Interesting Court Case: RealNetworks vs. the MPAA

The New York Times has a great piece today on a court case that begins in San Francisco today, over the issue of whether you have the right to take a DVD that you own and store a digital copy of that content on your own computer.

From Brad Stone's piece:

The case is ostensibly about RealDVD, a $30 software program that allows users to save digital copies of Hollywood DVDs to their computers — a capability the movie industry strenuously objects to, worrying that it will stimulate piracy and undermine the budding market for digital downloads.

But the outcome of the trial, set against the backdrop of plummeting DVD sales, could also have more far-reaching effects on the future capabilities of the DVD player — a device connected to millions of television sets.

Before it started making RealDVD software for computers, Real was also developing DVD-saving software that it hoped to license to manufacturers of DVD players, according to the company’s executives and legal filings in the case.

That software, which the company refers to by its internal name, Facet, would allow companies like Sony, Samsung and Toshiba to sell DVD players capable of making digital copies of all discs, even movie DVDs that have anticopying software, called C.S.S.

The owners of those devices could save copies of their DVDs to watch later — much as people use digital video recorders like TiVo to save live television programs.

Here's some earlier CinemaTech coverage of the suit, filed last October.

This is just the latest in a line of cases like Sony Corp. vs. Universal (the Betamax case) and MGM vs. Grokster... and the outcome will be important.

Thursday Reading: 'Wolverine' piracy, Hulu, Star Salaries, ShoWest, and More

- An unfinished version of 'X Men Origins: Wolverine' seems to be available online, a month before its scheduled release. Brian Stelter of the New York Times writes:

Eric Garland, the chief executive of the file-sharing monitoring firm BigChampagne, called the widespread downloading of “Wolverine” a “one-of-a-kind case.” “We’ve never seen a high-profile film — a film of this budget, a tentpole movie with this box office potential — leak in any form this early,” he said.

The studio, a unit of the News Corporation, spent the day demanding that copies of the film be removed from the largely anonymous swath of Web sites that swap movie files. But the copies propagated at such a swift rate that the digital cops could not keep up. BigChampagne estimated the digital film copy had been downloaded in the low hundreds of thousands of times in its first 24 hours on the Internet.

The studio said the F.B.I. and the Motion Picture Association of America were both investigating the film’s premature distribution.

- Interesting piece in BusinessWeek about Hulu's success at attracting viewers... but its problems selling advertising.

- In the recession, Hollywood studios are changing the way they pay big stars, according to The Wall Street Journal. Lauren Schuker writes:

For years, top movie stars often landed deals paying them a percentage -- sometimes as much as 20% -- of a studio's take of box-office revenues from the first dollar the movie makes, even if it turned out to be a flop that cost the studio millions. As a result, the biggest celebrities broke the $20 million mark. Eddie Murphy got that kind of payday for the flop "Meet Dave," which cost Twentieth Century Fox about $70 million and took in only $11.8 million at the domestic box office.

These "first-dollar gross" deals are hitting the cutting-room floor as studios slash the number of movies they're making. For two new projects, Viacom Inc.'s Paramount Pictures has done away with such deals, even though it has landed top talent. In "Dinner for Schmucks," with Steve Carell, and "Morning Glory," starring Harrison Ford, the actors accepted "back-end" deals, in which they get a portion of the gross, but only after the studio and its financing partners have recouped their costs. The studio also cut a back-end deal with "Dinner" director Jay Roach.

- The NY Times reports that the annual ShoWest convention in Vegas, where studios present their forthcoming product to theater-owners, is smaller and lower-key than usual this year.

Variety has its ShoWest coverage here.

SXSW ... 1,000 True Fans ... HBO's 'In Treatment' ... Movie Production Costs Keep Rising

Just a few links before I head to Austin on Friday morning for the SXSW Film Festival.... I'll be heading up two panels, one on Saturday called Digital Cinema for Indies, and one on Sunday called Animation and Digital Effects on a Budget.

