Piracy apologists’ convenient lie (of omission) that Hollywood profits means piracy doesn’t matter

More reliance on blockbusters means less diversity in film
More reliance on blockbusters means less diversity in film (graphic USC Annenberg)

Yes Virginia, piracy damages both the film industry and its audience

It’s that time of year again, when the piracy apologists pull out their annual canard that Hollywood’s profits provide proof that online piracy doesn’t hurt the film industry.   It’s an assessment that found in this week’s post by Torrent Freak’s editor Ernesto, Pirates Fail to Prevent 38 Billion Box Office Record:

…the MPAA and other groups warn that hundreds of thousands of jobs are at stake, while the economy is losing billions due to piracy. Illegal downloads, they say, are slowly killing their creative industry.

Interestingly, these stark warnings are not reflected in last year’s box office revenues.

Recent numbers show that the movie industry just broke the magic $11 billion barrier, generating more revenue than ever before at the North American box office. The revenue for 2015 totals $11.3 billion, which is roughly a 9% change compared to last year.

The worldwide grosses also reached an all-time record according to research from Rentrak, which estimates the global grosses at a staggering $38 billion based on data from 25,000 theaters across the globe.

Looks like a no brainer conclusion right?  Not so fast.   While (most) Hollywood studios did make a lot of money in 2015, the truth conveniently omitted from the post in Torrent Freak is that they did so by producing fewer films.  After all, the studios are in the business of making money for their shareholders and to that end–in this age of unchecked piracy–fewer chances can be taken on movies that won’t draw huge crowds.  The Hollywood films that are being made are those that are sure bets to overcome digital theft and still make money.  In 2015, the top 5 films made 20% of the revenue.

Terry Huang explored this trend in a piece on The Black List, The Blockbuster Strategy: Safety Sort of Guaranteed:
The studios have steadily been moving away from midsize movies and focusing instead on fewer, mega-budget movies. In 2006 the seven major studios combined made 187 films. In 2013 those same studios made only 139 films (a decrease of 26%). Those films generated $8.2 billion in 2006 and $8.8 billion in 2013 in real box office revenue domestically (an increase of 6%). More simply, fewer films are sharing more revenue.
…At the end of the day, if you’re a studio and looking to mitigate your overall financial risk, I guess it sort of does make financial sense stick with mega-budget films. So you have permission to greenlight Avatar v. Terminator v. Batman: The Oz Adventures!
This it’s important to drill down and examine the implications of this trend.  Yes, Hollywood shareholders may be doing OK, but with fewer films being produced, fewer people are employed in film production and audiences have fewer options when it comes to what they can see in movie theaters.  There’s a reason that the majority of cineplexes across the land are filled with formulaic, big budget faire.
Harvard Business School professor Anita Elbers, author of Blockbusters: Hit-Making, Risk-Taking, and the Big Business of Entertainment, was profiled in a piece for Harvard Magazine and explained why this focus on big budget films makes sense for Hollywood.

Strategically, the blockbuster approach involves “making disproportionately big investments in a few products designed to appeal to mass audiences,” Elberse explains. “Smart executives bet heavily on a few likely winners. That’s where the big payoffs come from.”“In the movie business, the product is the same price to the consumer regardless of the cost of manufacturing it—whether its production budget is $15 million or $150 million,” he told her. “So it may be counterintuitive to spend more money. But in the end, it is all about getting people to come to the theater. The idea was that movies with greater production value should be more appealing to prospective moviegoers.”

Fast fading are those lower budget films with limited audiences that carry more box office risk.  As noted in an article by Flavorwire’s   How the Death of Mid-Budget Cinema Left a Generation of Iconic Filmmakers MIA:

Back in the 1980s and 1990s, when Waters and Lynch were doing their most commercially successful work, it was possible to finance — either independently or via or the studio system — mid-budget films (anywhere from $5 million to $60 million) with an adult sensibility. But slowly, quietly, over roughly the decade and a half since the turn of the century, the paradigm shifted. Studios began to make fewer films, betting big on would-be blockbusters, operating under the assumption that large investments equal large returns. Movies that don’t fit into that box (thoughtful dramas, dark comedies, oddball thrillers, experimental efforts) were relegated to the indies, where freedom is greater, but resources are far more limited. As Mad Men’s Matthew Weiner put it, “Something happened that nobody can make a movie between $500,000 and $80 million. That can’t be possible.”

