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Boomtown columnist Kara Swisher published a closer look at Prince’s controversial statements about the internet and his position to not support digital versions of his content.

Below is an excerpt from her Boomtown column, and a link to the column in its entirety.

I can’t say what I am hearing is that much different in terms of the continuing frustration with the lack of decent business models to replace the ones that have worked for so long and been so lucrative for the entertainment and media industry.

From music to movies to television, the biggest minds here still sound perplexed as to what will finally be the golden ticket to carry them through to the inevitable next era of digital distribution.

Still, so many questions and so few answers.

Will consumers buy subscriptions to cloud-based content? Will advertising be enough to pay for broadcasting online? Who will pay for the high up-front production costs of most major entertainment projects? Can costs come down enough to make up the difference?

And while there is now a lot of interest around tablets, such as the Apple (AAPL) iPad, and Hollywood types seem to accept that their customers are shifting their buying and consumption habits around entertainment drastically, there still remains a level of outright hostility to it all that has not changed much.

“Why is the consumer always right?” said one exec to me this week in a typical statement. “You can’t have a business if there is no business model.”

Indeed. And, in fact, that’s just what Steve Levitan, co-creator of “Modern Family,” the ABC television hit, talked about cogently at the eighth D: All Things Digital conference last month, telling a largely tech-centric crowd some truths it much needed to hear.

(FYI: We’ll be posting the video of the entire interview session with Levitan and also longtime Hollywood player Lloyd Braun here tomorrow.)

As much as he himself loves tech products, Levitan noted that lack of a business plan or credit for consumption online made digital largely pointless to his work.

“At its core, 90 percent of my job is still sitting down in a room full of people and breaking stories,” he said. “And that requires virtually no technology.”

It’s a salient point and not so different from Prince’s saying: “I don’t see why I should give my new music to iTunes or anyone else. They won’t pay me an advance for it and then they get angry when they can’t get it.”

If you remove the sillier parts of his quote that preceded it, such a statement is not unreasonable from an artist who wants to be paid for his creative efforts.

http://kara.allthingsd.com/20100707/making-fun-of-prince-is-easy-figuring-out-how-talent-thrives-in-a-digital-age-not-so-much/

Survey: 64 Percent Of Gamers Still Prefer Hard Copies To Digital
by Leigh Alexander
 
July 6, 2010  
 
As media of all kinds goes digital ever more rapidly, much discussion has taken place around the value of physical product to consumers — and a new survey seems to demonstrate that video games are the leading area where people still want discs.

64 percent of 1000 people surveyed by research firm Ipsos MediaCT would rather have a physical than a digital copy of a game — a higher percentage than would prefer the same for newspapers, music or movies.

According to the firm, it’s the strength of the used game market that helps drive that preference. Ipsos MediaCT director Ian Bramley noted that gamers derive a great deal of value from the ability to re-sell and trade their games, and to buy used at lower cost. “This is unlike the music and film markets,” he noted.

“Physical games discs have a long and well-established history, which is a deep mindset to change – particularly when gamers build a physical collection as they fear losing digital versions,” he said. “And in-store browsing is also important to buyers.”

Media in physical form was second-most important to newspaper readers; despite much talk about the death of print, 63 percent of newspaper readers would rather stick with the hard copy. Consumers are more comfortable with digital music and film, as only 51 percent of movie-watchers said they require a disc-based version.

The music industry in particular has seen rapid, explosive digital adoption driven by online stores like iTunes, portable players that synchronize with music files, and blogs and search tools that let users find and download new music online quickly. Only 45 percent of music fans want a hard copy of their tunes. 

June 30, 2010

“Operation In Our Sites” targets Internet movie pirates
ICE, Manhattan U.S. Attorney seize multiple Web sites for criminal copyright violations

LOS ANGELES - U.S. Immigration and Customs Enforcement (ICE) and the U.S. Attorney for the Southern District of New York (SDNY) announced the launch Wednesday of “Operation In Our Sites,” a new initiative aimed at Internet counterfeiting and piracy.

