Cablevision and the infinite TiVo
This morning, the Supreme Court asked the Justice Department to weigh in on a service Cablevision hopes to introduce. It’s an issue every screenwriter (or TV viewer) should be watching closely, because it could have a huge impact on the entertainment industry.
The case is called Cable News Network vs. CSC Holdings. The case made it to the Supreme Court after a U.S. Appeals court reversed a lower court’s decision. The case will probably end up back at the Supreme Court this fall.
The issue is deceptively straightforward: Cablevision wants to offer its customers a “remote storage digital video recorder.”
At first blush, this seems pretty unobjectionable. Under current U.S. law, it’s legal for a consumer to record television programs for later viewing. This is considered time-shifting, and was first made possible by the VCR. Conventional DVRs are high-tech cousins to VCRs, with a hard drive replacing the videotape. In the U.S., many cable and satellite companies provide boxes that include DVR functionality, generally for an additionally monthly fee.
Cablevision wants to offer DVR as a service instead of a device. Rather than recording 30 Rock on the box attached to your TV, the show will be recorded at Cablevision’s headquarters. Then, when you want to watch it, Cablevision will send the show to your television. If it works right, it should feel just like a normal DVR. Only without the cost of the DVR.
If Cablevision offers this service, I think it will be very successful. Less hardware means less things to break, and the service could presumably send a show to any TV in the house. (Some conventional DVRs can do that, but it’s often a hassle.) Plus, storage scales very well. Cablevision could offer a user much more recording space than a conventional DVR.
In fact, Cablevision could offer unlimited storage. And that’s where it gets dangerous.
Say Mary Jones sets her Cablevision RS-DVR to record 30 Rock. So does Bob Smith. Cablevision only needs to record it once. They can send the bits to Mary or Bob whenever one of them asks for it. 1
Given that Cablevision has more than four million customers, it’s a fair bet that at least one of their customers would be interested in any given show, so it makes sense for Cablevision to record and catalog every channel it distributes, 24/7/365.
Conventional DVRs only record what you ask them to record, with some modifiers, such as “new episodes of The Simpsons,” or “movies with Steven Seagal.” So for Cablevision’s service to work like a conventional DVR, it should only offer you programs you specifically chose to record. No fair waking up Friday and asking for last night’s The Office.
But wait. Cablevision is already recording every show. Why don’t they just offer a “Record Everything” option?
Once they offer you the choice to record everything, you suddenly have the ability to watch any show broadcast since you signed on to the service. This is transformative, a Wayback Machine for television.
It would also destroy television as we know it.
Here’s where I put in my obligatory, “I’m no Luddite” disclaimer. I was the first person I know to have a DVR (the original ReplayTV), and consider myself highly familiar with the legal and less-legal options for watching video on computers and TV. As a consumer and geek, I would love to have a service like Cablevision’s. But I don’t think Cablevision should be allowed to do it their way.
Cablevision’s RS-DVR is back-door video-on-demand. They’re trying to offer the networks’ output to their customers on their own temrs, without paying any additional fees.
But it’s worse than that.
A service like Cablevision’s makes reruns absurd. Why would anyone watch a rerun of Desperate Housewives when it’s always been available for free on the RS-DVR? And it’s not just television shows that are affected. In a Cablevision universe, a feature film loses all its television value the first time it’s shown. Why would HBO want to show Slumdog Millionaire more than once, considering everyone who could ever want to see it would have it available for free in perpetuity via Cablevision?
For that matter, why buy a DVD, or spend $9.99 to buy a movie through iTunes when that same film is sitting on your (virtual) DVR?
Without reruns and ancillary markets (like DVDs and iTunes), there are no residuals, so that’s obviously a concern for writers.
But it’s worse than that.
Without reruns and ancillary markets, there are no feature films and no scripted television. Outside of lower-cost reality programming, it is simply not profitable to make a movie or TV show that can only be shown theatrically, or once on television. Very, very few movies are profitable in their theatrical release. Most make their money on video and television, which would largely be irrelevant with services like Cablevision’s. A movie studio could decide to never permit their films be shown on any station carried by Cablevision. For television, that’s not an option.
So what should happen?
The Supreme Court should rule that copyright holders (the studios, in this case) retain the right to profit from the distribution of their work for a given period of time. Yes, copyright law is frustrating, and corporations routinely abuse their authority through DMCA and endless extensions. Generally, the studios are the bad guys, so it’s hard to be on their side. But if they’re not getting paid, nobody’s getting paid. And if nobody’s getting paid, there is no industry.
The studios should then negotiate with Cablevision and all the other cable and satellite providers to roll out a system that calls this service what it really is: video-on-demand. A consumer should be able to watch (or record in their home) an episode when it’s first broadcast, or get it through VOD for a fee. That fee should be low, cheap enough to make it an appealing alternative to piracy.
And studios should continue to support Hulu, iTunes and all the other competing services. Television will change, and it will probably resemble something like what Cablevision is trying to do. But it needs to keep paying the people who make the shows, both corporations and individuals. Or there’s no television left.
- Alternately, Cablevision could partition drives so that every customer has a certain number of gigabtytes (terabytes? petabytes?) of storage, and record each show in that partition just like a conventional DVR. But this is tremendously inefficient, and nearly impossible to audit. ↩
Articles
January 12th, 2009 at 7:25 pm
“Outside of lower-cost reality programming, it is simply not profitable to make a movie or TV show that can only be shown theatrically, or once on television.”
This should be, instead, “it is simply not profitable to make a movie or TV show that can only be shown theatrically, or once on a television, the way the entertainment business is currently structured.”
Which is a problem facing everyone in content, from news to music. Record labels used to argue this point — that there would be no more music, rather hysterically — and that has not yet proven true.
January 12th, 2009 at 7:48 pm
It would be fairly easy technically to copy each show once, and then give each customer a limited number of shows (or storage) they can watch. It would be your 1. alternative but done via indexes rather than physical partitions. Think of it like the way netflix used to do their on demand service, so many hours a month based on the kind of subscription you had. This would allow for residuals (I assume you get them from Netflix).
January 12th, 2009 at 8:36 pm
How would TV that generally exhausts its run on first viewing look like? Night-time soaps, the programming choice of most of the world, with few exceptions.
January 12th, 2009 at 9:00 pm
@APR:
Yes, by “scripted television” I mean The Sopranos, The Office and the like. I want shows of this caliber to continue to be made. They’re expensive.
@marc sobel:
Cablevision could limit its customers, either in storage or number of shows. But they have no incentive to do so. Storage is cheap, bandwidth is cheap, and they’re not paying for content.
January 12th, 2009 at 10:00 pm
John,
From your proposed solution, could Cablevision also impose a kind of “sliding fee” scale for what you rightly point out is Video-On-Demand?
