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hollywood – jstrauss

Tag: hollywood

Vote against #SOPA with your pocketbooks: Boycott the Box Office

That money in politics you’re always complaining about, it’s yours. Take it back!

Our government is way broken. As citizens, we need to fix it fundamentally. And until then, the Internet industry needs to get better at playing by today’s broken rules. But in the case of SOPA/PIPA (also see this great infographic), there isn’t time to fight lobbying fire with lobbying fire, and the notion that emailing and Tweeting at Congress is our best shot of battling entrenched special interests is naive IMHO.

Yesterday we saw a great example of how grassroots online organization can focus our collective economic leverage into influence and results. But before we all go patting ourselves on our collective backs, let’s be honest: this was a gimme — an Internet business dumb enough to thumb their nose at their core customers, and who could ultimately be swayed by a chorus of angry digerati. I applaud the spirit of the GoDaddy boycott, and even participated, but I want us to parlay this small win into something much more meaningful. Let’s not stop at the pawns, let’s strike at the root of support for SOPA/PIPA: the entertainment industry.

More specifically, we need to kneecap the MPAA. Once you understand the motivations of the players involved, the logic of how we can put an end to this nonsense is relatively straightforward. The MPAA is a trade group that represents and is funded by the 6 major film studios (Disney, Warner Brothers, Universal, Fox, Sony, and Paramount). It has an annual budget, determined by its members, that has been shrinking since 2009. The recently appointed new head of the MPAA, former Senator Chris Dodd, is pulling down more than $2 million a year to turn the organization around, which means convincing the studios that they should increase its funding. Not to be overly-cynical here, but it doesn’t seem like too much of a stretch that a former Senator being paid a ton of money in the private sector might seize on Congressional legislation highly favorable to the industry he now represents as the quickest way to prove his (and his organization’s) worth.

I am convinced that the management of the studios don’t really care that much about SOPA/PIPA. If they thought anti-piracy legislation was important, they wouldn’t have been slashing the budget of their lobbying organization over the last several years: in 2007 the MPAA’s overall annual budget was $93 million, in 2009 it was down to $64 million; and within the MPAA itself, the money spent on lobbying went from $2.7 million in 2008 to $1.7 million in 2010. This legislation is even worse than what everyone thinks — it’s not being driven by the needs of a single industry, it’s being driven by the needs of a single industry *trade group*. The studios support it because they’ve been told it will be good for them (even though anyone who knows anything about technology knows it will do little to actually stop piracy) and because there’s no additional cost to them other than what they’ve already sunk into the MPAA’s annual budget. Let’s change that!

If we can show the studios that this ineffective legislation that only succeeds in being hostile to their customers is going to cost them money, I believe they’ll rein in Dodd and the MPAA right quick and that would be the end for SOPA/PIPA. The good news is we have a clear path for demonstrating that cost because, even though these guys may not read the bills they’re paying to have written, they watch their weekend box office receipts like hawks. The bad news is I don’t think the usual online activist base will be enough — in order for this to work, we need to get real people to take real action by changing their offline behavior (i.e. it only works if people who normally go to theaters don’t go when we ask them).

So, here’s what I propose:

  1. We pick a weekend far enough from now that we have time to adequately mobilize mass support
  2. We educate our non-geek family and friends (aka muggles 😉 ) about how SOPA/PIPA will impact the Internet in ways they care about (e.g. censoring YouTube and Facebook)
  3. *Then* we start making noise online to get as many people as possible to join the boycott on the appointed weekend and to make clear to the studios that the dip in revenue they’re going to see that weekend is a direct result of their support of SOPA/PIPA

That’s my idea. I think it can work, but only if enough other people think it makes sense and want to help. I’m open to suggestions on how to move forward and happy to help however I can in making this a reality. You can reach me at jonathan [at] jonathanhstrauss.com and @jhstrauss on Twitter.

And in the meantime, I’ll be that guy annoying his girlfriend’s family about the evils of Internet censorship at Christmas dinner 😀 .

Crystal Ball for Studio Execs or WWJD?

