The Piracy Wars: No White Hats Here

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It’s strange how the mind works; the odd connections it can sometimes make. I’ve been reading a few articles recently which have brought to mind the 2003 Errol Morris documentary, The Fog of War: Eleven Lessons from the Life of Robert S. McNamara, an extended self-critical analysis by the Kennedy/Johnson Secretary of Defense often considered the architect of the policies which went oh-so-wrong in Vietnam. Four of his eleven lessons in particular lit up for me:

Empathize with your enemy, meaning see the world through their eyes; understand their values, goals, what is important to them, what they see as a threat and why;

There’s something beyond one’s self, which I take to mean to avoid judging other parties by your own values;

Get the data which seems self-explanatory;

And be prepared to re-examine your reasoning which is a diplomatic way of saying never take off the table the possibility that you’re – at least in part and maybe en toto – really really wrong.

The odd connection at work here is that what brought these savvy tips to mind wasn’t the latest flap in the current extraordinarily vicious political campaign, or some foreign policy Quran-burning gaffe or anything like that.

Rather, it was several articles on content piracy (yeah, I know; it seems a reach, but I did say minds work in strange ways – at least mine does). The reason I made these connections to McNamara’s tenets was that after reading them it finally occurred to me the piracy debate isn’t about legal and/or moral rights, although it’s often positioned that way. No, it’s a culture war; a combat between two opposing worldviews, neither of which, I fear, quite understands the other, neither of which can – or is willing to — get past its own inflexible standards of what should and shouldn’t be, neither of which seems to have any clear idea of the possible impact their stands can have on the media terrain years down the road.

Or, to put it simply and bluntly, both sides are doing an awful lot of talkin’ but not a hell of a lot of listenin’…or, for that matter, much clear thinkin’.

*****

A few weeks ago, a student in one of my university classes emailed me a link to a February 3rd article on Forbes.com: “You Will Never Kill Piracy and Piracy Will Never Kill You” (). The author is a bright twenty-something gentleman named Paul Tassi. According to Tassi’s bio, he is the editor-in-chief of Unreality, a film/TV/gaming site he founded, and is also the movie news editor at JoBlo.com. He typically contributes to Forbes.com on the videogame industry, and prides himself on being “…part of the first generation of journalists to skip print media entirely.”

Tassi puts forward a couple of theses about video piracy in the article that tripped the McNamara warnings for me. For one thing, he doesn’t consider video piracy to really be piracy: “Piracy is not raiding and plundering Best Buys and FYEs, smashing the windows and running out with the loot…when you take a copy of (a) movie, another one materializes in its place, so you’re not actually taking anything…” ergo “The movie and music industries’ claim that each (pirated) download is a lost sale is absurd.

Tassi also suggests that content controllers – the movie studios, in this case – kinda/sorta bring it on themselves: “The primary problem movie studios have to realize is that everything they charge for is massively overpriced” and that they have also “…failed to realize that people want things to be easy.” The effort of going to the movies is demanding enough, says Tassi, but particularly onerous at current outrageous ticket prices and ditto for buying DVDs.

Tassi’s bottom line is that the studios will never gain a step on pirates. Pirating technology, he asserts, will always be ahead of protective technologies. As for the controls content providers advocate – like the defeated SOPA and PIPA bills – those are a form of censorship of the Internet for the purpose of “…studio and label executives (adding) a few more millions onto their already enormous money pile.” Their best anti-piracy strategy, says Tassi, is to provide content at the low prices and with the easy access Internet users want.

In a follow up article less than a week later (“Lies, Damned Lies and Piracy”), Tassi went even further positing that the entertainment industry’s Chicken Little run-in-circles-scream-and-shout attitude about content piracy is “…way more smoke than fire, and if you were to actually look at the numbers, the entertainment industry isn’t suffering the way they claim they are at the hands of file-sharers.”

Tassi’s comments jibe with a post which recently came up in Sound on Sight’s Tumblr account from Paralegal.net – “How Hollywood Is Using Piracy Against Us”. Paralegal looks at the 120-odd year history of the motion picture in America to call the movie industry’s current anti-piracy stance hypocritical, and also that Hollywood’s own numbers don’t justify its assertion that piracy is a dagger held against the industry’s financial jugular.

As it happens, about the same time I was mulling over these pieces, the issue spilled over into the mainstream press with a 2/19/12 Associated Press story by Martha Irvine. According to Irvine, piracy – at least at a certain generational level – is so rife as to be some kind of norm. She cites a recent Columbia University survey which found “…that 70% of 18- to 29-year-olds said they had bought, copied or downloaded unauthorized music, TV shows or movies, compared with 46% of all adults who’d done the same.” Irvine reports there is a view among users that their piracy isn’t the problem. “The real problem,” according to a quoted Drexel University law student, “is…a failure to innovate on the part of content providers.”

Going to my point that this is less about who deserves to get what and for how much than it is about two mindsets trying to decide how to define the alternate media universe, Irvine quotes Joe Karaganis, vice president of the American Assembly, a public policy institute at Columbia University, as describing the anti-anti-piracy voice as signifying “…the emergence of a real social movement around these issues.” (italics mine)

This isn’t a business issue. This isn’t a copyright issue. This is war!