Let’s look at in another way.  If studios didn’t have to deal with a business model predicated on minimizing the threat posed by online piracy it’s more likely more of these mid-budget films would be made.  Film industry profits should not be considered poison–they provide the means to produce more, and potentially riskier films.  By diminishing this flow of money to potential productions, piracy does indeed erode the overall health of Hollywood.

With more blockbusters comes less diversity

graphic USC Annenberg

This risk-averse trend toward producing only blockbusters also has an insidious impact on representation in the movies we see.  Just as the number of productions have fallen, so too have the number and quality of roles available to women and minorities.  In an LA Weekly reported on USC Annenberg report Inequality in 700 Popular Films: Examining Portrayals of Gender, Race, & LGBT Status from 2007 to 2014:

Academics analyzed the 100 top-grossing films for 2014 and found that none of of them, save for those with ensemble casts, featured a woman 45 or older. They found only three non-ensemble films that featured minority women.

The percentage of women in speaking roles has actually gone down since 2007, when about 30 percent of films featured speaking women, USC found. In 2014 that percentage is 28.1 percent. That’s about the percentage of films featuring women in sexy attire or at least partially nude. When it comes to men, that figure is 8 percent.

The report says “females function as eye candy” in top-grossing movies.

Women behind the camera aren’t likely to fare much better in an industry focused on the next great blockbuster either.  According to research by San Diego State’s Center for the Study of Women in TV and Film independent films are where women find the greatest opportunity:

In 2014-15, women comprised 29% of directors working on documentaries and 18% of directors working on narrative features screening at more than 20 high profile film festivals in the United States. These figures stand in stark contrast to the percentage of women directing top grossing films in 2014 (7%).

Looking further at their research its safe to say that as Hollywood become more focused on tent-pole productions to generate profits, women are less likely to find opportunity.  As budgets go up, opportunities go down.

SD State Center for Study of Women in TV and Film graphic

This lack of diversity extends beyond sex.  According to the Annenberg Study:

The landscape of popular cinema in 2014 remains skewed and stereotypical. Across 700 films and over 30,000 speaking characters from 2007 to present, movies continue to distort the demographic reality of their audience. Film characters are overwhelmingly White and male, despite both population statistics and viewing patterns.

Employment trends behind the camera evidence a similar dearth of diversity. Only five Black directors helmed top movies in 2014, and women were underrepresented by a factor of 5.3 to 1 as directors, writers, and producers in 2014. Further, the 100 top films of 2014 featured no Asian directors. Despite activism, attention, and statements about addressing the issue, Hollywood’s default setting for characters and content creators remains fixed on “status quo.”

The “film industry” is more than just Hollywood

Per usual, piracy apologists as frame their pro-piracy arguments using a David vs. Goliath scenario with Hollywood being Goliath.  Somehow the industry made to be the enemy because it deigns to defend the products it produces from theft.  As part of their construct piracy-apologists propaganda that paint big bad Hollywood as an enemy, conveniently neglect to mention any filmmaking that takes place outside Hollywood.  It’s a convenient omission, but one that undermines the credibility of their thesis that piracy is a victimless crime.

BFI Report 2015

Take film production in the United Kingdom, which boasts a film industry second only to that of the U.S. According to a British Film Institute (BFI) study released last month, UK film production, particularly in the lower budget range has actually fallen.

