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Flailing the latest digital whipping boy

IP attorney Nancy Prager says the movie studios and television producers are to blame for the economic woes of their industry, not Steve Jobs or Apple.

    Color me confused. The Motion Picture Association of America and the broadcasters are leading the charge to shut down peer-to-peer networks and prosecute those who distribute content illegally over the Internet. One of the most common excuses file sharers give for transmitting content without permission from--or compensation to--the owners of the content through applications like TorrentSpy and LimeWire is that their use is promotional.

    They'll tell you they share because they love. File sharers claim they want people to watch the television shows, see the movies, go to concerts, or otherwise compensate the creators.

    Of course evidence suggests that file sharing cannibalizes the economic value of the movies, television shows, and music distributed illegally on peer-to-peer networks. Being able to obtain content on peer to peer networks negates the need for consumers to buy DVDs, watch television, or go to the movie theater.

    It costs money to produce films and television shows. Though ticket sales primarily have been the method of financing films, producers now rely on a blend of ticket sales, broadcast rights, DVD sales and the ever popular merchandise rights. Television shows continue to rely on advertising, though DVD sales have provided a new and lucrative revenue stream, as has merchandise where applicable. Yet, ticket sales and advertising revenue continue to provide the bulk of the funds used to finance production.

    Unlike the music industry, film studios and television producers have actively been developing new revenue streams resulting from the Internet. One could say that television producers and movie studios are leaving no stone unturned as they look to replace revenue lost to illegal distribution on the Internet.

    Hindsight is 20/20, but in Eisner's case he may be looking back through cracked glasses.

    Recently, Michael Eisner placed the economic woes of the entertainment industry at the feet of Steve Jobs and iTunes. According to Eisner, Apple has forced movie studios and television producers to execute deals that do not fairly compensate them for their content. Though Eisner has essentially called Jobs a bully, it is likely a case of seller's remorse. Eisner and his cohorts may have undervalued their content to participate in what, at the time, was the iTunes juggernaut.

    The movie studios and television producers are to blame for the economic woes of their industry, not Jobs or Apple. When iTunes expanded to include video, the studios and producers were thrilled to have a means to deliver content on demand over the Internet to consumers and be able to be paid.

    Hindsight is 20/20, but in Eisner's case he may be looking back through cracked glasses. Some could argue that being able to deliver content through iTunes stemmed the tides, or at least slowed the currents, of BitTorrent and peer-to-peer delivery streams.

    In the past two years, studios and producers have focused on developing new means to deliver content and be compensated over the Internet. Broadcasters are streaming their content, with advertising, on their Web sites and through partner sites. Film studios are delivering content on demand--for a fee--to television sets around the country through services from Amazon.com and others.

    Even individual shows like The Daily Show with Jon Stewart are experimenting with making their shows available, with advertising, on the Internet. And of course, consumers are able to buy both physical and digital copies of films and television shows for their permanent collections from retailers ranging from iTunes to Wal-Mart Stores.

    The members of the Writers Guild of America have something in common with Eisner and his cronies: they know what it is to sign a bad deal. In 1988, on the eve of the home entertainment revolution, the writers agreed to a limited royalty for home entertainment sales of their works because the market was "unproven." Hindsight provides empirical evidence that the writers missed the boat, as more than three-quarters of American households have at least one DVD player, and spending on home entertainment increases every year.

    Nearly 20 years later, the Writers Guild of America is on strike at the cusp of another home entertainment revolution, the Internet and content delivery on demand. The primary issue of the strike is the share of revenue that writers will receive from the monetization of new delivery models.

    As the producers and studios scramble to monetize the Internet, they argue that the writers should not participate in new revenue streams because the Internet is a promotional vehicle. The producers' argument is specious for a number of reasons. Movie studios and producers are pursuing multiple avenues for delivery of content where they get paid on the Internet. Additionally, they are pursuing those who distribute content without permission even though the distribution is claimed to be for promotional purposes.

    Without their words, the producers and studios would have no content to deliver to consumers and the Internet would be a pretty boring place. Like Eisner with Apple, the writers have regret over the 1988 contract and now they intend to participate in the revenue generated from new media streams.