It would seem to make sense that they could charge more for first-run high-popularity shows, and less for “library titles” or reruns. And, like marc sobel’s scheme, Cablevision could index the number of times a user accesses a particular title and charge the account accordingly.
Based on everyone’s comments, the issue seems to be not how many times the programming is recorded, but rather how many times it’s accessed for viewing.
January 12th, 2009 at 10:23 pm
Even if Cablevision’s desires were supported by law, couldn’t the problem simply be avoided through language in the distributor’s contract with its exhibitors (e.g. Cablevision)?
January 12th, 2009 at 10:57 pm
Why not just make it a one Week back allowed thing?
Yesterday the Terminator Series started in Germany. Not only did I forget to record it (but got the rerun this night), but if I tell someone at Work from it he’ll not be able to see the Show and therefore not watch it at all probably. But if he can travel back one Week he would look it if I tell him it’s cool to watch.
And Movies or Series that will lay longer on your Webstorage than one Week back need to be flagged in this Week upfront. If not they are gone?
Wouldn’t that work? And be good for the Viewer?
January 12th, 2009 at 11:34 pm
Wow. This threatens the sustainability of screenwriting as a career. Scary. Also shows how important it is we restructure residuals to emphasize digital distribution in a sustainable way. Thanks for bringing this to our attention.
January 13th, 2009 at 1:31 am
An alternative would be to limit the amount of time ‘recorded’ shows are available via this service, say 2-4 weeks from airing.
Where I live domestic programming on free to air TV is available in this manner with certain services. I’ve found it to be really useful and have actually discovered one or two shows that I would never have watched otherwise. So it is not all bad for content producers! However the shows are only available for about one month after airing (varies somewhat). Seems like this strikes the perfect balance.
January 13th, 2009 at 2:06 am
The difference in production costs for music and video is tremendous. The RIAA can afford to tell half their market to go screw themselves and allow piracy to run rampant. Television and film have a completely different way of operating. The solution is one of fairly pricing content, fairly policing piracy and giving people a reason to see content outside of their living room.
January 13th, 2009 at 3:48 am
You do understand that if personal DVRs are allowed, forbidding Cablevision’s “community disk” is a stopgap measure. It buys about ten to fifteen years. Moore’s law (applied to physical storage) coupled with codec evolution means personal DVRs will reach a virtually unlimited storage capacity at some point in the near future.
January 13th, 2009 at 4:24 am
I think another issue is the length of time Cablevision archives the content. Re-runs would be relevent if the content is only archived for one week. There is certainly an incentive (storage costs) for Cablevision to limit archive time.
January 13th, 2009 at 5:09 am
I came here to say what Tom said. A half-hour too late, as it turns out.
In fact, in Canada, where the laws are different (though no less draconian in several ways) many cable companies are already offering a service like this; you can watch any show in an on-demand fashion if it is currently airing, but eventually those shows cycle out of your list of available shows. Seems like a simple solution to the problem you raise in this post, John.
January 13th, 2009 at 6:10 am
Yeah, another vote here for the one-week-limit thing.
I find this all really interesting. It’s like we’re on the brink of inventing the Next Big Thing and figuring this all out, legally and economically.
January 13th, 2009 at 6:51 am
I think this is all missing the point. You are still thinking of television as a sequential broadcaster. It’s not, it’s a delivery system – either to your screen, hard drive or tape machine. The fact that broadcasters make it difficult for you to watch what you want, when you want to is why TiVo’s and services like the one Cablevision want to offer exist. The real issue is; what are you paying for? Are you buying the right to consume once, or many times? That’s the difference between a subscription service and a copyright purchase.
We don’t actually need to purchase pieces of plastic anymore, we just need to buy the rights to consume copyrights as and when (and where) it suits us. If you pay for the rights to consume once, like a subscription to a broadcast service, then, with this type of system, you should select to record a show (obviously the data doesn’t actually need to be duplicated) and view it once only. If you pay for multiple viewings (probably no limit to the number of viewings, but limited by region – which is still a mess) then you can ‘own’ it forever. There may even be a middle ground, pay less and view for a limited period or finite number of viewings.
This is going to happen. It’s inevitable and has been ever since delivery system technology allowed real time streaming from remote servers. In fact, like all improvements to delivery systems, it will enhance and encourage greater consumption.
Or maybe home taping did kill music after all.
January 13th, 2009 at 7:10 am
And before any of you (like-minded) pedants beat me up about ‘buying copyrights’ I am aware that what you really pay for is a license to consume, not a copyright. What should happen in practise is the license you purchase will stipulate usage rights and the actual data will be stored online, backed-up, secure and accessible from multiple locations (if that’s what you’ve paid for).
January 13th, 2009 at 8:00 am
People are no longer willing to be victim of control. With how fast technology is advancing, users are given more and more control over what they view, absorb, and exposed to. Twenty years ago, my entertainment dollar was very dictated by the companies that offer them, meaning that I could only view what I wanted when I was told to.
Now, I can choose much more freely what I want to, when I want, and how I want to watch it.
January 13th, 2009 at 8:24 am
Yes, by “scripted television” I mean The Sopranos, The Office and the like. I want shows of this caliber to continue to be made. They’re expensive.
Is there a boxofficemojo.com for television? I’d love to know how expensive The Office is, particularly in comparison to the UK original and the German adaptation.
I remember when The Sopranos premiered, Michael Imperioli appeared on Jay Leno telling this hilarious story of how he needlessly wrecked at least one car during filming for the pilot because he couldn’t drive and wasn’t mature enough to tell David Chase about it. The fact that Chase didn’t fire his sorry ass and replace him with a less irresponsible actor suggests that whatever the budget for The Sopranos was, it was way too high.
And that brings me back to APR’s point, which you so deftly ignored. My questions is: are these shows expensive because they have to be, or because Hollywood productions are unnecessarily bloated? I’m not trying to be inflammatory here; I obviously have some suspicions, but I’d be really interested in some hard numbers which either confirm of falsify my ideas.
Even if Cablevision’s desires were supported by law, couldn’t the problem simply be avoided through language in the distributor’s contract with its exhibitors (e.g. Cablevision)?
Both the LA Times article and John’s post are unclear on how Cablevision actually works and what exactly it offers, but if I understand it correctly, the basic idea is that one guy tapes a show from his tv and sends out copies to everyone who’d flagged it for recording. That wouldn’t require a contract with any distributor at least as far as network television is concerned. Obviously, channels like HBO could make special stipulations in their contract with Cablevision (and I’d be very surprised if their contracts do not already include clauses prohibiting the widespread copying of their content), but for network television this wouldn’t apply.
January 13th, 2009 at 8:29 am
I’ve never used video on demand: if I purchase a show on demand (say, The Office), does it have ads? can I watch it again a month later without having to pay for it again?
If the answer to both of these are no (as I suspect), then this would be a major difference between DVR and VOD. I like to be able to watch some things I recorded months later (I usually delete shows after watching, unless it is a show I like enough to watch again).
