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Heck of an admission over the weekend from former Sony Pictures executive Mitch Singer, who now heads up the Digital Entertainment Content Ecosystem consortium (a.k.a. UltraViolet), regarding the future of movie and other content distribution. Speaking to the Financial Review of Australia, Singer said Hollywood’s long-standing practice of licensing movies on a territory-by-territory basis to maximize revenue may be dead within a few years, done in by the increasing availability of tools for circumventing geo-blocking measures meant to restrict the movement of content across borders.
“Ultimately [territorial] exclusivity on a global basis may just simply go away,” Singer told the paper.
That would represent a major change in how movies and other types of content have long been licensed. Movie studios, like book publishers and other rights owners, have long sold exclusive territorial distribution rights, extracting premium licensing fees from local distributors in exchange for protection from cross-border competition.
The system has been under assault for more than a decade, however, particularly for movies. The movie studios compelled CE companies to incorporate region coding into DVD players in an attempt to restrict the flow of DVDs beyond the regions for which they were licensed. “Region-free” DVD players capable of playing discs from any region quickly became available, however, and many retailers built lucrative side-businesses “modding” region-locked players to play discs from anywhere.
With the shift to streaming, the studios have attempted to sustain the old territorial exclusivity system by requiring the use of geo-blocking technology to restrict access to their content by IP address, credit-card billing addresses or similar means.
Those efforts have become a hot topic of debate in Australia, however, where Singer was speaking. Last year, the Australian government moved to prohibit the use of geo-blocking measures on downloadable computer software after finding that Apple, Adobe, Microsoft and other major publishers were using it to artificially inflate prices on software sold in Australia.
Many Australians also use widely available circumvention tools — many of them openly advertised — to access Netflix, even though the service is not legally available there. Netflix officials admit to having roughly 100,000 “subscribers” in Australia, although other estimates put the number at twice that.
Whatever the real number, it’s large enough it has disrupted plans by News Corp.-owned Foxtel to launch a competing service and caused headaches for Quickflix, a local streaming service launched in 2011. Singer told the Financial Review there are additional steps Netflix could take to tighten up on access from Australia but he doesn’t think they would make much difference in the long term.
“It’s going to be very difficult to enforce,” he said. “There may be other things we can do, but that’s something that looks like it will be disrupted in the next two to four years.”
The issue hasn’t received as much attention in the U.S., in part because most American content is released here first anyway. But last year, the Supreme Court sent a shiver through the book publishing world with its ruling in Kirtsaeng v. John Wiley & Sons that books from U.S. publishers purchased outside the U.S., often at a fraction of the domestic price, could legally be brought back to the U.S. for resale. In principle, the same would apply to DVDs, Blu-rays, CDs and all other forms of packaged media.
Though the ruling does not apply to digital content, it knocked an important legal pillar out from under the wider system of selling exclusive territorial licenses.
Nothing Singer said his interview was news to anyone who has been paying attention for the past few years. But he probably wouldn’t have said it a few months ago, when he was still at Sony Pictures and invested in the old system. The fact that he’s saying now simply indicates the folks who still run the studios know the jig is up, even if they can’t say it out loud.