Tuesday, May 8, 2012

Going To the Movies Costs $250

The various lobbying groups frequently throw out statistics showing the financial harm piracy causes their industries. These numbers are usually taken at face value and reported as fact by the anti-piracy critics and the media. Every time, these inflated numbers are debunked by those with the patience to comb through the details of the reports.

Admittedly, I don't read every piracy study that gets released into the wild. I kind of randomly read a few when one specific detail perks my interest. But one thing I have observed is that people critical of file-sharing never read these reports, all they do it trump the end-result numbers. I find this very frustrating because if people on both sides of this debate were more educated on the topic, we could stop splitting hairs over fictional losses and get to the meat of these debates.

So with that, I want show you a glimpse of how many anti-piracy studies get their numbers. And we're going to do it by taking a trip to the movies.

Out in my part of town, movie tickets are $11 a pop. So when me and my guilty-by-associated-ip-address dirty pirate wife go see a movie, you might think it costs us $22. You would be wrong.

Sure the tickets cost $22, but when we see a movie we always get dinner at a nearby restaurant. I added up our last two months worth of grocery bills and they averaged $108 a week. At three meals a day, our average meal is $5.14. I also averaged our last 10 dining out meals and they averaged $47.84 per meal. So by going to the movies, we spend an extra $42.70.

  • Tickets: $22.00
  • Food Upgrade: $42.70

But let's not forget that I've actually got to get us to the movie theater, and that takes gas. The theater we go to most often is 6 miles away. So at $4.22 per gallon in my 17 miles per gallon truck, a round trip sets me back $2.98.

Well, we also have to take into account that driving those extra miles lowers the resale value of my truck. A Kelly Blue Book comparison of my vehicle at 1,000 miles and 100,000 miles shows a loss of $0.08 for every mile driven. There's also car insurance that runs me $0.06 per mile and oil changes, wiper blades, tires, battery, brake pads and general maintenance that sets me back another $0.11 per mile.

And if we're at dinner and a movie, we're certainly not working. Combined, my wife and I make about $61 an hour. A dinner and movie takes about 3 hours so this is costing us $183. And during dinner, we use my cell phone to decide on a movie and watch trailers. Using the phone runs about $0.002 per minute and we use it for around 20 minutes. And let's not forget that we're going to want something to drink and a snack while inside the theater.

  • Tickets: $22.00
  • Food Upgrade: $42.70
  • Gas: $2.98
  • Vehicle Depreciation: $0.96
  • Vehicle Insurance: $0.72
  • Vehicle Maintenance: $1.32
  • Missed Labor: $183.00
  • Cell Phone: $0.04
  • Snacks: $15.00
  • Total: $268.72

Over $260 to see one stupid movie? That's outrageous! Is there any question as to why I pirate movies? The only people able to afford to see movies on a regular basis are the 1%'ers. Good thing we don't have kids or else we'd have to consider the babysitter's labor rate and all of her vehicle and food expenses as well!

If you think I'm being unreasonable, then you obviously haven't read any of the piracy reports the industry has put out. This is the exact same methodology they use to generate their lost sales data.

Next post: Why I Share

Sunday, April 29, 2012

My favorite critics

Once Techdirt featured my Step2 open letter, several discussions ensued. A lot of it pointed out how much of an entitled asshole I am, but several people had what I thought were some though-provoking comments. None of these comments will change my behavior, but I do feel they deserve to be highlighted. No commentary from me, I want these comments to stand on their own.

My absolute favorite comment was this animated gif posted by BewbzAndV8Splash at Day One Patch.

puttputter at Techdirt had a good point:
"If you go to an apple orchard and pick a bunch of apples, there are bound to be some rotten ones in the batch. Consuming content is the same thing. Not everyone is going to love every song on an album. Some apples are better used to making pies instead of eating and some content is better suited to unique musical or artistic tastes. We still need to respect the integrity of the content produced and compensate both the artist and producers. There are discerning ways to consume content and still get what we want."

I'll take this comment as a compliment:
"Piece of shit with charismatic writing; Go fuck yourself."

