NBC Universal's Own Preferred Researcher For 'Anti-Piracy' Stats Comes Out Against SOPA/PIPA

from the well,-look-at-that dept

This is fascinating and unexpected. We've discussed the research firm Envisional a few times here at Techdirt. The company is NBC Universal's preferred research firm for coming up with stats that NBC Universal then uses to insist that it needs new laws like SOPA/PIPA. Some have certainly called into question Envisional's research as a paid vendor. However, a year ago, we noted that if you actually looked at the details of the research Envisional did for NBC Universal, it actually showed that piracy was Hollywood's own fault. NBC Universal and the MPAA twisted those results to say that piracy was a huge problem, but the data certainly suggested the real problem was Hollywood's failure to release what people wanted in formats that they wanted.

Still, we never expected Envisional to come out and actually make that same point (even if that's what the data said). Yet, as this recent Ars Technica article notes, at CES, Envisional's "head of piracy intelligence," David Price, didn't mince words in saying that infringement was, in fact, Hollywood's own fault for not offering products in the way customers wanted and that SOPA/PIPA were the wrong approach to fixing its business model problems:

"The content owners are really fighting the tide of the Internet," Price said. "They're trying to fight the flow of the Internet which is all about making content as widely available as possible, as easily as possible, as quickly as possible. They're trying to hold back the 1.4 billon users of the Internet from doing what the Internet wants them to do."

In discussing SOPA/PIPA:

Price does not like the way the bills are drafted, potentially causing major technical and free speech issues. "When I talk to content owners I try to tell them this is not the way to go," he remarked. "You don't want to hurt people. You want to try and go with a compete approach, put the content out there and hope people will come to you."

Again, none of this is surprising. We've been saying the same thing for ages -- and we get dismissed as "piracy apologists." Yet this is the research firm that NBC Universal has relied on and regularly quotes in making its arguments about just how "big" a problem infringement is. That says something. And that something is that NBC Universal (yet again) is unwilling to face reality.

Filed Under: business models, hollywood, research, windows
Companies: envisional, nbc universal

Why Hollywood's Idea Of 'Innovation' Is SOPA

from the regulatory-capture dept

A ton of folks have been sending over Steve Blank's absolutely awesome detailed analysis of why Hollywood can't innovate... and the result is SOPA. It touches on many points we've raised separately, but puts it all together in such a fantastic and comprehensive package. Seriously: just go read it.

It kicks off by noting a key point that we've raised in the past, but which often gets underplayed: the vast majority of movie industry revenue these days comes from pay-per-view TV, cable, satellite, video rentals, DVD sales and online subscriptions/digital downloads. In fact, this is the part of Hollywood's business that it insists is most under threat from infringement. But, here's the thing: if the MPAA had had its way over the last century, none of those things would have existed. It fought tooth and nail against every innovation that resulted in those new and lucrative markets. Blank puts together a great historical list:

• 1920’s – the record business complained about radio. The argument was because radio is free, you can’t compete with free. No one was ever going to buy music again.
• 1940’s – movie studios had to divest their distribution channel – they owned over 50% of the movie theaters in the U.S. “It’s all over,” complained the studios. In fact, the number of screens went from 17,000 in 1948 to 38,000 today.
• 1950’s – broadcast television was free; the threat was cable television. Studios argued that their free TV content couldn’t compete with paid.
• 1970’s – Video Cassette Recorders (VCRs) were going to be the end of the movie business. The movie business and its lobbying arm, MPAA, fought it with “end of the world” hyperbole. The reality? After the VCR was introduced, studio revenues took off like a rocket.  With a new channel of distribution, home movie rentals surpassed movie theater tickets.
• 1998 – the MPAA got congress to pass the Digital Millennium Copyright Act (DMCA), making it illegal for you to make a digital copy of a DVD that you actually purchased.
• 2000 – Digital Video Recorders (DVR) like TiVo allowing consumers to skip commercials was going to be the end of the TV business. DVRs reignite interest in TV.
• 2006 - broadcasters sued Cablevision (and lost) to prevent the launch of a cloud-based DVR to its customers.
• Today it’s the Internet that’s going to put the studios out of business. Sound familiar?

