Wednesday, April 02, 2008

The book's the thing

While looking over my the two and a half years of blogging about the film industry, it occurred to me that I write a lot about the form of digital entertainment, i.e., how digital content is delivered to consumers. For example, I was early to note how Netflix was developing downloadable movies through their site, how Universal was offering download-to-own DVDs, and how Steven Soderbergh tried to combat piracy by releasing his film Bubble in theatres and DVDs simulatenously.

A number of my readers have been after me to do a book, citing that many of my posts are entertaining and informative about the film business. Between my own projects and other work, I've thought about it. Indeed, a man cannot live on blog alone. Given my inordinate fascination about The Shape Of Things To Come for digital entertainment, a book about piracy in the entertainment industry seemed like the next natural step.

However, I've been testing the winds to see which direction I should set sail. Filmmakers in the mini DV world live in perpetual anxst, one foot in each camp: I'd like to get a sweet studio distribution deal, but will I fare better if I offer up my film for a $1 download? If I'm going to write a book on music and movie piracy, I have to figure out exactly how I feel about it, and why.

Over the last two months, I've started to see the entertainment industry in a different light. I used to get violently angry when I saw movies getting copied. "It's immoral and illegal!" I used to say. "Why does everyone keep doing it? Don't they know they're destroying the entertainment industry?"

However, after hearing about how pervasive piracy is in India, China, Brazil and Eastern Europe, I changed my mind about it... a lot.

The world has changed. People treat digital content much more differently than they would a car or a house. And digital content is different. You can't duplicate a car 1,000 times and give those duplicates away for free. So why are we applying the rules of car ownership to something so inherently different? The fact is, the world is deciding on its own how it wants to pay money for this new kind of object—we can steadfastly enforce our car ownership rules on it and watch people steal anyway, or we can listen to what the world is telling us and find a way to work within that framework.

Anyway, here's a section of the book I started writing, which will probably end up in the introduction somewhere:

Let's say you owned a shop selling pastries in a small town somewhere. Every morning at 8:00 sharp, you unlock the front door, turn off the alarm, get ready for business. Your doors open at 9:00 and you serve your customers as they come in. One pastry costs you $1 to make, and $5 to sell, leaving you with a nice revenue of $4. Kids in the neighborhood stare longingly at your yummy pastries through your shopfront window, and while you're busy serving customers, they might try palm a pastry or two without you seeing, but you almost always catch them. Once you've caught them, you might call the cops and have them prosecuted, or you might dismiss it as a harmless nuisance. At 5:00 that evening, you close your doors, turn on your alarm, and go home. This is perfectly sensible approach to doing business and making a living. In fact, you could do this your whole life, and even teach your children to do it, if they wanted to. There is enough profit in it to allow your business to continue well into the future.

Now let's say your shop selling pastries suddenly had some alterations to it, some real and some magical. Let's imagine that anyone could buy one of your pastries and duplicate it perfectly... which they gleefully do, and pass along these duplications to everyone they know. Additionally, your shop now has no windows so anyone can lean in and take a pastry from your storefront before you even know what's happened. Your business still has an alarm, but now it has a 24 hour delay before going off so by the time the cops come, the thieves would be long gone. On top of that, everyone in this small town is constantly awake so you can't possibly stand guard all day long to ward off thieves. Even if you could successfully jail all the offenders, the local jail is nowhere near large enough to hold all the offenders. Worst of all, many of the thieves don't think what they're doing is fundamentally wrong; for years, they've been grumbling that $5 per pastry is really too high a price to pay, and they're finally "balancing the scales" by taking back what is owed them. Your revenues plummet, and you shout at anyone who will listen, how could everything have become so unfair to your once idyllic lifestyle?

This is the state of the movie industry now. Where once a small town business thrived under the buying and selling of the commodity business model, it now exists in a different game with different rules. The Old Pastry Shop existed under a capitalist framework derived from an Industrial Age, and the New Pastry Shop functions within a new economic model forged from the Information Age.

As with all evolutionary processes, only the animals who adapt to their new environment will thrive, while the others clinging to their old traditions will starve over time and, with venomous hissing, eventually self-extinguish. When DVDs are priced at $35 and CDs are priced at $20, movie and music producers have only themselves to blame for seeing their customers rationalize pastry theft.

Our world is smack in the middle of a war over how to most effectively monetize the distribution of digital content. We've already seen some successful business models emerge, but only time will tell if these new approaches have any stamina. In a global market of the Information Age where digital content is no longer bought and sold under the old storefront paradigm, piracy is the genie that won't go back in the bottle. Thus, the question movie and music producers—and even software developers—must ask themselves now is, how do we make money off this new model?

Because the alternative is death by a thousand cuts.

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