At the end of May, the New Yorker hosted a panel discussion called “The Future of Filmmaking.” At that panel, Michael Lynton, Chairman and CEO of Sony Pictures Entertainment, made the following comment (paraphrased version from Wikipedia):
“I’m a guy who doesn’t see anything good having come from the Internet, period. [The internet has] created this notion that anyone can have whatever they want at any given time. It’s as if the stores on Madison Avenue were open 24 hours a day. They feel entitled. They say, ‘Give it to me now,’ and if you don’t give it to them for free, they’ll steal it.â€
This statement was like a shot across the bow of the blogosphere and incited ridicule, derision, and a general uproar. In many cases, though, the response was one of incredulity that a CEO of a major content company doesn’t see the bigger picture and cannot see the absolutely amazing advances the Internet have made possible.
Mr. Lynton responded by writing an article for the Huffington Post. He expanded on his comment saying that the Internet has spawned nothing but piracy and has had a massive impact on “legitimate” business and threatened a number of industries including music, newspapers, books, and movies. He goes on to say that the Internet should be regulated, much like how the Interstate Highway System was regulated when it was built in the 1950’s.
The problem with his response is that he overlooks the reason behind much of the piracy, as well as making a flawed comparison of the Internet to a highway system. This is a gentleman who was formerly the CEO of America Online, one of the first Internet providers. Having been at the forefront of the Internet revolution, I would have expected more from him, but apparently not.
At the moment, he’s the head of a major media organization that makes their money by creating content that the viewers pay for. For many years the movie industry has created content and released it in a controlled fashion, first to the theatre, then to VHS/DVD, and finally to cable television stations. Each phase of the release cycle opened up a new revenue stream for the movie companies, allowing them a continuous source of income. One of Mr. Lynton’s chief complaints is that the Internet has broken this business model. His belief is that people are no longer willing to wait for content and are willing to break the law to get their content.
In a way, he’s right. The Internet has allowed this. Of course, this is the price of advancement. Guns allowed murderers and robbers to threaten and kill more people. Cars allowed robbers to escape the scene of the crime faster, making it more difficult for the police to chase them. Telephones have made fraud and deception easy and difficult to trace. Every advancement in technology has both positive and negative effects.
As new technology is used and as people become more comfortable with it, the benefits generally start to outweigh the drawbacks. Because the Internet is having a global effect, it has shaken up a number of industries. Those industries that are not willing to change and adapt will die, much like the industries of old. When cars were invented, the horse and buggie industry did what they could to make owning a car difficult. In the end, they failed, and went out of business. When movies were invented, the theater companies protested and tried to stop movies. In the end, movies mostly killed off theaters. Of course, in both instances, traces remain.
The Internet is forcing changes all over. For instance, users are finding their news online through social media such as blogs, email, and more. Newspapers have been slow to provide online content and are suffering. Because of the instant nature of the Internet, users are more likely to find their news online, rather than wait for the newspaper to be printed and delivered to their home.
Users want more content in an instant manner, and the industries need to adapt to the new climate. Media companies have not adapted quickly enough and users have found alternate methods of providing the content that people want, often leading to piracy. And this, I think, is the crux of the problem. If the content is available in a quick and easy manner, people will be more likely to obtain it legally. But it has to be provided in a reasonable manner.
Media companies have decided to provide content, with restrictions. They claim the restrictions are there to prevent piracy and protect their so-called intellectual property, but if you look closely, the restrictions always mean that they make more money. Music and movie companies add DRM to their content, restricting its use and, in many cases, causing numerous interoperability problems. Content is provided via the company, but if the company vanishes, so does the content you paid for. In many instances, the company holds the key to whether or not you can view or listen to your content, and if the company disappears, so do the keys.
When movies were provided on VHS, and music was on tapes and CDs, people were able to freely copy them. There was piracy back then, too. But the overall effect on the industry was nil. Now, with the advent of the Internet, distribution is easier. What’s interesting to note, however, is that distribution (both legal and illegal) increases awareness. X-Men, the pirated movie that Mr. Lynton mentions in his article, still opened with massive revenues. Why? The pirating of the movie was big news as the FBI was brought in and as the movie company ranted and raved. As a result, interest in the movie grew resulting in a big opening weekend.
It doesn’t always have to be that way, though. Every day, I hear about interesting and new things via the Internet. I have discovered new music, movies, books, and more. I have payed for content I received free over the Internet, purely to give back to the creators. In some cases there is an additional benefit to buying the content, but in others, it’s a desire to own a copy. For example, a number of stories by Cory Doctorow were re-imagined as comics. You can freely download the comic online, which I did. At the same time, I’m a fan and I wanted to own a copy of the comic, so I went and purchased a copy. I’ve done the same with books, music, and movies. All things I learned about through the Internet.
In the end, industries must evolve or die. There are many, many companies out there who “get it.” Look at Valve and their Steam service. How about Netflix and their streaming video content. How about the numerous music services such as iTunes. It is possible to evolve and live. The trick is to know when you have to. Maybe it’s time for Mr. Lynton to find a new business model.
