Piracy has been beating film distributors at their own game for years, and it’s not going away.

This is hardly news. Most filmmakers understand this. Most film watchers understand this – even as they guiltily Torrent another new release.

Even The Oatmeal gets it, in their much-cited comic about Game of Thrones.

So it’s hard to understand why distributors are not only failing to see this new reality, but are actively making the situation worse for everyone.

Hardest hit are the indie filmmakers whose chances of making a profit were always slim, but these days there are essentially no indie filmmakers able to earn a living from their work.

The Major Distribution Problem

Theatrical film distribution was never designed to benefit indie filmmakers.

The major distributors are closely partnered with the major studios (i.e. Fox, Time-Warner et al).  These distributors are also closely allied with the major cinema chains. Consequently the only low budget and independent movies that make it onto these screens are not there because they have commercial potential, but because they are a sop to credibility.

When a major Hollywood release can earn $200m in one weekend, why even bother with a $2m indie movie which might only break even after several weeks, if at all?

 

(Source: ScienceDirect)

But the piracy problem affects everyone, large and small.

Piracy is a fact of life and it is not going away. The sooner the studios come to terms with that, the sooner we can start discussing proactive measures of connecting films with audiences and maybe being profitable again.

Most distributors however are not looking at new models of distribution, or improving engagement with consumers and filmmakers, or streamlining paths from production to exhibition. Instead they are spending billions lobbying for changes in copyright law and writing Draconian and Shock Doctrine-like legislation.

The proposed legislations are generally impractical, unenforceable and technically inept. In fact their main achievements are in criminalising viewers, marginalising artists and exposing the ignorance, corruption and greed at the core of every major media conglomerate – while producing no measurable reduction in piracy.

 

The Celluloid Distribution Model

Here’s a little background on traditional distribution. When films came on celluloid, a staggered release allowed a small number of prints to be circulated around many cinemas. Here is a typical schedule for a celluloid distribution of a Hollywood film:

  • 0 – 6 Months – Domestic (i.e. USA) theatrical release
  • 6 – 12 Months – International theatrical release
  • 6 – 15 Months – Video/DVD/BluRay release
  • 15 – 18 Months – Pay Per View
  • 18 – 30 Months – Pay TV
  • 30 + Months – Free TV

(Source: http://www.creativeskillset.org/film/knowledge/article_5103_1.asp)

Of course this schedule is a huge generalisation. There are as many variations as there are films.

Also TV is an old paradigm. Plummeting commercial revenues show people aren’t watching broadcast TV in the numbers they once did (except possibly for live events and contests). So why is a movie’s premiere on TV still seen as a flagship endeavour and a reason to delay the rest of the distribution chain? It’s crippling the ability of films to make money.

But the main thing every model of distribution omits is the single most effective and significant stage of distribution for every movie:

  • Day 1 – The film is pirated and available to download for free.

 

The Transition to Digital Distribution

But surely the internet has changed all this? Now anyone can upload their film and immediately the entire world can see it. It should be a matter of minutes between releasing a film to the public, and seeing the cash start to trickle in to your bank account.

The problem is someone else can rip and upload your film just as quickly and your cashflow is side-stepped. So the obvious solution is that if you want to make money from your film, you have to make your film easier to see legally than to pirate.

Digital distribution has fundamentally altered the release schedule too. It is now preferential to release a film to streaming, rental and retail BluRay within weeks of the theatrical release. Some films are actively pulled from theaters (especially before holiday season) to encourage retail sales.

The technology makes this more achievable and commercially preferable, because digital prints cost nothing and there is no physical media to ship. A film’s commercial lifecycle has been reduced to months, and within a year it has been consigned to the A-Z shelves and the backlists of Netflix and iTunes.

 

Why Studios Associate Digital Formats with Piracy

To protect revenues of online distribution, all the major online movie portals are still stuck in the dark ages of DRM and locked-down streams.

MP3s went through this phase and today few MP3 sellers use any kind of DRM – largely because it’s futile and also because it turns off consumers. You want to listen to that music you bought on your iPod and your CD player? Tough luck. You want to send a mixtape to your girlfriend? Sorry.

With movies, it still seems like the year 2000. None of the major studios offer DRM free downloads of their films, nor do any online stores.

A representative sample of studio offerings reveals that the Warner Bros website only offers WMV streaming and only for PC, while the 20th Century Fox website will only sell you cinema tickets!

HBO is a market leader, it is in a prime position to change how these things work. And yet its HBOGo portal is still blindly falling into the same traps as the studios. Their offerings are curbed by exclusivity, restricted by region and by DRM.

