Downloading and the collapse of the old media regime

Most people I know do not watch TV in real time anymore but use bit torrent to download what they want to watch, when they want to watch it, and without commercial breaks. While charges of piracy have loomed over that activity, this practice is arguably legal right now in Canada – one of the purposes of last summer’s Bill C-61 was to make the practice illegal. It is taping shows on a VCR for viewing later that is currently illegal (but would have been made legal by Bill C-61).

In spite of industry attempts at demonization, bit torrent file sharing serves consumers who are demanding access to content on different terms than what’s offered by big media companies. Those media companies are desperately trying to preserve their business models and a complex web of relations that span content producers and distributors that exist in parallel to, but increasingly intertwined with, the Internet. Rather than moralizing, we should be leveraging the Internet to spread content, and make money in non-traditional ways.

Much slower to change are our legal institutions, such as copyright, although there seems to be growing debate over how relevant existing copyright laws are to our modern world – not so much in the sense of making them ever tighter in accordance with what vested industry wants, but whether copyright even works at all for its expressed purpose of creating an incentive to create. The Economist is hosting an excellent debate on the topic, and I think the anti-copyright side is winning.

Personally, I have never believed that artists or inventors were doing what they do for the lucre, but for what drives them as human beings; yes, they need to eat, and should be able to make money off their work but it is not obvious why that should that be a right without limit. Economist David Levine asks whether JK Rowling would have written Harry Potter if offered “only” $8 million – that would have been a great deal for a struggling single mom (or anyone for that matter). So to what end do we have a regime that seeks to ensure she can be a billionaire instead of just a multimillionaire? Levine develops these ideas in a series of papers here (he also critiques patents as stifling innovation, but I will not get into that here).

The Globe’s new “download decade” series does a pretty good job at capturing this state of Schumpeterian creative destruction. Music gets downloaded but artists are typically better off by reaching new audiences, and making money by touring and selling T-shirts. The series’ most recent article is a pretty good read, starting with the iPod as the gateway drug to widespread downloading culminating in bit torrent.

There are some major omissions in the article about who is making how much money. For example, it talks about how last year’s Dark Knight (Batman) movie got put on the Internet less than 24 hours after release, but neglects to mention that it made $1 billion, making it the second highest grossing movie of all time (in the US, fourth worldwide, but with DVD sales still kicking in). When it comes to movies, if studios produce a good product people will want to watch it on the big screen, which is why I am going to see Star Trek tonight rather than downloading some crappy version ripped off someone’s cell phone. Take a look at the top grossing movies of all time and most of them were made during the era of downloading.

Most of the attention on old media has been on the owners of copyrights, but there is more. The Internet has changed the face of the telecommunications industry. Downloading has been part of the reason why big telcos and cablecos have had surging profit margins. Now, exposed by the recession, more traditional distributors are trying legal means to protect their piece of the action. This report in the Globe looks at a fight at the CRTC where TV stations want to get some cash from cable companies who currently do not pay the signal they pass over their networks:

The TV networks say conventional stations need the right to collect subscriber fees from cable and satellite companies, the same way specialty channels do. Those channels, including dozens owned by CTV (such as TSN and Bravo) and CanWest (Showcase and HGTV) are more stable since they don’t rely solely on advertising dollars, which have been hit hard in a recession. The networks say they shouldn’t be forced to give their signal away for free to the cable and satellite carriers. However, the distributors are vowing to pass the proposed 50 cent monthly fee per subscriber on to their customers if it is approved.

In some big sense this whole thing is missing the boat, given the Internet’s ability to let people choose their content at watch it at their leisure, the only exception being live sports or news. As an aside, I still find it frustrating that I cannot pay for just one cable channel or for one game/show. I’d love to just get TSN but instead I need to pay $500 per year for a whole package of channels that I will never watch (it’s cheaper just to go to the local bar). With bigger pipes to support higher quality video I’d be happy just to stream off TSN’s web site, and live with the commercials.

But there are too many people making too much money by sticking to the old business models, even as they are dying. In my ideal world, these fat pipes would be run as a public utility, and content producers would make money in different ways: exclusive premiere showings; embedded advertising like the network logos on the bottom of the screen, or advertising-sponsored browser windows as some networks are already doing.

As the meteor called the Internet continues to wreak havoc among the dwindling population of old media dinosaurs, the key scarcity in all of this is time: the available hours individuals and families have to spend on information and entertainment services, the wide proliferation of alternatives within the existing media environment (web sites, youtube videos, streaming content) and without (video games, playing outside, reading a book).