Open Letter to George Lucas

Or, how IP will transform movie distribution...

George,

Despite the advanced technology that serves as a backdrop for your blockbuster Star Wars franchise, your movie distribution process is firmly stuck in the 20th century.

According to a recent article in Forbes ("Special Report: Star Wars") the Star Wars media empire has earned $20 billion since the original film in 1977. According to Forbes, here is the breakdown (inflation adjusted dollars):

$5.67 billion through movie theater
$9 billion for Star Wars toys
$1.5 billion for video games
$700 million for publishing

and just $2.8 Billion for video and DVD distribution.

So here is the question which you should be asking yourself. If you released full digital copies of all of the Star Wars films -- with no DRM -- allowing anyone to duplicate and distribute to their hearts contents... would sales in the toys, video games, and publishing categories increase by enough to offset the loss in sales from video and DVD?

Now this isn't a formula applicable to the movie industry generally. After all, we are unlikely to ever see "Sleepless in Seattle" action figures. But with Star Wars the money is clearly in the physical products sold around the franchise. So the more ubiquitous the franchise, the more every child grows up thinking about the world of Star Wars, the more toys, video games, books, and magazines will be sold. The movies merely become advertising for the "Star Wars lifestyle."

Lets do the math. The franchise is today a little over 25 years old. So in 25 years, it has sold just $100 million a year in video and DVD products. In the same period $11.2 billion in toys, video, and books have been sold -- or about $450 million a year. So sales in those categories would only need to increase about 22% to replace ALL of the video and DVD sales.

Now lets think about the power of the Internet. IP distribution of Star Wars could reach 150 million broadband connected homes (as of Dec 31, 2004 according to Point Topic). Each of those homes would only have to spend, on average $0.67 on toys, video games, and books in order to replace all of the income earned from videos and DVDs. Assuming an average $40 product price (probably low) that means that only 1 in every 60 broadband connected homes would have to purchase an additional Darth Vader Voice Changer Helmet or X Box Revenge of the Siths Video game to replace this lost income.

After $20 billion dollars, George, you can afford to experiment a little. Why not at least take Star Wars, I mean "A New Hope," and make a legal digital copy available worldwide. You don't have to make it HD quality -- how about just extended TV quality? Promote a special product in the intro or trailer to the movie -- a special URL to go to where some product can be purchased which is only advertised through this free digital copy of the movie. Then sit back and watch the power of the IP world to spread your message.

In one blow you will have called into question the philosophy of fighting the unfettered digital distribution of movies and proven that the Star Wars franchise can move into the future of "...speeding spaceships, chattering robots and lightsabers..." and the Internet.

IP Inferno Consumes TV

As VoIP becomes a household word in 2005 -- or disappears from the vocabulary because ALL voice is over IP -- we watch as the next industry is consumed by IP. Today's ruling by a federal court against "broadcast flags" will certainly be appealed to the Supreme Court or to Congress directly. As such it is an interesting indicator of the battles to come over the future of digital entertainment.

The Washington Post's Peter Kaplan quoted the US Court of Appeals statement:

"We can find nothing in the statute, its legislative history, the applicable case law, or agency practice indicating that Congress meant to provide the sweeping authority the FCC now claims over receiver apparatus," the three-judge appeals court panel said in its opinion.

Kaplan also quoted National Association of Broadcasters President Edward Fritts as saying

"Without a 'broadcast flag,' consumers may lose access to the very best programming offered on local television. We will work with Congress to authorize implementation of a broadcast flag..."

Could it really be true that broadcasters will refrain from delivering programming to their audiences without broadcast flags? Is this the same industry that reports declines in viewership every year?

Content copyright holders clearly have a legitimate right to protect their work from being copied and redistributed illegally. But it seems that the larger problem is delivering content that consumers actually want to watch. At the heart of this problem is the medium itself -- linear broadcast programming. When you think about the world from the perspective of an 8 PM "timeslot" on Thursday nights, and your objective is to have the most valuable audience seated in their living room, glued to the glowing light in the corner you immediately lose the MAJORITY of consumers.

Here is a simple recipe for the content industry -- make it EASIER for consumers to get access to content, not harder. I know this is counter-intuitive, but what if consumers could go to the Internet and access the programming they cared about, whenever and wherever they wanted. What if you charged them a small amount of money or got them to agree to watch targeted advertising for each program? Would you need broadcast flags?

Why do consumers want to make a copy of a program? So they can watch that program at some other time or place than it is being made available. Eliminate that restriction and you eliminate the need to make a copy. Streaming media content over IP networks is coming, and it is going to burn down the entire broadcast flag debate.