Why entertainment industry release windows drive piracy that we all have to pay for

My latest Guardian column, "Why the entertainment industry's release strategy creates piracy," looks at the weird entertainment industry practice of defending their right not to sell us the things we want to buy, and the rather more odious practice of asking the public to foot the bill for this strategy:

In a real marketplace, the ability of entertainment companies to stagger their releases would be curtailed by the willingness of customers to put profits ahead of their own desire to watch TV or movies when the rest of the world is talking about them on Twitter and Facebook – and not six months later, timed to coincide with a bank holiday. However, by equating watching TV at "the wrong time" with theft, the entertainment companies have been pretty successful in convincing politicians that the public should foot the bill for this decision through costly market interventions, up to and including a branch of the City of London police charged with finding copyright infringers.

Which brings us back to the empirical evidence on lawful alternatives and piracy rates. The fact that people eschew the black market when there is a legitimate alternative tells you that they're not thieves looking to steal. Rather, like the notional customer who sneaks in her own fizzy drinks rather than paying for the cinema's insane markups, they are potential customers whose purchases have been forfeited by a business that has violated rule number one: offer a product that people want to buy at the price they're willing to pay.

Why the entertainment industry's release strategy creates piracy

• [Michael D]

  Haven’t really noticed. When they started becoming jerks, my consumption of their product dropped by about 95%. What they do now, I hardly notice. The only solution, it appears, is an appropriate reaction: if you don’t like the vendor, don’t use his product.

  • [GlyphGryph]

     Except the article is about how that doesn’t work – they end up hitting your pocketbook anyway to pad their own bottom line.

  • [len]

    Or you can pirate it, and taunt him with the fistful of money he could have taken if he were willing.

• [Another Kevin]

  I do wonder sometimes how the entertainment industry will work it out that they’ll put a toll on other recreations. When I shoulder my backpack and head off into the state forest lands, that must be infringing on their rights, mustn’t it? Because I’m having fun without consuming their product! 

  Maybe the birdsong is infringing some music baron’s copyright, as with http://productforums.google.com/forum/#!category-topic/youtube/how-to-use-youtube-features/eSjKSGBrFMo .  Or maybe the views from the mountaintops are trademarked: http://www.nytimes.com/1990/08/02/us/monterey-journal-trees-and-trademarks-the-disputes-run-deep.html .  I’m sure a clever lawyer can think up something.

  And that’s why boycott won’t work as a strategy. The entertainment moguls claim to own your whole life. You can’t boycott when they think everything is theirs.

  • [comma splice]

    You are confusing litigation with something larger: the capitalization of cinema.

    Investment in Hollywood cinema certainly accounts for the historical state of leisure. The Hollywood film business did not exist before the late nineteenth century, and could it exist if people were doing other things with their time? The Avengers, for example, can be valued as an asset because there were confident expectations about the habits of moviegoing. Is this a natural phenomenon? Will this or does this need to continue forever?

• [SamSam]

  Yoiks that’s a hard headline to parse. I finally got it after reading The Guardian’s headline, which adds a possessive and removes the “windows drive piracy” construction that I was stuck on… (I was wondering who was pirating Windows drives, and why the industry would release the piracy.)

  Anyway… that aside… yes, good points!

• [comma splice]

  “Today it’s hard to find any knowledgeable person who thinks that making more money by delaying a release to an optimal date is possible, except to the extent that the knowledgeable person is selling something.

  That’s not surprising. Lots of businesses would be more profitable if their customers arranged their purchasing choices for maximum seller profitability. But in the real world of markets, businesses have to confine their profit maximisation strategies to schemes that customers are willing to go along with.

  So cinemas can charge hefty markups on soft drinks, but not totally insane markups. Once the markups reach a certain threshold, the losses from people who sneak in their own drinks will outstrip the extra profits from the higher margins earned on “honest” customers, and prices have to come down.”

  Is this even logically true? Could not a cinema increase its prices in order to make up for the losses, rather than try to compromise with the “less than honest” customers? And in any case, what is this threshold? Is there even a threshold if the “less than honest” customers are a tiny proportion of all moviegoers?

