In recent years, the term ‘piracy’ has come to be applied to the unauthorized copying of music, movies and computer software. Oodles of sales are lost, we’re told, because of this kind of piracy.
That’s the third kind of piracy. Traditionally, there are two other kinds. The first, of course, is the ocean-going sort, but it’s the second kind of piracy that makes all the others pale into insignificance.
If you grew up in the days before digital music and software piracy there were only two kinds. The waterborne kind, and the kind committed by publishers and studios.
If it wasn’t about stealing stuff off of your boat, it was about publishers and studios cheating authors, film-makers and content-creators out of their money.
And that’s bigger business today than it ever was. Certainly a bigger business than both other kinds of piracy put together.
What it comes down to is a practice called “Hollywood Accounting”.
Let’s look at the Lord of the Rings trilogy of films.
The intellectual property for the three films was licensed from the Tolkien Foundation, and New Line Cinema agreed to pay 7.5% of the gross.
Peter Jackson, writer/director, was contracted to receive a share of the profits (about 3%, I think).
So, the films cost (in round figures) about 280 million dollars to make.
The gross was about 3 billion dollars.
So, that’s about 2.7 billion dollars profit, before we even factor in DVDs and merchandising, right?
Well, no. New Line Cinema did a bit of tricky accounting and called it a loss. So, Peter Jackson didn’t get the hundred million dollars they’d agreed to pay him. As for the Tolkien Foundation’s percentage of the gross (about 225 million dollars)?
NLC blew them off.
The Foundation had to sue to get their money. Jackson had to sue to get his.
Isolated case, right? Wrong.
Harry Potter and the Order of the Phoenix. Hey, look at that! In fact, none of these extraordinarily popular films had a profit on the books, and thus nobody who was supposed to get paid a share of those profits got paid. Unless they had the resources to spend years arranging comprehensive audits and lawsuits. This particular film (the most profitable so far) booked a net loss of $167 million, while making Warner Bros many millions in profit.
Spider-Man? Stan Lee had to sue to get his portion of the gross.
Winston Groom, who wrote the screenplay for Forrest Gump? This extremely successful and profitable movie was booked as a net loss, so Groom got nothing.
Television series Babylon 5? Ditto. Fantastically profitable for Warner Bros (about a billion dollars) but writer/producer Straczynski is told that the production remains in debt, and he doesn’t get a share of those profits.
And on, and on and on.
Not counting a huge merchandising and DVD industry, Hollywood pulls in about 10.6 billion or so annually in North America. Something around half of that turns into profits. However, few films are booked as having made any money at all (only about one in 20), and those that are booked with a profit are generally booked as having almost negligible profits – and thus everyone who’s been promised a share of the profits or royalties gets little or nothing.
Now that is piracy, and on a breathtaking scale. And it’s not just confined to films. The games industry has plenty of examples of similar.
All three kinds of piracy remain a real problem, but the real money is in publishers screwing content creators.
| In recent years, the term ‘piracy’ has come to be applied to the unauthorized copying of music, movies and computer software. Oodles of sales are lost, we’re told, because of this kind of piracy.
That’s the third kind of piracy. Traditionally, there are two other kinds. The first, of course, is the ocean-going sort, but it’s the second kind of piracy that makes all the others pale into insignificance.
If you grew up in the days before digital music and software piracy there were only two kinds. The waterborne kind, and the kind committed by publishers and studios.
If it wasn’t about stealing stuff off of your boat, it was about publishers and studios cheating authors, film-makers and content-creators out of their money.
And that’s bigger business today than it ever was. Certainly a bigger business than both other kinds of piracy put together.
What it comes down to is a practice called “Hollywood Accounting”.
Let’s look at the Lord of the Rings trilogy of films.
The intellectual property for the three films was licensed from the Tolkien Foundation, and New Line Cinema agreed to pay 7.5% of the gross.
Peter Jackson, writer/director, was contracted to receive a share of the profits (about 3%, I think).
So, the films cost (in round figures) about 280 million dollars to make.
The gross was about 3 billion dollars.
So, that’s about 2.7 billion dollars profit, before we even factor in DVDs and merchandising, right?
Well, no. New Line Cinema did a bit of tricky accounting and called it a loss. So, Peter Jackson didn’t get the hundred million dollars they’d agreed to pay him. As for the Tolkien Foundation’s percentage of the gross (about 225 million dollars)?
NLC blew them off.
The Foundation had to sue to get their money. Jackson had to sue to get his.
Isolated case, right? Wrong.
Harry Potter and the Order of the Phoenix. Hey, look at that! In fact, none of these extraordinarily popular films had a profit on the books, and thus nobody who was supposed to get paid a share of those profits got paid. Unless they had the resources to spend years arranging comprehensive audits and lawsuits. This particular film (the most profitable so far) booked a net loss of $167 million, while making Warner Bros many millions in profit.
Spider-Man? Stan Lee had to sue to get his portion of the gross.
Winston Groom, who wrote the screenplay for Forrest Gump? This extremely successful and profitable movie was booked as a net loss, so Groom got nothing.
Television series Babylon 5? Ditto. Fantastically profitable for Warner Bros (about a billion dollars) but writer/producer Straczynski is told that the production remains in debt, and he doesn’t get a share of those profits.