This is an amazing blog post; excellently crafted! Thank you for posting it!
Glad you enjoyed it. It’s going to be interesting to watch what the media industries do over the next 2 years. I think we’ve finally hit a tipping point where they’ll either need to evolve or die. I fully expect that a lot of these companies will make major missteps and seriously hurt, if not destroy, themselves. Those that come out will likely be set for a long time.
I’d hope that this serves as a mechanism for some smaller players to grow and possibly oust the existing leaders, but I’m not going to hold my breath.
“What’s interesting to note, however, is that distribution (both legal and illegal) increases awareness. X-Men, the pirated movie that Mr. Lynton mentions in his article, still opened with massive revenues. Why? The pirating of the movie was big news as the FBI was brought in and as the movie company ranted and raved. As a result, interest in the movie grew resulting in a big opening weekend.”
I think this is the place where your argument breaks down. Aside from your own anecdotal experience, you provide no other information that suggests a link between piracy and increased popularity. As the old “Pirates vs. Global Temperature” graph illustrates, correlation (even were you to show it) does not imply causation. It could be that X-Men opened big because of a massive advertisment campaign across all medias. (Using Occams Razor, which do you find more likely — that X-Men opened big because a few thousand nerds stopped playing WoW long enough to torrent it, or because the studio spent the monthly budget of a small country promoting it?) It could be because of reviews. It could be some combination of factors that we don’t have any data on. It could even be piracy — but again, you need to do more than point and one and point at the other and say “See?”
To turn the anecdote the other way, I know that personally, in the distant past, I rarely purchased things that I downloaded for free — nor did anyone else that I knew. Why would I? It’s right there on my computer. I can burn it to a CD. Who pays for things they already have acquired at no cost? You take any widget of price X and make it available in infinite quantities for free with no strings attached (and no consequences for accepting the offer), the number of people willing to pay price X for the widget will decrease. Because they’re all getting it for free. You might find a handful of people willing to toss a few nickels at someone out of pity or a sense of moral duty, but for the most part most people are too selfish to just hand money to people for no reason. If cars were magically free tomorrow and delivered over the internet, you’d probably download as many Lamborghinis as would fit in your garage. And Lamborghini would go out of business. It’s highly doubtful you’d pay them $4,000 a month for the next few years out of the goodness of your heart.
The internet is an awesome thing, but America is a country that mostly exports intellectual property. It does not bode well (at least for Americans) that the value of IP is becoming more and more unstable and dilluted, to the point that for some industries (newspapers, magazines, music, etc.), it’s approching a point that it no longer even pays the bills, let alone makes a profit.
You make a good point, correlation != causation. It’s a mistake that many of us make. Perhaps I used the wrong wording here. There seems to be an implied relationship between bad press and increased interest. Sure, there is a good bit of up-front marketing, but bad press seems to pull people in more often. I can’t name the number of times I’ve looked into something because of the bad press it received, when I wouldn’t otherwise waste my time.
Offering things for free, with no consequences, and offering them for free, if you don’t get caught, are two separate things. I’m not suggesting that movies, music, etc. should be offered for free, but that the current models for offering them at all are broken. With the Internet came new avenues for obtaining “stuff” that one wanted. If “stuff” wasn’t available, it was up to some enterprising person to make it available. Unfortunately, that sometimes meant piracy and other illegal activity. However, other that have embraced the Internet as a means of selling “stuff” have seen increased profits.
Look at the model for the independent game developer. Pre-Internet, the revenue they could expect was pretty slim since there were limited means of advertising and spreading the word. Since the advent of the Internet, the independent developer market has blossomed and there are quite a few developers who can make a decent living doing what they love. And that includes those who suffer from piracy.
There are those that will always pirate, always steal, etc. And then there are those of us who truly want to pay for what they receive, but are sometimes stymied by the system. I enjoy listening to music on my MP3 player, but when my options for purchasing music are limited to vendors the employ draconian DRM, I can no longer use my MP3 player the way I want to. For example, most of the music (and audio books) that I own are in .ogg format. I use this format because it’s lightweight, open, and it works for me. However, when I get my audio books, they are DRM’ed and locked to a specific device. As a result, I have to waste time re-sampling them so I can use them on my device. I’m willing to take the time to do this, but others are not, and so they look elsewhere for what they want. Often this ends up being torrent sites.
I’m more than happy to pay for what I use/play/etc. But I will not be forced to vendor lock-in. Look what happened with the Zune (http://is.gd/1awv1). Buy your music, play it, enjoy it. Oh no, the Zune marketplace no longer offers that album. Oh well, guess you can’t get that music anymore, even though you already paid for it..
Vendors need to evolve. They need to modify the way they do business. There’s plenty of business out there, you just need to find a way to meet the demand.
As an aside.. Nice site you have, those are some incredible pictures. :)