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Saturday, January 10, 2009

Reactionary Action - Adopting the Pirate Way

Much has been made about Radiohead's straight to web distribution method. The success and acclaim they have received since has become a revolutionary turning point in e-commerce - proof that if freely available, enough people will still pay to make it worthwhile.


But whether this is always the case, or whether it is a result of the acclaim a band such as Radiohead would have received anyways (especially considering that the album, In Rainbows, is considered a good album by any standards), what should be made of this turn of events? Should the world shift to a "Free availability" model? How many "successful" examples are there out there? Failures? Read on, dear readers, read on.

When I think "available online," the first thing I think of is open source programming, which has been widely available for many years (e.g. Linux). However, the point of this post is not to discuss open source programming (though that may be an interesting post for later) - it is to talk about content that was previously available offline, usually in disc format, which would be easy to rip off of a disc and post online for anyone to simply take.

The music industry has long been the main focal point; with the emergence of Kazaa and other P2P programs (which I won't discuss), and the general mindset that music industries have long overcharged for their products, "piracy" became a commonplace occurrence. In attempts to quell such activities, record labels went and arbitrarily sued random people for obscure (and often obscene) amounts of money, which did little to quell piracy (in fact, it may have had the reverse effect, prompting angry protesters to disavow the purchase of CD's.

Radiohead's In Rainbows campaign changed the rules, somewhat. For many years, artists have been promoting themselves over MySpace and such, but never before had an accomplished name done something like this. As I pointed out in my previous post (go read it again if you don't remember), fame is not as much "Created" online as it is "Enhanced." Radiohead's supposed success has led to others following suit, but I'd like to point out that most of the profit is made after the initial offering, with a shift to iTunes sales, collector's sets, or additional add-ons, with the original product being mainly a "Free sample" sort of business plan. While Radiohead has never officially released statistics on In Rainbows, estimates have placed the earnings at somewhere around $4 - 10 per album ($9 being the official guess based solely on the actual website, discounting records taken without going through the official channel). I still believe this method is better than the previous "get mad at our audience and sue" tactic, but just a head's up that a) the profit will have to be made on volume, and b) a creative and multilayered marketing plan is required, rather than merely providing it online for free for no reason.

Beyond music, movies and videos are often subject to this as well (mainly anything that can be ripped off of a DVD). This is most often the case with anime, as fansubbing undercuts a lot of sales, and when the DVD's DO come out, they tend to be highly overpriced, due to localization costs. However, recently the localization companies have changed their strategy, realizing that they could not compete in terms of speed (and in many cases, quality) with fansubbers. ADV was one of the first to shift practice methods, by making a lot of their content available off Bittorrent (hailed by the very same companies previously as a cancer upon their industry), and even more recently, Gonzo and Funimation have taken to posting their shows free on Crunchyroll as soon as it airs in Japan. This has the effect of making most legitimate fansubbers stop distribution (since fansubbers live by a pretty strict code to stop distribution when things become available for non-native speakers), and for the most part has been pretty effective (from a reactionary "stopping fansub" point of view rather than a profit point of view, at least). How much money is actually made is up for debate, with most of the profit being from people purchasing to download the movie in higher quality, and from advertisements that litter the page.


I have long contested that distribution companies would be better off forming partnerships with fansubbers, and get fansubbers to handle the subtitles, formatting, encoding, etc., as well as asking them to place a short advertisement in each distribution they give. By embracing the fan community, the distributor would have access to the entire fanbase for advertising, and the quality/speed of the subs would actually be better than what the distributor could do themselves (oftentimes, the difference in quality/typesetting and translation are staggering between "fan made" and "official," with official often losing out). This would likely be almost free, as well, since technically, the fansubbers do it for free, anyways, so the entire operation could be done for the simple costs of filming the short advertisement that needs to be inserted into each release, as well as possibly paying server costs to keep the website/distribution channels alive. Why nobody has chosen to do this remains one of my biggest questions - it seems as legitimate a business plan as posting the episodes for free online, and as seen with music distribution, most of the profit is made off people who liked what they saw/wanted bonus material, so the amount of people who watch for free without paying anything is likely the same between showing the episodes online and downloading fansubbed episodes (with the difference in profit being what is made through advertisements shown when on Crunchyroll from third parties).

Not all of the "straight to online" things have been reactionary, however. Sometimes, it is a shot from outsiders towards the large companies they normally work for, as if to say "Traditional methods are not necessary." Micheal Moore has long insinuated that information should be widely available, and if he demanded payment for his movies, he would be hypocritical. To this end, his movie, Slacker Uprising was made available for anybody to see, (the fact that I don't think it's that good a movie notwithstanding). During the Writer's strike, Joss Whedon, of Buffy fame, created a direct to Web movie in order to protest, and as a sign that the TV networks were not necessarily necessary. The resulting product, Dr. Horrible's Sing Along Blog, has had much critical acclaim, and as I have stated before, gone onto be profitable thanks to sales on iTunes. The phenomenon that resulted from Dr. Horrible has also led the cast members to a sort of internet infamy, to the point where they had to refuse interviews because they were so inundated with fan support.



However, as before, only those who have established names hit it big. Others still produce things online, but their fanbase tends to be far less, which limits the possibilities to make profits due to merchandising afterwards (though there are always success stories) In the end, while a few smaller examples hit homeruns with worldwide fame, most are merely content to find a niche, and sell to a smaller (but still loyal) fanbase (much akin to hitting a single, I suppose).

So the conclusions I have come to from straight to online content:
  1. It reduces "piracy" in that people will choose a legitimate channel if the prices are equivalent.
  2. Fame / reach is not increased by this method; rather, it takes advantage of fanbases already available
  3. While the profit margins are less, it is still profitable, and the volume makes up for the difference
  4. Profit is a function of merchandising and product promotion after the fact, with the initial offering being a "Free sample" of sorts
  5. Much of the opportunity is still untapped, as companies have yet to fully understand the capabilities of e-commerce

Possibly over time, the large companies will take advantage of the opportunities to do business online, and move away from their more traditional stances, but for now, this is a very positive step in the right direction.


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