Fear and Loathing in Los Angeles

Over the past few months, the con­tro­versy over nap­ster has con­tin­ued to grow increas­ing fear among the music indus­try that it is becom­ing an endan­gered species. How­ever, this issue is not about music but about movies.

Yes, L.A. is start­ing to feel that it has now has to open war on a sec­ond front as its lead­ing indus­try is start­ing to get threat­ened by the Inter­net. The noise is nowhere near as strong as the one you can hear about music but as band­width con­tin­ues to increase, so does the risk of movies becom­ing widely exchange­able on the Inter­net. Napster-like tools Gnutella, Freenet and Scour Exchange are the new con­tenders to the title. Cou­pled with a new com­pres­sion for­mat called DivX (not the failed DVD for­mat but a new codec), this spells dis­as­ter for the movie indus­try. So let’s look at this chal­lenge and see what can be done to face it.

For starters, expect the movie indus­try to sue. It’s already hap­pen­ing and it will end up in fail­ure. Wit­ness the recent case over nap­ster. Sure the music indus­try won the right to even­tu­ally shut down nap­ster but it hasn’t yet man­aged to shut down sim­i­lar ser­vices. As a result, law­suits against dis­tri­b­u­tion of dig­i­tal media have become the equiv­a­lent of a giant game of whack-a-mole: take down one com­pany and a slew of oth­ers will pop up.

Actu­ally, the law­suits are only fur­ther­ing the prob­lem as they bring increased pub­lic­ity to the sub­jects and poten­tial users start flood­ing the new ser­vices in increased num­bers. Nap­ster, Gnutella, and Freenet were rel­a­tively fringe move­ments until the Nap­ster trial pro­pelled them to the front page, increas­ing each of those ser­vices mem­ber base an thus increas­ing the amount of pirated con­tent avail­able. Con­firm­ing the prin­ci­ples of Metcalfe’s Law, the value of those net­works increases expo­nen­tially for every new user that is in the net­work and is added to the net­work. Hence, law­suits are only mak­ing mat­ters worse.

The music indus­try may be try­ing to avoid the issue but it will not go away. In the case of the movie indus­try, it gets worth. In the cur­rent world, copies of recent movies are rel­a­tively dif­fi­cult to come by in most places. If you are in a city cen­ter like New York (where I live), you can get videos of recent releases on the street, taped by peo­ple who sneaked into the movie the­ater with a video cam­era. Gen­er­ally, the video and sound qual­ity of those second-hand pro­duc­tions is less than stel­lar and they are not worth the $5 they retail for.

How­ever, I’ve noticed that a new phe­nom­e­non is start­ing to spring up: peo­ple mak­ing dig­i­tal copies of movies with dig­i­tal video cam­eras. What sur­prised me more than any­thing on this par­tic­u­lar mat­ter was that some of the copies I’ve seen are not made off cam­eras pulled into a movie the­ater but off actu­ally pro­duc­tion reels. I was recently vis­it­ing a hacker friend of mine who recently showed me a com­plete copy of “The Art of War”, a new movie star­ring Wes­ley Snipes which is not going into wide release until… next week! When I asked him how he had acquired it, he told me that it was avail­able for down­load on IRC a cou­ple of weeks ear­lier. He then went on to explain to me the nomen­cla­ture for some of those files:

• wp usu­ally means workprint, or an exact copy from stu­dio orig­i­nal pro­duc­tion reels, as was the case of this movie.
• a screener is a movie that was taped in a movie the­ater with a video camera.

Gen­er­ally, the files are avail­able in a vari­ety of for­mats but there has been an increase in the use of DivX, a new for­mat that makes fairly com­pact high qual­ity video files (on aver­age, a 2 hours MPEG-encoded movie takes about 1 Gb of space, while the same movie in asf will run about 500 Mb. DivX film can offer the same qual­ity as MPEG for about 1/10th of the size (about 100 Mb per movie).

Of course, 100 Mb is not some­thing that you’re going to down­load with a reg­u­lar modem but on a cable modem or DSL line, it is some­thing you might con­sider. After all, if you can get a movie in less than a half-hour for free a few weeks before it is released in the movie the­ater, it becomes a very tempt­ing prospect.

Cou­pled with the increas­ing dis­tri­b­u­tion of P2P tools, this for­mat makes movie pirat­ing the next big Inter­net trend.

