The Problem With Piracy Is Ignorance – Or Artists: Stop Whining And Tell The People How You Make Money

What has pissed me off royally lately is the amount of ignorance and “knowledge” in every damn discussion about piracy lately – and on both sides of the fence. I have made my living mostly from copyright fees and in TV and media for about a decade. In spite of that I’ve been very very critical about the current copyright systems, the mostly inefficient fight against piracy with block lists and ruining school kids’ lives with multimillion euro fines, and generally how outfits like MPAA, RIAA and their local counterparts function. Internet has been a game changer and the media industry dropped the ball in a pretty epic way.

One could talk about the cluelessness of the media industry, many artists and most politicians about how internet works ’till the cows come home, but that coin has an other side too. The internet is full of people who “know” how this is a golden time of income for the artists and the media industry, how bands (including lyric writers and the studio crew, apparently) could function just with throwing gigs and selling merchandize, how films are really mainly funded with product placement, how the only thing preventing film makers from selling movies as direct downloads with Paypal links is stupidity, etc. There’s a whole lot of “knowledge” in the other side of the issue that is actually total bullshit. I know this, because I kind of used to be one of those guys. For example before my stint working in the film business I was kind of wondering why the heck don’t the filmmakers sell the movies directly as downloads, because I certainly would be a buyer. To my defense, I should say that this felt like a thing that looks really simple to an outsider, but once you enter the sausage factory, things turn out to be quite complicated. And that’s of course exactly what it was.

Here’s the part where I blame the victim. You hear a lot of bitching from media industry and artists that these filthy internet people don’t understand the realities of the work. And whose fault is that, hmm? They don’t understand the realities of the work, because nobody has fucking told them. If one percent of the energy that is spent calling downloaders filthy thieves was spent educating the public about how the business model works now, maybe, just maybe someone would’ve already come up with viable alternatives. People don’t need platitudes and generalities anymore, people need numbers: how much does it cost to produce an album, how is it funded and where does the money come from, how does the money from gigs get divided between the people involved, how much does it cost to publish a novel and an e-book version of it, what goes into making a TV series or a film, etc.

It is not the customer’s job to come up with a working internet era business model for the media industry, but that doesn’t mean that there aren’t people out there who are willing to try and to and to give suggestions. If nothing else, understanding how things work could give some sympathy to the industry that looks like a good enemy for an ever growing amount of customers.

Ten points to a Finnish band called CMX who did exactly this right when I was thinking about this entry.

Funding Films In Finland And Europe

To put my mouth where my money is, here’s something I’ve learned about the film business in the last couple of years. The reality of funding films in Finland and generally in Europe was far more byzantine I even suspected, and it made me appreciate the problem of fixing this system which – in my opinion – is pretty badly broken in the internet era.

Important note: this is not meant to be a 100% accurate and detailed explanation of the system, it’s meant to demonstrate what kind of an interconnected messy spool of yarn the whole issue is.

Grants, Funds And Tax Breaks

First of all, a big part of the film funding comes from different kinds of organizations, funds and tax breaks, which aim to support local film culture and to bring in foreign multi million euro film projects, which will then proceed to dump those euros in the area by hiring everything from film professionals to carpenters and caterers. Some of this money has to be paid back, some of it is for the film makers to keep, with the logic that it pays itself back through the money the film project dumps in the area. These funds and grants also have different kinds of requirements, for example the main fund in Finland requires the backing of a TV network.

The Distributors

Then we come to the actual money shot, the distribution companies, whose money forms the lion’s share of the film’s budgets. These distributors work in a certain area, like Finland, Australia + New Zealand, German speaking Europe, etc. It varies a bit. The aim of the film project is to sell the distribution rights to as many distributors as possible even before the film is completed, and the money coming from distributors forms an important part of the cash-flow. You can’t necessarily sell the rights everywhere until the film is finished, and in any case many distributors won’t pay before they have received the finished film. If you have a completion bond, which is sort of a guarantee that the film will be finished, you can use these agreements as a backing to get a bank loan, and so on – there are incredibly difficult loops to jump through here.

