Digitalwerks

Expert on piracy?

Late last month, Frederick Huntsberry, the COO of Paramount Pictures, gave a talk at an FCC workshop on the future of broadband policy in the U.S.  He gave a ten minute Powerpoint presentation about the problem of piracy of media content, particularly the unauthorized distribution of Hollywood produced films.  Huntsberry’s contribution to the workshop received a good deal of coverage, some focusing on the odd sight of a studio executive giving an almost “how-to” guide to downloading unauthorized copies, but also from Paramount’s attempt to prevent Huntsberry’s talk from being distributed itself, for fear it would teach some would-be pirates how it’s done.

Commentators knowledgeable about the P2P world pointed out the numerous technical inaccuracies contained in Huntsberry’s presentation, particularly in his list of piracy assisting offenders that included such Internet giants as Google, Yahoo, but also promising technology start-ups like Drop.io and Boxee, not mention electronics makers like Apple and Sony. The heavy-handed nature and basic cluelessness of the talk, now widely distributed by YouTube, has received a great deal of mocking, yet the comedy has obscured the larger issues that the workshop discussed and Hollywood’s stated analysis of piracy.  Now that the entire transcript of the workshop is available, I thought it would be worthwhile to dig a bit deeper, and look at not only what Huntsberry’s presentation reveals, but also examine what the other Big Media representatives had to say.  (although, if anybody has a copy of the Powerpoint deck Huntsberry showed, I would love to get a copy)  What we see is both more damaging to Hollywood’s credibility when speaking about piracy, but also raises disturbing questions about their vision of the Internet more broadly.  In part 1 of this post I’m going to look at the scenario Hollywood paints of current piracy, while in Part 2 I will show how far off the mark they are and why their prescriptions should be dismissed as both inaccurate and likely to cause more harm than good.

The speakers from Hollywood included not just Huntsberry from Paramount, but also Dan Glickman, CEO of the MPAA,  along with representatives from the Director’s Guild, the Copyright Alliance and the Writer’s Guild (Gigi Sohn from Public Knowledge presented a more civil liberties-oriented perspective).  Not surprisingly, the Hollywood consensus was that any future government involvement in broadband policy must address what Glickman termed “the tidal wave of piracy” online.  The Hollywood speakers however went beyond the mere fact of copyright violations to emphasize how the problem is actually growing worse.  The emphasis of what Huntsberry in particular demonstrated was what he called the shift from “Geek to Sleek” in video piracy, or how technological and business developments online have made it markedly easier to both distribute and receive unauthorized content.  As he put it, “What we’ve seen now that there’s been a huge development shift in piracy — if you go back a few years it was strictly — you know, you have to be computer-literate as a user. Today, anyone can pirate a movie.” (emphasis mine)  According to Huntsberry and Glickman there has been a crucial move away from downloading to the streaming oftpirated movies, a fundamental change in their view.  No more confusing software to install, no more waiting for lengthy downloads to complete.  In Hollywood’s nightmare, it is no longer only tech-savvy geeks sealing content, but potentially everybody with a computer, a fast Internet connection, and a desire to see the latest blockbuster film for free.   New gadgets can even get that illegitimate content off the computer and into the living room.

Even more disturbing to Glickman and Huntsberry are the multitude of ways legitimate companies are seemingly supporting the pirate infrastructure, making it easier for users to participate by lending a kind of legitimacy to the outlaw operations.  Pirate websites often make money from advertising, including from respectable companies, or can employ Paypal to generate revenue from their “customers.”  Internet connected devices from Apple and Sony, innovative software from Boxee and Yahoo, even seemingly innocuous services like Facebook and Drop.io all contribute to what Glickman called a “lawless environment” with “no rules of the road” or clearly defined distinctions between what is allowed and what is not.

