The Motion Picture Association commissioned LEK (a strategy and consulting firm) to conduct a study on worldwide digital piracy, the results of which were distributed in 2005. The most startling statement to come out of this study is that piracy is the largest threat to the continuity of the motion picture industry. Thinking about the Digital Millenium Copyright Act's anticircumvention provisions put in place through technological protection measures on, for example, DVD's or legally purchased online media, I find it hard to believe that piracy could take down a global industry. The slowness of Hollywood to adopt and embrace new technologies within the realm of online film distribution appears to be the biggest hindrance to the success of the motion picture industry. This lack of innovation has led to many unforseen consequences to consumers, technology firms, and academic research. Through the increased copyright protections put in place by the DMCA, Hollywood is fighting the wrong fight. I hope to identify the current slate of consumer online film options, discuss why innovation is so critical to this issue, the reasons as to why Hollywood is taking so long, and suggestions for moving forward.

Author Fred von Lohmann discusses the role of the 'gatekepers' (such as exhibitors, insurers, distributors, and broadcasters) when filmmakers may have to clear copyright uses in their own works. While fair use is supposed to protect the transformative uses of copyrighted materials, many gatekeepers and large broadcasters and studios are failing to honor the principles of fair use. Instead, we are seeing more of what von Lohmann calls a 'clearance culture' in which full expression is stifled at the hands of media gatekeepers. The content controllers are requiring clearances for every instance of copyrighted material in films, even if it falls under fair use. This is causing many films either to be abondoned during production or distribution or for filmmakers budgets to be severely drained by obtaining clearances. In terms of relevance to my own project, the role of the gatekeepers helps to explain why the full potential of online film distribution has not yet been explored. Although this article focuses mostly on fair use and copyright clearance, when I read this article it made perfect sense why some directors (such as the more established Edward Burns or the newcomer Madonna) reject the traditional distribution system for many different reasons, and choose to distribute through online platforms such as iTunes.

The rise of internet distribution offers new outlets for filmmakers who can not afford the traditional methods of distribution. von Lohmann identifies two distribution options: video hosting sites such as YouTube or Yahoo Video that can get your film to an audience for free and immediately, as well as by purchasing bandwidth from an ISP and running your film online via a filmmakers' own server.

Internet gatekeepers such as a YouTube or an ISP are more lax than traditional ones due to the safe harbor provisions of the DMCA. In the case of online video content sites, they use a 'notice and takedown' policy to enforce copyright infringement violations. In order for a video hosting site to be free from monetary damages incurred through a copyright infringing video posted by a site user, the host must issue notice to the user that the content requires them to takedown their video, followed by a 'counternotice' option for the user's benefit in the event that a user wants to challenge the takedown. So long as the site removes the copyrighted content in a timely manner and follows this procedure, they will remain exempt from prosecution.

If a filmmaker decides to host his own video by buying a service from an ISP, a similar safe harbor under the DMCA protects the ISP's from any possibly copyright lawsuit. Under this provision, ISP's are not required to follow the 'notice and takedown, counternotice' steps as outlined above. They are viewed as only the 'pipe' in providing access, not an entity that can enforce the content present on computers owned by others and therefore out of its control. As in video content sites, ISP's do not act as middlemen in any copyright lawsuits, therefore leaving the filmmakers or other users to work out their own disputes with copyright owners directly. 

von Lohmann argues that these new distribution tools represent a new creative freedom or at least, should ensure new creative freedoms in the future. Under these new options, filmmakers' work can reach the proper audiences first - unlike in traditional media distribution in which work must pass through insurers and lawyers first.

The Motion Picture Association asked L.E.K., an international strategy consulting firm, to conduct a study on the financial losses incurred by the film industry due to piracy. The MPA (the international version of the MPAA) is comprised of seven major Hollywood studios - Buena Vista Pictures Distribution, Metro-Goldwyn Mayer Studios Inc., Paramount Pictures, Sony Pictures Entertainment Inc., Twentieth Century Fox Film Corp., Universal Studios LLP, and Warner Bros. Entertainment Inc.