In the first action carried out as part of the initiative, authorities executed seizure warrants against nine domain names of Web sites that were offering first-run movies, often within hours of their theatrical release. Seven of those sites were targeted for seizure by the SDNY. Agents from ICE’s Homeland Security Investigations (HSI) also seized assets from 15 bank, Paypal, investment and advertising accounts, and executed four residential search warrants in several states.

ICE Assistant Secretary John Morton, joined on a Los Angeles soundstage by senior representatives from major movie studios, entertainment unions and the Motion Picture Association of America (MPAA), made clear that the theft of such intellectual property is a serious crime and one the U.S. government has made a priority combating.

Copyrighted material is known as intellectual property (IP) under the law.

“ICE and our partners at the National Intellectual Property Rights Coordination Center are targeting pirate Web sites run by people who have no respect for creativity and innovation,” said ICE Assistant Secretary Morton, who was in Southern California to meet with the leaders of the movie industry. “We are dedicated to protecting the jobs, the income and the tax revenue that disappear when organized criminals traffic in stolen movies for their own profit.”

“Criminal copyright infringement occurs on a massive scale over the Internet, reportedly resulting in billions of dollars in losses to the U.S. economy,” said Preet Bharara, the U.S. Attorney for the Southern District of New York, whose office handled the seizure warrants of seven domain names Wednesday. “That translates into lost jobs and real hardships for ordinary working people. That’s why we took the actions we did. If your business model is movie piracy, your story will not have a happy ending.”

“Content theft online has become increasingly ubiquitous as technology and software improve and access to the Internet increases,” said Mike Robinson, chief of operations, content protection for the MPAA. “We are committed to working with law enforcement to get the illegal choices out of the marketplace and instead focus on continuing to offer more innovative and flexible legal options to consumers to enjoy the movies and TV shows that we all love. The American motion picture and television industry is one of our nation’s most valuable cultural and economic resources. We are grateful to ICE, the Obama Administration, and the federal agencies that have made the protection of intellectual property a priority for the United States.”

“We are facing a dramatic rise in the number of foreign and domestic Web sites that are in the business of making films and television shows - created by our members - available for illegal download or streaming,” said Kathy Garmezy, associate executive director of government and international affairs for the Directors Guild of America. “If left unchecked, this illegal activity threatens the very ability of filmmakers to both earn a living and create the content that is enjoyed by billions around the world.”

“We commend the action of ICE and the IPR Center in striking a significant blow against those who seek to profit from the copyrighted, intellectual property of others,” said Matthew D. Loeb, president of the International Alliance of Theatrical Stage Employees (IATSE). “Intellectual property is the basis of our modern economy. The stealing of digital content is not a victimless crime; it’s also the theft of tens of thousands of American jobs.”

The National Intellectual Property Rights Coordination Center (IPR Center), based in Virginia and managed by ICE, is directing the government’s response to a crime that is estimated to cost American industry billions of dollars and hundreds of thousands of jobs every year. Its “Operation In Our Sites” is targeting not only films and music, but other items distributed over the Internet, such as counterfeit pharmaceuticals, software, electronics, games and other products that threaten public health and safety.

The investigation involving SDNY together with the ICE New York Special Agent in Charge and the IPR Center resulted in the seizure warrants for seven domain names: TVSHACK.NET, MOVIES-LINKS.TV, FILESPUMP.COM, NOW-MOVIES.COM, PLANETMOVIEZ.COM, THEPIRATECITY.ORG, and ZML.COM. In an undercover capacity, investigators downloaded various newly released movies from the Web sites and their affiliates, to identify those Web sites that were involved in the distribution of stolen content.

Also on Wednesday, as a result of a months-long operation, the IPR Center seized the domain names and Web site content of NinjaVideo.net and NinjaThis.net, both of which generated revenue from donations and advertising. These sites allowed visitors to stream or download popular television shows and movies. Over the course of the investigation, agents observed links to more than 200 movies and more than 300 television programs on the NinjaVideo site. This investigation resulted in the execution of federal search warrants for their content and domain name at servers in the United States and the Netherlands. HSI agents also executed four residential search warrants in North Carolina, New Jersey, New York and Washington. The case is ongoing.