And caught in the crossfire between the content users and the content providers, unheard when not simply ignored, suffering – as they usually do – the collateral damage from the bombs being dropped by both sides, are the content creators.

But when did anybody ever care about them?

*****

If you want to put forth the proposition the studios and TV networks and record labels are run by a bunch of money-grubbing robber barons, you won’t get much argument from me. Or talent, or craft unions, or anybody else who doesn’t sit in the executive suites, hold a desk at the banks providing them with their credit lines, or own a share of stock. Just don’t expect me to be terribly surprised or shocked and appalled – shocked and appalled, I say! – at the news. Telling me these companies are driven by greed is like telling me Al Capone was only in business for the money. No kidding.

Without disagreeing with content users who do seem – God knows why – shocked and appalled by this, I would only point out that outfits like 20th Century Fox and Warner Music and Rainbow Entertainment and all the rest of the media empires are not PBS. They were never set up with the intention of being only modestly profitable enterprises. Charlie Chaplin didn’t make movies for scale, so none of this is exactly news.

Nor is it any great revelation that Hollywood – or much of the rest of the traditional entertainment business – is behind the curve on effectively adapting to the Internet. Hollywood, for one, has a long, sorry history of being a late adapter, and only then of making belated changes out of desperation. The movies didn’t want the expense of converting to sound; they were doing quite well without it, thank you. But a struggling Warner Bros. needed a gimmick to stay afloat and sound was their Hail Mary pass. Wide screen, color, stereophonic sound – more woefully late advances to beat back TV after Hollywood had already underestimated both the staying power and popularity of the upstart medium. Cable, the home VCR – the same initial denial, then panic, and then a shamefully tardy recognition that, “Hey, ya know, we can actually make money with this!”

About the only time I can recall the movie business getting the jump on a new technology was with the introduction of the DVD. Hollywood had always felt burned about how the VHS business had played out. The high prices set at first-issue for VHS releases had meant few individual consumers bought tapes; most were purchased by video stores and used as rentals. Hollywood looked at all that rental revenue in which it didn’t share, and never forgave itself for mis-designing its business model and missing out on those piles of dough. Instead, DVD was priced as a sell-through product, and the proportion of private purchases to rentals reversed itself. It was one, shining – and sadly singular – moment of industry smarts and foresight.

I spent 27 years at Home Box Office. I don’t want to come off that I was privy to the inner, upper level councils of the company because I wasn’t. But I saw enough of how the company worked to think of them as one of the shrewdest, savviest, just plain damned smartest TV companies in the business. Through them, I got a peek at the thinking in other media companies as well. From that viewpoint, I’m thinking here’s where Tassi et al don’t know their enemy. Traditional media organizations may be greedy, but they’re not stupid. It’s not like they don’t see the impact the Internet is having – and is going to have – on their business. Tassi writes, “They have failed to realize that people want things to be easy.”

Tassi’s wrong. They know that. That was the founding principle behind HBO and all the other pay-TV services, just as it was the driving idea behind home video. Hell, it was the idea behind commercial TV in the late 1940s. That “they” Tassi likes to regularly lambaste knows people want things easy, and they want them cheap.

That’s the problem.

*****

Both the Tassi and Paralegal pieces throw around a lot of revenue numbers to make the case that Hollywood hand-wringing over piracy is like Ebenezer Scrooge boo-hooing over the pocket change he’s lost in his sofa.

True, piracy isn’t driving anybody out of business, nobody’s going home poor and having to break the heart-breaking news “Honey! Kids! There’ll be no villa on Lake Como this summer thanks to those nasty, copyright-violating movie pirates!”

But the movie business does have its health problems, and these stories take a very un-analytical, carelessly superficial view of revenue numbers.

Paralegal, for example, looks at the monumental worldwide grosses of the “Most Pirated Movies of All-Time” to make the point “Despite Hollywood’s claim that piracy will deal a huge blow to ticket sales, Hollywood is still continuing to break box office records.” Paralegal picks 10 titles – two of them the top-grossing movies of their release years, and none coming in lower than #6 — including Avatar (2009; $2.5 billion worldwide), The Dark Knight (2008; $1 billion), Pirates of the Caribbean (2003; $960 million), Inception (2010; $832 million), and Transformers 2007; $709 million).

Those are some pretty staggering sums, granted. But the year Avatar became one of the biggest-earning movies of all time, 82% of the 521 movies released that year grossed less than $30 million domestic. In fact, of the combined 2800 films released in the five years cited above, a little over 2300 – a hair over 83% — didn’t make $30 million domestic. The worst batting average was in 2007 – the year the first Transformers was released – when 86% of the year’s 631 releases fell below the $30 million domestic mark. What that means is that nearly nine out of every ten movies hitting screens that year was probably a money-loser in theatrical release.

How do I figure that?

The Motion Picture Association of America stopped disclosing average production and marketing costs in 2009 (maybe because the numbers always made people blanche – outsiders at how profligate it made studios look; studio people because of how profligate it made them look to outsiders). But as of 2007, the last year stats were disclosed, on average it cost $106.6 million to make and market a studio feature, and there’s no reason to suspect the price tag has gone down since then. The rule of thumb is that since not every dollar at the box office goes back to the studio, a movie needs to gross two-three times its cost to reach breakeven (or more depending on how much revenue is siphoned off by profit participants) which means the theatrical side of the movie business is a Harvard MBA’s nightmare in terms of Return on Investment.

