The misguided effort by MovieLabs (see Security Key Management, TKR, and MovieLabs) to manage security keys is only a tiny grain of sand compared to the mountainous misfire by Hollywood with SOPA. The entire episode underscores the great divide between the brick and mortar world of motion pictures and the Internet world. That divide not only manifests itself in the oversimplified understanding of technological processes, but also in the fundamental shift that technology creates in the behavior of people and in the way business operations must now be handled.
If you are in the US, you’d have to be living under a rock to not know about SOPA, the acronym for Stop Online Piracy Act. The text of the act is online at http://judiciary.house.gov/hearings/pdf/112%20HR%203261.pdf. SOPA is a 78 page bill introduced into the US House of Representatives to give the owners of intellectual property the ability to take strong measures against non-US internet sites that illegally distribute protected material. Those measures include not only the blocking of domain names, but the ability to litigate against payment providers and advertisers that support such sites.
SOPA places the governance of the US Internet directly in the hands of the US Department of Justice. It does not impose a high threshold to legal action against a web site. An action can be taken on the basis of “good faith belief.” (These are the words used in the Act.) As such, it does little to prevent frivolous and/or political action against web site owners, to which the accused would be forced to engage in an expensive legal process. One can imagine its abusive use as tool to close down startups, the prospect of which has been a major cause of complaint. There is no question that the industry needs to fight pirated content distributed through foreign web sites. But the industry needs to work closely with the technology community to find acceptable ways to do this. The motion picture industry could do much better than SOPA to address the problem.
The stunning misstep by Hollywood is that its new well-groomed political leader, the former Senator Dodd, fought for the bill, which wasn’t his legislation, without first reaching out to the technology community. Instead of using his newbie advantage to improve relations with Silicon Valley, he chose to call them names in the press. The damage he wrought for the motion picture industry will take years to repair.
Of course, Mr. Dodd did not do this all by himself. He was encouraged to do so by his new employers, the CEOs of Hollywood. The episode exemplifies how difficult it is for senior management in the movie business to grasp the paradigm shift caused by technology. Even though Wikipedia’s English-language site was not available during its one day of protest, the site received 162M viewers worldwide. The producers of the US Superbowl game would be ecstatic to garner that many viewers from around the world.
A less visible misstep with technology has been Hollywood’s entry into DRM through Ultraviolet. Ultraviolet is a business model for boosting the sales of DVD and Blu-ray discs. By purchasing the hard copy, the buyer is given the right to view a soft copy on a variety of consumer electronic devices. The intent is to encourage hard copy sales, which generate direct revenue to studios. The hope is that it will discourage illegal downloading of movies. Ultraviolet relies on a complex digital rights management scheme, which has been a topic of complaint on many blogs. But DRM is not the problem faced by Ultraviolet.
Ultraviolet may utilize clever technology, but it is based on old school brick and mortar thinking. By linking digital downloads to hard copy sales, the scheme undercuts the emerging online ecosystems for digital download of movies. Amazon bought into it, because it can generate revenue from the sale of a DVD. But not so for Apple. So it’s no surprise that Apple has shown no interest in participating.
While an older generation might connect to owning a hard copy, the challenge is to get younger generations to purchase soft copies. Those entities building ecosystems have the best ability to meet that challenge. But the Ultraviolet business model undercuts those same entities. Just as fundamental, the studios load the purchased Ultraviolet copy with trailers that must be fast-forwarded to get to the movie. A pirated copy doesn’t have this problem. For reasons such as these, it’s unlikely that Ultraviolet will generate sales with the demographic that studios seek to reach. It’s another example of not understanding how technology has changed the game.
Not all studios have joined the Ultraviolet frenzy, however. Keychest, Disney’s DRM system, was conceived by Arnaud Robert, a PhD in Computer Science, and former Director of Distribution Technology at Technicolor. Where Ultraviolet is a business model around which awkward technology has been developed, Keychest is a sophisticated technology in need of a business model. Disney’s approach has been to develop the technology solo versus by committee, and later offer it to the industry at large. From a consumer point-of-view, Disney has it right. Keychest applies equally to soft and hard goods purchases, and, unlike Ultraviolet, is designed to be invisible to the user. But Keychest needs to share revenue with the platforms that accept the keys, and therein shares a critical problem with Ultraviolet. However, if Apple should prefer Keychest to Ultraviolet, then it’s a no-brainer to understand where this is going.
Paradigm shifts are not easy, and the shift introduced by technology has placed top studio execs outside of their area of expertise. If studio execs are having a difficult time grasping the new order of things, they can find solace in the knowledge that they’re in good company. Kodak’s board of directors will surely sympathize.