Sony Pictures CEO: The Internet Is Still Bad

from the digging-a-deeper-hole dept

A week and a half ago, Sony Pictures CEO Michael Lynton made some news for saying that nothing good had come from the internet, period. Plenty of online sites (including ours) took him to task for that, wondering how one gets to be the CEO of a major content company without understanding the internet. Today, Lynton hit back at critics -- not by saying he was quoted out of context or misunderstood, but by standing behind the statement and adding some gems to it as well. Let's take a look...
In March, an unfinished copy of 20th Century Fox's film X-Men Origins: Wolverine was stolen from a film lab and uploaded to the Internet, more than a month before its theatrical release. The studio investigated the crime, and efforts were made to limit its availability online. Still, it was illegally downloaded more than four million times.
And, as was widely noted, the movie still opened to a massive box office take, despite pretty dreadful reviews all over. In fact, the movie had a lot more buzz leading up to it because of all the talk about the leak. Funny that Lynton seems to ignore that part. Could it really be that the CEO of a major motion picture studio doesn't understand that people go to the movies for the experience, and not just the content?
I actually welcome the Sturm und Drang I've stirred, because it gives me an opportunity to make a larger point (one which I also made during that panel discussion, though it was not nearly as viral as the sentence above). And my point is this: the major content businesses of the world and the most talented creators of that content -- music, newspapers, movies and books -- have all been seriously harmed by the Internet.
This is like saying "the major transportation companies and the most talented creators of transportation devices -- horse carriages, buggy whips, blacksmiths -- have all been seriously harmed by the automobile." Markets change. They may cause trouble for dinosaurs unable or unwilling to adapt, but they have not harmed content creation or the content business. And it's not "the internet" that has harmed the "most talented creators of that content." It's folks like Michael Lynton who seem to be funnelling them towards bad business models.
Some of that damage has been caused by changing business models (the FTC just announced an inquiry into the impact of new media on the newspaper industry). But the primary culprit is piracy. The Internet has brought people with no regard for the intellectual property of others together with a technology that allows them to easily steal that property and sell or give it away to everyone, with little fear of being caught or prosecuted.
Wow! At least he's able to admit that business models play a role, but he's flat out wrong about blaming piracy. He claims that it's "people with no regard for the intellectual property of others," which is hilarious coming from Hollywood -- a town built on showing no regard for the intellectual property of Thomas Edison. You know what comes out of showing no regard for artificial scarcity? Amazing new industries. Lynton is a product of piracy... and yet now that he's in charge, it's evil? Funny stuff...
To be clear, my concern about piracy does not obscure my understanding that the Internet has had a transformative impact on our culture and holds enormous potential to improve the prospects of humanity, and in many instances already has. I am no Luddite. I am not an analogue guy living in a digital world. I ran an Internet company and my studio actively uses the web to market and sell our movies and television shows. We create original content for new media.
If you think that "using the web to sell and market our movies and television" or "creating original content for new media" represents what the internet has to offer, you really need to educate yourself on the internet. It's not about selling and marketing. It's about interactivity. Hire someone who doesn't hate the internet, please.
And yes, new talents have emerged thanks to the democratic and viral impact of the web. Yes, the rise of new distribution platforms for existing content is exciting and rich with promise.

But at the same time, I cannot subscribe to the views of those online critics who insist that I "just don't get it," and claim the world has so fundamentally changed because of the web that conventional practices concerning property rights no longer apply; that the Internet should be left to develop entirely unfettered and unregulated.
It's not that "conventional practices concerning property rights no longer apply," it's that content isn't property. You've been blinded by the phrase "intellectual property" into believing it's something that it is not. The internet is neither unfettered nor unregulated. What you're really complaining about is that technology has put a crimp on your old business model, and rather than adjust, you want new laws to force things back to the way they were before -- back before we had the rise of new distribution platforms and the ability to share content that we like with one another.

