Intellectual Property

The Senate Is Ready for Its Closeup with Hollywood—And Tech Heads Are Pushing Away

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The NY Times reports on a little foreseen outcome of the new Dem Senate: Warmer relations with Hollywood–and likely deference to the entertainment industry's take on piracy issues, technological lockdowns, etc. Snippets from a recent meeting between stars such as Will Smith and pols in DC:

The conversation often turned to piracy, the existential issue that dominates the association's agenda. Mr. Hackford, who spent more than a decade developing "Ray," told of finding a bootleg DVD of the movie on the day of its theatrical release, and said 42 million illicit copies were sold within five months.

That meant millions of dollars in lost revenue—"and DVDs is how people get their money back," he said of movie financiers. "If they don't, will I be able to sell a hard-to-sell picture like 'Ray'? No."

In a rare moment of newsmaking, Barry M. Meyer, the chairman of Warner Brothers, issued a sharp rebuke to the president of the Consumer Electronics Association, Gary Shapiro, who warned in January that antipiracy efforts could "smother" technological progress and said that "private conduct may be unauthorized, but that does not mean it is piracy."

Mr. Meyer took issue with calling the theft of intellectual property merely unauthorized rather than illegal, and said that Hollywood's promotion of so-called digital rights management technology had made it possible for consumers to rent or buy movies and TV programs at a variety of prices.

"It's easy to demonize it, but without some level of control and order, things don't work," he said. "The only choice we're not offering is free."

Director Hackford, btw, also called himself "working class," so his reality testing may be off a little bit. Ray grossed at least $75 million in the U.S. alone, though I'm sure everyone buying those neatly counted 42 million "illicit" copies would have ponied up $5 or whatever to rent the thing from Movie Gallery had they been forced to).

Reason has been covering the policy war between big entertainment and the tech industry for years (go here for more). If Hollywood gets what it wants from Congress–think the Digital Millenium Copyright Act and the Copyright Term Extension Act–the little guy (with the possible exception of Citizen Hackford) will likely get screwed just a little bit more.

And here's a bit of ironic timing: Reader dzinski points to this Times' story about Apple's Steve Jobs seeing the light when it comes to removing copy protection from online music (including iTunes):

He proposed that labels could shed digital rights management altogether. Mr. Jobs pointed out that only 10 percent of all music sold last year was through an online store and that music is already easily loaded onto digital players from CDs, with no antipiracy features. Attaching digital rights management to music bought online has only limited the number of online music stores, he wrote.

"This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat," he wrote.

Mr. Jobs's move comes as the music industry appears to be facing a crisis. Sales of its mainstay product—the album—continue to sink, and sales of digital music, including individual songs, have not increased fast enough to offset the decline.

Jobs' conversion to this position trails that of Rob Glaser, the head of rival service Rhapsody, and seems more than a little linked to pending cases again iTunes' proprietary system throughout Europe.

But it does set the stage for a clash, especially if Hollywood is moving east in any significant way.

NEXT: Hillary Clinton Doesn't Care About Mexican People!

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  1. The idea that Ray sold 42 million illicit copies is laughable. According to Wikipedia, only FIVE music albums have sold more than 40 million copies. And I’m talking about supermegahits like Thriller and Dark Side of the Moon.

  2. Maybe Congress will take this up soon. Perhaps their Medicare Drug plan overhaul technique could be applied. The Gov could negotiate all our entertainment costs as well as drug pricing. Two birds with one stone.

    Or music could become music again if its not already to late. Todays music is CRAP by and large, how can they expect sales of the Pink Floyd sizes when they are pumping out pimp juice and poon as the musically “talent,”. Sorry but waving your ass around and throwing your hands in the air will only get you so far, don’t plan to make a 20-30 year run at it.

    The genie is out of the digital bottle but that is the beauty of music, it is to be played and performed live for audiences, thats where you make your money. With anyone being able to record on their own label of course major labels are losing out. The Dead made more $$ nearly every year they toured than any other band and they had special sections for you to RECORD the shows. According to RIAA this is not something thats possible.

    A artist may make a small amount off each album or X amount of dollars for X # of albums under contract. So as the “artist,” and not the marketing/sales dept of the Record Co. you want to tour and sell $40 t-shirts etc.

    Hard to sell music no one really wants to buy though.

  3. I don’t know if it’s possible to move closer to Hollywood’s position on intellectual property than where the Republicans have been.

    Like the drug war, this seems to be an area where both parties are just terrible.

  4. joe,
    I can see how you might think that, given how spineless the Republicans have been. However, Hollywood showers succor disproportionately on the Democratic side of the aisle. Look for them to be as shameless on IP as they are on Labor.

  5. and said 42 million illicit copies were sold within five months.

    Bootleggers are using SoundScan now?

  6. Warren,

    I’d attribute that disproportionate succor to the Dems’ (mainly) superior stance on free speech/indecency issues, as well as lefty cultural issues like gay rights that are popular in Hollywood. There’s a reall difference here.

    I don’t see enough difference between the two parties on IP to explain why Hollywood prefers Dems.