But that's just the preamble to his piece. From there, he explains how the industry set itself up to be so anti-innovation -- focusing on regulatory capture to help block innovation. The story reminds me of Andy Kessler's distinction between political entrepreneurs and market entrepreneurs. Political entrepreneurs focus on connections in government to create protectionist policies. Market entrepreneurs ignore all that and just build cooler products. In the end, the market entrepreneurs win, but the political entrepreneurs can disrupt their lives for a while and make it difficult.

But the end result is SOPA/PIPA rather than technology or business innovation:

The SOPA bill (and DNS blocking) is what happens when someone with the title of anti-piracy or copyright lawyer has greater clout than your head of new technology. SOPA gives corporations unprecedented power to censor almost any site on the Internet. It’s as if someone shoplifts in your store, SOPA allows the government to shut down your store.

History has shown that time and market forces provide equilibrium in balancing interests, whether the new technology is a video recorder, a personal computer, an MP3 player or now the Net. It’s prudent for courts and congress to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude.

What the music and movie industry should be doing in Washington is promoting legislation to adapt copyright law to new technology — and then leading the transition to the new platforms.

I actually think Blank underplays this a bit. The MPAA doesn't just have a "copyright lawyer" with more clout than a technology person... it's that the entire MPAA is designed around anti-piracy, with a whole series of execs and staff whose sole job is "content protection" -- not business model or technology innovation.

Either way, I highly recommend checking out the full article.

Filed Under: copyright, crying wolf, history, hollywood, innovation, pipa, protect ip, regulatory capture, sopa
Companies: mpaa

Obama Working To 'Fix' His Relationship With Hollywood

from the hello...-sopa dept

We recently wrote about how it was unlikely that President Obama would veto SOPA/PIPA if they reached his desk, because he probably feels he "needs" the support from Hollywood. As if to underscore that point, apparently he's worried that he's pissed off folks in Hollywood -- who feel that he "has given their causes short shrift since moving into the White House." In order to fix that, according to the Hollywood Reporter, Obama has sent his former top Hollywood fundraiser, Nicole Avant, back to Hollywood to help patch things up there. Apparently, as a thank you for helping raise money in 2008, she'd been given the assignment as the US Ambassador to the Bahamas. But she's left that job to go back to fundraising in Hollywood. One has to imagine that a key "cause" that Hollywood will want assurances on is... SOPA/PIPA. Already, Avant is apparently beginning the fundraising process as part of an attempt to "rekindle at least some of Hollywood enthusiasm for Obama." Of course, Obama is also seeking support from the tech industry, who's almost universally opposed to the bill. Could make for some interesting discussions on his frequent swings through California...

Filed Under: fundraising, hollywood, lobbying, nicole avant, obama, pipa, protect ip, sopa

Hollywood Union Members Sign Petition Asking MPAA & Hollywood Unions To Stop Supporting PIPA/SOPA

from the losing-your-own-members dept

The opposition to SOPA and PIPA continues to come from all sorts of places. The latest interesting one? Union members who work on movies and TV... whose bosses signed them up as supporters of SOPA and PIPA against their wishes. They've put together a petition urging the MPAA, IATSE, IBT, WGA, SAG, DGA, and AFTRA to formally oppose both SOPA and PIPA, noting that it would be a barrier to innovation that Hollywood desperately needs, wouldn't actually stop infringement, and would also be an online security nightmare. The groups listed in the petition are basically all of the groups that have been major supporters of the bill, but as some of the signatories note, they want no part of this. Just a few examples:

I'm a proud Local One and USA829 member, and am appalled to find my union supporting this act. While I agree that piracy is bad, this act is ill-designed by legislators with no clue how the internet works, and guided by greedy corporations who have ulterior motives, and who have a track record of abusing the DMCA the same way they'll abuse this.