The overall major statement expressed in the report is that 'piracy is the biggest threat to the US motion picture industry.' I disagree - I believe that lack of innovation is the biggest threat. The results of this report will provide the framework for my own thesis, which is to argue against the idea that piracy will take down the motion picture industry.  The lack of consumer choices and convenience leads to piracy.  This report appears to be pointing fingers in the wrong direction.  Throughout history, Hollywood has been very slow to adopt new technologies - whether they were beneficial to consumers or not. With as much risk as Hollywood deals with daily, any slight change can severely hamper the bottom line. One one hand I can understand their hesitancy, but not their focus solely on fighting piracy. The results of this study will form the backbone for my own research.

In 2004, the MPA appointed L.E.K. to spearhead the study not only to determine financial losses on a global scale, but also to pinpoint the demographics of the typical pirate.

Three major areas that the report focuses on:

-losses due to both 'internet and hard goods piracy'.

-analysis of the cost of piracy as it affects not only the domestic industry, but worldwide as well

-typical pirate profile

Internet piracy is defined in the report as movie goods downloaded from the internet or obtained from a personal source who had downloaded from the internet. Hard goods piracy, meanwhile, takes place in real space - a consumer either purchases a bootleg copy via a commerical source or obtains a copy from a personal source.

An $18.2 billion worldwide loss to piracy was reported. This figure indicates losses to the studios, foreign and domestic producers, distributors, theaters, video stores, and pay-per-view handlers. The MPA studios alone lost $6.1 billion. 80 percent of these losses are a result of overseas piracy. 62 percent represent hard goods losses, while only 38 percent are from the internet. Only seven percent of all digital piracy occurs in the US.

China, Russia, and Thailand represent the top three countries engaging in the most digital piracy (90% China, 79% in both Russia and Thailand). According to the report, piracy rates are determined from 'MPA member company legitimate revenue plus estimated revenue lost to piracy in each market. They are a static snapshot of the percentage of the potential market that is lost due to piracy' (page 6). In other words, the preparers of this report did not take into account any possible market growth if piracy did not exist.

The report also states that the typical snapshot of a digital pirate is male, aged 16-24, and resides in an urban environment.

The countries where the most potential revenue lost is highest are Mexico, the UK, and France. These mature markets ensure higher amounts of revenue compared to still-developing markets like China and Russia. In China's case, the country only allows the theatrical release of 20 non-Chinese films per year, therefore the amount that US studios make there is small compared to the free markets of Mexico, the UK, and France.

This is a February 2008 memo to Time Warner employees from CEO Jeff Bewkes - a kind of 'state of the union'. In it, he openly states the need for their business to rapidly innovate their digital distribution. I found this memo very insightful in regards to my project because it's really interesting to get a glimpse into what is going on inside the head of the big corporations - do they want to innovate? Where do their current priorities lie? I can't speak about the major studios and conglomerates without some kind of idea of the current culture.

Bewkes notes that they either met or exceeded all of the financial projections for 2007 - stating that they have a solid financial foundation. With this stability in an unsure economic time, Bewkes asserts that it is time to move forward. What I found interesting in his memo was that he discusses the need for exploring more online digital distribution options not for the benefit of its consumers, but its shareholders. Maybe I'm naive - obviously a business has to make money and please its owners, however I would think that customer satisfaction (or at least a little appeasement) would play into the idea of moving forward and seizing new technological opportunities.  Bewkes assures that their company already has the means to create a digital entertainment environment for consumers who can watch what they want in pretty much any way desirable.  Why now choose to move ahead if this has been the case for some time?   Bewkes ends his memo by advising they stay 'ahead of the curve' and think like entrepreneurs.  After reading through some literature on organizational innovation, this is curious.  The memo discusses the restructuring of AOL and the possibility of rethinking their stake in Time Warner cable.  At this level, you have to keep very tight control over all areas of your company, especially when you run different types of companies.   This kind of organization can lead to rigidity which can be a serious hindrance to innovation.   I'm interested to see how this memo influences the company (or doesn't) over the next year or two. 

