A recent report by the London School of Economics suggests that far from hurting the music industry, piracy is actually helping. They say…
Contrary to the industry claims, the music industry is not in terminal decline, but still holding ground and showing healthy profits. Revenues from digital sales, subscription services, streaming and live performances compensate for the decline in revenues from the sale of CDs or records- LSE MPP Policy Brief 9 Copyright and Creation, London School of Economics
A few people have asked me if the same applies to the film industry in the UK. I’ve taken a look at some of the numbers to see if it’s clear either way. In summary…
- 2012 UK DVD revenues were half what they were in 2004
- Overall revenue in the UK film industry has hardly changed in the last six years
- DVD now makes up the same percentage of revenue that VHS did in 2000
- Between 2004-08, DVD sales accounted for 40% of all film revenue
- Hollywood is responding with ‘event’ movies, 3D and IMAX
What do the numbers say?
Physical media (VHS and DVD) sales in 2012 were half of what they were during their 2004 peak. Rental income has shrunk slowly and last year was the first year in which Video On Demand (VOD) income outstripped rental.
The graph below shows the revenue for each major income stream in the UK, adjusted for inflation to 2012 pounds.
As a proportion of income, DVD revenues have returned to the level of VHS revenues in 2000 (24% of the total income earned by movies in the UK).
DVD and Rental down; Cinema, TV and VOD Up
The graphs above can be read in a couple of ways; either…
- Piracy has destroyed DVD income, causing over £1 billion of lost revenues. It could be higher if we assume that the DVD market would have continued to grow as it did in the early 2000s.
- Piracy has had little effect as more people are going to the cinema. The DVD boom was an anomaly as people replaced their VHS collections and so we’ve naturally returned to the pre-2000 ‘normal’ state.
Overall revenue in the UK film industry has remained pretty static in the last six years, adjusted for inflation.
Measuring Missing Money
It’s worth noting that it’s impossible to be definitive on this issue of piracy as we’re dealing with somewhat invented “lost revenues”. Two recent US congressional bills claimed that piracy causes $250 million of damage to the US economy and the music industry has sued downloaders for $22,500 per song downloaded. So when we try to put an exact figure on a future that’s not happened we start to stray into a ‘Minority Report’ world of pre-revenue stolen by pre-criminals.
Hollywood’s Reply – Marketing, 3D and IMAX
Hollywood’s response to falling DVD sales has been to pump more money into marketing, thereby creating ‘event movies’. If you didn’t see ‘Skyfall’ the weekend it came out then you felt left behind. The Studios are also increasing the number of IMAX and 3D movies, which are hard to pirate, hard to replicate at home and have the added benefit that they can charge a higher ticket price.
In My Experience, Piracy Hurts Niche Filmmakers
I can speak from some experience on this issue. In 2006 we brought out a DVD around the growing sport of Parkour, called ‘Parkour Journeys’. We had created the DVD as a vehicle to raise money for a Parkour short film, with the DVD featuring the short and two hours of other new content.
Pre-sales were good and it looked like we were on track to be able to make a new DVD every year. The money wouldn’t have been huge but it would have funded filmmakers to make short-form content and Parkour fans would enjoy the regular new niche content.
However, a couple of days after release our sales dropped to almost nothing and they never recovered. The DVD had been uploaded to The Pirate Bay, meaning we struggled to break-even and future DVDs were not viable.
We received a large number of supportive messages from the Parkour community but in the end, almost everyone who enjoyed it had pirated it.Chris Jones tells a similar story of a fan openly admitting to him that he’d viewed Chris’ film via an illegal download.
I can see why the community pirated as they did – our core audience were teenage boys, who are also the keenest pirates. They were faced with a choice of either paying money (via credit card, which they may not have) to wait a week for a physical copy to arrive which could be scratched or lost; or they could instantly get a copy for free, which could also be backed-up and shared with friends. To each pirate, the decision was a no-brainer, although their actions led to less content created for their community.
The Pro-Piracy Case
A recent European Union investigation concluded that music piracy actually increased sales, although other industry bodies disagree. Also, piracy doesn’t affect people’s available spending money so one could argue that if they don’t spend it on CDs and DVDs then they will spend it on another forms of entertainment (digital products, live events, etc). This might be cold comfort for the creators and distributors of CDs and DVDs but I guess that the old business adage applies here – Adapt or Die.
The Final Word
If all this equivocation on my part has been exhausting, here is a lovely cartoon by way of an apology.