What I’d tell my own kids about piracy. Why scarcity is a good thing.

Photo by Gaia Moments
Photo by Gaia Moments

The ongoing debate over copyright in the digital age is clouded by so many layers of new-age malarkey and overblown, political banner-waving that it’s easy to lose sight of the behavioral realities behind all the self-serving theories of bloggers, legal scholars, corporate interests, and futurists. Take a very common activity like watching movies online via torrents or other sites that enable free viewing (aka piracy).  My kids’ generation, growing up around this behavior as a norm, will hear words to describe this kind of movie viewing as contrarily theft or sharing.  What are they to make of it?  Certainly, I’ve taught them to share and not to steal.  For the sake of their cultural and psychological growth, however, I’d suggest for the purposes of discussion, that this kind of media overconsumption is, if nothing else, dumb.

For context, we need to admit that the majority of unlicensed, online movie viewing is done by young, middle-class, generally privileged Americans, who are watching mainstream, Hollywood-produced fare. Search for top movies viewed through torrent sites, for example, and you’ll find that the lists will comprise tentpole films produced by the big studios who represent the part of the industry most vilified for efforts to mitigate piracy. If that hypocrisy is not enough to raise your brows, though, the very nature of these films is then used as a justification for the pirate-enabled viewing in itself. We typically hear some combination of the following:  “So much of the mainstream stuff is junk that it doesn’t deserve to be paid for.  These films already make millions. I would never pay to see it anyway, so it’s not like they’re losing a sale.”  If my own kids presented me with these rationales, we’d have a serious talk because this is corrupt thinking no matter what the law, the technologists, or the economic theories say.

Consolidate these oft-repeated positions into the declarative, first person, and the stupid shines through a little clearer:  “I’m going to spend hours of my life watching movies I probably won’t like, but because I expect not to like them, I’m not going to pay for them.”  And as a kicker, “I am going to help put money in the pockets of the people who stole the movies in the first place.”  Bloggers like Mike Masnick will try to argue the new and bizarre economics of free media; and scholars like Mr. Lessig will argue that there is something intellectually or culturally constraining about “permission culture.” Then, these purely academic theories trickle down to the ears of my kids and their contemporaries, who translate it all into the aforementioned rationale. But as a parent living in the real world, what I’ve just heard my kids say is that they’re shoplifting cartons of potato chips at the corner store, which doesn’t matter because chips aren’t real food anyway.  Hence, my kids now have both a moral and a health problem.

With regard to movies (or any creative media) the first thing I’d tell my own children is that their lives are not at all enriched by watching scores of films they probably won’t like. To the contrary, when they make time for media consumption, they should develop a critical sense for what kind films might be worth the investment of their time and attention. What matters is not the fifty films they’ll forget within hours of viewing, but the five this year that will change their lives in some way. It doesn’t matter that the sale for the producers of the tentpole is zero whether my kid watches it through a torrent or doesn’t see it at all; what matters is making the decision that if it isn’t worth paying for, it probably isn’t worth the equally valuable resources of time and attention. In short, it’s not only okay to let some things go, you don’t really have a choice.

It is a valuable component of cultural experience for the individual to pay attention to what kind of art or media affects him and to seek out that which fulfills these emotional connections.  Nobody can watch, read, listen to, or experience everything; so there is not only nothing wrong with scarcity, it is an absolute necessity for an individual’s cultural development. Those who promote the idea of abundance as some sort of digital-age renaissance are not really contributing to a more enlightened, more cultured generation so much as they’re breeding a new crop of agitated media junkies. Remove for a moment the questions of legality or creators’ rights, and we’re still living in an era of media obesity and don’t yet know what this means for the future of culture in general.

Many of the filmmakers whose works have touched my life and the lives of my contemporaries were dead before the Internet was even built.  We somehow managed to experience their films without this technology and without in any way contributing to IP theft. Through pre-Internet experiences, I have seen motion pictures that I doubt my own children will ever know existed; and still, in over thirty years of loving this medium, I know that there are dozens, if not hundreds, of films that I will not see in my lifetime. This is true for my children as well, despite the overblown promise of technology to put “the world at their fingertips.” So, what I’ll tell my kids is simply this:  “You can’t consume it all, you shouldn’t try, and whatever is worth your time is also worth your money.”