Granted, in any given year, the tally of low-grossers includes a fair number of low-budget art house indies and foreign language flicks, all of which have extremely low breakevens. But the bottom line is that most theatrical releases flop. In fact, most releases from any given studio flop.

More than half of Hollywood’s revenue comes from overseas distribution, but in terms of the ROI on individual titles, overseas money is no panacea for domestic box office weakness. While one often hears about movies which stiffed here at home but made a killing overseas, that’s not a rule. More often, movies that flop here flop overseas. Look at the 2011 $90 million remake of Conan the Barbarian. It died almost immediately on release, grossing just $21.2 million domestic. Despite being the kind of empty-headed actioner which is supposed to travel well overseas, it didn’t play much better anywhere else pulling in just $27.5 million from all out-of-country markets combined.

And then there are the movies which are hits here, but the success doesn’t travel well. Oscar-contender The Help (2011) did a huge $167.7 million domestic, but its situations were too specifically American for the overseas audience where it pulled in just $37 million.

Nor is any of that foreign revenue free money. It comes with additional marketing and distribution expenses for each language-specific market.

The typical major studio might release 20 or better titles in a year. It hopes two or three will be breakout hits; blockbusters. It hopes another few will earn some good midrange coin. And then it prays the combined revenues from those winners will outweigh the great proportion of losers.

Paralegal wants to talk about Avatar? That same year, 20th Century Fox – which distributed the James Cameron sci fi epic – released 23 other titles. It was a good year for Fox. They had some other major hits (including Alvin and the Chipmunks: The Squeakquel, Ice Age: Dawn of the Dinosaurs, X-Men Origins: Wolverine), and some nice art house-caliber moneymakers (among them: Crazy Heart and (500) Days of Summer). But – using a 2:1 ratio to calculate breakeven, and not including marketing costs — 14 didn’t make their money back during theatrical release, even after including overseas revenue. Overall, the studio had a good year pulling in about $2.9 billion against total production costs of $793.7 million. Even after figuring in marketing costs, Fox still ended 2009 well into the black ink on its theatricals.

But the breakdown demonstrates that moviemaking is a crapshoot, and the plan in releasing so many flicks is based on not knowing which ones are going to hit (and for how much), which are going to miss (and by how much), and praying the winners win enough to pay for the losers.

Nor does the wealth get spread evenly around. Fox may have had a good year in 2009, but the average domestic take for each of the 521 movies released that year – and mind you, this was a year when the Top 20 releases pulled in almost $8 billion domestic out of a total US box office of $10.8 billion — was just a hair under $21 million. And studios are nothing if not inconsistent. The year of Avatar, Fox had five other films in the domestic Top 20. In 2010: zero. In 2011, four, but all in the bottom half of the Top 20.

Another aspect of box office revenue neither Tassi nor Paralegal touch on is just how shaky the theatrical business is once you get past the impressive size of the numbers. Last year’s domestic tally was down 3.5% from 2010, and the only thing keeping the decline from being sharper was rising ticket prices and 3-D surcharges. In fact, ticket price inflation has been puffing up box office numbers for several years. The measure of the vitality of the theatrical business is attendance, and it’s not a great measure. Attendance for 2011 was down 5.2% from 2010 which was down 6% from 2009. Generally, attendance has been heading south since 2003, with last year’s stats representing the lowest attendance in 16 years. In other words, despite those fat-looking revenue numbers, the theatrical business is eroding, and has been for quite some time.

To boil all that down, the commonly held industry view is theatrical release is, more or less, a breakeven business. Some years you’ll do better than others (and vica versa), but theatrical’s primary value for all but a handful of breakout titles is to create enough visibility for a title to carry it through its ancillary markets: commercial and pay-TV, On Demand, DVD, downloads, etc.

The aftermarkets: that’s where the gravy is.

*****

The impact of movie piracy on theatrical is, I’m guessing, modest. With so many aftermarkets – both legit and otherwise – the only reason to go to the movies is either because you’re one of those I-gotta-see-it-first obsessives, or you’re in that shrinking audience which still enjoys going to the movies and/or seeing a flick on the big screen. Pirated copies can’t replace that experience.

But DVDs? Legal downloads? Television broadcasts? That’s a different story, and since that’s the revenue flow keeping Hollywood afloat and studio execs in their Bel Air mansions, that’s why the studios get all foamy at the mouth about piracy.

Tassi claims because a physical object isn’t being stolen – that illegal downloads can never cause a shortage of supply – that it’s not really/not quite stealing.

But content piracy is about degrading the value of content, not about diminishing its quantity. Or put it another way: only saps shell out for the cow when everyone else is drinking pirated milk for free. And we’re not just talking about other users here. The Columbia survey limits prevalent piracy to a young demographic, but do some forward projection to where that cohort ages into being the foundation of the consumer universe. If more people are pirating than not, what’s the value of movies to pay-TV? To commercial television?

Tassi’s generation is too young to remember, but as late as the 1970s, the then three broadcast networks had theatrical movies on in prime time every night of the week. Pay-TV channels like HBO, and then home video, devalued movies for the nets to the point of — … Well, how many movies do you see on network TV these days? It is not inconceivable that both legal and illegal downloads could devalue theatricals to the point where premium and basic cable channels pay less and less for telecast rights.

