In the last ten years "business as usual" has been anything but. Industries have changed and market dominators have tumbled. At the core of this change has been the Internet.

It seems as though every industry has had to adapt to a new way of doing business. From bookstores to Wall Street brokers, businesses have changed dramatically due to the adoption of the Internet. Yet, these changes have not always been embraced.

When Amazon.com first launched its website, people laughed. The idea of selling books online would never catch on...or so people thought, especially bookstore owners. I guarantee the bookstore owners, both big and small, are no longer laughing.

What should be readily apparent is our industry is next. The Motion Picture Association of America (MPAA) essentially shouted this fact from the rooftops just a couple of months ago with the decision to ban screener copies of films under awards consideration. Despite the fact that piracy is copyright infringement and a federal offense, the MPAA's action led to an outcry from members of the Academy and many other industry organizations. Ultimately, a lawsuit filed by smaller production companies has, at this writing, succeeded in stopping the ban.

Inevitably, technology brings changes, but instead of banding together and attempting to embrace this change, we have somehow resorted to suing each other. We, as an industry, should be watching and learning from the Recording Industry Association of America (RIAA), as the music industry has been the latest industry to be changed by the Internet. The "music revolution," as it's been called, was initiated by the growing popularity of peer-to-peer (P2P) networks. Napster was the first of these networks, and while its progeny may not have achieved the same level of brand recognition, they continue to refine its piracy-enabling model of file sharing.

On September 8, 2003 the RIAA filed lawsuits against 261 individuals who were using P2P networks. Given that there are roughly 60,000,000 individuals using P2P networks at any given time, it should be obvious to anyone, except possibly a lawyer, that lawsuits are not going to solve the problem.

Even as I'm writing this article, the legal landscape has changed. Recently, the U.S. Court of Appeals for the District of Columbia overturned a lower court ruling that required Verizon Communications to turn over the names of its P2P users. The latest ruling is a huge blow to the RIAA lawsuit campaign and further demonstrates that lawsuits are not the solution.

So, how can we combat piracy? Whether you look to black-market DVD sales on a downtown street or people illegally sharing copyrighted files on P2P networks, piracy is very real. In fact, according to New York Magazine, our industry lost $3.5 billion last year. The people pirating movies aren't just the stereotypical street thugs, but industry "insiders" and even students sneaking camcorders into theaters, as well.

One thing to bear in mind: piracy has been around far longer than our current technology has. Well before P2P networks, before the Internet and before computers were commonplace, pirated movies and bootlegged music circulated throughout the world. The piracy problem is not technological. The piracy problem is behavioral. I think the solution is both technological and behavioral.

First, let me emphatically comment: I do not believe it is possible to protect digital content. Period. Some may call this point of view pessimistic; I consider it simple pragmatism. The admittedly brief history of this technology suggests that every mechanism used to protect digital content can and will be broken. If you choose to accept this belief, then you implicitly understand that we need to alter our production and distribution process. Ultimately, the entire business model for entertainment will have to change.

Other industries have been forced to deal with the Information Age; we haven't. We are lucky. Since our medium of moving pictures consumes a lot of "digital space," the material can't be pushed around the Internet quickly. However, this is rapidly changing. Jack Valenti, President of the MPAA, estimates in three years people will be commonly downloading movies.

When a person accesses the Internet, the access can occur at different speeds. The higher the speed, the faster a person can move data. Since most people don't have a Broadband, or high speed, Internet connection, the piracy of movies and television shows has not been of great concern. However, as more people obtain broadband connections, and as those connections become faster, the threat of motion picture piracy will grow exponentially.

In addition to the Internet, Digital Video Recorders (DVRs) are beginning to reach critical mass. DVRs are much like digital VCRs; the most well-known is TiVo. Since they are digital, the features of the systems are more advanced. The most prominent feature allows viewers to easily skip through commercials. According to James Marsh, a Wall Street analyst, if only 15% of viewers use a DVR and they skip 60% of the commercials, there will be a $6.6 billion drop in ad revenue by 2006. If you think our budgets are small now, they will most likely be even smaller in two years.

Essentially, our medium has given us a "stay of execution." As producers it is our responsibility to embrace and understand this change, so we can continue to bring our visions to life. Whether we like it or not, P2P networks and DVR technologies will change both production and distribution, and a lot sooner than you think.

The business models for television and movie production vary. Television shows are distributed for free, as they are supported by ad revenue through commercial breaks. There are also subscription services like HBO and Showtime, which distribute programming for a monthly service fee. Movies are supported through theatrical release, pay-per-view and VHS/DVD rentals and sales. There are a number of hurdles for us to overcome in each outlet, but any solution will have to be effective for all of them.

The biggest hurdle I foresee is people are used to viewing entertainment for free. Just as people are used to listening to music for free on the radio, they are accustomed to viewing programming on television. We will therefore face the same mindset that has brought mayhem to the music industry.

The solution is to integrate advertising within our content. Sponsorships and product placement are our advantage over music. Unless every song were to contain something like "...I was sitting around drinking my [insert drink of choice here]...", I don't see how else the music industry can incorporate advertising. We have already seen a growth in sponsorships and product placement and I think this trend will continue.

