Tuesday, June 28, 2005

Hollywood and digital piracy ... Last night Kevin Drum took up the digital piracy issue:
As bandwidth increases, DVD technology improves, and software becomes as easy to use as a toaster, every piece of digital content on the planet will be available within minutes. It's possible that the movie industry could survive for a while based on the dwindling band of old farts who like to sit in theaters, but that's about it. Unless a movie has enough cross-promotional potential to make the production worthwhile all by itself, it will be impossible to make any money in the movie industry. Ditto for music.

As on point as Kevin typically is, I think he misses a key distinction here between movie production and movie distribution.

The demand for movie production has always held fairly constant: people enjoy being entertained. That said, there's only so many times you can watch Spiderman before it stops being entertaining. So if no new movies were made for, say, a year, by the end of that year people would be quite willing to dish out cash for new content. How exactly they'd make that payment -- watch ads, buy a dvd 'bond', etc -- is open to debate. But the point is the demand for the production of movies will always be there.

Not so, however, for distribution. Currently an enormous chunk of a movie's full expense is tied up in marketing and distribution costs. I don't know the exact figures off the top of my head, but it's at least half the price of a ticket. What a digital platform is going to do is drive down the price of that half-ticket. As with the music industry, file sharing programs will match producer and consumer directly and largely bypass the traditional distribution points in between.

The people crowing the most about digital piracy are the theatre chains and major studeos, each of whom have significant stakes in the distribution process. But what they're really concerned about is not the piracy per se so much as, again, the platform. They dominate the way films are currently distributed, so this represents a huge potentially huge loss of revenue for them. But the all important fact here is that revenue gained from film distribution does not finance subsequent movies.

So there's no way I'm shedding tears for those guys. They're trying to say Hollywood will disappear when the truth is only they will. Technology is radically altering how their business; they need to deal with it the same as everybody else.


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