Matthew Inman had a typically blunt, funny cartoon a while back that sums up the feelings of many early adopters when it comes to consuming great content on computers and other connected devices. I think the reason it’s great is that he explains the issue from the consumer perspective without managing to sound like a rich, entitled jerk (which frankly, is how many people, myself included on a bad day, sound when they make this argument). He’s willing to pay to watch Game of Thrones. He tries to get it from Netflix, Hulu, iTunes and HBO. He can only get it from HBO by upgrading his cable package. He can’t get it from the other sources. He doesn’t want to upgrade his cable, so he pirates the show.
Marco Arment chimed in with his own take on the situation, and an analogy to boot. His piece focuses on why it’s sometimes better to do the pragmatic thing, rather than the “right” thing. He talks about how, in a previous job, the floor of the bathroom was always littered with paper towels by the door, because people didn’t want to touch the doorknob after washing their hands. Rather than put a trash can by the door, building management took to posting signs asking people not to throw paper towels on the floor. They were right. Throwing paper towels on the floor is a jerky thing to do. But the signs didn’t stop people from doing it. Putting a trash can by the door would stop 99% of it.
Marco draws the analogy to current digital distribution of filmed entertainment: If Hollywood addressed the demand for digital distribution in a legal easy way, a good chunk of piracy would be eliminated. Piracy is not right. But it’s going to exist, and the best way to address the otherwise non-jerky people engaged in it is to give them what they want.
Analogy is often an imperfect explanatory device. There’s always holes, always things that don’t quite match up in terms of explaining every aspect of the situation. But I like analogies. Here’s mine, inspired by early 20th Century American History:
We are currently under prohibition. The sale and manufacture of digital alcohol is illegal. But because there is such demand for it, criminal enterprises have sprung up to address the demand. And otherwise law abiding people like Matthew Inman are patrons in the digital speakeasy.
Here are the players and parallels:
|Prohibition Era||Modern Era|
|The Temperance Movement||Hollywood|
|The Federal Government||The Federal Government|
|Speakeasies/Speakeasy Patrons||Torrent sites/Otherwise Law Abiding Downloaders|
|Unguarded Canadian Border/Waterways||Usenet, Peer to Peer|
|Legal exemptions/loopholes||Legal channels (iTunes, Hulu, Netflix)|
|Moonshine producers/consumers||Hardcore, unapologetic pirates|
|Repeal of Prohibition||????|
This is some fairly surface, lazy research. Most of it comes from Wikipedia and other online sources, but I’m painting with broad strokes here to illustrate a point.
The road to Prohibition
The Temperance Movement gained strength and influence throughout the United States in the latter half of the 19th Century. The coalition advocating a ban on alcohol consisted largely of Protestant religious organizations and women’s organizations. They pegged alcohol and saloons as the prime cause of America’s overall moral decline (real or imagined). The movement continued into the 20th Century and by the 1916 election, a large majority of Congress advocated Prohibition. The 18th Amendment was passed by Congress in 1917, ratified by states in 1919 and Prohibition went into effect in 1920.
The media and entertainment giants may not quite have the influence to amend the Constitution, but they have consolidated and used lobbying and political influence to advocate for legislation (DMCA, SOPA). This legislation co-opts the federal government and law enforcement into policing what is arguably a market problem. They are protecting the declining profits (imagined or real) of the entertainment industry much like the government stepped in to protect the (imagined or real) “declining morals” of society during prohibition. This prohibition that Hollywood and the feds have set up is arguably also detrimental to the overall economy, as it suppresses innovation and growth in this sphere. During prohibition, brewers, distillers and vineyards suffered as a result of the sudden ban on alcohol.
Forces opposed to the ban on alcohol represented a growing urban/rural divide in America. Educated urban dwellers, along with large ethnic communities (Jews, Italians, Irish, etc…) with cultural and religious attachments to alcohol didn’t appreciate government intruding into the private sphere and legislating morality. Today I would argue this divide is largely generational. Younger consumers, who have grown up with digital technology simply don’t understand why they can’t get digital copies of movies and television shows when they want where they want. We’re not talking about piracy here either. People want to pay, much like consumers in the 1920’s were willing to pay for access to legal, regulated alcohol. They are “forced” to obtain the prohibited goods by other means as a result of policies and laws meant to protect profits/morals.
The Prohibition Era
Prohibition was a fantastic opportunity for criminal enterprise and marks the rise to prominence of highly organized criminal syndicates to control the manufacture, import, distribution and sale of illegal substances. “Speakeasies” sprung up across America to address demand for alcohol. Al Capone is said to have controlled over 10,000 of them in Chicago.
