Illinois Updates Film Tax Credit for Non-Resident Stars

Somebody in Springfield must follow my blog, because it appears they're going to update the film incentive to include non-resident cast.

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Online Piracy Has a Silver Lining

by Jeff Steele

Let’s Fund Find the Opportunity

The US Dept. of Justice and the US Immigration & Customs Enforcement are continuing their aggressive crack down on copyright-infringing websites.  “Operation: In Our Sites” (as the joint effort is known) not only targets software, music, film and television offenders, but also online purveyors of counterfeit designer merchandise – all of whom are getting their domain names seized.  So far over 100 domain names have been seized, which doesn’t mean much because their I.P. address remains intact, so they just continue operations under a new name.  For example, the domain “Re1ease.net” was seized in a recent crackdown and was back up in a week as “Scrrls.net”.  Same site, it just needed a new name.  It would be like the government seizing Countrywide’s name/trademark, but allowing them to stay in business and continue ripping people off.

On a similar front, Voltage Pictures (the prominent foreign sales company and Oscar winning producer of Hurt Locker) has taken a much more direct approach to tackling piracy: Voltage has filed a direct lawsuit against a handful of named illegal downloaders of “Hurt Locker”, as well as up to 5,000 yet-to-be-identified illegal downloaders.  Kudos to Voltage for tackling the problem head-on; unfortunately, it’s going to take until 2013 to get the names of the “yet-to-be-identified” from their respective internet service providers (ISP’s).

I just checked The Pirate Bay (the world’s most popular public Torrent site) and at present there are 85 copies of Hurt Locker available for download, with over a thousand active downloads in progress.  To be clear, that’s just a snapshot of one site at one moment in time.  Pirate Bay doesn’t display the number of downloads-to-date, but another site does.  Presently, Demonoid displays an estimated 260,000 downloads-to-date (and that’s coming from the sixth most popular Torrent site.)  Now extrapolate that to the Top 10 Torrent sites!  At $1 per download, that’s over $2.6m.  At $5 per download, that’s over $13m!

Back in 2006, when “Who Killed the Electric Car?” was about to be released in theaters, I was apoplectic when I saw that 20,000 people had already downloaded the entire film on YouTube.  At $8 per ticket, that was $160k in lost box office.  Comparatively, that’s a drop in the bucket, next to Hurt Locker, but it wasn’t a total loss: there was value to be found.

Taking a page from Sun-tzu (“Know your enemy and know yourself and you will always be victorious”), I have been actively following Torrent sites ever since.  I’ve sampled every movie offering available: theater cameras, R5, 1080, 720, DVDs, Blue Rays, Academy Screeners and more are all readily available.  If you can’t wait for VOD and don’t mind VFX that aren’t quite finished, then an Eastern European R5 version is your best bet.  If you can’t wait for the R5 and don’t mind the sound of an audience, then a camera recording of a Russian theater screen (with audio from the assisted listening port) is your best option.  If you absolutely have to see it first (and you don’t need VFX and don’t mind timecode on the bottom of your screen) then the telecine rip is your ticket.  There’s something for everybody.

On most torrent sites, each download also has it’s own public forum.  These are useful for giving thanks, as well as conveying technical concerns, to the Uploader.  Users can also let potential downloaders know if the file is corrupt or fake, as well as the quality of audio and video (A6/V7, on a scale of 1-10).  But there’s something else in torrent sites that the press overlooks: word-of-mouth.  After viewing the film, numerous active users return to the forum to critique and discuss the film.

There’s a trove of research gold to be monitored and mined from these sites.  Any experienced filmmaker whose worth their salt understands the value of test screenings — studios spend millions on them.  Most premium indie filmmakers will budget for them, but most low-budget indie filmmakers can’t afford them.  If producers can look past their lost hypothetical revenue, then they can harness the benefit of thousands of people commenting on the technical and dramatic aspects of your film.  It may not be as scientific as a focus group, or as articulate as a film critic, but it’s certainly on par with what you overhear from audiences as they’re leaving the theatre.

