The Sky Continues To Rise: EU Gross Box Office Returns And EU Film Production Both Hit Record Highs In 2011

Even though just about every objective statistic suggests otherwise, the copyright industries still take turns bemoaning the terrible toll that piracy is supposedly taking on their markets. So it's good to come across some official figures that suggest the contrary, particularly because in this case they come from the European Audiovisual Observatory—not a market research company, but a public service body. Here are the latest numbers for the European film industry:

On Techdirt.

'British Cinema's Golden Age Is Now': So Where's The 'Serious Problem' Of Copyright Infringement?

Last week we learned the UK government has precisely no evidence to support its plans for stricter copyright enforcement, which include disconnection upon repeated accusation. Instead, the best it could come up with was: 

On Techdirt.

The Origins of Europe's Suicidal Copyright Policies

One of the most important recent pieces of research to appear in the field of copyright and its enforcement was "Media Piracy in Emerging Economies".  If you haven't read it, please do so now - I'll wait...

The author of that study, Joe Karaganis, has now penned perhaps the best short explanation of why Europe's policy on strong enforcement of copyright does not make economic sense:

where do the EU’s economic interests lie?  Let’s look at the numbers:

*** According to the World Bank, Europe’s audiovisual imports exceed its exports by a ratio of around 4-1.  In 2008, Europe (EU 27) imported roughly $14.7 billion in audiovisual and related services (basically, licenses for movies, TV, radio, and sound recording).  In contrast, it exported about $3.9 billion, for a net trade deficit of $10.8 billion  (International Trade Statistics 2010: 156).

*** About 56% of those imports ($8.35 billion) come from the US.  The EU, in turn, exports about $1.7 billion to the US, resulting in a net negative trade balance of around $6.65 billion.  This does not include software licenses, where US companies monopolize larger parts of the European consumer and business markets.

*** The US, in contrast, is a large net exporter of audiovisual goods, with roughly $13.6 billion in exports and $1.9 billion in imports.

 Therefore:

For countries or regions that are net importers of copyrighted goods, higher IP standards and stronger enforcement will result in increased payments to foreign rights holders.  Because the US thoroughly dominates European audiovisual markets, stronger enforcement in these areas is, in practice, enforcement on behalf of Hollywood.

So pirating of US audiovisual products actually reduces the outflow of money from the European economy.  Ah, yes, the industry pundits will retort, but what about the loss of revenue due to pirating of copyright works that circulate purely within the EU?

Domestic piracy may well impose losses on specific industrial sectors, but these are not losses to the larger national economy. Within a given country [or in this case, region], the piracy of domestic goods is a transfer of income, not a loss. Money saved by consumers or businesses on CDs, DVDs, or software will not disappear but rather be spent on other things—housing, food, other entertainment, other business expenses, and so on. These expenditures, in turn, will generate tax revenue, new jobs, infrastructural investments, and the range of other goods that are typically cited in the loss column of industry analyses. To make a case for national economic harms rather than narrower sectoral ones, the potential uses of lost revenue need to be compared: the foregone investment in the affected industries needs to represent a better potential economic outcome than the consumer surplus generated by piracy (Sanchez 2008). The net impact on the economy, properly understood, is the difference between the value of the two investments. Such comparisons lead into very complicated territory as marginal investments in different industries generate different contributions to growth and productivity. There has been no serious analysis of this issue, however, because the industry studies have ignored the consumer surplus, maintaining the fiction that domestic piracy represents an undiluted national economic loss.

For our part, we take seriously the possibility that the consumer surplus from piracy might be more productive, socially valuable, and/or job creating than additional investment in the software and media sectors. We think this likelihood increases in markets for entertainment goods, which contribute to growth but add little to productivity, and still further in countries that import most of their audiovisual goods and software—in short, virtually everywhere outside the United States.

This is a point I've made elsewhere, and which is almost universally overlooked in analyses of the economic impact of piracy.