It will do nothing to stop it, will give unfettered power prone to abuse to corporations who don't deserve it, will short circuit due process, and will have huge unintended negative effects on the internet as a whole.

And, another one from a studio grip:

Proud Local 80 Motion Picture Studio Grip and I'm signing because these bills go too far. I'd like to think that IATSE is just trying to do what's best for its members. But, I think once they dig past the surface they will see the same thing I did. And that is that these bills need to be quashed. We need another way to deal with piracy.

Once again, for all the talk of widespread "support" of SOPA and PIPA, it seems to be crumbling in every direction, including from within the groups who have acted as if these bills were absolutely necessary.

Filed Under: hollywood, pipa, protect ip, sopa, unions
Companies: aftra, dga, iatse, ibt, mpaa, sag, wga

Reuters Media Columnist Explains That SOPA/PIPA Are A 'Cure Worse Than The Disease'

from the of-course-they-are dept

In the continuing mainstream news realization that SOPA and PIPA are dreadful bills that won't stop infringement, but will have massive negative consequences for the internet, we've got Reuters' (formerly Slate's) celebrated media columnist, Jack Shafer, explaining how "Hollywood's pirate cure is worse than the disease." If you've been following Techdirt for a while, there's nothing really new here, but it is a nice summary. I especially like the part where he responds to a Fox exec claiming that Hollywood's "mistake" was allowing people to call infringement "piracy" (no, really, Tom Rothman, co-CEO of Fox Filmed Entertainment actually said that):

...resorting to this sort of hyperbole is just the Hollywood way of winning an argument. In 1982, Jack Valenti, then head of the movie business’s trade association, told Congress in 1982 that the VCR was “to the American film producer and the American public what the Boston Strangler is to the American woman at home alone.” The happy Hollywood ending to that copyright Armageddon? The VCR made the movie industry ridiculously wealthy by creating a new sales channel.

Pirates and the “intellectual-property defense industry” ([Adrian] Johns’s delightful phrase) have been clashing at least once a century since the end of the Middle Ages. Sometimes cultural changes spur the fight, as in the Enlightenment era when the first modern copyright and patent systems took hold, he writes. But leaps in technology drive the conflict, too, as the histories of inexpensive movable type, the piano roll, the Victrola, the VCR, the personal computer, and the Internet prove. The faster that technology moves, the more vicious the fight. In recent decades, the piracy debate has moved to those new industries that have persuaded the government to expand the IP rights to their plant seeds and genes. (And, yes, the agriculture and pharmaceutical industries have allied themselves with the entertainment complex in this current political battle.)

In the end, Shafer notes that even as he makes his living creating "intellectual property," he can't support such awful bills.

As someone who creates "intellectual property" (I shudder at the phrase) for a living and works for a huge company that owns slews of it, I have a vested interest in this fight. But SOPA or PIP would do excess damage to free speech, free association, free commerce, and innovation in the name of scuttling the Internet’s scurvy pirates. As the character Ramon Miguel “Mike” Vargas says in Orson Welles’s Touch of Evil, “A policeman’s job is only easy in a police state.”

Filed Under: hollywood, jack shafer, pipa, protect ip, sopa

Congressional Research Service Shows Hollywood Is Thriving

from the shouldn't-congress-wonder-why-they-need-sopa/pipa? dept

The Congressional Research Service is the research arm of Congress that is widely respected as presenting (non-partisan) high quality, extremely credible research for folks in Congress. In fact, the quality is so good, that many are annoyed that the output of their research, despite being public domain, is rarely made available to the public. The only way that information is released is if the elected official who requested it decides to release it. Thankfully, some of our elected officials do just that.

