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Source link: http://archive.mises.org/17178/mpaa-cartelization-not-creativity/

MPAA: Cartelization, Not Creativity

June 2, 2011 by

The Copyright Cartel — aka the Motion Picture Association of America — was back before Congress yesterday demanding more subsidies for Hollywood’s business model. Michael O’Leary, the MPAA’s head lobbyist, demanded the House Judiciary Committee expand the definition of “felony” copyright infringement to include streaming of content over the Internet (as opposed to mere downloading, which is already classified as a felony). O’Leary repeatedly emphasized the need for more copyright subsidies to protect Hollywood’s essential “creativity”:

In addressing the subject of illegal streaming, it is important to note what this debate is not about. It is not a debate between technology and innovation and the creation of content. That is a false choice raised by too many people. This issue is really about favoring legitimacy over theft – about promoting and preserving creativity and production and punishing people that seek to profit through stealing the hard work of others. Technology and content should agree on that point.

Streaming technology is an emerging way to deliver content and information to consumers the world over, and it is a technology being embraced by our industry – more than 352 legitimate business ventures such as Hulu, Crackle, Netflix and HBO GO use streaming to deliver their products today.

The activity that is the subject of today’s hearing is not innovation, it is theft. Streaming technology is rapidly becoming the most popular mechanism for transmitting stolen content on rogue sites. Users have instant access to illegally distributed movies and television shows without the risk or inconvenience of sometimes lengthy downloads.

O’Leary really does a hatchet-job on the definition of “innovation.” According to him, it’s not innovation when people develop new technologies that provide “instant access” to information, but it is innovation when the federal government threatens to imprison people who copy — not “steal” — information that was previously released to the public. When O’Leary says he favors “legitimacy over theft,” what he really means is that he favors preserving the status quo over innovation. He wants the government to subsidize an obsolete business model — and that is what copyright ultimately is, a business model — while falsely presenting himself as a defender of the new.

Let’s consider the canard that copyright is necessary to protect “creativity.” O’Leary said Congress must criminalize non-MPAA-approved internet streaming as part of “promoting and preserving creativity” and to mitigate the “the negative impact that [copying] has on the lives of our creative community.” This would be the same “creative community” — the major studios that compose the MPAA — that is on pace to produce a record number of sequels in 2011, as noted back in January by Brandon Gray of Box Office Mojo:

Sequels (including prequels and spin-offs) comprise over a fifth of the currently scheduled nationwide releases, tallying 27. Last year, there were 19, and the previous high was 24 in 2003.

[ ... ]

The majority of sequels are repeats of the last two years: Eight movies follow 2009 movies, while six follow 2010 movies. Sequels to 2006 movies are the next best represented at five. The longest time between sequels will be The Muppets‘ 12 years, followed by Scream 4‘s 11 years, Rise of the Apes‘s ten years and around eight years each for Spy Kids 4 and Johnny English Reborn. None of those are a match for the waits for last year’s Tron Legacy (over 28 years) and Wall Street: Money Never Sleeps (nearly 23 years).

Just this past weekend, the top three grossing films were sequels — “The Hangover, Part II,” “Kung Fu Panda 2,” and “Pirates of the Caribbean [IV]: On Stranger Tides.” The top ten also included the fifth film in the “Fast & the Furious” series and one film (“Thor”) based on a comic that debuted in 1962.

Now sequels don’t necessarily mean there’s a lack of “creativity,” but this recent sample size certainly suggests that is the case. I’ll note here Roger Ebert’s review of “The Hangover, Part II,” which, again, was the top-grossing film in North America last weekend:

If you saw ["The Hangover"] (which grossed $485 million, so you may have), there’s not much need for me to describe the plot this time. It’s the same story. Director Todd Phillips seems to have taken “The Hangover” screenplay and moved it laterally from Las Vegas to Bangkok while retaining the same sequence of scenes: Call to bewildered bride to be, flashback to wedding plans, ill-advised bachelor party, four friends waking up with terminal hangovers in unfamiliar hotel room, ominous signs of debauchery, desperate quest to discover what happened, etc.

It may be the same story, but it still managed to gross over $200 million worldwide in about a week. This suggests audiences aren’t all that enamored with “creativity.” There are plenty of highly original films that never find a commercial audience. In truth, movies are no different then any other product. Customers often value consistency over originality. In any city you will find high-end restaurants that will serve you a $15 gourmet hamburger; you’ll also find a ton of McDonalds and Burger Kings.