Filling The Gaps

Then there’s product placement, sponsors and other such things, but they are mostly about plugging the holes in the budget. Important, but not as important as many people seem to think. As far as I know, product placement doesn’t depend on the amount of views of the film, but it’s an one-off, a clump of money the filmmaker gets. I can’t really see how it would work dynamically, as some people seem to think.

Dividing The Loot

When the film is finished, it’s hopefully paid in full, but if the film went over budget, it’s nail biting time. By this time the distributors have paid the filmmakers a certain agreed sum, called Minimum Guarantee. They have sold the films to cinemas, DVD-outfits and so on in their area, and they start recouping the MG from ticket sales and such. When the Minimum Guarantee is recouped in full, the film makers and distributors are off the red, and it’s the time for actual income and profit. Yay. This is divided according to certain pre-arranged percentage, and usually the film makers spend the money to pay the last outstanding expenses of the film, and use the money to finance the pre-production of their next project.

So What Gives With Global Digital Distribution?

So, why no direct global distribution of the film, or day-and-date multiformat release? Problem number one is that if the film makers distribute the film directly online by themselves, they stomp on the foot of their distributors – who, as you might remember, bring in most of the budget. No distributors, no money to make the film. So, why don’t the distributors do this? Here the main problem are the movie theaters, who want to show the film first, and don’t want to compete with digital distribution or physical discs. Bam, that’s a huge amount of income out from distributors’ hands.

What about a company that distributes the film globally? Here we run into resources. For a feature film distribution rights for a single country could bring in anything from thousands to millions of euros to the budget. Multiply that sum with 100 and that’s the sum a single company would need to be able to put into the film – and take the risk that it never makes it back. That narrows the playing field a lot.

Shit like this makes me ashamed of working in media and entertainment.

Complex Solutions For A Complex World

So, that was in a nutshell and approximately how films are funded in Finland and generally in Europe. In US things work very much differently, since many of these functions are handled by the studios themselves in the big films, and in the indie films (ie. not backed by a big studio) there are investors and such in the mix. As you can see, it’s not as easy as to “we’ll make a film, put it up for a download, pay it with Paypal donations and jump in the jacuzzi”. Dismantling or altering a system like this is hard. I’m not saying it’s impossible, or that it’s the customer’s responsibility to do it, I’m just saying that it’s harder than most people realize.

I’m predicting a ton of replies about how piracy is not the main culprit of the loss of revenue with media industry, as opposed to the amount of entertainment exploding and peoples’ money being spread thinner, how statistically speaking those who download entertainment illegally spend more money in it than those who don’t, how the artist has to become an marketer and a salesman, how this and that. Yeah, yeah, yeah – I’m not disagreeing with that, I’m agreeing with it a whole lot. But the thing is, that’s not the point in here.

So, artists and media industry: unless you want to look like whiners or the evil empire, how about speaking openly about how things work and the difficulty in adapting the business model to the modern era. And to the opponents, unless you want to come across as clueless nerds who are easy to ignore, how about demanding those answers, getting to know the industry and methods you protest and sticking to the facts,  instead of hyperbole about every rocker swimming in money, hookers and cocaine. What this situation needs is some fucking constructive dialogue between the artists, their companies and the modern customers.

This is a challenge to everybody who works in a creative industry: instead of whining about piracy and people not understanding, educate them. Tell them how you make your money and how much a people in your area earns, and how things have changed. Also, listen to them when they tell you why the current methods of fighting piracy by block lists don’t work, and join the fight. This is a discussion that needed to happen a decade ago.

In the end, what this builds down to is the fact that we have a group of people who want to make art and entertainment and need to pay their rent, and a group of people who want to consume and support it. Can’t we all just work together to make this happen?



(thanks for brain bounces to Jarmo Puskala)




13 Responses to “The Problem With Piracy Is Ignorance – Or Artists: Stop Whining And Tell The People How You Make Money”

  1. Juha Autero on January 20th, 2012 22:25

    Like I commented (in Finnish) in tweet response to Tuomas Enbuske this could be seen as automation replacing jobs. It’s just that when a factory worker loses his job to a machine, he doesn’t have the power to fight the machine to keep his job.

  2. Ville Hautamäki on January 23rd, 2012 15:11

    Global movie theater distribution is right now non-trivial task. So how about, localized/regionalized theater distribution but global internet distribution well after theater sales have materialized?