Obviously, most filmmakers don’t want years of work and thousands (or millions) of dollars to be judged on a pre-release copy of their film – it’s not the best foot forward.  By the same token, most downloaders have no desire to watch something ripped from a telecine bay; it’s distracting and hard to watch.  So the people who do like to watch “unfinished” films are not only the minority, but are accustomed to viewing films in this state; their commentary not only reflects this, but also resides within the forum for that particular copy of the film, which provides context.  Producers, filmmakers and studio executives are capable of providing constructive feedback from unfinished films.

Harry Knowles and Ain’t It Cool News used to “illegally” critique audience test screenings and quickly became the bane of the studio establishment.  The studios eventually gave up trying to quash him and instead harnessed him by making him a studio executive and guest film critic.  The Borg prevail by assimilating their enemies, not killing them.

If the torrent sites were to streamline the data collection on their sites (by providing dropdown menus and radio buttons for the technical quality of the films, as well as for overall user feedback), that information would quickly become way too valuable for studios to pass up.  The money the studios could pay and the intel the torrent sites could provide would compel them into bedfellows.  Legitimizing ill-gotten gains is a natural step in the evolution of any criminal enterprise.  Should the studios be a catalyst for change, or an obstacle to change?  As a matter of principal, I don’t like to sling “should statements” without offering possible solutions, so by reallocating the time, money and energy they’re spending on lawsuits, they can begin assimilating by:

  • Providing the cash/resources for implementing the data-collection.
  • Allocating the video content and managing how it is viewed/distributed (a “clean-needle” program).
  • Paying the sites for the marketing data/research they provide.
  • Providing purchase discounts to “beta testers” and tastemakers.

Just to be clear, I’m not condoning the illegal actions of the sites, nor am I heralding the quality of discourse contained in their forums.  I am, however, advocating that there are significant silver linings to be found, namely: pre-release testing, and word-of-mouth marketing.  Studios can’t openly admit it, but they are already cognizant of these benefits and their marketing executives actively monitor these sites.  It’s not ideal, but it does have value.

  • http://www.tisza-baranya.com John

    Thanks for your insight – it takes a lot of courage to be a member of the motion picture industry say what you did in your article .

    While I consider online piracy a significant problem to our current models of content distribution (from which I currently derive most of my income) I agree that there are opportunities that have yet to be exploited – what we can learn via data that you describe in your article, and just the reality that millions of people are consuming this content, whether we like it or not. Since the content is digitally distributed, it’s trackable with the right technologies, ones that exist today. Someone will find a way to commercially exploit this in a manner that benefits content owners / creators.

    Today’s lost revenue will have to become tomorrow’s financial opportunity, because I don’t believe that litigation will solve the problem in any meaningful or cost effective way.

    Technology will force current business practices / models to adapt or perish.

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  • http://www.themagicofchristmasmovie.com Al Cacioppo

    I don’t know Jeff, giving any value to film thieves is akin to thanking a bank robber for providing the SWAT team with some target practice.

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  • Scott Hillman

    Intresting way of looking at things. But i am not entirely sure i buy you.

    While the audience that goes to prerelease copies of movies is may be a large one- i suspect its fairly self contained. If a film pirate hears about a movie and is pumped about it, does he go out and buy a ticket-or does he you know pirate it?

    I suspect pirates do legitamtely purchase tickets a fair amount of time, and tell friends who aren’t pirates. However this seems less silver and more tin.

    On the article you post about the most torrented movies a couple of weeks ago, what struck me what they where-they where movies like i am number 4 which mostly did pretty terrible box office-and well like the hurt locker.

    I had always been under the assumption that Piracy wasn’t a real problem in the sence that it effects all movies equally, so the loss was part of doing business. Now i feel a little worse about it. Thanks for reality yet agian.

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  • Randy V

    Well, I have to say that if you think theatre owners got pissed about Premium VOD, imagine their reaction to the studios actively condoning and supporting the illegal downloading of movies while they’re still in the theatre. And rightly so.

    This just seems like the further commoditization of films. Like the information gained from thieves is more valuable than the thing they stole. I’m not a film snob or anything, but film is art. And art has always been about commerce; if artists can’t make money, they cease being able to make art.