By doctorfrog at Donation Coder:
"I once felt this way myself, but I kinda grew up. This is extremely immature, but it's also the attitude of someone (again I was like this myself) who probably wasn't going to part with a buck to support your work anyway. I jumped in and out of hoops downloading the stuff I wanted, went to the trouble of archiving and hiding it just in case. I felt completely justified and it was actually pretty fun getting stuff "my way."

A lot of what changed my attitude, though, was just basic patience. Just about every game, movie, TV series, or piece of music I ever coveted, and then some, eventually has taken one of two paths:

1) It will arrive on a delivery platform that works for me, and requires an absolute minimum of cost and hassle.

2) It won't, and I will live just fine without it."

From Aslan at USDN:
"The basic flaw in his logic is that he seems to think the record companies and film companies care what anyone thinks."

From Anonymous Coward at Techdirt:
"When you buy a Movie - you are paying for intellectual stimulation that the movie provides - laughter, sadness, adrenalin, etc. *That* is what you are paying for, and *that* is what is being stolen - period. You can degenerate the movie, say it was mediocre, and not worth paying for - but the fact of the matter is - it was good enough for you to download and watch - so all that is irrelevant.
The *only* proper response to not agreeing with the movie industries pricing and release practices is to:
1) NOT infringe on their content
2) NOT purchase their content
3) send them letters as to why you are not consuming their content."

CMerriman at Day One Patch:
"My guess... he's probably pushing 350, covered in cheetos, and has binary written all over his wall. "

Anonmyous Coward at Techdirt:
"But the theme throughout was feed me content for free to wet my appetite and then I'll become a paying customer. He says that he downloads to avoid getting burned by bad content. But then he unapologetically admits that he only paid for 1 out of 4 albums from an artist he liked. He justifies it as the first three he found made him like the guy so that's why he bought the 4th, and the artist should not lament the 3 lost sales because if not for the downloads he would not have bought the one he did. If he did not have a sense of entitlement then he would have found a way to go back a buy the 3 albums he liked, or paid for the 4th one 4 times to fairly compensate someone for 4 products he enjoyed."

Next post: The problem with piracy statistics.

Wednesday, April 18, 2012

The Theatrical Movie Business Perished

Last post I showed you that the most pirated movies of all-time were highly profitable. I also showed you that of the 50 most pirated movies of the last five years, 49 of them made money. To me, I think those numbers speak loud and clear. But ok, you're not convinced yet. Fair enough, let's go bigger.

Since the end of April 2011, TorrentFreak has published the top 10 pirated movies of the week. That's a years worth of monitoring the top 10 downloaded movies each week. I went through each movie on every list and collected as much data that was available. Here's what I came up with:

Raw CSV data.  

Over the last year, 135 movies have appeared on those weekly lists, however not all of them are relevant to our discussion. Two movies haven't been released theatrically yet and 10 movies went straight to video. There were also 6 movies where I couldn't find any budget information. If we exclude those 18 movies, we have 117 left.

Now, there were 5 movies where I found a budget but there was no ticket sales data at Box Office Mojo, IMDB or Wikipedia. However, instead of using that as an excuse to exclude those movies, I'm going to leave them in and say that they all had $0 in ticket sales and therefore lost all their money. I'm also going to restrain myself from cherry-picking individual movies to exclude. For example, I could have excluded Red State because the box office data shows it lost over $2 million but Kevin Smith said the movie was profitable before its theatrical release.

I could have also excluded 5 Days of War because it only played in 6 theaters and I could have excluded Shaolin for only playing in 11 theaters. I could have also excluded and The Awakening because they didn't play anywhere in the United States. But I didn't exclude any of those films. It's not fair to try and have an honest discussion while at the same time manipulating the data prove your point. So those movies stay.

So we've got 117 movies and 92 of them (78%) made a profit. Let that sink in:

Of the 117 most pirated movies in the last year, 78% of them made money.

And 72 of the films (61%) had profits that were equal to or larger than the budget. Just like before, we're not dealing any special type of movie either. Jack and Jill got a 3 from Rotten Tomatoes and profited $70 million. Insidious had a $1.5 million budget and grossed $97 million. Rockstar played in 112 theaters and made $10 million in profits. Explain to me why we needed SOPA again?