January 13th, 2009 at 8:37 am
I respectfully disagree with the tone of this post. I think a better approach would be to invent new ways to generate revenue from this service that appears to be something most television viewers would want. If you introduce a service that is in high demand then you have a service people are willing to pay for, whether through a fee or through advertising. Limiting when a show is available to be viewed seems rather heavy handed considering the direction the industry is headed. Freedom to view a show when and how you want is the way of the future, look at streaming episodes of popular shows online, and the first studios to profit from it will be the most successful. Those that try to legislate the movement away will be left behind.
January 13th, 2009 at 9:12 am
@ben K:
Yes, a network could pull (or threaten to pull) its programming from Cablevision until they got the terms they wanted. That’s what happened in the recent TimeWarner/Viacom negotiation. The challenge is that with the current monopoly (or duopoly) on cable television distribution, the cable companies have tremendous leverage.
Regardless of how the Supreme Court case plays out, I think you will see aggressive negotiation.
@GPSchnyder:
One-week-back is already how networks calculate their total ratings, so yes, I think it’s within reason. The issue becomes, who enforces it?
@Sérgio Carvalho:
Yes, personal DVR capacity will continue to increase. But in order to match what Cablevision is providing, a consumer would need to be able to record all channels simultaneously and archive it indefinitely. Also, tomorrow’s TV may be huge, despite the codec. 3D, for example.
Also, an individual recording things to watch in his own household is different than a cable company accumulating third-party content and profiting from its distribution.
@Steve:
What you’re describing is the iTunes model, and I agree: it’s a reasonable way to think about the difference between “renting” and “owning” something. I think a legitimate VOD service like Cablevision’s could be profitable for everyone if it were priced properly. (That is, cheaply.)
@Nicholas DiMucci:
Yes, and consumer choice is terrific. Studios, courts and cable companies need to find ways to offer sustainable choice.
@APR:@MarkusThe expensive shows are expensive because it costs a lot of money to make them. I know that’s a tautology, but the cheaper version of The Sopranos doesn’t star James Gandolfini and isn’t written by David Chase. It’s not waste or bloat that makes them expensive, anymore than pork that swells the federal budget. Studios are constantly pushing to hold down costs; showrunners are constantly pushing back to maintain quality.
January 13th, 2009 at 9:47 am
Thanks for this rundown! Very informative. The only thing you left out is what the current legal standings are?
January 13th, 2009 at 9:48 am
Living in NY my whole life I can tell you that Cablevision is the single slimiest company on Earth and is run by two men who can only be described as human turds… the Dolans (yes, the same idiotic family that ran the once proud NY Knicks into the ground). It’s no shock to me that they’re once again trying grow even richer and fatter at the expense of more productive and harder working people and companies. This family is so reviled in NY there’s going to be a party in Times Square the day they’re finally all dead. Just one more reason to hate the Dolans. Nice.
January 13th, 2009 at 10:11 am
I do love how people on here are “voting” on reality. Why should you get to say how a business gets to operate because it might step on some of your screenwriting revenue? It’s called progress, that’s what happens.
Using the law to purposely hold back benign technology is disturbing and the logic here is pretty embarrassing.
For the record, Cablevision wouldn’t “make” reruns absurd. They happen to be absurd and the technology would let people do something about it.
January 13th, 2009 at 10:18 am
I think there are two main reasons to hold off on any kind of collective pants-pooping for the time being.
The content providers just aren’t going to put up with a plan like this. They can and will insist on limitations, or simply threaten to break their licensing agreements with Cablevision.
Yes, storage scales well… but can you IMAGINE the capacity we’re talking about here? Let’s say one entire day’s worth of HD programming for one channel runs about 200 gigabytes. Now multiply that by 365, and we’re at 73 terabytes. Cablevision offers 60 HD channels right now, so that’s 4.4 petabytes per year. Then add another 300 or so SD channels, which is the bandwidth equivalent of another 30 HD channels. 6.6 petabytes per year. The cheapest storage you can get seems to be about $2/gigabyte, so we’re talking almost $15 million a year in additional operating costs (and that doesn’t include the additional bandwidth costs, nor the massive IT costs of running a practically Google-scale server farm).
January 13th, 2009 at 10:41 am
This could actually be a great boon to the industry if it is handled correctly. Imagine a time when all of the new shows, on all the networks, are downloaded into Cablevision at the beginning of the week and will stay available for that one week period (until the next big download). During that time people could watch any show they wanted, at any time they wanted. No more prime time, no more situations (like Monday nights) where you might have 3 shows on that you want to watch all at the same time.
Also, and this might be a real boon, it would be a lot easier and way more accurate way to know who is watching what show. Since each show is selected and “downloaded” to your home then the networks would have exact, down to the single digit, ratings of how well a show is doing. They would know exactly how many households are watching a show week-to-week. No more Neilson Box estimates of household viewing of shows. This would give exact numbers.
One way of making this work, and to also possibly be a benefit, would be to disallow/block fast forwarding of these shows (so viewers can’t skip commercials) and then allow/edit in different commercials for the shows over the period the show is available. Commercials can then be time sensitive to the day/time a customer watches the series and location sensitive to the city/state the view lives in. New commercials can be downloaded to Cablevision by the advertisers at any time and put into shows. With real time streaming this is entirely possible and would allow “direct” advertising to specific areas. Heck, with viewer tracking (since they would know which households download which shows), they would have even better ways to target households with specific commercials based on their taste in shows.
January 13th, 2009 at 11:52 am
They reason why the music industry doesn’t necessarily suffer the same problem is that there are still broadcast radio stations in every city nationwide. We’re not solely getting our music via iTunes and CDs just yet. Also let’s not forget satellite radio.
Imagine all radio going to a play-on-demand type setup, then we can correctly argue the point with this current mess and cable TV.
January 13th, 2009 at 11:57 am
why limit it to one week?
i fail to see how this is different than music. i’m sure clearchannel doesn’t buy multiple copies of the songs they play on all the radio stations throughout the country, but they still pay a royalty on every “spin”. as mallet said, a distribution network of this type would allow for extremely accurate accounting of just who is watching what. i agree that cablevision shouldn’t be able to simply gather all this content and make it available without paying the content providers anything additonal – but it shouldn’t be too difficult to track and account for royalties on it. that’s what needs to be worked out.
i don’t believe a vod model will work. i never use vod on my cable dvr service because i’m not interested in paying extra for each selection. i already pay over $100/month for my cable/internet. i want the netflix/internet model.
it’s potentially just a matter of determining the average cost of the service and charging that. the cable industry recorded revenues of $75.2 billion in 2007. the film industry (theatrical), recorded a record $9.62 billion in 2007. seems these numbers could be worked out. there were 65 million basic cable subscribers in 2007 – this is a bounty for everyone waiting to happen.
if my service goes up to $150, but now i have access to everything ever recorded (just like how for $18/month i have access to every film netflix carries), that’s a deal (of course, it would also save me $18/month since i probably wouldn’t need netflix). like all similar services, a small majority will overuse the service and a vast majority will underuse it to the distribution companies profit.
it’s inevitable that we’re headed for what we all as consumers want – the ability to watch whatever is available whenever we want. as ryan hinted, our current viewing environment is absurd – it’s simply a vestige of a lesser-capable technological period. there’s no requirement to have sweeps week, or once-a-week 1hr episodes or anything else dictated by the production and distribution limitations of the original media.