    I agree with Al above. I suppose we can learn something from every crime that occurs, but the most valuable thing we can learn is how to prevent it happening again. I seriously doubt that the feedback to be gleaned from the misanthropes who so devalue the thing they’re critiquing that they won’t even pay to see it, can be worth the lost revenue of them stealing it. The same feedback from paying customers (even if it’s just in the form of their payment) provides the same if not greater value, plus allows the lessons learned to actually be put into play the next time, by paying the bills.

    Just an opinion.

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  • http://Www.ufofilm.com Phillip Roth

    Legal action against the torrent sites is never going to iradicate them. What has to happen is if the studios can’t beat them, then buy them. How much revenue do these sites really make? From advertising and Google revenue I doubt much. So why don’t the studios start buying them. Start with 10 largest torrents in the world. Revamp them into legal VOD sites, but while that conversion is going on control them. Pull fresh theatricals off the torrents. Instead of full movies available for download make them promos and press packages. Put the guys who now run the sites on payroll. Give them a chance at amnesty and a legitimate business. Yes we will alway have the Internet cowboys who will refuse to go legit but anyone who has tried to make a go at a revenue producing web site knows how tough it. I think you could easily take 50% of the torrents legitimate within a few years. Then these guy will become their own enforcers going after any new illegal torrents that come on line.

    In Bulgaria the 2 largest torrent sites Arena and Zumunda are owned by the theatrical operators. They watched their DVD business go to zero. So rather than be beaten they decided to join them. To protect their theatrical operations they pull any movies playing in their theaters off their torrents. They are are making revenue from the advertising on their site while doing as much damage control as possible. Sure its not perfect because many people just access other torrents but they feel by at least controlling the two biggest in Bulgaria it a financially worth while operation. Now imagine what could be done if there was a consorted effort by the studios and other investors to buy all the torrent sites.

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    • http://www.n5p.com Ant

      I vote for Phillip Roth’s idea, most logical and possible solution I ever heard.

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    • XFunc_CaRteR

      But… When you buy the site, the pirate running the site will say thanks… and then start up another pirate site.

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    • http://www.atlasmediagroupllc.com Joe Orlandino

      I agree Phillip.

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  • Pierre Lapointe

    Interesting take, Jeff, but I’m not convinced that garnering that type of intelligence once a film is either completed or nearing completion has any real immediate value; most marketing plans have been devised and put in action at that point and changing direction would cost millions.

    I do like the idea of “beta testing” though and it could be a great way to advertise, market, and generate buzz for films in post by allowing a limited number of participants (say the size of a preview audience) to view screeners online and provide critique. This would be a minor expense for studios compared to the current process.

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  • Mark Geretti

    Jeff,

    There is always value in obtaining information about behavior and taste if it can be implemented in a cost effective, timely manner prior to public launch. As Pierre mentioned, the timing and implementation of potential product changes may be in question at the time of data procurement.

    I have long thought that the creative industry should try the same model some restaurants are using albeit adapted for the Internet world. Let customer’s register for free, pay the price they think is fair for the property then post purchase prices in public view. Maybe have a portion of proceeds go to charity. Sure the revenue stream per customer will be lower but you’re bringing everyone into the main stream. It is human nature to choose different behavior when there is public accountability and stream of consciousness involved. Much like the school of fish theory, people will react in tandem as others are doing the same. Worth a shot isn’t it?

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  • wildgift

    I’m a quasi-leech. Around 2005 I started downloading and watching TV and some movies from the internet. It didn’t affect my consumption of movies, which I didn’t really watch too many of annually anyway. (Around 6 per year maybe.)

    However, it has changed my TV watching. From around 1992 to around 2005, I watched very little television; perhaps 200 hours a year, though some years I didn’t own a TV and it was down in the 10 to 20 hour per year range. Of that, most of it has been PBS. Effectively, I was nonexistent to TV advertisers.

    Around 2005, because of my pirating behavior, I got interested in buying TV shows. Unfortunately, they were on DVD and cost $30 per. That was too much for me. My price range was more like $5 for 5 shows. So I did end up buying some discount DVDs with 3-5 old shows per disc. This effectively displaced most of my TV piracy. It took less effort, and the quality was better.

    What I know is, if you don’t watch regular TV, you don’t learn what movies are out there. Today, again because I lack regular TV access, I find out about new films from movie trailers at the movies and online, via print ads, and, mostly word of mouth.

