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  • The Entertainment Industry Still Doesn’t Grok Apple

    September 11th, 2007

    It’s sad, really. Apple’s iTunes store has sold billions of songs, millions of TV shows and movies, yet the entertainment industry still resides in the middle of the 20th century, so they can’t appreciate what’s actually happened.

    For those of you who weren’t around in those days, we were saddled with black and white TV, and vinyl records. Of course, we didn’t realize that was any particular disadvantage. Except perhaps in laboratories, digital sound was nowhere in sight, and the prospect of recording a TV show for later viewing with cheap gear in your own home was something confined to science fiction stories.

    You see, in those days, the entertainment industry had full control over what you heard or saw, and when and where the product was exhibited or sold. Sure, there was piracy, I’m sure, but not in the sense that we see it today, where show business representatives and their high-priced attorneys sue their customers — and not just each other.

    Every time the consumer had the chance of gaining control, the industry would fight tooth and nail, without actually thinking of the consequences. Take videotaping your own shows from TV. That was a huge one. How could they let you get away with that? However, when they finally thought it through, they realized they could rent and sell videotapes and make a bundle.

    With the arrival of the compact cassette, and later the CD and DVD, they discovered another scheme to separate you from your money, and that is to make you buy all your favorite tunes and movies all over again.

    The problem with CD and DVD, of course is that, unlike vinyl recordings, they don’t wear out very often, and then usually only if you scratch the living hell out of them.

    So the money-grubbers in Hollywood finally devised a way for you to still buy all new versions of what you already own, by dint of remixing and remastering albums, and providing special “Director’s Cut” editions of movies, sometimes with alternate endings on a separate disc. There were even “collections,” which contained several movies in a series, or even a full season of a TV show.

    In fact, some shows, such as the all-too-quickly-canceled science fiction western, Firefly, got a new lease on life, sort of, and generated more income for the movie studios, because of the DVD versions. All right, I freely admit that this is one collection I actually purchased.

    However, when the world went digital, the entertainment industry went bananas. They couldn’t see the forest from the trees, so rather than embrace the new medium and monetize it, they could only see the physical media that wouldn’t be sold. They sat on their heels and watched people go to Napster and BitTorrent to illegally download the content they wanted.

    In the end, they should bow down before Steve Jobs for showing them what they couldn’t see for themselves, and that was how to make billions from legal downloads. However, rather than thank Jobs and Apple for bringing us the iPod and iTunes, they got the bright idea to try to induce Apple to increase prices. Or just charge extra for hot product, and a little less for older catalog selections that weren’t selling near as well.

    Jobs, however, wanted things to be simple and straightforward, so he said no. Worse, he had the temerity to tell the entertainment industry that they should remove all the DRM that tethered music to a handful of computers.

    So far, only one music company, EMI, has acceded to those demands, at least on iTunes. But they got something in the bargain, which was to sell the DRM-free music for $1.29, rather than 99 cents. Sure, you also get a high-reslution 256K version for the extra cash, but EMI’s costs don’t change one iota. They just have to give Apple two versions of the same music file, and count the money; that is, except for the pittance they pay the artists and song writers in royalties.

    Universal/NBC, of course, couldn’t tolerate operating in an environment that actually succeeds, so they tried to play chicken with Apple. They decided to sell DRM-free songs elsewhere, and move TV shows to Amazon Unboxed, the better to ignore Mac users. Yes, that’s really smart, folks! Exclude millions of potential customers. And for what purpose? To spite Apple? Engage in a power play?

    As I said, the entertainment industry has a golden opportunity to expand their marketplace and reach millions of younger folks who live online almost 24/7. I see lots of potential profits there, and Apple can show them the way. But, typical of Hollywood moguls, they may hear, but they do not see.



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    15 Responses to “The Entertainment Industry Still Doesn’t Grok Apple”

    1. Jon says:

      “They just have to give Apple two versions of the same music file,…”

      Just curious, but do you know this as a fact or are you presuming?

      I ask because, for some time now, I have had the opinion that Apple has a single, high bit-rate (CD quality or better), “master” file of each music track. When someone buys a track, that master file is re-encoded at a lower bit rate and wrapped in FairPlay DRM (or not, in the case of DRM-free EMI tracks).

      I have two reasons for thinking this.

      1) IMO, it just takes way too long to download a typical iTunes FairPlay track. This may be subjective, I know. Those tracks aren’t much larger than equivalent MP3s. If simple downloading is all that’s going on, what’s taking so long? I think it is re-encoding, DRM wrapping and downloading that’s taking so long.