Millons of otherwise law abiding Americans patronized speakeasies. Today, millions of Americans visit torrent sites to look for movies. Many of those are likely just interested in having whatever they want for free. But many are also driven there by what they perceive as unreasonably high cost and restrictions entertainment producers place on their product. They don’t understand industry practices such as release windows and territorial rights. They don’t understand why, when they buy a movie, they can’t play it wherever they want. They just want the product and they want it to be easy. Many also pay fees to private download sites and Usenet providers to access the product they want. Kim Dotcom of Megaupload may simply be a nonviolent Al Capone of the digital era, providing a product that people want at a reasonable price.
Given the widespread flouting of the laws, Prohibition became almost impossible to enforce. Despite similar prohibition in Canadian provinces, alcohol was widely available and produced. The long Canadian border couldn’t be sealed off from boats and cars making midnight deliveries of the millions of barrels of booze that Americans desired. Digital pirates are similarly difficult to police, and one might argue that Peer to Peer networks, private download sites and Usenet are the porous Canadian border of the digital age.
Prohibition DID allow for certain exemptions to the laws. Consumption of alcohol was legal, even if manufacture and sale were illegal. So wealthy people simply stocked up before prohibition went into effect. Home production for personal consumption was also permitted, so enterprising vineyards switched production to selling grape concentrate for fermentation and bottling at home. Exemptions were also made for religious practices. Today, you can get entertainment in digital forms, but only in the ways deemed appropriately protective of profits by the entertainment giants. So you can get certain things on iTunes, Netflix, Hulu, etc.. But availability is subject to the whims and rules of the giants. Speakeasy patrons don’t understand the rules, and they’re an inconvenient barrier to consumption, so they flout the legal channels through which they can obtain (digital) alcohol.
Eventually, the federal government realized it had erred. While Prohibition likely succeeded in its goal of reducing overall consumption of alcohol, a variety of social and political ills emerged in its wake. There was a rise in violent crime associated with battles for control of the alcohol trade. Thousands of people died as a result of drinking illegally produced, unregulated alcohol. Perhaps most significantly, all levels of government struggled to replace an estimated 14% of tax revenue that flowed from alcohol sales and licensing. Prohibition virtually destroyed the nascent winemaking industry and removed thousands of industrial jobs from the economy in distilling, brewing and bottling plants. As the Great Depression deepened, the revenue and jobs that the alcohol industry could provide, as well as the need to combat criminal enterprises centred around alcohol motivated the repeal of Prohibition in 1933.
Individuals and enterprises still flout the regulations imposed on the production and sale of alcohol. Bar patrons who want to drink after 3am go to boozecans and after hours clubs. Moonshine producers in rural areas still produce volumes of unregulated, untaxed and cheap alcohol to satisfy consumers who don’t feel the need to pay liquor taxes in order to get their drink on. But these are fringe activities. Criminal activity around alcohol production and distribution has largely disappeared as a result of turning production, distribution and sale over to the commercial sector. Similarly, digital piracy is always going to exist, but we can move it to the fringes by making it easier and cheaper to access digital versions of filmed entertainment.
My hope is that Hollywood and the federal government eventually learn a few lessons of history and take action to repeal Prohibition.
1 – Digital distribution is a revenue opportunity
A federal income tax in the United States was only created with the ratification of the Sixteenth Amendment to the Constitution in 1913. But this revenue source couldn’t match what local, state and federal governments gave up from regulating the legal sale of alcohol.
As more consumers decide that patronizing the digital speakeasies of Peer to Peer and Usenet is preferable than paying the studios for an inferior product, Hollywood will hopefully recognize that they are protecting legacy mechanisms like theatrical distribution, territorial distribution, cable television and DVD sales at the expense of a massive opportunity to address the desires of consumers to access their products in new ways.
Similarly, federal governments around the world may recognize that there are potentially millions of jobs and dollars that can be created by enabling new technologies and methods of distribution. They will stop passing laws and regulations that stifle innovation and creativity to protect profits and jobs in the production and legacy distribution industries.
2 – You can’t defeat the pirates
You don’t have the resources. They are smart and they use the latest technology which will always evolve in ways to circumvent whatever methods you use to limit copying and distribution. This is just a fight that you’re not going to win. And younger consumers can’t figure out why you want to win. They want to pay you, but you won’t take their money. So they just go get the product for free from the Digital Speakeasy.
3 – You have the scale and smarts to win if you change
History seems to demonstrate that the major players in the entertainment industry always cry wolf over new technologies. Television would kill movies. The VCR would kill movies. Home taping is killing music. In every case, the industry changed, new players were created, but overall, the major players adopted new technologies, created new products and methods of distribution, and made a ton of money.
At the end of the day, the studios and other producers are putting up the capital to make great entertainment. They deserve to make money. And they’re going to make money because there’s no product without them. When they finally embrace digital distribution in the wake of consumer demand, I think they’ll make more money than ever. And countless opportunities will be created in a transformed industry.