The IPR Center has united the U.S. government agencies that combat intellectual property theft. In addition to ICE, the partners include: U.S. Customs and Border Protection; the FBI; the Department of Commerce; the Food and Drug Administration; the Postal Inspection Service; the General Services Administration, Office of the Inspector General; the Naval Criminal Investigative Service; the Defense Criminal Investigative Service; the Army Criminal Investigative Division’s Major Procurement Fraud Unit; and the Government of Mexico Tax Administrative Service.

The IPR Center is one of the U.S. government’s key weapons in the fight against counterfeiting and piracy. The IPR Center offers assistance for both law enforcement and the private sector to address the growing transnational threat of counterfeit merchandise. The IPR Center coordinates outreach to U.S. rights holders and conducts domestic and international law enforcement training to stem the growing counterfeiting threat as well as coordinating and directing anti-counterfeiting investigations.

Report information on counterfeiting and trademark violations at (866) IPR-2060.

Watershed Moments In Internet History: Mark Your Calendars. Google Won.

June 28, 2010 · Posted in Colleen Quinn’s Blog 

By Colleen Quinn

June 23rd, 2010. 6/23/10. It’s a real shame the numbers don’t have more of a ring to them. A verdict on the 10th of October (e.g. 10/10/10) might be more resonant. But, even if the date doesn’t roll off the tongue, mark my words: this is a date which will live in infamy for content distributors and content owners everywhere.

This is the day Google won. In a potentially landmark decision (though one with many, many appeals in its future), a federal judge in New York threw out Viacom’s $1 billion copyright infringement lawsuit against Google’s YouTube.

It’s a long story—and one made-for-Hollywood with its subterfuge and plot twists. But, in short, Viacom sued Youtube for boat loads of money for copyright infringement– that is, knowingly posting copyrighted materials to the site, without financial remuneration to the rights holders.  In one of the truly major tests of the “safe harbor” provisions of the Digital Millennium Copyright Act, the judge found that YouTube/ Google were not liable. Title II of the DMCA generally protects a Web site from liability for copyrighted material uploaded by its users as long as the operator of the site takes down the material when notified by its rightful owner that it was uploaded without permission.  So, in the judge’s estimation, YouTube met this test.

But, here’s the good stuff: the case evidence dated back to some pretty shady pre-Google-acquisition days, and highlighted alleged tactics that pointed fingers at YouTube’s founders. Equally bad behavior was alleged on the part of Viacom, who was accused of hiring a clan of promotions companies to upload “leaked” Viacom content to the site under pseudonyms. Naughty, naughty.

The fact of the matter is that YouTube—and YouTube-like services—are the way of the future in the eyes of the consumer. And, while no one can say YouTube is perfect in its attempt to “protect” content-owners, they surely seem to meet the DMCA provisions with the processes and technologies they’ve implemented to alert copyright owners. I just listened to a fascinating TED Talk last week from Google’s Margaret Gould Stewart, where she outlined YouTube’s methodologies to alert content owners to rights infringements.

YouTube has created a massive registry for rights holders where they can upload reference copies of their content. Then, YouTube runs EVERY piece of newly uploaded content against that registry—analyzing picture, audio, and more—to identify matches. The system is so sophisticated, allegedly, that it can account for quality degradation, video effects (slow-motion or speed-up), clip-extracts and more. When a match is found, the system alerts the copyright owners, who can then block the content altogether, or monetize it through advertising and product promotion.  It’s a fascinating process—and the technology was so, well, cool that I was awestruck.

