In the first part of this article I talked about the difference in cinema ticket purchases and DVD ownership. The third great fallacy of the anti file sharing argument is that file sharing results in lost ticket revenue. This holds a two part answer and rebuttal. It would be difficult to argue that some tickets are not purchased because people will wait for the DVD, rental, or download. But what we gather from this is that there is a reason they will not see the film in theaters, quality or convenience. Which brings us to the concept of “home theater.” The industry has for years been pushing the concept of cinema in the home. Most recently with the audio and visual quality of blu ray high definition discs. 

 

The industry faces a quandary in promoting home entertainment. They currently bring in massive revenue from Blu Ray and DVD sales but face increasing revenue losses from - not just piracy - but the rise in legitimate Internet streaming services. TV related revenue accounts for  by far and away the most profitable stream of income in Hollywood. It is part of the home entertainment related media sales which make up 85% of revenue.  Based purely on gross percentages DVD sales beat out TV sales, but the extremely low margins of TV deals make them the holy grail of Hollywood profits.

The issue is becoming as much about your Internet connection as it is about what you illegal materials you are downloading. To explain, the beauty of cable TV was that the broadcast company knew exactly what you were watching at any given time. That’s the joy of a schedule. The nice thing apart from that is that with a few studies you can march off to your advertising affiliates and give them a pretty good idea who’s watching at any given time. They in turn pay you more to run the ads confident that it’s reach target audience. 

The advent of online distribution, particularly Hulu has started to obliterate cable TV revenues. This the probable reason for the problems with Warner cable in the US recently attempting bandwidth caps and restrictive pricing. Hulu serves ads but without the time targeted abilities of TV scheduling ad revenue is much decreased. On top of this media companies are slowly starting to think of content in the same way the consumer does - by volume of bandwidth or storage space. In a model like Hulu, where the latest shows are available for high quality streaming for free, just days after they debut on television, the limiting factor for the viewer is only time and the amount they can download. Warner can effectively tell the consumer how much they are allowed to watch by regulating bandwidth. If this was successful it would open the door to regulating bandwidth based on time of day and limit access to sites. Essentially providing enough regulation to ensure a cable TV style limitation of viewership and the associated ad deals available due to this degree of control. 

However, this is unlikely to happen. As the Warner attempt showed, even the slightest effort (and believe me the Warner efforts were slight in the overall scheme of Internet controls) to dictate to the Internet user will be met with harsh opposition. It is a fight between media companies wanting to turn the Internet into effectively just another content delivery platform and the users decrying unfettered access as a basic right.

To make things even worse for the cable companies, viewers are increasingly moving towards set-top boxes capable of organizing digital content. There is a running battle with forcing Hulu to block access from set-top boxes and software designed for use with TVs. In reality this is both a foolish and futile. When the industry is at the point of telling me that I can access Hulu from my TV as long as I’m using it as a monitor with my computer and running my browser, but not with my Apple TV box running Boxee (a free open source program), something is a little loose in logic city.

What does all this mean? That either the Internet is another way of saying “cable TV” or it isn’t. Actually I have the answer - it isn’t. In the next part of the series we will go even further into digital distribution and the problems of home cinema.

To be continued...