Online Movies, Taiwanese Law, and the American Film Industry.

By the MP3 Newswire Staff - 02/04/02

Did you know that apparently the law in Taiwan says that for a movie to be protected by copyright law one has to apply for such protection within a month after the opening in the theaters? Did you know very few Hollywood features ever apply for such protection and thus have long fallen into the public domain as far as the island of Taipei is concerned? That's what Slashdot is reporting.

Enter Movie88, on online googolplex where you can watch recent hits like Shrek or Save the Last Dance for $1.00. Using the home video rental model, that single dollar gets you access to the movie as many times as you want for three days as a stream (the movie can only be streamed, it can't be downloaded). They don't have to ask the permission of the movie industry, they don't even have to pay them and it is all legal.

Technically, the site is no different from broadband movie sites like MovieFlix.com and LikeTelevision.com, which also show movies in the public domain. The exception is that Movie88 is able to show recent releases because a particular movie's distributor failed to consummate a required registration process.

Doing business over borders

Copyright law gets very interesting when we add foreign nations to the mix. If you think US laws like the DMCA are vague, convoluted, or just plain misguided, remember that there are hundreds of countries out their with their own complex array of laws. All of them arguably trying to do the right thing, but subject to the various political processes and internal pressure unique to each.

That's just a long-winded way of saying you want to find consensus in the world - good luck. What makes the Internet truly amazing and powerful to date is the way it transcends all of this, creating its own space - an ether if you like - that runs by its own rules. It not only clearly avoids the trappings of traditional international communication and commerce, it sometimes feeds off of it, using favorable states as safe harbors.

Off-line, though, each net service is subject to the jurisdiction of the host country and many companies are now looking strongly at states that can offer protection rather than the treacherous legal exposure that has dogged much of Net music. This includes both the legitimate companies looking to aggressively develop a new industry and those of questionable provenance and intention.

When the Dutch court shutdown P2P company KaZaa, the company sold itself a one way ticket to Australia, where it continues unabated. Other companies beyond the Napster Clones may likewise choose to avoid American and European litigation exposure by setting up shop elsewhere. The dotcom bust is not the only thing to hurt the commercial US industry. The overly litigious conglomerates who control much of our copyrighted content have been so aggressive they have literally pushed budding entrepreneurs into looking overseas for relief. Some are finding it.

There are no "fair use" issues surrounding Movie88. They are clearly selling content to you and me, but without having to pay for the rights to sell it. It may be legal, but it's on a technicality. Neither the music or movie industries are garnering much sympathy these days, but they do deserve the opportunity to earn revenues when something of recent creation is "sold" (when they actually own the rights. In the music world, where only the most recent contracts specify digital rights, there is a strong case that artists who signed earlier contracts never transferred their digital rights and thus own them. That's what Napster Judge Marilyn Hall Patel implied when she questioned whether the record companies have copyrights that apply to digital distribution of music).

The good news for the movie industry is that they can fight this, but not in the courts. They can simply do what the music industry has failed to do. Offer a better product for a reasonable price, in this case access to all movies beyond those that fall under "public domain". In other words, license their copyrighted material for online distribution.

How does the movie industry compete?

Before the movie industry panics let's think of what a dollar here brings the average person. Three days access to a video feed they cannot liberate from their PCs. Anyone who has tried to watch a full length movie through the 2 x 2 inch window on their monitor immediately recognizes the limitations of film online.

The reason people still go to the movies with the availability of cheap video rentals is because the wide screen experience is superior to the TV experience.

Likewise, we would rather spend the $2.95 to rent the video tape of Shrek than $1.00 to stream it online. Of course, $1.00 is compelling enough at times when a) we don't want to schlep to the video store and b) the site offers access to movies our local store may not carry.

In that light, online video stream rental is priced right here. It's a product of lesser quality, but with conveniences not offered by the local video store and therefore not made irrelevant by the off-line rental industry.

This is the price the movie industry should rent their movies online at, one single dollar. If they do, they would compete head to head with a site like Movie88 and probably win. In fact they will win because the draw here is recent releases and the industry can legally shut off that supply by diligently registering their films, making the opening in Taiwanese laws moot.