      2) It just makes more sense as it would make the system much simpler, IMHO. It would mean fewer files to keep track of and it would save on server storage space.

      As for TV shows and movies…well if Apple is going to offer SD and HD quality streaming, rentals, and whatever at some future date, wouldn’t make sense to already have single HD “master” files in place and re-encode at the appropriate rates as needed?

    2. “They just have to give Apple two versions of the same music file,…”

      Just curious, but do you know this as a fact or are you presuming?

      I ask because, for some time now, I have had the opinion that Apple has a single, high bit-rate (CD quality or better), “master” file of each music track. When someone buys a track, that master file is re-encoded at a lower bit rate and wrapped in FairPlay DRM (or not, in the case of DRM-free EMI tracks).

      I have two reasons for thinking this.

      1) IMO, it just takes way too long to download a typical iTunes FairPlay track. This may be subjective, I know. Those tracks aren’t much larger than equivalent MP3s. If simple downloading is all that’s going on, what’s taking so long? I think it is re-encoding, DRM wrapping and downloading that’s taking so long.

      2) It just makes more sense as it would make the system much simpler, IMHO. It would mean fewer files to keep track of and it would save on server storage space.

      As for TV shows and movies…well if Apple is going to offer SD and HD quality streaming, rentals, and whatever at some future date, wouldn’t make sense to already have single HD “master” files in place and re-encode at the appropriate rates as needed?

      I am simply posing a generic situation. Obviously the mechanics of how a company provides content aren’t important. A file is a file, whether it’s one or two.

      Peace,
      Gene

    3. Tom B says:

      NBC and other media execs are greedy monkeys. They think they can have as much of the “pie” as they choose. They have failed to comprehend that it’s iTunes or else (DVR/Handbrake plus BitTorrent). People want easy, consistent solutions, not a patchwork of confusing options. Dealing with DRM-laden spew like UnBox and Walmart isn’t going to prvide for that need.

      Apple is in the driver’s seat, since they make the hardware. Even if a successful competitor to iTunes arose (unlikely), people would still get it onto their iPods, via some simple utility, if necesssary.

    4. Dave says:

      As far as I’m concerned Hollywood can keep all of their movies and TV shows. Based on my experience 99% of them are worthless anyway.

    5. Richard Taylor says:

      Gene!

      I grok, water-brother!

      Okay, the few of us who understand that slang are Robert Heinlein fans, but it is just swell (oops, rad? Cool? Nifty? Sweet?) to hear ‘Grok’ trotted out yet again by a fellow geezer (wait, sci fi fan). The last time I remember hearing the term was when it applied to Spock, as in ‘I Grok Spock’.

      As for movie moguls and their recording industry brethren, they aren’t in the technology business, as they will gladly tell you (and their conduct will convince you). No, they’re in the lion’s share business, separating content creators from capital and pocketing as much of that capital as possible. As a reformed screenwriter, I can tell you first-hand no one in Hollywood wants anything new or innovative — they want what worked yesterday, and lots of it, after which they will charge aspirin, new socks, yaga lessons, deep muscle massages and so on against the project in question. In a climate like this is it any wonder greed might raise its ugly head?

      Let’s face it, Gene — they aren’t our water-brothers, now are they?

    6. Gene!

      I grok, water-brother!

      Okay, the few of us who understand that slang are Robert Heinlein fans, but it is just swell (oops, rad? Cool? Nifty? Sweet?) to hear ‘Grok’ trotted out yet again by a fellow geezer (wait, sci fi fan). The last time I remember hearing the term was when it applied to Spock, as in ‘I Grok Spock’.

      As for movie moguls and their recording industry brethren, they aren’t in the technology business, as they will gladly tell you (and their conduct will convince you). No, they’re in the lion’s share business, separating content creators from capital and pocketing as much of that capital as possible. As a reformed screenwriter, I can tell you first-hand no one in Hollywood wants anything new or innovative — they want what worked yesterday, and lots of it, after which they will charge aspirin, new socks, yaga lessons, deep muscle massages and so on against the project in question. In a climate like this is it any wonder greed might raise its ugly head?

      Let’s face it, Gene — they aren’t our water-brothers, now are they?

      Correct, water-brother 🙂

      Peace,
      Gene

    7. Dana Sutton says:

      I think you’re reading too much into the NBC hassle, Gene. The essential point is that no other network is imitating NBC (Fox has explicitly announced it’s staying with Apple, and ABC and CBS haven’t made any move to the contrary). NBC did this because they have their own goofy and no doubt doomed distribution plans. When they fail, they’ll probably have to suffer the double embarrassment of coming crawling back to Apple and explaining this snafu to their shareholders.

