Ever since the SOPA/PIPA drama it seems like I see five articles a day with a title like that these days. They always read something like this one. They’re some tech pundits talking down to Hollywood execs, who they see as stupid, evil, and out of touch.
I’m not sure when software developers got such an ego, but I think it’s not very self-serving. If anything it’s harmful. It’s also humorous because it shows just how dangerous being so insulated from reality can be.
One thing I like to do when someone is behaving differently than I would expect them to is to ask myself why. There are really only ever three reasons. I’m assuming, for the sake of argument here, that I am intelligent and that what I expect them to do isn’t just what I want them to do, but rather what I honestly think would be in their own best interest.
Reason #1: They’re stupid.
If they’re stupid, that’s all the explanation you need. Stupid people are basically random number generators. You can predict and manipulate them to some extent, but you really can’t understand them in anything but the most academic sense. They do what is in their perceived best interest, just like anyone else. Their perception is just warped.
This is one of the reasons to which tech pundits often attribute Hollywood not just giving Netflix rights to every movie at whatever price they want. It comes from the ivory tower mentality. It’s easy, when you’re in software, and all of your friends are in software, to assume that you’ve got some sort of monopoly on high IQs.
It is, however, quite simply not true. In the interest of full disclosure, my company, Blue Frog Gaming, has a working relationship with NBC Universal which owns Universal Pictures one of the six major studios. The guys I know work for Syfy, so they’re not really “movie studio execs”. I have met a couple though, and I’ve also talked to a lot of people (even in the tech industry) who have, and there’s one thing I’m sure of, which is that they aren’t stupid. Just like most high-ranking executives in any big business, they’re very smart people.
You just don’t get to high enough up in a multi-billion dollar corporation to make decisions about whether or not to license your content without being pretty smart. The people that most of the pundits are railing against are, quite frankly, smarter than the pundits. They went out and got MBAs from prestigious colleges, and while we can all argue about the value of such, I think we can agree that Harvard and Yale don’t hand them out to stupid people. WordPress isn’t as picky about who they give accounts to.
Reason #2: I Know Something They Don’t.
Ask yourself this, when it comes to digital movie distribution, what do you really know? The tech industry loves to tell them things like “scarcity is a shitty business model” but is it? I mean can you prove that, with numbers, or is that just your hunch? It’s been working for De Beers for over 130 years.
I define anything you “know” to be something you would bet your entire net worth against a cheeseburger for. I’d bet everything I have that 2+2 is 4 if the other side of the wager was Five Guys, because it’s an easy, free, tasty meal. Would you make that same wager about Hollywood seeing an overall increase in revenues by licensing all of their movies to Netflix at whatever trivial rate Netflix must pay them to be able to make a profit by charging $10/ household? If so I’ve got a cheeseburger with your name on it.
It strikes me as quite possible that a world in which some users pirate movies, and others pay $5 or $6 to stream them through their cable companies, and some pay $10-15 a head to see them in a theater might actually be a better one for film companies than one in which some users just pirate and some pay Netflix $10/month.
We in the tech industry, despite a lot of training to the opposite, still manage on almost a daily basis to confuse anecdotes for data. The AVC article I pointed out is a good one. Sure, maybe you just watched some TV and went to bed because the movie you wanted to watch was in theaters and not on demand in your home. But theater goers spend $10+ a pop while a whole family can stream a movie via VOD for $5 or via Netflix for something less than $1. Even for just a couple, scarcity only has to encourage me to go to the theater one time in 5 for Hollywood to break even.
Which leads me to the last and final reason…
Reason #3: They Know Something I Don’t.
The fact that techies are so unable to even consider that this might be the case is really hurting us. We keep telling Hollywood that they’re stupid and they just don’t get it, but they have a lot more data than us.
Things that I don’t know include, but are not limited to:
1. How much Netflix pays movie studios for access to their library.
2. How much VOD pays movie studios.
3. How much they make off of physical media rentals (ie. video rental stores, Redbox, Netflix’s mail service, etc.)
4. How much people would pay for a streaming Netflix-like service that actually has good movie selection. Let’s say every new release. (And whether or not they’re quietly building such a thing as we speak.)
5. How many people would subscribe at what price point.
6. How much piracy is really hurting them (ie. how many people who pirated a movie would have paid for it in some way). I suspect they overestimate this, but I also suspect tech pundits underestimate.
7. Why people think Betty White is so funny. She just says unfunny stuff and people laugh because they’re old. Not relevant to this post in any way, but seriously. She’s like a modern-day Robin Williams, except she isn’t even motivated enough to come up with silly voices.
Numbers 1 through 3 alone are necessary to make an informed decision about whether building a Netflix-like digital distribution system would lead to an increase in revenues. I doubt anyone knows the answer on 4, 5, and 6, but I’d be willing to bet they’re somewhere between what tech pundits and the RIAA claim.
The question I’m forced to ask myself though, is whether or there there could exist a set of numbers for 1-6 that make the industry’s current tactic (maintain the status quo while throwing legal dollars at fighting piracy) more profitable than licensing all of their content to Netflix? It seems at least quite possible, when you consider that the price of a movie ticket has to be at least 20x what they get from a Netflix view.
As I said before, Hollywood execs aren’t stupid, and they have a multi-billion dollar industry to protect, so they probably aren’t lazy either. I’d bet they’ve done their homework. My feeling is that Hollywood very much has these variables in mind. They know the answers to the first three questions and all of the tech pundits railing about how they “just don’t get it” don’t. I’d be willing to bet they’ve done market research on the next three, though I don’t feel like anyone can truly know 4-6 until someone builds such a thing. As for Betty White, I guess we’ll never know.
So rather than excoriating them for being dumb or out of touch, perhaps there is a way to build a service that alleviates their concerns. Given that Netflix costs $10/household, while movies are $10-$15 per person and VOD $5-$6, it’s not surprising that Hollywood is reluctant to cannibalize itself.