One aftermarket that is already bleeding is the DVD business. Once one of the crown jewels in the ancillary market crown, DVD sales have been sliding since 2007 and there’s no sign they’ve bottomed out. Tassi’s right: people prefer downloading rentals – it’s easier, it’s cheaper. Then why, writes Tassi, are the Hollywood powers-that-be threatening “…to put Netflix out of business by charging them huge amounts of money to have access to their content”.

Because, at the moment, online delivery hasn’t shown it’s going to generate the same kind of revenue DVD sales did – and still do. Downloads and streaming have grown, but not nearly enough to offset the overall decline resulting from the fading appeal of DVD purchase, and it’s an open question at this point whether or not they ever can.

I suspect any number of studio and TV execs look at these stats and are haunted by what they saw happen to the music business. Yeah, music company execs still get to drive around in stretch limos, rock stars still trash hotel rooms, but in terms of revenue generation, the music industry is a shell of what it was just a little more than a decade ago. Downloads haven’t even come close to making up for what’s been lost in CD sales: From 1999 to 2008, worldwide music sales dropped 25%; in the US over the same period, by almost 29%. Financial analysts see the numbers continuing their southward march for the foreseeable future. That in mind, Tassi & Co.’s demand for cheap, easy access doesn’t exactly set the studios drooling.

So, on the one hand, you have content providers trying to protect a fading revenue model and digging in their heels with efforts like SOPA to forestall what I’m sure they see as an inevitable eventual reconfiguration of how home entertainment works; and on the other end, content users who want cheap, liberal access to that content.

Ok, so that’s the money end. What about this “culture war” I’ve been talking about?

Well, in my view, that’s where it gets really ugly.

*****

There’s a certain Power-To-The-People/Death-To-All-Tyrants/Robin-Hoody flavor to this anti-anti-piracy view, from Tassi’s and Paralegal’s pieces down to the attitude of that Drexel law student quoted by Martha Irvine. The title of the Paralegal post – “How Hollywood Is Using Piracy Against Us” – hints at some nefarious scheme to deprive all Americans of their inalienable rights.

Let’s be clear about what this fight is over. There’s a lot of militant blather going back-and-forth about First Amendment and censorship and freedom of information and blah blah blah. I won’t deny there’s legitimate spillover into those issues, but at heart, what’s driving this fight only collaterally has anything to do with those more noble-sounding, comparatively abstract ideas.

Right now, you can go on the Internet and find out whatever you need to know to self-diagnose your suspected cancer, do your taxes and learn how your Federal, state, and local government are wasting them, discover the skeletons in any big-mouthed politician’s closet, find out the “truth” behind every conspiracy from the Lincoln assassination to what the Air Force really has tucked away in Hangar 18. From porn to foreign policy details, it’s all available to you for the price of Internet service. Other than that, it doesn’t cost you a damned dime, and it’s all (well, mostly) provided to you legally. Whatever your appetite is for pictures of naked celebrities or the Face on Mars or trying to track how many times Mitt Romney has flip-flopped on the pivotal issues of our time, there are no inhibitions on your ability to access this stuff.

This fight is about the ability to get movies cheaply at home. That’s it. Don’t let anybody fool you, but that’s the bottom line, the endgame, the Big Enchilada everybody’s grabbing at in the middle of the table.

The anti-anti-piracy gang takes an NRA slippery-slope tack – “Let them take away your Teflon bullets and the next thing you know they’re kicking down your door and taking away your God-given right to defend yourself!” – suggesting controlling entertainment content might be just the first step in controlling the free-flowing stream of info on the Internet. But the dialogue is almost strictly based on entertainment content which – let’s face it – has all the practical value of Kleenex; it’s nice to have but your well-being hardly depends on it. This is a fight over what seems to be an assumed inalienable right to be amused in your home at consumer-friendly prices. Yup, that’s what the boys suffered for at Valley Forge to win for you.

I’m in strong agreement with Tassi and his peers that the entertainment industry is driven by a bunch of overpaid execs turning out empty-headed entertainment in wasteful fashion and then offering it to the public at ungodly prices. I practically have to take out a second mortgage to take my family to the movies, particularly if it’s in 3-D. But I’ve solved this problem in simple fashion: I don’t go. I don’t find that this gives me less fit air to breathe (well, as fit as air in New Jersey gets), less potable water to drink (ditto), or starves me or my kids (we do have some great pizza in this state).

Call me old-fashioned, but I still think if it’s your property, you can do any stupid, selfish, short-sighted and ultimately self-destructive thing with it you want; it’s yours. You want to spend $200 million to turn some comic book nutbar in tights and a cape into an action figure/videogame/Happy Meal-shilling franchise, and then spend another fortune hyping the hell out of it to get the ComicCon geeks to shell out way too much of their hard-earned stock-boy-at-WalMart pay to see it? Well, that’s American enterprise for you. I think it’s a waste of your time and money and theirs, but that’s just me. And, if I don’t like it – either because the movie is crappy and/or it just costs too damned much — I don’t go.

