Aug 09
20
The Problems Of Being In The Content Business
I was talking yesterday to a young entrepreneur who thinks he has a P2P product that is going to set the world on fire. He was telling me that he has had some problems getting interest from the big studios. Not surprising. Let me give you a few insights into the challenges that the big studios have, and how they do business…
Not by any means an exhaustive study, mind you – but just a few thoughts:
One of the problems that you have when you create a set of rules (such as copyright) which enable you to build an industry, is that you have to follow the rules that you have set yourself. Now you can say that the movie or the music industry didn't set the rules – they were put in place by successive governments – but the reality is that the rule book that we have nowadays looks the way it does because of consistent lobbying by the various peak bodies that represent the various stakeholders in the industry and the lawmakers, our elected officials, trying to find the appropriate middle ground in legislation, that satisfies as many people (in the industry) as possible. The will of the people isn't generally consulted because the people are considered to not know what's good for them.
So when you have to actually play by the rules doing things becomes somewhat complicated, particularly when you have a technology in play that can so easily be adapted by the people who don't know what's good for them.
For instance, a young entrepreneur that wants to play in the P2P space may think this way:
“Imagine if I could build a distribution system for content built on a P2P platform that would make it easy for consumers to watch their favourite movie, wouldn't that be cool? I wonder if I could get someone to invest in it? If I could get an investor, they would want to make money out of it – maybe I can build an ad serving engine to go into my new player?” And so on….
Then they get religion and decide that the idea is really cool so they had better think about how to pay the content owners a piece of the megabucks that are going to be generated from the cool idea.
Here is where it gets tricky.
The studios (certainly the Hollywood studios anyway – and that is the bulk of the business) would love to make more money. If the right idea comes along they will be into it like a rat up a drain. The problem is that the Hollywood studios have to follow a very strict set of rules that have come into place over decades. These rules are so important that it would be a death sentence to break them.
(I remember a friend who used to work with legendary movie producer Saul Zaentz telling me that Saul said there were only two things that a successful producer had: His word and his taste).
The problem for Hollywood is that there are so many interested parties that need to be brought to the table for a discussion and any discussion that requires them to agree gives the other side an opening to negotiate on a lot of other stuff. So the result is that Hollywood really doesn't want to open discussions at all.
These parties that would need to provide agreement on any move into a new medium are the following:
The Screen Actors Guild (SAG). SAG has an agreement with the studios that provides for a certain amount of residual to be paid to actors who are members (which is everyone who sets foot on a set on that side of the camera) when there is ancilliary income of some kind. So when a scene from a movie featuring a crowd is licensed out to a consumer goods manufacturer for instance to go into a TV commercial, the SAG collects a fee and distributes it to the members who were in the particular movie. They would need to agree to the terms of any deal for content to be distributed via P2P with a revenue stream from either pay per play, ad supported or whatever scheme is dreamed up.
The Stars: Every movie star contract with anyone of note has exclusion clauses up the kazoo. These provide that nothing embarrassing will happen along the way. So for instance a star has an endorsement agreement with Rolex watches. He or she wouldn't want their name or likeness associated with Seiko. That would put their personal endorsement agreement into breach. So the movie studio basically takes the view that they cant license a move for ad content, because it would mean a huge amount of administrative work to figure out whether there is a possible watch commercial that could create embarrassment. Now I know you are going to say: “Well on TV they interrupt the movies with commercials all the time – that doesn't seem to cause a problem”. That is right, but that is one medium that is probably called out in a specific clause in the contract and carefully defined. The agreement probably carefully prohibits all other kinds of distribution, whether invented now or not, and puts them in a wrapper that means that an army of lawyers will have to go through the contract to figure out what the deal is.
The music copyright owners: The owners of the music master and the song have synch licenses in place for the movie that are specifically for the movie. When the movie is played on TV, the copyright owners get paid, because along with the movie a set of cue sheets travel that show every piece of music in the movie. They go to the performing rights society in the country so that when a broadcast takes place the TV company pays the performing rights association, who then account to the relevant society in the country where the writer lives and so the payment takes place. When there isn't an agreement in place because the technology is new, there can't be a payment, and so the agreement probably prohibits distribution by means that are not yet invented without there being a renegotiation of the agreement.
Then there is the Screen Writers Association. The same thing applies there. A carefully constructed set of agreements that allow for the payment of residuals for the original writer of the book that the movie was based on, the guys who wrote the screenplay etc.
Then there is the Director and the Producer. These guys possibly have a huge say in what happens to the movie depending on who financed the movie and how important they are in the pecking order of Hollywood.
And each of these groups knows in their heart (regardless of the truth) that they are being screwed mercilessly by the studios. So any opportunity for a fight to get a better deal is welcome.
So the studios have a very jaundiced view of the sort of “opportunity” that are offered to them by geeks who say, “We have this cool P2P device that is going to make you millions”. Because it is too damned risky for them.
For them it is frankly much easier to keep fighting P2P distribution and to demonize it totally and to throw the weight of their lawyers behind prosecuting content distribution by new means.
It is actually the path of least resistance! And nature always follows the path of least resistance.
So when you are next thinking of a really cool idea that is going to change the world, just realize that it may make perfect sense to you, but you are actually up against the weight of a huge machine that is not just the studios. It is actually the entire creative ecosystem.