  The same can be said for piracy. The choice between paying to see a movie and pirating it is a real choice, but one that may only apply to relatively stable proportion of all moviegoers. Yes, there are a whole bunch of people that know how to use utorrent, but do the markups of the filmed entertainment business change when there is a growth in pirating?

  • [lafave]

    “Could not a cinema increase its prices in order to make up for the losses, rather than try to compromise with the “less than honest” customers?”

    No – there is a ceiling – a maximum point at which the decline in profit from people not buying tickets/soda, etc exceeds the profits from people willing to pay the increased prices.

    • [comma splice]

      I was not trying to suggest that a cinema can increase its prices indefinitely–so yes, at a certain point, prices will rise and  people will say, “No thank you.”

      But there is a difference between charging “what the traffic may bear” and making a theoretical argument that this hypothetical ceiling is relevant in this particular situation.

      Can a cinema raise its prices 75%? Probably not. But could it raise its prices at a slightly faster rate than the rate of inflation? Possibly, and in this case I am not sure why the so-called ceiling (a fav in neo-classical economics) should forclose alternative theoretical curiosities.

      • [lafave]

        You can play with the prices to try to find the sweet spot, but (in the US, for example) wages declining relative to inflation, raising prices on luxuries means that people will buy fewer movie tickets, so good luck with price increases.

        • [comma splice]

          I don’t know if it is that simple.

          The black series is ‘real’ average US movie ticket prices, expressed as a rate of change and as a three year moving average.

          The red series is ‘real’ US hourly earnings, also expressed as a rate of change and as a three year moving average.

          It seems that there have been periods when US movie ticket prices have increased when US wages have stagnated or declined.

• [Kaleberg]

  It always puzzled me that movie theaters don’t sell copies of the movie in the lobby on one’s way out to capture the peak purchase moment, right after viewing the movie on the big screen. It’s obviously not about the money.

  • [oasisob1]

    Because that would cut into the studios’ revenues. Studios want only 1 channel for their product at that time – go see it in the theatre. If people could buy it in the lobby, they would, then go see it at home on their 50″ screens while drinking soda and eating popcorn that didn’t cost $30 – they’d skip seeing the movie at the theatre entirely.

    • [C W]

      The theaters make the money off the concessions, not the studios. AFAIK the studios only get their cut off ticket sales.

• [Richard]

  Obligatory Oatmeal link:
  http://theoatmeal.com/comics/game_of_thrones

• [Jackson Bloomston]

  The title of this post should be rewritten. I’m extremely interested in this conversation, particularly Cory’s take on it… but the headline is confusing to lay people.  I had to re-read it a couple times myself.  

  Side-note:  it’s awesome that Cory has a column at The Guardian.  I wish some big US papers/sites would pick up articles like this too.

• [andygates]

  Example of the moment: Wreck-It Ralph. Great reviews, plenty of buzz, all my nerd friends overseas went to see it, maybe I’ll indulge over the holiday. Oh. Maybe I’ll indulge after FEBRUARY?  GUYS, WHAT THE HELL?

  I’m throwing my money at them but they don’t want it?  This industry built on gratification is telling me to wait?  All the spoiling will be spoiled, all the buzz buzzed off.  Godsdammit, I threw my money at them and they threw it back.  I’ll just torrent it instead.

• [Gerald Mander]

  Unshakable release windowing also enormously affects the business models of services such as Netflix and Hulu. One of the major complaints is that more recent releases aren’t available for streaming. Netflix would love to stream The Hobbit 10 minutes after the last theater screening ends. But the film studios won’t allow it until after foreign release has ended, then DVD releases have peaked and declined, then (sometimes) the film has had its tentpole run on cable.

  Like the music industry, they are increasingly out of touch with how the public wants to consume their media. Any time you have people saying, “Look, I’m begging you, take my money, please!” and you reply, “Not without me imposing conditions that will prevent you wanting to give it to me,” you’re basically allowing the construction of the wall you’re eventually going to hit.