Of course, Motion Picture Association of America (MPAA) head Jack Valenti will scream loudly of piracy and let loose his hordes of lawyers to right this wrong, but the courts have not done anything to stop the trading of music or movie files on the Net to date. The truth is, at this point, the courts are not fast enough to keep up with the fluidity of the Net or the lack of consensus among the nations of the world.

Valenti needs to modify his strategy. What the movie industry needs to do is not make the same mistake as the music industry. They must release their products online as streams and train their audience to stream rather than trade.

They can do this because even though you can trade a movie file the same way as you trade a music file, there are significant differences that make it less convenient and satisfying. First of all there are the bandwidth demands. The average song file runs between 3-5MB. A test download we did of a very good copy of Shrek came out to over 342MB, a 100 times more.

Even though we have a broadband connection, it took us several hours to download the damn thing from Morpheus. Sure it was free, but viewing it on our PC was inferior to relaxing on the couch and watching it on VHS or DVD on a 27 inch set. Frankly, three bucks to rent a movie is very reasonable and we much prefer to do that and save the room on our hard drive. Sometimes we can also rent a movie at the store and view it quicker than we can download it, which is why online trading in Hollywood celluloid leaves us flat (at least until bandwidth and compression schemes improve).

We''ll pay a buck to stream the latest movie rentals, though. Here's why. Unlike CDs, which we always buy to own, movies we mostly rent. We already have a different mind scheme when it comes to feature films and streamed rentals for a period of days works for us. It is also more practical for those of us without a terabyte of storage on our systems.

Sure, we can burn it on CD and store it there. We still have to view it on our PC as we know of no CD movie viewers. DVD burners are on the horizon, but if streaming the same movie is very cheap there is less incentive to spend good money on the needed hardware to capture and store it. Geeks will spend this money anyway as the technology itself compels them as much as the content, but the average person on the Net is more concerned with convenience and the quality of the final experience.

We would not pay $5.00 to see a two-by-two stream when we can rent the DVD for less. We would not pay the same $2.95 either, again because the store rentals are superior and thus a better value.

At a buck, though, it opens up a whole new pricing tier. One that can generate more paid movie viewing. The lesser quality of streamed files also works in favor of the movie industry as streamed Real or Windows Media files are no threat to the sales of high quality DVD's. Precedent shows that people will pay for higher quality product, that's why when CDs were first introduced, such a high percentage of sales turned out to be from consumers replacing their favorite (and still perfectly good) vinyl versions of their albums with the new medium.

MovieFlix.com and LikeTelevision.com already serve this market. While they both have a lot of movies they are still somewhat limited in what they offer. It seems the movie industry would rather set up and own their own services than license to these guys, but the studios proved long ago they didn't have to own the movie theaters or rental shops to make a big profit. Also, the record industry proved that cutting out outside online vendors could be a tragic mistake.

The MPAA should guide the studios to put their library of films online on their own services, but they should also guide them to license their content to outside vendors like MovieFlix.com and LikeTelevision.com, further helping to build a thriving domestic online industry. If these companies could rent a stream of a film the same moment it hits the video stores, they could move from the monthly "all-you-can-eat" business subscription model into a viable pay-for-play model, at least for the most recent releases. This would promote services that pay the industry for use of its films over services like Movie88 that don't have to.

The goal

What is the ultimate goal here? To make every surviving piece of celluloid that exists available to the public. There are some wonderful movie classics like Josef Von Sterberg's Anatahan, Harold Lloyd's the Freshman and Ernst Lubitch's Trouble in Paradise that are no longer available on tape. The truth is there is not enough of an easily reached audience to justify the substantial copying and distribution costs via VHS and DVD.

The Net solves that problem, both because it is relatively cheap to digitize and stream movies online and because it can easily bring together disparate minions of like-minded viewers in the same way that eBay brings together like-minded collectors of the most obscure items.

As film fans we would start with every available silent movie print (studio content with the most limited audience) and move on through the thirties and fourties and so forth. This would include such ephemera as newsreels, trailers, screen tests, out takes, and anything else that can serve the most rabid fan or meticulous film scholar. Why not? These items are not earning any income decomposing (literally) in a warehouse in Burbank.

