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

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V. Conclusion

The challenge facing the movie industry is not going to be solved by this paper or any other paper written on this subject. Copyright law, the foundation on which the movie industry was built, is not going to save the day either. Piracy is only going to be solved by the movie industry adapting to present digital technologies and consumer demand; not one that holds on to a business model that is out-dated and has fallen second to piracy. The industry itself has even recognized that frustrated consumers will pirate movies.⁹⁸

It will not be an easy task for the movie industry to make a radical change, however, especially with big players like Wal-Mart strongly opposing efforts in online distribution.⁹⁹ The fact is, though, that the movie industry must follow its consumers, and its consumers are going online, fast. It is predicted that all televisions will be internet-enabled by 2015.¹⁰⁰ Accenture has even advised the entertainment industry “not [to] be prissy about where people consume your content.”¹⁰¹

This paper is a wake-up call to the leaders of the movie industry who are still reluctant to change their business model to incorporate the Internet. The president of Disney-ABC has admitted that “[p]iracy is a business model…[i]t exists to serve a need in the market…[a]nd piracy competes for consumers, the same way we do: through quality, price, and availability.”¹⁰² She further stated that even though the industry does not “like the model…we realize it’s competitive enough to make it a major competitor going forward.”¹⁰³ It is going to take a lot of time, experiment, and creativity to recapture all of their consumers they lost to piracy, but the movie industry has not been one of the biggest industries in the world without being able to defeat their competition. And piracy is just another word for competition.

1 Steve Knopper, Appetite for Self Destruction (2009); Henry H. Perritt, New Architectures for Music: Law Should Get Out of the Way, 29 Hastings Comm. & Ent. L. J. 259 (2007).

2 Daisy Whitney, As Piracy Climbs, TV Takes Up Arms, http://www.tvweek.com/news/2009/05/as_piracy_climbs_tv_takes_up_a.php (last visited Nov. 25, 2009).

3 Hulu, About Hulu, http://www.Hulu.com/about (last visited Nov. 25, 2009).

4 Economist, Listen to the Music (Nov. 28, 2008) available at http:// www.economist.com/people/displaystory.cfm?story_id=12633125.

5 Film Budgeting, http://en.wikipedia.org/wiki/Film_budget (last visited Nov. 25, 2009).

6 Id.

7 Id.

8 Id.

9 Id.

10 Alan Duke, ‘X-Men Origins: Wolverine’ leaked to Web, http://www.cnn.com/2009/SHOWBIZ/Movies/04/02/xmen.piracy/index.html (last visited Nov. 25, 2009).

11 Peter Sciretta, Wolverine Still Tracking High Despite Early Internet Leak?, http://www.slashfilm.com/2009/04/13/wolverine-still-tracking-high-despite-early-Internet-leak/ (last visited Nov. 25, 2009).

12 The average HD-quality movie file is 4.5GB. Screen Digest, Download speed for different types of content over different broadband connection speeds, http://www.screendigest.com/reports/08willtheinternetbreak/RJAY-7KEAWV/WillTheInternetBreak_sample.pdf (last visited Dec. 18, 2009).

13 Liz Gannes, Will Digital Revenue Ever Replace What It's Displacing? (NewTeeVee, July 8, 2008), http://newteevee.com/2008/07/08/will-digital-revenue-ever-replace-what-its-displacing/.

14 Greg Hernandez, TV Ads to Hit Movie Piracy Series of Prime-Time Spots Will Air Tonight (July 24, 2003), http://www.thefreelibrary.com/TV+ADS+TO+HIT+MOVIE+PIRACY+SERIES+OF+PRIME-TIME+SPOTS+WILL+AIR+TONIGHT-a0105815577.

15 17 U.S.C. § 106.

16 Mark A. Lemley, Property, Intellectual Property, and Free Riding, 83 Tex. Law Review 1031 (2005).

17 Id at 1034.

18 Id.

19 Joshua Rich, MPAA study finds movies cost more than ever: Ticket buyers beware (Mar. 6, 2008), http://hollywoodinsider.ew.com/2008/03/06/mpaa-study-find/.

20 Ben Bland, Social sites grow as do illegal downloads (July 31, 2007), http://www.telegraph.co.uk/finance/2813230/Social-sites-grow-as-do-illegal-downloads.html.