This article is important to my research as it identifies the adverse effects the DMCA has had on technology industries, consumers, and scientific and academic research. My thesis aims to discuss how the Motion Picture Association labels piracy as the biggest threat to the motion picture industry and how that thinking can be seen as short-sighted and incorrect. Lack of innovation caused by technology protection measures under the DMCA is the biggest threat. This article really spells out what the DMCA has unintentionally done and will help me make my point in regards to illustrating how anti-piracy or anticircumvention measures are only fairly effective, and don't address the real problems that the MPA faces.

Author Timothy B. Lee opens the article with a quote from Robert Frost: "good fences make good neighbors" (2). It's pretty safe to say that fences are effective in establishing and maintaining private property rights. In this scenario, digital rights management, the technical measures placed on digital media such as CD's and DVD's, are the fences of intellectual property and copyright. DRM provides content owners a strict level of control not previously available under copyright law - control that hinders the creativity and free thinking that tech firms employ in order to revolutionize and expand their products. The article discusses how plenty of new technologies have allowed customers to purchase and view media in brand new ways, ways that the film studios don't always immediately condone. In the past, Hollywood has been very hesitant towards new technologies, from cable, to the VCR, to DVD's and now the internet.

In discussing the fight against piracy, the author identifies three significant actions that Hollywood and the recording industry take (or have taken) to deter and reduce the act: lawsuits, PR campaigns, and digital rights managment technology. These actions may keep someone who is not technologically informed from committing piracy, but for the most part these solutions have done little to help in the fight.

The DMCA's anticircumvention provisions have created many problems, including the unhealthy corporate misuse of the DMCA in trying to destroy competition.  Not only are competitive tech firms brushed aside under this act, but academic research has been stymied (again, by corporate bullies who don't want product flaws and misrepresentations to go public).  Under the DMCA, too much power is put in the wrong hands, hands that want only to protect their 'property' and possible financial revenues.

 

This article discusses the potential future of Hollywood if it would open its arms and embrace the internet as a legitimate ancillary market. Fears of piracy leading to the death of America's film idustry pervade the thoughts of major film studios, leading them to very slowly and cautiously adopt the internet, unlike television which has been much more open to the possibilities of the medium.  I happened to read this article earlier in the semester and it was the spark that led me to pursue online film distribution in general as my research topic.  The article focuses heavily on the current distribution options that are available to filmmakers and consumers.  This information provides me with an efficient base in looking at what is available to filmmakers and consumers now, legally vs. illegally, and ideas as to why Hollywood has been slow to act.  

The article suggests that in order for money to be made, more choices need to be available to consumers. FilmOn.com and MovieFlix are two of the currently available options, however the former fails to carry a number of popular titles, while the latter focuses on true independents, straight-to-video, and student productions. Great for niche audiences but certainly not good for studios. Speaking of studios, Movielink, another distribution portal formed by studios with approximately $150million in start-up money, was recently sold to Blockbuster for only about $20million - this doesn't exactly bode well for proponents of online video opportunities.

Apple's iTunes is another option. At the time of this article's writing, Apple was allowed by all six studios to distribute, but only via a rental agreement, offering no download-to-buy options. If download-to-buy options were to be allowed, the writer contends that sales would be sufficient enough to show studios the internet's potential, which in turn would hopefully make Hollywood more comfortable with this new distribution tool.

The article hypothesizes on why Hollywood is so slow to act: the industry takes major financial risks daily. Any changes to its existing business model would indicate taking even bigger risk. Another reason relates to the values of Hollywood business as it's based on recognition of films, not necessarily on growth. Also, DVD's are still very much big business - a money maker that studios don't want to tamper with.

An important fact noted by the author is that Hollywood has always been slow to acknowledge new technologies, from cable to the VCR to VHS, even to DVD's. Adopting the internet whole-heartedly will also allow studios to maximize their vast film libraries, considering that most store retailers do not have enough shelf space to stock all that's available (or could be available). If you make more content available for DVD, effectively selling more films, they can be more affordably priced. This effect on pricing could help deter piracy substantially.

Other obstacles mentioned include the popular consumer preference to view movies on their t.v. screens, not computer screens, as well as the lack of common standards between websites and devices which enable the downloading of content from the internet to then be viewed on your t.v.