January 13th, 2009 at 11:58 am
The least draconian solution is also the most. Compulsory licensing.
January 13th, 2009 at 1:10 pm
Television is a dying medium of distribution and has been for quite some time. The biggest problem for screenwriters and other people who actually create content is that media companies fear changing a model that is currently quite profitable. What this Cablevision story illustrates is that the technology exists for entirely new distribution models but the conglomerates are too afraid to jump in because they’re making good money the way things are.
Companies like Apple and Netflix have bored holes in the current system which is why things have begun to change, but in order to accelerate the pace at which new and effective distribution models are established we need to bring the big dog in. The federal government is preparing to spend trillions (!) to keep the economy from going under (and hopefully to make the economy work better in the long run). Here’s the thing: economists know we have to spend a certain amount to get out of the recession, but one of the problems is figuring out how to spend that much in such a way that it creates jobs right now. Some hundreds of billions are going to spent on roads and bridges and school repairs, etc. But there are only a certain amount of so-called “shovel-ready” projects in this category. Well, I know John August has a couple of “shovel-ready” projects. One of them is called “The Remnants” and the other is called “Shazam!”
In the 30s, the WPA created the Federal Theater Project to create jobs and it ended up developing such talents as Arthur Miller and Orson Welles. By allocating a very small portion of the stimulus money for funding arts and entertainment, not only would you create jobs, but you’d force the media companies to come around to the idea of a better distribution model in order to effectively compete with the federal government which would provide high quality content to consumers practically for free. Plus, with the grim economic and environmental realities we will be facing for the foreseeable future, the public is going to need low cost “bread and circuses” to keep things running with a modicum of smoothness.
In short, I think it’s about time for a real American version of the BBC.
January 13th, 2009 at 1:48 pm
You’ve got the core facts of the case wrong and, your assertions regarding the feasibility of auditing notwithstanding, those facts have not been in dispute.
From the petitioner’s (CNN et al) certiorari brief:
“If 100,000 subscribers request the entire season of the hit show 24, Cablevision makes 100,000 identical copies of each episode of that series as it airs, and ‘assigns’ one copy of each episode to each requesting subscriber.”
From the 2nd Circuit Court holding:
“…the RS-DVR system, as designed, only makes transmissions to one subscriber using a copy made by that subscriber….”
and
“Using a remote control, the customer can record programming by selecting a program in advance from an on-screen guide, or by pressing the record button while viewing a given program. A customer cannot, however, record the earlier portion of the program once it has begun. To begin playback, the customer selects the show from an on-screen list of previously recorded programs.”
Accordingly, while your analysis may be interesting, it relates only to a system of your own conception, and has no relevance to the case at hand.
January 13th, 2009 at 1:52 pm
“@APR:
The expensive shows are expensive because it costs a lot of money to make them. I know that’s a tautology, but the cheaper version of The Sopranos doesn’t star James Gandolfini and isn’t written by David Chase. It’s not waste or bloat that makes them expensive…”
I assume this is directed at me (The buzzwords are all mine but I’m not APR, unless I have a personality disorder I’m unaware of). If so, you once again dodge the issue. Where are the numbers? Two of the reasons I’m interested specifically in the numbers for The Office are that it exists in at least three countries in comparable fashion and seems to be, production-wise, a fairly simple show: the mockumentary approach is antithetical to stunt-casting, the setting is largely confined to one location, there’s no need for extensive special effects or action set pieces. Scripted Television doesn’t get much more fundamental than this. Still, I strongly suspect the US version is vastly more expensive than either the original or the German adaptation.
So — assuming I’m right — why is that? Why doesn’t James Gandolfini star in The Sopranos if he doesn’t get $400,000 per episode? Obviously in the current production structure, there’s the studio market to consider. James Gandolfini or David Chase can point to other actors/writers: if HBO doesn’t pay them the big bucks, somebody else will. But if the production structure changes so that all studios pay smaller salaries to actors or writers, will Mr Gandolfini take up that hated accounting job (hypothetically speaking; I make no claim to Mr. Gandolfini’s feelings on the accounting profession)? Or will he grumble a bit and then continue acting because it allows him to make a living doing something he loves? Obviously, the “making a living” part marks a lower limit: if an actor cannot make ends meet in his chosen profession, he or she will eventually do something else. But since there are plenty of actors who make a living without ever starring in a high-profile series (or the salary involved; for a quick and dirty comparision, David Tennant got less than a quarter of James Gandolfini’s salary for the titular role on Doctor Who), the cut-off point is a lot lower than what Mr Gandolfini was actually getting. You may argue that Mr Gandolfini (or David Chase, for that matter) is worth more than David Tennant, but that market price is driven by the audience. If The Sopranos sells a gazillion HBO subscriptions and DVD sets, he may be worth more. If, in an age of an increasingly fragmented media landscape, The Sopranos doesn’t, he’s worth less — and, if this translates in a drop of the market price for acting of his caliber, the show becomes less expensive. My point is: if you want to argue that these shows need to be as expensive as they are, you need to demonstrate that their makers by and large would turn their back on their profession if they didn’t receive the salaries they do.
Incidently, this kind of incestuous reasoning is pervasive in management positions: how do managers justify their excessive salaries and bonus payments? Well, everybody else gets them, so why shouldn’t they. But, as Stephen Jarislowsky once noted, most CEOs would work just as hard for a comparatively miniscule $250,000 a year because they’re primarily in it for the power. Anything above that is just a nice add-on.
January 13th, 2009 at 2:04 pm
Totally free and unfettered choice looks good on paper, and it will look even better in zeroes and ones. But imagine how almost instant access to Everything will affect the industry? We will have traded one tyranny (Big Studios) for another (the whims and tastes of the community). What are the true costs of YouTubing and monetizing the world’s professional video and film library? What will happen to genuine variety . . . and quality? Ironically, we may be creating a future with less of both. I agree with Nick (above): “Collective pants-pooping” is probably a long way off. Cablevision will not get everything they want; the trick is going to be expanding the juicy part of the pie and making sure the slices and bites get passed down the food chain. I suggest free-pooping for awhile, to see what kind of a hassle total-freedom-to-crap is. If you want quality water/sewer services, you’re going to have to make some choices, and pay for them about every month.