For me, the most amazing number is that the median profit to budget ratio for these 117 movies was 144%. I had to check my numbers to make sure I didn't have any glaring typos. The lobbying groups are trying to pass insane laws to combat online piracy and yet half of the most pirated movies had ticket sales that were at least 2.4 times larger than their budgets. In a recession no less! Impressive. For anyone interested, combined these 117 movies grossed $21.3 billion with a budget of $6.8 billion. That's a profit of $14.4 billion.

So it comes down to this: either my data is wrong, or the conventional anti-piracy logic is wrong. Pick one.

Some people are going to question the accuracy of my numbers. They're going to say that the profits in my charts are too high because budget numbers are often under-reported and the longer a movie stays in theaters, the less the studios get. To which I will counter that my numbers don't include licensing deals, DVD sales, rentals, product placements, pay-per-view, tax breaks and Hollywood Accounting.

And let me be perfectly clear, I am not insinuating that online piracy helped these movies be profitable.  I am also not saying piracy is ok because the most pirated movies make money. The only thing I am saying is that online piracy is not harming the theatrical movie business.

And for anyone who is critical of file-sharing, take (copy) my data and see what you can do with it. Spin the numbers in a way to prove to us that file-sharing is killing the industry. Until you do, I'm going to point to these posts every time you bring it up.

1. It's wrong to steal/copy.
2. The creator/publisher should get to control formats, price, release dates, etc.
3. Piracy is killing the movie business.

Next post: My favorite critics.

Tuesday, April 17, 2012

The Theatrical Movie Business is Dying

Let's talk movies. Specifically movies released in the theaters. Critics of file-sharing have several reasons for why online piracy is bad. Inevitably, you can trace their complaints back to one of these reasons:

1. It's wrong to steal/copy.
2. The creator/publisher should get to control formats, price, release dates, etc.
3. Piracy is killing the movie business.

I look forward to debating the first two points in the future, but right now, I want to kill off point number three once and for all. Movies are a business. Let's not try to spin a politically correct position either. The number one reason for making a movie is to profit. It doesn't matter how many tickets were sold, it doesn't matter if domestic gross is larger than foreign gross and it doesn't matter what the gross per theater is. The basic, simple answer is you want to receive more money in ticket sales than it cost to make the movie*. This isn't even a debatable point.

The logic of the anti-piracy crowd is that with all these movies available for free online, movie studios can't make any money and they will soon have to stop making movies. That's why we need new laws to punish those who copy things without paying for them. If we assume that logic to be valid, then that same logic tells us that the most heavily pirated movies should also be the biggest losers at the box office. How else can you come to the 'online piracy is killing the movie business' conclusion?

* (Yes, it's possible to have a profitable movie when ticket revenues are less than the budget, but that only helps my argument, and I wanted to keep it simple.)

What if I were to tell you that of the 50 most pirated movies over the last five years, only one of them lost money? You read that right, just one movie out of 50. Would you even believe me? Would you agree that it defies the conventional logic? With enough data, could I convince you to stop trying to argue that file-sharing is killing the movie business?

Let's start small and then work our way up to larger numbers. In October of 2011, TorrentFreak put out a list of the top10 pirated movies of all-time. Keep in mind that this list only tracks downloads through BitTorrent and does not include file-lockers, newsgroups or streaming, so the actual amount of piracy is larger than what is represented in their chart. I looked up each movie's theatrical gross and budget on Box Office Mojo and IMDB.

Each of those 10 movies made money. See for yourself:

Raw CSV data.
RT, IMDB, MC = Ratings from Rotten Tomatoes, IMDB and Meta Critic.
Profit/Loss = Total gross minus budget in millions.
P/B Ratio = Profit to budget ratio. 100% means profits were the same amount as the budget.
Margin = What percentage of the gross is profit.

The worst performing movie in straight dollars was Kick-Ass which grossed $96.1 million with a $30 million budget. But Kick-Ass was only third-worst in terms of profit to budget ratio. The Incredible Hulk could be considered the worst performer of the group because they generated profits ($113.4 million) that were only 75% of the budget ($150 million.)

Now the critics might be looking at this data and saying, "Well of course these movies made money, they are some of the most popular movies." But that doesn't make any sense, who cares how popular the movies were, these are literally the most pirated movies of all time so your anti-piracy logic tells us they should have struggled heavily to make money.