Talking Branded Entertainment with Filmmaker Amy French (Podcast)

There are a lot theories and a lot of experimentation with regard to independent filmmaking, the digital age, and the prospects for redefining the ways in which filmed entertainment can be funded by sponsors and distributed over the web.  I thought it would be interesting to talk to Amy French, an old friend who is a writer, filmmaker, and actress who has experience in the world of traditional TV commercials, in independent feature filmmaking, and is now working in the world of branded entertainment. Amy and her colleagues just released her first project in this format — a humorous mockumentary style  series for California brand Umami Burger. You can watch Episode 1 of “The Fifth Feeling” below and watch the rest of the series at funnyordie.com.

I spoke to Amy in Los Angeles via Skype.  See podcast player below.

For more information about Amy and her work, visit www.ameliafrench.net.

Pandora Isn’t Exactly Struggling

Yesterday, on Capitol Hill, the House Judiciary Committee held a hearing to discuss the Internet Radio Fairness Act, a bill largely backed by Pandora Media, Inc. and opposed by a growing number of musicians and songwriters.  In fact, I recommend Chris Castle’s excellent synopsis of the message taken to The Hill by a handful of songwriters.  If you want legal context for understanding the IRFA, I’ll direct you to Terry Hart’s Brief History of Webcaster Royalties, but if that’s more nitty and gritty than you want to know, consider this:

In defense of Pandora’s position that internet radio services should pay lower license fees to musicians and songwriters in the interest of “fairness,” you’re likely to encounter the bullet point that “Pandora isn’t even profitable yet,” conjuring an image of some fledgling, innovative enterprise trying desperately to survive within an outdated system.  But as a guy who grew up around the motion picture industry, knowing something about the shenanigans of some producers, I know that literal profitability ain’t necessarily the same thing as everybody making buckets of money.

Keeping in mind that Pandora, like so many internet-based services, is basically a means by which software delivers a product that someone else has invested to produce, I had to wonder what kind of costs other than licensing Pandora has to cover while it is supposedly staggering toward profitability. Not surprisingly, according to the income statement on Yahoo Finance, the Operating Expenses shows two lines:  R&D at a mere $130k and Selling General and Administrative at just over $249 million.  This is from January 30, 2012 against revenue of just over $274 million.  Presumably, the cost of licensing music is part of this second line item along with basic overhead like rents, servers, etc.  But the rest is salaries and bonuses.  What else do they have to pay for?

Now, when an ordinary entrepreneur thinks of a business that isn’t profitable yet, he thinks in terms of continually reinvesting in his business, keeping his own and any other founders’ salaries in check while growing that business and pouring in a ton of sweat equity.  It just so happens that this is exactly what a songwriter, performer, or emerging new band does most of the time.  But web entrepreneurs have a history of making money while losing value.  Remember the Dot Com bubble?  There was plenty of loss, but plenty of start-up founders also made out like bandits in the process.  Failing with a few million in one’s pocket would be an artist’s dream because the nature of the work is so fickle, but I digress.

The top five executives at Pandora, not including founder Tim Westergren, earn combined salaries of just under $3 million, although CTO Thomas Conrad had exercised stock options of $5.9 million as of the January 30 report.  Mr. Westergren is worth an estimated $100 million.  According to Pandora’s own statements, it paid “50% of its revenue in fees” last year.  Assuming this is true, that’s $137 million, plus the $3 million in top executive salaries, plus some unknown number to Tim Westergren, but let’s estimate that there’s at least $100 million or so left for other expenses, including the salaries of 530 employees.  Divided evenly, which of course it is not, that would be annual salaries of over $180k per employee.

So, there is a world of difference between a company being profitable and those in the company making lots and lots and lots of money.  If Pandora fails because, as it claims, the licensing fees are unfair, then many people involved with the company will walk away having failed upward.  Meanwhile, it won’t take long for a new internet radio service to appear — one that can be profitable without exploiting the people and companies who make the real investments in the products that make radio function in the first place.