The underlying, though generally un-stated, argument that Huntsberry, Glickman and the other media lobbyists put forth was that the neither the FCC nor any other government agencies should prevent ISP’s from taking on a monitoring role to prevent the trafficking of pirated content through their pipes.  In fact, what the copyright owners would love to see are laws that mandated ISP’s become copyright enforcers with the ability kick offenders off the Internet entirely, as has been promoted in a handful of countries recently.  Any expansive notion of “network neutrality,” that might actually limit the ability of ISP’s or other proposed monitors from examining or manipulating Internet traffic is anathema to organizations like the MPAA and is a constant target of their lobbying efforts.  Huntsberry’s presentation, that also included a giant banner depicting the massive flow of unauthorized copies of the most recent Star Trek film, was purely to alarm government regulators of the apocalyptic scale of the piracy problem and overwhelm any lingering reservations about possible negative effects of monitoring.

Yet neither Huntsberry, nor Glickman, or any of the other speakers, were able to present any hard evidence that piracy has in fact grown recently, or has indeed shifted to a new more dangerous form, or even that it fundamentally threatens their current business models in a profound way.  We’ll examine the veracity of their claims next week in part 2.

An oft-mentioned aspect of the digital comic discussion at the San Diego Comic Con this year was the role of intellectual property rights, as both a source of revenue for creators but also as victim to widespread comics piracy.  As with so many popular artistic endeavors, the creators themselves often expressed ambivalent feelings towards intellectual property conceptions, especially in light of technological changes radically undermining the traditional business models of comics publishing.  Many of the most interesting comic book creators I heard at the Con seemed to recognize that new distribution models, digital comics in particular, could create innovative avenues for exposure and revenue, even if every digital copy was not purchased in the same way a physical comic book would had been.

On the other hand, every publisher I encountered at the Con seemed to have the precise opposite opinion, that physical and digital property required the exact same treatment both legally and economically, despite the fundamental differences between an economy of scarcity and one of ubiquity.  At one industry insider panel I attended a publisher appealed to comic artists to create characters and stories that above all contained licensing potential, as a way to ensure revenue streams for “you and your family for generations.”  Needless to say, what I did not hear from many industry representatives was any notion of humility towards the power of intellectual property laws, or a recognition of the incredibly messy history of comic creation and ownership (as the current Superboy lawsuit continues to demonstrate).  At the same time, it seemed so ironic to me for industry professionals to ignore, at Comic Con of all places, the countless ways in which it was the intense interaction and involvement of the fans themselves that have enshrined comic characters with such value. The power of a Spider-Man does not come, as J.K. Rowling might have it, merely from what the publisher puts out every month, but from the intense embrace fans give him, whether through a hand-made convention costume or through all the online discussions, wikipedia entries, fansites, etc. that have helped to sustain Spidey for the decades since his arrival in 1962 via Stan Lee, Steve Ditko and Jack Kirby.

Of course, now that Spider-Man is the property of the Disney, one can only imagine the intellectual property structure that will be enforced around him.  Not to say Marvel was very progressive in such matters, but there is no one more aggressive and powerful about extending both the terms and the lengths of copyright than the Mouse.  Which is unfortunate given the state of the digital comics evolution.  As we discussed in a previous post, unless the comics industry truly begins to loosen its grip and take innovative business models seriously, the rather extraordinary levels of comics piracy will continue with no real alternatives presented.  With Disney now entering the field in a dominant fashion, I have little optimism, however, even if the creators themselves are interested in expression far more than locking in revenue streams for “generations.”

Welcome back to Digitalwerks, and apologies for the long delay between postings. I’ve been working on a few articles, but each of them has encountered some complications that will be explained later as they come out, which should be soon hopefully. In the meantime I did want to discuss a topic that may fall a bit outside of this blog’s usual the topics, but actually does share some logical connections as it turns out.