But something else the critics should be pointing out is that this is too small of a sample size to be that meaningful. I agree, so let's expand things. Each year since 2007, Torrent Freak has put out an end of year list ranking the top 10 most pirated movies on BitTorrent (2007, 2008, 2009, 2010, 2011.)

Those 50 movies include 9 from the previous list so there are 41 newcomers. Surprisingly, things still look very good for the movie business:

Raw CSV data.

These are the 50 most pirated movies over the last five years, and 49 of them (98%) turned a profit. The only movie to come up short was Green Zone which had a $100 million dollar budget but only brought in $94.8 million in tickets. Collectively, these 50 movies grossed $21.2 billion and profited $16.2 billion. 47 of them (94%) had profits that were at least 30% of their budget. Just look at all that financial harm.

And don't think these are critically acclaimed movies either. Sucker Punch got ratings of 23 and 33 yet still profited $7.7 million. Clash of the Titans was rated 28 and 39 and its profits ($368 million) were almost three times higher than its $125 million budget. Nor are all these AAA big budget movies. Juno had a $7.5 million budget and grossed $231 million. The King's Speech had a budget of $15 million and profited nearly $400 million.

Some of these movies didn't even have a wide theatrical release and made excellent returns. The Hurt Locker was the 9th most downloaded movie in 2010 and it was only released in 535 theaters. It profited $34.2 million over its $15 million budget. RocknRolla only played in 826 theaters and profited $7.7 million. But I'm not done yet...

Next post: An even wider net.

Sunday, April 8, 2012

Why Your Fans Are Disconnected

This is the last in my series of posts exploring criticisms of file-sharing. During the series, I touched on how I don't feel entitled to free content, I want to be treated fairly, I buy content that I think is overpriced and like it or not, the customer can and will control distribution. The final criticism I'm going to explore is probably one of the most common ones I see. It's also the one that shows why file-sharers don't view entertainment products in the same spectrum as physicals products.

I think something content creators should try to absorb is that file-sharers have disconnected entertainment from physical products such as shoes and cars. In our minds, we've even disconnected the song from the physical CD it comes on, to us, these are two completely different items. We wouldn't steal a CD from Best Buy, but we see no harm in downloading that same album for free. I'm hoping to explain to you why that is.


You see this criticism listed in several different forms, often times with an example using a tangible item: “If you don't like the price of the car, you don't steal it.” Or, “If you don't like the DRM on the movie DVD, then don't buy it. You don't deserve a free copy just because you don't like DRM.” And sometimes they tie it into a customer service issue, “If you don't like the service at Home Depot, then you take your business to Lowe's, you don't just go take what you want from Home Depot.” All three of those are rather compelling arguments on the surface. If I wasn't so knee-deep in the file-sharing battlefield, I'd probably use those arguments myself.

I'll gloss over the "copying is not theft" portion of the criticism and explain why, even though it starts out fairly solid, this argument doesn't hold up well with me. My first issue is that many times, you don't know what the restrictions are until you've purchased and opened the product. And once opened, the product is mine to keep. The disconnect has started. Publishers have gotten better at printing the terms on the box, but it still has quite a ways to go. It's usually hidden in small print and can be extremely vague at times. The other issue I have with this particular criticism is that it tries to equate tangible items with entertainment.

Critics will have you believe that entertainment products are no different than a hammer. Buying a hammer and buying a movie are not even remotely in the same ballpark. Try this experiment, go down to Home Depot and buy the shittiest hammer they have. Take it home and use it. Return the hammer to Home Depot the following day and tell them, "This is the shittiest hammer I've ever used, I'd like a refund." You'll get your money back. Try taking a movie back to Best Buy the next day and tell them, "I just watched this movie and it was horrible, I'd like a refund." Let me know how that works out for you.

As a content creator, you might think your project is no different than a hammer and should be transacted in the same manner. But I've never had to gamble on buying a hammer. I've never gone to a hardware store and had to watch videos of people using various hammers before deciding which one to buy. I've never had to buy a hammer based solely off of promotional “reviews.” And I've never been stuck with my hammer purchase once I found out the hammer sucked. The disconnect has widened.

