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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