    In this respect I see separate distributor to be mostly economic overhead to the whole system of movie production.

    About funding. Is it possible to get bank loan backed by a collateral of a _potential_ viewers by a global distribution?

  3. Jussi Kari on February 13th, 2012 14:19

    Well said – it is often said to critics of the current copyright system that “they have no idea how the system works”, but no one tells them HOW it really works, or how the creators see it functioning themselves. So thanks for this blog post!

    Moreover, I agree: we need openness, open facts and open discussion.

    HOWEVER: that doesn’t solve the problem itself. While it’s nice and useful to know how the system works, the consumers couldn’t care less WHY they can’t buy e.g. DRM-free movies easily online wherever they are.

    It’s not their concern: if they can’t buy something (e.g. product not offered in the area; very common with e.g. iTunes, and that’s celebrated as one of the most efficient online music shops!), they WILL download it from PirateBay etc.

    If the problem lies with the licensing contracts or market splitting by distributors, etc., it’s their job – and in their best interests – to fix it: after all, the consumer can always download what they want.

  4. Janos on February 13th, 2012 18:26

    …BUT the world and the internet is full of smart creative people with great ideas. True, most of the people couldn’t give a flying fuck about why the system doesn’t work, but there are always those who want to think about how to make things better. Laying out the problem is the first step to solving it, and I’m sure there’s dozens of people there with great ideas on how to start unraveling the mess with the movie financing, for example – if they only knew where the problem was. This is my motivation for the openness.

  5. Hannu Oskala on April 5th, 2012 21:37

    Hmm. I think I’ve seen the process and value chain of music business explained many times. Last year, for example, by a well known Finnish singer-songwriter Anssi Kela:

    And I’ve done it myself many times on different forums over the years…

    So I really don’t think that piracy is caused by about lack of information. More information is of course always a good thing, but were gonna need some kind of a stick to enhance the carrot’s effect.

  6. Janos on April 6th, 2012 13:54

    I haven’t seen it that often, as a matter of fact Anssi Kela and CMX are the only exceptions that have caught my eye in Finland. The public discourse has been much more about transparent guilt-tripping and clear out whining, frankly – not to mention the horribly embarrassing Captain Nation stuff. Whereas the “pirate” side of the table has been mostly talking numbers that people do actually understand, the media and artist side has been whining and guilt tripping.

    This is a PR war the content side has been steadily losing. Also, there’s the unfortunate fact that internet is and was a game changer in the industry that just didn’t adapt fast enough. The world doesn’t owe anyone a living and there can be no return to the old business models.

    Just to illustrate how badly even the music side has done their PR and customer research: a ton of people who got really disappointed with the early music download stores still believe that most of music is sold with DRM. Really, you still run into these complaints nowadays, and the bad DRM was the main complaint of consumers through the damn decade. Now then, how many Finnish online music shops have had “we have no DRM crap” as their main marketing spiel? I haven’t noticed a single one.

    But yeah, about this blog post, having the title say “the problem” is provocation, but “a major problem” is certainly true. As I wrote, an average customer doesn’t give a flying fuck about how the industry works, they just want to buy stuff easily and in a format they want it to, but the world is full of smart, resourceful and ambitious people, who we need to be aware of how the business with music, movies and other media works nowadays, so it can be reinvented for the online era. Because frankly, especially with movies and TV series, that model is hopelessly broken currently.

    About the stick… yeah, I don’t think messing up peoples lives with multi million euro lawsuits over a bunch of songs, or cutting off their internet access is the right choice. The problems with the latter are obvious, starting from the fact that you can’t reliably connect an IP address to a certain person, and you get these situations where a networked printer or a 80 year old granny without a computer get these threatening letters.

    For the Finnish readers: Piratismi pelastaa elokuvan

  7. Janos on April 8th, 2012 12:25

    Also, the sticks don’t really seem to work that well. I’m very skeptical that any kind of net snooping solution does in fact jack shit to actual piracy, it just creates mechanisms that can be used to snoop on people – and once those mechanisms are up, dismantling them can be quite difficult.

