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How Movie Studios Can Profit From Pirating
 by: Jon Steele

The movie studios as a whole continually complain that they are losing revenues to the pirate. They constantly say that it’s the street level movie seller that literally cuts into thousands of dollars in potential profits. They also claim that sophisticated pirate rings throughout the world are cutting into production studio profits by the millions.

This is a flat out lie, a fabrication by the movie studios. Sure they lose some profits but the problem of pirating is not as problematic as they claim. First off, pirated movies are not the big business it claims to be. Yes, many are profiting from this new form of digital theft but the reality is; the biggest pirating is done in impoverished countries where most of those buying the bootlegged copies of movies would not be able to afford the price of a legitimate movie ticket anyways.

The fact is the movie studios are too stupid to realize that they can profit from movie pirating and in the process create a new revenue stream to fund more of their productions.

The studios in their infinite greed and stupidity have not truly analyzed the problem of pirating and the selling of bootleg copies of films. If they did they would find that the problem is not necessarily per se the pirate, it’s the buyer.

Without the buyer or client there would be no potential business for the pirates to profit from. In a word, to stem or slow the tide of pirating the production studios need to simply realize the average bootlegger would not be in business if there was not someone interested in buying, and in identifying the potential type of clients that bootleggers sell to, the production studios can thereby create a niche market that will afford them even more profits for their films.

There are three types of buyers in the world of pirated films and we will analyze and look at all three. Understanding their motives for purchasing bootleg films will go a long way to curb the tide of pirating.

The movie studios need to first and foremost understand one simple fact; no matter what new technology they implement they cannot and will not stop pirating in all of its forms. The sooner the studios realize that there are “acceptable losses” that have to be allowed, the better they can manage the potential new market this could create for them as a whole.

To look at the breakdown of it all; there is only one type of pirate and that is a person driven by the idea of making money selling items that they acquired in an illegal fashion. The items they acquire, in this case films, are generally obtained free of charge, making their profit margin 100%, an ideal business indeed.

But we need to look more closely at the buyer, for the pirate would not have business if there was not a ready supply of people waiting to buy from them. That being said, there are three types of buyers of pirated films.

1. Those that live in other countries or regions that are several months behind the U.S. release dates. For example, if a film is released in the states in July, it will not be released in say, South America for several months after the fact. This has a tendency of alienating this group of people making them feel as if they were less than viable than those in the premium markets of the U.S. and Europe as a whole. Those that live in regions where they see the film months after its U.S. release want to feel as mainstream as the rest of the world, and most buy pirated films from the street because they just do not feel they should have to wait to see it.

Many feel out of place when speaking to colleagues or relatives who live in other regions when asked in casual conversation if they have seen a latest film that’s out in one part of the world and not in theirs. This creates a subconscious resentment toward the movie studios as a whole and why many do not even bother to go to the movie theatres to see a first run film. Now while it is evident the movie studios as a whole do not care of the alienation of one group to another, this again has to be stressed that by implementing new measures the studios can easily generate a positive cash flow from a new market.

2. Those that don’t relish the movie theatre experience. There are many in the world who find going to a movie theatre quite unpleasant and this was my main reason and motivation for purchasing pirated films from the streets. Personally, I did not like being in a crowded movie theatre with people constantly talking through the film, or the ever persistent person sitting behind me who kicked my chair constantly throughout the entire film, not to mention the sordid conditions of the movie theatre itself; i.e. sticky carpeting, gum in the chairs and general uncleanliness.

The main advantage to buying pirated films from the street is you can watch in the comfort of your own home. You can watch it as much as you like, and if there is a scene you wish to see again you only need to rewind to a specific scene again. This is most of the appeal of having the ability to watch a film from home. Many need the movie theatre experience to feel they have really “seen” a film but most, if given the chance would prefer to watch a new film at home. With the advent of plasma tv’s, bigscreens and high definition surround sound systems, it is now possible to get the same experience as in the movie theatre in the comfort of ones home. You can take off your shoes without the fear of getting something on your feet. You can also pause the film if you need to go to the bathroom, thereby not missing anything, getting the full value of the film. You can repeat scenes to enjoy again and again, whereby in the movie theatre it is definitely a “one shot deal” type of situation when it comes to viewing.

