Entertainment & Media, Law
Recently, Amazon announced the creation of “Kindle Worlds,” which it describes as “a place for you to publish fan fiction inspired by popular books, shows, movies, comics, music, and games.” Fan fiction (also known as “FanFic”) are works such as books, videos and the like created by fans of an original work that adapt the characters and stories of the original work without the permission of the owner of the copyrights to the original work. Amazon’s new publishing venture will allow writers of fan fiction to do so legally and to earn royalties.
Under copyright law, one of the exclusive rights owned by the copyright holder is the exclusive right to control the creation of works based upon or incorporating the underlying copyrighted work. This “derivative work” right means that currently fan fiction constitutes copyright infringement. While some copyright holders (such as Anne Rice) have consistently objected to all such fan fiction, many other copyright holders see such works as a way to broaden and deepen the audience for their own works. As a result, even though technically an infringement, copyright holders often have allowed it to take place if the fan fiction has been distributed for free. To date, fan fiction largely has been a non-commercial affair.
Thus far, Amazon Publishing has secured licenses from Warner Bros. Television Group’s Alloy Entertainment for Gossip Girl, Pretty Little Liars, and The Vampire Diaries. Those licenses allow for adaptations and other “extensions” of the underlying works without fear of a copyright infringement lawsuit. In return, Amazon, the fan fiction writer and the licensor (in this case, Warner Bros.) will share in proceeds from the sale of the fan fiction on Amazon. While Amazon has arranged for licenses only for these three works initially, they plan to negotiate other deals with rights holders to broaden the scope of potential fan fiction works.
Amazon has announced that fan fiction authors will receive 35% of the net revenue from the book if the work is longer than 10,000 words. For short stories, that amount is 20%. While this is much lower than Kindle’s normal ‘self-published” royalty rate of 70%, it is important to remember that: 1) without the license, these works technically are illegal; and 2) current practice is to give away, not sell, these types of works.
For the original copyright holders, this Kindle Worlds deal means that they will earn additional revenues from their works that they currently do not earn. In return, Amazon takes its “house cut.” Amazon essentially serves as the intermediary to bring fan fiction writers and rights holders together. This intermediary role is essential, as very few fan fiction writers would have the resources to negotiate a deal with a major rights holder. And, of course, the fan fiction writer gets a piece. So, all three parties get something out of this new relationship.
The creation of “Kindle Worlds” represents a sea change for fan fiction. Until now, fan fiction has been produced for the pleasure of its writers or as an “homage” to the original work and distributed for free over the internet. Currently, many, if not most, fan fiction writers are not professional, published authors. The commercialization of fan fiction by Amazon might change this. Now that writing fan fiction can produce real money, professional writers might choose to do so. While this could result in better quality writing and more polished fan fiction, it might discourage the fan fiction hobbyist. Particularly if Amazon is able to negotiate a large number of additional “Kindle Worlds” licenses, the entire concept of fan fiction, at least literary fan fiction, may be transformed. Once written purely for the love of it, fan fiction may soon be written purely for the money.
Law, Music, Technology
We’ve all been there. You had to have the latest release by Mariah Carey (you may begin thinking up an excuse for that), and you went on Amazon and purchased the CD. After listening to it a couple of times (and experiencing a case of buyer’s remorse), you decide that you want to sell the CD. Under the Copyright Act’s First Sale Doctrine (which I discussed in another context in a prior blawg post ), it is perfectly legal to do so. You may sell it, rent it or give it away and you owe the copyright owner nothing further.
However, what if, instead of purchasing the Mariah Carey album in CD format, you elected to purchase the mp3 version on iTunes. Can you sell the mp3s just as you can sell the CD? According to a Federal court in New York in the case of Capitol Records LLC v. ReDigi Inc., the answer is “no.”
