Imagine a corporation that spans the world, with theme parks, a huge distribution network, several record and movie production companies, publications of books and magazines, radio stations, and of course, its most famous icon: a mouse wearing red trousers. Imagine him kicking in your door, flashing a FBI or Homeland Security badge and taking everything you own as evidence. Imagine, a government so cowed by industry that it makes the announcements from the soundstage of a cartoon networks’ home office.
On June 31st 2010, 7 well known internet sites’ offices where raided by federal forces that seized computers, froze assets, and removed records. The owners of the aforementioned sites where placed in the tricky situation of defending themselves from the full power of the United States government, Homeland Security, Immigration, and the FBI. These federal institutions have arrayed themselves against a group of 20 something’s who never got into the field really to make money, but instead have found themselves in the cross-hairs of the government machine.
What are we talking about here? Usually these tactics are reserved for those spreading government secrets, distributing pornography, or doing something truly reprehensible over the internet. What we are talking about is the online posting of streaming television shows and movies.
This was the cumulative efforts of less than a year’s of work, and without legislation or law supporting it, federal institutions brought in Homeland Security into the mix. Homeland Security does not have the same legal requirements to provide a basis for charges before conducting raids, searches or seizures. At the press conference conducted for “In Our Sites”, the architects of the raids likened streaming internet sites to picking the pockets of everyday people.
“We are dedicated to protecting the jobs, the income and the tax revenue that disappear when organized criminals traffic in stolen movies for their own profit,” said Assistant Secretary John Morton of the U.S. Immigration and Customs Enforcement (ICE) at the press conference announcing the raids. The previous month, ICE held a conference that attempted to create a link between online video streaming and terrorism by lumping them together with organized crime. They could not bring concrete negative impacts of online streaming, because their are no validated ones at this time.
“IP [intellectual property] theft robs people of their innovation, jobs and tax revenue that funds vital government services,” said Morton on June 3rd, 2010, less than a month before they raided the internet sites. “IP theft is a crime organized criminals engage in, turning their profits toward other criminal activities, and IP theft creates safety risks for everyone due to the proliferation of substandard goods, including counterfeit pharmaceuticals, aircraft parts or daily consumables like toothpaste.”
Looking back now, it can be seen that ICE was preparing the public rationale for the coming raids.
The argument that “one download equals one lost sale” has been used since the advent of file sharing, specifically in the well known case of Napster and online music sharing. Many studies have either disproved, or shown that it has a positive effect on the music industry. In short, any statistic that the entertainment industry has been able to cook up, non-partisan researches have arrived at the exact opposite finding.
From a 2004 study conducted by the Harvard Business School:
“Downloads have an effect on sales which is statistically indistinguishable from zero, despite rather precise estimates. Moreover, these estimates are of moderate economic significance and are inconsistent with claims that file sharing is the primary reason for the recent decline in music sales.”
Studies conducted since the early 90s to the present day have indicated that it actually profits companies that have been leading the charge against these webhosts. Video availability, and the free distribution of high quality copies on the net have affected the distribution hopes of the entertainment industry. Their attempt to close down these networks, at least those that provide free alternative’s seems to echo the sentiment that Terry Pratchett’s Richard Guilt in Going Postal expresses “good business isn’t about providing a good service, it’s about providing the only service.” With attempts to limit the availability of alternatives, the general population is forced to turn to corporate communities that are either behind the technology that public is used to, or is being used as a commercial outlet. The second of these two models is a far more desirable.
This week, Netflix has announced that it will be streaming movies and television shows with EPIX, granting them exclusive rights to television shows and movies from Paramount Pictures, MGM and Lionsgate.
The operators of one of the most popular sites that was taken down, NinjaVideo, could not be reached for comment do to the restrictions that the government has placed on them. Instead, readers are directed to their initial post on www.saveninjavideo.net, their official forum and blog site. Responding to ICE’s claims that people operating sites like NinjaVideo, where making “millions”, Ninja’s Phara and its moderators took cap in hand and began asking for 1 dollar donations to their legal fund saying:
“We’re a few twenty to thirtysomes. I have a cat. Wads [Admin for Ninja using the handle Wadsworth] likes to bicycle, etc… We’re normal people. We always were, every step of the way. No one did this to get rich. We supported independent artists, released podcasts, fostered growth and debate. We were on our way to opening the Ninja Design Firm, wanted to set up an Independent Film Festival, a Spotlight Artist Music Concert… We had and still have so many wonderful plans. So many ideas to change this world. At least part of it. Ninja was the beginning of something that meant more than money. It was a small corner in a much larger debate. Now Ninja is the debate. And we are Ninja personified. We’re not bankrolled by a major corporation. We’re not funded by taxpayers. We’re individuals who banded together through the internet, just like you did. We played in the grey space of the internet, and they’re going to try to use our case to shade that area black.”