The point is that copyright has nothing to do with creativity or originality. If anything, the original idea has no use for copyright. The original idea often struggles to find a place in the market. Once an idea takes hold, however, there’s a natural desire within the market to emulate — or copy — that idea to adapt it for other uses. This is where copyright comes in; it tries to stop the creative process at the source of the first idea.

This makes the entire process more bureaucratic and expensive. Consider those 27 movie sequels. Sequels are not a cost-saving measure. They are usually far more expensive than the preceding films. Of the 20 most expensive films to produce in US history, 16 were sequels or remakes. This is partially due to copyright. Consider the third “Pirates of the Caribbean” film released by Disney, reportedly the most expensive film ever made at around $300 million. Imagine what would happen if Disney couldn’t legally prevent other studios from copying the film. I don’t mean Internet downloads of Disney’s product. I mean what if another studio could have gone out, hired the same cast, and produced their own film under the same title. If there was actual competition to produce these films, the costs would almost certainly go down, and there’d be a much higher chance someone actually develops an original script. In every non-IP-based market, competition breeds innovation, which breeds lower costs in the long run. Only in IP-dominant markets — i.e., movies and pharmaceuticals — do costs continue to rise despite a lack of innovation.

What the MPAA wants is to bring technology down to the level of the movie industry. It wants government cartels, higher costs, and less consumer choice. Anyone who defends that as “promoting and preserving creativity and production” is simply lying.

{ 17 comments }

GSL June 2, 2011 at 10:26 am

Here in California they’re so anxious about copyright infringement that one legislator wants to push aside the 4th Amendment to stop it.

Karl June 2, 2011 at 10:47 am

Does this emphasis on sequels mean that if Hollywood starts releasing fewer sequels, then copyright laws are okay?

Suppose the justification based on “innovation” is a canard. (Didn’t someone opine that there are only four basic plots?) Is there not an economic justification? It’s not called innovation, it’s called allocation of resources with an expectation of return. You may want to poo-poo Hangover II, but obviously lots of folks are enjoying it, otherwise it would not have sold so many tickets. Should those people have to pay for their enjoyment? And if someone is paying for the enjoyment, to whom should that payment go — the persons who initially invested the resources to create the movie or someone else?

Books pose the same issue: writing, editing, designing and preparing the book are all allocations of resources (whether time or otherwise). Who should get the return on that investment, the people who made the investment, or someone else?

If IP laws create a certain stability that permits potential investors of resources to calculate, with at least some certitude, the potential return on their investment of resources, does that not make it more likely that they would invest those resources to make books, movies, or what not? If you focus on what rights should exist in a movie that has already been released to the public, whatever that means, you are skipping over the point where the movie does not exist and someone has to decide whether to allocate resources to create it.

The invisible hand of the market is pretty amazing, but it doesn’t write books or make movies.

Shay June 2, 2011 at 11:19 am

Books pose the same issue: writing, editing, designing and preparing the book are all allocations of resources (whether time or otherwise). Who should get the return on that investment, the people who made the investment, or someone else?

The question is whether the government should use force to make a particular business model viable. There are plenty of business models that wouldn’t work (would give “someone else” a return on an investment) unless the government propped them up too; thankfully these business models haven’t been similarly propped up. Almost immediately New Orleans comes to mind as a similar situation, where something wouldn’t be viable without government intervention, and people who depend on it consider it unreasonable to suggest that it’s an artificially-supported situation.

Karl June 2, 2011 at 1:42 pm

“The question is whether the government should use force to make a particular business model viable.”

Well, it does not bother me in the least that the government’s potential use of force is the ultimate source of confidence that pre-existing limited liability laws will protect my expectations regarding the extent of the risk I’m exposing myself to when I invest. In a more extreme but certainly relevant to your question example, it does not bother me in the least that my ultimate confidence in the safety of a factory, for instance, built near a border, depends at least in part on the government’s willingness to use force to protect me from uses of force originating across the border. (Think of the burning of Columbus, NM, in 1916).

So I have to say that whether the government ever should use force to make a particular business model viable, it certainly does use force (or potentially use force) to give me confidence that pre-existing laws will produce expected results. So can’t we say that any model depending on the corporate form to protect investors is supported at least in some way by the government’s potential use of force. So it can’t be simply a question of whether government force is involved somewhere in the mix to make a business model viable.