Capitol Records sued startup company ReDigi, claiming that ReDigi had infringed Capitol’s copyrights. ReDigi, which calls itself “the world’s first pre-owned digital marketplace,” was founded in 2011. ReDigi’s platform allows listeners to swap music tracks for substantially less than the traditional $.99 cost to purchase new on iTunes. ReDigi makes its money by charging fees on each transaction conducted on its platform.
Capitol Records’ lawsuit claimed that the Copyright Act’s First Sale Doctrine is not applicable to sales of “used” digital copies. The court agreed. It distinguished the situation of the resale of physical CDs (which, of course, are bought and sold in used music stores all the time) from the attempted creation of a marketplace for digital copies. Because ReDigi’s service requires the seller to upload the digital music on ReDigi’s servers, the court held that this was creating a new copy of the music. As a result, the First Sale Doctrine did not apply. The court found that in ReDigi’s situation, the original digital copy is reproduced when it is uploaded to ReDigi’s cloud service. ReDigi argued that there was no reproduction because the original digital copy would be removed as part of the process of reselling a digital file on its service. The court was not persuaded by that argument and, instead, simply focused on the fact that an unauthorized reproduction had been made. It stressed that the First Sale Doctrine only applies to the resale of lawfully made copies.
For reasons that are not clear, the court did not focus on another key issue raised by digital resales—whether the “purchaser” of digital music is an owner of a copy or merely a licensee of the copyright holder. iTunes and similar services make it clear that the content they offer is licensed, not sold. The First Sale Doctrine only applies to copyrighted works that have been purchased. This factor alone could have been enough to rule in favor of Capitol.
Instead, the court quoted and appeared to place a good deal of emphasis on a 2001 United States Copyright Office report to Congress that argued forcefully against allowing for a right to resell digital works. The report stated, in part:
“Physical copies of works degrade with time and use, making used copies less desirable than new ones. Digital information does not degrade, and can be reproduced perfectly on a recipient’s computer. The ‘used’ copy is just as desirable as (in fact, is indistinguishable from) a new copy of the same work. Time, space, effort and cost no longer act as barriers to the movement of copies, since digital copies can be transmitted nearly instantaneously anywhere in the world with minimal effort and negligible cost. Then need to transport physical copies of works, which acts as a natural brake on the effect of resales on the copyright owner’s market, no longer exists in the realm of digital transmissions.”
Clearly, the Copyright Office’s position was based, in large part, on the assumption that people selling digital copies would simply retain the original digital copy. Compare this to the situation of the resale of a CD in which that particular physical copy is sold. In my view, a key fact here is that the original owner of a CD no longer possesses that copy after it is sold. At the time of the 2001 report, a good technical solution to ensure that the original digital copy would be deleted in such a transfer situation did not exist. However, technology has advanced and there are more viable (albeit, imperfect) ways to assure that the original is deleted today. Nonetheless, this decision in favor of the copyright owners clearly draws the distinction between the treatment of digital and physical copies.
I believe this case could have a wide reaching impact beyond music to other types of digital works, such as games, movies and books.
Law
Anyone who recently has purchased college textbooks knows how expensive they are. A student from Thailand who moved to the United States to study mathematics recognized the huge price disparity between textbooks in the U.S. and his native Thailand. So, he asked friends and family to buy foreign edition English-language textbooks in Thai book shops, where they sold at low prices, and to mail them to him in the United States. Being an enterprising businessman, Kirtsaeng then sold the books, reimbursed his family and friends, and kept the profit. So what’s the problem? The book publisher, Wiley & Sons, did not want him importing and selling books in the U.S. that it had only authorized for sale outside of the U.S. because they set different price points for the same books, depending on the territory.
Wiley & Sons decided to sue Mr. Kirtsaeng under a provision of the U.S. Copyright Act that enables copyright owners to block imports of copies made overseas. Seems straightforward, right? Wrong. The Copyright Act also has a provision, commonly referred to as the “First Sale Doctrine,” that gives the owner of a copy “lawfully made under this title” (i.e., the Copyright Act) the right to resell or rent that particular copy. Wiley & Sons argued that even though the copies purchased by Mr. Kirtsaeng were lawfully made (they had licensed a foreign subsidiary to make and sell the books in Thailand), they could still prevent the import of them.