NinjaVideo fans released a statement over Ninja’s public forum expressing what many felt. Regionalism and distribution rights may not cross borders, but the internet does with ease.
“Today, the world has lost a collection of media that many will never be able to access again. Today, we have lost a database which not only shared media, but which introduced people around the world to media which they may not ever have heard of if it were not for Ninjavideo. Today, we have lost a place where media was not restrained by the subscription fee you pay, by the channels available on your meager little box, or by international boundaries.
Americans have lost the ability to watch BBC documentaries once again. Brits have lost the ability to watch American sitcoms without waiting and having to pay extra. The rest of the world has lost the ability to watch programs not filtered by their countries’ respective tastes, choices, or budget limitations. Today, we have lost a friend.”
This hits the nail on the head, it wasn’t about making a profit by enabling users to watch programs at their leisure, it was one of control. The internet and internet media has always been a place where enthusiasts seem to have a leg up on the corporations, and now these corporations want the communities and the structures and distribution patterns for themselves.
Koleman Strumpf, the co-author of several studies on internet file sharing and their effects on the music industry (and the co-author of the report already cited) was able to comment, although he prefaced all his remarks as being a specialist on music, rather than video, file sharing. He hopes that later this year he will have enough information gathered to make a report specifically about video sharing and streaming.
“It is hard to see the economic rationale for Operation in Our Sites,” says Strumpf, “they targeted and shut down 7 video sites, while there are likely thousands out there. I am sure that within 30 days, 30 replacement sites will be up and running to replace those seven that were taken down. Crackdowns and prohibitions on online activities are often unsuccessful. Take gambling, in the past the government tried to crack down on gambling sites, but if people want to gamble they will find a way.”
It’s true, when the government attempted to crack down on gambling sites, those in the business simply moved their servers to a geographic location that allowed the activity.
The motivation, says Strumpf, as far as he can figure, has been encouraged by private groups with seeming vested interest pressuring the federal government. He was also not surprised to learn that the announcement of the raids was made from a Disney studio.
“What I do is keep a handle on the empirical facts. Sometimes interested groups will exaggerate claims of damages or make unsubstantiated claims about particular aspects of an activity. I think it is incumbent to back up any such claims with research.”
He also points to cases where major networks have distributed pilots for new series in magazines and elsewhere prior to their official premier as a manner of creating interest.
Money, of course, is a major driving force of the raids, but not the only one. ICE’s statements even reflect this, blaming internet distribution not for loss of actual money, but brand value. Distributors and studios want to be able to control the messaging and information about forth coming projects. Two examples seem to exemplify this. When Iron Man 2 was leaked onto the net a few weeks before the release their was barely a ripple with mostly positive online reviews, but when X-Men Origins: Wolverine and 2003’s Hulk met with wide spread panning by internet critics and the studios wanted blood.
“It is unclear if the arrested operators of these sites have been able to make much money. Their main source of revenue is likely ads, which in this case are not likely to be very lucrative,” says Strumpf.
The solution to this situation, Strumpf suggests, has been hinted at with the development of sites like the US only Hulu site, “I would think you can’t put the genie back in the bottle with this one, I would like to see a creative way of monetizing streaming and video sharing, I honestly think that’s the future.”
There have been several positive effects that can be seen from the early music file sharing communities. When CD prices shot up to $26 average a CD, listeners simply refused to pay. CDs can now be had at about $9.99 and seem to crest at $14. This is what the market can bare, and music studios learned the lesson of keeping prices reasonable and people won’t expend the effort of downloading content. With a recession still ongoing in North America, the movie industry has been charging more and more per movie screening. With prices that were around $6-8 in the early 2000s, prices have now reached $13-18 a screening. The real way to deal with downloaders, if the movie industry takes instruction from the music industry, is to reduce prices to make it not worth the effort of downloading.