  7. Free Minds, Free Ray?

  8. Of course, Jobs is only concerned with ppl making money off the music. if there are ppl willing to write better songs and make them available for free, then you would expect declining profit as consumer choice and aesthetic diversity increase.

    In other words, what is good for the industry is bad for music as a whole. Its that whole art versus commerce thing.

    Don’t forget to check out the album I “released” late last year:

    http://www.farceswannamo.com

    .wav or .mp3. No money down. No interest. No payments. More creative and different tunewise than whatever else it is that you do lissen to now. CDBABY called it “profoundly strange” and “genreless.” Bonus points if you can spot either of the two identifiable “copyright infringements” (assuming that fair use is a dead letter).

  9. And here’s a bit of ironic timing: Reader dzinski points to this Times’ story about Apple’s Steve Jobs seeing the light when it comes to removing copy protection from online music

    It wasn’t really so much a matter of Jobs “seeing the light” – adding DRM to iTunes was one of the concessions he’d had to make to obtain buy in from the record companies for the iTunes service. If he hadn’t gone along with it, it’s not likely any legitimate download service would have gotten off the ground any time soon.

    Consider that Apple doesn’t realize that much of a profit on iTunes, they make their money selling iPods. I’m sure Apple could do nicely without the headaches and expense of enforcing DRM.

  10. Presuming that there are 300 million people in the US, one in 7.14 people would have to have purchased an illegal DVD of Ray if the 42 million claim is accurate. Of course, overseas sales would make a difference, but the claim still seems to be prima facie absurd. That leaves aside the question of how those supposed sales were tracked.
    I’m guessing that my media colleagues reported that figure without any questions or skepticism.

  11. Of course the IP industries always appear to be facing a crisis. They pay a lot of people to nurture that perception. One way they do that is to claim that 42 million illegal copies made Christmas impossible this year. My question: what do the record companies do well? They are years behind the internet/digital music curve, A&R has been laughable and they’ve been shown up by the goddam porn industry.

    Barry Meyer’s statements show that he is fighting for relevance. The only option they don’t offer is “free” but there are many authorized and legal sources of free music. It won’t contain Britney’s or J.Lo’s asses, but free music is big enough to cut into CD and download sales.

    If the government were to allow anything remotely approaching a free market in the area of music and movies, Hollywood would survive. However, the current CEOs who have an interest in sustaining their outdated business model will not. Not only is Hollywood selling buggies in the era of cars, their buggies are of disgustingly poor quality by have shiny paint jobs and slick marketing.

  12. I don’t understand why hardware manufacturers and those whose use their products- home users and corporate users – aren’t screaming bloody murder about hollywood trying to effect tech inovation by crippling hardware. Hollywood (moviemakers, support industries and actors) are small fish in our economy. For christ sakes the gaming industry is bigger. Why are our legislators listing to these pipsqueaks?

  13. because:

    (1) Hollywood is consolidated and lobbies;

    (2) music and movie audiences are fragmented and do not lobby; and

    (3) the hardware makers are overseas (with isolated exceptions).

    remember this next time campaign finance or lobbying reform comes up here at HnR. They are unlikely to make this connection for you above the fold.

  14. Why are they listening to the pipsqueaks?

    Simple, because money talks and BS walks. To these folks anything other than something that makes them money is BS. They make money they send money to campaigns and everyones happy. Well except for the rest of the people that get screwed in the process.

    No different than a group of people that has membership in a organization and claims they speak for an entire sector of the population. When in fact the entire membership is only say 300,000 people. So regardless of the fact that 300,000 only equals 1/10th of 1% of the population at large they claim to speak for the other 99.9% of the population as well. Biggest problem is in many cases they actually get listened to by politicians. The more money you have to share with the pols the smaller number of people you actually have to have come together to evoke change. Democracy in Action!

  15. Hollywood screams piracy then expects the government to prop up their profits with more onerous laws. Is it any surprise that Hollywood has yet to innovate?

  16. Is it any surprise that Hollywood has yet to innovate?

    This has a lot more to do with media mergers than with draconian copyright laws.

  17. prop up their profits

    That’s funny. On the one hand you braniacs claim “Big Entertainment” is too stupid to make money. On the other hand you say they’re so rich they can afford to buy off “Big Government” with protection money. What always gets left out of the “what is good for the industry is bad for music as a whole” clich? is that consumers like consuming crap and “Big Entertainment” is only too happy to provide it. The vast majority of consumers are willing to pay for it, but they aren’t above stealing it if they can get away with it. I have no problem with copyright protection. If I don’t like it, I can lump it. I claim no right to other people’s property or to tell them how to design and distribute their products. In the long run they’ll do as businessmen always have done: bend over and kiss the asses of the consumers.

  18. SamFranklin: Are you sure? Even before the mergers, the trade groups (like the RIAA) represented the industry as if it were a merged entity.

  19. ed,
    Yes they have money, and yes they are also crying that they can’t make any money. You see these inconsistent assertions as a defense of the industry? Are you at all familiar with hollywood accounting? I mean, knowing something about what you are talking about could lead one to label you a brainiac or something.

  20. Ed-When you begin a post with an insult, all you’ve accomplished is to make sure that most people will dismiss your post without reading any farther.

