Watch Pirate Movies and Play Games On Your TV for $99

Ouya, a game console startup recently raised $4m on Kickstarter.  The product design has three selling points; a) it will cost $99, b) it will enable you to run android apps on a television, and c) it is 100% hackable.  According to the blog Kotaku, one of the consequences of these features is that you will be able to watch free streaming live sports events on your television.  You will also be able to stream movies via BitTorrent.  As it gets easier and easier to steal content with no meaningful deterents, revenues in multiple industries are cratering.  The number of cable subscribers on Comcast (CMCSA) has dropped 7% from 24.1 million in 2007 to 22.3 million in 2011 (source: Comcast Annual Reports).  That was in the old days when you actually had to know some techie stuff to connect your PC to your TV or burn a DVD to watch pirated movies.  With Ouya, you will just connect your Android phone or tablet running BitTorrent to your TV and you will never have to pay a content creator again.  If this drop in revenues was occurring due to innovation that was creating value in the marketplace, we would applaud that, but it is not.  What happened in the marketplace between 2006 and 2011?  The volume of illegal movie downloads in the US grew by a factor of eight.  Unless something changes, these new piracy technologies will just continue to fuel the collapse of the creative industries.

Between 2007 and 2011 the amount of traffic used for P2P BitTorrent “filesharing” in North America grew from approximately 3000 petabytes to more than 13,000 Petabytes in 2011.  In our opinion, the reduction in paying cable subscribers is directly correlated to the increased volume in media being consumed illegally.  In the same period of time, revenues from Home Video, which includes BluRay, iTunes, Netflix, Amazon, Hulu and all legal streaming services dropped 26% from $26B to $18B.

The mantra from the anti-copyright pundits is; a) there is no need for law enforcement, iTunes proves people will pay for content even when its available for free, and b) piracy is about lack of compelling options, if compelling options are provided, people will pay.  Between Xfinity, Hulu, Amazon, iTunes, HBO Go and Netflix, the offering in 2012 is pretty compelling, so why are Home Video revenues cratering?  Because no industry can compete long-term with their equivalent product available instantly for free.

First, while digital music sales on iTunes have grown from zero to $6B worldwide in 2011, it is still a tragically reduced industry compared to what it was and what would be possible if there were some measures in place to mitigate illegal free distribution.  The facts are that in the US in 2011, total digital music sales were $2.6B and subscriptions (Spotify, et. al) were $241m. This industry as recently as 2000, generated $12B in the US and $27B worldwide. Did music become less popular?  No, music consumption soared to 132 billion mp3s downloaded illegally in the US in 2011.  The great majority of music consumers do not pay.  People don’t pay because nothing happens when they take the product illegally.

If we are judging the future of digital media by iTunes, then its “hasta la vista” baby to movie, television and sports revenue when everyone can have a “game console” for $99 that makes watching pirate media on your television incredibly easy.

The bottom line is that the law in the United States says that the ISPs only have safe harbor from their third-party liability if they are terminating repeat infringers.  If ISPs were following the law, 18.8% of all US internet traffic would not be used to illegally distribute music, movies, software, games and books for free.  If ISPs were following the law, there would be some consequences when a customer buys the $99 Ouya and then downloads every game, TV show and movie on it for free.  Today, there are no consequences.  That is why wages to musicians and musical groups are down 45% since Napster appeared.  The same thing is coming for all other media industries.

How many of America’s 8.2% unemployed were people who worked in recording studios, wrote songs, played bass, wrote screenplays, worked at a software company (Adobe laid off 750 people in 2011, 3 million Photoshop downloads on BitTorrent to date), designed video games (revenues down 25% from 2010 to 2011) or worked behind a camera?  Enjoy unlimited free movies, games and TV on your Ouya while you put thousands of Americans out of work!

Google Will Censor Legal Firearms – Not Illegal Content

This is a short post, because it only takes a few sentences to make this point.  Google Shopping sent an email to merchants updating its new policy of censoring Google Shopping results.  When you read this realize that in our opinion, Google is the primary tool that people all over the world use to find links to acquire illegal content.  The latest fun Google search to try is “21 Jump Street Free” and see all of the links on Google to watch this first run movie illegally for free.