Living in San Diego has many benefits, not least of which is that we are the hometown of the biggest annual popular cultural extravaganza in the U.S., the San Diego Comic-Con, or as I like to think of it, “nerd-vana.” As an old-time comics fan, if very sporadic these days, I still love to attend the SD Comic-Con every year, sometimes professionally but always as a big-time geek, reveling in the seemingly unstoppable advance of nerd-favorite themes in Hollywood and culture generally. This year, other than helping out an old friend with some of her blogging responsibilities, I spent my time at the Con tracking what clearly was a big theme in 2009, the possibility of digital distribution coming to the comics industry. Unlike the music and film industries, the adoption of new distribution technologies in comics is very much in its infancy, but 2009 may turn out to be a tipping point, when digital comics went from at best a sidelight to a major player in how comics are sold and consumed.

Why have comics lagged behind other entertainment industries in feeling the effects of new distribution technologies? Comics are strangely, sui generis, in the sense that they share many of the characteristics of the publishing industry, but in my opinion are quite different from books. Specifically, comics share many elements with art. Comics, no matter how low brow their history, are undeniably a visual medium with a very different experience than purely textual books. Further, comics have traditionally been a collector’s medium, in which the tangible object of the individual comic book, no matter how widely distributed, has value (monetary and sentimental) in the physical sense. Traditional elements of comic book culture often include garages and attics full of “longboxes” containing hundreds or thousands of revered comics safely protected in mylar bags. Nonetheless, even the traditional culture of comics is beginning to recognize the possible benefits of digital distribution, for readers, artists, and for publishers alike. Comics distributed digitally, as plain .jpeg’s or as proprietary formats embedded in separate platform specific applications, do have a number of potential advantages, including eliminating onerous storage requirements, vastly improving search functionality, and providing many new avenues of innovation for enhanced reading experiences or aggregation services. At the same time, digital distribution would radically disrupt existing revenue models, particularly for the two big publishers, Marvel and DC that continue to dominate overall sales and rely very heavily on the quasi-monopolized “direct market” of specialty comics shops. Anything that could damage that revenue stream will certainly need to prove its compelling rationale for acceptance to reach the mainstream of comics publishing.

Yet, in all the comic-themed panels I attended at this year’s Comic Con, digital distribution was an unavoidable topic, brought up by audiences, creators or outside observers, no matter the specific theme of the talk. Not surprisingly, the most vocal proponents of digital comics were those entrepreneurs with their own digital comic services to promote, including LongBox, iVerse, comiXology and the digital arms of DC and Marvel. A consistent message from all the digital spokespeople is that attitudes have changed enormously in recent years and that the acceptance of digital distribution from artists, publishers, and readers has grown by leaps and bounds. The most visible proponent of downloadable comics was LongBox CEO Rantz Hoseley who was seemingly ubiquitous at Comic-Con, appearing at numerous panels and actively giving out codes for users to try out the beta version of his company’s software application (launch is expected in September or October). A tireless marketeer, Hoseley envisions LongBox as the “iTunes of comics,” empowering publishers to sell their comics in a digital format (at .99 an issue) via the internet, to be read on PC’s (and eventually mobile devices and e-readers) using a slick interface that will ultimately have a heavy social recommendation engine. Instead of cannibalizing existing sales, Hoseley believes digital distribution will only increase the size of the comics marketplace by appealing to an audience that would “never” walk into the self-limiting world of comic shops. A key part of his business plan, to entice publishers to cooperate is a system of coupons allowing purchasers of single digital copies of a comic to get a discount on printed collections, the graphic novels that are today a very large percentage of comics sold. Presenting LongBox as a particular champion of smaller independent publishers and creators, Hoseley uses well respected comic creators, like Phonogram’s Kieron Gillen and Jamie McKelvie to extol the possibilities of digital sales in providing non-mainstream comics artists with a living wage.