Back when automobiles were first introduced, laws were passed requiring people to walk in front of every automobile waving red flags. Officially this was for safety, but it was really an attempt to limit the automobile and keep things the way they used to be for carriage makers. You're not asking for reasonable rules and regulations. You're asking for red flags and a speed limit of 5 mph when cars can easily go 120mph.
In no other realm of our society have we encountered so widespread and consequential a failure to put in place guidelines over the use and growth of such a major industry.
There are guidelines. You don't like the ones that are there, and the market has decided that many of them don't make sense. Let history be a lesson to you: when the majority of people think that "guidelines" don't make sense, making them even more stringent isn't going to fix things. Instead, it's time to look for opportunities within what people are doing.
I'm not talking here about censorship, taxation or burdensome government restrictions.
Yes, you are. You'll just call them something different.
I'm talking about reasonable boundaries, "rules of the road," that can help promote the many positive attributes of Internet technology while curtailing its hugely damaging effects.
Right, just as reasonable as the guys waving flags in front of cars. Those were designed to promote the many positive attributes of the automobile while curtailing its hugely damaging effects. The problem then, as now, is that people looked at the automobile through the prism of the horse carriage (that's why they were originally called horseless carriages). So the idea that they could travel much faster was seen as a bad thing (ooh, dangerous!) rather than a good thing. The same thing is true today. The fact that people can share content and help promote and distribute it for you is seen by you as a bad thing (oooh, dangerous!), but once things shake out, those who don't hate the internet will realize it's actually a huge opportunity for new businesses to grow and thrive. It's 1904. Do you want to be the CEO of the Durant-Dort Carriage Company or do you want to run Buick? William Durant made the right choice. You're making the wrong one.
And this becomes even more critical as governments around the world are subsidizing and promoting the ubiquity of high speed broadband to make their economies more efficient and competitive. With this increase in speed, content will travel that much more easily on the Internet. But without restraints, much of that content will be contraband.
Yes, as nations around the world are subsidizing national highways, this becomes ever more important. With this increase in speed, automobiles will be able to travel that much more easily. Without restraints, much of that travel will break the speed limit.
I've already seen it happen in South Korea, which has one of the most highly developed broadband networks in the world. But piracy has also become so highly developed there that we and virtually every other studio has recently had to curtail or close down our home entertainment businesses. It's hard to sell a legal DVD when it can be stolen without any repercussions.
And yet, there are new businesses springing up every day to take advantage of this wonderful abundance. JY Park is building a massive entertainment empire in South Korea by embracing the fact that everything he does will be "pirated" in some manner. But he's still bringing in a ton of money. That's because he's not focused on how to sell horse drawn carriages any more, but how to make automobiles go faster and faster.
Contrast the expansion of the Internet with what happened a half century ago. In the 1950's, the Eisenhower Administration undertook one of the most massive infrastructure projects in our nation's history -- the creation of the Interstate Highway System. It completely transformed how we did business, traveled, and conducted our daily lives. But unlike the Internet, the highways were built and operated with a set of rational guidelines. Guard rails went along dangerous sections of the road. Speed and weight limits saved lives and maintenance costs. And officers of the law made sure that these rules were obeyed. As a result, as interstates flourished, so did the economy. According to one study, over the course of its first four decades of existence, the Interstate Highway System was responsible for fully one-quarter of America's productivity growth.
But that highway is already built. You're not asking for reasonable guidelines. You're asking people to walk in front of automobiles waving red flags, while everyone else is already zipping around in their automobiles.
We can replicate that kind of success with the Internet more easily if we do more to encourage the productivity of the creative engines of our society -- the artists, actors, writers, directors, singers and other holders of intellectual property rights -- yes, including the movie studios, which help produce and distribute entertainment to billions of people worldwide.
We're already replicating that kind of success. Your problem is that it's happening without you.
But, without standards of commerce and more action against piracy, the intellectual property of humankind will be subject to infinite exploitation on the Internet.
Imagine a resource that is infinitely exploitable? Imagine that wonderful abundance? Who could possibly complain about that? Oh right, those who benefited from the previous scarcity. Still, it's quite amazing to see someone actually complain about abundance.
How many people will be as motivated to write a book or a song, or make a movie if they know it is going to be immediately stolen from them and offered to the world with no compensation whatsoever?
Well, considering how many people create content today already, I'd say plenty. And, of course, this statement has an implicit fallacy embedded in it: that because content can be shared (not "stolen") that it means there's "no compensation whatsoever." Need we remind you that despite Wolverine being "stolen," compensation came in at about $90 million in its first weekend? If that's the kind of "no compensation whatsoever" we can expect when content gets "stolen," sign me up.
And how many people whose work is connected with those creative industries -- the carpenters, drivers, food service workers, and thousands of others -- will lose their jobs as piracy robs their business of resources?
Oh, right. The poor carpenters, drivers and food service workers. Well, since we've already pointed out that there's still plenty of compensation, they'll continue to be just fine. They don't get paid based on some obsolete business model. They get paid by the hour. That continues.
Internet users have become used to getting things when they want it and how they want it, and those of us in the entertainment business want to meet that kind of demand as efficiently and effectively as possible.
You say that as if you mean it, while the entire rest of your article is about how you don't want to meet that demand, and how you want that efficiency walled off and blocked via gov't fiat.
But what has happened online is that if it is 'beyond store hours' and the shop is closed, a lot of people just smash the window and steal what they want.
No one is "stealing" anything. What are you missing? No windows are broken. And, part of your problem is the fact that you think the shop "closes." If you can't recognize that the shop doesn't close anymore, you shouldn't be running a major content company.
Freedom without restraint is chaos, and if we don't figure out some way to prevent online chaos, the quantity, quality and availability of the kinds of entertainment, literature, art and scholarship we need to have a healthy, vibrant culture will suffer.
I don't know which culture you're looking at, but it seems to be me that entertainment, literature, art and scholarship are all thriving like they never have before. Where's the problem, other than your own inability to adapt?
In my own household I know it is my responsibility, along with my wife, to monitor how my family uses the Internet for school work and enjoyment. And I know the web can play a big role in our daughters' future. But I also want their future to be filled with the kind of music and books and films and other creative sparks that have enlivened my life and our culture through the years.
And, thankfully, she'll be able to experience a lot more of such culture thanks to the internet and the efficiency it allows. Many authors, musicians and filmmakers today are purposely putting their works of art online for free. Would you like some pointers to help with your daughters' cultural education? We're more than willing to help.
Because actually I'm a guy who wants to see lots of good things come from the Internet. But it's not going to happen the way it should if we do not act now to safeguard the fruit of our world's most imaginative and talented minds. Period.
The only "safeguarding" you've suggested is your own obsolete business model. It's got nothing to do with culture and content creation. It has nothing to do with the internet. It has everything to do with the fact that you're viewing all content creation through the distorted prism of the movie making industry, where content creation comes from a big corporation and is then mass marketed and sold to the people. You need to step out from behind that prism, put down the red flags you're waving in front of automobiles, jump onto a passing car, and look at all the wonderful things the internet allows in terms of creativity and new business models. Don't let Sony Pictures be the Durant-Dort Carriage Company, clinging to the past.

