Since voting on SOPA would have started today, we thought we’d toot our own horn and repost and older article we originally wrote here, while right under we’ll have an article on porn (actually, while it does mention porn, it deals with the same subject. But continually mentioning porn is a cheap ploy to make more people click through).
How Movie Studios Shoot Themselves in the Foot
In 1975, Sony released Betamax, a video cassette recording device that could be attached to a television set and could record television programs onto its Betamax cassettes.
In 1976 Walt Disney and Universal Studios sued Sony for copyright infringement. They argued that these video cassette recorders (VCRs) could be used to copy and distribute their movies. They also argued that most people would record movies for later viewing and, when this viewing occurred, they would skip over the commercials, thereby depriving the studios of their source of revenue. The case dragged on, through various courts, until 1984, at which point the supreme court ruled in favor of Sony.
Interestingly, the movie studios failed to realize that in a few short years a market for videotapes of each of their movies would provide huge revenue streams. Needless to say, had the court ruled in their favor, movie videotapes, and therefore companies such as Blockbuster and Hollywood videos, would not have existed for many years to come, and the whole VCR market would have been pushed back by years.
Fast forward to 2004, and MGM, along with 27 other entertainment studios, is suing Grokster (remember them?) over copyright infringement for their P2P software. Much like the Betamax case, Grokster argued that their product could be used legitimately or illegitimately and, just like Sony Betamax, they were not liable for what their users chose to do. More to the point, the studios should have noticed the parallels and realized the potential for future profits in this new medium.
Unlike the Betamax case, however, the courts ruled in favor of the studios in 2005. Now, half a decade later, we are at much the same point as we were then (except other companies have taken Grokster’s position). MGM could have tried selling movies online, encoding them, providing a monthly access fee, advertising the fact that movies available through their websites were legitimate and virus-free, among many other revenue generating schemes.
Instead they chose to set back the online movie industry by years.
What Porn Can Teach Us
The movie industry is finding itself at a crossroads. This is a multimillion dollar industry staring nervously at the music industry, the file sharing that swept it up, and the industry’s abysmal response to it all. Now Hollywood is wondering what will happen to them. Will they lose returns because of illegal sharing? Will this mean they won’t be able to afford to make new movies? Will all our actors be out of work?
We think it would help if these Hollywood execs, rather than looking at the music industry, followed millions of internet users and looked at the porn industry. This is an industry that, not many years ago, had movie directors, released movies, had well-known actors and actresses, and could be a lucrative career for many. These days, however, there are countless online providers of free or cheap videos and websites. Amateurs are quite literally posting videos from their bedrooms and competing with the professionals.
So what has happened? There are still plenty of sites that make much money (otherwise you wouldn’t be bombarded with spam about it), but they do so by differentiating themselves. Whether it be a specific niche (we won’t get into specifics) or a performer who has created a name for her/himself, certain people have found ways of standing out by providing the customer with what they want.
What does this mean for the movie industry? Hollywood will usually say that without their big budgets (and therefore their grasp on the industry) expensive movies like The Matrix would never have been made. We believe this will be less and less true as time passes. With the equipment that can be bought on credit card advances, people are increasingly able to film and edit video that looks more and more professional. So special effects will be more and more mainstream. Of course, hiring big name actors might become harder, which would mean The Wachowski brothers might have had to hire someone other than Keanu Reeves to play Neo.
On the other hand, actors who differentiate themselves will still be in very high demand. Likewise, freelancers who have real talent will find funding for their movies. Movies will be more niched, more targeted and provide more of what customers want, and an industry that once had extremely high barriers to entry will be giving everyone a shot at bat. And those who are able to keep with the times will benefit enormously. Much like has happened with the Porn industry.