January 13th, 2009 at 2:07 pm
Is not the problem you describe the same one faced by anyone who creates a product that can be resold as used or can be rented? Look at authors who get royalties only on the first sale of a book, or a car maker who only receives profit on the sale of new car, or, for that matter, the sculpter who only gets paid from proceeds from the first sale of a piece? Then there are libraries: buy one copy-lend many times with the author only getting proceeds on the initial sale. What you describe as frightening is completely normal business for thousands of manufacturers, artisans, and tradespeople who depend on making profit only on the first sale.
January 13th, 2009 at 2:13 pm
It’s ironic how the most arrogant posters here are the ones who are unable to address John’s argument.
Ryan Holiday — you take the cake for missing the point completely. Nowhere in John’s post does he come close to suggesting he wants to use “the law to purposely hold back benign technology.”
DVR and other storage options exist. The technology is there and no one is trying to hold it back.
What John’s talking about here is a cable company acting as a distributor of on demand digital content without an agreement with the content provider to allow to do this. Cablevision can’t simply exploit content in this manner without specific language in their contract with companies like HBO and Showtime. You as an individual wouldn’t be allowed to charge people to watch movies and tv shows you recorded on your personal dvr. How is what Cablevision’s doing any different?
Also, how are re-runs absurd? Just curious.
January 13th, 2009 at 2:22 pm
@Ryan Holiday:
I haven’t seen anyone arguing against technology. Several commenters have pointed out ways that the technology can let viewers get what they want while letting creators get paid.
@Henry:
The radio analogy is helpful, but not a perfect match. I get frustrated when people try to simplify it down to copying a book at Kinko’s, because the type of copying happening here is very different.
@Christopher:
I’m suggesting there’s a price point — under a dollar, maybe — at which true VOD becomes very appealing. Again, it has to be low enough that it’s a viable alternative to piracy.
@Anonymous (31):
CNN wants to make the point that Cablevision is making 100,000 copies — that is, a crime multiplied one hundred thousand times. But I haven’t seen anything from Cablevision promising that they would stick to this inefficient one-copy-per-requester model, and as you note, it’s nearly impossible to audit.
Supreme Court decisions are far-reaching, which is why it’s important to consider not only what the petitioners are seeking but what impact a decision could have.
So call this conjecture, but the system I’m describing for Cablevision is achievable. Achievable things can happen much more quickly than we expect.
@Markus:
Yes, I meant you, not APR. I will fix that.
Well, why are NFL stars so well paid? Shouldn’t they just play for the love of the game.
I’m not dodging your question, but I’m not going to waste paragraphs trying to explain and/or justify why shows cost what they do, or whether Gandolfini is worth his salary. Because it’s easy to say it could cost less. Of course it could. But it wouldn’t be same.
Every few years, a newcomer tries to shake things up and force fiscal responsibility (or some other bit of obviousness) on Hollywood, only to discover that it’s a lot more complicated than expected. But I invite you to try to do the same.
January 13th, 2009 at 2:30 pm
There is a digital subscriber channel (Film1) in the Netherlands that uses a similar construction.
The channel broadcasts feature films on four streams, 24/7/365. Every month, the list of films broadcast on the channel is updated. Subscribers pay a fixed amount (14.95 euros per month) to be able to view all four channels. However, if the film you want to see is not being shown when you want, you can also access their video-on-demand feature and request only the films they are showing that month, for no additional costs. So a film that was in rotation last month, but not this month, cannot be requested through VOD.
January 13th, 2009 at 3:00 pm
Thanks for the update, John. Very interesting case with implications I hadn’t considered.
I think Sergio had a good point about cheap storage, though. Keep in mind that consumers aren’t going to want access to ALL programs, rather only the ones they’re interested in. Sure, there may be a show or special here or there they’d like to see, but generally, they’re going to want access to only a small percentage (less than 5%?) of everything out there. After all, there are only so many hours in the day. Cheap storage in a decade will give them access to all the programming they could conceivably need.
Of course, new technolgies such as 3D TV may eat up that storage and keep the medium safe, but a day will come that every consumer will be able to store any show they could ever want at home.
January 13th, 2009 at 3:20 pm
I think Markus’s argument is that some vague sort of collusion is needed in Hollywood to cut budgets to a number that would make him, personally, happier.
January 13th, 2009 at 3:42 pm
John, you are simply incorrect in all your points in response. If you had read the petitioner’s brief, you’d know they are simply describing the system, not claiming it a crime multiplied by 100,000, as you say.
Regardless, whatever their point, it’s irrelevant to the discussion at hand. What is relevant is that your description of the system is incorrect, and there is no dispute among the parties regarding the facts. The only disputes pertain to matters of law. (And that’s why the District Court proceeding was for summary judgment — something that can only occur when law, rather than facts, are in dispute.)
As for whether Cablevision would stick to an inefficient system, that’s also irrelevant. Again, if you had read any of the relevant materials in this case (the briefs of the various parties, the District Court holding, the 2nd Circuit Holding) you’d know that these have been very fact-specific proceedings.
If the courts find a system that makes individual copies to be non-infringing, that says absolutely nothing as to the status of a system along the lines you posit, making shared copies.
If you read the 2nd Circuit holding you will see that it is simply not the case that the holding could inadvertantly extend to the very different system you imagine. If the Supreme Court hears the case, neither will their holding inadvertantly extend to completely different systems. Agree with them or not, the justices are hardly a group of fools. The Court is certain to tailor the decision quite deliberately.
That the system you imagine is achievable is irrelevant. Cases get decided based on the facts of what parties actually do, not based upon completely different facts that others concoct, regardless of whether those concocted facts are achievable.
Your argument is analogous to arguing that if a court finds killing in self-defense to be legal, then it is tantamount to finding that premeditated murder is also legal, because premeditated murder is achievable, and a person acquitted of murder on the basis of self-defense might later choose to murder with malice aforethought! By your argument, the court should proactively declare killing in self-defense to be criminal — regardless of what the law actually says. In the real world, however, self-defense is an affirmative defense to murder, and if self-defense were proven, the court would acquit the defendant. If the defendant should later choose to murder with malice aforethought, we would expect that completely separate matter to be separately adjudicated, at a later time.
I fear that the reality is that your analysis and conclusions are entirely a product of your lack of familiarity with the actual facts of this case. So it remains the case that while your analysis of the system you imagine may be interesting, it is wholly irrelevant to the case before the Court.
Finally, I neglected to mention that, in your initial posting, you were fundamentally mistaken in your suggestion as to what the Court should do. The Court should impartially interpret and apply the law. It should not adopt a specific conclusion based on an analysis of the impacts to any given industry, as you suggest. That would be policy-making. Courts are not supposed to be policy-making bodies. Policy-making is the domain of Congress.
