Paramount’s relaunch of Star Trek this past May grossed over $385 million in theaters. This wasn’t good enough for Paramount. The studio’s parent company, Viacom, said it was deprived of even greater revenues because of internet “piracy.” Indeed, Star Trek was the most “pirated” film of 2009, according to one survey, and Viacom wants the federal government to do something about that.In an October letter to the Federal Communications Commission, Keith Murphy, Viacom’s Beltway lobbyist – er, government relations and regulatory counsel – argued, “content creators must have the legal and regulatory flexibility to use technological tools in partnership with Internet service providers to stem the tide of online copyright theft.” In other words, the FCC and large media companies should form a cartel and ban any business model that competes with the status quo. Because this idea has worked so well in the past.
Murphy cited Star Trek as an example of how Internet-crazed evildoers turned a highly profitable movie into a slightly-less-profitable movie:
Star Trek kicked off the 2009 summer film box office for Paramount Pictures. The movie was theatrically released in select countries on May 6th and rolled out worldwide two days later on May 8th. The first pirated copy was made available on DVD and the Internet on May 8th using a video camcorder placed in a theater. Based on unique markings imbedded in each print of the film, but invisible to viewers, Paramount Pictures was able to determine that the stolen copy originated from a Russian theater and was considered to be of “fair” quality. The attached “Piracy Propagation Chart” outlines the proliferation of stolen copies of Star Trekacross the world in the days and weeks following its release.
Once the first copy (with Russian language) was made available via the Internet, it was quickly localized by online “release groups” who married that video image with stolen copies of just the soundtrack (easily and discretely recorded directly from the headphone jack in the theater seat) in every language in which the film was released. Following the Russian release, “camcorded” copies emerged on the Internet within days from the Philippines, the Ukraine, Spain, Germany and the United States. Quality drives consumption in markets both legal and illegal, and demand soon shifted to the high quality Ukrainian copy. All told, just 6 camcorded copies of Star Trek were released on the Internet, but once the high quality Ukranian [sic] version was discovered, further versions were unnecessary and the release groups could turn their attention to the next major theatrical release.
By the end of August, Paramount Pictures counted over 5 million worldwide unique IP addresses downloading a copy of Star Trek using forensic technology provided by Bay TSP. By comparison, approximately 35 million people attended the film in theaters. As staggering as these piracy numbers may seem, they tell only part of the story. Illicit digital film downloads, which can take an entire day to complete on a P2P network, are now complemented by streaming video versions available almost instantaneously, and the Bay TSP calculations do not include video streams. Streaming video is particular appealing to consumers, as hulu.com and youtube.com have learned, and that appeal has been exploited by sophisticated criminal syndicates now operating professional-quality but illegal websites.
Murphy goes on to explain how “piracy” websites – aided by renegade companies like Google – have adopted more sophisticated business models that threaten Hollywood’s traditional distribution of motion pictures. He concludes the government must protect “threatened” companies like Viacom from extinction:
The flood of stolen content currently available online – including every major theatrical film within hours of release – poses an immediate threat to the motion picture industry, which in 2007 supported 2.5 million jobs, $41.1 billion in wages, and had a trade surplus of $13.6 billion. The prevalence of pirated material online provides a strong disincentive for investment in motion pictures and other professional video content, which are well-understood to be key drivers of broadband adoption.
At this point, I raise a practical question: Why didn’t Viacom simply release Star Trek for DVD/Blu-ray and iTunes purchase on the same day as the theatrical release? That would have eliminated virtually all of the demand for inferior, “pirated” Russian-language downloads. By Viacom’s own admission, it ignored as many as five million potential customers through its arbitrary decision to make the film available for individual purchase more than six months after theatrical release began.
We can argue about whether Internet “piracy” is a violation of property rights all we want, but let’s not overlook the obvious: Viacom and its brethren demand government protection of their business models, not their property rights. New technology indeed poses “an immediate threat to the motion picture industry” – that is, as the industry currently does business.
Adapting to changing technology means discarding the pre-DVD/Blu-ray, pre-Internet distribution model. Viacom would rather lobby and regulate than innovate and change. Let’s not pretend this is a property rights argument.