Then, I waited a few minutes, and started to scoff at this notion of protection for content owners. Perhaps it’s all my years having been a “content creator” and working for and with content owners. But, I couldn’t beat away the nagging question: why is the burden on the rights holder? And, I assure you, that same question was likely one of the largest on the minds of Viacom execs as they embarked on a now 4-year journey to take-out YouTube.  It’s a large burden indeed.  To protect your content, you must encode, upload and capture metadata about EVERY piece of content you own; you must think through and capture your protection policies about that content; and, you must review notifications when protected content is uploaded to determine the desired response (e.g. remove vs. monetize). Whipping out my calculator here, I see that amounts to a load of operational cost, resources and time for already strapped businesses.  Imagine similar and probably more unwieldy processes taking place across other UGC aggregation sites. I’m not sure how that scales, even in the face of the revenue upside.

So, here I leave you with two sides of the coin. I should say that I am pleased with the verdict. And, I am, for the most part, impressed with YouTube’s processes to screen content, though I hesitate to see YouTube in the same beatific light they themselves suggest. There’s no question that YouTube and rights holders need to be, more than ever, partners in this eco-system. And, I’m not so sure we needed a judge to even confirm that. But, confirm he did. Here’s to 6-2-3. A milestone, indeed.

releaesd December 14, 2009 

Motion Picture Association of America (MPAA) CEO Dan Glickman and Recording Industry Association of America (RIAA) CEO Mitch Bainwol today joined U.S. Immigration and Customs Enforcement (ICE) Assistant Secretary John Morton, Assistant Attorney General Lanny Breuer and other federal officials from the National Intellectual Property Rights Coordination Center to announce the recent results from a nationwide federal law enforcement crackdown on counterfeit products.

The enforcement action, codenamed Operation Holiday Hoax, focused on illegal vendors throughout several major U.S. cities and netted five arrests and 79,796 counterfeit CDs and 79,610 DVDs.

The full release can be viewed here.

from VARIETY December 14, 2009:

Studio chiefs and showbiz CEOs will gather at the White House today for a roundtable discussion on piracy hosted by Vice President Joseph Biden.

The Obama administration is calling the meeting a first-of-its-kind event to highlight ways to combat piracy in the face of fast-changing technology.

link to full article here.

An excerpt from Hastings Entertainment, Inc. 3rd quarter report for fiscal 2009:

“The recession continued to negatively impact consumer spending; however, our total comparable revenues increased in September and merchandise and rental comparable revenues increased 2.0% and 4.1%, respectively, for the month of October,” said John Marmaduke, Chief Executive Officer and Chairman. “Our core customer base remains stable; however, customer purchase behavior has shifted toward value priced merchandise which is evidenced by the fact that the sale of total units increased 6.9% for the quarter compared to the same period for the prior year. Our movie rental business was negatively impacted by the de-valuing of the price of a rental movie primarily as a result of the growth of rental kiosks that rent movies for a dollar per day.”

Mr. Marmaduke continues to explain Hastings’ response to the impact of the de-valuing kiosks:

“In response, we have implemented a promotion where thousands of movie titles in our stores now rent for $0.99 per week. This has lowered our rental revenue in the short-term; however, we are seeing a significant increase in units rented along with growth in new customer membership sign-ups.”

A clever and resourceful response, without question.  But it’s also desperate and bodes poorly for the future.  This is one rabbit we collectively should NOT chase down the hole.

Isn’t this a suicidal ploy?  How can producers and retailers recover the margins when the content is distributed at astonishingly (and diminishingly) low price points? 

The entire Q3 2009 report can be read here.

Why bother with these cases?

Because the outcomes of these cases could help clear up the “fair use doctrine” for consumers, content producers and manufacturers.

It may also help establish some redeeming value to DMCA:

In its “circumvention” provisions, the DMCA prohibits the manufacturing or trafficking of products designed to circumvent measures that protect copyrighted titles.

Most fair-use-loving authorities will concede that DVD rippers that chuck the CSS schemes don’t pass muster with the DMCA.

“But is it circumvention if the manufacturer makes bit-for-bit copies of copyrighted DVDs? The big studios think it is. Under the auspices of the Motion Picture Association of America (MPAA), they sued RealNetworks for its RealDVD ripping software, claiming violations under the DMCA.

