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.