Certainly I can’t imagine someone arguing that vigorous protection of property rights other than IP rights is an illegitimate feature of a business model’s viable.

My adoration of the Framers of the US Constitution certainly causes me some level of bias in favor of finding the protection of IP rights to be legitimate. Since they thought it important enough to delegate to congress, my default would be to assume it is reasonable to protect this type of property. I don’t see the new technology as altering the basic issue: copies of IP will always be much cheaper to make than the original work was to produce. That was true in 1787 and is still true today. That copies are much much cheaper to make today doesn’t seem to me to alter this basic model. So were the Framers just out of lunch on this issue, or is there something meaningfully different in 2010 than there was in 1787?

Slim934 June 2, 2011 at 11:12 am

“The invisible hand of the market is pretty amazing, but it doesn’t write books or make movies.”

Except that the “invisible hand” WAS the actual motive force for the creation of hollywood in the first place. One of the primary reasons that the Industry is now in California and not where it originally developed (which was the East Coast around New York and its neighboring states), was to escape copyright enforcement which was much more heavily prevalent there than on the West Coast. So the notion that genuine markets cannot get the money to write books/ make movies is a crock. In relation to books there are more and more authors releasing under creative commons or outright sharing their stuff and still deriving a profit from it.

As to the notion of allocation of resources itself, that is NOT sufficient justification to provide legal privileges to “recoup investment”. If it were, then it would not be a huge jump to say that merely investing IN ANYTHING is sufficient to demand some law to ensure they get their money back. It is fairly obvious at that point exactly what would happen to the competitive process if one were to argue on those lines: it would cease to exist because the notion of economic loss would cease to exist.

The fact that they are producing things and not making money (more accurately not making as much as they CLAIM THEY SHOULD BE) is a business model problem. There is no getting around the non-scarcity argument and what it implies to thing which are infinitely reproducible. None. There is no non-arbitrary legal remedy which can fix it; the only way it can be fixed is through business models which properly utilize both scarcity and non-scarcity of the good to ensure the developer/investor/whatever can make a living. This is totally possibly in these industries, but they do not want to change to do it. It is probably true that changing in this manner will also fundamentally change what kinds of movies are made (huge budget jobs like Avatar for example would likely not be made). But so what? Why is it a given that movies as they are made now SHOULD be made that way and should continue to be in perpetuity? There isn’t; it is taken as a given by the industry because they have no desire to change. I see little reason to artificially perpetuate their business model when technology is obviously screaming that it has to change.

Karl June 2, 2011 at 12:59 pm

“As to the notion of allocation of resources itself, that is NOT sufficient justification to provide legal privileges to “recoup investment”. If it were, then it would not be a huge jump to say that merely investing IN ANYTHING is sufficient to demand some law to ensure they get their money back. It is fairly obvious at that point exactly what would happen to the competitive process if one were to argue on those lines: it would cease to exist because the notion of economic loss would cease to exist.”

That’s a faulty version of the slippery slope argument: We must not do A because if A then necessarily B, and B is certainly bad. But you’ve not even made the A-necessarily-B step. You just say if A “then it would not be a huge jump” to B. But your A and B are not very close at all: The situation I addressed (the A) is a decision to base one’s economic activity on a pre-existing law that permits one to have a certain expectation. (Like the pre-existing law creating limited liability corporations that permits me to invest with some level of confidence about what resources I’m putting at stake.) Your B (the horrible) is either (1) a post-hoc request for protection (I invested, now I want protection) or (2) a request for a new law (asking for some future protection before I agree to invest). I just don’t see the work that the horrible does for you.

“The fact that they are producing things and not making money (more accurately not making as much as they CLAIM THEY SHOULD BE) is a business model problem.” Well, most viable business models include at least some feature of the person who invests resources and creates a valuable property (a car, for example) is unquestionably entitled to the benefit of this conversion of resources into some product that can be sold. If he knew up front that he would not get the benefit, he would do something else, wouldn’t he? So the question I raised is whether IP, which is fundamentally different from products like a car, precisely because the exhibiting or making and selling copies is the way you recoup your investment rather than a simple sale of the unique item, suggests a different sort of willingness to make investments and create products. I don’t think you addressed that question.