Here's a real key point in all this: entertainment products are the only type of product where the terms and conditions can change after you've paid for the product. When the DMCA passed in 1998, I became an overnight criminal. Every CD I had ripped and converted to mp3, every movie I had copied to my computer and every game I had installed on both computers I own despite the manufacturers attempts to stop me, made me a lawbreaker. No other products in the marketplace suffer from this weakness. The disconnect strengthens.

Since the critics love analogies so much, let's try one. Imagine for a second that you purchased a car in 2010. It doesn't matter what kind of car, let's just say a Ford SUV. And let's say in this car is a stereo made by Pioneer. You like this car, it's got all the features you wanted: cruise control, power windows, air conditioning, iPod port, etc. You like it so much that you even bought a service agreement that covers quarterly oil changes, weekly car washes and yearly tire rotation. Now fast forward a couple of years to March 2012. Without your input, Ford has decided that every SUV currently on the road is no longer allowed to have air conditioning. They are going to send a crew to your house to dismantle your air conditioner in such a way that you can't get it repaired. Oh, and they're not going to reimburse you for the loss of the air conditioner even though you paid for it when you originally bought the car.

Well, that sucks. So now you have a car with no air conditioner. Two days later, Pioneer announces that they are not renewing their agreement with Ford, so no more Fords will ship with Pioneer stereos. In addition, Pioneer wants all the currently installed stereos to be remotely disabled so Ford sends a signal to your stereo that makes it self destruct. This time though, Ford will give you a $49 credit on a future Ford purchase for the inconvenience. Two more days later, Ford decides the service agreement you signed up for no longer includes weekly car washes and they are keeping the monthly fee the same.

As far-fetched as what I've just described sounds, each of those scenarios has a real-world entertainment equivalent but people seem to not bat an eye because "it's on the internet." The critics response to all this is, “If you don't like it, don't buy it.” What? I've already bought it. What's my recourse now? I would never have spent $25,000 on this car in the first place if I knew all this was going to happen. They've made my car less valuable and I just have to deal with it? Disconnect complete.

As a person who buys a lot of content and also engages heavily in file-sharing, it's rather amusing to have critics try to simplify what's going on with the “If you don't like it, take your business to Lowe's” analogy. As if this was just a nonchalant issue of poor customer service, like staying away from a horrible restaurant. To us, this is much larger than a poor customer service issue. This looks and feels like a scam. After being sold something, we find out later that it's not what we bought. When we turn to the sellers begging for reform, they instead sue us and try to get laws passed to criminalize our behavior.

Customer's make very personal connections with entertainment. You only need to look at the outpouring of support and numerous memorials when an artist dies for proof. You simply expect someone to stop liking an artist and "take their business elsewhere" when they aren't happy with post-purchase changing terms and conditions. That's insane. So I guess if you're in love with Taylor Swift's music, you're supposed to just drop her and take your business elsewhere by buying Stephen King's books when Universal Music starts using retroactive play-once DRM. Shit, I hope I didn't just give the RIAA a new DRM strategy.

The entire “If you don't like it, don't buy it” criticism is based on an extremely flawed assumption. The critics assume that when I'm looking at content, that I listen to 30-second sound clips, watch movie trailers or play game demos and then go pirate what I want instead of buying it. That couldn't be any further from the truth. If I have even the slightest interest in something, my very first stop is the file-sharing sites. I don't listen to 30-second samples. I don't read preview chapters. I don't watch trailers. Like it or not, my “samples” are the full unrestricted versions of the content.

It's pretty much gotten to the point where if I can't pirate your stuff, you'll never get my attention in the first place. I'll never know about what you have to offer, I'll never know if I like your products, I'll never buy your stuff because to me you won't exist. Your only hope to get me to buy at this point is that you become so wildly popular that I have no choice but to know who you are. But if you're that wildly popular, you'll be pirated anyway.

There is a valid underlying point in the “If you don't like it, don't buy it” criticism. I actually don't buy it if I don't like it. But I think here is where the critics and I go down separate paths. The critics will say that I shouldn't pirate it either, and I say that if I don't pirate anything, I won't buy anything, including the stuff that I like. Who knows, maybe that's what you want. It won't bother me, I like your content, but I don't need your content. Before I started file-sharing, I didn't buy anything. If overnight, the critics could wave their magic wand and make file-sharing go away, I would stop buying content, simple as that.

