Tuesday, September 24, 2002

Movie industries collude

Intertainer wants to deliver movies to people through the Internet. It will fail, because the Internet is a lousy distribution channel for movies, but in the mean time their CEO is accusing the movie studios of collusion because they refuse to license him their content.

This whole thing is weird. Firstly, one of the promises of the Internet was that it made publication easier, allowing content to get directly to end-users with fewer intermediaries. Intertainer seems to be complaining because studios might sell their product directly to end-users and cut out the middleman--but in my book that sounds good for consumers.

Secondly, an integrated content production and distribution company has every economic incentive to distribute other peoples content, or license out its own. People worry about media consolidation, but this sort of discrimination is not a good reason to.

So why are studios slow to license? Part of the reason is to prevent a distribution industry that forces the upstream content owners to compete. In the CARP process we saw the government step in to write and enforce the collusive agreement between music content owners (RIAA), but so far that has not happened for movies. And while studios may have enough discipline to refrain from price competition, they may not be able avoid non-price competition so long as Digital Restrictions Management systems remain undetermined.

For example, movie studios might want to keep their hits tightly locked up, but care less about flops. Even if they charge the same price for every movie, they might make the flop more attractive by loosening up whatever Digital Restrictions Management scheme they tie it up with, such as regional encoding, for example. Without a baseline Restrictions regime worked out in collusion and enforced throughout all digital distribution channels, the MPAA will not release content--leery of possible competition down the line.

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