Digital News, Congress, downloads, Hollywood, innovation, Internet, music industry, online piracy, Sopa, You Tube — January 8, 2012 12:02 — 0 Comments
Sopa: why it must not pass, at any cost
Will the Stop Online Piracy Act (Sopa) Act signal the end of the internet as we know it? The US Congress tried to finalize the bill before Christmas for a vote early this year. But fierce opposition – much of it online – has put it on hold. It’s yet another kneejerk response of the ’content’ industry to change that will stifle innovation. Here,Steve Banks looks at the movie industry and its inability to innovate
● Further reading: Sopa and Pipa: don’t let big business break the internet
But the total movie industry revenue was $87 billion. Where did the other $57 billion come from?
From sources that the studios at one time claimed would put them out of business:
The Movie Industry and Technology Progress
The music and movie business has been consistently wrong in its claims that new platforms and channels would be the end of its businesses. In each case, the new technology produced a new market far larger than the impact it had on the existing market.
- 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 (VCR’s) were going to be the end of the movie business. The movie businesses 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 consumer to skip commercials was going to be the end of the TV business. DVR’s reignite interest in TV.
- 2006 - broadcasters sued Cablevision (and lost) to prevent the launch of a
cloud-basedDVR to its customers.
- Today it’s the Internet that’s going to put the studios out of business. Sound familiar?
The movie industry was born with a single technical standard – 35mm film, and for decades had a single way to distribute its content – movie theaters (which until 1948 the studios owned.) It was 75 years until studios had to deal with technology changing their platform and distribution channel. And when it happened (cable, VCR’s, DVD’s, DVR’s, the Internet,) it was a relentless onslaught. The studios responded by trying to shut down the new technology and/or distribution channels through legislation and the courts.
But why does the movie business think their solution is in Washington and legislation? History and success.
In the 1920’s individual states were beginning to censor movies and the federal government was threatening to do so as well. The studios set up their own self censorship and rating system keeping most sex and politics off the screen for 40 years. Never again wanting to be at the losing side of a political battle they created the movie industry’s lobbying arm, MPAA.
By the 1960’s, the MPPA achieved regulatory capture (where an industry
Management of Innovation
The introduction of new technology is always disruptive to existing markets, particularly to content/copyright owners whose sell through
In an industry facing constant technology shifts the exec staff and boards of the studios have lawyers, MBAs and financial managers, but no management skill in dealing with disruption. So they rely on lobbying ($110 million a year,) lawsuits, campaign contributions (wonder why the President won’t be vetoing SOPA?) and Public Relations.
Ironically, the six major movie studios have a great technology lab in Silicon Valley with projects in streaming rights, Video On Demand, Ultraviolet, etc. But lacking the support from the studio CEOs or boards, the lab languishes in the backwaters of the studios’ strategy. Instead of leading with new technology, the studios lead with litigation, legislation and lobbying. (Imagine if the $110 million/year spent on lobbying went to disruptive innovation.)
One of the claims that studios make is that they need legislation to stop piracy. The fact is piracy is rampant in all forms of commerce. Video games and software have been targets since their inception. Grocery and retail stores euphemistically call it shrinkage. Credit card companies call it fraud. But none use regulation as often as the movie studios to solve a business problem. And none are so willing to do collateral damage to other innovative industries (VCRs, DVRs, cloud storage and now the Internet itself.)
The studios don’t even pretend that this legislation benefits consumers. It’s all about protecting
The SOPA bill (and DNS blocking) is what happens when someone with the title of
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.
The U.S. State Department has been championing the Internet Freedom initiative across the world. Secretary of State Clinton said, “…when ideas are blocked, information deleted, conversations stifled, and people constrained in their choices, the Internet is diminished for all of us.”
We wonder, “Why can’t the film industry innovate like Silicon Valley?”
- Studios are run by financial managers who lack the skills to exploit disruptive innovation
anti-piracy/copyright lawyers trump their technologists
- Studios have no concern about collateral damage as long as it optimizes their revenue
- Studios $110M/year lobbying and political donations trump consumer objections
- Politicians votes will follow the money unless it will cost them an election
●This article appeared in steveblank.com and is published here with the author’s permission