Hollywood’s Profits, Demystified - The real El Dorado is TV

The best-kept secret in Hollywood, especially from Wall Street, is that the movie studios’ biggest profit center is not theatrical movies, or even DVD sales; it is TV licensing. If the details of the profits remain clouded to outsiders, it is no accident. The studios purposely blur together their three principal revenue sources–the box office, video sales, and television licensing–into a single portmanteau category called “studio entertainment” in their quarterly and annual reports. Keeping audiences in the dark may be a time-honored Hollywood tradition, but this breakdown can be demystified by consulting the studios’ internal numbers, which they furnish to the Motion Picture Association on a confidential basis.

[...] With the advent of the DVD, home video has become a vast retail business, with studios selling both new and past titles, as well as television programming such as The Sopranos, Friends, or Chappelle’s Show, at wholesale prices that can go as low as $5 a DVD. Studios, which have meticulously analyzed these costs, estimate that manufacturing, shipping, and returns costs average 12.4 percent; marketing, advertising, and returns costs average 18.5 percent; and residuals paid to guilds and unions for their members and pension plans come to 2.65 percent. So, about two-thirds of video revenues are gross profits (which participants, such as stars, producers, and directors, may share in once the movie breaks even). In 2004, the studios’ estimated video gross profit was $13.95 billion.

But the studios’ real El Dorado is television. What makes television licensing, both at home and abroad, especially profitable for the studios is that virtually all the expenses required to market a television program, including tapes and advertising, are borne by the licensee. The studios only have to pay the residuals to the guilds and unions, which varies between movies and TV and average roughly 10 percent. The studios get to keep the other 90 percent. In 2004, this amounted to slightly more than $15.9 billion, making it the studios’ single-richest source of profits.

A host of strange arguments (including conveniently forgetting that the wired network was created under a government-awarded monopoly regime), but the confusion is appropriate: FCC schizo on DSL, wiretapping

The Federal Communications Commission has become weirdly schizophrenic.

In a pair of decisions on Friday, the commissioners voted to veer in two radically different directions: deregulating DSL lines while simultaneously imposing onerous wiretapping requirements on broadband providers.

Proliferating data mining: Analyze This: Combining Data

In hopes of broadening the potential of this kind of software, several companies plan to announce an agreement Monday on a technological standard that will let multiple computing engines for sorting unstructured data work together.

The programming codes that govern the framework, spearheaded by International Business Machines in conjunction with academic researchers and the Defense Advanced Research Projects Agency, will be open source and freely available.

The cooperation is required because so many different kinds of unstructured-data engines have sprung up in recent years, driven in large part by the U.S. government’s demand for intelligence analysis. The CIA has funded several unstructured-data management companies, including Attensity.

(of Google) is not good for the gander, apparently: Google’s Chief Is Googled, to the Company’s Displeasure

CNETNews.com, a technology news Web site, said last week that Google had told it that the company would not answer any questions from CNET’s reporters until July 2006. The move came after CNET published an article last month that discussed how the Google search engine can uncover personal information and that raised questions about what information Google collects about its users.

The article, by Elinor Mills, a CNET staff writer, gave several examples of information about Google’s chief executive, Eric E. Schmidt, that could be gleaned from the search engine. These included that his shares in the company were worth $1.5 billion, that he lived in Atherton, Calif., that he was the host of a $10,000-a-plate fund-raiser for Al Gore’s presidential campaign and that he was a pilot.

After the article appeared, David Krane, Google’s director of public relations, called CNET editors to complain, said Jai Singh, the editor in chief of CNETNews.com. “They were unhappy about the fact we used Schmidt’s private information in our story,” Mr. Singh said. “Our view is what we published was all public information, and we actually used their own product to find it.”

See also Europe Zips Lips; U.S. Sells ZIPs; ZDNet UK Begs for Google’s Forgiveness; Google’s Boycott Misses the Mark

Software Maker Plans to Share as Way to Fight Microsoft

VMware, the leader in the fast-growing market for virtual machine software, plans to announce today that it will share its code with partners like I.B.M., Intel and Hewlett-Packard in an effort to make the VMware technology an industry standard.