    Just something to keep in mind.

  21. SamFranklin: Are you sure? Even before the mergers, the trade groups (like the RIAA) represented the industry as if it were a merged entity.

    A good case to start with is SONY v. Universal (1984). Only 23 years ago, but what different times, antitrust wise. Maybe back then bigness did not equal badness. Or maybe we didn’t know what bigness really was. At any event, that case won us, the tv watchin’ public, the right to have VCRs over Hollywood objections.

    Think about how that case might play out differently today and why. Think about how SONY is different today then it was when it was winning us important rights at SCOTUS.

    Linkee:
    http://en.wikipedia.org/wiki/Sony_Corp._v._Universal_City_Studios

  22. Steve Jobs of Apple Computer? The computer company that sues others for making computers that are the same color and/or similar shape to Apple computers?

    He wants other companies to do what? Let people make direct copies? Am I reading this right? Are the direct copies okay but someone else recording the song with a similar sound not okay? Oh that last bit was not addressed.

    Steve Jobs: He’s against OTHER people’s copy protection. – raynr

  23. He wants other companies to do what? Let people make direct copies? Am I reading this right? Are the direct copies okay but someone else recording the song with a similar sound not okay? Oh that last bit was not addressed.

    Let’s address it then.

    If a computer maker adopts distinctive colors and shapes, which are then used by a competitor, then consumers are likley to be tricked.

    If a band adopts a distinctive musical style, and another band apes the style, then consumers are not likely to be tricked.

    That is probably the most important reason that that trade dress law applies differently in different commercial contexts. there are second order legal doctrines, like “palette depletion” and “aesthetic functionality” which may serve to undercut Apple’s trade dress protection at the end of the day, but it makes some sense that Apple lookalikes are protected in a way that Ben Folds Five soundalikes are not.

    DRM doesn’t have much to do with the problem of fooled consumers. people who circumvent DRM generally understand the source of the songs they want. For example, circumventing DRM is not a way to make listeners believe that an N*SYNC song was actually performed by the Backstreet Boys. DRM is about piracy (bad) and the limits of fair use (controversial and nuanced).

    In short, ip is not an all-or-nothing proposition and there is nothing incoherent about taking the position that some ip is good and other forms of ip bad.

  24. “protected” should be –forbidden–

  25. According to Box Office Mojo, Ray grossed about $123 Million World-Wide on a budget of $40 million.

    Taylor Hackford in his career has directed movies with total BO of over $400 mil in the U.S. He also has writing and producing credits and has been handed fairly substantial budgets. I am guessing that he was no longer “working class” in 1982 ( 25 years ago) when an Officer and a Gentleman grossed $130.

  26. Crikey, Sam, the Betamax case? The SCOTUS pissed all over that case in the holding of the Grokster case. I would say it’s effectively dead. The Grokster court held that the manufacturer’s marketing and intent trumps the consumer’s potential use of the item. It was the potential non-infringing uses of the item that made the Betamax legal. That’s all dead now.

  27. I don’t understand why hardware manufacturers and those whose use their products- home users and corporate users – aren’t screaming bloody murder about hollywood trying to effect tech inovation by crippling hardware.

    Because most consumers don’t know or care, and the hardware makers don’t believe they can win a game of “chicken” with Hollywood yet. It’s hard to sell portable movie players without Hollywood movies to play on them, but Hollywood will still make plenty of money from their movies whether they allow them to be played on portable movie players or not. (This probably won’t be true in five years, but for now…)

  28. Crikey, Sam, the Betamax case? The SCOTUS pissed all over that case in the holding of the Grokster case.

    Exactly. The law forms differently when the cases are like SONY versus Universal than when they are like Grokster versus consolidated industry organizations representing a few huge companies moving in lockstep. That was my point, in a nutshell.

    Unless you are saying that the Grokster case is better law than the Sony case. I will have to take your word on that bcs my Internet connection drops out everytime i try to go to a site (such as the wikipedia entry) which prominently mentions the word “Grokster.” Now that is market POWER!!!

  29. Interesting point, Sam. My point was that there has been a linear shifting of values on the bench. There used to be a rugged individualist strain (like the Betamax case: it doesn’t matter that people will use this to make illegal copies, the point is that somebody could use it for legit purposes), but now there is only a corporatist strain (hence the focus on the manufacturer’s intent in the Grokster case). Of course, Sony is more respectable than some offshore piracy company, but let’s not forget that Sony was somewhat new in the early 1980’s.

  30. Of course, Sony is more respectable than some offshore piracy company, but let’s not forget that Sony was somewhat new in the early 1980’s.

    and then there is SONY now . . . I have got the vertical integration blues.

    MP3.com didn’t do any better, and they were neither offshore nor piracy. Afetr the devastating court loss, a big player (Vivendi, IIRC, but it doesn’t matter which one really) bought the destroyed shellofa company and had it sue its own outside counsel lawyers for daring to challenge the RIAA line.

    Michael Roberts was a California boy. Saw him speak a coupla times back in tha day. Boy genius, that is. It is sad when true talent get co-opted or destroyed.

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