The case was heard on appeal by the United States Supreme Court and their decision was announced couple of weeks ago. The Supremes announced that copies lawfully made under the authority of the copyright owner may be imported and resold, regardless of where they were manufactured. The Court’s decision could have significant consequences for U.S. copyright holders and their attempts to control distribution channels for their works.
The Wiley decision is important because it removes copyright law as a weapon for U.S. companies to prevent the importation and sale of so-called “grey market goods.” Grey market goods are goods lawfully produced under the authority of a copyright or trademark owner. However, there are territorial restrictions place by the owner on where such goods may be sold. If you have ever tried to purchase a camera or consumer electronics item from an internet retailer, you will often find that there is a large price disparity between the exact goods if one carries a U.S. warranty and one that does not. That is because the latter likely is a grey market good not intended for resale in the U.S.
Now that the Supreme Court has stated that “grey market copyrighted” products (such as books, movies, software, artwork, etc.) are legal to import, what can the owner of such products do to prevent such sales in the U.S. that are not intended? In certain cases in the copyright world, the owner still can use technological means, if available, such as using country codes on DVDs. (A country code is a piece of embedded software on a DVD that only allows the DVD to be played on machines with the same country code.) Removing or disabling such copy protection devices is a violation of the Copyright Act.
Trademark law may be the best alternative to prevent the importation of such grey market goods. Under U.S. trademark law, importation may be prevented only if the grey market product is “materially different” from the corresponding U.S. product. The threshold for a “material difference” under U.S. trademark laws is fairly low and can include differences in the composition or ingredients of the product; differences in the language of the labels, stickers, or owner’s manuals; differences in the availability of warranty coverage; and any other differences that would be material to a U.S. customer. Even with that relatively low threshold, in the Wiley case, it appears that the quality of the books sold in Thailand was not materially different from those sold in the U.S. and, as a result, importation could not be prevented under trademark law either.
Another option available for intellectual property owners would be to remove some of the incentive to import the goods from a foreign territory into the U.S. Pricing the goods in other countries at a point closer to the U.S. price point would reduce that incentive. That could mean either raising prices in foreign markets or lowering them in the U.S.
As a result of this case, I expect to see intellectual property owners adding more “material differences” to their products designed for the U.S. market.
Entertainment & Media, Law
A few weeks ago, loyal Downton Abbey viewers were left slack-jawed as one of the more popular characters, Matthew Crawley, portrayed by Dan Stevens, died in a violent car crash in the final scene from the third season of the series. “How could the producers do that?” was a popular refrain on social media and around office water coolers the next morning. The answer is simple: Mr. Stevens did not agree to another three year term on his contract with the production company. Killing him off was the only thing to do, at least in the minds of the show’s creators. This type of thing has been going on in the entertainment industry for years. While we may see the finished product on the screen or tube as a purely artistic endeavor, artistic choices are interwoven with the complex business and legal issues that arise between production companies and the talent. There are plenty of examples of characters being killed off strictly for artistic and dramatic purposes: the character of Edith Bunker on the All in the Family spinoff, Archie Bunker’s Place; Lane Pryce on Mad Men; and “Big Pussy” Bonpenserio on The Sopranos, to name just a few.
However, in many instances, the decision to kill off a popular character has been driven by legal and business considerations. Here are a few examples:
Downton Abbey
In addition to Dan Stevens, Jessica Brown Findlay, who played Lady Sybil Crawley, also did not agree to a new three year contract. The result? Death following childbirth.