    8. I think you’re reading too much into the NBC hassle, Gene. The essential point is that no other network is imitating NBC (Fox has explicitly announced it’s staying with Apple, and ABC and CBS haven’t made any move to the contrary). NBC did this because they have their own goofy and no doubt doomed distribution plans. When they fail, they’ll probably have to suffer the double embarrassment of coming crawling back to Apple and explaining this snafu to their shareholders.

      My point is simply that the entertainment industry, in general, does stupid things, and certainly NBC epitomizes that.

      Peace,
      Gene

    9. LonePalm says:

      Gene (and the first poster),

      I remember reading during the Sony “I can fit more songs on my MP3 player than you can.” saga that the reason Apple’s 128 kbps song files sounded pretty good was that they were encoded directly from the master files. At the time people were wondering why their own 128 kbps-ripped encodings from CDs sounder worse than iTunes downloads.

    10. I think the basic problem is that the media distributors, such as the networks, have not noticed they are reduced to being media distributors rather than running the whole show as they used to. The big studios may be affiliated with the distributors, but they are not tied to them.

      It will not be too long before a amazon (or itunes) like business emerges that begins to replace the current lot – a group with the right contacts and a decent promotion machine and organisation can feed individual broadcasters and online distributors as well as this lot.

    11. gopher says:

      I think the basic problem is that the media distributors, such as the networks, have not noticed they are reduced to being media distributors rather than running the whole show as they used to. The big studios may be affiliated with the distributors, but they are not tied to them.

      It will not be too long before a amazon (or itunes) like business emerges that begins to replace the current lot – a group with the right contacts and a decent promotion machine and organisation can feed individual broadcasters and online distributors as well as this lot.

      It already has happened. In fact it has happened so much Tower Records has gone out of business. Very few CD and DVD outlets manage to stay in business. If you look at Borders book stores, almost no one is buying their DVDs that they are selling for $30 a pop except for a few that are $11 or $12, and the rare one that is $7. Even so, somehow the big movie titles believe they can get you to spend $30 on a Criterian edition, when it is the same cost to go to Netflix for one movie or another. The revolution has begun. When Apple starts selling HD movies on the iTunes music store for $10 a pop, not even HD-DVD nor Bluray will be able to compete.

    12. HD-DVD an Blue-Ray won’t compete for another reason, which is that the two factions are so busy fighting each other that they can’t see the market slipping away from them. Their window of opportunity is preciously short, as you observe, and if they can’t stop bribing studios to support them and learn to work together, they will end up like the enhanced audio or Super Audio-type CDs that went nowhere.

      Peace,
      Gene

    13. Pecos Bill says:

      Although Jobs got his letter out to the public first, accounts on the web indicated that it was EMI’s initiation. I’m sure all in the computer side of the industry have known for quite some time how pointless DRM is. If it can be decrypted — such as during playback, it can be stolen. And, if you missed it, AACS — the new DRM for HD DVD and BluRay, has already been cracked.

      Tom B: I’m not so sure that NBC will ever return to Apple without some dramatic change. I think they’re more than happy to offer shows online via their own separate streaming technology or sell via hulu.com, their joint venture with NewsCorp due to unleash it’s detritus next month. All are right that Unboxed will go nowhere. Presumably, hulu will be based on Microsoft tech so it will also have its success in question. The only way I see hulu working is if they turn off all the other outlets and send users to hulu for purchasing and free streams. My guess is that it will run Sliverlight from M$ but to my knowledge, Silverlight only supports streaming currently.

    14. Wayne says:

      One thing you forgot about the studios. Not only do they want to be free to gouge customers for more popular products (i.e. raise prices on some tracks), but they also want to be able to punish bands who don’t do as demanded (i.e. lower prices on some tracks, signaling that they are so bad that they need a fire sale).

      It’s like the movie industry, where no movie in history has actually made a profit. Seriously, only the very naive would ever sign a movie contract specifying a percentage of profits, because no movie makes a profit no matter how much it rakes in at the box office. Creative accounting guarantees that every movie breaks even or loses money.

      The recording industry doesn’t go quite so far, but if you do a google search I’m sure you can find a nice description of how many pennies from a hit record gets through to the artists. They value their gate-keeper power enormously, and they thought that someone else holds those reigns really bothers places like NBC.

      (And don’t even get me started on Vivendi’s arrogance and greed in the gaming industry.)

    15. Those companies are the epitome of ingrates.

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