And has this prevented piracy? The Pirate Bay lists hundreds of seeds for Game Of Thrones, in a variety of formats and languages, in 720p HD, “ready to burn” and with all the extra features. In other words, in the real world, HBO’s fantasy of exclusivity is a myth.

So where are the legal downloads? Primarily on iTunes. With DRM, ludicrous time restrictions, exorbitant rental costs, and scary remote deletion.

Studios are afraid of purely digital (non-physical) formats because there is no restriction on their distribution. With physical media, you have to supply an actual tape or a disc to pirate it. You can also add hardware-based restrictions to prevent duplication, like region locking and CSS encryption.

But didn’t this all happen 30 years ago? In the 1980s, VHS home-recording was Hollywood’s lament. Videos were copied and shared just like mix tapes, and with comparably appalling quality with each generation. But that didn’t stop eager movie fans who just wanted to see the film, no matter the quality. It also didn’t stop the studios creating their own hideous image-shredding copy protection system called Macrovision (which could be easily circumvented with an aerial cable).

Today the only companies offering DRM-free film downloads are small independents or even the filmmakers themselves. This is mostly because they understand that piracy is inevitable, and piracy-prevention seeds ill-will amongst audiences, and because the legal and technical costs involved in battling piracy are far beyond their means (not to mention of dubious efficacy).

 

Marketing Is Global – Distribution Is Not

A movie’s success is judged by its domestic (i.e. US) opening weekend box office gross. When the film gets its international release some weeks or months later, the drop-off in profits is precipitous. Studios seem to think this is because the global market is simply less profitable, but in fact many people outside of America will have already heard about, downloaded and watched the film, long before it legitimately reached their shores.

Web advertising fuels that fire. Studios spend hundreds of millions on banner ads, online promotion and website sponsorship. This kind of marketing is often not region specific, it’s seen in every country in the world, even if the movie is only showing in the States. Then the studios seem surprised when piracy soars outside the USA, because the advertising worked and people want to watch the movie.

Piracy cannibalises every bit of revenue down the chain. But the chain only exists because of this staggered model. Why should someone in Europe or Australia wait a year to see an American movie? These days they shouldn’t – and increasingly they don’t…

So surely the obvious solution is to release films in every country at the same time?

PriceWaterhouseCooper’s 2010 survey (PDF) asked movie pirates why they do it. It found all the obvious conclusions: piracy is free, easy and immediate. However the survey is very America-centric, not accounting for why “international thieves” have such a wide-open window of opportunity.

Some comforting evidence of change is in The Avengers, currently the most successful opening of all time. Disney gave this film a wide international release before it came to theatres in the States, curtailing the impatient pre-release pirates in one move. Was its huge commercial success a coincidence? Of course not.

(Early reports stated it was one of the most pirated movies of all time too. But in fact it wasn’t even the most pirated movie that week, coming third after Haywire and This Means War.

 

Streaming and the Subscription Model

The streaming subscription model is now en vogue, thanks in part to faster broadband.

Mature music streaming services are seeing great success. Spotify recently confirmed over 4 million paid subscribers in its 15 million user base. (The story isn’t so good for artists though. Spotify pays them just $0.005 per song or 1/140 of the royalties from an equivalent iTunes purchase.)

So where are the movie subscriptions?

First a point of clarification: by “streaming service” I  mean media streamed over the internet. On-demand cable packages stream movies down the same pipe as your internet but they don’t count towards your broadband allowance, e.g. Sky, TCM, HBO. The diagram is even more confused when you consider that the leading streaming services such as NetFlix, Hulu, iPlayer, HBOGo are also frequently bundled in with cable packages. The defining factor seems to be where you watch it. If it’s only on your TV, it’s cable. If it can be on a multitude of different devices including phones, tablets, PCs and also TVs, then it’s probably a streaming service.

The main companies offering movie as part of subscription services are NetFlix and Hulu. They provide access to a limited library of provider-approved movies, which are DRM-protected and usually only play on HDCP enabled screens. The movies available will primarily be studio releases, with a limited number of independents relegated to the A-Z listings. The very latest movies will probably not be included in your subscription, but will be an extra $10-20 to rent and you will probably be required to start and finish watching them within a certain timeframe. (Of course there are variations between services and new providers come and go. These restrictions are typical though.)

At no point do you own anything that you are watching and the options available to you can be pulled without notice at any time.

But can you subscribe to movies on your phone or your tablet, or your PC? Your options there are pretty limited. In fact it’s basically only iTunes which links an ecosystem of Macs, iPhones, iPads and its Apple TV.

Despite an early identity crisis (Is it a Tivo? Is it just a glorified Airport?) the Apple TV is surely maturing into the shape of the future for media. It is a hybrid device streaming cable media and also local (downloaded) media via Airplay, while also providing a portal for Netflix, Hulu and other cable mainstays like ESPN.

