Archive for March, 2008

While recent posts have focused on how Hollywood is theft prevention focused rather than sales oriented in its approach to digital distribution online, it is worthwhile to take note of how the studios have played this field.

There was MovieLink, which several studios formed together and then sold to Blockbuster after several years. Recently BitTorrent, originally the mother of Peer to Peer video file sharing, and still the open source underpinning of much of the so called Darknet, as well as more visible file sharing efforts like The Pirate Bay, partnered with studios, raised private capital and launched a download site.

The studios have made websites, complete with teasers, free wallpaper images and other promotional tools part of all their releases since “The Blair Witch Project” success got their attention in 1999. They haven’t integrated the latest web technologies to make it possible for you to find where to watch or buy the product, the way the Energy Star program directs you to retailers of efficient appliances, or Victronox/Swiss Army has a “Where to Buy” button on the top of their page.

Last week, the operators of The Pirate Bay were interviewed by Dayrobber, a web-tv site that publishes five minute shorts. Describing Pirate Bay as “whatever you want it to be” and  ‘not a company” or “uncensored sharing”. The only boundaries are “what is illegal” of which they mostly view as snuff films and child pornography. They are cooperating with police (“they don’t know crap- we’re going there next week to explain how BitTorrent works”) and claim that The Pirate Bay makes no money, other than “speaking at conferences and seminars”. The key take away from (from part 2 on the TorrentFreak page) is their advice to Hollywood “Open a torrent site just like the Pirate Bay” and “have it ad based”.“It’s always we are getting the question of ‘how can they survive’ and shouldn’t they come up with that? Isn’t it their problem?”

While that is a good question, the fact that their solution is basically to make the internet like traditional newspaper or magazine publishing and over the air television broadcasting , makes the interviewer’s characterization of these men as “the cutting edge of the internet” somewhat questionable. But they are engineers first, not businessmen. As mentioned above, the studios currently view all of their web content as advertising. The internet is a promotion channel and a theft channel. Not a business medium.

We offer an alternative. Using the internet as a medium for business. Establish communication first, and then as a conduit for trusted transactions, and customized delivery second. Doing so would make it possible for the studios to achieve the lowest possible costs of finding their audience and delivering their product efficiently.  Our particular product- SmartMarks- is part of ‘trusted transactions” which are required in today’s marketplace as well as tomorrow’s.

One of the allures of the silver bullet, or the technically magical prevention of theft, strategy is that it promises a simple clean solution. Despite the fact that it is 1) highly hackable – all strategies aimed at prevention so far have been hacked, 2) alienating to customers – complicating purchase and use of consumer electronics devices and 3) been a failure, this approach still seems ‘easier’ than enforcement.

Let’s look at why. Take this example from the Business Software Association. A large unnamed international corporation had multiple illegal copies of various software applications. The BSA filed “a criminal complaint made by the BSA on behalf of Adobe, Autodesk, Avid and Microsoft” which “led to police raids on the company’s premises and the freezing of its assets.”

Note that a business association led the effort- not law enforcement. While theft of software is a crime, galvanizing law enforcement efforts around this has not been as attractive to the MPAA as lobbying Congress for changes in the copyright law that also allows them to inspect the contents of private computers.

Another enforcement challenge is scale. The longer pirates are in play in the current model, the more outlets and places exist. Looking at DirectTV’s efforts at enforcement of the pirating of their license cards - an effort somewhat aided by the fact that in order to steal a scrambled satellite signal one must have a dish, a set top box and a card to enable the box – DirecTV has busted a lot of operations. This can be seen on this page of links to sites that DirectTV has control of. The names of the domains read like pirate addresses “pirateden.net”, “dishnethack.com”, “satellitesorcery.net”. Over a 120 domains that DirectTV has pursued and captured through their enforcement efforts. People have been fined, and dealers of hacked equipment and cards have been sentenced to jail time.

Justice of this sort demands patience, persistence and collaboration. Of these three, only persistence can be said to be a historical trait of Hollywood, and then mostly of the talent.

