How Hollywood Promotes Piracy

How Hollywood Promotes Piracy

The movie industry’s inability to adapt drives viewers to piracy, experts say, as consumers move toward mobile and streaming technology for entertainment.

The movie industry seems reluctant to alter its entrenched system of “windowing,” a sequential release pattern that staggers movie release dates on various platforms, resulting in some viewers waiting months to see a movie already released in other locales.

For example, Oscar-nominated movie “The Help” released in U.S. theaters in August 2011, reached the U.K. in October, but didn’t d├ębut in Russia and Japan until February of 2012, two months after the movie’s U.S. DVD release, leaving ample time for pirated copies to make their way across the Internet.

Studios have long profited off each release window via licensing deals, using each window to build marketing power for the next. But this distribution strategy, analysts say, breeds piracy, and leads to more loss than gain in the long-term.

Consumers are increasingly used to viewing media on demand via streaming services like Netflix and mobile phones and computers, and those anxious to see a particular movie but lacking the option to buy it often turn to unscrupulous methods to get it.

Denying customers access to the films they want, when and where they want to watch them, leads people to seek out another competing form of entertainment, resulting in a loss of content control and deflated revenue for studios.

A study by the University of Minnesota and Wellesley College, titled “Reel Piracy: The Effect of Online Film Piracy on International Box Office Sales,” discovered returns for films released overseas after their U.S. box office debut were 7 percent lower as a result of piracy exacerbated by long release windows. Shorter release windows, however, kept revenues higher.

Studios should therefore reconsider their release strategies as consumer viewing patterns shift. Viewing content digitally doesn’t necessarily replace a trip to the movie theater. Plenty of consumers don’t want to spend $30 at to go out to see and see a blockbuster action movie, but the same consumer might be happy to pay a lower price for a romantic comedy they can watch instantly in the comfort of their home, for instance.

Other media industries like television and music are embracing mobile and social tech with mixed results. Apple revolutionized the music industry with the iPod and iTunes, and while audio piracy sites are largely defunct due to the accessible ease of iTunes, but Apple now exerts significant control over the way the industry works, a path the movie industry clearly wants to avoid.

Television, however, is pioneering new ways to integrate broadcast, streaming, and online content. CBS research chief David Poltrack says his network strives to eliminate the reasons for piracy by making content more readily available.

“Online video ads have higher CPMs than what the network gets for broadcast viewing, and CBS now generates more ad dollars online than it’s able to get from DVR’d content,” he said, arguing that granting access to what viewers want online is more lucrative in the long run than traditional cable models.

Hulu is a perfect illustration of Poltrack’s argument. The site, which offers viewers a chance to view previously aired network TV shows fairly quickly after their TV broadcast, consistently rates in the top ten online video properties, according to comScore, and its market share is steadily increasing since its launch three years ago. Hulu is also a top destination for advertisers, generating $420 million in revenue last year.

Still, it’s a tough time for the movie industry. Studios face increased movie-making costs, declining box office revenue, and a significant lag in DVD sales. To maintain control, the big studios are selective when striking deals with streaming distributors like Amazon and Netflix, severely restricting content to protect their own assets. But this strategy isn’t working, and could even be harmful to the bottom line in the long run.

Studios have turned to legal remedies to help stem the losses from piracy, with decidedly poor results. Two controversial bills, the Protect Internet Protocol Act (PIPA) and the Stop Online Piracy Act (SOPA), backed in part by major players in the TV and movie industry, attempted to remove pirated content from the Internet altogether, but the move was vehemently opposed by corporations like Google, Yahoo, Facebook, and Microsoft.

Internet providers shifted responsibility to the movie studios for failing to make their content more accessible, saying they wouldn’t have to police Web sites if the studios agreed to adapt to changing technology.

The industry has made some moves to modernizing with new technology. A consortium of major studios including Warner Bros., Paramount Pictures, Universal Pictures and Sony Pictures, unveiled a studio-direct streaming cloud service called UltraViolet late last year, hoping to get movies to viewers faster, but the distribution channel has yet to strike a chord with consumers.

However, Hollywood’s own solutions have failed to penetrate into the market deeply and catch on with consumers, and viewers frustrated by the lack of available content continuously turn to piracy. Instead of fighting against the tide, the film industry will likely need to embrace the trend and work to change itself along with emerging technology.

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