But still, if you want to legitimately purchase, download and own a movie these days, none of these options will give you a DRM-free movie to watch anywhere you like at any time you like. Try to watch an iTunes movie on your Android, or on a flatscreen that doesn’t have Apple TV, or on a PC without iTunes, forget about it.

To take a video store analogy, if you like the idea of walking into an online shop, picking a box off the virtual shelf, paying for it and taking it home to add to your collection, those days died with Blockbuster.

In short, the streaming model is the only successful paradigm in monetising media at the present time.

But did you notice who is out of the equation? Consumers and producers.

Consumers no longer own anything. All they have is a time-limited right to access a selection of media determined by an unaccountable corporation.

Producers are no longer selling to consumers. They are way back up a chain that first pays the distributors, technology companies, and cable providers (all of whom are affiliated with the major studios), leaving only a fraction of a fraction of the available revenues to pay for the very thing that the system exists for: the movies.

If you’re an independent movie producer, you are a sheep among wolves. Getting onto iTunes or Hulu is not straightforward, and aggregators now exist to do that work for you but take a percentage, and in an echo of the old record label archetype, if you’re small time don’t expect much attention.

That said, iTunes can sell your movie for $10 a time, and you can get $7 for each sale.

(Source: Light Film School)

 

Studios Are In Denial

The major studios are failing in every way to come to terms with the internet. They are working with a paradigm that dates back to the 1980s. In the process they are criminalising their own audiences, causing incalculable damage to independent revenues, exposing new depths of political skulduggery and still failing to achieve any impact at all on their perceived problem.

This is compounded by Hollywood’s ongoing PR clusterfuck surrounding SOPA/PACT/ACTA. This is turning the public against the studios (rightly so) but also against filmmakers.

Few filmmakers profit from their films. In fact most independent filmmakers endure significant financial hardships, if not actual bankruptcy, to see their films completed and released. So quite justifiably, they want to make some money out of the finished product. But the prevailing attitude of viewers that films should be free, and the prevailing attitude of studios that most people are criminals, is leaving indie filmmakers caught in the middle of two entirely unreasonable and irrational positions.

The growing ill-will felt by consumers towards major studios is rarely enlightened enough to separate independent filmmakers from the same charges. Consequently indie filmmakers are fair game to be pirated, torrented and MegaUploaded just like Hollywood. These indies can’t charge real money (i.e. the 20 bucks a new Disney BluRay costs) because they’ll be seen as “establishment” and therefore unable to profess their humble indie roots in exchange for IndieGogo donations, but on the other hand they don’t have the legal manpower (or inclination) to chase down pirates.

At the most basic level, filmmakers want to earn a crust and don’t want to see their children starve or the banks take their homes.

 

In Conclusion

Dear Distributors,

Your actions are directly increasing movie piracy. The facts are clear:

  1. Staggered movie releases promote piracy.
  2. Piracy cannot be prevented.
  3. Copyright enforcement alienates and criminalises your customers.
  4. There are huge, global, tech-savvy audiences hungry for legitimate content.
  5. Online distribution costs nothing.

So please look around and see what is actually happening, and how the world has changed, not just since the 1980s, but even since last month, and consider these few words of advice:

  • You need to release your films online and to all territories simultaneously.
  • The price per movie must be $5 or less.
  • It must be in all possible formats.
  • It must be DRM-free.

The following positive consequences will immediately happen:

  • Your total marketing costs will drop.
  • Your legal costs fighting infringements will vanish.
  • Additional legal costs of negotiating global contracts will be offset by the profits gained from a huge and immediate boost in unit sales.
  • Whoever pioneers sales of DRM-free movies will steal a march on the entire industry.
  • Billions of eager viewers around the world are trying to give you their money right now.

The problem has been obvious for years, but the change is not coming. None of the major players are talking about it, but instead they are just picking fights. The first company to stop this and instead negotiate a new, innovative, practical model of distribution will certainly reap the rewards

 

Final Words

This is a long post because it is a messy issue touching every aspect of film production.  Scientific American recently published a much shorter assessment of how Hollywood is encouraging online piracy.

I’ve focussed on the technical and distribution side of film here, but this excellent New Republic article talks about how Hollywood is murdering movies creatively too.

This post isn’t an essay but I hope it’s slightly better than a rant.

Since I first started writing it several months ago (inspired by that Oatmeal cartoon) the situation has changed in many respects, and continues to do so on a daily basis. My main reason for writing this was to try and educate myself about why this simple consumer/producer/demand exchange has become so completely dysfunctional. I still don’t have a fucking clue.