Digital Darwinism: Piracy Pushes Progress

It wasn't all that long ago that, if you chose not to see a movie in the theater, you had to wait months before it was available for home viewing. Fast forward to the summer of 2002 when an estimated 1 million to 3 million people illegally downloaded or viewed Spider-Man and Star Wars: Attack of the Clones before the films were even released to movie theaters. Multiply by your average $8.50 movie ticket and that's up to $25.5 million in lost revenues right there.

To combat such losses, movie studios are beginning to follow in the footsteps of music groups like Metallica, who took to the offensive in the battle against digital piracy. Thus far, the movie studios' tactics have ranged from directly litigating small time dealers to implementing their own online distribution methods. In 2001, Antonio Daniele III and his mother were charged with illegally distributing films over the Internet and settled with the Motion Picture Association of America (MPAA) for $110,000. Studios learned from the Napster debacle, however, that litigation is not sufficient because for every digital dealer who gets shut down, another emerges to replace him.

To round out their offensive strategy, studios are hoping to retain customers and profits by establishing online film sites of their own.

Video-on-demand services supported by top film distributors, such as MovieLink, are expected to introduce services later this year. Consumers can already buy and rent movies over the Internet for computer viewing from a handful of legal sites, such as Intertainer, SightSound, and CinemaNow, which offer films as rentals to viewers who pay-per-view or as monthly subscribers. But most major studios are focusing on cable and satellite services linked to television, rather than Internet services, and generally all of Hollywood's Internet distribution plans have lagged far behind online competitors.

Legitimate Internet video services hope to find a consumer base willing to pay a fee in order to obtain legal content and customer service. Curt Marvis, CEO of CinemaNow describes the appeal of video-on-demand: "When you are pirating a file you never really know what you are getting. It can be mislabeled, it can be incomplete, it can even be a virus. When you buy a pay-per-view or subscribe to CinemaNow you know what you are getting and if there is a problem, you know who to complain to."

Rich Taylor, vice president of public affairs for the MPAA, is certain that most people will be willing to pay for the convenience, confidence, and security that legal sites offer. "Most Americans are not hackers, they just need an alternative. They are willing to pay a fair and reasonable price to get exactly what they are looking for."

The foes of such legal ventures abound, however. Illegitimate VOD sites include, based out of Taiwan, which offers major films for $1 apiece. Earlier this year, the international arm of the MPAA shut down, but months later, sprouted up, also charging $1 to $1.50 for films, but based in Iran, with whom we have no diplomatic relations. Although maintained that it would pay copyright owners a percentage of profits and abide by U.S. laws, the MPAA prevailed and shut the site down after contacting an Internet service provider in the Netherlands that was hosting Film88's content. The MPAA has now filed suit against and the individuals and businesses associated with it.

With some legal successes bolstering the movie industry, their latest weapon of choice is the very technology that maligned them in the first place. A few government officials, including Representative Howard Berman, who's district includes Hollywood, are considering allowing copyright owners to employ hacking as a means of determining who has pirated their material; Berman is currently drafting a bill on the subject. In a similar vein, Senator Fritz Hollings, has introduced the Consumer Broadband and Digital Television Promotion Act (CBDTPA) whereby any "digital media device" must be sold including copy-protection technologies to be determined by the Federal Communications Commission. Thus, future personal computers and electronic devices would not be sold without technology prohibiting the reproduction of any copyrighted material.

The Electronic Frontier Foundation (EFF) has been proactive in the fight to protect the rights of users over copyright owners. Fred von Lohmann, senior intellectual property attorney for the EFF says, "EFF hopes Congress will not succumb to Hollywood's request that innovation be hamstrung in order to protect their old business models. It's like putting the dinosaurs in charge of evolution."

But the motion picture association doesn't want piracy to be a part of digital content's evolution. They estimate that by year end more than a million movies will be downloaded daily, resulting in potential losses of billions to the film industry. The question remains, however, whether this is a problem to be tackled via government regulations or changes in the industry.

von Lohmann points out that "at a time when the MPAA is complaining long and loud about widespread file-sharing of movies in current release, those same movies are driving the biggest summer box office season in history. Obviously, the impact of file-sharing on copyright incentives is not as simple as Hollywood would like you to believe."

"That is such a hollow argument," Taylor says, "one does not forgive the other. Theaters will remain where people want to see films for awhile, but if people already possess Spider-Man, Star Wars, or Insomnia in their collection, there is no need to spend money at that point for home viewing. I guarantee if people could upload Volkswagens off of a lot they wouldn't call it auto-sharing."

The chairman of Yahoo!, Terry S. Semel, has voiced concern that the music and movie industries are wasting energy worrying over piracy concerns when they should be using this as an opportunity to explore new opportunities for development. Perhaps efforts would be better spent evolving video on demand by developing ways to incorporate this consumer base instead of fighting it, since past experience shows that there are enough teens with ample free time to crack any code or security measure developed.