    Now that the big TV and movie piracy sites are gone, all I have to inform me about new product are websites, which is too bad. I basically don’t exist to the film market.

    Another thing I used to pirate were ebooks, mostly computer books. Today, I find that I will buy ebooks if they are in the $10 range or less. $3 to $8 is a magic zone where I don’t think twice about buying it.

    Also, I used to pirate music. Now, I just listen to streamed music for free and buy MP3s from different online stores. I pay 25c to $1 for the music.

    People say piracy is bad, but piracy is responsible for keeping me informed about the new entertainment products out there. Seriously. From 1992 to 2000, I was really disengaged from the TV, music, and film market. From 2000 to 2005 I leeched and was…

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  • andy halmay

    Next to piracy, which I find enraging, there is terrible spelling which I find depressing. It reminds me of the decline in America’s educational system which can eventually destroy the country. It seems more out of place here among otherwise intelligent sounding contributors of comments. If dyslexia is your problem, type your comments in Word first and use Spell Check. Then copy and paste your comments here with corrected spelling. As for piracy and theft, it is never wise to rationalize any excuse for it or to salvage some value from it without a serious attempt to eradicate it. When it becomes economically disastrous for pirates to practice their game, they’ll seek other ways to generate income. When it becomes physically dangerous for them to continue on top of an economic burden, then they’ll become choir boys. They must be taught that they can become choir boys or corpses. It is all up to the folks who are being robbed. If they don’t fight back in every possible way, they’ll be taken. Law suits in law abiding territories; assassinations in overseas locations where the law doesn’t mean much. When word gets out that one can lose one’s life for merely stealing films, they’ll look for other things to steal. If the robbed don’t fight back, you get anarchy.

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  • Francesco

    Andy, I hope that people like you will never be allowed to get in the position to affect in any way the justice process.
    You are an example of the decline of human race to my point of view. It is well known that responding with brutal measures to any problem, never solved a thing, but just raised the bar of conflict level and pushed even more people to the anger against forced restrictions that limit the range of freedom. It is the human nature.
    We must realize that we are living in a digital era already, and the market itself is on the verge of a big change.
    The question is how top smart people is going to use technology the proper way (someone is already doing it), not repressing or forcing anyone with awkward restrictions, but finding new wise/intelligent solutions to bring balance to the actual chaotic trend.
    I agree with most of the above comments. Probably the answer is half-way.
    I think that, is not a question of illegal activities anymore.
    There must be a reason for millions of average users/customers, common people, to choose downloading a bad quality preview for free, than paying a full ticket at the theater just to give it a shot and maybe end up being disappointed. Don’t forget that many people now live on very shortage of finance to be wasted on spending money for leisure activities; priority goes to more “necessary” things, which is normal in recession times.
    Therefore, I don’t feel like to blame anyone for having that kind of behavior. Of course people who take advantage of that, can be blamed for it, but I believe that wisely there can be found the right compromise to give everyone a share of satisfaction.

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  • Francesco

    In addition, personally I don’t like to download and watch a movie or a show in a bad quality (if I have any expectations already), but by principal, I like to take a look at something (especially when I’m not sure if I’m going to like or not), before I buy it. Probably like many others out there.
    Obviously then, I choose what is worth spending money on. This can be considered common sense I think.
    Hope this can give a clue to the mentioned smart people who have business interest in the matter.
    A huge discount for “on-line pre-viewing” of some movie or show, could be one wise solution in my opinion.

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  • XFunc_CaRteR

    People don’t understand how the justice system works. It is purely pre-emptive.

    When someone commits a “normal” crime, we pour tremendous resources into tracking down the killer. However, there is a payoff: it prevents future crime.

    It doesn’t stop crime directly. If we relied on that, we would be overwhelmed. If everyone just started committing crime, our society would not have the resources to stop it, and we would regress into primitive tribalism – a world where might is right, but also a world where creative work cannot be done, because its fruits are too easily stolen.

    If you want to stop piracy, you have to vigorously attack certain criminals and make an example of them. That’s how we have done law enforcement for years, and it’s the only way that works.

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  • http://www.atlasmediagroupllc.com Joe Orlandino

    I do think Phillip Roth nailed it.

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