The file-sharing community made some decisions. Yes, it sucks that you weren't at the meeting. We got kind of tired of waiting for you to show up so we moved on without you. We are done with your sleight-of-hand tricks. File-sharing unrestricted files prevents us from getting screwed. This is why we still download everything that we buy. The better you understand this, the more money you stand to make.

This post was not my attempt to explain why I'm right and you're wrong. For those who are heavily anti-piracy, everything I just said is heinously wrong on multiple levels. They think it's people like me who are killing entertainment even though I buy a ton of stuff. This post was also not me trying to defend myself, I've already told you that I'm not ashamed of my file-sharing. What I'm really trying to do is convey my thought process so you can leverage the information to make a profit. In an odd way, I do it for selfish reasons. I want to see entertainment continue to grow. I consume it on a regular basis and I can't wait to see what you guys make next.

File-sharing has allowed us to invest in your products instead of gambling on them.

Next post: How file-sharing is destroying the movie business.

Saturday, March 31, 2012

Getting paid, voting with your wallet and free samples.

This is the next post in a series exploring criticisms of file sharing (part one, two, three.) Again, this is not a rebuttal, it's how to get a pirate to buy.


I agree 100%. If Chevrolet hires you to work on the assembly line, you deserve to get paid. But file-sharing critics seem to also be saying that if I make my own perfect copy of the car, Chevrolet deserves to get paid even though they didn't sell anything. I understand this particular criticism is more nuanced than the example I gave, but just because a studio makes a movie or a label makes an album, they don't deserve to get paid for sales that didn't happen. And I'm not talking about for-profit piracy here, that's a completely separate debate that we likely agree on.

If I legally record an MMA bout on my DVR and let my friend come over and watch it, does UFC deserve to get paid? If I install Fallout: New Vegas on my gaming laptop and then loan the laptop to my friend so he can play it, does Obsidian deserve to get paid? If I loan a Bruce Springsteen CD to a friend who makes a copy, does Columbia deserve to get paid? If I describe in fine detail the plot of The Lorax, does Universal deserve to get paid?

I can understand the critics point: I have (a copy of) the content and I personally didn't pay for it. But if you're going to sit here and lambast file-sharing, then you should also demand payment in every example I gave in the previous paragraph. In each of those, someone got the content without paying for it.

The internet has allowed me to quickly and efficiently make copies of the content my 10 million friends have in their possession. You may see it differently, but we see it as borrowing our friends CDs. And as long as you don't see it that way, you're going to have a hard time collecting from us.


I touched on this in my open letter and I completely disagree. The current sample market is not indicative of the purchased product. But really, that's only part of the uphill battle you're going to have as a content creator. The file-sharing community has moved beyond samples. Proclaiming there's no reason to pirate because of available samples just shows that you haven't grasped where the file-sharing mindset is yet.

We don't deal in samples anymore and we don't feel guilty about it. Just like with the VCR, the industry cried and sued to get us to stop file-sharing but we didn't feel guilty about copying those files in the 80s and 90s. Oh, you missed last weeks episode of Cheers? Here, I've got a copy of it.

Think about your favorite authors and musicians for a second. Did you fall in love with them after hearing their 30-second samples or reading their preview chapter? No, of course not, we both know that's not how it works. Entertainment is a bonding experience that happens over time. With the sheer amount of content that's available, file-sharers skip sampling and jump right to the bond-building stage with or without your cooperation.


I am voting with my wallet. Instead of giving Ubisoft any money, I'd rather invest that $60 in two or three Kickstarter games. The critics would say that I shouldn't pirate Ubisoft's game then. To me, piracy is a form of protest that I believe will be more effective than not purchasing their products.

Let's say under normal circumstances, one million hammers are sold every year and Home Depot knows they sell half of them. Now let's say that in 2012, Home Depot sells only 100,000 hammers. The first thing they're going to do is check to make sure one million hammers were still sold. Once they've confirmed that, they are going to realize they have an issue: either they have piss poor customer service or their hammers are real shitty.