M*A*S*H
The hugely popular television series set during the Korean War followed the motion picture of the same name and included many of the characters who appeared in the film. In the television version, the lovable Lt. Colonel Henry Blake was portrayed by McLean Stevenson during the first three years the show aired.
Stevenson reportedly was unhappy about not having a larger role on M*A*S*H and asked to be released from his contract. In the last episode of the 1974-75 season, his character was sent home from Korea. Rather than just leaving the story with his return to the US, the producers decided that his plane would be shot down over the Sea of Japan. Even the other actors in the cast were unaware of this until the scene was about to be filmed. McLean Stevenson’s career effectively died then as well. Stevenson later said that leaving M*A*S*H was the biggest career mistake he had ever made. He was also reportedly upset by the fact that his character’s death made it impossible for him to ever return to the show.
The Godfather, Part III
The third film in the Godfather trilogy (not nearly as well-received as the first two installments, both of which received the Academy Award for Best Picture) was a project agreed to reluctantly by most of the principal parties involved, including Francis Ford Coppola and Al Pacino. Writer/Director Coppola’s studio, Zeotrope Studios, was seriously in debt at the time as a result of the poor financial performance of some of Coppola’s other projects. Al Pacino agreed to do it primarily for a paycheck. Pacino initially insisted on $7 million plus back-end points but “settled” for $5 million.
Robert Duvall, a key character who had portrayed Corleone family consigliere Tom Hagen in the first two Godfather films, insisted on being paid as much as Pacino. The studio turned him down, and the part was recast and altered for George Hamilton to play the new character, lawyer B.J. Harrison. A single line of dialogue was inserted to explain that Hagen had died years before. The result? Coppola and Pacino had their paydays, but Hagen’s absence created the lack of a critical counterbalance to the Michael Corleone character.
Valerie
This show was supposed to be a star vehicle for Valerie Harper. However, during the second season, Harper quit the series in a salary dispute. Her character was killed off, she was replaced by Sandy Duncan, and the series was renamed Valerie’s Family. In 1988, it was renamed again as The Hogan Family and the son, portrayed by Jason Bateman, became the series star.
Two and a Half Men
When Charlie Sheen, the show’s star, and Executive Producer Chuck Lorre got into a very public fight in early 2011, Sheen was fired. (He later filed a $100 million lawsuit against Lorre and Warner Bros., which was reportedly settled for $25 million.) Although Sheen publicly implored Lorre to give him back his job, Lorre refused, instead writing a funeral for Sheen’s Charlie Harper character. Clearly, Lorre wanted there to be no chance for Sheen to re-appear on the show.
Law & Order
In the show’s 1996 season finale, Assistant District Attorney Claire Kincaid, portrayed by Jill Hennessey, was in a car accident. Hennessey was still in negotiations with the show’s Executive Producer, Dick Wolf, at the time. Hennessy was supposed to return that fall to reprise her role in a one-shot guest stint. But, according to the show’s writers, after Hennessy’s agent informed the show that she was not interested in returning, they had her character die. Hennessy later said there was a miscommunication between her agent and executive producer Dick Wolf.
NYPD Blue
The writers created a story line where Detective Bobby Simone, played by Jimmy Smits, contracted a heart infection that required him to have a heart transplant. At first, it seemed that Bobby would survive the operation and return to his duties as Andy Sipowicz’s partner. However, by the end of the story arc, his body rejected the new organ and he passed away. More accurately, Jimmy Smits passed on the producers’ contract offer to stay.
Dallas
In one of the more bizarre examples of death by contract, Patrick Duffy, who portrayed the “good guy” brother, Bobby Ewing, wanted to leave the show. The writers created a storyline where Bobby was run down by a car and he later died in the hospital from his injuries. However, when ratings started to sag and Duffy was persuaded to come back to the show, the writers used the less than novel approach of “it was all a dream” to explain Bobby’s death. The writers were then free to return Bobby to the show, unscathed.
