MoneyWatch Tech

Studios Get To Lock Set-Top Outputs but Overlook Their Real Problems

By Erik Sherman

Updated on: May 10, 2010 / 5:27 PM EDT / MoneyWatch

"If at first you don't succeed, try, try again" should become the motto for the video producers of the world. They've seen music labels repeatedly shoot themselves in the foot when it came to preventing consumer downloads, even as the nature of the music industry was changing. So what have the studios done? Emulate the labels by following a strategy that's worse than useless, because others have already proven it to fail.

Late last week, the FCC decided to encourage studios to make movies available on demand when they release. Smart move? Sure, except when you consider the problems:

Movies will only play on newer digital sets, not older analog ones.
Cable and satellite TV companies will be able to turn off set-top box output to prevent people copying movies.
Some recording equipment that has analog connections would not work, even if legally allowed to.

Essentially, the FCC is trying to promote a new business model and one that might be necessary. Depending on theaters to turn over half of the ticket revenue hardly seems the future for the studios, particularly as major productions become ever more expensive to film. In addition, when tickets are $10 to $11 for a normal movie and 3D runs maybe $15, taking the kids to the movies is something a family has to carefully consider, particularly when drinks, popcorn, and snacks can run an equal amount.

But an FCC exemption that allow television transmission companies to disable output on set-top boxes to prevent copies won't help media outlets a bit. Should someone want to make an illegal copy, they could do as they do now and sneak a camera into a theater to record what is on the screen -- only they won't need to sneak. Who gets smacked by this latest scheme? Normal consumers.

When you keep telling the vast majority of customers that you think they are criminals and out to make copies, you actually encourage that very activity. After all, if they feel judged no matter what they do, why not try to tweak the offending corporation back?

What's next from the studios? An RIAA-style blitzkrieg to find consumers who are infringing copyright? I understand that companies need to make money, but perhaps their attention is in the wrong place. The studios want to tell themselves that they're missing enormous revenue from theft, but their real problem is efficient operations. For example, a Time Warner's Filmed Entertainment division brought in over $11 billion in revenue during FY 2009. If you can't make money with that type of revenue, you've got a bigger problem than consumers copying your wares.

I understand and even sympathize with concern over intellectual property. On a small scale, I'm in the same business. But the biggest issues should be new ways to satisfy consumers and, as a byproduct, make money, as well as spending control so the company isn't in the red at the end of the year. Treating customers as criminals is a distraction through which executives tell themselves that they take tough action all the while averting their eyes from their companies' biggest problems.

Image: Courtesy Disney/Silca