Familiar Path In Distribution Patterns

Stephen Yagielowicz

One topic of high-level discussion at the recent XBIZ 360° Digital Media Conference in Hollywood was how shifts in the way consumers are creating, consuming and sharing entertainment media continue to hurt (and empower) the adult entertainment industry.

Hurting is not killing, however; and some comfort can be taken in the rising revenues reported by many event attendees, as well as from the realization that all forms of media are facing similar challenges. It is not a unique process, but a familiar path that must be trodden by successive generations, as new technologies, taxes, turmoil and other factors can combine in a perfect storm of operational instability, spiraling down into bankruptcy.

The advent of TV was blamed for a 40 percent drop in box office revenues, adding to the fiscal melee depicted by the film. This massive percentage drop is similar in scope to decreases in adult entertainment revenues due to free porn, piracy, and economic instability, among other negative factors, providing a remarkably similar statistic.

Let’s take a look at how changes in consumption and distribution patterns are a theme with recurring roots, as well as some of the lessons that today’s operators may take away.

When it comes to how entertainment media is enjoyed as well as how business adapts to fickle fads of fashion, shifts in consumer expectations can take many different forms; such as requiring immediacy of a response — whether it involves 24/7 customer support or same-day shipping by online retailers or some other interaction. This process often is initiated using a mobile phone to either voice-call the vendor or via an in-phone browser to access the merchant’s website or service. As TaskRabbit rep Johnny Brackett told the New York Times, “People have become accustomed to this idea of instant gratification — where you just type something on your phone and the next thing you know, you have what you need.”

This pervasiveness of mobile technology use extends into the realm of digital content creation and distribution, with applications that opponents claim negatively impact rights’ holders, as well as legitimate distribution chains. For example, attend a live event targeting younger audiences, or view modern concert footage videos, and you’ll see that they are replete with countless subscreens illustrating roughly the same scene; as attendees use their mobile devices to illicitly record the event, eating into the profits of performers and promoters, among others. But does this practice actually erode revenues — or rather, through the inevitable sharing of this phone footage, does it open up new audiences and markets for bands, brands and labels?

While a case can be made for either viewpoint, one effective proponent of its position on all things technology related, is the Motion Picture Association of America (MPAA), a vocal entity on any issue affecting its represented industry’s bottom line.

In its Best Practices to Prevent Film Theft, the MPAA recommends theaters adopt a Zero Tolerance policy prohibiting audio, still or video recordings of any portion of any movie and notes that the use of cellular phones in theaters as a recording device or still camera has become increasingly prevalent.

‘Theater managers should alert law enforcement authorities whenever they suspect prohibited activity. Do not assume that a cell phone or digital camera is being used to take still photographs and not a video recording,” the Best Practices state. “Let the proper authorities determine what laws may have been broken and what enforcement action should be taken.”

It is an aggressive approach designed to favor the copyright holder and revenue chain.

Apple has even taken steps to allow live venue owners to disable attendee’s iPhone cameras via infra-red sensors, when someone tries to record or photograph a live event.

Previous generations also posed problems with personal recording devices, however.

For example, the MPAA so opposed development of the consumer videocassette recorder (VCR) as an evil enabler of copyright infringement, that former MPAA chief Jack Valenti characterized the menace in a 1982 congressional hearing by famously stating that the American motion picture industry will “bleed and bleed and hemorrhage, unless this Congress at least protects one industry that is able to retrieve a surplus balance of trade and whose total future depends on its protection from the savagery and the ravages of this machine.”

Similar cries of blood loss were claimed by stakeholders in the DVD wars.

“Nobody likes a change in format,” Library Technician Lagomorph Watson blogged. “I have to wonder if one day there will be people specializing in transferring data from one format to the next, a rapidly building snowball of content that we strive to hold on to simply because we made it ... never mind the getting paid part.”

That last sentiment focuses on significant changes in revenue models, including the uncertainty of getting paid — or of being able to keep what you earned — a subject that has been a longtime concern of those in the entertainment business. And of course, the U.S. Congress and the motion picture industry are no strangers to one another.