These are just a few examples. The creative reins of a show or movie franchise are held as much by the production company’s legal department and the actors’ lawyers and agents as they are by the writers and directors. So the next time you see a popular character meet their demise in a sudden and unexpected way, you might wonder: what was the REAL cause of death?
Entertainment & Media, Law
An interesting case was recently filed in the Federal District Court in the Northern District of Illinois. Call it: The Case of the Phantom Copyrights. On February 14, 2013, noted Sherlock Holmes scholar, Professor Leslie S. Klinger, filed a declaratory judgment suit against the estate of the late Sir Arthur Conan Doyle (the original author of the Sherlock Holmes books), asking the court to acknowledge that the characters of Holmes and Watson are in the public domain and as such are no longer protected by copyright in the U.S. At issue is whether or not the Conan Doyle estate can prevent a third party (in this case, Professor Klinger) from writing stories, movies or other creative works featuring the Sherlock Holmes and Watson characters made famous in the original Conan Doyle works.
Conan Doyle wrote a total of four novels and fifty-six short stories featuring the famous detective. These stories first appeared in publication in 1887. The copyrights in all of Conan Doyle’s works expired in the United Kingdom in 1980 and are public domain there. The issue in the case is the status of the copyrights under U.S. law. The length of the term of copyright protection under U.S. law is somewhat complex as a result of the interplay between the old Copyright Act of 1909 (which had a fixed set of two copyright terms of 28 years each and applied to works first created prior to January 1, 1978) and the current Copyright Act of 1976 (which created a new “life of author plus” method for determining the copyright term and applies to all works first created after January 1, 1978). For pre-1978 works, U.S. copyright law provides that all works published in the United States prior to 1923 are now in the public domain, and that is not in dispute because the maximum 56 years of copyright protection expired. However, for pre-1978 works that were published after 1923 but before 1963, if the copyright was registered, the Copyright Act of 1976 provides that its term lasts for 95 years.
The Conan Doyle estate admits that those Sherlock Holmes works published prior to 1923 (which are the overwhelming majority of the works) now are in the public domain under U.S. law. However, the estate bases its copyright ownership claims on the fact that it registered the copyright to The Case Book (which was published in the United States in 1927) in 1981 and, therefore, is subject to the 95 year copyright term. That 95 year copyright term on The Case Book is set to expire in 2023.
The legal issue at hand is the right of the Conan Doyle estate to insist that anyone writing a modern “Sherlock Holmes” story must obtain a license from them on the basis that the characters from the original works are protected by the unexpired copyright which applies to the later works. Over the years, there have been many parties who have created works based on the characters from the original works. Examples include the Robert Downey, Jr. films over the past couple of years and the new television series, Elementary. In many cases, parties desiring to create new works, such as those productions, have agreed to obtain licenses from the Conan Doyle estate (largely, I believe, as a form of “insurance policy” against a suit). However, Professor Klinger has refused to obtain such a license because he believes that the characters created in the first Sherlock Holmes works are now in the public domain and free for all to use.
As I previously noted in my February 20, 2013 blawg post, the owner of a copyright under U.S. law actually owns a “bundle” of rights. Included within this bundle is the right to prepare derivative works based upon the original work. However—and this is a critical point—the copyright in a derivative work only extends to the portion changed or added to the original work. For example, if I were to write a musical arrangement of The Star Spangled Banner, I would own a copyright in that arrangement. As such, I would have the right to prevent another party from copying my arrangement. That right would not extend, however, to preventing someone else from copying the original piece and doing their own arrangement.
Even if the Conan Doyle estate did not register each subsequent Sherlock Holmes story as a derivative work of the original story, it still does not change the basic character of those later works; namely, they incorporated many of the same characters and elements of the earlier stories. Under proper copyright analysis, copyright protection would apply to those later works, but only with respect to new characters, plot elements, stories and other creative elements. To accept the Conan Doyle estate’s position regarding this copyright issue would amount to the creation of a perpetual term of copyright protection, as long as elements in an original work continue to be incorporated into new works. That simply does not make logical sense. In my view (we’ll see if the District Court agrees with me), the characters established by Sir Arthur Conan Doyle in the early Sherlock Holmes books are now in the public domain and, as such, anyone is free to use them. Note that once in the public domain, these characters will remain as such, and nobody can claim to own them.
