Downloading is not killing Hollywood.

The numbers were still coming in at press time, but 2004 looks like another highlight year for the American entertainment industry. U.S. box office hit a record US$9.4 billion, up $200 million from the previous year. North American DVD shipments were up 55% heading into fourth quarter 2004 (year-over-year, according to the non-profit Digital Entertainment Group). And while 2003 saw DVD retail sales jump to $11.6 billion – a 33% increase over the previous year – 2004 was on track to break all records.

Faced with those sorts of numbers, it’s hard to back the claim that downloading is hurting the industry. An argument might be made that downloading hurts potential income, but potential income is amorphous. It’s like saying you should have listened to your mother when she told you to be a doctor rather than a doc-maker. You might be making more, you might not.

And if there is short-term pain, it’s offset by long-term gain. Downloading has upsides. First, it’s training the next generation to go to their computer for content, which is exactly what the industry should want. The future is broadband, vod and a host of other services that make concerns like retail space, warehousing and DVD pressing obsolete. In this issue, we cover the debate over next-gen DVDs, but to be honest it’s like arguing about what brand of gin should be served on the Titanic. In less than a decade, it won’t make a difference. High capacity DVDs will only be used for home archiving.

Secondly, and far more importantly, downloading differentiates the cost of content and the cost of the medium in the mind of the consumer. Consider that for a minute. Until now, consumers have placed value on ‘the album’, ‘the CD’, ‘the DVD’ – the physical manifestation of the intellectual property. Downloading shifts value in the consumers’ mind to the creativity itself. What is the value of Robert Greenwald’s Outfoxed to me? What is the value of Catwoman? Consider what that means for doc-makers, whose audience (I believe) tends to be better educated and more affluent – just the people who will understand the value of paying for content they can access without having it filtered through a programming exec’s mandate.

Of course, there’s a caveat. The test is whether or not the market will accurately value properties. The music industry, as it has for the last decade, totally misunderstood its role in the new order. You can download your favorite CDs from a number of sites now, but you only save 10% to 20% by doing so. Consumers historically allowed for the cost of the medium – they had no choice – but they won’t continue to pay when they have to supply the medium themselves (either hard drive or disk). If the tv and feature industries find the market value of their intellectual property, the market will support it. It may be an alarmingly small number at first, but it will be offset by the sheer size of the market. Hopefully, the music industry will serve as cautionary tale and not role model. In the meantime, try to think about potential revenue lost through downloading as non-specific marketing expenditures.

Besides, there’s no point whinging about downloading anyway: lawsuits won’t work long term, and anti-piracy devices get cracked within weeks of hitting the market. At a certain point, efforts at manhandling the future begin to echo the complaints of lamp lighters who worried that electricity was driving them out of business. Better to look for light bulbs than curse the darkness.

Brendan Christie

Editor