Tassi, Paralegal, that law student (which I find terrifically ironic – what the hell kind of law are they teaching at Drexel these days?) in the Irvine story blame piracy on content providers. “If you made it cheaper, people would stop stealing it,” which is as prized a bit of self-serving sophistry as I’ve heard in a long time.

Besides, I don’t know that that’s true. Hollywood can never lower the price enough to beat “free.” But I take their point. And I interpret that point is being, “If a Lexus didn’t cost so much, I wouldn’t have to steal one.” That’s not some oppressed group railing about the exploitative policies of some power elite; that’s just a brawl between two different kinds of greed.

(Or maybe three kinds. Aggregators – like YouTube, The Huffington Post, and so – make their living, to some extent, by attracting audiences through content produced by others. Ya gotta love the irony of New Media living and dying by its ability to freely use Old Media content.)

What you’re dealing with, I think (Alert! This here’s the culture war bit) is a changed generational worldview on proprietorship, and – in my highly, highly, highly subjective, retrograde, atavistic, and undoubtedly stone aged view – it extends well beyond the issue of paying or stealing to watch junk like Transformers: Dark of the Moon (2011) at home. The fallout from the Internet’s greatest asset – free-flowing data and communication – has been an erosion of traditional concepts of boundaries, both personal and professional.

You see it in the epidemic of plagiarism on college campuses. It doesn’t happen because students are lazy (although you’ll probably get some argument from some instructors) or because they’re malicious. By the time they’re college-aged, they are so used to accessing information without any sense of it “belonging” to someone, the traditional concepts of attribution and proprietorship seem antiquated if not downright irrelevant.

People post online the kind of personal information they used to reserve for their bartender after a couple of tall scotches, and then, having posted it on a universally-accessible platform, seem shocked there’s any kind of blowback. Here in New Jersey, we’re witnessing a trial in which the defendant – a young college student – allegedly thought it was ok to spycam his gay roommate during a date, and then tweet to his followers to view a second show (the prosecution alleges the resultant embarrassment pushed the gay roommate to suicide). The personal has become public, the private the communal. And this social movement Joe Karaganis referred to regarding entertainment content – “If it’s there, I should be able to get it, and get it cheap!” — seems (to me) to fit right into that sensibility.

Throw that up against Hollywood’s corporate sensibility – “Our goal is to squeeze every last penny out of every last bit of content!” – and you wind up with a brutal war between two, unforgiving, all-or-nothing views of how media is supposed to work.

Somewhere in between, with everything to lose – and they probably will – are the content creators.

*****

When people like Tassi write about Hollywood corporate greed, I have to laugh. Oh, I don’t disagree with them, but they tend to take a very simplistic view of the industry. It’s like judging the financial health of the average American by what Warren Buffet makes. What Tassi doesn’t see nor the studios overly care about is that the matter of aftermarkets – particularly residuals, and trying to protect that revenue stream – is a bread-and-butter issue for an awful lot of people in movies and TV.

Tassi may rail against the “A-list actors (who) do not need multi-multi-million dollar salaries,” but the erosion of residual value of films and TV shows – either through legit lower-value online downloading and streaming, and/or piracy – isn’t going to hurt them. After all, they have those multi-multi-million dollar salaries. But the average annual pay for a member of the Screen Actors Guild as of March 2012 is $40,000. For Hollywood-based actors, the average is $13,000. Considering that in any given year, most of the membership doesn’t work, and those multi-multi-million dollar salaries are pulling the average up to $40,000, it means most of the membership at any given time is living on air. When they do get a residual-paying gig, that’s gold.

Or take screenwriters. They’re not all Akiva Goldsman. Most screenwriters – providing they ever do get traction in the business – do not have extended careers nor do all that much better than scale. Most screenwriters are like the rank-and-file players in pro football: with luck, you’ll have a few hot years, but then it’s selling used cars for the rest of your life. In any given year, somewhere around half of the members of the Writers’ Guild of America don’t work, and the average annual income for a WGA writer is about $40,000.

Talent has a long, appalling history of being exploited by studios and producers. Shady (but somehow legal) bookkeeping, one-sided contracts, etc. are as much a part of Hollywood history as sprocket holes. No news there. But if piracy – and here I agree with Tassi et al – is survivable by Hollywood, at least to some degree, simply because the entertainment industry makes so damned much money, not so the talent at the rank-and-file level. Tassi may think this conflict is just Old Media execs defending their ability to “…add a few more millions onto their already enormous money pile” – and he’s not completely wrong about that – but below those execs are people who will take a hit (if they haven’t already) by this new paradigm which eats away at aftermarket value.

But, as I said earlier, when did anybody ever care about them? They’re just as invisible to the Tassis as they are to the industry that’s always exploited their talent. The sad irony here is that without them, there’d be nothing to exploit or steal.

*****

Tassi’s prediction the online terrain is going to change for Hollywood whether Hollywood goes along with it or not is probably true. I’d be surprised if the sharper execs in the business didn’t feel the same. And for any of those with dim foresight, YouTube is providing a glimpse of the future rolling out nearly 100 channels of original programming. It’ll be TV – and it won’t. It’ll favor short form, it’ll be accessible at the user’s convenience instead of based around an anchored schedule, and it will feature niche-oriented content to try to grab that advertiser-coveted 18-34 demo. It’ll be TV tailored to the tastes and impatient, insatiable viewing habits of a totally-wired, constantly-stimulated new generation of entertainment consumer.

