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November 05, 2009

What Does The MPAA Waiver Request Really Mean?

Okay... hate this... but once again, a hysterical headline/post by Rushi Finkebaugh is so out of touch with reality or logic that I have to do an explainer.

Yesterday, the MPAA put out a release about a FCC filing they made about "SOC," which is Selectable Output Control. What's that? Basically, it would allow the studios to electronically disable outputs on TVs, DVRs, etc when they stream High Def images into your home. The purpose for this is to make home piracy a lot more difficult. It would also allow the studios - as you already see in many PPV offerings on both cable and satellite - to control the life of any filmed product in this category after it flows into your home.

So... if they decided to try to day-n-date the next Harry Potter, this would allow WB to sell one showing of the film, disallow DVR recording of any kind, as well as to disable the outputs of anything other than a HDMI cable from your cable/satellite box to the TV. Theoretically, it would also allow them to sell you a DVR-able delivery for a different price point... say, $10 to watch the movie once and $30 to DVR it right then and have it to watch whenever you like.

That said, unlike Hysteria Girl's misunderstanding (surely given to her by some other hysteric), this does not appear to be a major step towards day-n-date, but rather, a bit of MPAA bait-n-switch, giving the FCC an excuse to allow SOC, which is clearly not about expanding consumer options, but limiting them.

The thing is, for me, this is not objectionable. I believe that copyright must be protected in any way possible, regardless of the cost to the consumer. The relationship between the studios and the consumer should be determined in the marketplace, not by making studio self-protection illegal on the basis - as Public Knowledge seems to love to argue - of illegal piracy existing on the web, therefore somehow invalidating legitimate copyright standards... as in "Well... it's already out of control... illegal downloads can be found on the web on the day of release... so anarchy seems like the best choice moving forward."

I am no tech prude, but I continue to be stunned by how many smart people don't seem to understand that they are advocating burning down the village because there are homeless people and only by burning down the village can we all be equal.

Public Knowledge also doesn't seem to understand that the future of VOD for independent distributors - who are still just surviving with their VOD efforts and not thriving - is quite a different animal than it is ever likely to be with studios. Revenues from the theatrical release and DVD sell-thru of studio films are, with anything other than the weakest commercial product, many multiples of all but the very strongest independently distributed product. (In other words, there are exceptions on the high and low end, but 90%+ of the time, Indie revenues are a tiny slice of Studio revenues on each film.) So when PK writes, "The MPAA’s members should therefore follow in the footsteps of other studios that make their content available to MVPDs and DVD distributors simultaneously," they are either being disingenuous or ignorant.

Studios are scrambling, as DVD has turned softer, to figure out how to maximize all revenue streams and to understand just how much money is possible in each. The "answer" is whatever combination of delivery systems with whatever kinds of windows will portend the greatest amount of revenue for the majority of studio-level films.

Is it possible that we will see a scenario like the Harry Potter example I suggested above? Absolutely. A studio seeking a cash infusion - think Paramount 2009 or MGM - could find itself compelled to experiment in day-n-date on a wide release, critic unfriendly film - think GI Joe or Fame - on opening weekend, looking to generate potentially hundreds of millions of dollars in one weekend with reduced distribution costs for 3/4 or more of the revenue.

And getting back to Finkebaugh, yes, exhibitors would pass stones if this kind of experiment was coming, most likely considering a boycott of that film's theatrical? Yeah. And they would be making a big mistake, especially if the studio in question went forward anyway and generated multiples of theatrical opening weekend revenues without the 45% cut to exhibitors.

Exhibitors would be much better served to be embracing the idea of experimentation and therefore, positioning themselves to be effective in cooperation with the studios for the long digital future. It used to be that a movie of a stage show marked the end of the stage show's life cycle on stage... but the stage show of Chicago has made revenues that dwarf the grosses of the movie Chicago since the movie came out. Things change and no one really knows how the alchemy will work.

Personally, I think highly selective day-n-date could be workable, for studios and exhibitors. (More than 6 times a year and I think it will cannibalize revenues instead of enhancing them.) But I also think that studios have woken up, in the last couple of years, to the absolute value of theatrical as a major revenue stream and are not looking to "betray" exhibitors or, more importantly, to screw themselves by forgetting just how important theatrical exhibition is to their bottom line. The instinct to throw the baby out with the bathwater was seriously diminished when DVD sales - not rentals - started dropping off.

But again, I don’t think SOC and the excuses MPAA is making for wanting it to be allowed by the FCC have much at all to do with narrowing the theatrical release window. Nor is it about NetFlix. It is about getting firm control on the electronic post-theatrical universe that is filled with potholes, which include piracy, but are not exclusive to piracy by any means.

I have always argued that consumers are getting more used to freedom of use every year, from the VHS to the DVD to the DVR to the iPod and other electronics-to-go tools and that consumers would keep the studios from trying to re-set the pricing on all and any home delivery options to something higher. That effort, not the current state of piracy, is what hangs over the film industry like a music business cloud. This would be suicide, opening the door to a majority of people believing they had a right to steal content rather than to pay reasonable amounts.

But like I said above, this is something for the industry to work out through good old capitalistic instincts. And we see that all the time. I will be writing soon about the new push in Blu-ray for this holiday season as the studios try, aggressively, to push this incrementally more profitable disc delivery system forward. The 3D push is not about seeing movies in a new way – except for many of the artists involved – but about the premium ticket pricing that is the only way studios see to raise ticket prices significantly without getting slapped by the public.

See… they want DVD… they want theatrical… and, indeed, they want home delivery in every way they can make it work. And they may someday experiment on a studio level with day-n-date again.

But if you are falling for the “this is about day-n-date eating theatrical” spin that the MPAA is using as “consumer benefit,” thinking this is the primary issue here, you are falling for a classic MPAA-ism. Look here… while we make real changes over here.

Of course, in 2009, why would we expect people who call themselves journalists to actually understand what they are writing about before they post hysterical headlines?

Here is a pdf of the MPAA press release that went out yesterday, which you have likely seen elsewhere.

Here is the pdf of the actual letter from MPAA, that speaks to Public Knowledge quite a bit and which I have not seen anywhere else.

Posted by dpoland at November 5, 2009 11:35 AM

Comments

Posted by: a1amoeba at November 6, 2009 04:19 PM

Posted by: Porcupine Pie at November 6, 2009 06:31 PM

Posted by: leahnz at November 7, 2009 02:41 AM

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