This goes for old television programming too. There are many old shows that never made the syndication circuit, yet could draw viewers. We personally have explored most of the television episodes posted on MovieFlix.com and almost all the toy commercials on LikeTelevision.com. Most were aired long before we were born so they were mostly unknown to us, yet despite not being of our era we found them quite entertaining to watch. Such content doesn't work well under the traditional distribution formats used for VHS and DVD (whose going to buy and store 117 episodes of "The Trouble with Father"), but they work great as streamed entertainment for the Internet.

All we need is for Hollywood to do less fighting and do more delivering.

And will Hollywood deliver? If the laws in Taiwan are indeed what the Slashdot story says they are, Hollywood better deliver.

That or make the same mistake the music industry made in 1998 when the likes of MP3.com and EMusic.com asked them to be their online music stores and the major labels told them to go scratch. There was no Napster then and finding, let alone successfully downloading, anything beyond the latest Britney Spears hit could be a chore.

Had they licensed their entire catalog to these two services they would have offered the most convenient access to online music at that time. Liquid Audio already offered a secure online format that would have easily competed with MP3 because MP3 did not yet coalesce all the music of the major labels. Liquid Audio could have done it first, making it a compelling format for the user to consider.

But the record industry did not want to "enrich" these companies with their music, even if they were paid for it. They wanted to run and control it all. Unfortunately, they were not up to the task.

We all know what happened. Napster came along and did it all for them, turning digital music downloads into a free-trade medium as opposed to a pay medium.

More important, Napster spread the breadth of music available online, becoming an ideal source for those looking for music beyond what gets heavy radio rotation at a given time. This included a lot of vintage music unavailable in stores.

The music industry went to court and eventually shut Napster down, but legal remedy did nothing to offset trading (the very visible trial actually promoted it). The end result, more people trade free MP3 files than ever before (see Americans tune into online music).

The movie industry worries about the Napsterization of its films. They can prevent that by stepping in now and providing what Napster and the Napster clones can't. Because the files sizes of digitized movies are so big, people who trade online are limited to how much they can offer from their personal hard drives. What works for music trading doesn't scale very well for film. An online movie stream service doesn't have this problem and can easily generate an audience because they can offer much more.

PressPlay and MusicNet are struggling in their music subscriptions, because they offer much less than the Napster clones and are pretty expensive to boot. The record industry's problems don't have to be the movie industry's. They will if studio politics and congressional lobbying take precedence over low cost licensing of their films.

Napster was created out of Shawn Fanning's frustration over accessing music online. Remove that frustration you alleviate the pressures that lead to the creation and mass adoption of Napster in the first place. That doesn't mean Napster would not have happened, but the progress of its development could easily have been delayed.

Either through the MPAA or individually by studio, the film industry should create a repository that represents all movie studios and license out everything they can catalog to any service wishing to sell streams of its movies. Each studio is free to also create it's own service that stress their own movies. Streams must be priced to make them compelling to the user, creating value so as the user will see the advantages while tolerating the disadvantages.

The studios are already going that way with their new MovieLink service due to open in the latter half of this year. Backed by Sony Pictures, Paramount, AOL Time Warner, Vivendi Universal and MGM the service should launch sometime late this year. Newly elected CEO Jim Ramos said the service has settled on offering downloads of full-length feature films rather than streams, an interesting twist when compared to what we mentioned above supporting the cause to stream rather than download. We're sure MovieLink will be selling these files for more than $1, which pits them directly against the free Napster clones without leveraging the limitations of these clones.

Licensing to outside services allows the quicker implementation of other business models and allow the studios to better hedge their bets. Doing this the film industry can set the pace and the tone for digital movies on the Net and still have a hand in controlling and growing a budding industry. It doesn't look like they will, though, at least at this time. We will have to see how they do on their own with MovieLink and Vivendi Universal's newly started MP4.com.

If the film industry doesn't open its content up, someone may do it for them and in a way more compelling than what the P2P programs offer today. It may not be Movie88, but it may be someone.



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