@ Mipcom: Festival Of The Pirates

Mipcom Cannes Oct 2006

This was an absolutely cracking session with a really polarised panel – specifically Rick Sands, COO of MGM, leaning way back in his seat away from Bit Torrent co-founder and president Ashwin Navin, just on his left.
Navin said 35-40 percent of all data on the internet is video, particularly in the past four years since broadband reached a critical mass. BitTorrent has about 8.5 million users and around one million films are downloaded from the service every day. Nearly all of that is pirated, says Navin, and the panel shifts uncomfortably in its seats.
— First off, Sands doesn’t even seem to too keen on legal digital distribution. No deal has been made with iTunes because the sticking point is price: “We believe our content has a certain price and we haven’t been able to come to terms on that yet,” said Sands. It comes back to marketing; he sees that as choosing between making the product available everywhere at every time, or putting some kind of value on exclusivity. As he explains it, broadcasters are asking for additional new media rights, even though those services are often separate businesses and this is all part of “the friction of old media meeting new delivery systems”. But his concern seems to be beyond all that, that there is too much risk is a day-in-date release because if it is launched on all platforms at the same time everywhere and then bombs, there’s no opportunity to market it again. As it is, “we make a lot of money by virtue of the release pattern”.
— Echoing what Anne Sweeney said yesterday, LOVEFiLM CEO Simon Calver said online downloads aren’t about cannibalization but about the total pie. Most movies downloaded through LoveFilm more than 3 months old so that’s a classic long-tail business model. He doesn’t see that competing with cinema but says the site cross-sells and up-sells cinema. Calver made three observations about business models going forward. He said businesses needed to think that if they don’t own the content, they must own the consumer. Developing tools like recommendation helps keep sites sticky. Secondly, he said businesses should have flexible, hybrid, models that allowed them – and the consumer – to cope with the convergence and fragmentation of this phase of the industry. He also said media businesses need to make themselves a valuable partner, and pointed to LOVEFiLM’s discussions with Sony and Warner about its ‘envelope real estate’ – the site has 27 million consumer ratings posts on its 60,000-strong inventory. That way the distributor is not just a channel but a valuable part of the chain. Sands doesn’t hold with the ranking/recommendation system for content – he believes in good old fashioned marketing.
— Against a background of huge costs – not least spending what he describes as “tens of millions of dollars” on lawyers to clear the rights to put stuff online – Sands defended their entitlement to make money from what they create: “It’s like somebody coming to your house and saying let me go and drive your car. They’ll put 50,000 miles on the clock and not pay you anything, and you still pay the lease payments. That’s what it feels like. It’s not new media/old media – it’s going to be invisible to the consumer. There will just be media – people who create content, people who distribute that content and people who deliver that content to users. All I’m asking for is that people pay for what they use. It’s the most simple concept that there is.”
— Granada’s new media head Martin Blakstad got the nub of the distribution issue when he pointed out that content should be created with these difference distribution systems and platforms in mind – that’s the critical issue here that was missed. Sands’ views of MGM is static, but the content will (eventually) change for different platforms. At the moment he’s quite cross that their tried-and-tested movie format appears to be under threat. It’s the old adage that where there’s a threat, there’s an opportunity. I’d see it as an amazing opportunity that one million movies are being downloaded on BitTorrent every day – that’s an enormous endorsement not just of the quality content that people want to watch and share, but also of a distribution system that works. When Sands explained that MGM spends a huge amount of money tackling piracy – by putting out fakes, ghost programmes and on DRM solutions – it doesn’t get that money back. Instead, I asked, why not spend that money buying BitTorrent, making it better and then using it to distribute MGM movies? That’s a phenomenal distribution network with a huge audience. He was stumped for a bit, and then said: “I’d rather buy Facebook – that’s going to be a great asset. Hard to value what BitTorrent is worth right now. We’re a distributor – we don’t want to be end of the pipe. We create content. Ownership of that type of aggregator and community is further down the end… It is a distribution network, one that right now as a model isn’t very attractive for us. If I can deliver products downstream by virtue of MGM.com than I don’t really have to buy BitTorrent.” It’s not such a crazy idea, BitTorrent is launching a legal version and is in negotiations with all the major studios and music labels. I talked to BitTorrent president Ashwin Navin after the session – more from that later.

This article originally appeared in MediaGuardian.

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