other employees to do such basic fact checking. So, given that 1177 movies are going to be released in 2009, doesn't it make sense to, say, push back on Cotton's bogus number? Apparently not.
Random aside: I wonder how much money CBS makes from the big studios buying movie ads? That can't be important here, can it?
Most of the rest of the program is Soderbergh making a bunch of totally unsubstantiated statements, such as saying that no one would make The Matrix today. Why? No explanation. It's just that Sodergbergh says.
And, of course, beyond failing to fact check the most basic facts, no one at 60 Minutes thought to talk to anyone outside of the studio system to see if it made sense. It didn't talk to any one of the growing number of people who are making movies and embracing file sharing to help get those movies seen. It didn't talk to moviemakers who are embracing new business models. It didn't talk to copyright experts and consumer advocates who have shown how ridiculous the MPAA's claims are. In other words, it presented an MPAA press release as if it were news. Thirty years after it did the same exact thing and got the entire story wrong. It didn't even go back and note that earlier episode. It just repeated it with modern stand-ins.
The way Lynton tries to get around this is by not actually talking about how many movies are coming out, but just counting the number of movies that came out of "the leading studios." I find this quite amusing, because in the podcast we discussed last week involving Paramount's Scott Martin, part of his argument was that while the big studios were fine, the independents were all suffering and fewer movies were coming out because of it -- and, as a "fan" of independent movies, he found that sad. I didn't bother to check the numbers, but it appears that Martin was simply wrong. More movies are being made, and it looks like an increasing percentage of them are coming from smaller independent shops.
The problem, again, seems to be that the folks at the movie studios (just like those at the record labels) only like to count the big hits as successes -- rather than the smaller projects that actually make money and make up the majority of the actual market. It's the same sort of thinking that makes movie studio people insist that we need to explain to them how they can keep making $200 million movies. That's the wrong question. The question is how do you make profitable movies. The technology has advanced such that it's cheaper and cheaper to make movies (which is why we have more of them). But notice that the studios never focus on ways to make movies in a more economical way, but how can they keep spending. Perhaps that's a bigger problem than "online piracy."
Last week, we wrote about the legal battle Redbox is facing with some of the movie studios. Redbox, of course, rents DVDs at a $1/rental from vending machines that it places all over the place. Some of the studios are upset that (a) they don't get a cut of each rental and (b) that Redbox also sells those DVDs. So they've been trying to force Redbox to sign agreements that would give them a royalty cut and which would put limitations on Redbox -- such as not renting out videos until well after the DVDs are released and also having the company destroy, rather than sell DVDs when they were done renting them. Of course, the labels don't have much of a legal claim here. Redbox has every right to buy DVDs and to then rent them (right of first sale and all that). But, what at least some of the studios have done is to demand that DVD wholesalers not sell to Redbox, which certainly seems like a typical restraint of trade situation. In at least one case, a studio has also told downstream retailers, like Walmart and Best Buy not to sell to Redbox either.
Now, you might think that Redbox could just send employees into those stores without saying where they're from, but those stores probably don't carry enough stock for Redbox to buy enough DVDs efficiently. But what if they did something different? In the comments to that post last week, our rather insightful community started suggesting ways that Redbox could get around the sales blocks from studios by crowdsourcing the acquisition of movies.
There were a few different suggestions on how this could work, but the basic idea, presented by commenter "McBeese" laid out the basics:
Consumers open online accounts with Redbox. The account contains a Paypal id for deposits.
Redbox publishes how many copies of each DVD that they want.
Joe Consumer buys the movie, watches it, and then logs in to the Redbox site and 'pledges' the DVD. Each pledge automatically reduces the amount of a particular DVD that redbox is seeking.
Joe consumer mails in the DVD with an associated pledge number. When the DVD is received, the agreed amount is deposited into Joe Consumer's account.
A little slower than buying in bulk, but unstoppable.
I'd argue that rather than paying the user for it, Redbox could just credit their account for a certain number of free rentals. Then, not only does Redbox get these movies, but it builds up an even more loyal userbase... with really no significant way for the studios to block this out. There are some things that are tricky about this -- including verifying that the purchased DVDs are what they say they are, and coming up with a way to accurately handle the inventory management, but it is creative, and it shows that as much as the studios want to think they can control this market, there's always going to be some way around their restrictions.