3. The third type of pirate client is someone who simply put, could not afford the price of a ticket anyway. The rising cost of movie tickets can be very discouraging to those on a fixed budget or income. In many countries families are very large and not the typical “2.4 kids” expected by the average American family. So many would not be able to afford to take their whole family out for a movie night. Pirates, albeit illegal in nature, exists because they can see the needs of the potential client and fill it. If the movie studios themselves took the time to look at the potential moviegoers and not the demographics they would know this and be better equipped to meeting the needs of all thereby making more of a profit on films.

Again, the problem with pirating is not the pirates themselves but those that buy from them, remember, there clearly would not be a market for bootleggers if there were no buyers willing to buy. It’s the buyers that drive the market and not the pirates themselves.

In the past the movie studios have thought of “clever” ideas in their efforts to prevent pirating and all of their bright ideas have met with failure, embarrassing failure. For example, when the film Matrix Revolutions was released, it had a world wide release. Meaning the film was released simultaneously all over the world. This was done to supposedly prevent pirating, and it had disastrous results. The movie was still pirated all over and in many cases copies were sold just a few hours after its initial release in the theatres. Why did this happen? Because the studios were too ignorant to realize the different types of buyers that exist for pirated films.

Even though this movie was released worldwide at the same time, it was still pirated for reasons number 2 and 3. Although the Matrix films were big box office draws, many did not want to sit in a crowded movie theatre around devoted Matrix “true believer” type of fans, not to mention the overall unpleasant conditions that exist in just about every theatre for a big box office draw.

So the “brilliant” idea of a world wide release did nothing to stem the tide of pirating. This is again because the studios have taken the time to profile what types of piraters are out there selling but they have never taken the time to profile the types of buyers of bootlegged films. Once you understand why people are willing to buy films from the street, even knowing that many will be low in quality, you can then figure out how to put the bootlegger out of business………or profit from him.

Is it possible for the movie studios to profit from pirating? In a word………..yes and very easily. They can not only profit from pirating but create a new revenue stream in the process.

The easiest way to profit from the dilemma is to give potential consumers a choice. Free choice is the key to creating a revenue stream outside of the mainstream movie industry. How? Since just about every film that is released in theatres will eventually wind up on DVD, the best way to cut out the bootlegger is for the studios to bootleg their own movies.

If the movie studios made released DVD’s at the same time as the theatre release and gave people a choice to buy them for a slightly elevated price, the profits would be astronomical. For example, if a new movie is released at the theatre one could go to the movie theatre in his designated area and instead of buying just a ticket they could also purchase a copy of the film to take home and watch, the theatres would generate double the profits. There would be the general ticket sales for moviegoers and then the sales from those who purchased the DVD’s at the theatre. If the movie studios also made a limited number of available DVD’s for sale at the theatres, it would be an incentive to make potential buyers/collectors move faster to ensure obtaining a copy. The discs could also be encoded so that the movie studios would know which theatres got which copies thus keeping track of potential pirating. Also as an advent the studios could stipulate that to buy a DVD release version of the film one had to show a driver’s license, it would greatly reduce the possibilities of pirating.

The thing that makes pirating work is its anonymity. One can easily walk up to any seller on the street and buy anonymously but when its necessary to show some type of identification to buy a copy it thereby makes the buyer responsible for his or her own copy, and since most are afraid of the possible repercussions of pirating, most would end up protecting their copies for fear of reprisals from the movie studios on a whole.

If the price for a single movie ticket is around $12 dollars per person, the studios can fairly charge approximately $30 dollars for the “Theatrical Release DVD” or TRD and would generate a new stream of profit from these sales. These special DVD’s will include the movie, a menu and some deleted scenes along with the film trailer as well as other trailers of upcoming productions by the movie studio releasing the film.

This is a great way to advertise for new and upcoming films by the production studios as well as distributing the DVD and drastically cutting down pirate sales. The movie studios should not feel in any way that releasing a TRD disc will take away from sales of the regular retail release of the DVD after the movie has made its theatrical run.