The Court’s only role is to interpret and apply the law. It should engage in impact analysis only if the law as written by Congress requires such analysis. Given that the District and Circuit Courts reached opposite conclusions, but neither undertook an impact analysis, I think we can safely conclude that the law does not require an impact analysis in this case, nor is such appropriate.
If the Court’s findings ultimately result in a conclusion that Congress finds problematic, then Congress is free to act to change the law to address that perceived problem. It would be wholly inappropriate for the Court to usurp that authority.
January 13th, 2009 at 5:30 pm
@Anonymous (31 and 40):
It’s really time to get your own blog, and sign your own name. Unless you work for one of the involved parties, which based on your IP address, seems very likely.
January 13th, 2009 at 5:38 pm
Every time content is published/transmitted to the consumer a licensing fee should be due. The modality of publication (broadcast, cable, hard copy, internet, cell phone, etc) ultimately makes no difference.
The search for a free (=stolen) meal continues…
January 13th, 2009 at 5:47 pm
Perhaps so, but that wouldn’t eliminate the need to correct the misinformation you’ve provided. If I erred in too thoroughly refuting what now appear to have become willful misconceptions (given you seem unwilling to let the facts of the case, or our legal system, get in the way of your argument), I expect that most readers will forgive me.
January 13th, 2009 at 6:32 pm
To be clear, my response in 43 was to the original version of your comment in 41, which read simply: “It’s really time to get your own blog, and sign your own name.”
January 13th, 2009 at 10:28 pm
@Anonymous:
Does posting comments on an entertainment blog count toward your billable hours? Because if so, I might just have to bite the bullet and go to law school.
(Note that that was an ironic statement and not meant to denote or imply an intention on my behalf to pursue a Juris Doctorate now or at any future date.)
January 14th, 2009 at 3:26 am
“@Markus:
Yes, I meant you, not APR. I will fix that.”
No problem, I just wasn’t quite sure you’d already read my comment when I replied.
“Well, why are NFL stars so well paid? Shouldn’t they just play for the love of the game.”
I think we have a serious miscommunication here. I am not making some sort of ethical claim that writers, actors or NFL players shouldn’t get the money they do. I’m disputing your factual claim that they couldn’t work for anything less without loss of quality. That’s a vital difference: if the current market sustains highly-paid actors and writers, fine. But if it no longer does, nothing changes for the audience unless the market price drops so low that actors and writers simply get out of business. The limited data I have suggests there is significant breathing space before that lower limit is reached. That is my claim, and you have done nothing to address that. In fact, as near as I can tell you’re the one making an ethical claim, namely that actors and writers shouldn’t work for less because… well, just because. Should market considerations only apply to Hollywood when they’re in your favour?
January 14th, 2009 at 4:32 am
@Nick
Does posting comments on an entertainment blog count toward your billable hours?
Perhaps it would if I were an attorney, and I were hired to represent someone. I’ll take that as a compliment regarding my understanding of the case, but in fact, I am neither. ;) You don’t need to be an attorney to correctly understand the issues in this case. But you do need to do a little homework to know the actual facts of the case, the law, and how the courts have applied the law to the facts, to this point.
It’s also worth noting that unlike many others here, I have not advocated for any particular outcome. I have merely attempted to correct blatant errors regarding the facts of the case, distinguish the relevant from the irrelevant (as a matter of law, regarding the actual case at hand), and correct misconceptions regarding how our legal system functions to resolve such cases.
Not claiming I’m impartial — none of us are. We all have our personal biases, if nothing else then as consumers who might feel they will benefit, or as producers who might feel threatened. However, I’ve done my best (and I think pretty well) to stick to the facts (of the case, and the law), rather than arguing the merits. And no need to take my word regarding the facts, if you don’t trust it. You can find the facts of the case, and understand how the courts actually handle such cases, from the published court documents I’ve mentioned, albeit in a much less compact form.
Feel free to reach whatever conclusion you choose. But don’t you want to form your opinions based on accurate, rather than inaccurate, information?
January 14th, 2009 at 5:00 am
I can’t believe no one has mentioned this yet:
http://en.wikipedia.org/wiki/BBC_iPlayer
There are UK commercial tv alternatives. Programmes are usually available for a week after broadcast though it stacks some series for their whole broadcast duration. It is available through the television on some cable services and through games consoles so can be watched on television. Includes some movies and US tv. Also includes radio. Has revolutioned UK tv basically and no one feels threatened — other than ISPs who’re finding themselves having to deal with data bottlenecks. Some talk of them offering premium deals for heavy users.
January 14th, 2009 at 9:03 am
Seems your main concern here, John, is the business model — the need for creative people to get paid, to have an ecosystem that will support those involved.
So, if Comcast gets permission to do what it’s proposing but there’s also a way for everyone to get paid fairly, why can’t it work? You’re right that residuals will eventually dry up — the technology will ultimately make everything available on-demand, all the time, to multiple devices. So, shouldn’t the issue be compensation rather than use of the technology? (And wouldn’t the market solve this — because folks won’t make the content Comcast needs unless they get compensated?)
January 14th, 2009 at 10:38 am
Personally, I’m still confused as to how I pay for cable/satellite and still have to see commercials. That’s how it works for movie channels, why doesn’t it apply to other cable channels? Over the air tv it makes sense. But, once it’s a subscriber channel, it just seems like double dipping and not so palatable. (Yes I realize this post is slightly off topic)
January 14th, 2009 at 11:09 am
@Markus Hirsch:
Yes. Everyone could get paid less. And in systems like UK television were there is less money overall, they do get paid less. The UK can make some very good television at lower budgets, but they can’t make The Sopranos. They can’t make 22-episode seasons of 30 Rock. There is a category of television which has proved very popular in the US and other markets which could not exist at lower budgets supported by ancillary sales.
@Stu:
Thanks for the link. Worth noting that as a public service broadcaster, the BBC has different goals and challenges than American TV.
@Dorian:
Yeah, I think I’ve made it very clear that I’m not opposed to a system like Comcast’s existing — more legal options are always good — just that money needs to be paid to copyright holders.
@Paul Ramos:
How much would you pay to have all your cable channels commercial-free? If you’d be willing to pay a couple hundred a month, there might be a business model. But for now, there’s not.
January 14th, 2009 at 1:27 pm
@ Anonymous 31,
Just remember that a brief is an argument, not an impartial statement of facts. This is not to say that the facts as they appear in the brief are not accurate, but it is to say that those facts do not tell the whole story.
And then there’s this: While I’m sure the system currently works as stated in the 2nd Circuit decision, depending on the legal reasoning that the Court uses in it’s decision, the decision could open the door for the situation that John imagines, or something similar. Whether this is good for society or bad for society (or good or bad for entertainment companies or for artists) is a policy question. Wherever you come down on that issue, the fact remains that we are at a major crossroads. Our system of copyright as we know it is necessarily undergoing a major transformation as a result of the changes that technology has brought. At moments like this, it is essential that we think critically about the implications of our decisions and craft a system that achieves our policy goals.