Besides having to change their business model, Hollywood's exclusive 'windows' practice, a system that follows a film from theatrical release to on-demand, to DVD, to online for example, would be in jeopardy. Hollywood is quite fixed to this system; though the overall time of different windows has shortened considerably, it doesn't seem that the studios are interested in abandoning this process any time soon.

An interesting question raised by the author is that Hollywood certainly knows and enjoys using the internet to market its films - why not sell them there as well?

Fisher proposes three ways in which the recording and film industries can be reshaped, two of which involve changes to the current copyright system. Proposal number one asks that studios and recording companies stop looking at copyright as property. Fisher believes that a limiting of copyright protections would offer more selection and decrease piracy. The second idea is to treat entertainment industries as public utilities, placing a large amount of governmental control over them. Again, more selection and competitive pricing would lead to less piracy. The third proposal suggests a complete overhaul of the current copyright system - content owners will be given a unique identifier for each piece of protected material. A government agency will be set up to track each ID and see how often it is downloaded, watched, remixed, etc. A copyright tax would be implemented to pay for said agency and monies from this tax would be distributed to content owners based on a scale determined by the agency when analyzing the 'performance' of content.

The latter two of Fisher's suggestions call for heavy governmental controls over creative industries. The intersection of business and art has frequently encountered issues. This book is worth looking at for my project in that I am also proposing at least one alternative for the film industry in order to accomodate customers and at least deter piracy. Although I do not advocate Fisher's ideas of bringing the government into it, his thinking out of the box is quite innovative and interesting to think about when thinking about my own research.

This is a textbook used for courses taught in the Wharton School, specifically for courses that deal with the management of technology and innovation (MGMT 237 in particular). I was referred to this text by Dr. William Hamilton who is the founder of the Jerome Fisher Program in Management & Technology - an undergraduate dual-degree program with Wharton and SEAS. After discussing my research topic with Dr. Hamilton, he referred me to Chapter 10 of this text as a starting point in researching more on the organizational methods companies take when innovation is such an important factor in their business. Professor Hamilton notes that even though the cases discussed within the text do not specifically reference the Hollywood film industry, the chapter will help immensely in learning more about what drives companies towards or away from innovation. The text also has some wonderful further reading suggestions.

Chapter 10 focuses on structures within a firm that can lead to implementing an innovation strategy. By looking at research on different corporate structural dimensions in relation to firm size like formalization, standardization, and centralization, one can understand how these affect a company's propensity towards innovation. The size of an organization can greatly influence the possibilities for innovation. It has been argued that smaller organizations are less rigid in their procedures and are more into fostering research, experimentation, and creativity. The other side of that argument is that as long as a large entity is organized efficiently and employs practices that are well-thought-out, development opportunities are also very likely to be implemented effectively.

The three structural dimensions noted above are the three factors most associated with affecting a firm's inclination towards innovation, as well as its possible success. Formalization involves rules, protocols, and the written communications that are used to help shape individual or group conduct within the company. Formalization has often acted as a way to manage, especially when you have less managers. The problem here is that when you have too much formalization it can lead to rigidity within the company and it's working community. Standardization involves uniformity, and how the company's standards, day-to-day operations, projects, etc. are performed in a consistent manner. In the same way that formalization can cause rigidity, so can standardization represent a significant roadblock towards adopting innovating practices. Centralization is how much decision-making capabilities are kept at the uppermost levels of management, while decentralization refers to the lower levels of a company and the amount of decision-making that is made at this level.  This concept is often looked at in a geographical sense - firm activities can either be held in a central location, in this case, at company headquarters, or a decentralized location far away from headquarters.  These two concepts can not determine a propensity towards innovation in a cut and dry sense; they both have positive and negative affects on the possibilites for innovation.

Organizational structures have been divided into two traditional categories by scholars:  mechanistic structures, which are good for maintaining efficiency (and incorporates formalization and standardization) and organic structures, which are seen to be freer and more open to creative and progressive activities.  There are companies that try to adopt both a mechanistic and organic structure - these are called ambidextrous organizations.  Trying to balance both is a constant struggle for multinational corporations who find the need to innovate and develop new products and business schemes imperative to compete in their marketplace.

