Embrace the Future, or Perish

Something extraordinary has been happening this week. The film that Jamin Winans has been working on the last few years, Ink, was released and suddenly exploded all over BitTorrent: 400,000 downloads as of today, and counting. But that's not even the extraordinary bit—the filmmakers, independent filmmakers at that, aren't mad or resentful that hundreds of thousands of people are watching their film without their permission, for free... instead, they're ecstatic so many people are watching their movie.

I've been studying piracy with great interest over the last four years, and I've arrived at a few conclusions...

Counter-intuitively, the filmmakers behind INK have sold way more DVDs and ticket sales as a result of this "piracy". It's worth emphasizing that they haven't sold INK to a distributor and only built word of mouth by four-walling and promoting/selling DVDs through their web site (and from riding the publicity off their amazing short, Spin), so when their film got 150,000 views via BitTorrent in only 72 hours, this increased exposure could only have helped their film and company.

After carefully studying DVD piracy and BitTorrent file sharing, here's my own take on piracy:

1. It's morally wrong to copy or download music, movies, and software for anyone other than the person who purchased that product. I've always thought so and will always continue to think so. Piracy is like forcing a musician to busk against their will, and that's not what he agreed to.
   
2. It's currently impossible to stop the masses from engaging in piracy. If you stop them in the US, they'll do it elsewhere and now anyone can watch movies by going online. For example, right now, I can watch any movie I want—100% free—by going here: watch-movies-online.tv or surfthechannel.com. The quality can be bad sometimes, but if all I want is to see a film, then it's good enough for me.
   
3. Piracy is the market pushing back against too much control. Nobody would accept producers of furniture, automobiles, toys, or confectionaries to tell consumers how to use their product after it was purchased. Can you imagine selling me a car and then telling me not to hang dice from its rear view mirror? Yet that is exactly how producers act when you "share" an MP3 with a friend. In China, only 20 foreign movies are distributed every year—is it any wonder piracy is so rampant there? Wouldn't you resort to piracy if also presented with the same authoritarian control?
   
4. Piracy is usually about convenience, not cost. Consumers simply want to watch the film right now and they resort to piracy to get around any obstacles to that need. The obstacles are not often money, e.g., a movie is not out on DVD yet, or it's released overseas months before it's released domestically, or the duplicated DVDs are being given away for 25 cents, or for free.
   
5. Piracy does not necessarily equate to lost sales. In an information age where content can be infinitely duplicated without degradation, a pirated viewing is probably from a consumer who wasn't going to spend money on your product anyway. However, if they see/play/listen to your product, they might change their mind and buy your product, or tell their friends who might then buy your product.
   
6. For an unknown production company or film, piracy can be fantastic and inexpensive word of mouth. Sure, you can spend time and money trying to stop it, but you will ultimately fail and you just get frustrated and resentful in the process. Instead, it's much better to be happy someone is watching your film and—this is the key part—telling all their friends about it.
   
7. It is still possible to compete with piracy. Tap water is ubiquitous and free and the bottled water industry remains extremely profitable. Musician Trent Reznor gives away all his albums for free and still makes a ton of money around the unique ways he packages his music, e.g., selling a limited edition boxed set for $1500 (he made $1 million in less than 48 hours selling just those boxed sets).
   
8. The emerging business model (thanks to techdirt.com) to counter piracy seems to be:
   

   CwF + RtB = $$$

   
   This stands for Connect with Fans and give them a Reason to Buy. iTunes offers convenience at almost no cost, and that's a great reason to buy instead of resorting to piracy. Reznor goes out of his way to cultivate and reward his fan base... then he offers them options to buy scarce goods like physical merchandise that cannot be pirated.

In 1999, I thought that all music piracy should be prosecuted to the full extent of the law. However, over time, I've come to see (as have the heads at ABC and Disney) that piracy is an informal business model and, as such, it's a more efficient use of one's resources to simply compete with that model rather than trying to fight against it. Look at hulu.com and abc.com as choice examples of how big Hollywood producers are effectively competing with piracy.

For all these reasons, I'm not so worried about piracy as I once was. Yes, it is a financial risk for producers if not approached properly, but as long as producers keep in close contact with their fans and give them a good reason to buy by making a great product, piracy will just give producers great exposure (like INK) and end up adding more value to their product.

If you want to read one of the most lucid and insightful interview about piracy, check out this interview of Eric Garland, Big Champagne's CEO (thanks to Sheri Candler's tweet.). Garland points out:

I don't want to sound like the armchair pundit. You end up sounding not very empathetic. You sound like some ass who says "This is how it's going to be and if you don't like too bad." I'm not trying to be dismissive. I'm not trying to be glib about this. I understand the implication may well be tens-of-thousands of jobs lost, billions of dollars pouring out of the industry, shutterings, downsizings...I'm not trying to make light of that. I'm just telling you that in the final accounting i think some things we now know. Some of them are very unpopular even in concept and some of them are very hard to incorporate into strategic thinking, but that doesn't make them any less avoidable or inevitable.

Then later:

We'll spend some number of months—I'm just essentially recounting the music industry's journey—filing vast numbers of infringement notifications, letting everybody and their granny know you're infringing our content. They'll take the temperature and they'll do surveys and collect data and they'll try to convince themselves that this is having a real effect in reversing the tide and then after some period it will just not have been convincingly demonstrated to have worked. And they'll realize that by any number of measures the piracy problem has only grown worse. But they will have to exhaust all of those things and more. They will have to chase legal remedies, legislative agendas, all the way to what they view as being the end of the line before they say "OK, so this really is the landscape we're stuck with. As much as we didn't want it, this appears to be it. Now we have to just dive in and make businesses that work here."

As Seth Godin put it, "...how will this new business model support the world as we know it today? Who cares if it does? It is. It's happening. The world will change around it, because the world has no choice. I'm sorry if that's inconvenient, but it's true."