Piracy and the movie industry: change your business model now or end up like the music industry

Sean Jungels

It has been over ten years since Napster hit the Internet creating the world-wide phenomenon of peer-to-peer file sharing and online piracy. Since then piracy has thrived by satisfying the public’s demands for fast, cheap, and easy-to-access entertainment. The strength of piracy is seen through its immunity to the continuous campaigns against it. Despite the Recording Industry Association of America’s (RIAA) efforts, desperate and ruthless at times, it has only been able to watch piracy turn the music industry upside down.¹ The momentum of piracy has recently invaded the television industry, which has seen a shocking decline of advertisement revenue, as ratings drop due to consumers downloading their favorite shows illegally on the Internet instead of watching them on TV.² This has forced network television to change its distribution strategy by offering its content online.³ The Internet and online piracy have forever changed consumer demand and will continue to affect new industries as technology progresses. Today, technology has reached a point where piracy can take on another entertainment giant, the movie industry.

The movie industry must take notice that piracy will continue to grow among its consumers forcing it to change its business model because consumer demand shapes businesses, not CEOs. And the Internet has recently evolved consumers into the “on-demand” generation.⁴ The Internet can give consumers their entertainment when they want it, where they want it, and how they want it. The piracy business model has given consumers a taste of this power by taking advantage of the Internet’s ability to provide free, worldwide, instantaneous distribution of content. The movie industry must focus on what consumers want and create a business model that rivals what piracy currently provides consumers in order to defeat piracy.

This paper takes a look at the situation that a CEO of a major Hollywood movie studio may currently be dealing with by analyzing the following: 1) the reasons that piracy will grow into a problem for the movie industry; 2) the mistakes that the music industry made with piracy; and 3) possible solutions to piracy, including a new potential business model.