- Kevin Kelly, one of the founders of Wired, has a wonderfully thoughtful essay titled '1,000 True Fans.' Here's part of the opening:

...the long tail is a decidedly mixed blessing for creators. Individual artists, producers, inventors and makers are overlooked in the equation. The long tail does not raise the sales of creators much, but it does add massive competition and endless downward pressure on prices. Unless artists become a large aggregator of other artist's works, the long tail offers no path out of the quiet doldrums of minuscule sales.

Other than aim for a blockbuster hit, what can an artist do to escape the long tail?

One solution is to find 1,000 True Fans. While some artists have discovered this path without calling it that, I think it is worth trying to formalize. The gist of 1,000 True Fans can be stated simply:

A creator, such as an artist, musician, photographer, craftsperson, performer, animator, designer, videomaker, or author - in other words, anyone producing works of art - needs to acquire only 1,000 True Fans to make a living.

- Michael DiBasio is cheesed that HBO seduced him with free episodes of 'In Treatment,' then turned off the tap. I'd argue that HBO is going to have a very hard time offering its content online in any form ... whether paid downloads at iTunes, or ad-supported streams ... because its biggest revenue stream is cable and satellite companies, who want that content to be their exclusively. (Why else do people pay $100 a month for cable, except for HBO and Showtime?)

- The average cost of producing and marketing a studio movie in 2007 hit an all-time high, according to the Wall Street Journal (based on data from the MPAA): $106.6 million. Releases from studio "specialty" divisions, like Fox Searchlight, was $74.8 million, a big jump from the prior year. But it was also the best year ever for the US box office, led by Sony Pictures' 'Spider-Man 3.' The studios raked in almost $10 billion (and that's ticket sales only -- no home video.)

Post-Thanksgiving Linkage: Blockbuster Kiosks, Streaming Video Piracy, Speed Racer, Vudu

- Blockbuster is gonna try putting automated movie rental kiosks into Papa John's pizza joints and Family Dollar stores. DVDs will rent for just a buck, cheaper than at Blockbuster's traditional outlets, and they can be returned to any kiosk -- not just the one they came from.

- Slate has a great piece on a new kind of online movie piracy. Dan Morrell writes:

As the MPAA has focused on BitTorrent downloading, however, a newer, more popular kind of piracy method has come along. BitTorrent is out. Streaming video is in.

Before it was shuttered by European authorities in October, the British-based TVLinks—which offered links to hundreds of pirated movies and television shows—had become perhaps the Web's leading destination for illicit streaming video. If you've never heard of it, you're not alone: A LexisNexis search found only four mentions of TVLinks in major news sources over the past year. The Pirate Bay, one of the most popular torrent Web sites, was cited more than 300 times. The lack of hype didn't stop the site's spread. According to Web traffic analyzer Alexa, TVLinks passed both the Pirate Bay and TorrentSpy in global traffic rank this August. At the height of its popularity, TVLinks ranked 160th in global traffic, near the level of the New York Times.

- Looks like the Wachowski Brothers are taking the green screen approach with 'Speed Racer.'

- To help market its $399 set-top box, Vudu is throwing in high-def copies of two of Universal's 'Bourne' movies. (Here's more on Vudu.)

- My mother-in-law asked me on Thanksgiving for my advice on whether she should buy "a Blu-ray." When I mentioned the format war, she didn't seem aware of it, and she didn't seem to have much recognition that HD DVD existed. She and my father-in-law are big Netflix users, and Netflix offers movies in both Blu-ray and HD DVD, so I told her the only possible problem could be if HD DVD wins, they'd need to buy a new DVD player in a couple years. Just a data point...

Susan Sarandon Explains Digital Cinematography to You ... 'Manufacturing Dissent' Debuts on AOL ... CNET Q&A with MPAA Piracy Exec

- So apparently the Wachowski brothers are doing something innovative with the digital cinematography on their next project, which a live action version of the cartoon 'Speed Racer'. Will you understand exactly what they're up to by reading this interview with actress Susan Sarandon? Probably not.

