There’s no doubt that traditional content is in trouble. Theatrical box office and admissions (number of tickets sold), despite some fluctuation, have generally been flat for a number of years. The DVD business is declining, and Blu-ray may prove too little, too late. The network television business is harder than ever, and also in trouble are other traditional content industries, such as those centered on music, newspapers (as Los Angeles Times readers well know), books, and magazines. People still consume media the old-fashioned way, but fewer and fewer do so every day, especially younger people.
Why is traditional content losing its vigor? Everyone focuses on the culture of piracy, but there are other reasons as well. One is supply and demand. Demand for entertainment is relatively static, because leisure time is constant, whereas supply (online content) has grown enormously. Some of this is professional content, but even more is user-generated content (UGC). Other factors are the loss of physical form (intangibles generally seem less valuable than tangible things), the low-friction nature of the Internet (things that are easy to get cost less and lose value), and ad-supported new media business models (free things seem less valuable than those that are paid for).
Market forces are also key: Computers, Web services, and consumer electronic devices are more valuable when more content is available and, in turn, these products make content more usable by providing new distribution channels. That encourages the growth of UGC and pirated content, reducing the market share of paid professional content, and, not incidentally, increasing the sales of new technological devices and services.
All these developments have led to a migration away from paid media to UGC or pirated content. UGC is often a flawed substitute for professional content or traditional media. But that’s little comfort, because competitive goods don’t have to be perfect substitutes in order to acquire market share at the expense of established product. And, yes, in some cases, new media make money for creators and companies—but the money’s much less than it used to be. As NBC Universal’s Jeff Zucker lamented, the content industries are being forced to “trad[e] today’s analog dollars for digital pennies.”
In contrast to the stagnation and decline of the
The entertainment industry has responded in several ways. One has been through brute-force lawsuits, such as Viacom’s pending suit against YouTube and Google (YouTube’s corporate parent) for copyright infringement related to users’ unauthorized posting of Viacom content on YouTube. See Viacom Int’l, Inc. v. YouTube, Inc., No. 1:07-CV-02103 (S.D.N.Y. filed Mar. 13, 2007). The case may settle with a blanket license to YouTube, but then again, it may go to the Supreme Court. Other such legal action includes the many demand letters and lawsuits filed by the music industry against individual users alleged to have illegally shared music via such systems as BitTorrent. These responses have been only marginally effective.
Another route has been legislative. Even before the high-profile litigation campaigns,
Another 1998 statute lengthened the term of copyright by an additional 20 years. See 17 U.S.C. §§ 301(c), 302-304. This change, though controversial, was upheld by the Supreme Court. Eldred v. Ashcroft, 537
If the studios continue to lose their grip on distribution—to become vertically de-integrated and disintermediated from their own distribution channels—they’ll be left with content as their core business. That’s a problem because, fundamentally, the economics of content creation are inferior to those of distribution. The former is an industrial process, painstaking and manual. The latter, in the digital age, is post-industrial and automated. Nothing in