The movie-going audience will continue to shrink, and those ancillary markets that are not already downtrending may take a hit as a more Internet-focused, Internet-weaned breed of consumer takes the keystone position in entertainment spending. The movie business will try to prop up revenues by bumping prices, but that’ll hit a point of diminishing returns (if it hasn’t already), and overall revenues will decline.

Tassi and his peers will not weep for a Hollywood which winds up contracting along the lines of the music industry. Tassi thinks “Projects with bloated budgets and massively overpaid talent might start to fade away, but that can only be a good thing creatively for all the industries.”

He’s probably right about the former – or at least there’ll be less of it – but I doubt it’s going to kick off an explosion of better, more moderately-budgeted fare. There’s plenty of writing here at Sound on Sight about how many small, terrific movies – including Oscar-winners – go ignored by the general public. I sincerely doubt not having Ghost Rider: Spirit of Vengeance or John Carter around would have driven more people to The Artist. Besides, Hollywood doesn’t need big budgets to make crappy movies; the industry already makes plenty of crappy cheap movies.

Box office for the year so far is up 24% over the same period 2011 (though still behind 2009 and 2010), and admissions up 25%. It’s still too early to tell if this signals 2012 as a turnaround year or just an uptick. A recent Entertainment Weekly story looking at the hot start to the year attributed it to the strong performances of movies like The Vow, Safe House, Journey 2: The Mysterious Island, Dr. Seuss’ The Lorax, Contraband, The Devil Inside, Underworld Awakening, Chronicle, Act of Valor, and Project X. That’s the good news.

The bad news – at least for anybody who, as Tassi seems to, likes a good flick – is that most of these movies range, by critical consensus, from weak to downright suckiness. Only found-footage sci fier Chronicle received good reviews (an impressive 84% positive on Rotten Tomatoes). Every one of the other titles was rated “Rotten,” with all but two not even breaking the 50% positive mark. Among the bottom-crawlers, combat movie Act of Valor (29% positive; $51 million worldwide gross so far against a $12 million budget); teen-party-out-of-control found-footage flick Project X (26% positive; $32.6 million and still earning against $12 million); horror franchise sequel Underworld Awakening (30%; $152.5 million against $70 million); and the box office story of the year, the brilliantly marketing but monumentally awful The Devil Inside (the year’s record-holder so far with a microscopic 7% positive; $77.5 million worldwide against a cost of just $1 million).

So, I agree with Tassi to the extent we may get less big budget crap…but we won’t be getting less crap.

If Tassi’s right about how the scenario will play out, however, Hollywood may very well cure its piracy problem though inadvertently. Tassi may not think much of those big, overpriced, air-headed blockbusters, but according to Paralegal’s chart, they’re driving piracy just as much as they’re driving the legit box office. The only movie remotely resembling a drama on Paralegal’s “Most Pirated Movies of All-Time” list is crime flick The Departed (2006). The rest of the list looks pretty much like any year’s box office toppers with movies like Avatar, Transformers, and The Hangover (2009). In other words, the numbers suggest movie pirates don’t want a more cost-effective Hollywood turning out higher quality films they can make available at lower prices. What they want is the same crap everybody else wants; just cheaper. Changing economics could push Hollywood toward following Tassi’s prescription; curing piracy by no longer being able to make the kinds of things most people want to steal.

*****

I honestly don’t know how much of this is probable, but a lot of it does seem possible. The currents – unwanted or no – seem plain, and Tassi and Paralegal and that Drexel kid seem to be on the side of history, however one judges the morality of their view. As an occasional content creator, their casual attitude about proprietary rights does bother me, and I’m even more bothered by how I see it reflected in the attitude of many of the students I teach, but maybe that’s just old fartdom at play.

One thing I’m sure of. There are no Good Guys in this fight. This isn’t about competing needs, but competing wants. The final irony I’ll cite is that list a few paragraphs up about the movies currently energizing the box office. I look at them and think, “Hardly seems worth the fight.”

Bill Mesce

 

11 Comments
  1. Bill Mesce says

    Whatever anybody’s feeling on the issue of piracy, I think the one thing we can all agree on, is, piece by piece, the media biz is going through an enormous reconfiguration. I’ve lived through a couple of them and I’ve learned two things:
    You can’t stop them.
    Two, they’re only, at best, mixed blessings. Everything you get comes at a cost. It’s like what somebody once said about the telephone (in the days before answering machines). The phone meant you could now talk to almost anyone…and it was guaranteed to ring when you were in the shower.

    1. Staindslaved says

      100% Agreed =). And again I fully respect your stance and insights on the subject. Thanks for another great and informative article

  2. Staindslaved says

    My stance on piracy is and always has been if I’m willing to pirate it that means I’m not willing to pay for it or it is not available to me any other way.