{ 23 comments }
I like the whole idea that the government in Viacom’s interest trample on the private property rights of BOTH content providers like Google and transmission providers all to preserve the intellectual property rights of Viacom.
The only thing Viacom did not mention was that the Internet Content and Internet Transmission industries are a whole lot bigger than the motion picture industry.
It’s really an incredible thing. This entire world would have to be turned into a total-state-run prison to stop this stuff. And all the name of entertainment!
Ban the replicator on the USS Enterprise!
No cams please. I always wait for dvd rips since the unintelligible Harry Potter fiasco last year. Unfortunate that axxo retired, but others filled the role well.
No cams please. I always wait for dvd rips since the unintelligible Harry Potter fiasco last year. Unfortunate that axxo retired, but others filled the role well.
Ban the transporter as well – it makes illegal digital copies.
Oh I forgot the holodeck – that has to violate a whole bunch of IP “rights?”.
Are Libertarians hypocrites for phoning the police when a crime occurs? Aren’t they using thugs to conform society into their vision of what’s good?
“Are Libertarians hypocrites for phoning the police when a crime occurs?”
Only if you think making a copy of collection of bits is trespass against someone’s property. But then, this whole article is about how Viacom is not interesting in protecting property, they’re advocating the government trespass in far more intrusive ways against the population at large simply to protect their preferred way of doing business.
Good post, but I must disagree with the “slightly-less profitable” notion.
The reason why internet “piracy” is so rampant is because the only parties to use the internet as a medium of distributing digital media have so far been (mostly) independent online release groups. Even though more than a decade has passed since the inception of the internet, these big media corporations like Viacom still haven’t caught on, and are still trying to stifle superior business models in favor of their own outdated one.
The piracy phenomenon is nothing but the market providing the consumer base with a demanded good – the ability to watch films and TV shows on the internet. If Viacom, WMG or whatever simply partnered up with popular sites like youtube to provide paid streaming or download content, then their profits would skyrocket. Already this idea has been implemented by content sharing programs like Steam.
Piracy is just a fringe factor that should not impact the media industry in any substantial way. People don’t solely pirate because they want to get something free, they pirate because it’s more convenient to them. If these companies provided the same service as these illegal distributors, with superior speed and better customer support thrown in, then profits lost due to illegal downloading should no longer be a factor.
“Viacom and its brethren demand government protection of their business models, not their property rights.”
I’m still not convinced by the anti-IP crowd, I got stuck somewhere in the middle, so I don’t agree with that argument. You might as well say that police should not punish shoplifters, because Wal-Mart’s bad business model is to blame (they should be assigning a security guard to every shopper, for example). The “bad business model” argument is too vague, too shaky in my book.
“People don’t solely pirate because they want to get something free, they pirate because it’s more convenient to them.”
It’s seductive to arrive to that conclusion, but I don’t think it’s true, at least not for most pirates. My friend owns a relatively successful company developing games for iPhones and iPods. Even though these products usually cost a buck or two, there’s a rampant piracy among iPhone and iPod users, even though it’s more inconvenient to pirate a Apple device software than to buy it through the iTunes and the pirates bear considerable risk jailbreaking their devices. The Apple business model is great and highly convenient, the prices are negligible but people still pirate (and they do it a lot – according to recent study there’s like 80 percent piracy rate on the Apple device software market worldwide). I think we need some better – or wholly different – explanation for that.
The fundamental flaw in the “lost revenue” calculations surrounding software piracy is the assertion that all of those who acquire pirated products would have purchased them, in the absence of illicit copies being available–this is nonsense…
It is more likely that the significant majority of such recipients would have not purchased the product, either because it was not worth the full price to them, or just plains lack of funds.
Over the last 35 years I have certainly acquired or been offered more than my share of pirated materials and would estimate that I would have purchased less than 5% of the entire bulk had that been the only alternative. Of these, I have probably gone on to purchase legitimate licenses/copies of the products for many if not all, in order to obtain a higher quality copy, extended support, etc.
Of the remaining 90% there is a portion, that had I paid for the product, I would be seeking a refund, or perhaps even initiating legal action against the publisher for crimes against humanity (Office 95 comes immediately to mind).