21Video, http://en.wikipedia.org/wiki/Video_recording (last visited Nov. 25, 2009); Music Technology, http://en.wikipedia.org/wiki/Music_technology (last visited Nov. 25, 2009).

22 Compact Disc, http://en.wikipedia.org/wiki/Compact_disc (last visited Nov. 25, 2009); DVD, http://en.wikipedia.org/wiki/Dvd (last visited Nov. 25, 2009).

23 Id.

24 Dial-up Internet connections have a maximum theoretical transfer speed of 56 kbit/s. Dial-up Internet Access, http://en.wikipedia.org/wiki/Dial-up_Internet_access (last visited Nov. 25, 2009).

25 The average U.S. Internet connection shows that the median real-time download speed in the U.S. is 2.3 megabits per second (mbps). National Study of Real-Time Internet Connection Speeds Shows U.S. Falling Further Behind Other Advanced Nations, http://www.cwa-union.org/news/national-study-of-real-time-internet-connection-speeds-shows-u-s-falling-further-behind-other-advanced-nations.html (last visited Nov. 25, 2009).

26 Hard drive capacity over time, http://en.wikipedia.org/wiki/File:Hard_drive_capacity_over_time.svg (last visited Nov. 25, 2009).

27 Hard Drive, http://en.wikipedia.org/wiki/Hard_drive (last visited Nov. 25, 2009).

28 Davion Wong, Download Full Movies – Why Pay?, http://www.statssheet.com/articles/article69428.html (last visited Nov. 25, 2009).

29 There is also the chance of copies of DVDs and digital tape being smuggled out of the production facilities that can result in non-readable or incompatible movie formats. Id.

30 Id.

31 Id.

32 Id.

33 Most commercial DVDs are copy-protected using DRM, but there are many software programs that can break the encryption in DRM creating a great incentive to use these programs. Lucille M. Ponte, Coming Attractions: Opportunities and Challenges in Thwarting Global Movie Piracy, 45 Am. Bus. L.J. 331, 366 (2008).

34 LEK, The Cost of Movie Piracy, http://www.perfspot.com/docs/doc.asp?id=1098 (last visited Nov. 25, 2009); MPAA, 2005 U.S. Piracy Fact Sheet, http://www.mpaa.org/USPiracyFactSheet.pdf (last visited Nov. 25, 2009)

35 MPAA, 2005 U.S. Piracy Fact Sheet, supra note 34.

36 MPAA, Research and Statistics, http://www.mpaa.org/researchstatistics.asp (last visited Nov. 25, 2009).

37 Ponte, Coming Attractions, supra note 33.

38 MPAA, Theatrical Camcorder Piracy, http://www.mpaa.org/piracy_theatrical_cam.asp (last visited Nov. 25, 2009).

39 MPAA, Fighting Optical Disc Piracy Around the World, http://www.mpaa.org/piracy_OptDisk.asp (last visited Nov. 25, 2009).

40 MPAA, 2005 U.S. Piracy Fact Sheet, supra note 34.

41 See Ponte, Coming Attractions, supra note 33

42 MPAA, 2005 U.S. Piracy Fact Sheet, supra note 34.

43 Brett and Shane Lunceford, The Irrelevance of Copyright in the Public Mind, 7 Nw. J. Tech. & Intell. Prop. 33, *11 (2008).

44 Id at *10.

45 Id at *11.

46 “If we do have intellectual property law for the cyberspace of the future, it will – or, at least, should – be quite different from the general system that currently governs owners and users of communicative works in the analog world.” Id at *33.

47 Jim D'Entremont, Napster and the Dogs of War, Index of Censorship, Oct. 2003, at 9.

48 Id.

49 A study found that 51.3% of their respondents “do not regard piracy as improper or intrinsically wrong.” Sameer Hinduja, Trends and Patterns Among Online Software Pirates, 5 Ethics and Info. Tech. 49, 54 (2003).

50 Jon Healey et al., Song Swappers Face the Music; The Record Industry Sues 261 Internet Users. Thousands More Cases Are Expected in the Labels' Latest Attempt to Dissuade File Sharers, L.A. Times, Sept. 9, 2003, at A1.

51 RIAA's Lawsuits Meet Surprised Targets; Single Mother in California, 12-Year-Old Girl in N.Y. Among Defendants (The Washington Post, Sept. 10, 2003), at E01; Jon Healey et al., supra note 50, at A1.