J. Murray June 2, 2011 at 11:31 am

I was reading that when factoring in not just sequels and spin-offs, but also reimaginings and movies based on toys (Transformers), comics (Thor), and television series (best I can think up off the top of my head is that bad Bewitched movie), and dramatized real-life events (like The King’s Speech), some 97% of films produced by MPAA members fall under those categories. True originality is an endangered species in the film industry.

Daniel June 2, 2011 at 12:37 pm

It would be cool if Mr. Tucker wrote an article or blog post about My Little Pony: Friendship is Magic, since all episodes can be seen for free online on youtube in high definition.

Since Hasbro’s focus is making money on toys, and they do make more money from toys, they don’t really care about their show being online for free.

I propose the title “Ponies for Freedom”

Karl June 2, 2011 at 2:02 pm

So whenever anyone gives away something of value in hopes of obtaining a bigger return later on, this is supporting “freedom”? Isn’t that just a marketing strategy? The company is using its own IP to benefit itself. How does that buck the present system? Remember all the BMW movies that were available for free download? They even got Ang Lee to make one.

nate-m June 2, 2011 at 2:19 pm

Even CNN and other ‘News’ networks operates off of marketing strategies. Their goal and profit motivation is to sell you mops, diet pop, drugs, and anything and everything else that they advertise on their networks.

That is why they do what they do. That is their goal, their livelihoods. The better they are at getting you to watch their stuff and the better the commercials do to get to you buy stuff the more money they make.

I don’t really see anything wrong with any of it.

Inspector Ketchup June 2, 2011 at 3:46 pm

I miss the good old times of G.I.Joe and Transformers. cartoons and toys.

Inspector Ketchup June 2, 2011 at 3:42 pm

What if I watch a movie at the theater, “download” it in my head as I watch it and then “play” it back in my head over and over again at my house or anywhere I go ? Instead of using a digital camera to capture the movie, I used my eyes and my brains. Instead of playing it back on my computer, I “play” it in my head.

What’s the difference ?

I do that with music all the time. I have memorized several hundread songs I play in my head over and over again for free, plus I don’t need a portable MP3 player, I don’t need batteries and I don’t need headphones.

What are you going to do RIAA and MPAA ? Huh ?

David June 2, 2011 at 4:38 pm

This is the beauty of ideas. They are infinitely reproducible. When I create an idea and then give that idea to someone else, we both have the idea. There is no scarcity of ideas.

Inspector Ketchup June 3, 2011 at 9:28 pm

But, before the internet and the digital world, there were a scarcity of the means to spread and show the ideas. Ideas were intimately related to physical media and therefore it was easier to manage ideas like you manage objects. Ideas needed physical objects to move about, spread and reach others and they were much easier to control and to extract rent.

So the copyright model had some viability because a song needed a disk or a cassette and it was not easy back then to copy records without severely distorting the quality and you could certainly not spread it across millions of people like you can today.

Ideas always required a high cost to spread, move about and to communicate and this situation supported the copyright and intellectual property model.

Now that ideas cost nothing to replicate, to spread, to move about and to reach people, the copyright model is completely destroyed and will fall into obsolescence. Any attempt to crack down on this free circulation of ideas will create enormous problems and could even lead to wars. At some point, the government’s desperate attempt to control the circulation of ideas and information will lead to their demise. Dinosaurs disappeared simply because they could not adapt to the fast paced changing environment despite their physical and bulk superiority and the fact that they ruled the world for a hundred million years.

Same thing will happen to governments, their war against freedom of speech, freedom of communication and freedom of ideas will cause their demise. There is too much at stake and the livelihood of too many people and organizations depends on it. If the government can’t win the war in Afghanistan, if it can’t win the war on drugs, it will certainly lose the war on ideas.

JdL June 3, 2011 at 1:33 pm

The point is that copyright has nothing to do with creativity or originality.

It would be hard to think of a more nonsensical statement than this. You anti-copyright harpies are really going over the edge! I expect to see drooling, screaming people on the street next, who claim that copyright drove them insane.

nate-m June 3, 2011 at 1:41 pm

Maybe it wouldn’t seem so nonsensical if you actually took the time understood what was going on.

sweatervest June 3, 2011 at 4:55 pm

And when you do, the anti-IP case will be decisively defeated!

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