Creative content doesn't work the same way. If I'm not happy with Far Cry's DRM and I decide to buy Minecraft instead, Ubisoft won't see it as a customer serivce issue, they will think they just put out a shitty game. That is not the message I'm looking to convey to Ubisoft. I'm going to buy Minecraft and I'm going to pirate Far Cry. That is my protest.

Here's where it gets tricky. If Ubisoft sees the video game industry growing while their own sales decrease and they see high piracy levels for their games, maybe they'll get it through their dumb heads what they're doing wrong. That scenario is unlikely to happen though, because I have seen time and time again, when piracy levels rise, so do sales.

Next post: How things get disconnected.

Sunday, March 25, 2012

Pirates Are Not Content Distributors

This is the next post in a series exploring criticisms of file sharing (part one, part two.) Before continuing, I need to repeat something from my last post: I'm not defending myself or trying to provide a rebuttal to the criticisms of the anti-piracy crowd. I'm giving you the information you need to bring a pirate back to the pay table.


Everyone sitting here reading this knows how valuable the VCR was to both consumers and Hollywood. In retrospect, we're all amazed that the VCR battle got so intense that they actually held congressional hearings over it. It seems simple and obvious now, but 35 years ago, they had the exact same battle over the VCR piracy that we are having over internet piracy.

We've all heard about the craziest thing Jack Valenti said in front of congress in his attempt to make VCRs and home recording illegal. But when you look at everything he said, it's eerie how closely his complaints back then mimic the complaints now:

“Unless Congress recognizes the rights of creative property owners as owners of private property, it is going to be eroded in value by the use of these unlicensed machines. Nothing of value is free. The VCRs only mission is to copy copyrighted material that belongs to other people. The fifth amendment forbids the taking of private property without just compensation. The permission of the copyright owner is required for the use of their programs in all markets. We cannot live in a marketplace where this one unlicensed instrument is capable of devouring all that people had invested in and labored over, laying waste to the orderly distribution of the creative content.”
“86.8 percent of all VCR owners erase or skip commercials. If you are an advertiser it destroys the reason for free television. As one VCR owner wrote in his diary, why buy prerecorded movies? You can record the same thing from a premium pay channel much cheaper. There is also less need for VCR owners to go out to the movies. In economic terms, people are deriving value, benefit, utility from the ownership of a home taped copy of a video film production while there is currently no equivalent benefit payment for the producers in the economic exchange.”
 “If 56 of the 93 movie recordings made by 250 households are saved for the shelf and for additional playback -- then the number of movies collected in a year by the Nation's 2.4 million VCR households would be 6,537,216. At a prerecorded purchase of $50, they would have a retail value of $3.2 billion. Mr. Chairman, things like that could make grown men cry.”

It boggles the mind how much Valenti's comments parallel today's piracy discussions. He even pulls a bogus “lost sales” statistic out of his ass to show the economic harm VCRs cause to Hollywood. [note: Valenti's math looks wrong. Should be 65 million recorded movies, not 6.5 million] Valenti even complains that we can't live in a marketplace where the consumer can control distribution. He also complains that when people record a show at home, the creators don't get compensated. And when people have copies at home, they won't buy movie tickets or pre-recorded movies. Does any of this sound familiar? Those were incorrect arguments then, and they're incorrect arguments now.

If you read his full testimony, it's laughable to see what else he complains about. Skipping commercials, time-shifting, creating a permanent collection, etc. We can all sit here now and realize that Valenti was wrong. The VCR was not only harmless to Hollywood, but turned out to be an extremely profitable enterprise for them once they embraced it. But if you transplant yourself back to the time of those hearings, you'd be hearing the same criticism from today, “This isn't your movie, you don't get to decide who gets a copy.” And yes, I will gladly concede that the internet has made copying infinitely more easy than the VCR ever did. But the critics and I probably disagree on how relevant that point is to the discussion.

I'm not pointing all this out to say that I'm more advanced than the anti-piracy crowd. Nor am I trying to say that the critics “just don't get it.” There are a lot of smart and passionate people who think file-sharing is horrific. I just think that it's misguided to think that the internet piracy discussion today is all that different from the VCR piracy discussion over 3 decades ago. And if we can see how wrong the industry was then, we should be able to see how wrong they are now.

Next post: Samples, wallet voting and deserving to get paid.