 

Author Fred von Lohmann discusses the role of the 'gatekepers' (such as exhibitors, insurers, distributors, and broadcasters) when filmmakers may have to clear copyright uses in their own works. While fair use is supposed to protect the transformative uses of copyrighted materials, many gatekeepers and large broadcasters and studios are failing to honor the principles of fair use. Instead, we are seeing more of what von Lohmann calls a 'clearance culture' in which full expression is stifled at the hands of media gatekeepers. The content controllers are requiring clearances for every instance of copyrighted material in films, even if it falls under fair use. This is causing many films either to be abondoned during production or distribution or for filmmakers budgets to be severely drained by obtaining clearances.

The rise of internet distribution offers new outlets for filmmakers who can not afford the traditional methods of distribution. von Lohmann identifies two distribution options: video hosting sites such as YouTube or Yahoo Video that can get your film to an audience for free and immediately, as well as by purchasing bandwidth from an ISP and running your film online via a filmmakers' own server.

Internet gatekeepers such as a YouTube or an ISP are more lax than traditional ones due to the safe harbor provisions of the DMCA. In the case of online video content sites, they use a 'notice and takedown' policy to enforce copyright infringement violations. In order for a video hosting site to be free from monetary damages incurred through a copyright infringing video posted by a site user, the host must issue notice to the user that the content requires them to takedown their video, followed by a 'counternotice' option for the user's benefit in the event that a user wants to challenge the takedown. So long as the site removes the copyrighted content in a timely manner and follows this procedure, they will remain exempt from prosecution.

If a filmmaker decides to host his own video by buying a service from an ISP, a similar safe harbor under the DMCA protects the ISP's from any possibly copyright lawsuit. Under this provision, ISP's are not required to follow the 'notice and takedown, counternotice' steps as outlined above. They are viewed as only the 'pipe' in providing access, not an entity that can enforce the content present on computers owned by others and therefore out of its control. As in video content sites, ISP's do not act as middlemen in any copyright lawsuits, therefore leaving the filmmakers or other users to work out their own disputes with copyright owners directly.

von Lohmann argues that these new distribution tools represent a new creative freedom or at least, should ensure new creative freedoms in the future. Under these new options, filmmakers' work can reach the proper audiences first - unlike in traditional media distribution in which work must pass through insurers and lawyers first.

How Hollywood has been trying to disrupt disruptive innovation

online portal that tried to build an online jukebox for movies - investigate them further

details about Eros' (Bollywood distributor) third online film distribution platform. this most recent platform offers free ad-supported streaming films, clips, etc from Eros' catalog. Eros already offers pay downloading services - pay to watch once and pay to own.

explanation of digital delivery networks (DDNs) - service providers whose business it is to connect paid content providers with audiences.  written by the head of Limelight Networks, a DDN.

IMDB/Without a Box merger

TiVo/Amazon's Unbox 

details about the Blockbuster/Movielink merger.  Movielink is a studio-developed and financed movie downloading site.

updated details on Apple TV studio deals/developments

anne thompson is closely following alternative distribution on the internet in her blog and column for Variety. 

notes that Edward Burns' latest film, Purple Violets, is the first straight-to-iTunes feature film release.  there is a slow push for online film however most consumers have not bought into this option yet.

by now, this might be a bit outdated however i think it might be worth taking a look at to get a look at the beginnings of hollywood's resistance to the internet.

discusses hollywood's consistent overlooking of the internet as major source of film distribution revenue, in favor of DVD's.

opinion piece by two Bain consultants in their media division. mostly geared towards television and not film consumption , but still some interesting points raised.

references many technological advances in the works, from social networking to online shopping. also has a section on film and tv.

summary of the tentative agreement between the AMPTP and WGA after the 2007-08 strike.

briefing about Jackass 2.5, the sequel to Jackass and Jackass 2 that is being distributed online to test the demand for online viewing.

discussion of independent films turning to online distribution to reach an audience, reflecting on the recent Sundance Film Festival crop still seeking distribution at festival's close.

article focuses on Steve Jobs' strained relationship with Hollywood studios as he tries to roll out a deal with all major studios to get video-on-demand to iTunes.