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Digital Piracy: Competing Against Free

digital-piracyFor as long as I can remember the motion picture industry has been involved in their never-ending war against piracy. Their movies have been pirated since the invention of the VHS. They always complained about how piracy was hurting them. They have been fighting piracy mostly through legal means(i.e. law enforcement, lawsuits, cease and desist letters, and lobbying for legal protection), and it seems that they are wasting more money than they are recouping. I remember seeing on the news a group of police officers who raided a small shop in Los Angeles that was purportedly seeing bootleg DVDs, and from what I remember, the store didn’t have that much.

In the digital age, where piraters can remain anonymous to a certain degree and information moves at the speed of light, getting rid of piracy is akin to washing your dog. You spend all that time cleaning her and 30 minutes later, she comes back dirtier than before, jumps on you and ruins your favorite shirt… My dog sucks. The motion picture industry, and most of the entertainment industry in general, took a long time to warm up to the internet. Why support a medium that makes it easy for others to steal from you, right? It took people outside of the industry to show them that there are better ways to fight piracy, and some of them are starting to see how the internet can grow their industry.

Recently, Ted Sarandos, a top executive at Netflix, said in an interview how Netflix has successfully been battling piracy by providing better access to the movies and TV shows that everyone loves.  He specifically stated that whenever Netflix launched in a new market, bittorrent traffic in the area dropped and Netflix usage increased. BitTorrent is one of the main programs used by piraters, but it does also have legitimate data sharing usages.

Another and perhaps easier way to look at all this is money.

In 2012 alone, the box office reported that movie theaters sold $10.84 billion worth of tickets in the US alone, beating the previous record of $10.59 billion. (Not bad, Hollywood.) Sure, this doesn’t mean every movie that was released in 2012 made a profit. Or broke even for that matter.  John Carter, with a budget of $250 million, only sold $73 million in tickets. (Sorry Disney. But I’m sure you can handle the loss. Avengers, anyone?) The movie industry is claiming that piracy is hurting them, but the numbers seem to say otherwise. But I can understand where they are coming from. Each time a movie is pirated through BitTorrent or any other method, it’s money that could go into their pockets. That being said, if piracy was so much of a problem that record-setting revenue years couldn’t keep Hoolywood afloat, then we wouldn’t see any movies being made.

On that same note,  streaming services like Netflix and Hulu are making more money each year.  Hulu alone, which grossed less than $100 million in revenue in 2008, closed their books in 2012 with $695 million. In 4Q, Netflix posted a revenue of $945 million. With piracy as rampant as the movie industry claims, businesses like these were doomed to fail, right? I mean after all, who would want to pay for something they can get for free?

Clearly, something is amiss.

So how do you compete against a competition that gives away your product for free? Sarandos believes that the best way to combat piracy is to provide their customers with better options than the pirates.

Pirating movies from BitTorrent, while free, comes with a few downsides. The speed at which a pirater can download a movie is dependent upon how many good sources, or seeders, that person has to draw upon. Lower numbers potentially means slower downloads. Also, each movie takes up hard drive space, especially for people who prefer to only watch movies in HD quality. There are some some simple and some complex technical changes a BitTorrent users can make to their network router and computer to improve the download rate, but there is always a limit. Plus you have to know which websites to go to in order to download the torrent file and also hope that these files are clean and malware or virus free.

Netflix

Netflix provides instant access to a huge library of Movie and TV show titles and in HD quality, all for only $7.99 a month. I’m not trying to advertise for them here, but you get the picture right? In today’s day and age, people do almost everything on the computer, from talking to friends, doing work, playing games, and even watching movies.

The best example I can give in this regard is the Valve software company. Valve created Steam, a game platform that sells and distributes thousands of games to their subscribers. In an interview with the Cambridge Student, Gabe Newell, Valve’s co-founder and managing director, said that the company’s goal was to create a greater service than pirates and that piracy had been a non-issue for the company.

“Prior to entering the Russian market, [Valve was] told that Russia was a waste of time because everyone would pirate their products.” The problem was that most video game publishers released all American made games in the US first, and then released the game in the other countries a few months later and there were always restrictions like region lock. This, it is argued, caused people who wanted to play the latest releases, which is everyone, to look for pirated games. However, pirated games have many drawbacks: some required hacks, there were no updates to improve the quality of the game, and certain features, like online play, were removed or unavailable.

Valve, when they brought their platform, made all of their games instantly available, cheap, and easy to purchase. The Company even gave their users an option to sell or gift their own games to a friend. Russia is now one of Valve’s largest markets in Europe. If they can succeed in a market notorious for digital piracy, then there is hope for the movie industry.

Just look at CK Louis. He sold his comedy special, DRM free, online for only 5 dollars. Guess what. He raked in one million dollars after 12 days.

So the blueprint to fight piracy is out there. Just give us instant access to all your high quality movies for a small fee. That would be awesome.

simpsons movie - chalkboard

Jun Kim
Jun Kim is a writer based out of Los Angeles, California. After graduating with a B.A. in Comparative Literature, he worked as a researcher for a prominent Orange County law firm. Currently he is the head technical writer for a corporate tax consulting firm who splits his day between analyzing tax credit studies and sneaking naps in his office. A self-professed lover of EDM and gamer extraordinaire who loves concerts and moonlit strolls to liquor stores.

2 thoughts on “Digital Piracy: Competing Against Free

  1. This jives with numbers they’re getting back from the new season of Arrested Development. It’s piracy numbers are way less than expected, presumably because Netflix made it so easy to get.

  2. I agree. I used to be a huge violator in terms of downloading movies, but since the advent of Netflix’s streaming service, I rarely look for illegal options.

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