Barn door, horses, yadda yadda
The content providers have to realize that their fundamental model is changing. Like the music industry before it, they're fighting an uphill battle. All that precious content they’re guarding like Fort Knox? It’s already out there, available to anybody who knows where to look (just ask your friendly neighborhood geek about BitTorrent). And while most consumers may not be going down that road just yet, the more that the industry withholds content through arbitrary, capricious licensing measures, the more potential viewers will slip through its fingers. Encouraged by dissatisfaction, consumers will discover what many before them have found: Piracy actually provides a more flexible, more convenient, and often higher quality product than what the content providers themselves are handing out.
Still, the industry insists on doing its level best to wipe piracy from the face of the earth. Only, piracy can’t be eradicated; it follows what I call the “hydratic equation”: Every time one torrent site gets taken down, two more spring up in its place.
There’s another option, though. As the overwhelming popularity of digital music has shown, attempting to eliminate illegal downloading isn’t the only way to win the game. You can adapt and compete with piracy successfully, as long as you don’t make it onerous for people to consume your content on their terms. (Case in point: According to recent numbers, Netflix accounts for more traffic than BitTorrent.)
This is where the television and movie studios have gone wrong, and they’re going to learn the same thing that the music industry learned over the past decade: Fighting—and fearing—your customers is bad for business.
The very model of a modern major movie studio
As frustrating as the situation is, I’m heartened that some people on the inside seem to get it. Take Hulu CEO Jason Kilar, who made waves earlier this year by writing about the future of TV.
…we believe the wise move is to find ways to exploit these new trends and leverage them to build great businesses. History has shown that incumbents tend to fight trends that challenge established ways and, in the process, lose focus on what matters most: customers. Hulu is not burdened by that legacy.
Ding ding ding. Somebody give that man a prize.
Despite their flaws, Hulu and Netflix are great examples of where the future of TV is going. They’ve managed to shake up the industry in a way that on-demand TV purchases and rentals from the likes of Apple and Amazon have not; simply put, they deliver what consumers want: a large library of content available for instant watching, on a variety of devices, for a reasonable monthly fee. With Netflix, I can start watching a movie on my iPad, pause it, and then resume watching on my Apple TV, Xbox 360, iPhone, or Mac. Hulu lets me subscribe to most of my favorite shows and provides a handy queue so I can easily see which programs I still need to catch up with. These are features that make watching a movie or a TV show a substantially better experience for consumers.
That seems to frighten the studios, when, really, it ought to delight them: more and better ways for people to consume their products! But over time, the industry has become entrenched in its comfortable, lucrative position. You can see it in the paltry attempt it makes to embrace digital media; every few years it seems like the content producers concoct another new scheme. But they all have the same fatal flaw: They focus first and foremost on how to protect the content rather than how to consume it. By doing so, the content providers have shown they have the wrong people's best interests at heart and proved that they're far less interested in creating a product that consumers want to buy than they are in creating one that consumers are forced to buy.
And in that case, they ought to be scared. As we've seen time after time, people respond far better when they can choose something they want than when they have no choice at all.
We’ve been through this before, with the battle over music protected by digital rights management. It’s not exactly the same, of course, but the strategies are largely identical: The producers impose artificial limitations on how people could consume media, in the hopes of keeping their precious content safe and controlled. But you can’t just seal all your content away in a vault. After all, what’s the good of music nobody can listen to, or movies that nobody can watch?
All that’s left is to change, to adapt. It’s a painful process, especially for companies that have held the reins of control so tightly for so long—and there will be casualties. Everything rises but to fall.
Cloudy as the future may be, my magic 8-ball says the current fight will end pretty much the same way it did with the music industry: The movie and TV industries will be dragged kicking and screaming into the modern era, whether they like it or not. If they keep fighting it tooth and nail, well, then, my money’s on “not.”
And yet fighting it they are—and their tenacity would be almost admirable were their motives not so self-serving. In recent weeks, both Showtime and Starz have said they will be dialing back and delaying Netflix's access to content from their networks. Industry executives have said pretty openly that they plan to use Netflix as a dumping ground for their “least-valuable material.” The radical statements by Hulu's Kilar have reportedly put the streaming site at odds with its network backers.
But while they're fiddling, Rome is burning and the Visigoths are pounding on the door. YouTube is investing big money in original programming. Netflix even outbid traditional networks to secure rights to an original series, produced by top-tier talent like David Fincher and Kevin Spacey, that will broadcast online-only starting next year. Independent studio Miramax has made multi-year deals with both Hulu and Netflix to bring its extensive catalog of popular and critically acclaimed films to the streaming services.
This is how it ends: not with a whimper, but with a bang. If the content producers are going to take their toys and go home, then the upstarts are just going to come up with a new game that doesn't need those toys. Despite comments from Netflix CEO Reed Hastings that he doesn’t want to incite World War III, it seems undeniable that the new and old guards are on a collison course. All it might take is one big player—for example, HBO, which has already proved that customers will pay for premium content—to step away from the conglomerate of producers and distributors, and it's a whole new ballgame.
I can't help feeling that there's a perfect phrase to sum up the precarious, untenable nature of the content producers' position. And in a stroke of coincidence, it also just happens to be the title of that first original Netflix series: House of Cards.
[Dan Moren is a Macworld senior associate editor.]