What The Entertainment Industry Doesn't Understand

Let’s imagine for a minute that I have a 5 year old who loves the movie Cars. Loves it so much he even loves Cars 2. He wants to watch it over and over and everywhere. I buy him every single Cars toy, buy Cars pajamas, Cars lunchboxes, etc. But let’s imagine that I illegally downloaded the movie. Not to delve too far into this imaginary tale but … he really wouldn’t stop demanding that we go to the theaters and even afterwards just kept wanting to go and finally, one night, during a tantrum about not going to see the midnight showing for the 10th time, I finally buckled and stole the film. 

Why am I’m using Cars as an example? Because the Cars franchise, as a whole, is one the largest entertainment franchises in the World.

It has earned over $2B per year since 2007. Mind you, this is during a time when there wasn’t even a movie in theaters. The original movie sold only $406M in ticket sales but since it’s release( and before Cars 2 was released) it made more than $6B. The DVD costs $15 dollars but nearly all of the Cars toys start at that price. Clearly Disney is making the vast majority of their revenue from the franchise and not from the film. The film is, essentially, a large ad for the products.

Let’s return the fantasy where I have a brat for a kid. If I’ve downloaded the film what I have essentially done is downloaded an ad. This ad will result in my child demanding the purchase of more and more product from the franchise. The movie is, essentially, worthless on its own. It’s value is completely tied to the products around it. Downloading it isn’t theft, it’s capitulation and commitment to an intent to purchase.

But why does “illegal downloading” happen at all? Many times illegal downloading happens because the content creators believe they have a right to control the distribution of their product. They believe that they will increase value by decreasing supply. But the Internet has shown their product for what it really is: a vehicle for a brand. Movies, like music and even books, become more valuable the more widely they are distributed. The more deeply a franchise reaches into the heart and soul of a culture, the more value that brand can extract from our beating core. The Internet has already increased this distribution and already created the value-add but the industry has yet to see the truth.

Downloading of entertainment, whether paid or otherwise, is a net benefit to the entertainment industry. Their product is not the content. Their product is the franchise and brand around the content. 

Don’t believe me? Harry Potter anyone? It’s the largest movie franchise in history, recently breaking the $7B mark in ticket sales. But the franchise as a whole is said to be worth $15B and that figure was released before the most recent film was released. Or how about Star Wars? If you’re a 30-something guy and didn’t have a Star Wars action figure when you were 10, you probably had some major moments of peer-pressure-induced self-doubt.

Ok, but the Entertainment Industry needs to make money on the films themselves right? What about movie theaters and Netflix? I’ve been wondering the same thing. But at this point no entertainment lawyer has a solid figure about what percentage of loss is actually happening because of illegal downloads. They simply say that it is “hindering” the growth of their industry. Which is odd, since the entertainment industry is growing at a faster pace than the US economy

So what’s to be learnt here? If I could wave a wand (sorry) and make the industry learn something it would be that supply and demand are not the issue.  There’s far more value to be gained from two directions: 

first, create more depth to your franchises to create more products, 

second, create distribution platforms that promote the widest possible distribution of your films to the broadest audience.

What happens if they don’t learn this lesson? Well, then SOPA and the Protect IP act will come back to haunt the industry in a few years. Why? Because these bills reduce the ability to widely distribute the content that sells the products which make all the money in the first place. The Internet as a whole will simply adjust and the theft they were trying to stop, won’t. But when it comes to their own distribution, the studios and distributors will run into issues with the people who actually created the work. 

If the industry can learn this simple set of ideas then there’s no need to try and destroy the Internet. Because no matter how flexible the Internet is the Protect IP and SOPA bills will hinder its growth. That means hindering the growth of the US. You see the Internet is responsible for 1/5th of GDP according to a recent McKinsey report. “Stopping Piracy” won’t happen but “hindering growth”? Well, that will but the one’s being hindered will be the innovators and the job creators, and not the thieves.

Ok, rant over…

oh wait … what’s that over there? Looks like the video game industry.