Filed Under: copyright, intellectual property, internet, michael lynton, movies, piracy
Companies: sony

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  1. icon
    Mike Masnick (profile), 29 May 2009 @ 2:51am

    Re: Re: Re: Internet bad?

    First of all, that the movie did well in spite of the theft does not justify the theft or in any reduce its magnitude.

    First, you are confusing "theft" with infringement, but we'll leave that aside for now.

    I didn't say it "justified" it. I'm not defending the practice of infringement. What I'm saying is that it's NOT an issue of "theft" or "right or wrong." It's a reality of the marketplace AND (more importantly) it doesn't mean you can't make money. It just means you need to change your business model.

    It is very easy for someone who hasn't put their butt on the line to sit back and determine that someone else who risked it all has made sufficient enough return on their investment.

    We weren't judging whether it made an acceptable ROI, but responding to his claim that it was evil and wrong. The movie did much better than expected based on similar movies. No, no one can determine the overall impact, but there's an awful lot of evidence that it had next to no impact whatsoever.

    The fact that unauthorized distribution of content may create more buzz for that content is a positive by-poduct a an activity which is still wrong.

    Wrong? You're focusing on the moral issue, when it's not a moral question. Who cares if it's "wrong" if you can make more money by embracing those trends? Driving without a guy waving red flags in front of your car was "wrong." But it was dumb.

    Wrong is a moral issue. 100 years from now people will think that not sharing content freely was just as silly as the red flags.

    The fact that a company or industry has not come up with a business model to exploit that sort of buzz does not lend any legitimacy to the practice.

    I don't care if it "lends legitimacy." It's happening. Arguing over whether or not it's legitimate is pointless. You can argue all you want, or you can focus on using it to your advantage. Those who have always make more money once they stop worrying about it being "wrong" and recognize they can use it to their advantage.

    The automobile vs. the horse & carriage is merely an evolutionary step with respect to human mobility. It also represents a centralization of the means of getting around - anybody could have a horse, but the relative number of automobile manufacturers was quite small. The internet is revolutionary in that it represents just the opposite: a complete decentralization of the means of distribution of content, along with a loss of the ability to directly collect funds to support its production. Is there similarity in the way those vested in the status quo reacted to these advances? Certainly. Should content providers and distrubutors expend more energy comming up with new business models than badmouthing the internet? Definitely. But to say that someone whose multi-million dollar project was stolen and tossed before the world prior to its official release doesn't have a legitimate beef - that's a major stretch.

    Not at all. The parallels are nearly identical -- but people get confused because they think CONTENT is the product (and that it can be "stolen" which it can't). The PRODUCT of the entertainment industry has always been the EXPERIENCE, and they still have many ways to control and sell the experience. And the analogy is dead on because the horse carriage makers thought they were in the carriage business, when they were really in the transportation business. Same thing. You and much of the entertainment industry thinks they're in the business of "selling content." They're not. They sell experience, and the real product for those companies is the promotion and distribution of those experiences.

    The problem is that (like the horse carriage makers) since they think they're in a different business than they're really in, they don't recognize the opportunity and think it's a threat, because it changes the fundamentals of the business they're in.

    But the end result is the same: consumer want something and if you're not providing it, you're dead. Like Sony Pictures apparently. Going against the will of consumers is death.

    BTW, yes, those employees do get paid by the hour - by others who count on receiving profit from their ventures. You sound as if you believe the money just materializes somehow. This from someone who appears to find joy in flaunting the fact that he took a few economics courses.

    No, I've never said money just appears. I've spent years demonstrating exactly how you create business models that allow you to make that money. And, again, every single time we've seen someone properly put in place such a business model they've MADE MORE MONEY.

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