Recently, Senator Ron Wyden asked CRS if it could explore the state of the movie industry today as compared to 1995 on a variety of different criteria. You can read the full report embedded below, but here are a few key points. First off, despite the industry's regular attempt to play up its contribution to GDP and employment, the report found that the combined GDP contribution of both the "motion picture and sound recording" industries was a whopping 0.4% in 2009. Back in 1995... it was also 0.4%. As for employment, Hollywood loves to claim that it employs millions of people. One popular number is that 19 million people have jobs in "IP-intensive industries." Of course, we've discussed how misleading a term that is, as they lump in all sorts of jobs that have absolutely nothing whatsoever to do with copyright. So, how many people are actually employed in the movie industry? Not that many. 374,000 in 2010 -- and that includes both full and part time workers. And that's really not much different from the 392,000 in 1998. So it's not like the industry has been losing employees in droves as they imply. Furthermore, that's only slightly more than the number of jobs that Facebook's app platform alone is estimated to have created. Hell, we've seen reports that have said eBay alone created 750,000 small business jobs. Perhaps Hollywood isn't as big a part of the economy as it likes to claim.

Similarly exaggerated? Its dire straits. Let's take a look at box office revenue: Also interesting is the look at CEO pay at the major movie studios, then and now. It seems that Disney's CEO (Robert Iger) made $29,617,964 in 2010, compared to Michael Eisner's mere $10 million back in 1994. Time Warner? CEO Jeffrey Bewkes made $26,303,071 in 2010, while his predecessor Gerald Levin made $5 million in 1994. CRS apparently couldn't find past data on the other studios, but in the present, it looks like their execs are all cashing in. News Corps' Rupert Murdoch made $33,292,753. Viacom's Chairman, Sumner Redstone, made $15,033,630, while its CEO Philippe Dauman famously made $84,515,308. NBC Universal was still under GE in 2010, whose CEO, Jeffrey Immelt, brought in $21,428,765. Then there's Sony, whose CEO was the pauper of the bunch, having his salary and bonus cut to a mere $4.3 million due to "financial problems stemming from the Japanese earthquake and tsunami."

It doesn't sound like things are that bad these days in Hollywood. So why do we need massive legal changes again?

Filed Under: business, congressional research service, copyright, data, hollywood, movies, pipa, protect ip, sopa, thriving

Yet Another Study Shows That Hollywood's Own Bad Decisions Are Increasing The Amount Of Infringement

from the and-again-and-again dept

We've pointed out over and over again that the real way to stop infringement is to offer compelling legitimate services that are reasonably priced. Time and time again, throughout history, it's been shown that the real reason there's widespread piracy is because the content isn't available legally at all, or is available in a limited or inconvenient way. Make things easy, not locked down, convenient and reasonably priced, and tons of people pay. Books have been written about this. Studies have been done on this. And just the success of things like Netflix and Spotify show how this works wonders.

Now there's a new study, once again, showing the same thing. Professors Michael D. Smith and Rahul Telang (from Carnegie Mellon and Heinz College) have added some more evidence -- and it again suggests the "problem" isn't that the law isn't strong enough or that enforcement isn't draconian enough. It's that the industry still refuses to give customers what they want:

Our research suggests that Hollywood is leaving money on the table — and is in turn failing to address a root cause of piracy — by preserving its separate release windows. Based on our analysis of seven large nations, we find that in most countries, every week customers have to wait before they can buy a DVD translates into, on average, 1.8 percent lower DVD sales. Given that good-quality pirated versions are available close to 14 weeks before the legal versions, the losses can be in the millions of dollars. Not surprisingly, a 14-week delay also translates to a 70 percent increase in pirated movie downloads in those countries.

The study basically found what many of us have been pointing out for ages: making things not available doesn't drive sales. It drives infringement. This is such a fundamental point, and it seems so obvious to many of us... but those in the industry still refuse to believe it. Now, some of the problem with the delays come from the theater owners, who flip out at any attempt to shorten windows, even if the "competing" options are priced ridiculously high.

But the studios themselves are frequently guilty of this same self-defeating thinking. Many are really pushing for rental delay windows, such as denying new movies to Netflix or Redbox until 28-days after they go on sale. One studio has broken ranks here: Paramount. That's the only studio that has made it clear that delaying movies doesn't increase sales. The other studios, though, still don't seem to get it, and don't realize that for people who want to see a movie, but are stymied due to a stupid release window, that they do have a few other options: (1) simply go away and forget the content entirely or (2) go find the content elsewhere. Neither scenario is good for the studios.