In the most recent decision, Judge Marilyn Hall Patel upheld her original preliminary injunction against Real, prohibiting the company from distributing RealDVD until the case concludes. The court concluded that Real violated both contract with the DVD CCA, as well as the DMCA provisions that prohibit the trafficking of anti-circumvention devices.”

For more information on what has transpired over the past 4 years in these cases, visit this link to Julie Jacobson’s article in CEPro.

To be sure, there are a handful of contributing causes for the downturn in packaged media sales.  In no particular order:

1. sluggish economy
2. mature product (DVD)
3. piracy
4. voluntary drop in price points

Number four is probably the least discussed.  But i’ve been LONG saying it’s a harmful practice.  Even the revenue sharing deals for large rental outlets is a poison pill.  But the short term boon was always enough to encourage people to turn a blind eye.

At the Independent Film & Television Alliance Production Conference, Bill Mechanic spoke directly on this very subject.  Who is Bill Mechanic?  What are his credentials?  Among other things, he was the CEO of Fox Filmed Entertainment and the head of Disney’s video division.

Here are a teaser of his comments: 

“I get asked a lot if the problems [of declining DVD sales] are systemic. My answer is: not necessarily. That we would reach a point of maturation in DVD is natural and logical, but too much of the downturn is completely self-imposed.

Like much of the bad decision making that has helped take a lot of the profit out of the business, the air was let out of the tires by the studios themselves. No top management of a studio really cared what was going on over the past few years other than was their budget being met.”

Read Marcy Magiera’s full article from Video Business magazine here.

Indie retailers take aim at Redbox

PHYSICAL: Campaign suggests kiosks hurt entertainment industry

By Susanne Ault — Video Business, 9/4/2009

SEPT. 4 | PHYSICAL: As Redbox battles three of the major studios in court, a group of independent bricks-and-mortar video retailers is working on a campaign to convince consumers that the kiosk operator’s $1-a-night rentals are putting the entire entertainment industry at risk.

Meanwhile, a study released this week by SNL Kagan suggests that Redbox’s low prices could hurt the burgeoning video-on-demand segment as VOD companies would not be able to match the kiosks’ prices while maintaining profitability.

The Video Buyers Group, one of the main drivers for the indie retailer campaign, said its 1,700 mostly mom-and-pop member stores are struggling to compete with Redbox’s inexpensive rentals. VBG and an unspecified publications firm are reaching out to studios and guilds to secure their support and/or participation.

The campaign aim’s to show Redbox as hurting future film production because studios are generating less revenue due to the $1 rentals, as opposed to the $3 to $5 rentals or $15 to $20 DVD sales available at traditional retail outlets.

Print, online and TV ads will encourage the public to drop Redbox as a source for DVDs.

A spokesman for Redbox had no comment.

“Dollar rental kiosks are to the film industry as the Internet was to the music industry,” VBG president Ted Engen said. “That’s how bad this thing can get.”

Apart from VBG, no other businesses have formally signed onto the campaign, but there is indication of some studios being sympathetic to the group’s cause.

“One company can’t be allowed to artificially reduce the value and availability of movies,” said one studio source. “Redbox’s short-term gains will shortly wreak havoc on producers, writers, laborers and ultimately consumers who love a broad selection of movies. If you don’t work with Redbox on its terms, it sues.”

The kiosk operator has split the major studios. Warner Home Video, Universal Studios Home Entertainment and 20th Century Fox Home Entertainment have tried to impose a kiosk window at least 30 days after the general retail street date of their titles, and Redbox responded by suing the studios. Sony Pictures Home Entertainment, Lionsgate and Paramount Home Entertainment, however, have signed lucrative distribution deals with Redbox. Walt Disney Studios Home Entertainment has an agreement with the kiosk operator in regard to limiting used DVD sales.

http://www.videobusiness.com/index.asp?layout=articlePrint&articleID=CA6694763