    1) If I’m not willing to pay for it, than guess what? I’m not going to watch it. I saw Sherlock Holmes (2009) in theaters, didn’t like it, no way I’m paying money for the sequel, however I might pirate it. I don’t, and have never understood, how the studio has lost money on me. I was not going to watch your product unless it was free. If pirating is not an option I’m still just not going to watch it. How did you lose money on me? Now say I liked the new Sherlock Holmes. Hum…maybe my interest in the franchise is rejuvenated. Perhaps I’ll pay to see the inevitable third one. The music/movie industry sees every pirates movie/song as a lost ticket or CD sale when I am 100% positive that is not always the case. Maybe the music industry is down because music over the past 12+ years has sucked! I used Napster and a bunch of other filesharing programs back in the day but I also bought a lot of CD’s and went to concerts. My interest in music, purchasing and pirating, has plummeted over the years. There have been maybe 2-3 new artists over the last decades who I’ve thought were worth a damn. Sorry music industry I don’t care about Beyonce, Miley Cyrus, Justin Beeber, Taylor Swift or the dozens of American Idol winners.

    2) If I have no other way of seeing it I’ll pirate it. Drive and Shame were never playing anywhere near me or my local theaters all last year. What? I have to be the guy who’s out of the loop while the entire online community is abuzz about how great these films are. I was willing to pay good money to see these films but they were never EVER available to me. I did what any good self-respecting film-buff would. I waited till a good copy was online and downloaded it. I also took a two-hour train into Boston to see The Tree of Life last year because it would be my only chance to see it in theaters. The whole day cost me nearly $40. Not many films are going to motivate me to do that too often. Yes I would like it easier please.

    I have 0% compassion for any company or film creator who feels I’ve somehow stolen from them when I pirate something. It is not the same as stealing. I can borrow a DVD from a friend or rent a film from my local library and pay nothing to see it. That is OK yet watching it streamed online is a no-no. If you want to keep control over content than it shouldn’t be free to anyone, through any method, anytime. Once content is out there its out there. That’s my opinion of it. Am I still supposed to pay to see Taxi Driver or Casablanca? (Ironically I will be paying to see Casablanca in theaters this next Wednesday…amazing what a good product can generate even 70 years later). Perhaps I’m heavily on one side of the cultural fence (as Bill mentions in his well detailed article) but I see no difference between this and the newspaper industry going under because news content became free online and they failed to change or expand their ways to stay in business. Online content is not going anywhere, the music/film industry will go the way of the dodo before free content online is nullified. Learn to adapt and change with your market like any Business Major fresh out of College would tell you.

    1. Bill Mesce says

      There’s a moral issue, and a legal issue.
      The legal issue is black and white. The copyright holder owns it. Period. As I said in the post, it’s theirs to handle, mishandle, use, abuse as they see fit.
      What you bring up with great clarity is the moral issue; that under certain circumstances, content theft is ok, and I have a problem with that. I understand it, emotionally, philosophically, I feel the same things you do about some of this stuff, but I won’t cross that line. If it was my movie, my book, my song, I wouldn’t want it done to me; for me, it’s that simple.
      As I said, I agree with the articles I cited that you’re not actually stealing a “thing.” What theft does is degrade the value of the material to those who do pay. I don’t know how probable it is, but it’s obviously possible for the movie business to wind up where the music business is.
      I would argue that music, as a whole, isn’t any better or worse than it was before Napster (there was always more crap than gold), but that the collapse of the music industry — for whatever reason — and the collapse of the traditional distribution pipelines for music actually works AGAINST the ability and viability of music companies doing what they used to do: trawl the clubs for local bands, build up talent, support an introduction of a talent to a once more-unified audience through platforms that served that audience. Along with the implosion of the music industry, downloading, satellite radio and all the other New Media pipelines have fractured the audience into small niches that make it hard both to break — and to find — new, adventurous talent.
      I think the moral of what happened to the music biz and the caution for those calling for a revolution in how Old Media works for movie and TV is, Be careful what you wish for etc.

      1. staindslaved says

        Obviously I’m well aware that anytime I watch something streamed online or download content it is by the strictest definition illegal and immoral. I fully respect your stance on this and your convictions not to cross that line. Really when it comes to online piracy I just don’t care. I don’t see the damage in black and white. I finally got a friend of mine to watch The Walking Dead. He watched the past episodes online and now consistently watched the show. The show now has a new weekly follower because of piracy. I’m convinced this type of thing happens a lot. I agree with Paul Tassi if the availability was easier I wouldn’t do it at all, and as I said before I really only do it when forced. If someone were to download a film and sell copies, that I have a huge problem with. That is profeting off someone elses work and that is stealing and that is black and white. Michael Moore took a similar stance when his film Sicko was put online. He said he was fine with it because he wanted his film to be seen by as many people as possible but would disapprove of someone selling his content.

        1. Bill Mesce says

          Actually, in your example, I don’t think you pirated anything. I’m not exactly sure, but I don’t think you did. You took something off of basic cable which is another brand of commercial TV. Again, I’m not sure, but I think legally what you did would be no different than streaming an episode of BIG BANG THEORY.
          The financial model for commercial TV — as well as its intent — and a premium service like HBO or SHO is quite different, and even then, HBO has said you can copy a movie, you just can’t resell it or mass produce it.
          There’s a very complex (legally) gray area between piracy and legit duplication.
          But let me posit this scenario: your friend becomes a regular viewer but only through illegal streaming. He doesn’t want cable service but he wants the show. People who do pay for their service are now subsidizing his viewing.
          If his numbers grow to the point where, say, 20% of the potential aftermarket for the shows (and these shows do not make money while they’re in production — most TV shows of that scale, network or cable, are produced at a deficit, even major hits) has been eroded by piracy, the aftermarket justification for continuing the show begins to diminish. The further away from recoupment piracy pushes a show, the more likely you are to see things like production budget trims or maybe an early termination of the show.
          At the risk of being repetitive, I don’t know how probable that is, but somewhere down the road as the current proportions expand, I see it at a possibility.
          That may be less of an issue with a juicy hit like WALKING DEAD, but I think it could be more of a factor with midrange shows who have less of a lock on a large aftermarket audience.