Through the use of existing technologies, we can actually verify when an advertisement has been viewed. I refer to this process as "Verified Viewing." The advertising integration process would require two steps. The first step would require the physical integration of a product into a scene, for example having a character driving a certain brand of vehicle. The second process would require an implementation similar to closed-caption encoding.

Verified Viewing will prove exceptionally useful in dealing with both P2P networks and DVR technologies. By simply encoding a unique identifier for each sponsored scene, for example Kiefer Sutherland's character "Jack Bauer" driving a Ford F-150, the advertiser can know how often the scene has been viewed.

Technically, we would encode this information into line 21 of the vertical interval time code (VITC) and use the DVR to account for how many times the image has been viewed. Upon the DVR's synchronizing of its schedule, which it does often, the DVR could upload the viewing information. The distributor of the program could then bill the advertiser accordingly. Much, if not all, of this can be accomplished by following the Society of Motion Picture and Television Engineers (SMPTE) DDE-1 standard.

We can also apply Verified Viewing to the desktop computing world as well. By using the same approach, but applying different techniques, digital files can also be Verified Viewing-enabled. Since both the distributor and the advertiser are able to receive very accurate viewing metrics, the P2P network becomes an ally instead of an adversary.

A television show or movie with integrated advertising can be freely distributed without the fear of piracy. Our visual medium is our most obvious advantage. We are already responsible for garnering "eyeballs" on both television and on screen. As producers, in the future, we will be responsible for integrating advertising into our programming, while trying to maintain our project's integrity.

By implementing Verified Viewing, both distributors and advertisers could gain ground in the digital age. Although privacy concerns may be raised about Verified Viewing, the current legal climate protects P2P user's privacy. Additionally, the information recorded can simply be the number of times an specific advertisement has been viewed and nothing more. I would not be surprised to read Nielsen Ratings began tracking P2P file popularity in the near future. Ultimately, advertisers will want to know how many times an advertisement has been viewed, not just how popular a file is in the P2P network. Verified Viewing will provide such metrics in the future distribution system.

One current problem for P2P network users is that the shared files are not always technically sound, not to mention legal. But if the distribution company willingly releases a technically sound, and legal, Verified Viewing-enabled copy of their motion picture file, it would likely become a preferred and widely distributed file. I foresee companies regularly releasing technically sound files into P2P networks, as they will have a financial incentive for widespread distribution and viewing.

If I were to search a P2P network for "ESPN" I would receive back a fairly consistent set of sports-related material. Branding will thus take on increasing importance; the music industry missed this opportunity and it will never be given a second chance. The branding opportunity could very easily be seized by production companies who currently provide programming to the networks. Given this scenario, I wouldn't be surprised to see companies like Harpo Productions and Dick Clark Productions become major P2P distributors of Verified Viewing content. The Verified Viewing model presents a challenge to our current distribution networks, but would in no way threaten the production companies themselves.

In fact, the most likely victim will be the local television stations. All of the players in these scenarios - the artists, the production companies and the distributors - should be able to adapt and survive the upcoming change (whatever it might be). The local stations, however, do not have content to distribute. Additionally, they rely heavily on local advertising. Unless a method is created to integrate localized advertising "on the fly," I cannot foresee how the stations will adapt.

If Verified Viewing is not adopted, the new distribution system will probably mimic the Apple Music Store. A viewer may simply be able to locate "Apocalypse Now" and choose to view a streaming version for $4.99, download it for $9.99 or view a stream and have a DVD shipped for $19.99. Viewers will be able to access television shows and movies for a low price, on demand.

Should our industry follow the same path as the music industry, I feel the Movie Store outcome is inevitable. I also feel it is only a stopgap solution, as file sharing would continue with no recurring revenue stream for the distributor. The Internet culture often leans toward the saying "Information wants to be free." If we expect our industry to adapt to the coming "movie revolution," we need to understand our consumers.

Finally, there is the increasingly popular practice of simultaneous release. By simultaneously releasing content, whether music, television shows or movies, the opportunity for piracy is reduced, while increasing initial revenues. The December release of "The Lord of the Rings: The Return of the King" was a worldwide event. If the reason people pirate content is because they want it and it is not available to them, by providing them what they want, we can reduce the demand for pirated content. Until the next solution is implemented, I think simultaneous release of content will become typical.

As an exercise, I asked people I whether they owned any pirated software programs. Since software is essentially composed of digital files, I felt it most closely resembled what motion pictures will be in the near future. The trend was overwhelmingly in favor of pirated software. In fact, according to the Business Software Alliance, the global software piracy rate in 2002 was 39%. If consumers consider digital movie files to be equivalent to software, it's safe to predict motion picture piracy will grow exponentially.

We must embrace the coming change and help to create our new industry now. Ray Kurzweil, an emerging technologies specialist, recently stated "Inventions need to make sense in the world where you finish a project, not the world in which you start the project." We need to start now. We have three years to finish.
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