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But Your Father Was a Pirate

"It's more fun to be a pirate than to join the Navy."
-- Steve Jobs

Remember in Pirates of the Caribbean: The Curse of the Black Pearl, how Will stated early on that he wishes to kill pirates, only to finally realize later on that his own father was a pirate? As Jack Valenti and the studio heads battle movie piracy on the Internet, I wonder if the day will come when they have the same realization.

Aye, me hearties, Hollywood was born of pirates! Sit back whilst I tell ye the tale... (okay, that's enough pirate talk). Back in the early 1900s, Thomas Edison and a group of manufacturers, called the Edison Trust, held the patents for the movie camera and projector. Anyone who wanted to make movies had to pay royalties to the Edison Trust, which was based in New York. Some producers (many of whom became the studio founders) signed contracts with Edison, but then decided they no longer wanted to pay. Other "producers" wanting to get into the movies biz never signed contracts at all. To enforce his patents, Edison had a group of thugs that went around town and beat the crap out of anyone found shooting "unauthorized" movies. They used Mafia-like tactics of threats, intimidation, and brute force, whichever was needed to enforce their patents (any of this sound familiar?).

So, these producers did what any sensible person would when you have a Mafia-type organization on your back -- they ran. As far West as they could go, to California, to a little religious community called Hollywood. Occasionally, Edison sent his thugs out West to track these rogue movie-makers down. Some fought back (as I recall, director Allan Dwan even had to work wearing a pistol to keep the thugs at bay), while others high-tailed it to Mexico until the heat died down. Eventually, the Edison Trust was sued for their strong-arm tactics, and was shut down. The Hollywood producers found that their little religious community was perfect for making movies -- it was 72 degrees and sunny every day, lots of skilled labor, and varied locales (beaches, mountains, deserts) in every direction. Thus, Hollywood was born.

Now let's skip ahead 80-some years. Piracy has become a big issue again.

Lately when I go to the movies, I keep seeing this anti-piracy commercial featuring a guy who does lighting or something explaining how piracy (i.e., downloading bootleg movies from the Internet, for those of you in Palm Beach, FL) hurts people like him. He goes on to say that it may not hurt the producers, but it does hurt the little guy. I've seen this commercial several times now and I've yet to figure out how it hurts this guy. The movies are still being made and he sure as heck doesn't have any gross or net points, so just how is it hurting him? If anyone is being hurt, it IS the producer, who does have gross points (people who have net points never get anything).

As more people get high speed connections and larger hard drives, Hollywood is waking up to the new threat of piracy and scratching their heads. The thing that keeps them up at night, sweating bullets, is what recently happened to the music industry. The record companies tried to fight piracy and failed miserably by offering what they wanted (subscription fees, not working with other record companies), rather than what their customer's wanted. It took Steve Jobs to come in and save the day with the iTunes Music Store.

Hollywood is heading towards the same crossroads, but with the benefit of seeing how the music industry shot themselves in the foot, but forgetting that when they were the pirates, they won. Too bad they're not using any of this info to their advantage. Not yet anyway.

What's really at stake is a question of power, not money. Well, money is a big part of it, but power is the greater of the two. Hollywood has always called the shots from Day 1 when it comes to their product, and the thought of the customer dictating how they distribute their product is totally foreign to them. Movies go to the theater, DVD/VHS, and cable in a set order on which they decide. They make money off of every step in the chain. To disturb the chain disturbs the potential cash flow. Piracy also threatens to take the power of decision away from the studios and put it in the hands of the customer. In fact, it already has.

The piracy battle is actually a war with two fronts. There's the Internet, which gets all the press, but then there's the bigger front, which is bootleg DVDs sold on the open market in Asia. Sometimes before US films are even shown in the theater, they are copied and sold on the street in Asian countries. These copies range in quality from "camcorder-in-the-theater" to near-professional digital mastering. When Hollywood finally gets around to releasing the next Harry Potter film on DVD in Asia, it's already been out for over a year. Likewise with the Internet, people are downloading movies (such as the unfinished version of "The Hulk") even before the film is released.

In addressing the Internet front, Hollywood has made a few half-baked attempts (in addition to litigation), such as Movielink.com and CinemaNow.com, where you can download the same movies you can rent at Blockbuster and watch on your TV. Big deal. That's not what the customer wants (they want them now, not later), so Internet piracy continues to flourish.

Truth be told, there is no ideal solution to eliminate piracy, but there is a tried-and-true method of tackling both of these fronts that will guarantee tremendous success -- give the customer what they want. To do this will require Hollywood to relinquish some of it's power, so the odds aren't good. Hollywood has always been slow to change -- just look back at television, video, and DVD. Hollywood fought against these tooth-and-nail, and now they make far more money than they ever did before.

To tackle the Asian piracy, Hollywood must change their release schedules. When they release a film in the US, they need to release that same film on DVD in Asia, competitively priced. That's where the Asian market is. Not in theater chains like we have in the US. With region encoding, something they already have in place, they can do this easily. When your average customer in Taiwan is faced with the choice of getting a bootleg or a high-quality, full-featured DVD of the latest Hollywood blockbuster, nine times out of ten they'll go for the real deal. That will shut the Asian pirates down pretty quickly.

As for the Internet, the strategy is nearly the same. When they release a film here, they need to make it available as a low-cost download, no more than two bucks. The problem is, they see this as competition to the theatrical run. They need to change their mindset once again and see Internet downloads as an ADDITIONAL revenue stream. Most people who download movies will either go see the movie in the theater anyway (if they like it), or wouldn't go see it at all (such as parents with small kids). File-swapping has several weaknesses of which Hollywood can easily take advantage -- slow downloads, poor quality, and misrepresented content (downloading one thing and finding out it's actually another). Faced with a choice between these factors and being able to download a high-quality, reliable copy with a fast connection, it's easy to see who will win, even if it does cost you a buck or two. It's the cost that's the real sticky issue with Hollywood, and this comes back to the power issue again. Their fear is that people will spend two bucks to download a movie instead of nine to see it in a theater. What they fail to factor in is comparative value. Two dollars is a fair price for downloading a movie that you can only watch in a small window on your computer screen, and it's also a price that justifies value over the competition (piracy, which is free, but with low quality and unreliable service). For the whole nine bucks you get to see it on a big screen, take your significant other, stadium seating, THX sound, and more. That's fair value. They could even up the ante on downloads by offering discount coupons for seeing it in a theater or for the DVD release later on.

Apple recently made a quiet announcement that they were working on a movie download solution similar to the iTunes Movie Store. Once again, it looks like Steve Jobs will save the day. Ahoy!