My dad and I had a long conversation over lunch today (at In-N-Out 🙂 ) about my most recent blog post. He mentioned that the studios are keeping a close eye on what is happening in the music industry as a preview of their own potential future 5 years down the road, and that they are taking preventative measures based on what they see. I replied with two reasons why I don’t think that’s something to brag about. First of all, that 5 years is more like 2 years (if that) and it’s shrinking every day. The pace of technological progress has only accelerated since it first began to disrupt the music industry, and it ain’t slowing down. Secondly, the film industry’s approach to understanding the data has been merely to plot historical events and interpolate a trajectory. They have made no attempt to understand the underlying equation and thus extrapolate the end-result. In high-school trigonometry terms, they are plotting points on the left half of a parabola without understanding that they are part of the graph of y=x^2. How do I know this? Because you can see it in their actions, they are clearly trying to treat a growing number of symptoms with no clue about the nature of the underlying disease.

My dad agreed with me and then said there’s a lot of money to be made by the guy who can show them what the future really holds. Being the giving person that I am, I hereby offer it to them free of charge (and with charts, no less!):

Audience Graph
First of all, your audience is moving from conventional offline distribution channels to new online ones. You may think you have the control to slow this, but you don’t! At this point, you must consider it *axiomatic* that every genie will get out of every bottle. There are over a billion people on the Internet, and it just takes one to put your content on BitTorrent and all your anti-piracy efforts are rendered moot. Content consumption is moving from offline to online whether you like it or not. So, you have a choice: get on-board by giving consumers what they want and keep some of them as customers, or drive them away entirely by ignoring their needs. If you choose the latter, you probably won’t ever be able to win those lost customers back. And even if you choose the former, you will most likely never be able to aggregate the same size audience for a given piece of mass-market content online as you could offline. Mainstream media (or ‘head’) content is a first-class citizen offline, where there is artificial scarcity and so being first in line counts for something. But, there is an (effectively infinite) abundance of content online and what matters most is finding what is most interesting to me.

ARPU Graph
That’s the bad news. Here’s the good news, by moving online you can build deeper relationships with that smaller audience and explore variable pricing options to increase the average value of each individual fan (again I reference Josh Freese, who illustrates this point not without irony). However in order to fully engage your most passionate fans and get them to give you more money, you can’t continue to just sit back and pump out passive entertainment experiences with some snazzy marketing around it. You will need to invest in turning your content into 360° entertainment and change your mentality about selling it as a packaged good.

Cost Graph
Yes, I know that sounds expensive. It definitely won’t be cheap and will require you to build out new competencies you don’t have today. But you’ll be able to pay for it (and then some) with all the money you save by getting out of the very expensive mass-market content and offline distribution businesses.

So if you’re willing to become an online-first media company, I think I can promise you’ll return to profitability in 5-10 years depending on how quickly you move to jettison your legacy offline businesses. Now, your shareholders may not be so keen on all these restructuring costs and write-downs, not to mention all the money you’re going to be leaving on the offline distribution table by focusing on getting into the online business while you still can. But, that’s ok because they value the long-term survival of the company over short-term profits. Right? </sarcasm>

Mass-market content and offline distribution are declining businesses, but they are still quite profitable. Especially compared to niche content and online distribution, which are clearly ascendent but still a rounding error to the bottom-line of these major media companies (not to mention the corporations that own them). I believe the decline of the former is going to be a lot quicker than the entertainment industry thinks (because they believe they can control it and they don’t understand the exponential acceleration of technological progress) while the rise of the latter will be retarded by a lack of investment in developing the infrastructure to make it a profitable business. The film industry obsessively spends hundreds of millions of dollars to build the biggest anti-piracy stick they can while watering the online video carrot with an eyedropper. If they were to put meaningful time and money into figuring out how to make legal online content consumption compelling and profitable, it would be more effective than spending a hundred times that on anti-piracy efforts. But they won’t, instead they will continue to do everything they can to prop up dying (but profitable) revenue streams, including stifling the growth of the emerging revenue streams that could one day take their place. And so, the studios will some day (soon) find themselves with not enough offline money and not enough online audience from which to try to make money.

If I were the head of a studio, I would stop trying to figure out how to grow the buggy whip business by keeping down the automobile. I would also recognize that transforming my profitable if shrinking buggy whip business into a money-losing automobile business making it up in volume is probably not in the best economic interest of my shareholders. So instead of throwing good money after bad trying to keep the overall buggy whip market from shrinking, I would focus on getting as much share as possible while all my competitors spent their time futilely worrying about the cars. I would ruthlessly cut costs to maintain profitability in the face of shrinking demand. And, I would put all those profits into a dividend so my shareholders would stop pressuring me for growth that isn’t there. Finally, when it’s time to close my buggy whip factory’s doors, I would take all that dividend money I earned and put it into the best automobile company I could find (and then I would be sure to sell that ~80 years later 😉 ).

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