The reason for this is that the TRD will not have all the features and extras that will be found on the retail version. What this means is if one were to purchase the TRD disc from a local movie theatre, the version they obtain will differ entirely from the version sold at retail once the DVD is officially released. True DVD collectors will purchase the “Special Edition” DVD release just for the sake of curiosity to see how it may differ from the DVD released at the theatres.

It should be noted that most DVD’s that are released for retail all seem to have the words “Special Edition” listed on the DVD. The disappointment to the consumer is that when you purchase these DVD’s there is very little about it that distinguishes it as truly being a “special” edition. In fact most of these so-called “Special Edition” DVD’s have just the standard features that most consumers have come to expect from any DVD purchased. But if the studios release a TRD that is limited to only a few deleted scenes, trailers and the movie itself, then when the regular retail DVD is released months later, collectors will be curious what other features are listed on the disc, so the curiosity factor alone will generate more sales also this making the retail release truly a “Special Edition”.

By making the TRD as competitively priced as the retail version, the price will not seem out of reach to the average consumer who is used to paying $24.95 for a standard DVD anyways.

What separates the TRD from the retail version is the features. The TRD DVD will have the film, a menu, and possibly a few deleted scenes. Whereas on the retail version there will be the commentary consumers are accustomed to getting on their DVD’s as well as a host of other features.

The main features can then be placed on the retail version of the DVD such as the behind the scenes documentaries, the commentary, some deleted scenes as well as trailers and possibly an alternate ending. The alternate ending is also a tool used to insure that there will be just as many buyers for the retail version of the DVD then for the TRD.

Now while this may represent an added cost to the studios, in reality the benefit of added sales and a new revenue stream far outweigh the costs of the production of this limited edition TRD. This would be a successful method in deterring pirating and creating a new source of ticket sales for movies.

Proof that this in fact works is that the studios themselves have experimented with this technique on a small scale and lower level and met with great success. The film, The Sisterhood of The Traveling Pants, was released to moderate ticket sales and success in the U.S. but in some parts of the world the studios chose to experiment with this film by releasing it on DVD at the same time it was released in the theatres.

The feeling at the time was that this particular film would not generate a big blockbuster response and the studios, being interested in recouping as much of the invested capital in the film as possible decided to gamble on this film by releasing it on DVD at the same time as the theatres. The result was overwhelmingly positive. This particular film was pirated far less then normal and many got to purchase the DVD from authorized outlets and watch it at home which then turned a film that had no projected large ticket sales into a cult classic in some venues abroad.

If the studios as a whole took this approach with more of their so-called blockbuster films they would find that overall receipts for the TRD and ticket sales would increase profitability of the films by a possible 70%. This would be added revenue that the studios would collect directly, thus cutting out the pirate or at the very least minimizing his client base drastically and also satisfying all types of potential bootleg buyers.

A poll was taken in the San Francisco area by this writer. What I was trying to determine is, if given the chance, would people prefer to buy a high quality DVD of a new release or would they rather watch the film in the theatre. Seven out of ten people asked said they would buy the TRD release of a movie if doing so would not get them into any trouble with regard to it being a pirated copy. Most said they would gladly pay up to $30 dollars for a DVD that they could obtain at their local movie theatre. They liked the convenience of it all and most said it was the thrill of having an authorized copy of the film that they could watch at home over and over again that would drive them to buy a TRD.

When asked if they had any problems with showing an identification to obtain a copy of an authorized studio DVD, almost all said they did not find it intrusive in any way and would have no problems in doing this.

Many expressed a safety factor that had not been considered at that time. Most felt that going to a late evening movie or a movie on opening night was something they would not consider due to the fact of potential danger of car accidents when going home, or possible dangers from the area, as many said some movie theatres are in or near high crime areas.

Many had told of past movie going experiences that turned to violent altercations due to the subject matter of films being shown. It should be noted that when the movie Boyz in the Hood was released a few years ago, there were several reported cases of gang violence when patrons were leaving the theatres.