Copyright originally came about as a means of compensating those who create original works of authorship. It was a response to the development of the printing press, which made it possible to easily copy works and distribute them for profit. Copyright law was designed to make sure that those who created the work to be compensated. In other words, it prevented printing press owners from taking someone else’s work and making butt-loads of money off of it without compensating the “author” (Note: In copyright law, the author is the “owner” of the copyright. In film and TV that’s usual if not always the studio or network who, thanks to the WGA, paid the actual author for the copyright they control).
Modern technology challenges our existing system of copyright and we’ve got to decide what a new system should look like. In music (which is inexpensive to produce), the technological changes have made it possible for musicians who may not have been the kind of artist that would capture a mass pop audience and be attractive to major labels to build careers over time. They can burn their own CDs, build an audience through live performances and internet word of mouth and downloads and etc. That’s probably good for artists, and record labels are still in business, having found new ways to do what they do best. Major labels are best at selling big acts that make tons of money and they have started to do 360 deals so that they get a piece of all an artist’s revenue streams.
It’s hard to say how the film industry will respond to the changing landscape, but the one thing that’s certain is that the music model is not a good fit. It’s expensive to produce films and TV, so denying studios and networks the right to fully exploit their copyright will have a different impact in the film industry than it has in the music industry.
I do think that however this case turns out, studios and networks will represent their own interests well in their future negotiations with Cablevision and others — that is, unless the Court’s decision so radically changes copyright law that they cannot.
It’s important to remember that the law evolves over time and is built on precedent, so a decision that seems innocuous now can have implications for the future development of the law that are not innocuous at all. Some cases have implications that reach far beyond the specific facts of that case. The reason this case was brought before the Court, and the reason the Court agreed to hear it is that it understands that this is such a case. The Court’s job is to think about how this decision will impact society. If we as a society want to see the kinds of films and TV programs that we have today, our laws must support their creation. Yes, there are many countries that have film and TV industries that don’t spend the kind of money we do in America (and in many cases, these industries are subsidized by the government). We in the U.S. have taken a different path and so our answers at this juncture cannot be found by looking to, say, the British model. Instead, the Court must look at our model and figure out how best to adapt our laws so that there is incentive to create and distribute the work in these changing times.
January 14th, 2009 at 2:54 pm
This discussion also brings up the issue of the effectiveness of copyright and patent law in general. A growing number of critics from economist Dean Baker to “Against Intellectual Monopoly” authors Michele Bodrin and David K. Levine have questioned the efficacy of modern intellectual property law in serving the interests of both the engineers, scientists, artists and entertainers that are behind the innovations and creations protected by copyrights and patents and society at large. It seems likely that technology such as that which we are discussing here will continue to prod the world in the direction of taking such arguments seriously.
January 14th, 2009 at 4:16 pm
@Paula
Briefs are certainly arguments. However, I cited them as evidence of that which was clearly agreed by the parties, and not at argument.
Read the 2nd Circuit holding (since that’s the currently operative holding). You will see that there is simply no possibility that the holding could be extended to the very different system John described in his original posting. The basis for the decision is totally dependent on the fact that a separate copy is made for each user, just as with conventional DVRs.
As for this being a crossroads — perhaps. But let us remember that the question here is not, as it was originally characterized, about the transition of DVR from a device to a service. DVR as offered by cable companies is already delivered as a service. The service happens to require a particular piece of equipment (typically rented from the cable company) to be present in your home. Fundamentally, this is no different from your HBO subscription, which as delivered via modern cable, also requires a particular piece of equipment (typically rented from the cable company) to be present in your home.
The transition pertains only to the location of the equipment required to deliver the service. In one case, it’s located in your home. In the other, it is located in a remote facility. I’d guess that most people would not view the location of the equipment as a defining characteristic. That is, as we move the DVR box farther and farther away from the TV, with a longer and longer cable, at what point does its fundamental nature change, such that we’re suddenly faced with a crossroads? Is it when the DVR moves into a different room from the TV? Is it when the DVR moves outside of the house? Is it when it moves inside a cable facility?
And if moving the DVR away from the TV crosses a threshold, does the same not occur when an individual attaches a sling box to their DVR, and plays back their recordings from a hotel room half way across the country?
In fact, it’s not at all clear to me that this represents a crossroads, since the reality is not the dramatic change in functionality John imagined, but rather just another way of delivering the same basic DVR functionality that people get today with a special piece of equipment in their home.
Let’s also remember that even when major changes are faced, the only thing that can be assured is that there will be widespread predictions of doom. Doom actually occurring is much less frequent. The Betamax case is an excellent example of such a change that spawned similar predictions of doom for the film and television industry, yet went on to have the exact opposite effect, vastly increasing revenues into that industry. Conventional, in-home DVRs are another: where commercial-skipping was predicted to spell doom, but where the actual impact has been far more muted. In both case, changes have occurred to adapt to the new paradigm, and the industry has proceeded productively.
(In fact, the Betamax example is instructive of a point that James Boyle of Duke University makes in The Public Domain (see thepublicdomain.org). Often, new technologies come along that actually vastly increase the ability of content creators to profit from their works, and they typically respond by wanting to accept all of the advantages, but none of the disadvantages, that come with new technology — and they will absolutely push for new laws to prohibit the disadvantages, and complain of how they are being wronged by them, despite the fact that, on balance, they are far better off.)
Also note that the Supreme Court has not yet agreed to hear this case. What it did earlier this week was to ask the Solicitor General to offer the government’s opinion as to whether the case should be heard.
January 14th, 2009 at 5:31 pm
It seems the liklihood of the Supreme Court taking this case is pretty slim. They hear less than a 150 cases (sometimes much less) out of 7,500 requests each term. It takes the agreement of four Justices to take a case. It looks like Roberts and Alito may be recusing themselves from this case (the reasons for which are not disclosed). That means that 4 out of 7 have to agree to take the case.
January 14th, 2009 at 7:08 pm
Roberts and Alito recused themselves because they own stock in the petitioners. The odds for this case being granted cert are very different than for the average case, and the fact that the Court asked the Solicitor General to weigh in clearly demonstrates that.
January 14th, 2009 at 7:22 pm
Sorry didn’t have time to read every response so I may be repeating something already said:
How is this different than HBO’s On Demand service where they allow their movies and series to be seen at any time after their initial broadcast? I watched the whole season 5 of The Wire in one weekend thanks to this service. It is a time limited service though with expiration dates on the shows.
January 14th, 2009 at 8:32 pm
It differs from HBO on Demand in the same way that your ReplayTV differs from HBO on Demand.
January 15th, 2009 at 8:35 am
A few points from reading the opinion:
The issue that is being presented to the Supreme Court for review is fairly narrow: is Cablevision liable for direct infringement of the copyrights. A bit of legal background: you can infringe a copyright both directly or indirectly. Direct infringement is designed to hold infringers liable for their own acts — ie, for the unlicensed copy you made. Contributory infringement is designed to hold infringers liable for the direct infringement of others, which they contributed to or induced.