And on, and on and on.
Not counting a huge merchandising and DVD industry, Hollywood pulls in about 10.6 billion or so annually in North America. Something around half of that turns into profits. However, few films are booked as having made any money at all (only about one in 20), and those that are booked with a profit are generally booked as having almost negligible profits – and thus everyone who’s been promised a share of the profits or royalties gets little or nothing.
Now that is piracy, and on a breathtaking scale. And it’s not just confined to films. The games industry has plenty of examples of similar.
All three kinds of piracy remain a real problem, but the real money is in publishers screwing content creators. | |  | |
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Great post! I think the evidence for actual financial harm from the third kind of piracy isn’t well supported. But it’s pretty well-document that “creative accounting” is customarily used to screw creatives.
If you use the word “publisher” in a broad sense (i.e. anyone who’s making money by making someone elses creations publically available) the same holds true to Linden Labs, where artists and creators are actually paying the publisher (LL) to make their creations available (and, as a nice ‘side effect’, shape their service, fill it with life and make it appealing).
P.S.: Must be the day of copyright rants.
P.P.S.: What’s this neat plugin called that allows for the editing of comments within 5 minutes?
It’s called “WP Ajax Edit Comments”, and works pretty darn well
This is also a problem in the music industry, as Steve Albini famously wrote about in the 90′s, in an article that is still often cited.
“Some of your friends are probably already this f***ed.”
So what if you saw your avatar or something you know you made before a movie went into the conceptual design mode show up in that movie? They stole it. It is obvious. They add a disclaimer saying the likeness is a coincidence.
Get your money up front. Same goes for any business involving IP rights.
Lawyers or bullets. Either solves the issue of rich bastards out of control destroying the planet.
Eye opening post, thanks
Someone should setup a service that would forward donations directly to the artists, taking only a small percentage of the donation for the service.
I myself already have some artists in mind that i would like to send donations to if i had the means to get the money there, and i don’t doubt there are lots of people out there that wanna give money to thank the creators of games, movies etc, and would rather download the stuff from the internet for free skipping the thieve and pay the artists directly.
as screwed up as those examples are.. for the major creators dealing with large media corporations….at least they got salary and paid “something” “real” at the time. and for the staffs they employed- UNIONized mainly as well- they all got enough to put kids in school and pay the morgage.
not the same for those making the content being made for LINDEN, or GOOGLE WAREHOUSE etc. the NEW models so far havent created hardly any mass value for the creative industries actual workers…
new boss is certianly learned the worst from the old boss…
and new media is already 25 years old…;)
c3
and btw to you interface post, that i wont join massivley to comment on..
“There’s over 15 years of realtime 3d interface experience out there. The fact that LL chose a developer that specializes in 2d flash movie websites, is not the professionals fault.
3D games have utlized 3d/ 2d hybrid interfaces since the early 90s. Same for VR simulations/applications etc.
If one searchs out the bios of those given task to the “interfaces” of most of the last 5 years “meta3d companies” that began almost overnight around SL bloggers, one may see why “everything appears new and not known “. But in fact, isnt.”
@TigroSpottystripes Katsu: There are quite some musicians already that publish their music themselves (Maybeshewill, Radiohead or NIN come to mind), and a lot of new / small musicians publishing under creative commons on jamendo.com, where you can donate to them directly.
@c3 Usually a reduced salary is negotiated. Less money now for the promise of a share of profits later.
…and this is better than “todays meta model” which is do the work for free, we’ll cash in and maybe youll get a “badge” for your facebook page?
I don’t think that’s really relevant to the topic of Hollywood accounting. Unless I’m missing some connection….?
uh.. WHY the post then? What’s your agenda? Why point out “old media” nonethical behavior and look to “redefine” new media unethical behavior by attempting to “neuter” a term like Piracy?
Of the three definitions of piracy, the one made popular by MAFIAA and company is the one that is the least piratey, they are the ones making “piracy” loose it’s weight.
Setting aside – for the moment – robbery and unlawful violence aboard ship, piracy by publishers and film studios (and corporations infringing on patents) was the only other kind of piracy referred to by the term for roughly the last 200 years. It’s the definition I grew up with.
Back then it wasn’t the huge business that it is now, and I think a lot of that has to do with the emotional underpinnings of the term “piracy”. The stigma of piracy clung to record labels, publishers, studios and businesses and kept the incidences down to some degree.
After most of two centuries though, those labels, publishers, studios and businesses have – effectively – redefined the term, and it has come to mean something else in common-use, and as the term “pirate” has come to mean something new, the traditional pirates have flourished as you can see by some of the figures (plenty more are available with just a little Web-searching). The pirates have adopted the term and redefined it to mean somebody else; as if Edward Teach had started calling the Royal Navy pirates, and popularized the usage.
As such, a lot of what was called piracy 30 years ago has fallen out of the public eye, and since doing so has grown *dramatically*. If you were the one doing it would you prefer to still be called a pirate or a practitioner of non-GAAP accounting methods?
Piracy, in all its forms, is (as I have always maintained it to be) serious. I find it interesting that the primary usage of the term is now directed outwards by the industries that traditionally perpetrate it, and that the practice has vastly increased in those industries since the redirection of the word. You might find that interesting too, or you might not.