Even when the classic film The Warriors was released, the studio execs were worried of potential violence stemming from the subject matter of the film. Because of these past situations there is a whole category of people who no longer go to films at night and due to their work schedules find it very difficult to see films during the day and these people are the ones who usually tell co-workers and friends, “I’ll just wait till it comes out on DVD to see it” when asked if they have seen a new release that may happen to be out at the time. With this new method of distributing films the studios can cash in on the category of consumer that would like to see a new release but that does not feel comfortable with the “theatre experience” anymore.

When one thinks of the thousands of dollars that are put into trying to catch and charge film pirates this then seems like a more cost effective alternative. Studios should not waste resources in trying to apprehend and shut down the pirates, it’s impossible, there will always be a measure or pirating, but if the studios offset the pirating by putting out their own high quality product, they can greatly reduce the number of buyers of bootlegged films.

If people are given the choice of buying a low quality copy of a film that may or may not play in their home players versus a studio authorized high quality copy that may cost a bit more but legal and problem free, the studios would be surprised to know that most would happily purchase the authorized studio DVD.

The studios would then be seen as pioneers, in that they are creating and catering to a whole new genre of film watcher………..the home viewer.

The selling of the TRD version of the movie would in no way cut into the rental sales either from Blockbuster and Hollywood video. Why not? Due to the fact that there are always going to be people who just choose to view the films and not own them and for this reason there will always be a good steady rental base, besides that the TRD versions that one could obtain from the local movie theatre would be limited editions of say only a few thousand or even a few hundred per movie theatre. Once they’re gone they’re gone. This type of supply and demand will really increase sales if potential consumers know that TRD DVD’s will only be available for the first 72 hours of the films major release or however long the studios specify.

Not to mention the people who will go the local movie theatre and be satisfied with just paying $12 dollars for a movie ticket and then later after they have seen the film they loved it so much that they choose to also spend an additional $30 dollars to buy the film as they walk out of the theatre.

So many times I personally have walked out of a theatre from seeing a film and thought to myself, oh yeah I’m going to buy this movie the day it comes out on DVD. Sadly due to the fact that the studios make you wait months before the film is released on DVD, many lose their enthusiasm for purchasing it. Having TRD’s available for sale as one walks out of the theatre, would cater to the impulsive buyer who is interested in instant gratification and getting their copy “now” versus waiting for the official DVD release months later.

The music industry employs this same technique in principle with the release of CD singles for upcoming albums. Usually, it’s the single for the forthcoming album and possibly an acoustic version along with a remixed version as well as the music video on one CD. The prices for this CD range, sometimes they sell for $1.99 and up to $9.99 and it’s basically just one song. This creates even more of an interest and demand so that by the time the full album is released there are plenty of consumers just waiting to spend their money on the album. If the movie industry did this as well with their films, they would definitely see a marked increase in ticket sales and overall receipts.

All the way around it’s a profit environment that the studios cannot and should not ignore, if they truly wish to reduce pirating and gain more profits, not to mention create a whole new category of movie watcher, this is by far one of the best viable options for them.

Unfortunately Hollywood studios are all driven by greed and many cannot see the moon for the stars, but some of the farsighted execs in those steel towers in Hollywood should definitely want to consider this as an option to generating more capital from a new release and combating piracy.

With the slump in box office business, the studios really have nothing to lose. Now is the time to get creative, to take chances and take the movie industry in a whole new direction. It could be this simple idea that could jump start and revive the film industry in Hollywood.

Hollywood needs to realize there’s a new type of moviegoer and that there are many who like films but no longer like the theatre experience or can’t afford the skyrocketing price of tickets and by catering to these consumers they cut out the pirate or at the very least they use a pirate like approach to gain the revenue that would otherwise go to the street seller.

It’s definitely something to think about.

About The Author

Jon Steele writes primarily about what it's like to live overseas in another country. His specialty is articles about Chile, yet he has broached many other subjects in recent months. He occasionally lectures about how to make money while living abroad if you don't have a work permit and other topics. Get on his mailing list by sending an email to the above email address and get notified when he has new articles or information that's out.

This article was posted on November 26, 2005


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