In addition to their copyright allegations, the estate also seems to believe that they have a right to prevent usage of the characters under trademark law as well. While it is true that a character in a story is capable of trademark protection if the character is so associated with a particular source that there would be a likelihood of confusion as to the source if another party were to use it, that character must be used as a trademark in order for that to be true. In other words, the character must be used as a symbol of the source of origin for a particular product or service in order for that character to be protected under trademark law. Take, for example, the character of Mickey Mouse. Disney not only includes Mickey as a character in its films, comics and stories, but it uses it as a symbol of The Walt Disney Company and various products and services offered for sale by The Walt Disney Company. As such, it is not only protected by copyright laws, but it is protected under trademark law because it also functions as a trademark. The Conan Doyle estate’s argument is that the Sherlock Holmes characters are so uniquely identified with Sir Arthur Conan Doyle that any other use of those characters, even in a literary setting, would create a likelihood of confusion that the actual source of those works is the Conan Doyle estate.
There are problems with that argument. If the Conan Doyle estate had licensed the image of Sherlock Holmes for use on a double-billed hat, it might be valid as a trademark for hats. Going back to the Disney example, an analogy would be a hamburger joint using Mickey Mouse on its signage. Even if Disney never sold burgers using Mickey’s image, Disney could very reasonably claim that such a use amounts to trademark infringement or unfair competition in that it creates confusion as to the true source of origin of the hamburgers. I don’t think that the Conan Doyle estate can make a similarly compelling argument here. The Sherlock Holmes characters are not being used here to sell goods or services; instead, they merely appear as characters in a literary work. In other words, they are not being used in the trademark sense at all. Nonetheless, this trademark argument probably is the only basis upon which the court could rule in the estate’s favor. To rule in the estate’s favor on the copyright claim would amount to creating a perpetual term of copyright, something that clearly is not part of U.S. copyright law.
My Prediction
The court will declare that Sherlock Holmes, Dr. Watson and the other iconic characters created in those early works are now in the public domain, free for all to use in literary and other artistic works. It seems elementary to me.
Entertainment & Media, Law, Technology
In my last post I was critical of Netflix’s recent policy changes regarding pricing and consumer privacy. This week I want to give a big shout out to the flick rental giant. A recent decision by Netflix as to how they would distribute original programming content was a thoughtful, consumer-oriented decision that deserves praise. As noted in my earlier post, the home entertainment market is highly competitive and Netflix, like other premium services, is not immune to that competition. More and more of Netflix’s customers (in part due to their ill-advised pricing policy change) have elected to receive only the streaming video service from Netflix. As such, they are competing with other content providers at the set top box such as cable and premium cable (including pay-per-view), Hulu, YouTube, etc.
Part of Netflix’s plan was to create quality original programming that could compete with the likes of that which is shown on AMC, HBO and Showtime. Their first outing is called House of Cards, a drama that explores corrupt politics and its relationship with the press, and stars an impressive cast led by Kevin Spacey and Robin Wright. What is most significant about House of Cards, however, is the manner in which Netlflix has chosen to release the show. Rather than following the traditional pattern of releasing a new one-hour episode once a week over a thirteen week season cycle, Netflix decided release the entire thirteen-episode first season at the same time. By doing so, Netflix has allowed its subscribers the power to choose when and how to watch the series, either a little at a time or in a single thirteen hour sitting. Netflix subscribers already have the flexibility to choose the device on which to view their programming.
