The film studios are shooting themselves in the foot over illegal downloads: Domenic Carosa

iiNet’s landmark win against the Australian Federation Against Copyright Theft has highlighted how the major film and television companies are shooting themselves in the foot by denying Australian consumers timely access to online content.

The victory by iiNet is hardly a surprise. Essentially, AFACT was trying to prove that ISP’s are responsible for what goes through their networks. It was a bit like trying to sue Telstra because one of its customers used the telephone to threaten a third party, or suing Australia Post because someone used it to post illegal substances through its network – totally ludicrous!

The major film studios (like the music industry 10 years ago) have missed the point – suing consumers and intermediaries like ISP’s isn’t going to solve the problem. In fact, the longer they keep their heads in the sand, the worse the problem is going to become. Just ask the record companies, who have lost billions of dollars globally over the last 10 years because they never embraced digital music and the MP3 standard in the late 1990s.

Here’s a little secret that’s not so secret: consumers are embracing digital content like never before.

So why are Australian’s pirating film content? Simple – they cannot get access to the content they want when they want. When a show gets released in the United States (let’s say Entourage or How I Met Your Mother, which are some of my favourite US shows at the moment) Australian consumers need to wait months if not years to watch the latest episodes.

So they visit a peer-to-peer site and download an illegal copy or alternatively buy a USA virtual private network service (which makes US website’s like hulu.com and tv.com think you are physically located in the USA) and then you are free to watch shows via the internet. For example, TV.com and hulu.com allow you to stream the latest shows directly to your computer or LCD TV.

Furthermore, I have been privy to numerous dealings with the major film studios (and record companies for that matter) where the commercial terms they demand make it virtually impossible for a small company to make money providing a video on demand service to consumers in Australia. They are demanding something like 60-80% of the retail price – no one can really make money on those commercial terms – so in effect they are shooting themselves in the foot.

There just isn’t one solution to this issue, it’s multi-dimensional and involves the film studios releasing their content globally simultaneously (or at least within a 24 hour window over the Internet) and being more reasonable (that is, less greedy) when negotiating with video on demand providers.

And Mr Film Studios, while you are it, drop DRM (Digital Rights Management) as consumers hate it and it’s hard to use. It only took the major record companies eight years to release this; hopefully you won’t be as stubborn as they were.

So the moral of the story is to give consumers what they want, how they want it, at a price they are willing to pay. It won’t totally eradicate piracy but it’ll go a long way in ensuring the revenues (and jobs) keep flowing to the studios.

Domenic Carosa is the founder and chief executive of Dominet Digital Corporation.