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Hi Speed Piracy Will Change Trends of Film Industry

October 22, 2009

Copyright theft is endemic. According to connexionFrance nearly half of French internet users admit openly to downloading copyrighted video and music. By focussing on 18-24 year olds the number rises to 64%. It is estimated that illegal file sharing accounts for 50% -75% of all traffic on the internet and the bill copyright piracy is estimated to be a gargantuan $54 billion per annum for the US economy alone. Also the fall of at least two major UK highstreet chains in the last year (Woolworths and Zavvi) are more than partially the result of illegal file sharing.

None of this is particularly new – the music and software industry has been feeling the pinch for over a decade now. But what is striking is that little has been achieved to stem the tide, and technology advances are putting more industries at risk.

Massively increased internet speeds driven due to fiber optic technology such at British Telecoms 21CN puts the film industryin a difficult position. Previously the likes of Warner Brothers, 21st Century Fox, HBO and Paramount enjoyed the protection resulting from the high data density of movies (a film on average is ten to fifty times as large as an album dependent on quality and length) making the films inconvenient and time consuming to pirate. However with average broadband speeds promised to rise by up to ten times over the next two years this defence evaporates. So, what’s being done about this?

To combat this major film and television companies are investing in newer technologies such as HD and Blue Ray to improve the “consumer experience” and defend existing revenues by driving up the data density of the movies. This initially seemed a wise approach – blue ray movies can be five to ten times larger in footprint than a DVD so theoretically more difficult download – but poor sales figures for Blue Ray decks are not boding well for the major television and film distributors.

A worrying trend pioneered (in the UK) by BBC’s iPlayer and 4OD has shown that consumers are not picky about quality. Both broadcasters have made a surprisingly vast amount of content available to consumers effectively for free (there is no functioning mechanism for prosecution of those who use iPlayer on their computer without a TV licence, and players such as 4OD are using minimal advertising to fund the application). Uptake, although originally slow, has increased vastly with greater bandwidth  speeds becoming more widely available.

The downsides of this kind of IP television – that the picture is poor, the sound fuzzy, and connectivity issues causing stutter or halt – do not seem to deter users. Rising numbers of consumers are using IP as an alternative to traditional television, to the point where in China TVs are being sold expressly for the purpose of streaming television via the internet. People seem to be electing for larger choice and lower price over quality. And now illegal broadcasters are utilising P2P IP applications such as Sopcast and TVAnts to move into the programming area. Quality is improving year on year. Soon it will be possible to watch vast amounts of video – film and tv – instantly at TV level detail over the net.

So what are the likely outcomes of this changing situation? There are two discrete scenarios. The first is that through improving security techniques and effective lobbying of government bodies an amount of control to be regained over copyright on the internet. In particular the change of the law in Sweden earlier this year resulted in dramatic falls in P2P use. However unless significant resources are applied to such a pursuit, and pirates effectively prosecuted in vast numbers, this approach is doomed to fail. An increasing amount of people within the industries are subscribing to the position that this is a fight impossible to win, such as Alice Taylor head of Channel 4 Education Programming.

If prosecution fails, as I believe, the only other foreseeable path is toward the Spotify model of micro payments or carried advertising for the film industry. Large film houses will have to sell their entire back catalogues at fractional prices to consumers over extremely fast networks. In order to make sales attractive not only will the service be cheap, but the quality excellent and the delivery as close to instant as possible. There is no other market into the home.

As a result the major film houses will also focus on the cinema experience, in the same way that musicians have now placed more emphasise on live concerts. This will provide more scope to improve consumer experience in a way impossible in the home through cutting  edge technology. Returns are guaranteed here – while the price of a DVD has fallen to roughly £15 to £5 in the UK in the last ten years, cinema tickets have risen from £5 to around £10 during the same period.

Expect to see large investments in cinema technology, and cinema specific filming technology (3D being a case in point ) in order to draw larger numbers to the spectacle, while on the net the emergence of a number of Spotify-type film services who strike deals with movie companies to resell films into the home.

If it is found to be impossible to shore up turnover by drawing larger numbers to the cinema the era of the blockbuster maybe coming to a close.

3 Comments leave one →
  1. Claude Van Inkins permalink*
    October 22, 2009 3:01 pm

    How much does the actual physical componenet of a DVD – including not only the disc, but is packaging, its shipping, its space on a shelf in a shop, a fraction of the rent of the shop itself, etc – cost?

    If the interent elimates these costs, and charges for the content only, don’t you think people would be willing to pay? Doesn’t i-tunes do this already?

    • sysh permalink*
      October 22, 2009 3:25 pm

      That brings up something else. I read a great article the other day about why Sarah Palin’s autobiography will not be available as an e-book ( Part of the reason is that publishers want people to know that you are reading this on the train, in the park, on the coffee table. It’s a status book.

      Films operate this way as well. Some films are status films: the enjoyment you get from owning a certain DVD and displaying it on your shelf is eliminated with digital streaming.

    • ianrecon permalink
      October 22, 2009 3:52 pm

      iTunes is already doing this, but it is at an early stage. The trend is that P2P is going to make just about every movie ever freeto watch instantly within the next couple of years. It will be like torrenting without the wait. The prices iTunes are going to charge are going to have to come right down (already they are offering a movie for 50p during promotional periods – even this may not be a sustainable price point).

      IMO the only way they are going to make money is from the cinema, and to do that they are going to have to beef up on things that will draw crowds to the cinema, especially as prices for things like home projectors come down meaning people can replicate the current cinema experience with more choice.

      It is a real issue for them. If I was in Hollywood I would be concerned. Movies are the biggest capital media copyright industry (blockbuster cost $200 million plus) so they need to protect their revenue.

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