Sometimes you just shake your head at ideas that come out of some executives that are just so incredibly dumb, it makes you wonder how anyone ever took them seriously. There have been some hints about this latest one, though. Just last week, in discussing the latest IP Colloquium podcast, we noted (with surprise) that Paramount's top lawyer thought the solution to business model problems in the entertainment industry was "more windows." Windows, of course, are the different time periods in which movies are released solely for different formats/media. So, it starts with the theater (the first window), followed by video, pay per view, cable and network TV -- each representing another window, and another chance to squeeze more money out of the same content.
Yet, with the industry facing some challenges, rather than actually looking at what users want, its top brains seem to think that the answer is more windows. It's hard to explain how incredibly short-sighted this is, because it's so monumentally backwards that it makes you wonder what they're thinking. At best, my guess is that the execs are extrapolating out in the simplest form that with the launch of each "window" they make more money, so the way to make even more money must be to offer more windows. Of course, this assumes two rather basic things that are totally wrong. One, is that these windows won't piss off users and two, that those users have no alternatives.
But, apparently not realizing that, these execs have hit upon a few different attempts to add more windows. First, they've been pushing for the permission to break your TV or DVR with selectable output control barring your ability to tape movies. This way, they can create a new "window" of movies on TV that you can't record, that they can offer before the movies even get out on video. Of course, this will (a) piss people off and (b) drive them to more piracy. Brilliant.
The other attempt, is to get video rental places to stop renting movies when the DVDs first come out. The LA Times had an entire article explaining this plan, whereby the studios would force all rental services, including Netflix and Blockbuster to not rent certain films -- but only offer them for sale. The idea (short-sighted as it is), is that this would somehow force people to buy more DVDs, which gives the studios a higher margin than rentals. We actually heard about this earlier this year with the contract terms that the studios tried to put on Redbox, but it's apparently trying to do the same with Netflix and Blockbuster as well.
This idea is so bad that even the LA Times, who tends to support its hometown industry more often than go against it, put out a separate opinion piece with the original article, calling this new idea "crazy" and "absurd."
In the meantime, what do customers actually want? Well, there's pretty good evidence they prefer choice not being limited by windows. They've been clamoring for so-called "day-and-date" release, whereby all these windows are compressed. If you don't want to see a movie in the theater, why not be able to get the DVD? It's as if the studios don't realize that part of what they're selling is the social experience of "going out" to the theater. Even better, if the DVD comes out at the same time as the theater version of the film, less marketing money needs to be spent to sell more DVDs, and you can do nice tie-ins, like having the ability to buy the DVD as you walk out of the theater. Giving people more value and more choice is what the market is asking for.
Instead, Hollywood execs are trying to take away choice and limit value. Incredible.
I have to admit I don't usually like scary movies, and I didn't like the Blair Witch Project at all. But I can't help but be impressed that the Blair Witch movie cost just $60,000 and pulled in a cool $140 million back in 1999. That kind of return makes me wonder why more movies aren't filmed on really small budgets. So it's somewhat surprising to see that it took about a decade for another Blair Witch-like film to get promoted by a major studio... and that a perfect candidate was almost missed. The movie Paranormal Activity was apparently filmed for just $11,000 over 7 days, and it was bought by DreamWorks/Paramount -- which originally planned to shelve the low-budget flick and re-make it with bigger stars and a much higher budget.
Goodman also admitted that DreamWorks, formerly a leg of Paramount co-headed by Steven Spielberg, had swooped in and pocketed 'Paranormal Activity' with every intention of leaving it on the shelf and remaking it with a big budget and marquee stars. Then they wised up.
They wised up indeed, and they also started promoting this movie in an interesting way, too -- by getting potential fans to demand it be shown in their neighborhoods and nationwide. Paramount promised to distribute the movie nationwide if a million requests for the movie were logged via Eventful. And it looks like they've already reached that goal.
As I said, I didn't like Blair Witch very much, and I'm not exactly looking forward to this movie, either. But from a pure business angle, it seems a bit shocking that movie studios wouldn't be trying to find/create more low-budget films that would appeal to moviegoers. Promoting the distribution of films in a way that actually target fans is a smart move, too. So with this example, there are about a million customers (or at least thousands, if you don't believe the Eventful numbers) willing to pay to see this movie that was made for (much) less than a $1 per fan -- and the movie studio's first gut-instinct was to try to re-make the film and drive their own costs up? It's a strange industry where insiders are always asking "how can we make a $200 million movie?" rather than how can they make good, but profitable movies, no matter what the cost. The industry seems so focused on what movies cost, that it so rarely seems to consider spending money more intelligently. Creating quality works for less, and targeting your best customers is a plan that's foreign to Hollywood, but perhaps it's about time they start exploring that plotline.
