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The Untracktable Problem of Hollywood

I was in Los Angeles last week attending the Digital Hollywood conference. The crowd was mostly executives from the entertainment business and it was held at a luxury hotel in Santa Monica.

Aside from the fact that every other session was either about mobile (re. content on iPhones) or about how to monetize content on iPads, there wasn’t all that much new being discussed. However, most of the executives I met were very sanguine about web content and the problems they have with existing and back catalog content.

One clear problem emerged around publishing web content – negotiating reasonable terms with rights holders. I heard several VP-level and above execs express huge amounts of frustration with rights holders and their demands. One had even recently quit because of his inability to get reasonable terms and several others were looking for a way to get out of the business.

At this point, I’d like to explain how TV shows and movies actually work. Basically, you can think of a movie or TV show (a ‘property’ in Hollywood-speak) as a collection of performances by a bunch of ‘artists’, choreographed by a ‘producer’. Each ‘artist’ (it could be a company as well) retains the right to their performance and are referred to as ‘rights holders’. And it’s the ownership of these ‘rights’ in particular ‘properties’ that allow ‘artists’ to be paid every time something is shown (this is know as ‘residuals’ in the industry). In most cases, ‘rights’ for a ‘property’ are negotiated when it is initially made, usually around ‘platform’ rights (e.g. a platform being movie, cable, tv, tape, dvd, airplanes, pay-per-vue, commercial use, etc) and geographic rights. However, when a new ‘platform’ emerges (web, internet streaming, downloads, blueray etc), rights must be negotiated for that new platform for each property.

So, back to our story. The (very) senior executives I was talking to were all facing the same rights problem. They would like to publish existing and back catalog content on the web, but the complicated matrix of people and organizations that owned rights in these properties made it impossible to get everyone to sign-off on web publication.

Apparently, some rights holders are demanding large upfront payments in exchange for signing off on web publishing the content. And, because the revenue models are uncertain, no body is willing to risk large amounts of money upfront….

The irony of this, of course, is that consumers will download the content anyway, further and further reducing it’s value. Even worse, the unwillingness of current rights holders to license content for web publication is undermining the future of the residuals system since it is pushing content producers towards ‘work for hire’ royalty free content.

In the end, the reason why your favorite show is not available online legally is probably because, someone, somewhere is being selfish and greedy. And that is adding up to a problem no one is seemingly able to solve.