MPAA Strategy Analysis

Via Ernest: Is Hollywood Failing to See the Big Picture? [pdf]

Why are media companies so resistant to change, especially when compared to their technology brethren? One obvious answer: Tech companies are entrepreneurial. They live and die by the success of new inventions. Hollywood’s main concern is content and, in recent years, it has pursued a deeply conservative content-creation strategy, churning out movie franchises largely based on comic books, remakes and sequels.

[…] “The battle that the studios lost [the Betamax decision] actually created the business mechanism that can help them deal with the Internet,” says William Morris agent Marc Geiger, a cofounder of Artist Direct, an entertainment company that serves as a one-stop commerce outlet for music fans. “They have seven or eight different ways for a consumer to watch a movie, depending on their habits and the price they’re willing to pay, from theaters and DVDs to HBO and pay-per-view. And it’s all because movies are essentially already distributed digitally. I go home at night, call up a movie and store it in a hard drive — it’s called TiVo — and I’m doing exactly what the music business is screaming about, except I’m doing it legally and paying for it.”

The studios have other advantages besides flexible ways to sell and price their product. The same consumers who feel gouged by record company CD prices have fewer complaints about the value of movies and DVDs.

[…] In part because of piracy concerns, Warner Bros. last week released “The Matrix Revolutions” on the same day, even at the same hour, in every major global market.

Warner’s chief, Meyer, predicts that “there is a day coming when, to properly protect movies from piracy, we’ll leverage off the original theatrical marketing campaign and release movies any way the consumer wants it — on his computer, on his TV or at Wal-Mart — all at the same time.”

Even in this era of sweeping technological change, one immutable law remains: The customer is always right. The record industry has been staggered because it was two steps behind its audience, which is bad enough when you’re promoting a new song, even worse when you’re trying to build a new business. The movie industry realizes that it can’t afford to be slow off the mark.

As [News Corp.’s Peter] Chernin put it in a recent speech: “How do you create a new economic model faster than the old ones are being destroyed?”

If history is any judge, Hollywood will have to take some big risks to discover the answer.

The Register on the Aimster/Madster/Deep Petition for Cert

Aimster calls for Supreme Court showdown — with a sympathetic reading. See Ernest for a contrary view of the broader strategic appropriateness of this tack: Madster Seeks Supreme Court Cert

Deep goes on to highlight the need for a resolution in these types of cases, citing the appeals court’s opinion “that the issue of contributory infringement for Internet service (as opposed to a traditional copying device) is of national importance both for the law and the market.”

Given that users of Aimster were both messaging and copying files, Deep argues that the lower courts’ injunctions against the service were far too broad. Aimster offers both consumers and businesses a way to send encrypted files anonymously, which could be used to protect privacy and for trading things such as corporate documents. These non-infringing uses bring the service on par with Sony’s recording technology, he argues.

In closing, Deep asks the court to hear this case at a crucial time in the development of peer-to-peer technology. Should the music labels have the right to intrude on a service provider and new form of technology before it’s even clear exactly what the usefulness of the service might be?

MusicNow Aligns Their Model With Others

MusicNow Offers Songs for a Buck

MusicNow is teaming up with retailer Best Buy to sell 99-cent songs without a monthly subscription fee, the companies said Monday.

[…] Apple and Napster have touted their own devices — the wildly popular iPod and the new Napster Samsung player — for use with iTunes and Napster, respectively.

“The reason that we’re adding MusicNow is that we carry a large variety of other (digital music) devices and there really wasn’t a music service designed for them,” said Scott Young, vice president of digital entertainment for Best Buy.

Young said Best Buy wants to provide customers with a variety of options for digital music players and digital music services. The company already sells a variety of subscription services, including Internet access, satellite TV, phone service and’s Rhapsody.

Declan on Cigarettes and Online Privacy

The Massachusetts Internet tax mystery

Since early this year, the Massachusetts Department of Revenue has been busy firing off 3,264 letters to online shoppers, ordering them to submit a check for unpaid cigarette taxes, plus interest and penalties–or risk fines and imprisonment. Like its tax-happy neighbors of New York, Rhode Island and Connecticut, the Bay State ranks in the five most expensive places in the United States to buy cigarettes. Massachusetts levies $1.50 a pack in state excise taxes, not counting state sales taxes and local taxes.

The 7-Eleven store on Hanover Street in Boston’s North End sells a carton of Marlboros for $55.75. Online retailer sells Marlboros for between $27.19 and $31.19 plus shipping. That’s a huge competitive advantage for DirtCheap, explained in large part by its location in the verdant tobacco fields of Kentucky, which has the lowest tobacco excise taxes in the nation.

