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What’s Breaking Hollywood? It’s Not Infringement.

A striking Variety cover article shows that there is considerable consensus within the film industry on its greatest challenge right now: innovating to stay relevant in a changing, disrupted marketplace. Unfortunately, that memo apparently hasn’t been circulated inside the Beltway.

On the cover of the January 28, 2015, issue of Variety, the phrase “Broken Hollywood” is superimposed over a cracked “H” from the iconic “Hollywood” sign. The editors explain that they chose this title for their cover story to convey the severity with which 22 industry leaders view the most pressing problems confronting the movie and television business, “which run the gamut from a declining movie audience — particularly among the vital younger demographic — and falling ratings in broadcast and cable TV, to an unacceptable lack of diversity in the creative ranks and executive suites, and inadequate audience measurement across platforms.”

The “luminaries” interviewed in the article discuss in great detail the viewing behavior of millennials, which they describe as tech-savvy, binge-watching cord cutters, cord-nevers, and heavy users of DVRs to skip commercials. However, nineteen of the 22 make no mention whatsoever of copyright infringement, and two (Harvey Weinstein of the Weinstein Co. and John Landgraf of FX Networks) mention infringement only in passing. Just one industry leader, MPAA chief Chris Dodd, focuses his comments on infringement. Dodd cites piracy as the greatest threat to Hollywood jobs, suggests Internet companies unaware of the infringement are “threats to our creative future,” and conflates online infringement with the Sony hack. Yet this isn’t what industry leaders raise in their interviews.

In fact, the gap between the actual concerns of the on-the-ground business leaders and the inside-the-Beltway talking points could not be more profound. Here’s how some of the interviewees describe the challenges they face:

  • Warner Bros. Entertainment CEO Kevin Tsujihara: “I don’t think our business models are keeping pace with the changes taking place in consumer behavior.”
  • Walt Disney Studios Chairman Alan Horn: “Audiences have so many things competing for their time and attention that just having a good movie with big stars from a reputable studio isn’t enough anymore; it’s extremely difficult to break through the noise.”
  • Cinedigm CEO Chris McGurk: “Hollywood needs to wake up to the idea that there’s been a permanent change in viewing habits by younger audiences or the economic model for movie studios and broadcasters is going to be at risk.”
  • Starz CEO Chris Albrecht: “We need to find ways to intelligently transition and adapt our business strategies to be able to invite this next generation of consumers into wanting our products. We need to find attractive packages that make them want to sign up. I don’t want to see the business abdicated to someone who is out-innovating us….Whether you’re Fox or Time Warner or Disney or NBCUniversal or Viacom, you’re making a ton of money off the status quo. But that status quo is not going to enlist the next generation of consumers.”
  • FX Networks CEO John Landgraf: “We can deal with competition from Netflix, Amazon Prime, Hulu Plus and anyone else who enters the marketplace. But … we have to be better than they are creatively. We have to be willing to take bigger risks, even if they are the so-called disrupters….What’s great today isn’t good enough tomorrow. Ultimately, the challenge for our business is it can’t get timid. It’s got to stay bold and aggressive. And for me, aggressiveness is singling out the most original, risk-taking, best storytellers and giving them free rein.”
  • Chernin Group CEO (and former News Corp. President) Peter Chernin: “Your job is not to protect an existing business, and in fact you can’t protect an existing business. Your real job is to grow new businesses faster than the old ones can possibly decay.”

To his credit, Dodd in his interview does not call for SOPA-like amendments to the Copyright Act or state enforcement actions along the lines of Project Goliath revealed by the Sony hack. He says that to combat infringement, “we need to make it easy for people to find content at a price point that’s affordable,” something DisCo has pointed out before.

But Dodd makes a Freudian slip. He states that “we need to propagandize better.” To propagandize means to promote a cause in a misleading or biased way. As the interviews in Broken Hollywood reveal, the focus on copyright infringement as a central problem facing the film industry is misleading, to say the least. As Congress reviews the Copyright Act, policymakers should take note of the gap between the stated concerns of business leaders versus those inside the Beltway.

Eli Dourado, the director of the Technology Policy Program at George Mason University’s Mercatus Center, recently suggested that the MPAA’s interests may no longer be aligned with the interests of its studio members. He asks what is the best strategy for the film industry: fighting the open Internet through legislation like SOPA or Project Goliath, or embracing the Internet as a potentially profitable distribution platform? “If the studios were to truly embrace the Internet, the MPAA would have a much diminished reason for existence. There is no one you need to lobby to release a film online.” Dourado concludes by noting that “over time, as the studios’ true interests become more and more painfully clear, so will the discrepancy between their interests and those of the MPAA itself.” The interviews in Broken Hollywood suggest that that day may already have arrived.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.