So how should the movie indus­try deal with this? Here are a few way to deal with it.

First, con­tin­u­ing the crack­down with law­suits against com­pa­nies will not work. How about start­ing to work with those com­pa­nies in terms of iden­ti­fy­ing poten­tial prob­lem area. If a new film pops up, alert the ser­vice imme­di­ately instead of suing them.

How­ever, if you are deal­ing with ser­vices like Gnutella and Freenet, you are not deal­ing with com­pa­nies. In order to alle­vi­ate some of that, spread the wealth: start pack­ag­ing com­plete clips of the film in some ad pack­ages and flood the net­works with them. In a way, this can become an extended 5–10 min­utes trailer. DirectTV already does that to some extent with their pay-per-view chan­nels: you get the first 5 min­utes of a movie for free but have to pay if you want to con­tinue watching.

The other thing to do is to cater to the fan base: seek out their input. Lis­ten to them and see what they would want. Maybe they do want to see the movies directly off the Inter­net. Offer that as a poten­tial option. Maybe a high speed web­site with tick­eted access to the site (let’s say $5–10 for a first run movie). That might alle­vi­ate part of the user base, which will only watch the movie once anyway.

Then start cut­ting deals with large ISP. In the case of AOL, it seems that WB could start offer­ing an extra “chan­nel” for an extra fee. Think of it as a pre­mium cable chan­nel. Imag­ine offer­ing a movie of the month pack­age as part of AOL Extra, a new ser­vice that would include high-speed access and offer a new movie on demand every month. Look at exper­i­ments like Inter­tainer, which intends to become a pre­mium ser­vice for Inter­net cable subscribers.

But deal­ing with the prob­lem online only does not solve it com­pletely. Pro­vide incen­tives to go to the the­ater, as you have done in the past with DVDs. Back in the 30s and 40s, movie the­aters use to offer car­toons (where do you think all that Looney Tunes came from) and news reels, all of which cre­ated the movie expe­ri­ence. Nowa­days, going to the movies feels more like going to a place with a very big TV: you end up with the same bor­ing con­ces­sion stand and the same theater-seats in pretty much every movie theater.

How­ever, if you see pic­tures of movie pre­mieres back in the pre-war era, you are treated to lav­ish (and almost out­ra­geous) movie houses that were as care­fully crafted as reg­u­lar the­aters. Back then, the indus­try was try­ing to cre­ate an expe­ri­ence. Now, it’s “here’s your ticket, the the­ater is this way, thanks for com­ing”: as a movie watcher, you feel like cat­tle, and the magic is gone.

Some of the big­ger the­aters are start­ing to get the idea, though. For exam­ple, one the­ater here in New York had dis­plays of “Titanic” arti­facts, when the movie by the same name came out. How about hav­ing some props dis­plays go along with a new release? How­ever, those would not be acces­si­ble until after you paid your ticket.

Other pos­si­bil­i­ties include give­aways (when “The Matrix” came out, they were giv­ing away comic books that included some extra back story) or con­tests (if you keep your ticket, you will be entered in a raf­fle to win a free trip to Hol­ly­wood or some of the props from the movie!). The win­ning ticket would have two codes: the first one would be the num­ber of the ticket. The sec­ond one would be a ran­dom list of num­bers and let­ters. Once a week, you would pub­lish the win­ning num­ber on your site. Peo­ple would check out the web­site (and see more ads for your movies) and if some­one had the win­ning num­ber, they would have to enter the sec­ond key from their ticket to con­firm that they have the win­ning ticket. At that point, they would have to enter some con­tact info and details on how to claim their prize. You would con­tact them to ver­ify that they really are hold­ing the ticket.

Cut out the prod­uct ads before the movie. I don’t mind see­ing movie trail­ers when I go to the movie the­ater (after all, they help me form an opin­ion as to what I want to see next) but do I really want to see ads for cars? Does any­one? They may be a great source of rev­enue for the movie the­ater but to be frank with you, the only impres­sion they make on me is that they are wast­ing my time. Maybe you can replace those 5 min­utes of ads with a “mak­ing of [include upcom­ing movie here]” fea­turette. This won’t cost you much more as you are already cre­at­ing those seg­ments for DVD and pre­mium cable chan­nels anyway.

Those may seem like silly ideas (but who knows, they may work), but they could become a start­ing point for new concepts.

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