But the professors make the key point that the studios are going about this entirely backwards based on the data:

Together these results suggest that delaying content in the presence of digital channels is likely to cause consumers to lose interest in the product at best, and lead consumers to alternate pirated channels at worst. A better strategy would be to do the opposite: Make it easier for consumers to buy the content in physical and electronic channels. For motion picture studios this might mean selling content in theaters, on DVD and on digital services at around the same time, perhaps at different price points.

Shocking. We've only been arguing for many years that you should be able to buy the DVD of the movie you just watched as you walk out of the theater (and if you show the ticket, you get a discount). It still amazes me that this is still not really being done -- even as the evidence piles up that moves like that would increase, not decrease revenue.

Filed Under: day and date, hollywood, infringement, piracy, windows
Companies: mpaa

How Much Does File Sharing Really Cost Hollywood?

from the questions,-questions... dept

The MPAA is famous for throwing around all sorts of completely bogus numbers when it comes to the "costs" of online infringement. Even parts of the US government have mocked the MPAA for its way of calculating "losses" from infringement. In one case, the calculation was so ridiculous that even the MPAA had to admit that it had fudged the numbers. However, the folks over at TorrentFreak decided to see if they could come up with a more reasonable calculation by doing a thought exercise: what if everyone who shared unauthorized movies and TV shows via BitTorrent, suddenly switched to Netflix instead? How much more revenue would that bring in?

The answer? Not a hell of a lot. Now, the report makes a large number of assumptions -- all of which are laid out directly, and whenever possible, they sought to use a number that favored the MPAA. So they assume that every download is a "lost sale" and are extremely quick to inflate how much BitTorrent traffic is movies and TV. They also assume that all BitTorrent traffic is infringing. Again, the idea is to be as favorable as possible to Hollywood. In the end, they find that it's possible the studios might have made about $60 million more under this simplistic scenario. They then point out that the MPAA's own budget is greater than that. We can quibble about the methodology, but assuming that the methodology stands up, it certainly raises significant questions about the true size of the "issue."

Filed Under: cost, file sharing, hollywood, piracy

NBC Universal Threatens Partners That They Need To Sign 'Grassroots' Support Of SOPA/PIPA Or It Might Have To Drop Them

from the this-is-getting-sad dept

We've talked about CreativeAmerica, the astroturfing group set up by the major Hollywood studios, pretending to be a "grassroots effort" in favor of SOPA & PIPA. A month ago, we challenged the group's claim that it had "sent 100,000 letters to Congress." Turns out that wasn't true. They had sent 4,191, and then about 33,000 people had "signed a petition" that the group had set up. The math by CreativeAmerica is that each thing sent out three letters: one to your Congressional Representative and one to each of your two Senators. Of course, petitions are mostly ignored. Letters have only slightly more weight -- and based on Creative America's own math, they really only had about 1,400 people sign their letter.

Either way, it seemed somewhat amusing to discover that some of the top execs at NBC Universal have been threatening all NBC Universal suppliers to sign the letter that CreativeAmerica put together or NBC might no longer be able to do business with them:

We are writing to ask you for help on an issue that is one our top business priorities – content theft on the Internet, which is a major threat to the strength of our business. Our major guilds and unions are joining us in the fight to keep our businesses strong so that the tidal wave of content theft does not kill jobs. But if the current trend continues, it’s not too strong to say that this threat could adversely affect our business relationship with you.

Grassroots effort? When NBC Universal's General Counsel, Rick Cotton -- who famously once claimed that piracy was destroying the lowly corn farmer, since people who watch pirated movies don't eat popcorn (or something) -- is threatening suppliers who don't sign on? That's not grassroots. That's just insane. Now, it's true that Cotton wrote this carefully such that you can read it to suggest it means that if this law doesn't pass, NBC Universal's business will be in so much trouble that it has to shut down or cut off deals with suppliers. But it seems pretty clear that the obvious implication is: sign this or we may no longer do business with you.