    Hadopi Accused Of ‘Massaging’ The Numbers To Make Anti-Piracy Activity Look Better

    Monica Horten from IPtegrity looks at a few different sources that raise serious questions about the Hadopi report. What the analysis shows is that P2P file sharing is still increasing in France. The “decline” is not in absolute numbers, but in relative numbers, compared to other sources — such as streaming. And streaming has gone up quite a bit.

    On top of that, France Telecom, who has said that P2P use continues to grow, has also noted that it saw “a marked increase in levels of encrypted traffic since the Hadopi notice-sending began,” suggesting that there’s plenty of file sharing going on via encrypted channels that Hadopi simply can’t track.

  8. Hannu Oskala on April 8th, 2012 12:48

    First, streaming was already on the rise before Hadopi – but a rising part of streaming content is legal. For example, most entertainment giants have exclusive deals with Google! And streaming sites are more easilycshut down than p2p-networks.

    But IMHO you are missing a larger point: the purpose of Hadopi is not to make all downloading impossible – the purpose is to make piracy a little bit moreinconvinient option for the casual user.

    The problem with paid content (with the notable exception of Spotify) is that you need more clicks before you reach the content you want than in the pirated option. In bittorrent you basicly just write the name of the product and click once.

    We need easier ways to pay online, but at the same time we need to make illegal downloading a hassle – just a bit too inconvinient.

    I think Apple has mastered this with the AppStore concept. Ease of use bundled with lower pricing model and security = basicly they have killed mac piracy for “adult” users.

  9. Janos on April 8th, 2012 13:20

    I get the idea behind that, but it doesn’t change the key facts about an IP address being an insufficient means of recognizing an user, and that this whole deal is about an industry, which was too resistant and oblivious to change, placing the bill of its own stupidity to be payable by the online privacy and rights of people. No industry is worth protecting with that cost. I find the idea of copyright organizations getting to pass the judiciary process and start policing things on their own via badly targeted extortion letters utterly appalling.

    That, by the way, is the same reasoning that was used with the child porn censorship block list, which I hope we all can agree was a massive clusterfuck – all done with the intention of making something “just a little bit harder”.

    People have been screaming for 10 years about how they want their media, and it still feels it’s falling on deaf ears, especially on the movie and TV side. When you look at the piracy statistics, the amount of music piracy has been steadily falling as some actually usable alternatives have popped up. TV an film piracy are still up, because for example in Finland the selection of usable alternatives is still rather shitty.

    It doesn’t take much to make the legal alternatives easier and better to use than piracy, which even now is bit of a hassle (downloading a torrent isn’t totally straightforward). It doesn’t take much to change a legal service from comically convoluted and platform locked to usable.

    One important thing here is that the asshattery of the media and entertainment business during the last 10-12 years has given a rise to a generation of consumers who see the industry as a backwards enemy that refuses to sell the what they want – and with a reason! This is also a big PR battle, and extortion letters are a a good weapon in losing it.

    Create the kinds of services people have been asking for pretty explicitly, and market them as such. That’s a positive way to turning this thing around, and it doesn’t require ruining peoples lives with ridiculous lawsuits or eroding the privacy and freedom of expression of the online world.

  10. Janos on April 8th, 2012 13:26

    BTW, a case in point about the ease of use – it’s often much easier to buy a box set of some series, and then watch it as a downloaded version. Chances are the downloaded files are nicer to watch than the dvd’s, because you don’t have to struggle with shitty menus or unskippable warnings, and other such inexcusable bullshit. The absolute height of fun in here were the unstoppable horrible anti piracy ads you had to endure every time you started to watch a DVD you frigging bought with your own money.

  11. Hannu Oskala on April 9th, 2012 16:55

    I agree with your last comment totally. All my Simpsons boxes have that “warning” and I frigging bought them instead of downloading! *facepalm*

  12. Janos on April 9th, 2012 18:20

    That’s the actual reason why I never bought the Jeeves & Wooster DVDs, which I borrowed from a friend and wanted to buy just to support the stuff: unstoppable “You wouldn’t download a car…”. That’s also so silly – I would SO download a car if it was possible! 🙂

    If I was a filthy pirate, I might download series from a torrent as they come out, and then buy them as DVD’s a year later just because that was the only way to pay for the series – and feel really fucking dumb having rows of dvd boxes in my shelf still in the shrink wrap… 😉

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