What’s a great deal for Massachusetts smokers horrifies the state’s tax collectors, who acknowledge that they’ve obtained the names and addresses of DirtCheap customers but refuse to divulge their source. The two possible culprits: DirtCheap and the United Parcel Service, which the company uses to ship cigarettes. DirtCheap’s lawyer told the Boston Globe that his client did not turn over the customer lists but said the state had obtained UPS spreadsheets that have delivery information. (DirtCheap did not respond to CNET inquiries Friday.)

[…] Massachusetts may have the law on its side in tracking down its taxpayers, but it doesn’t mean that the law is right or that the taxes are wise. Attempts to collect revenue should be weighed against the privacy of taxpayers. Turning UPS or other shipping companies into government informants that report on Internet shoppers is not an acceptable price to pay.

Windows Media Player for OS X

Step right up and get your copy; and help Microsoft make the argument that WMA should be the standard for digital distribution! Wonder if it has the same intrusive clickwrap license that it does on Windows?

Sony Copy Protection Plan

From CNet News: Sony plays new copy-protection song

On Monday, Sony will release rhythm & blues group Naturally Seven’s new CD in Germany with a so-called “second session.” The disc can be played on almost any device conventionally, Sony Music Chief Technology Officer Phil Wiser said.

It also contains a compressed digital copy of the music that can be quickly copied onto any computer. From the computer, people can copy that music onto Sony portable digital music players.

The CDs also allow people to connect to Web sites with exclusive features such as bonus songs and concert tickets. The features are only available if you have the original CD.

Such features are already available with Sony artists like Tori Amos and AC/DC. But the new discs combine the “second session” copy protection with the bonus features.

Sony will evaluate customers’ reaction to the new technology before introducing it in other countries. Wiser declined to specify a timetable for which the technology will be available in the United States.

Media Consolidation Marches On

From the NYTimes: RealNetworks in a Venture With Comcast [pdf]. So, exactly who’s in charge of guaranteeing that I will be allowed to use some other music distribution system on my cable modem? (See also CNet News: Comcast to distribute Real’s Rhapsody)

The relationship between online music and high-speed Internet access just got a little closer. Comcast Cable, the biggest provider of broadband Internet services, is set to announce today that it will offer the Rhapsody online music service from RealNetworks to its nearly 5 million subscribers.

See also this discussion of whether the Sony-BMG has queered the pitch for EMI’s merger plans with Time-Warner: Merger of Rivals Throws Up New Hurdle for EMI Chief [pdf] (plus a terribly spooky picture of Nora Jones and a bunch of industry shirts!)

Update: Then there’s this medium: Big Printers to Merge, a $2.8 Billion Stock Deal

The Register on PSU

I saw Ashlee Vance’s piece on the PSU/Roxio linkup and noticed that she hadn’t mentioned Barry Robinson, so I sent her an e-mail. Talk about turnaround! Penn State’s pigopolist pork is not smelling sweet

Penn State’s deep ties to the RIAA are intriguing. Along with Robinson, the school’s President Graham Spanier serves as co-chair of the Committee on Higher Education and the Entertainment Industry with Cary Sherman who is President of the RIAA. Given these rather friendly pigopolist connections, it should come as no surprise that Penn State is leading the way with this free music service, touting it as a potential model for myriad universities.

[…] It’s just a theory, but wouldn’t it be a bright idea for the RIAA to tap its cronies at Penn State to bill this service as a model for all universities, especially if Penn State gets first dibs at a massive discount. And isn’t nice that Napster gets to come along for the ride? Apple is claiming 80 percent of the legal download market. Forty-thousand students swapping files would help kick Napster’s share up a notch or two.

Another good question the Penn State students raise is why their school did not pick Apple’s iTunes Music Store as the service of choice. It runs on both Macs and Windows-based PCs.

At the moment, Napster is putting all of the onus on Apple to switch sides.

“We’ve always said we would like nothing more than to serve the Apple users,” said Seth Oster, a Napster spokesman. “Apple does not want to offer DRM that is compatible with any services other than its own. We are offering (our service) the way we can.”

So Apple is at fault for using an open file format, instead the proprietary WMA from Microsoft? And why is Apple’s DRM weak? The RIAA has agreed to use it.

“We’re serving 97 percent of the users,” the Napster spokesman continued. “What don’t you understand?”