Via Copycense, we learn that the students who formed the Disney Movie Appreciation Club at Washington University in St. Louis recently had to shut down the club due to threats of IP infringement, because the students were gathering together to watch the legally obtained movies, without getting a proper license for showing it to a larger group of people (rather than just a few people). The link above decries how separated IP laws have become from their intended purpose when a group of true fans of Disney movies can't even get together to watch them, without having to get some special license:
It makes no more sense to prohibit the viewing of a movie by multiple people than it does to prohibit the viewing of a portrait by multiple people. The people watching these films are not evil, conniving scammers out to claim Disney's films as their own. They are simply fans of Disney movies who want to take a break from studying and relax with a few friends.... Ultimately, however, I am not on a crusade against all forms of copyright. I just want to watch my movies in peace.
And, another generation of students is learning how copyright is so often abused, not to create incentives for content creation, but as a tool of control.
A bunch of folks have been sending in the recent Wired Magazine article talking about how Netflix's online streaming offering may be a disruptive innovation that takes down cable. The thinking is that, with Netflix service being built into lots of different settop devices, and the ability to watch various TV shows that are offered via DVD (and the Netflix streaming service, as well), why would people need cable any more? They can just wait until the "video" is out, and stream it via Netflix. The article may go a bit far in proclaiming Netflix as the winner of this battle right now, but it does suggest that (whether it's Netflix or some other provider) the model that cable television has relied on for so many years is certainly facing a pretty big disruption, one way or another.
Nathan Smith alerts us to an interesting interview with filmmaker Sally Potter, discussing her new movie Rage, which has a variety of unique and interesting facets to it. The movie -- which has a bunch of famous actors, including Jude Law, Judi Dench, Steve Buscemi, Diane Wiest, John Leguizamo and others -- is being released first on mobile phones, with a different part of it released each day for a week (I believe this past week). The film is supposed to be from the view of a cameraphone, so that makes sense. But, Potter has also worked hard to cultivate a strong fanbase through a variety of online methods. And, of course, she's all about embracing "free," embracing what the technology enables, and thinks the rest of Hollywood is a bit silly to live in fear and try to lock everything down:
FNB: It's true, everyone is talking about this, what is the economic model? Is there one?
SP: Not yet. The music industry is slightly ahead of us and had to go through the same thing already and it's shock, horror, terror, everyone's going to go bankrupt because everyone can have everything for free. Lots of resistance, I'm talking about filmmaking now, legislating against copyright and everything is watermarked, anxious, anxious, and all that. And I think my attitude is, go the other way. Open the gates, say "okay have it." It's free, it's yours and then if you want me to go on and make other things, you're going to have to complete the circle by going out and buying the DVD. Maybe in the future it will be some sort of subscription model but I always wanted to do that with this one.
FNB: There was a recent article we read that said the next generation of digital consumers still wants to pay to go to theaters. It's not mutually exclusive, which is calming to know that just because one is succeeding doesn't mean the other is going to disappear.
SP: Its not either/or, it's AND. It might make cinema owners and distributors sit up a little bit, and make it a more pleasant and thrilling experience to go to the theater, make the quality of the projection better, the seats more comfortable, make it back to the real beginnings of what joining together in a big group is all about. Similar people can have their own access to watch it home on Blu-ray, its one of the things that I do. I have a good screen and I watch things together with a group of friends. Comfortably lying about. And that feel just as true of a cinema experience as going to some wonderful cinema.
Indeed. We've been pointing out for the better part of a decade that going to the movies is a social experience, and the best way to do that is to make that experience better. Many theaters have started to catch on to this (finally).
YCombinator creator Paul Graham is the latest "deep thinker" to grasp the deeper economic meaning of infinite goods: they can't be sold. In fact, Graham recognizes that there's never been a real content business. It's always been about selling the scarcity:
Almost every form of publishing has been organized as if the medium was what they were selling, and the content was irrelevant. Book publishers, for example, set prices based on the cost of producing and distributing books. They treat the words printed in the book the same way a textile manufacturer treats the patterns printed on its fabrics.
