You may have heard the saying that goes something like, “If you owe the bank $300, you have a problem. If you owe the bank $3 billion, the bank has a problem.”
If you steal a pack of gum from Walmart, you have a problem. If your whole town goes to Walmart, loots it, and blows the store up, Walmart has a problem. You can’t arrest the whole town. Walmart has to figure out what made their customers decide to steal everything and blow up the store. And then Walmart has to fix the problem.
Content owners have the mindset that if someone downloads a TV show from BitTorrent or a song from LimeWire, they are engaging in the digital equivalent of stealing a pack of gum from Walmart. That customer should be fined, sued, or arrested. Peter Chernin, COO of News Corporation and CEO of Fox Group has gone so far as to call his customers “knuckleheads in the dorm room.”
As the Jerky Boys have noted, “this is not good business my friend.”
The customers have decided to loot the digital content store and burn it to the ground. It is up to the content owners to figure out what is wrong and fix the problem.
The Solution
Roger McNamee has already proposed the solution: “provide consumers with the content they want, in the form they want, at a price they believe is reasonable.”
This means giving me access to complete libraries, not a few movies on a half-baked Movielink (“We do not support Mac or Linux.” Thanks guys!).
This means allowing me to watch the content when I want. Not just on Fridays at 8:30pm after The Simpsons. I want to be able to watch content on my computer or TV. I want to manage my digital content and set-top box from my computer just like I manage my iPod with iTunes. I don’t want to use Comcast’s idiotic hierarchical blue-on-blue set-top box menu system. I need a tool with search and collaborative filtering built-in.
This means charging a few dollars for a film or television show.
Does this all mean that the number of $100 million budget films and $2 million per episode TV shows is going to diminish? I don’t know. Maybe Chris Anderson has the answer to that one.
I’m not asking content companies to do more work and create hardware and software that fits my personal fetishes. I’m asking them to do less. I’m asking them to do nothing but put the content out there in a simple way (e.g. BitTorrent) and figure out a way for me to pay for it when I download it.
Smart people outside the content companies will come up with the nice interfaces to access and organize the content with search and collaborative filtering and other things I haven’t thought of. Smart people will create the iTunes front-end for video content and they will probably make that front-end free. Content owners shouldn’t worry about that end of the problem — just put the content out there with an open API for getting to the content and paying for it. Other people will build the rest of the system.
(A Greasemonkey plugin on Amazon or Netflix that links to the relevant BitTorrent tracker will give you 80% of the required user interface with about 5 seconds of development time.)
DRM and Lawsuits Are Not the Answer
DRM is a waste of time for content owners. If you give customers “the content they want, in the form they want, at a price they believe is reasonable,” you don’t need DRM. People don’t want to steal. People don’t want to wait 5 minutes for LimeWire to start. They want an easy-to-use digital content store where they can buy what they want (e.g. iTunes minus its FairPlay DRM).
If you don’t give consumers “the content they want, in the form they want, at a price they believe is reasonable,” no amount of DRM will work. It will be circumvented. Even worse, it will create customer confusion, interoperability problems, and a ton of bad press. The last thing the customer needs right now is to be confused by more technical mumbo jumbo like DRM.
If you insist on using DRM, don’t sit around waiting for the ultimate solution. As Jeremy Allaire has noted somewhere, any DRM is better than the complete lack of DRM that content owners have in the analog world.
Foot-dragging by the content owners is creating a generation of consumers who think that it is okay to steal digital content. “Why should I use iTunes when I can get it free from LimeWire???” is a common refrain. LimeWire and BitTorrent are tools that the customer knows how to use right now. Are customers going to bother learning and switching over to your half-assed content store when you get it up two years from now?
Lawsuits will move hosting off-shore and won’t have much effect beyond that. To quote Hillary Rosen,
“I think, three and a half years later, the [Grokster] decision is irrelevant to the marketplace… …because there are 300 million copies of the file-sharing software out there, or maybe more…anything the court says is not going to change the environment in which the consumers are operating…so it ends up being a cat and mouse enforcement game if our side wins, and if our side loses, the innovators are going to keep doing what they’re doing….”
“The biggest mistake the music industry made was to think that tech will wait we’re ready… everyone talks about Apple and iPod being the saviors of our business, but that’s maybe $200 million when we’re still down $10 billion worth of worldwide valuations…”
In Summary
When the people revolt, there are not enough police to maintain the old order. You need a new Constitution. Content owners: publish complete libraries online using open protocols like BitTorrent and a published API. And find a way for people to pay you when they get the content. Let the hackers and entrepreneurs create the iTunes-for-video that accesses and organizes your content.
Time to hit the reset button on the media industry.
Here endeth the lesson.