Why is this significant? While it is not exactly the same thing, it is an indication that we may be moving a step closer towards what some (including me) have argued for years: the notion of simultaneous release. I believe, as do others, that the value is in the intellectual property of the programming, not the means by which or the time frame within it is seen. Stated more simply, viewers, now more than ever, want to view content when or where they choose and on whichever device or devices they prefer.
Simultaneous release (also referred to as closing of the “video window”) has been opposed for years by the major motion picture studios. The smaller, independent studios have advocated for it. Historically, movies have been released first in theatres, followed next by a DVD/Blu-Ray release. After a period of exclusivity (usually several months), the movie is released through pay-per-view television and then through the premium cable networks. Only after all of those markets have been exploited are films aired on free television. This staggered release schedule has provided each distribution channel with an exclusive “video window” in which to profit from the movie. The staggered release schedule has been beneficial not just to theatre owners: it has also been claimed to have enhanced pay-per-view and later video sales. The large studios have insisted that without it, they simply could not make profits on their films.
Contrary to this traditional “video window” approach, small, independent film distributors and studios like the notion of simultaneous release because the movies they distribute have much smaller marketing budgets. With simultaneous release, they can spend the marketing budget in a single marketing campaign, rather than separate campaigns for each video window. These independents argue that simultaneous release is the only way that they can compete with the large studios and distributors.
While there certainly are merits to both sides’ arguments, it seems that consumers ultimately will dictate how and when films are distributed. Some people absolutely prefer the “movie theatre experience.” Movie theatres, which have huge investments in infrastructure, depend on ancillary revenues such as concessions to make their profits. The downside, of course, is that the theatre operators decide when the movies will be shown and inflate the prices of these concessions. Other people prefer to watch films, at their leisure, on crystal clear large HD televisions. Still others want even more flexibility to watch on their computers, tablets and even smartphones. They value the convenience over the picture quality.
So who is right? The answer is simple: they are all right. That is the point here. The value in the creative work is the work itself, not the delivery mechanism for it. Marc Cuban, the colorful billionaire owner of the Dallas Mavericks basketball team, as well as Landmark Theatres, and Magnolia Pictures, and the chairman of the HDTV cable network AXS TV, long has advocated for simultaneous release to maximize the potential revenue on every film.
The concept of dictating the time and format of viewing has not been limited to movies. Television also has insisted on the “you will watch the episodes as we decide to release them” approach for first run shows. They depend on advertising and need programming over a longer time period in which to sell that advertising. However, they also will need to adjust to the reality of television audiences: the viewership for traditional network programming is shrinking rapidly as more and more people, especially younger people, choose to get their entertainment in different ways, especially via the internet. Just look at how many people DVR programs and have their own “mini-marathons” during which they will watch an entire season after the fact. The numbers don’t lie. As traditional viewership continues to slide, advertisers will follow where people are, not where the television networks would like for them to be.
This same thing has happened in the music industry. When it switched from analog vinyl recordings to digital CDs in the 1980s, the industry had to invest in manufacturing and distribution facilities for this new technology. When the iPod and other mp3 players came around, this new technology disrupted the status quo. While record companies kept on pushing for people to buy CDs and found online and other digital distribution of music, consumers did what they always do: they chose the preferred manner of accessing that music. As a result, the music industry had a devastating 10 year period of sagging sales. That industry finally appears to have learned what is should have figured out years ago: that the value was in the music, not in the manner in which it was delivered. While audiophiles may continue to embrace the higher fidelity of CDs and the warmth of vinyl recordings, most people have chosen the convenience of being able to carry around 1000 songs in a device the size of a stick of chewing gum, even if the sound quality of an mp3 playing through ear buds is not nearly as good.
As a subscription service and a provider of its own original content, Netflix is not subject to the same “video window” pressures that are felt by the studios or the television networks. However, in my view, it is just a matter of time before the networks and studios recognize that in order to extract the maximum value in their investment, they will have to deliver their intellectual property according to what consumers want.