The paper then provides a fascinating analysis of one particular industry, that of films.  It looks at what films are made in which countries, and who really benefits.  Not surprisingly, it reveals that the European film industry is completely in thrall to Hollywood, and it is this that is guiding copyright policy in Europe:

It’s this junior partnership that should be weighed against the wider sacrifices of privacy and freedom of speech built into so many recent national and EC-level IP enforcement policies, such as the French ’3-strikes’ plan, which will cut French citizens off of the Internet for the piracy of Hollywood productions.  Strong enforcement reinforces status quo positions in the market, but at an escalating public cost as consumer behavior becomes the real focus of enforcement activities.  There is nothing in these policies will alter the balance of cultural power or change the direction of payments.  That’s why I’ve characterized the EC enforcement plan as: “send money to the US.”

Moralizing IP rhetoric is also a handicap in this context.  Continuing to defend IP as a fundamental right long after it has been made an object of trade policy is to surrender any real leverage in making deals.  A trade negotiator would be very lucky have such a partner on the other side of the table.  

And that's precisely what the US has in Europe, not least thanks to Sarkozy, who has been the main proponent of Europe's counterproductive copyright infringement agenda.  The key statement of that topsy-turvy policy was made by him during the global joke known as the e-G8 meeting:

I know and understand that our french conception of author’s rights isn’t the same as in the United States or other countries. I simply want to say that we hold to the universal principles proclaimed in the American constitution as much as in the Declaration of the Rights of Man in 1789: that no one should have the product of their ideas, work, imagination–their intellectual property–expropriated with impunity.

Each of you understands what I say here because each of you is also a creator, and it is in virtue of these creator’s rights that you have founded businesses that today have become empires. The algorithms that give you your strength; this constant innovation that is your force; this technology that changes the world is your property, and nobody contests it. Each of you, each of us, can thus understand that the writer, the director, or the performer can have the same rights. – French President Sarkozy, opening the ‘e-G8? conference that he convened this past April.

As Karaganis points out:

With this fulsome praise of tech and media CEOs at the e-G8, Sarkozy expressed the basic European cognitive dissonance on IP:  the embrace of universal rights as a way of pretending equality with the real powers in the room.

The rest of his piece looks at how Europe ended up in this position where it would be arguing strenuously for an approach that was against its own best interests.  As such, it provides invaluable context for today's moves, and should be read by anyone wanting to understand them - and to counter them.

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Nigeria, India, China: Our Copyright-Free Future

Here is another of Kevin Kelly's brilliant posts, but this time it's not about deep philosophical issues, but something really mundane: "How to Thrive Among Pirates". It is probably the best post I have read on the subject, since it manages to marry fresh anecdotes, a wonderful eye for detail and convincing analysis. Here's the summary (but do read it all):

1) Price your copies near the cost of pirated copies. Maybe 99 cents, like iTunes. Even decent pirated copies are not free; there is some cost to maintain integrity, authenticity, or accessibility to the work.

2) Milk the uncopyable experience of a theater for all that it is worth, using the ubiquitous cheap copies as advertising. In the west, where air-conditioning is not enough to bring people to the theater, Hollywood will turn to convincing 3D projection, state-of-the-art sound, and other immersive sensations as the reward for paying. Theaters become hi-tech showcases always trying to stay one step ahead of ambitious homeowners in offering ultimate viewing experiences, and in turn manufacturing films to be primarily viewed this way.

3) Films, even fine-art films, will migrate to channels were these films are viewed with advertisements and commercials. Like the infinite channels promised for cable TV, the internet is already delivering ad-supported free copies of films.

Which is, of course, pretty much what I and people like Mike Masnick have been saying for a while.

It concludes with another rather good summing-up of what's happening here, and where we are going:

Producing movies in a copyright free environment is theoretically impossible. The economics don’t make sense. But in the digital era, there are many things that are impossible in theory but possible in practice – such as Wikipedia, Flickr, and PatientsLikeMe. Add to this list: filmmaking to an audience of pirates. Contrary to expectations and lamentations, widespread piracy does not kill commercial filmmaking. Existence proof: the largest movie industries on the planet. What they are doing today, we’ll be doing tomorrow. Those far-away lands that ignore copy-right laws are rehearsing our future.

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Cameron as Future Avatar of Film Industry

For some months now, I've been touting "Avatar" as a good example of how the film industry should be concentrating on enhancing the experience of watching films *in the cinema* - something that no copied DVD can reproduce - thus making unauthorised copies pretty much into marketing devices that encourage people to go to the cinema for the full experience.

