Archive for November, 2007

This week’s phone appearance on MoneyTV jumped off from the current WGA strike, which, like piracy, is a result of the disrupting digital technologies of content distribution and display. As the producers fret over erosion of their incomes, due to changing business models as well as piracy, writer’s have concerns that the producers will leverage their contractual obligations down using these same new channels, reinterpreting contract concepts like revenue along the way.

Both have good reasons to be concerned. The producers used the shift to HD cameras and acquisition to try and change the labor rules on television shows for both actors and crews just a few years ago; the effort ultimately failed to change either the actor’s deals or crew requirements or working conditions. So the writer’s have recent history to remind them of how producers will use these changes. Producers just have to look at their current revenue trends.

This isn’t the only issue that highlights shifting market conditions or is generating headlines this week. And piracy of content, and watermarking, figures in it as well.

The release of “Beowulf” in 3D is the spearhead of what will be a three year ramp up of 3D exhibition.  The first broad release of a 3D title in decades, “Beowulf” promises a new ‘premium experience” in theatrical motion pictures. As reported in detail in today’s press, over $160 million is the estimated cost of the collective bet by the industry, including the $30-50K for each screen to be upgraded to 3D.
The 3D capability is leveraging the long term effort by the industry to move to digital exhibition. By moving from prints to files for a third of the North American screens, the distribution operations of the studios stand to save about a billion dollars annually, to say nothing of greater flexibility and alternative revenue sources for theaters.

Digital exhibition is a double edged sword, as the same power and flexibility that makes that billion dollars available also creates the vulnerability to theft of the highest quality files of the current product. Thus the five years of diplomatic and technical work required to generate the Digital Cinema Initiative’s specification.
It was Jim Cameron, who spent his recuperation from his Titanic success working underwater sites and developing a 3D camera system to better bring you to the experience of the deep ocean, that championed using the digital projection equipment to reinvigorate the movie going experience through 3D. Stumping at trade shows throughout the spring of 2006, and making himself available to other filmmakers to enroll them in generating new 3D content, Cameron challenged the presentation industry to reinvent itself.

It so happens that this also has a anti theft element. Unless one has the capability to display in 3D, it isn’t very useful to steal the files of a 3D film. And not many of us are likely to have 3D in our homes soon, although there are companies working to make that possible.  And the DCI includes an element that makes watermarking mandatory in every digital ‘performance’ as they like to term a showing of a movie in a theater.  That element is currently the main way that the external world can see the industry desire for multiple vendors for watermarking.

The instant analysis media is likely to declare the experiment a success or failure by Monday morning, based upon whether “Beowulf” meets or exceeds its expected $30million weekend box office. Don’t buy it either way. The commitment to 3D will keep this effort running for at least a year, as the industry knows it has to retrain its audience.

Meanwhile we’ll be out putting SmartMarks everywhere we can and looking for those opportunities to enforce content licenses using them.

As we progress into fall, and the movie season of Halloween is supplanted by the prestige pictures hoping for Oscars as well as box office, the press is reporting an upsurge in prerelease piracy. This report suggests that the majors are “vigilant’ in their use of watermarks.

Well the industry is a long way from any comprehensive use of watermarks. It really doesn’t have an integrated strategy. On the one hand, through the MPAA, it seeks to get legislative favor for its authority to enforce its copyrights through looking through the computers of others, while it also seeks to have other industries capitalize complicated schemes to make it impossible for its customers to improperly make use of the content they are licensed to watch. It continually has problems with leaks in its marketing and post production matrices, yet has no standard methods of keeping track of the many copies of its products circulating there.

Google’s recent initiative to satisfy Viacom and others need to have their property protected on YouTube highlights one aspect of the challenge- volume. How much processing power will the filtering application require? Who is responsible for the costs of bringing all the copyrighted material into the system? Who will actually do the work? How will it be vetted?

AT&T, like many other telcos, is diving into content distribution using various IP technologies. It seems that the cable companies and the phone companies can only see growth in each other’s businesses. To get a leg up, AT&T has jumped into the filtering game too, and has demonstrated a technology that will watch what goes over its internet and phone lines. But as this report details, there are plenty of pitfalls in the game even if the technology works and the costs are not prohibitive.

And if you work your way to the bottom of the article, the real issue is getting the ‘free’ content out of ‘their’ pipes. In that almost all of the US suppliers of broadband services are, and really for nearly a decade have been, focused on managing a scarcity, as opposed to a cheap and plentiful supply, it isn’t surprising that the real business is making sure that anything going through that scarcity is producing revenue. That this also can be made a play to make friends out of the big players in the most profitable content is just gravy.

So once again, the focus is peripherally on theft, and theft of bandwidth first and content second. Much of this is done under the rationale of ‘big picture’ thinking, as if the fundamental business of the content industry, or the broadband industry for that matter, isn’t delivery of a high volume of quality product at a low cost to customers. Right now, and for some time to come, expect that the individual customer is just part of a demographic called ‘consumer’ who is suspect, not given any real diversity of choice, and is presumed to be willing to pay whatever price the big suppliers can extract.

Meanwhile, on another front, illustrating either that same lack of overall strategy or a willingness to try out different approaches, Warner Bros. and Paramount have formed a partnership to sell DVDs in that huge growth market China. What is really promising about this effort is that the announced retail price will be competitive with the pirated titles sold on the street there. For about $2US, Chinese will be able to buy a fully licensed, and one assumes featured DVD, legally. This technique, taking the margin away from the pirate, has been suggested for years.

Should this approach be deemed a success, expect other third world high volume piracy markets to be similarly engaged. Do not expect to see recent hits for sale at these prices at Blockbuster.