Claiming it is presented by “The Entire Motion Picture Industry,” and released under the grand auspices of The Council of Motion Picture Organizations, the 1953 industrial propaganda film, entitled “The Case Against the 20% Federal Admissions Tax on Motion Picture Theaters,” recently aired by Turner Classic Movies (TCM), provides a fascinating view behind the curtain of past motion picture politics.

Rather than today’s plague of content piracy, the battle du jour was, as you may have surmised, a 20 percent federal tax on theatre’s gross ticket sales — an exorbitant soaking of the movie-going public and a great example of selective, market-targeted taxation — an issue that has periodically raised its ugly head within the adult entertainment industry.

This film was made to be shown to members of a Congressional committee that was considering a lowering of this hefty tax, among other taxes, with the intention of swaying committee leaders to lower or repeal what the industry saw as a life-threatening tariff.

Operator of the Cooper Theaters in Colorado, Nebraska and Oklahoma, Pat McGee, kicked off the presentation by underscoring the scope of the problem — mentioning the countless everyday people who are impacted by the irresistible forces of market change; stating, “The technicians who make the pictures; the shipping clerks and bookers in the film exchanges who speed them to the theatres of the country; the cashiers, ushers and doormen, managers and janitors in the theatres themselves; all of us are vitally interested in our situation today.”

It was an appeal that distanced itself from the Hollywood fat cats over to Main Street.

The film then goes into an explanation of how the motion picture industry operates, calling local theatres “an integral part of the business, civic, cultural and religious life of the community,” and citing a statistic claiming that 93 percent of the investment in the motion picture industry is at the local theatre level — with only seven percent consumed by the studios. The film revealed how between 1946 and 1952, more than 25 percent of U.S. theatres, or about 4,500 individual movie halls, closed. This enormous plunge was highlighted by a breakdown listing the number of closed theatres in each committee member’s home state.

“Closed — big theaters, little theaters, old theaters, new theaters, big city theaters, small town theaters — closed,” the program’s narrator somberly intoned. It is an effective message that committee members must have found hard to ignore; especially when it was taken in context of the community-wide ripple effect that these closings often caused, as most theatres were at the heart of, and a major attraction of, America’s downtown areas.

Noting that the industry was not seeking special favors, only to be treated fairly and taxed equally to other relevant industries — explaining that theatres paid 20 other taxes (or more), just as other local merchants do, but that they are the only businesses in their communities saddled with this unfair tax rate, which is not imposed on other industries; the film included a range of theatre owners providing personal perspectives on how this high tax rate is destroying their livelihood and forcing theatres to close at an ongoing rate of two per day.

The adult entertainment industry could learn something from this personal approach, for its next round of public opinion campaigns.

The advent of television was blamed for a 40 percent drop in box office revenues, adding to the fiscal melee depicted by the film. This massive percentage drop is similar in scope to decreases in adult entertainment revenues due to free porn, piracy, and economic instability, among other negative factors, providing a remarkably similar statistic.

But despite all of these hardships, as well as enormous challenges to come (from new technologies such as home video recorders, cellphone cameras and the Internet), the U.S. motion picture industry continues to operate, and to generate obscene amounts of money for the world economy.

Some lessons learned from all of this include the reality that fighting against changes rather than embracing them is a losing strategy and that if you distort the facts and figures as part of your argument then you will lose credibility when the lies fall apart. It may thus be much better to predict where the marketplace is headed, and then attempt to already be there when it arrives, than it is to try and force the market to move in your direction, or to attempt to hold it hostage in some well-regulated walled garden.

Of course, there are far too many dollars, euros and yen at stake for wannabe media moguls to take a hands-off approach to marketplace development; eyeing the past dominance of AOL and the current stranglehold of iTunes and wanting their own captive audiences that have no alternative than to suck on the same tit of controlled media access.

But artists and all other creatives need to be paid for their creations — so a workable balance needs to be found between what the public wants and what professionals need to be paid for their work.

It is a familiar path, stretching from the days when the King’s men burned books and destroyed printing presses as a way of maintaining media control; to modern times when pretenders to the throne cry to Congress that the little people have too much freedom and are running amuck with horrible consequences for all mankind, demanding something be done about it.

However it all plays out, one thing is certain: porn will be a big part of the equation.

Stephen Yagielowicz is XBIZ World’s senior technology editor.


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