Hollywood vs.

The Internet

The media and entertainment industries in a digital and networked economy

- Andrew Currah

Currah’s argument

• “File sharing over the Internet has considerable copyright promise for all copyright owners […] radically new form of economic reproduction, oriented around increased consumer participation in the production, marketing and distribution of digital commodities”

• “The media oligopoly […] are institutionally incapable of exploring and defining the commercial parameters of legal P2P file sharing”

We are the kings of the world!

• Oligopolistic firms: “Collusion, strategic interdependence, the maximization of revenues and the preservation of industry structures” (Baumol, 1958; Stigler, 1964, cited in Currah, 2006: 440)

• “[…] can be economically and socially damaging […] favour higher prices, greater control and lower levels of consumer choice over the long run” (Currah, 2006)

Hollywood studios

• Disney• Fox • Paramount• Sony Pictures• Universal• Warner Bros.

“New Hollywood”

• From era of mass production (1930s-1950s) to “New Hollywood” (1960s-today).

• Characteristics of “New Hollywood”: – Vertical disintegration and spatial

dislocation of film production: “transaction-intensive” entertainment complex in L.A and satellite production clusters abroad.

– Film marketing and distribution underwent a process of vertical integration and globalization as part of conglomerates.

Cecil B. DeMille in the set of The Ten Commandments (1955)

What executives want…“Protect the existing spatial and temporal structure of ‘release windows’ which is currently dominated by a physical commodity form”

6.7 MILLION COPIES IN FOUR DAYS2.7 OF THOSE WERE BLU-RAYS

PARADIGM SHIFT: RIPBURNMIXCULTURE

Perception: “Is P2P bad?”

• “Among the 71 informants of Fukukawa’s (2002) research, 58% think that copying computer software or using unauthorized software is acceptable and 32% actively softlift; furthermore, 71% claim that recording a tape or CD instead of buying a new copy in a shop is acceptable, with 52% already engaging in this deviant behaviour. Vitell and Muncy’ s (2005) survey discloses that 26% of informants strongly believe that downloading music from the internet instead of buying it is not wrong, against 11% who strongly believe that it is. Finally, Ingram and Hinduja (2008) unveil that 90% of their sample believes that downloading music illegally was an appropriate behaviour.” (Harris & Dumas, 2009: 383)

– Dumas, A and Harris, L (2009) “Online consumer misbehaviour: an application of neutralization theory”, Marketing Theory, 9; 379.

 

“Digital and networked socio-economic environment”

The Internet “portends the displacement of oligopolies”

So, what’s the problem?

• P2P enhances “non-excludibility” and “non-rivalry” of digital content.

• “[…] difficult for copyright owners to effectively exclude non-payers from accesing the content”

• Studios want to criminalize the practice.

The (other) Hurt Locker

“Hi Nicholas, please feel free to leave your house open every time you go out and please tell your family to do so, please invite people in the streets to come in and take things from you, not to make money out of it by reselling it but just to use it for themselves and help themselves. If you think it's normal they take my work for free, I'm sure you will give away all your furniture and possessions and your family will do the same. I can also send you my bank account information since apparently you work for free and your family too so since you have so much money you should give it away... I actually like to pay my employees, my family, my bank for their work and like to get paid for my work. I'm glad you're a moron who believes stealing is right. I hope your family and your kids end up in jail one day for stealing so maybe they can be taught the difference. Until then, keep being stupid, you're doing that very well. And please do not download, rent, or pay for my movies, I actually like smart and more important HONEST people to watch my films. best regards, Nicolas Chartier Voltage Pictures, LLC”

–E.mail Chartier sent to an individual who had written him objecting to the producer’s plan to sue BiTorrent users who downloaded the Oscar-winning film.  

P2P is NOT 100% piracy

• “The growth of file sharing does not mean that more consumers are developing criminal or pirate tendencies; rather, it is reflective of a broader cultural and economic shift, which is profoundly changing the way we produce, distribute and consume creative works in a digital form”.

PIRATES ON BOARD!•Different from P2P, which is “free distribution of files between computer users”.•Piracy: “Scarce and rivalrous commodities [CDs, DVDs]”, “high profit margins”.

P2P: Multifaceted impacts on consumer

behaviour• Consumers might sample before “committing to a purchase, offline or online”.

• Expose consumers to invisible content. i.e. obscure artists “for whom obscurity is a greater threat than piracy”.

• Obtain content that is no longer commercially available (classic, arthouse, world cinema).

• Non-copyrighted content: independent work or public domain titles.

• “[…] invigorating effect upon the creative basis of the media and entertainment industries […] new forms of experimentation, and in turn, consumption of new cultural forms”.

We are not in Kansas anymore…

• Commercial promise of P2P sharing: – “Can be harnessed into a legalised and

secure form”. – How? Digital Rights Management

software technology: sets where and how file can be accessed and at what price (determined by copyright owner).

– File remains locked and is opened with usage license.

Benefits of DRM

• Distributed and scalable structure of P2P networks: more cost efficient than client-server architectures.

• Economic release: costs of distribution are practically zero.

• Consumers can be rewarded: from “leechers” to “citizens”.

• Content can be released in multiple formats and versions: abridged versions, subtitles, ratios.

• Possible “remixable version” for fixed fee.

Early trials…

The music industry has participated in these services:

• File conversion: commission of 35% for each file sold to others.

• File seeding: peer points to get free downloads. • File tracking: consumers are forced to buy

protected version. • Centralized file-sharing network: limited.

Studios want to “fix the Internet”• Turn P2P environments into “walled

gardens” with total control over content.

• “Business model [designed to] protect the structure of the industry, rather than exploit the disruptive power of a new technology”.

• Protect the “release windows”: carefully balanced system of revenue. Frame between theatrical and H.E. has shortened.

• Benefit a centralized server model.• Executives loathe risk.

The Netflix model

“DVDs by mailChoose from New Releases, Classics, and TV episodes. We have 100 shipping points nationwide and more than 97% of our members live within a one-business day postal zone.

Plus, instantly watch movies (some new releases) & TV episodes (including current season) online on your PC or Mac or on your TV via an Internet connected Netflix ready device.

Instantly watch lots of Classics, some New Releases & TV episodes - for no additional monthly fee.”

Why doesn’t Hollywood embrace de-centralized

model?• Centralized favours distribution of temporary files.

• No change in release windows (sandwiched between PPV and physical formats).

• They are neglecting an emerging and high margin market to protect a mature and lower margin market.

Obstacles for digital distribution• Complex system of copyrights: needs

clearance from right holders (international distributors, studios, DVD companies).

• High legal costs to clearing those rights: territorially defined rights.

• Digitizing is cheap: $5,000 USD per title.

• They want to protect Blu-ray and DVD sales. Home entertainment units have power to decide which films get produced. Also protect this guys…

Consumer dissatisfaction (2006)

• “Formulaic blockbuster concept films”.

• “[…] onset maturity of DVD market as consumers wait for the next generation technology”.

• “The studio model does not make it easier or even more attractive to acquire films over the Internet in a legal format”.

But by 2010…

Who are gonna call?

Home Entertainment 2010: invest in technology

• Blu-Ray: added aditional content. • 3D TV