Just last year, the US Chamber of Commerce, through its Global Intellectual Property Center, proposed a Campaign to Protect America with specific steps toward increasing enforcement. The membership includes all of the Hollywood majors (except Sony) among the 539 companies listed. As their video states, “this isn’t about Madonna or Fifty Cent”. It’s also about airplane parts, pharmaceuticals and other public safety related businesses.

This points up the other aspect of the challenge. Even when law enforcement is on the job, will they be available to work on the theft of movies, when there are fake pharmaceuticals to be kept off the shelves? Just how important is the lost revenue to anyone other than the distributors and related stakeholders in a given film or television show?

At the end of the discussion, the lost opportunity costs of focusing on theft instead of the possible new services and products that could be sold through digital technologies far outweigh these challenges. Shifting focus from theft to opportunity is the most serious challenge to the industry.

The current issue of Wired Magazine has this “Dear Hollywood” column by Frank Rose.

There is a lot to discuss in this essay, but let me point out the first obvious problem- there is no “Hollywood” to address. As pointed out in last week’s post, these are not coherent transparent well aligned entities. Each and every one of the now six major studios is a multiple business unit amalgamation that itself is a serfdom of a multinational corporation.

What this essay does very well is articulate the opportunity that the motion picture industry misses because it is focused on the threat of theft in digital delivery, instead of the potential profit.

Equally significant, is Rose’s point that if the legal distribution isn’t made available to the public, then the public will go find the product they want wherever it is, which means on a illegal dark net site, or some other source.

Remember, much of the movie business cost is in creating the demand, or desire to see their products. As an example, I wanted to see “Charlie Wilson’s War” but it was only in my town for a week, so I can’t see it in the current Hollywood ‘window’ model of delivery until it is available on DVD (April 22- a detail that isn’t on the film’s official website) unless I want to drive nearly 80 miles to the closest theater it is playing in (thanks to zap2it for this bit of information) But it is available right now on The Pirate Bay, a ‘torrent’ website, whose homepage has a convenient set of instructions on ‘how to download’ and get started with BitTorrent.

Drive an hour and a half, pay $9, or download for free here at home? Hmm.

An interesting sidelight is that The Pirate Bay was able to automagically recognize my zip code and supply me with advertising localized to me while the Hollywood distributor (Universal) and production company (Participant Productions) don’t even have this title (“in theaters now” according to the film’s site) on their home pages. Universal has already buried the film, and since it isn’t available now, you don’t see it on the DVD page either. Participant does at least show the title on its ‘Films’ page, but doesn’t tell you when you could get it or give you a way to find out where it is showing.

So although the technology clearly exists for a web page to adapt to where the viewer lives, and present relevant information, like say the closest theater to where I live that the title is playing in, or offer at least some information about the product I am looking for, the legal owners who have invested a lot of money and effort to have me want to see their movie, can’t seem to find a way to make it available, or even tell me how I will eventually be able to get it.

Netflix, the most clued in legal way to get the film, makes it relatively easy for me to not only learn about the product, but put it on my queue and be in line to have it delivered when the DVD is out, which they also publish.

The Pirate Bay listing was on the fourth page of my Google search because there are that many more relevant items to list, even when the word ‘download’ is added to the search. But the fact that a free download is even making the listings, begs the question of just how well are the studios protecting their current business model.

On the one hand, the Hollywood Rose is writing to is clueless, and focused on the wrong end of the threat/opportunity line. On the other, they have a tremendous amount of enterprises partnering to do all sorts of things like tell me when the DVD will be out or where I can go to a theater near me.

They dominate the marketplace they are in and have for nearly a hundred years. Is Rose right about them missing the opportunity or are they just too profitable now to mess with a good thing?

Our commitment at USVO is to provide content rights holders with the tools to distribute digitally confident that they can enforce their licenses, particularly against enterprise pirates- people actually stealing the product for profit. By enabling the distributors to engage the digital distribution marketplace trusting their customers instead of suspecting them, SmartMarks are a critical technology to transitioning these companies to the new technology landscape.