The facts of the Cablevision case — and both Supreme Court cases and lower court cases are limited to the facts of the case at hand — is pretty squarely a contributory infringement case. The appeals court opinion makes clear that Cablevision’s servers only copy a program at the direction of the user; an individual copy is maintained for each user; and, that copy can only be watched by that user. (which is the opposite of John’s 30 Rock scenerio). If the user has a fair use right to make such a copy, then Cablevision is not liable for copyright infringement (because no one has directly infringed the copyright). If the user does not, then Cablevision likely contributes to their direct infringement by providing the RS-DVR service.
What Cablevision is doing is no different than what TIVO is doing. They are merely facilitating the user in making a permissible copy for later viewing. The real trouble is in allowing the user to maintain that copy indefintely and that should be the center of the debate. Is it still “time-shifting” if you keep the copy after you watch it — probably not. That is where the companies should be directing their energy: and not just at Cablevision, but TIVO, DVRs, etc.
January 15th, 2009 at 9:56 am
@John
True, but as I mentioned vaguely, all of the other main uk commercial stations have similar services of one form or another:
http://www.itv.com/catchup/ http://www.channel4.com/4od/index.html http://demand.five.tv/Home.aspx
Also there are demand services like:
http://allyours.virginmedia.com/websales/service.do?id=1 http://www.sky.com/portal/site/skycom/skyproducts/skytv/skyplus http://www.topuptv.com/
Some of which are admittedly closer to Tivo, but still offer very comprehensive tv on demand services. Hope that’s of interest.
January 15th, 2009 at 12:09 pm
It’s worth noting with the British services that ‘catch-up’ television can’t always be fast forwarded at the same speed as regular shows recorded on digital recorders, which means that you at least get sight of commercials when watching catch-up TV, making it at least vaguely more appealing to sponsors. It’s also done with an agreement from the production companies – having the shows offered on catch-up TV for a limited period will be part of the contract and sale price for the show (and is included in artists’ contracts for BBC created programming).
And the TV On Demand is for a limited number of shows, not everything that’s been shown, and all with a time stamp, where the company offering the service has made some payment for those shows, which is then passed on to the subscriber.
All of these methods allow money to be properly allocated to the content’s rights holders.
January 16th, 2009 at 11:37 pm
“The UK can make some very good television at lower budgets, but [...] There is a category of television which has proved very popular in the US and other markets which could not exist at lower budgets supported by ancillary sales.”
But of course. That is why your orginal examples consisted of a show you explicitly claimed expensive for its quality writing and acting (something those poor Brits with their lower budgets apparently can’t afford) and a straight-forward remake of a British production (something those poor Brits with their lower budgets… hey, wait a second!).
You know, you could have just right at the beginning that you’re unwilling to discuss the merits of your argument.
January 23rd, 2009 at 9:53 am
@ Markus 46
Your claim that actors or NFL stars couldn’t/wouldn’t work for less if the overall film/NFL economy were to drop is completely untrue.
Surely, if the average NFL salary dropped from $770,000 to $693,000, there are some people who would choose not to enter the NFL and instead take on some other career – perhaps professional basketball or baseball, perhaps coaching college football, perhaps being an oil-well firefighter. Even if it’s just a few of the 1000 or so players, the moment this happens, overall quality suffers.
Now there’s no way to prove the direct effect of a small drop in salaries, but this is as fundamental as microeconomics gets.
January 26th, 2009 at 5:38 pm
David @ 63
Your argument ignores practical economic relationships.
Markus’s basic argument is that the supply of NFL players and entertainment talent (writers, actors, etc.) is, in economic terms, highly inelastic. That is, in practice, at current compensation levels, the reduction in supply of players/talent would be negligible, absent very, very large reductions in compensation.
There are certainly strong qualitative reasons to believe this could be true: in both areas, many people are likely to be motivated less by money than by fame, prestige and love of the profession. What’s more, in both professions, likely competing employment options typically pay far, far less.
And certainly in the case of the NFL, there is strong empirical evidence to support his conclusion: namely, the fact that the NFL has negotiated a salary cap. This demonstrates the inelasticity of the chain of consumer (fan) interest/demand -> quality of play -> supply of talent -> player salaries.
That is, if changes in player salaries translated to a significant change in the supply of talent, that caused a significant change in the quality of play, that caused a significant change in consumer demand, the NFL would be motivated to pay higher salaries, rather than to cap them. It’s only because this chain is highly inelastic that the NFL has a motivation to impose a cap.
Or to explain it differently, high NFL player salaries aren’t driven by competing with other professions to attract talent to the NFL. They are driven by competition among the teams for specific players, predominantly at the top. Teams can agree to compete against each other at lower salary levels only because it doesn’t significantly affect the size of the talent pool, or the ultimate quality of play.
Markus’s argument is that the same is essentially true of the talent pool for entertainment: salaries could be reduced significantly without significantly impacting the talent pool, the quality of the work, or consumer’s enjoyment of such. I expect most people would conceptually agree this is at least plausible. There may or may not be data out there to prove or disprove the contention, but a theoretical argument that quality must decline by some (possibly negligible) delta certainly doesn’t disprove it.
February 3rd, 2009 at 10:40 am
I call “bunk” on this article. New digital distribution methods are going to give longer life to “reruns” and more value to advertisers than ever before. Instead of an advertiser paying for an ad slot on a rerun, they are going to be inserting their advertisement into the VOD/DVR stream. The demographic data associated with each account will result in better targeting of advertisements as well. For example, somebody who often streams Disney programs will get mom related advertisements even during a series like 24, whereas a home with no kids can get completely different ads. Less cost per entry for ads, better targeting, and an infinite content shelflife makes for a very profitable industry.
For example, before Hulu what was really happening with 90% of the shows on there? Thinks like McGuyver were only thriving (if you can call it that), in DVD sales. Now I tend to go back and watch things that haven’t been on TV for years.
Another good example is the Alfred Hitchcock Hour. I’ve been watching that constantly on Hulu. How were creators monetizing that before? How were they introducing the writing and suspense of Hitchcock to new viewers? Answer is that they really weren’t. So essentially now that show will be on for another 50 years or more of “reruns”, just in streaming format with new paying advertisements.
I’d say you better find a way to change the monetization model on TV very quickly to adapt. I know many people now who are dropping TV all together for Hulu/Netflix. I know that’s how I watch 90% of my shows, or Over the Air HD. I don’t pay for cable, it’s ridiculously expensive, and I haven’t for almost 3 years now. But I would pay for 5-10 stations of my choosing, and the Al-La-Carte model with an unlimited DVR feature would be exactly what would motivate me to come back to cable to pay for TV again.