Media Piracy and Hollywood’s Business Model

by Reihan Salam

Would media piracy end if Hollywood expanded online options for viewing new release films? Many critics of large entertainment firms — myself included — have argued that they’ve been shortsighted about the piracy threat, as consumers are by and large willing to pay for convenience and quality. But Ryan Radia complicates the picture at the Technology Liberation Front. Hollywood may very well make a dent in piracy by offering legal downloads of new release films at the same time they open in theaters. One problem, however, is that doing so will involve leaving money on the table, as movie ticket sales might tumble and consumers might balk at digital download prices high enough to forestall that particular problem. Moreover, Ryan explains that when the studios make high-quality digital versions of new release films available, piracy seems to spike as pirates rack DRM protections. The “good cop” strategy is not the no-brainer it’s made out to be. And so Radia concludes on the following note:

[I]f Hollywood could double its profits while cutting piracy in half by revising its business model over the coming year, that’s a extremely good reason for Congress to hold off on anti-piracy legislation. If, however, Hollywood is doing its damnedest to curb infringement while preserving economic returns that are commensurate to the risks entailed in movie production, then it’s up to lawmakers to determine whether and how to better secure copyrights in a manner that serves human flourishing. Insofar as can help inform this debate, may a thousand similar websites bloom.

The “whether” question is also not a no-brainer. It could be that the social costs of effective policy strategies for curbing copyright infringement are unacceptably high, and so we just have to accept that capital-intensive entertainment business models are doomed.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.