52 Tara Touloumis, Buccaneers and Bucks from the Internet: Pirate Bay and the Entertainment Industry, 19 Seton Hall J. Sports & Ent. L. 253, 262 (2009).

53 See Electronic Frontier Foundation, RIAA v. The People: Four Years Later (2007) (“Napster was replaced by Aimster and AudioGalaxy, which were then in turn supplanted by Morpheus and Kazaa, which were in turn eclipsed by eDonkey and Bit Torrent. The number of filesharers, as well as the number of P2P software applications, has kept growing, despite the recording industry's early courtroom victories.”).

54 “The same 9^th Circuit that shut down Napster ruled Grokster was street-legal.” Rod Smolla, You Say Napster, I Say Grokster (Dec. 13, 2004), http://www.slate.com/id/2110982/.

55 David Sarno, The Internet Sure Loves Its Outlaws (L.A. Times, Apr. 29, 2007) available at http://www.latimes.com/technology/la-ca-webscout29apr29,0,5609754.story.

56 ThePirateBay would most likely be held liable for infringement under the secondary liability doctrine as articulated in MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 937 (2005); ThePirateBay is based in Sweden, and under the TRIPs international copyright protection regime, Swedish law governs the dispute. Touloumis, Buccaneers and Bucks from the Internet, supra note 52, at 262; see Paul Edward Geller, International Copyright Law and Practice § 3 [1][a][i] (Matthew Bender & Company, Inc. 2007).

57 D'Entremont, supra note 47, at 9.

58 Eric P. Chiang & Djeto Assane, Music Piracy Among Students on the University Campus: Do Males and Females React Differently?, 37 J. SOCIO-ECON. 1371 (2008).

59 See Senator Takes Aim at Illegal Downloads (USA Today, June 19, 2003), http://www.usatoday.com/tech/news/techpolicy/2003-06-18-hatch-wants-computers-dead_x.htm.

60 Lunceford, supra note 43, at *13.

61 Lunceford, supra note 43, at *14.

62 Id at *15.

63 Bryan Gardiner, MPAA: Frustrated Consumers Will Pirate (PCMAG.COM, Oct. 16, 2006), http://www.pcmag.com/print_article2/0,1217,a=191502,00.asp.

64 Alessandro Balestrino, It Is a Theft but Not a Crime, 24 Eur. J. Pol. Econ. 455, 455 (2008).

65 Jay Lyman, Analysts Question MPAA's Findings on Film Piracy (Crmbuyer, July 9, 2004), http://www.technewsworld.com/story/35036.html.

66 Lisa Lapan, Network Television and the Digital Threat, 16 UCLA Ent. L. Rev. 343, 346 (2009) quoting Economist, Listen to the Music, supra note 4.

67 Lapan, supra note 66, at 346

68 Kristina Groennings, Costs and Benefits of the Recording Industry's Litigation Against Individuals, 20 Berkeley Tech. L.J. 571, 584-85 (2005).

69 Steven Daly, Pirates of the Multiplex, Vanity Fair, Mar. 2007, at 287.

70 MG Siegler, The Movie Studios Have A Great Idea To Ramp Up Piracy (Aug. 14, 2009), http://www.techcrunch.com/2009/08/14/the-movie-studios-have-a-great-idea-to-ramp-up-piracy-and-blockbuster-wants-to-help/.

71 Id.

72 It should be noted that if the price difference is attributable to higher retailer costs or profits, then the RedBox business model is sustainable. If the price difference is attributable to lower revenue to the rights holders, however, it may not be.

73 Alternative distribution channels have not affected ratings for ABC shows. Nate Anderson, Disney-ABC: “We understand piracy now as a business model” (Ars Technica, Oct. 10, 2006), http://arstechnica.com/business/news/2006/10/7946.ars.

74 Lyman, Analysts Question, supra note 65.

75 Id.

76 Eric Bangeman, MPAA Sues Over DVD-to-iPod Service (ARS TECHNICA, Nov. 17, 2006), http://arstechnica.com/news.ars/post/20061117-8241.html.