Economically, the print media are in the business of marking up paper. We can all imagine an old-style editor getting a scoop and saying "this will sell a lot of papers!" Cross out that final S and you're describing their business model. The reason they make less money now is that people don't need as much paper.
He goes on to explore how this applies to music, movies, books, newspapers and software. From there, he comes to the same conclusion many of us have been discussing for years:
What happens to publishing if you can't sell content? You have two choices: give it away and make money from it indirectly, or find ways to embody it in things people will pay for.
The first is probably the future of most current media. Give music away and make money from concerts and t-shirts. Publish articles for free and make money from one of a dozen permutations of advertising. Both publishers and investors are down on advertising at the moment, but it has more potential than they realize.
I'm not claiming that potential will be realized by the existing players. The optimal ways to make money from the written word probably require different words written by different people.
Good stuff and worth reading the whole thing, though I think he misses one key important ingredient. If you take a step back and look at the overall economics of such markets, you quickly realize how much bigger they get when you free the content from the constraints and scarcity of physical media. This is the hardest part for some people to see, at times, but the key to recognizing it is realizing that the content itself is a resource, rather than a final product, and you've just increased the availability and massively decreased the cost of that resource -- and you can then use it (for free!) to make many other things more valuable. That, in a nutshell, is the most exciting part about freeing up digital content.
We recently wrote about how Kevin Smith was connecting with fans in a variety of ways, and after doing so, some of "his people" (see? I got this movie business lingo down) contacted us to see if we wanted to give away some copies of his new book, Shootin' the Sh*t with Kevin Smith: The Best of SMODCAST. So, we said sure, because we're told by people all the time that Techdirt readers "just want stuff for free." These aren't signed books or anything -- we tried, and apparently we're not cool enough and the signed ones are a reason to buy, so if you want that, pay up, cheapskate. But, hey, these books are still free. What are you complaining about?
Anyway... I've put together some trivia questions, which shouldn't be that hard to answer if you listen to Smodcast regularly (or if you're a creative Googler). Alternatively, write up a comment about something having to do with Kevin Smith or his movies, and make it funny, cool or original (preferably all three). Anyway, we've got five books. There are three trivia questions. The first person to answer any one of the trivia questions correctly gets a book (if you know the answer to more than one question, don't be that guy -- we know you're awesome; just let someone else get it). Then we'll take the two best Kevin Smith stories and award the books to them. If, by Monday night, no one's been able to figure out the answers to trivia questions (and, who knows, maybe I'll give hints), then for every unanswered trivia question, we'll pick another "Kevin Smith story" writer. Oh yeah, make sure you include a working email in the email box so we can contact you and work out the details. If we can't reach you or you don't respond to our emails in time, the free book goes on to the next winner... That's about the deal. This is intended to be fun, so don't go nuts over it. Silent Bob wouldn't approve.
Trivia questions (remember, just answer one):
When Clerks was first shown at Cannes, what famous rocker did Scott Mosier have to go wake up on that rocker's yacht one morning?
Kevin's got some dogs (three, I believe). One has a habit of interrupting SModcast with barks, and recently traveled to NY to bark on a special east coast SMod. Name the dog...
Smith recently got to meet the father of one of his heroes, who he's suggested there should be a new religion around. Who did he meet?
Again, if you're the first to get any of those right, you get a book. If you get more than one right, you still get just one book, but whoever is quick and copies your second answer in the next comment gets the next book. If you don't know any of these... start listening to SModcasts, or write a cool story that involves Kevin or (more likely) his movies. Update: Wow, you guys are fast. All three trivia questions answered. But, now we're still open for stories: talk about Kevin or how he influenced your life in some way and a book could be yours...
We've wondered in the past why the movie industry tries to shut down fansub efforts. It makes no sense. These projects tend to increase attention for a particular movie by making it accessible to those who couldn't enjoy the movie before. And yet, once again, we see stories of movie studios going after sites that are doing free labor for the studios in helping them translate the movies into other languages. In this case, they're demanding hundreds of thousands of dollars from three people who helped translate a bunch of films, and run a site for more such fansubs. What a world we live in when those who do free labor for you are worthy of being sued for huge cash amounts.
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