- AOL is making 40 minutes of the doc 'Manufacturing Dissent' available online for free. It's a somewhat critical profile of Michael Moore that played at South by Southwest; it felt toothless and overly-long to me when I saw it there... but maybe a 40-minute cut is an improvement.

What's the business model? Ads will be shown throughout the online version, and the distributor (Liberation Entertainment) hopes that when the DVD is released on November 6th, the online marketing will help. (November is a long way from August, guys...) Video can be found here.

- CNET interviews Dean Garfield, an attorney (no surprise there) who is the MPAA's chief strategy officer. (I interviewed Garfield in LA a year or so ago, and his responses to my questions were so milque-toasty I never did anything with it. A shame Jack Valenti is no longer around to give him some media training.) Here's a sample exchange:

CNET: What kind of technologies are you guys using to help prevent piracy?

Garfield: We're at the point where technology provides real opportunity, and it's not just down the road, but today. We're conducting requests for proposals in conjunction with MovieLabs around content recognition technologies. (MovieLabs is a company started by the six major studios to develop technologies that can help distribution of film.)

That testing is still ongoing, but the reports are that the technology really works. It is really effective. You can distinguish one piece of content versus another. That's real potential for monetizing and filtering out copyright content. Technology gives us real opportunities to give consumers what they want while also protecting the investment.

The MPAA's Annual Report, Video on the Xbox, and More

- In advance of next week's ShoWest gathering in Vegas, the Motion Picture Association of America has released its annual report on movie industry economics. (A PDF of the press release is here.) From the NY Times coverage:

The average production cost of a film made by [an MPAA] member company rose about 3.4 percent to $65.8 million in 2006, according to the report, while the marketing cost fell slightly, to an average of $34.5 million. (Association executives noted that the production cost figure does not include money contributed by outside investors who frequently underwrite the expense of Hollywood films.) The domestic box office rose about 5.5 percent last year to $9.49 billion, while theatrical admissions rose 3.3 percent to 1.45 billion, and the worldwide box office rose about 11 percent to $25.8 billion.

Variety offers a thorough analysis of the numbers. Some interesting elements from that:

> Spending on online marketing is growing
> So is the number of movies released each year (607 in 2006, an all-time high)
> There's a correlation between people who have a lot of technology in their homes (game consoles, DVD players, high-def TV) and people who see a lot of movies. (Seems to me this could be purely related to household net worth, rather than home theaters generating a desire to see movies in theaters.)

- Microsoft is clearly trying to promote the Xbox's video offerings, if this piece from Sunday's NY Times is any indication. Dave Itzkoff writes:

In late November Microsoft began expanding the library on its Xbox Live network, a broadband service available by subscription to Xbox 360 owners. In addition to the video-game trailers and playable demonstrations that the network has traditionally offered, you can now find an eclectically selected collection of films and television shows offered for downloading to a console’s hard drive: for a few dollars you can view “Mission: Impossible III” or “Chinatown” or the episode of “Chappelle’s Show” with the blind white supremacist, on your television, just as if you were watching a DVD or a video-on-demand channel.

...This month XBox Live will offer a new view of the corpulent form of Eric Cartman when it becomes the first outlet ever to offer an episode of “South Park” in high definition.

While Microsoft acknowledges that most consumers are buying Xbox 360s primarily, if not solely, to play video games, the company also sees an opportunity to use film and television content to draw an audience that doesn’t fit the stereotypical gamer profile.

“The original Xbox was probably the domain of that testosterone-fueled male in the household, and while we love him to death, we also want his little brother and sister and mom and dad and their friends to be able to enjoy it,” said Peter Moore, corporate vice president of Microsoft’s interactive entertainment business division.

- Viacom's CEO disses YouTube at an investment conference in New York, and says a deal with the video service Joost will give the company more control over its content, according to the LA Times.