It seems that one person who gets this is James Cameron himself:

He said the music industry made a critical mistake by trying to stop piracy instead of innovating to give consumers new experiences that the industry could use to generate more money.

"The music industry saw it coming, they tried to stop it, and they got rolled over," he said. "Then they started suing everybody. And now it is what it is."

Instead, Cameron said he has tried to innovate to give movie goers a reason to go to theater. And in creating a rich, "reinvigorated cinema experience," Cameron said he discovered that people are willing to pay money to experience the same content in different ways. Not only are they willing to pay $10 or more to see Avatar on the big screen in 3D, but they also will pay to own the DVD and to take it with them on their phone or portable device.

"People are discriminating about the experience," he said. "They want to own it, have it on a iPhone when they want it, and they want the social experience of going to the cinema. These are really different experiences. And I think they can all co-exist in the same eco-system."

Cameron said the fact that people are still going to the theater to see Avatar now nearly four months after it was released supports his conclusion. He said he has had several discussions with the movie studio trying to figure out when to release the DVD of the movie. Typically DVD's are released after the film has left movie theaters. But he said since people are still going to see the movie in the theater, they decided to release the DVD next month with the movie still playing in some cinemas. The movie will also be available soon on iTunes.

What a perfect summary of what can be done, and what should be done. Let's hope Cameron is the future of cinema - at least in this respect.

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Why the ICC Report Makes Me Ick

I have restrained myself from writing much about the ICC's "Building a Digital Economy" report, because I knew it would make me too cross. Fortunately, someone who is rather calmer me than me has done a better job than I would with some careful, rigorous analysis.

I urge you to read the whole thing, since it points out really well the huge holes in the report's logic and methodology. But there's one paragraph I'd like to pull out:

Most telling is the fact that the ICC report states that cinema ticket sales are also dropping, and seems to blame piracy for that. However, the MPAA has recently reported that global ticket sales are at an all-time high, with a global increase of 30% since 2005! More importantly, there is a lot of investment going into the industry, which indicates that it is very healthy. The MPAA reports that the number of digital 3D screens in Europe has grown from 0 in 2005, to 3,495 in 2009. That is hardly an industry affected by piracy.

I really think this is key: people are re-discovering both cinema and live music (something I've written about extensively on this blog). The fact that these are ignored is why the latest report is not just wrong, but completely wrong-headed. It perversely ignores the fundamental shifts in people's taste that the industry needs to understand and build upon.

And that's what really makes me sick: the fact that the media companies doesn't even want to acknowledge that it actually has a huge opportunity, but prefers instead to try to blame ordinary users for sharing and thus promoting their content.

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Obviously...Not

The Association of Learned and Professional Society Publishers (ALPSP) has released its response to the British Library's Content Strategy. It's a wonderful demonstration that they don't really know what is going to hit them:

We believe that a shift towards the provision of online rather than physical access is appropriate. However, customer expectations of what is possible with online content are limited only by the capabilities of the technology, and not by realistic business considerations; at the extreme, every UK citizen might expect free online access, and unhindered re-use, at home or at work to everything in the Library’s collection, which would obviously destroy the market for publishers.

Obviously. Not.

Saying that online access will "obviously" destroy the market for publishers is akin to saying - as was said - that television will obviously kill the cinema, that the cinema will obviously kill the theatre etc. etc. Those who are the gatekeepers of older technologies always fear new ones that will reduce their powers. But what happens is that new technologies tend to create new opportunities even for the older ones they appear to threaten - at least to those who are open-minded enough.

Two classic examples: MP3s have created a huge demand for songs that are no longer in the catalogues, and P2P networks are full of videos of old television shows. Think how much money they owners of these materials could make if they decided to satisfy this demand themselves, instead of trying to stifle it.

It's the same with books. Providing online versions does not kill the need for books; indeed, it is likely to encourage people to buy more, for one very simple reason. The text that you read online is not the text you read in a book, even though the characters are similar: it lacks the physical experience of bookness. It is that - not the text - that book publishers are ultimately selling.

"Obviously", judging by the comments above, and by many others elsewhere, it's going to take a long hard battle to din this idea into the heads of those in the publishing industry. (Via Open Access News.)