To assert that every pirated copy of anything represents a lost sale is preposterous, my gut tells me the actual number is well under 10% of the pirated total.
Cliff, perhaps makers of lower-priced competing software should be suing for lost profits, since it’s really them that a pirated copy of the more expensive product is competing with. Someone could easily justify pirating a $5000 product they were just going to use for casual use, while they could not justify pirating a $50 product with similar features. The $5000 product gives them justification for pirating it, and they don’t even notice the $50 product. If the $5000 product didn’t exist, they might have bought the $50 product, rather than pirating it. A common actual case is passing up free/libre software in favor of a pirated version of expensive commercial software, thereby actually benefitting the commercial vendor due to being familiar with their software, rather than the competing free/libre software.
A movie example of the above might be someone pirating big-name movies and recommending to friends (some of whom buy/watch it in theaters), while passing over more reasonably-distributed independent/small films and thus not giving them word-of-mouth advertising.
This is perfect.
A perfect example why the artificial statute monopoly grants such as “copyright” are not functional property rights.
We human beings evolved the concept of rights in order to deal with each other with less conflict. The idea of “rights”, of property and private ownership, decreases conflict and enhances the ability to generate fairness in a very unfair universe.
But copyright (as in this example) creates conflict. It enables one person to claim rights over another person’s actions which, save for the statute laws, had no effect upon them what so ever. It enables one group to claim prior ownership of “profits” from purchases that others have not made.
Intellectual Property must end, or the damage to the tradition of “rights” and private property may be irreparable.
Indeed the business models must change, and will change. But into what?
This is perfect.
A perfect example why the artificial statute monopoly grants such as “copyright” are not functional property rights.
We human beings evolved the concept of rights in order to deal with each other with less conflict. The idea of “rights”, of property and private ownership, decreases conflict and enhances the ability to generate fairness in a very unfair universe.
But copyright (as in this example) creates conflict. It enables one person to claim rights over another person’s actions which, save for the statute laws, had no effect upon them what so ever. It enables one group to claim prior ownership of “profits” from purchases that others have not made.
Intellectual Property must end, or the damage to the tradition of “rights” and private property may be irreparable.
Indeed the business models must change, and will change. But into what?
Digital media really only has only two avenues – either get anticipatory customers to pre-pay an amount covering the cost of production or attach ads to the media in such a way that it degrades the product’s quality to remove them.
“Murphy cited Star Trek as an example of how Internet-crazed evildoers turned a highly profitable movie into a slightly-less-profitable movie”
I don’t get it. So if I steal a little, that makes it okay? Or maybe if I just steal from the rich. Hmm, dubious argument from somoene freedom minded.
Supply Sider, there was no theft involved. This is about copyright infringement.
Oh, and I know of some other Internet-crazed evildoers who turn (theoretically) highly-profitable movies into slightly-less-profitable movies: reviewers. These evil people actually recommend that people not see some movies, stealing all that profit that was rightfully that of the movie distributor. And let’s not forget those evildoers in the business itself, who release competing movies in order to steal profits from other movies. Unbelievable!
Shay,
It’s fair to say, “there was no theft involved.” Hopefully, one would then make the case for such a statement. But that’s not what the author says. He simply says that the “pirates” are not materially impacting the producers. If that’s the case, it’s okay to steal a $2 pencil from Walmart since that too will only make Walmart “slightly less profitable.” The point is that it shouldn’t be an argument made by a freedom minded person. Theft is theft, regardless of degree.
There are more than one “fundamental” flaws in the argument that piracy leads to lost sales. A second “flaw” is that some of the people that pirated the film also purchased the film legally. This is a common occurrence internationally, as films are not released (in theaters or on DVD) at the same time worldwide. I can guaranty you there were many “Trekkies” that pirated the film when it came out in the US, and then went and saw it in theaters (some probably went several times) when the film was released in their country. Another common way this phenomenon of buying and pirating content manifests itself is when parties accidentally damage their legal copy. Instead of shelling out more money for a disk that they had already bought, many people just simply pirate a replacement. In summary, there are tons of reasons that people pirate content, not just because they do not want to buy it.
@bob
“Digital media really only has only two avenues”
Wrong.