[...] The move by VMware is an attempt to defend against Microsoft before that company accelerates its drive into virtual machine software. Microsoft’s push into this field, analysts say, is expected to begin in earnest with the next version of its Windows operating system to be introduced in late 2006.

The VMware announcement also points to the pressure on software companies to adopt a more open approach and share their technology. VMware’s big industry partners have become increasingly concerned that it is becoming too powerful, and could potentially become a crucial, proprietary layer of software in data centers, much as Microsoft’s Windows rules the market for personal computer operating systems.

Related: Adobe’s situation - Code war heats up between Microsoft and Adobe [pdf]

Setting the live music free [pdf]

In recent months there’s been an explosion on the Internet of what used to be called tape trading. This is not the illegal copying of commercially available music that is being fought by the major record companies. This is the free, generally legal exchange of fan-made concert tapes, radio broadcasts and material that was never officially released — by the Dead and just about anybody else.

It’s a world that is growing daily at an exponential rate — and has its foundation in the community of tapers and traders that initially coalesced around and was nurtured by [Jerry] Garcia and the Grateful Dead.

[...] These aren’t the sites where you might find the new Mike Jones album or other commercial releases without paying. These are the places for people coveting music that can’t be bought.

[...] The Recording Industry Assn. of America, the music industry’s lobbying organization that staunchly opposes illegal downloading, piracy and the sale of bootleg recordings, says that it supports this kind of music trading as long as the artists approve.

[...] But one rule is most adamantly stated by administrators and users alike: The music is not to be sold.

“There is no money changing hands,” says [Brewster] Kahle. “This was the ethos back in the day — you couldn’t even charge for the cassette you dubbed music onto. People really stuck to that. What was interesting to me was the level of labor and love put in by everyone involved.”

[...] “There’s no question that the wind has been taken out of the financial sails of the bootleg world by this free exchange,” editor Pete Howard says. “Bootleg CDs used to be pressed in the thousands, if not tens of thousands, for each title. Now, though it’s funny and ironic to hear the manufacturers moan and groan, no more than 500 copies is usual.”

[...] Despite so many recordings readily available on the Internet, the official releases of live albums continue at a steady pace, with the “Dick’s Picks” series now standing at three dozen titles alone, complemented by other live releases, as well as a newer program of Garcia solo concert recordings. Many make the argument that one feeds the other.

“We’ve really hit on something with this community,” says Internet Archive’s Kahle. “And yeah, it all came from the Grateful Dead, and it will give them a long life. They’re still selling stuff, and there are young kids involved. It is relevant.”

Europe Zips Lips; U.S. Sells ZIPs

“In Europe, the question has been settled: citizens have strong legal rights,” said Joel R. Reidenberg, a Fordham University law professor who is an expert on international data privacy rules. “In the United States, we basically have a mess, and we are still trying to sort it out.”

More fundamentally, these two systems for dealing with data arise from a cultural divide over privacy itself. In broad terms, the United States looks at privacy largely as a consumer and an economic issue; in the rest of the developed world, it is regarded as a fundamental right.

In the United States, said Trevor Hughes, executive director of the International Association of Privacy Professionals, debates over the privacy of personal data generally occurs piecemeal, when a particular abuse causes harm. “In Europe, ” Mr. Hughes said. “data is just protected because it is data - information about you.”

When Pigs Wi-Fi

This kind of network is the wave of the future, and eastern Oregon shows that it’s technically and financially feasible. New York and other leading cities should be embarrassed that Morrow and Umatilla Counties in eastern Oregon are far ahead of them in providing high-speed Internet coverage to residents, schools and law enforcement officers - even though all of Morrow County doesn’t even have a single traffic light.

The big cities should take note, said Kim Puzey, the general manager of the Port of Umatilla on the Columbia River here. “We’d like people to say, ‘If they can do it out in the boondocks with a small population, that model can be applied to highly complex areas,’ ” he said.

Mr. Puzey, who says wireless broadband is central to the port’s operations, argues persuasively that broadband is just the next step in expanding the national infrastructure, comparable to the transcontinental railroad, the national highway system and rural electrification.