  • The total filmed entertainment market in the UK in 2014 was worth an estimated £3.8 billion, down from £4.1 billion in 2013.
  • Revenues across all platforms were down compared with 2013 except for digital video which recorded a rise of 35%.
  • Gross revenues for UK film were an estimated £840 million, down from £895 million in 2013.
  • The 2014 market down 26% from the peak. In real terms, film revenues in 2014 were the lowest since 2000.
An even more glaring omission comes with the refusal to acknowledge impact that piracy has on indie film production worldwide.  For the Hollywood blockbusters, millions can be had via the box office, but for independent films with small or no theatrical release, revenue comes via the backend, DVD and digital distribution.  This revenue has been shrinking for both Hollywood and independent producers, and for the latter,  is crucial to paying off production debt and can be the difference-maker as to whether a filmmaker ever makes another film.  It’s here where online piracy and legit sales really do compete head to head.  
Smaller budget films are particularly dependent on this back-end income to recoup production costs.  As I noted in an blog post last summer:

Unlike those in Hollywood, indie filmmakers are not well-funded and often have to cobble together lean production budgets using a variety of sources from credit cards to crowd-funding. Without the deep pockets of the studios, these filmmakers often go deep into the red to create their not-so-mainstream films.

So, when it comes to assessing piracy’s damage, indie filmmakers, like their counterparts in music, are often the most vulnerable.

When indie filmmakers lose, so too do audiences

Given that unchecked piracy cannibalizes this much-needed income stream, online piracy does HURT the “film industry” and filmmakers like David Ward who described how online piracy undermined revenue for his film, Balls Out, in a Tumblr post:
I am writing this as a producer of the indie movie “Balls Out” that was just released on June 19th in theaters and VOD. Immediately upon its release, it made its way onto all the top torrent sites in full HD quality. We’re not stupid, we knew that as soon as the movie was out it would be up to download for free online. What we didn’t expect was just how popular it would be on those sites. We’re one of the most pirated movies right now in terms of how many people are currently downloading, and seemingly the only independent film currently on the list… we have a very small theatrical release and have to count on VOD to make our investors’ money back…None of the filmmakers I know are getting rich doing this, they are doing it because they love making movies and entertaining people. It’s unbelievably hard to get any kind of movie made, let alone one worth watching, and if people don’t support the filmmakers doing original work then we’ll be forever stuck watching sequels and spin-offs and sequel spin-offs of tie-ins until the end of time.
Jean Prewitt, head of Independent Film and Television Alliance, puts piracy’s ultimate impact on film production even more succinctly in comments to The Guardian:
What this means to the consumer is not that some producers don’t get rich, it means the product doesn’t get made.”

Let’s not forget that piracy’s cannibalization of back-end revenue streams has also played a hand in forcing Hollywood studios to make sure the movies they produce draw big at the box office the first few weeks in theaters.  Markets that used to serve as a financial cushion for margins is no longer and while digital sales continue to grow, it’s logical to assume that piracy will continue to take a bite out the profit pie.

Of course those who support piracy see things differently.  Torrent Freak’s Ernesto sardonically suggests that perhaps pirates should “up their game” if they really want to create havoc among those whose livelihoods depend on a healthy film industry.

That said, piracy has certainly not destroyed the movie business just yet. There are still plenty of people who are going to the movie theater to pay for their entertainment. Perhaps pirates should up their game?

Piracy TimeBut Piracy isn’t a “game”

Problem is, piracy isn’t a game and Hollywood isn’t an enemy.  It isn’t David v Goliath. It’s not Robin Hood in Sherwood Forest.  Piracy is theft.  Piracy has victims.  It’s a crime that takes a financial and cultural toll.

For those working in the film industry, it’s their livelihoods–and opportunity for advancement–at risk. For consumers, online piracy has quietly eroded both the number and diversity of quality movies to choose from.

So, when piracy apologists crow about Hollywood profits, look past headlines and cherry-picked facts and remember piracy incurs a cost we all pay for.

In the meantime,  last time I checked, industries are allowed to (thrive) and make money off the products they produce.  Why should Hollywood, or any other creative industry, not have the same right?

Ultimately piracy apologists try to rationalize and excuse morally dubious behavior by doing all they can to deflect and obscure the truth.  This latest, routine round of headlines is more of the same.