Digitalwerks

Despite years of debates over the morality, prevalence and impact of mass online copyright infringement, actual hard numbers, backed by statistically rigorous methods, are almost impossible to find.  Most of what passes as “knowledge” about piracy is based far more on pre-conceived notions and anecdotal evidence.  And that really should not surprise, since the fundamental questions about file-sharing generally have less to do with what has happened and more to do with what might have happened.  That is, what purchases did not occur because of the existence of free alternatives, what sales did not take place if the pirate networks had not made sharing so easy. Speculative counter-factuals are really all we are left with, and such questions can never be answered with any sort of definitive confidence.

The Hollywood film industry, or at least its official representatives in the MPAA, likes to talk tough about efforts to combat movie piracy on the internet.  They rabidly support DRM systems to supposedly keep their content locked-down (CSS, AACS, etc.), they push hard for new laws to control how video moves around online (like ACTA and COICA) and they will happily sue sites or individuals they feel to be contributing to mass copyright infringement (too many to name).  Nonetheless, a more objective examination of how movies get onto file-sharing networks, and then how those video files get distributed, would clearly show that the movie studios’ anti-pirate endeavors are fundamentally off-target.

Widespread DRM systems, like CSS on DVDs and AACS on Blu-Ray discs, have absolutely no bearing on how or whether movies end up online, as the primary leaks invariably come from within the production process.  DVD and Blu-Ray sourced files appear online *before* the date those discs are actually made available for sale.  And not just a few days before, but usually weeks if not months before the official DVD release to the public.  Someone in the production chain of Hollywood itself actively puts the video files online for anyone to download for free, and does so *before* any DRM protection can be applied to the film.  It strains credulity to think that the film studios that contract out these services could not increase pressure on their employees and partners to prevent this kind of leak.  Yet, in the decade or so since large-scale online copyright infringement began, they have never done so effectively.

Even more telling as a demonstration of Hollywood’s lack of seriousness about piracy, however, is the annual decision by the film studios to distribute DVD “screeners” to members of the film community in the period before and during “award season” leading up the Oscar ceremony.  Despite explicit knowledge that these critically acclaimed films will immediately be uploaded for mass distribution, and even while the movies themselves are still in theaters, and months before they are scheduled to come out on DVD, the studios continue the practice.  There have been half-hearted attempts in past years to devise a more secure system for distributing these screeners, but they proved unwieldly and ineffective.

Yet the crucial point is that according to Hollywood’s own cost-benefit analysis, the supposed lost sales from the piracy of its own best films is overwhelmingly out-weighed by just the mere opportunity of these films receiving a publicity bump from winning awards.  In their own calculations, Hollywood values the increased revenue an Oscar traditionally generates far more than they fear what a leaked copy loses them.  Such a decision is at minimum an admission by the people who should know movie finances best that what is gained by the screener policy is vastly larger than any fear of possible losses.

And just to underscore the point, I looked at a few of the highest profile films from the recent Golden Globes, that had screeners leak long before their DVD release dates.  In the case of Black Swan, a good quality version of the film from an awards screener appeared on file-sharing networks barely two weeks after the initial limited opening on December 3rd.  The film has nevertheless earned over $73 million in box office revenue and is likely to receive a great deal more publicity when Oscar nominations come out.  Another high profile film, The Fighter, had a screener copy leaked three weeks after its release on December 10th, something that the producing studio, Paramount in this case, had to know would happen if they chose to make screeners available.

The MPAA and its member studios are quick to bemoan their fate in a piracy-riddled internet, seemingly robbed of “billions” of revenue (at least according to the statistics they cite).  Yet it is hard to take their arguments seriously when they routinely chose to engage practices like sending out award screeners that has proven repeatedly to foment illegitimate distribution of high-profile films.  The possibility must exist therefore that Hollywood does in fact realize that the supposed damages from piracy are actually not as substantial as they so often claim.

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.

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.

An update to my previous post about the Swedish Pirate Party growing after the Pirate Bay verdict.

The results from voting today has the Pirate Party winning roughly 7% of the votes in Sweden, which will allow them to gain 2 seats in the upcoming EU parliament. According to reports from Sweden, the party did quite well among the young, receiving around 19% of voters under 30. From a US perspective those numbers may not seem too significant but in a proportional representative system, it’s actually very, very good for an upstart party, although the usual caveats about the general disinterest in EU voting certainly applies. Nonetheless, there’s little doubt that outrage among young Swedes over the Pirate Bay verdict did indeed cause a reaction. Whether or not the 2 Pirate Party representatives in Strassbourg can make a difference among the 725 other MEP’s remains to be seen, but if the copyright lobby expects to continue its crusade against file-trading without opposition, both legal and otherwise, they may be in for a rude awakening.

See Torrentfreak for more detailed coverage and discussion.

Ernesto at Torrentfreak recently reported that membership in the Swedish Pirate Party is skyrocketing after the recent Pirate Bay trial that resulted in a guilty verdict for the Bay, but also uncovered a number of disturbing facts about the prosecution and the trial judge’s impartiality. In previous life, I used to study European party politics, so I had to comment, as this strikes me as somewhat silly but also not without some possible real ramifications. Despite the membership gains, the Swedish Pirate Party is unlikely to actually disrupt the party landscape in as mature a political system as Sweden, but the particular timing of the trial does really work in the Pirates’ favor. The next notable election for Sweden is for the EU parliament, something that many, many Europeans do not consider of much importance, at least in relation to local and national elections. Not surprisingly, EU voting has been used for protests in the past, to focus on specific interests rather than traditional party differences. If the Pirate Party can translate their current momentum into enough actual votes to get representatives into the EU parliament, it would do a lot to get the word out on precisely the kind of copy-left, filesharing, network neutrality that the Pirate Bay has promoted for years, and it would do so via far more mainstream avenues than in the past. Obviously the Pirate Party would not wield any tangible power, but it would be quite a propaganda coup, and would, just as with the trial, create another strong platform for the proponents of a vastly different copyright landscape than than supported by the MPA’s, BREIN’s and IFPI’s of the world.

Being many, many timezones away from Stockholm (and having been woefully behind in blogging in general) makes anything I have to say about the guilty verdict for the Piratebay admins rather old news, but I will just reiterate my previous prediction that nothing substantive will change in the P2P or filesharing world.  Most likely appeals will prevent any change from affecting Piratebay itself for quite some time, but even if that proves mistaken, there is roughly zero chance that if the Piratebay disappears it would reduce the amount of Bittorrent traffic worldwide, much less decrease the amount of copyright infringement that occurs on the Internet.  Just as with previous rightsholder victories (Napster, Suprnova, Isotorrent, etc.) there will likely be evolution in the way people share files, making whatever the next mainstream avenue of piracy (usenet, directdownload, etc.) that much harder for enforcement to have any real impact.

For some other interesting analyses of the verdict, go here and here.