But, given that "the big guns" at NBC Universal are pushing all their suppliers to directly sign (or else!) the letter found at CreativeAmerica's site, you might think that a lot more people would have signed on. Especially over the last month, with SOPA making so much news. So we went and checked. It appears that 4,673 letters have been sent. A month ago it was 4,191. That's a grand total of 482 new letters sent since we last checked almost a month ago. That means in a month, with this story making major news every which way... and the major studios putting a lot of marketing muscle behind it and even threatening partners to sign on, they only rustled up 482 more signatures. And, since CreativeAmerica claims that each person who signs really sends 3 letters, we should divide that by three.

That gives us 161 new signatures (actually 160.666666 etc -- which makes me wonder what happened to that extra third of a person). 161. In a month.

Meanwhile, a real grassroots campaign turned out one million emails to Congress and 87,834 calls in one day. It should be clear at this point that the public clearly does not support SOPA/PIPA, and no amount of "faking it" is driving any public support.

Filed Under: astroturf, creative america, grassroots, hollywood, protect ip, rick cotton, studios
Companies: creativeamerica, nbc universal

Warner Bros., Right After Announcing Record Profits, Pleads Poverty In Asking People To Support 'Grassroots' Campaign For E-PARASITE Act

from the that's-chutzpah dept

It appears that the big Hollywood studios/MPAA have absolutely no shame. Thankfully, employees at some of those companies recognize just how ridiculous their employers look and have been passing along some details. On Wednesday, Warner Bros. announced third quarter profits (not revenue) of $822 million, representing a 57% increase on last year. Revenues were $7.07 billion, 11% higher than last year. The company sent out an email to employees talking about how it was "another record" quarter for the company. Then, very soon after that email went out, another email went out, telling employees about how difficult life was at Warner Bros. these days due to the scourge of "content theft," and urging people to support the astroturfing group CreativeAmerica.

In July, we informed you about the creation of and Warner Bros.’ involvement with Creative America, a grassroots coalition uniting the entertainment community and others against one of the biggest threats we face as an industry: content theft. Thank you to those of you who have already joined and supported Creative America. This is an important first step, but there’s still more we can do.

Thieves in the U.S. and abroad continue to make millions of dollars off our work, talents and creativity. For instance, “The Big Bang Theory” is one of the most popular targets of digital content thieves, with more than 600,000 illegal digital downloads thus far in 2011. Meanwhile, “The Hangover Part II” was illegally downloaded some 700,000 times in the first five months since its theatrical release.

Content theft doesn’t just affect a single show or film or even studio. It affects residual benefits, pension funds and health plans as well as jobs that our industry supports—whether directly or in ancillary markets and businesses. Therefore, it’s in all of our interests to stand behind Creative America.

I dunno. WB, if you've just made $822 million in profits alone, perhaps you could donate some of that to residuals? Ha Ha, who am I kidding? Movie studios never pay residuals. Remember, this is Warner Bros. And part of the reason it was so profitable this quarter was the latest Harry Potter movie. But last year, we got to analyze the accounting on an earlier Harry Potter movie, showing how Warner Bros. played with the numbers to take a movie that brought in $938 million and still let Warner Bros. claim a $167 million "loss," through highly questionable accounting, designed almost entirely to avoid paying royalties. The trick, of course, is to set up each movie as its own "corporation" that has to pay the parent studio "fees" for certain "services." You keep ratcheting up those fees, and the studio makes a ton, but the "company" that is the movie can always claim a loss to avoid paying royalties.

Honestly, if you know anything about the numbers, you'd know that Warner Bros. is a much larger threat to residuals and other things like health plans and jobs, than any file sharing by some kids who'd never pay to see the movie anyway. SOPA/E-PARASITE isn't going to help people in the business get paid. Execs, sure. But not everyone else. Not by a long shot.

Filed Under: astroturf, creative america, grassroots, hollywood, protect ip, studios
Companies: warner bros.