A central element to what LongBox, and its competitors, tell prospective publishing partners is to give up the “myth” that readers will not support experiencing their comics on computer screens. Not just anecdotal experience but also his tracking of the “multiple millions” of downloads of popular titles via file-sharing networks clearly demonstrates to Hoseley that readers are comfortable with digital comics. In fact, when the top selling title in a particular month, including big name books from Marvel or DC, barely cracks 100,000 actual copies sold, there are likely more people in sheer numbers reading it digitally than physically. Of course the trick will be in enticing some of those readers away from piracy back to purchasing titles, or by creating enough of an expanded marketplace through new technology to mitigate the “risks” that digital distribution could pose to existing revenue streams. Some of the new players are limiting their offerings to comic versions readable only on mobile devices, primarily the iPhone, taking advantage of the built-in iTunes market system, although obviously limited by the size and resolution of the iPhone screen. All of the solutions discussed at Comic Con 2009 retained some form of DRM, obviously to allay fears of publishers, although the piracy evidence would suggest that DRM, as in other media, would do absolutely nothing to stem unauthorized distribution, but will increase hassle and interoperability challenges for readers willing to pay for authorized copies. While DC and Marvel rarely came up in any of the technology discussions I heard at the Con, I’m sure that all the digital service providers are hoping that they can distinguish themselves from the pack and ultimately convince the big 2 to join with them. Currently the dominant publishers are basically running their own exclusive systems. Marvel in particular has a digital comics subscription (9.99 for a month’s access, 59.88 for a year) service that has a large number of back issues and a smattering of current comics. For some observers the comics industry is still in the “balkanized” stage of distribution, where the larger properties hope to maintain sole control of their products, and want company-specific services that are absolutely designed *not* to replace physical sales, but act more as a teaser. Whether publisher specific services can attract a large enough paying readership, most of whom probably read titles from a number of different publishers, remains to be seen.

Nonetheless, innovation is occurring as publishers and creators recognize that the new digital medium will allow for all kinds of different expressions of comics art than the clearly defined borders of the traditional four-color publication. A number of companies are experimenting with “motion comics,” short films that take the art directly from a published comic, adding some animation, music, and voice-overs to create an amalgamation of comic and movie. Probably the best known example was the 12 part motion comic recreation of Alan Moore and Dave Gibbon’s famous Watchmen that was released prior to the 2009 motion picture based on the original comic. In some ways Watchmen was well suited to the nascent form, as heavily as it relied on dialogue, but other attempts have been rather gimmicky in my opinion. Hoseley of LongBox speaks often of “enhanced” digital comics that may not include animation but could include soundtracks, voice-overs, directors’ commentary, etc, something that could be a natural fit for the music-themed Phonogram that he has secured for his service’s launch.

The future of digital comics remains to be seen, but I suspect we will see continued developments in a couple of directions. First, the Japanese manga on mobile phones boom clearly points towards comics becoming more popular on mobile devices, although the specifics of Japanese mobile culture may not be precisely repeatable in the US. More importantly, however, I think you will see a trend towards more comics becoming available widely in digital format, but also at lower and lower price points. Because comics do share some of the qualities of art, they have a tangibility that is different from music and film. They also have a much stronger tradition of collecting, so I think it’s possible you will see an interesting bifurcation, between cheap and possibly free digital copies matched with increasingly expensive limited editions. It would not surprise me if original comic art, limited print runs, special versions, etc. become more collected just as free copies of the same comics go down in price to zero, and become marketing materials for the tangible artistic goods or for non-comics media. Brand awareness of Captain America could become more important than individual issue sales to Marvel as the release date of the Avengers movie approaches. In other words, the digital distribution, even at little or no cost to the reader could become accepted business models as other revenue sources grow in different directions.

Both the New York Times and The Economist published articles in the last couple of days examining what is happening with online video.  Brian Stelter and Brad Stone in the NYTimes talked to the MPAA, Eric Garland of Big Champagne and the owner of the streaming site SuperNova Tube; the authors conclude that the pirates are “winning” the battle against the studios.  The Economist instead looked at Hulu and declares it the winner over YouTube and Joost, and feel that Hulu proves the superiority of the advertiser-supported in-browser streaming over download or separate application playback.

