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The Gizmo Guy - Piracy Panic Attack

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By Gordon Meyer
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Hollywood’s PR machine is bemoaning the recent defeat of the anti-piracy bills that were pending in Congress thanks to the grass roots campaigns of online heavyweights like Google and Wikipedia.  There is no question that piracy is a serious issue that needs to be continuously addressed.  But, as many have pointed out, those bills were so draconian in the way they dealt with the issue that there would have been a lot of collateral damage caused legitimate businesses

Just with current laws and law enforcement attitudes, people are already getting hurt. For example, Lily is a filmmaker catering to a niche market of film buffs.  For our purposes, the specific type of material she produces is irrelevant.  What is important is that, until a few days ago, she used a site called Megaupload.com to securely host her finished productions so she could easily provide customers a download link when they made a purchase and so she could send the files to others she worked with if they were sharing the content.  Imagine her shock last week when she attempted to upload a file, only to find a government notice on the page, stating Megaupload and its affiliates had been seized by the Department of Justice due to piracy. “My account and those of many legitimate users are gone, just poof!”

The DOJ’s rationale for seizing the site was finding evidence that a number of people were using Megaupload as a convenient way to distribute bootlegged copyrighted material.  And no doubt, a portion of the site’s customers were either uploading or downloading unauthorized copies of movies and more.  But what about the millions of people who used sites like Megaupload for legitimate reasons, who no longer have access to their own copyrighted content?  For that matter, what about people who may have used that service to archive very personal files that are now being pored over by DOJ investigators – a violation of their privacy.

But let’s get back to the issue of piracy, shall we?  As I said, this is absolutely a legitimate concern for everyone who makes and markets content.  It’s also important that we be realistic about what’s out there and put the threat and the potential consequences in perspective.

There are two points I want to make. First, realistically, that no matter what digital rights technologies are developed and no matter what kind of draconian laws are introduced and enforced, people will always find ways of securing and distributing unauthorized copies of copyrighted content.  Secondly, the entertainment industry has a history of panicking and overstating the potential damage of new technologies they initially see as threats.

Back in the 1950s, as television got more and more of a foothold in homes, Hollywood execs cried that the glowing tube would destroy the motion picture industry by siphoning off audiences.  In time, they realized that television could not only be used as an effective marketing tool to promote movies (Walt Disney was an early master of this), it would also prove to be a valuable revenue stream as broadcast rights to movie packages became a lucrative business.

In the late 1970s, several studios notoriously sued Sony for the introduction of the Betamax VCR out of fear that, giving consumers the ability to record programs off the air was an industry-threatening violation of their copyrights.  Within a few years of the Supreme Court ruling against the studios, those very same studios discovered to their delight that the very technology they had portrayed as an industry killer was actually a significant source of new revenues.  Imagine!

Back in the early 1980s, I managed a video store directly across the street from Grauman’s Chinese.  At that time, pre-recorded videocassettes of studio movies routinely sold for as much as $100 (in 1980 dollars!).  The studios worked on the premise that since this was strictly a rental medium, so they needed to rack up as much revenue as they could up front with high sticker prices. Because of those high prices, people would often rent a movie so they could make an illegal dub for their own libraries by connecting a pair of VCRs.  Early copy protection technologies were easily circumvented with readily available black boxes.  

Studios made extravagant claims about how much money they were losing by piracy even then.  They erroneously based their projections on the premise that every illegal copy of a movie would have otherwise been purchased at full price when, even though only a small fraction of the people who obtained bootlegged copies would have actually purchased those titles at full price.

Then Paramount Home Video embarked on a bold experiment – to offer the hit movie, “Star Trek II: The Wrath of Khan” for the sell-through price of $39.99.  At that price, tapes flew out the door like nobody’s business. The experiment proved that when you offer a quality product at an attractive enough price, consumers will happily buy legitimate copies instead of going to the time, expense and hassle of bootlegging.

We're in a similar situation now.  The Internet and broadband offer new opportunities for studios to develop additional revenue streams, at the same time others choose to illegally distribute that same content.   To effectively address the issue of piracy, the studios would benefit greatly from finding out WHY people download movies and offer cost-effective, legitimate alternatives that are so inexpensive, easy to use and provide such high quality, that it’s simply not worth it for most consumers to put the time and energy into looking for illegal, unauthorized downloads. 

The more studio executives understand and effectively address the elements that motivate most people who download bootlegs, the better they will be able to dramatically reduce piracy without resorting to the kind of draconian measures that were represented in the SOPA and FIFO bills and that caused financial harm to people like Lily, whose online distribution resource was seized without warning.

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