Anyone want to guess what the best selling book of all time is, and what book is the probably the best selling book year in and year out, the Bible. It is available online, legally and for free, and yet people buy more Bibles each year than any other one “Best Seller.” All those that argue for strong IP should be asked to answer this question: Why does the Bible still sell like hot cakes if it is freely available online?
Answer: Well, there are lots of reasons (as Austrian Value Theory argues), but convenience is probably the most popular.
The problem with movies, music, and most other “digital or digitized” media is that the producers do not give their customers enough ways to buy their product. If you want Star Trek, as an example, you either shell out $10 at the theater, $20 for a DVD, or wait until it comes out on TV. What if you want another way to see the movie or price point or time preference, well Hollywood says tough. Now, while it is entirely Hollywood’s right to sell their work on their own terms, that does not mean people have to buy their products (and people are beginning to not buy at a growing rate). Normally, people go to competitors, but because of IP law (which gives Hollywood a monopoly), there are no competitors. So, instead people pirate.
But, where Hollywood and bob make their mistakes is that they assume people will not pay for something that they can get for free. But, this is where the Bible example is so illuminating. The Bible is free, but people pay, often $50+. People would rather pay than print a Bible themselves. The same holds true for other forms of media. If CD prices came down, people would buy more CDs and DVDs, instead of taking the time to find a pirated copy, download it, and burn it to CD (and most people do not know how to do this anyway). Bible makers sell so many copies because they have gotten their price points and business models pretty optimum. The result is when you think having an extra copy would be preferable, or you need to replace a damaged or old copy, you just buy a new one, and do not even consider “pirating” a copy. Thus, you go into many people’s houses, and they will have many copies of the Bible, but only one copy of their favorite CD or DVD or other book.
Hollywood and the music industry will eventually figure out that piracy is their fault. The large volume of piracy shows that people badly want their work. The fault lies in the fact that the producers will not sell their works at prices, terms, times, and forms that the people want to buy. There is a fortune to be made if the producers would only open their minds to alternate business plans and models. Luckily, someone will, someday, figure this out (and make a lot of money) and in the process change the status quo, we the consumer just have to wait.
When I encountered this blog, I thought it had something to do with economics. Instead it is a screed favoring theft.
If we believe in markets, and I’m unaware of a better system, then property owners have a profit -maximizing strategy based on microeconomics – oversimplifying – that is where the supply and demand curves cross. Movie industries don’t do dvd day and date, because they can make more money by having a theatrical exhibition window first -at a higher price point. The law here supports the free market – and allows producers and consumers to properly allocate resources by communicating through markets.
Don’t confuse “protecting a business model” – a biased concept used by haters of private property and free markets – with protection of property rights. If property rights are respected and consumers won’t buy – tough luck. Property rights even help to destroy business models – because they encourage investment by innovators and new competitors. Government shouldn’t protect business models. But it SHOULD protect private property.
Further, competition with free also has no support in economic theory – stretch as some might to find rationalization for theft. IP products – from movies to software to compilations of information – are the results of lots of hard work put in my many regular hardworking people. The law and reason protect this productive activity – allowing them to work together and get paid if they create a product that business or consumers which to consume. The bible may be available for free – but Microsoft Windows, or SAP, or a business research, or recently released movies aren’t and their producers are entitled to set the price.
One last thing – intellectual property is a foundation of our economy – there is data that over a trillion dollars of economic activity depends on the copyright industries. These industries pay taxes, employ millions of people and do so by providing works that people want to see. Pirates don’t pay taxes, don’t employ people – they simply free ride on the hard work of others. Don’t confuse slogans with economic logic.
Michael Fricklas, markets are for managing things for which there is a limited number available. There is a limited number of apples, so there must be some system to allocate them to people who want them. The number of copies of an idea is not finite, so you don’t need a system to allocate them.
Creation of the first copy of a particular idea of course usually requires resources, but this doesn’t explain why we should therefore call an idea physical property, and impose a policing scheme in order to impose the limitations of physical property (scarcity). Your argument seems to come down to supporting a particular business model for funding idea crreation, even though you claim that it’s a property issue. Put it this way: if new ideas just fell from the sky all the time, each unique like a snowflake, would you still support current IP laws?
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