Janko at P2P-Blog has already pointed out that the NYTimes mistakenly placed TorrentFreak in Germany, not the correct Netherlands (hi Ernesto!) but applauds Stelter and Stone for high-lighting the MPAA’s admission that lawsuits are not going to be a long term answer.  And the reader comments to the article very rightly point out that the figures cited by the studios are utterly meaningless, and that TV and films should probably be analyzed separately because of the very different geographic and financial models of their distribution.  The Economist instead looks beyond piracy for the most part, but does lump it into its criticism of Y0uTube as a visually confusing and unsavory place for professional content (read ad dollars) because of all the user-generated content.

A few points occur to me in reading both these articles back-to-back.  First, the MPAA, I believe, quite deliberately elides any notion of quality in their statements about pirated content.  Yes, as the article says, The Dark Knight was available for download within a few hours of its release to theaters this summer.  However, as previously shown here, the only copies that existed for the first seven weeks of the film’s release were extremely low quality camcorder recordings (a decent copy didn’t show up on P2P networks until September 9, HD not before November 21st).  And considering that The Dark Knight is now the 2nd highest grossing film of all time, those cam copies did little to nothing to impact the film’s financial success, at least at the domestic box office.  Piracy likely does impact DVD sales and box office outside of the US, but certainly not in the widely exaggerated claims of the MPAA that considers every single download to be a loss of a sale.

As The Economist rightly points out, streaming is an entirely different beast from download, and combined with a genuinely interesting catalogue of content, Hulu has attracted a sizable audience and in a form that advertisers are relatively comfortable supporting.  The other YouTube competitors, including Veoh, Joost, Revver, Metacafe, and Stage6 all followed what they saw as the YouTube model, i.e., grow an audience through liberal upload policies for user generated content and then use that audience to attract premium content and advertising revenue.  As even the leviathan YouTube has shown, advertisers are just not interested in UGC, so it was going to take something far more managed like Hulu to achieve any kind of critical mass.  As a veteran of the Stage6 experience, I can personally attest to the difficulty in  allowing uploaded content while keeping a site free of porn and illegitimate content, not to mention while burdened by the bizarre strictures of the DMCA ruling.  Sadly, Stage6 ultimately had to close down precisely because it could not find an acceptable balance between attracting eyeballs and paying for the bandwidth those eyeballs were using, not to mention the ever present threat (and eventual reality) of lawsuits.

Of course Hulu has its problems too, particularly around the geographic limitations that rights-holders force it to respect.  And it’s not really sure that the current model for Hulu is self-sustaining, depending as it does on rather fluid advertising dollars and the continued cooperation of the participating networks, something that is far from assured as the re-launch of cbs.com may demonstrate.

Based on my experience, I believe the key dynamic that brings the two stories together to give us a deeper understanding of what is “working” on line is the geographic element.  Wide-scale video sharing took off in the wake of DVD and broadband, but it took off far more strongly in Europe than it did in North America (just look at the market penetration of DivX enabled DVD players to track that phenomenon).  The key driver was the desire to see movies and tv shows that had high consumer awareness but no distribution, that is, high profile, highly marketed films or shows that had been released in the US but were delayed in Europe, so the only avenues available were illegitimate channels.  As communications and marketing become more global, instantaneous, and community driven, they rapidly move beyond any effective notion of geographic boundaries, especially among tech-savvy online participants.  If Hulu can be said to work, it is only in the US context, just as the BBC iPlayer does in the UK, but neither really work outside of it, and in fact likely drive viewers to precisely the kinds of illegal distribution channels mentioned in the NYTimes piece.  Until the geographic restriction/opening window issues get resolved, it will be hard to say that online video “works” as well as it should, or as well as users demand.  And piracy will continue to provide an experience that meets those demands, regardless of the wishes of the content creators.