          1. Staindslaved says

            Why wouldn’t that be considered piracy? He watched it from a site that I showed him which also lets you watch other current TV shows and movies (some still out in theaters). This is kind of my point. It is sometimes OK to watch for free and other times it is not. I don’t see that line in the sand anymore. He wasn’t going to start watching without catching up on the storyline. Now that he’s exposed to the content he’s more likely to buy a Walking Dead poster or shirt or even start reading the comics.

            I understand the logic of “If it’s all for free than no one will pay and no one will make anything”. I just don’t think that is actually what the landscape is. The people doing the most downloading of content are the 15-25 year olds and they are also the ones shoveling out $$$ to make record breaking weekends each summer at the box-office.

            I view it more as exposure. If something is good its good. The more people who can see it and realize its good and spread the word, the more likely it is to turn a profit. I know people who bought the graphic novels of Watchmen (even though I told them for years to check it out) because they liked the movie, which they watched online. They were skeptical, wouldn’t have paid to see the film, because they downloaded it for free they bought the books and so the property made money. Money it wouldn’t have made otherwise.

            I understand most people will never see it this way. Also lots of you here on Sound on Sight have careers and reputations in and out of the biz. When I see articles that paint the whole “free content online” in a more positive light it is always pre-faced with “I would never advocate piracy myself”. I just thought I’d be bold and say I do it, I advocate it and I honestly think the industry is benefiting from it more than they think they’re hurting from it.

    2. Edgar Chaput says

      I think one need proceed a bit more cautiously when approaching the whole ‘it’s not different than someone lending a DVD’ argument. It is not often that a DVD is watched by 200, 300, 4000 thousand people at once. Sure enough, I’ll lend a DVD to a few friends, or I will invite some friends over to may place and we’ll all watch the movie together. My 2, 3, or 4 guests did not pay to see the film. Absolutely true. I can’t argue against that.

      If someone gets hold of a DVD copy, even if it is rightfully purchased, rips the content from the disc (which to me seems increasingly ludicrous when just about every new home video release includes when the studios call a ‘digital copy’) and puts it online, imagine how many people will download it then. These aren’t 4 people who came over for movie night at my home, these multiple thousands of people who are illegally getting hold of a film only 1 person bought. Let’s be honest with ourselves, the numbers are vastly different.

      I sympathize with those who feel they are getting jipped when they pay 13$ bucks for a movie that sucked. It’s even worse when paying 18$ for the Imax 3D version (POST CONVERTED 3D no less! WTF?!?). Heck, I like to think I have minimally discernible tastes as well and can smell a rotten film when I’m seeing one in the theatre (after paying the 18$, of course), but outright theft is not any more morally just then the studios serving crap for dinner.

      1. Staindslaved says

        My only answer to that would be other than the number of viewers whats the difference? Why is one OK and the other not. That’s my biggest problem with the whole thing. If neither was OK then fine fair enough, however one is acceptable even though the two acts are essentially the same thing. If I’ve let 100 people watch my directors cut of The Lord of the Rings for free, should I stop lending it out? Because its reached its limit?

        Anyone remember back in the day of VHS tapes. When we used to record movies and pause the tape during commercials then quickly start the recording again when the show came back on. Sometimes you’d screw up and there would always be that half of a Burger King ad in the middle of The Lion King. My parents had a library of films recorded on blank VHS tapes because they couldn’t afford to buy them. If they couldn’t have recorded them off the TV than they still would not have bought the tapes, we simply would have gone without. However, this was making a copy of copyrighted material. But no one cared and we didn’t sell them to try and make money. I’m so confident almost anyone who ever lived in the 80’s did this or something like it at some point. Now in the digital age this same exact thing is being done just on a larger scale.

        1. Edgar Chaput says

          You raise a very fair point about the day of VHS. That being said, the times have changed and by consequence so have society’s means of having access to media on a vastly more rapid scale. More people can obtain film, music or television illegally, which in turn has caused a degree of consternation among those working in the business. Back in the days of VHS, there was no high speed internet or smart phones with HD recording ability. At the risk of sounding a little shmaltsy, it was a ‘more innocent time.’ Nowadays, everybody can download stuff at an incredible pace and stock an incredible amount of material, again, illegally. It should come as no surprise that studios are displeased about this. The one thing can at least agree on is that studios are having a tough time adapting and, frankly, not always choosing the best course of action in response to this reality (which makes them appear sometimes stubborn, other times foolish), but let’s not bemoan them for not being happy about what people are doing and trying to fight it, seriously.

  3. aido says

    Fantastic article. Balanced, well researched, well argued. Nice to see some lucid debate on this topic for a change.

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