77 Hulu, About Hulu, http://www.Hulu.com/about (last visited Nov. 25, 2009).

78 Id.

79 Lapan, supra note 66, at 358 citing Gannes, Will Digital Revenue, supra note 13.

80Lapan, supra note 66, at 358 citing Liz Gannes, Analyst Hulu to Bring in $120 Million in ‘09 (NewTeeVee, Mar. 31, 2009), http://newteevee.com/2009/03/31/analyst-hulu-to-bring-in-120-million-in-09/.

81 Lapan, supra note 66, at 358.

82 Lapan, supra note 66, at 357 citing Toni Fitzgerald, Latest Ad Forecast: From Bad to Worse (Media Life Mag., Mar. 31, 2009), available at http://www.medialifemagazine.com/artman2/publish/Media_economy_57/Latest_ad_forecast_From_bad_to_worse.asp.

83 Lapan, supra note 66, at 357 citing Press Release, eMarketer, Numbers Show Decline in TV Ad Spending (Jan. 27, 2009), http://www.emarketer.com/Article.aspx?id=1006900.

84 Lapan, supra note 66, at 357 citing Brian Stetler, Hulu Questions Count of its Audience (N.Y. Times, May 15, 2009), available at http://www.nytimes.com/2009/05/15/business/media/15nielsen.html?scp=1&sq=Hulu%20Questions%20Count%20of%20its%20Audience%20&st=cse.

85 Lapan, supra note 66, at 385.

86 Id.

87 Lapan, supra note 66, at 385 citing Brian Stetler, Web Site's Formula for Success: TV Content With Fewer Ads (N.Y. Times, Oct. 29, 2008), available at http://www.nytimes.com/2008/10/29/business/media/29adco.html?scp=1&sq=Web%20Site's%20Formula%20for%20Success:%20TV%20Content%20With%20Fewer%20Ads%20&st=cse.

88 Lapan, supra note 66, at 385 citing Joshua Cohen, Hulu is Cooler Than You Think (Tilzy.TV, Nov. 14, 2008), http://www.tilzy.tv/hulu-is-cooler-than-you-think.htm.

89 Lapan, supra note 66, at 385.

90 Lapan, supra note 66, at 367.

91 Jack Loechner, Elusive Consumers Create Marketers' Needs For Branded Entertainment (Media Post, Mar. 7, 2008), http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=77639.

92 Wayne Friedman, TV's New Metrics - Ben Silverman Knows the Score (Media Post, Nov. 17, 2008), http://www.mediapost.com/publications/? fa=Articles.showArticle&art_aid=94887.

93 Lapan, supra note 66, at 359.

94 Daly, supra note 69, at 287.

95 MPAA, 2005 U.S. Piracy Fact Sheet, supra note 34.

96 Anne Thompson, Distributors Hold Firm Against Day-and-Date (Hollywood Rep., Mar. 17, 2006), http://www.hollywoodreporter.com/hr/search/article_display.jsp?vnu_content_id=1002198452.

97 Gary Gentile, “Bubble” Hits Theaters, TV, DVD on Same Day (USA Today, Jan. 18, 2006), http://www.usatoday.com/tech/news/2006-01-18-bubble-theater-threat_x.htm; Anders Bylund, IFC,Comcast Starts Day-and-Date Distribution Service (Ars Technica, Mar. 1, 2006), http://arstechnica.com/old/content/2006/03/6294.ars.

98 Gardiner, MPAA: Frustrated Consumers Will Pirate, supra note 63.

99 Economist, Coming Soon - Hollywood and the Internet, Feb. 21, 2008.

100 Duncan Riley, By 2015, Every New Television Will Be Internet Enabled (The Inquisitr, Sep. 1, 2008), http://www.inquisitr.com/2799/by-2015-every-new-television-will-be-Internet-enabled/.

101 Lapan, supra note 66, at 371 quoting Accenture, Beyond the Hype: How New Content and Technology are Redefining the Future of Media, available at http://www.accenture.com/global/research_and_insights/by_industry/ media_and_entertainment/entertainment/2007contentstudy.htm (last visited Dec. 18, 2009).

102 Jemima Kiss, @ MIPCOM:Piracy is a Business Model, says Disney Co-Chair Anne Sweeney (Paidcontent.org, Oct. 9, 2006), http://www.paidcontent.org/entry/mipcom-piracy-is-a-business-model-says-disney-co-chair-anne-sweeney.

103 Id.

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