Their email to merchants states that they will censor shopping items that do not confirm to their “values.”  They have the audacity to put the following in print, “Our company has a strong culture and values, and we’ve chosen not to allow ads that promote products and services that are incompatible with these values.”  Yet, they will block out their logo on the #1 web page on the internet to advocate for their “rights” to display billions of links to help people access illegal content.  The access that Google provides to free content hurts real people.  According to the Bureau of Labor Statistics, “Musical groups and artists” income plummeted by 45.3 percent between August 2002 and August of 2011.  Google’s “values” don’t seem to include helping tens of thousands of songwriters, musicians, authors, screenwriters, cinematographers, photographers, software developers and game designers who have lost jobs or are underemployed due to billions of units of lost sales resulting from links to their products available illegally free on Google.  Here is their email:

Dear Merchant,

We’re writing to let you know about some upcoming changes to the product listings you submit to Google. As we recently announced, we are starting to transition our shopping experience to a commercial model that builds on Product Listing Ads. This new shopping experience is called Google Shopping. As part of this transition, we’ll begin to enforce a set of new policies for Google Shopping in the coming weeks. A new list of the allowed, restricted, and prohibited products on Google Shopping is available on our new policy page – http://www.google.com/appserve/mkt/ApI7UWRj6OCZpd.

Based on a review of the products you’re currently submitting, it appears that some of the content in your Merchant Center account, HamLund Tactical, will be affected by these policy changes. In particular we found that your products may violate the following policies:

Weapons

When we make this change, Google will disapprove all of the products identified as being in violation of policies. We ask that you make any necessary changes to your feeds and/or site to comply, so that your products can continue to appear on Google Shopping.

To help you through this new set of policies and how to comply with them, we would like to give you some specific suggestions regarding the changes needed to keep your offers running on Google Shopping.

Weapons

As highlighted on our new policy page http://www.google.com/appserve/mkt/ApI7UWRj6OCZpd, in order to comply with the Google Shopping policies you need to comply first with the AdWords policies http://www.google.com/appserve/mkt/StQ08jAzM4fVtG.We do not allow the promotion or sale of weapons and any related products such as ammunitions or accessory kits on Google Shopping. In order to comply with our new policies, please remove any weapon-related products from your data feed and then re-submit your feed in the Merchant Center. For more information on this policy please visit http://www.google.com/appserve/mkt/GbBNIGHOribLzf.

We’re constantly reviewing our policies, and updating them when necessary, to ensure we’re offering the best experience possible to our users. We’ve identified a set of policy principles to govern our policy efforts on Google Shopping in the U.S. These principles are:

1) Google Shopping should provide a positive experience to users. Showing users the right products at the right time can truly enhance a user’s experience. When people trust us to deliver them to a destination that’s relevant, original, and easy to navigate this creates a positive online experience to the benefit of both users and merchants.

2 ) Google Shopping should be safe for all users. User safety is everyone’s business, and we can’t do business with those who don’t agree. Scams, phishing, viruses, and other malicious activities on the Internet damage the value of the Internet for everyone. Trying to get around policies or “game the system” is unfair to our users, and we can’t allow that.

3) Google Shopping should comply with local laws and regulations. Many products and services are regulated by law, which can vary from country to country. All advertising, as well as the products and services being advertised, must clearly comply with all applicable laws and regulations. For the most part, our policies aren’t designed to describe every law in every country. All advertisers bear their own responsibility for understanding the laws applicable to their business. Our policies are often more restrictive than the law, because we need to be sure we can offer services that are legal and safe for all users.

4) Google Shopping should be compatible with Google’s brand decisions. Google Shopping must be compatible with company brand decisions. Our company has a strong culture and values, and we’ve chosen not to allow ads that promote products and services that are incompatible with these values. In addition, like all companies, Google sometimes makes decisions based on technical limitations, resource constraints, or requirements from our business partners. Our policies reflect these realities.

We’ve given much thought to our stance on this content, as well as the potential effect our policy decision could have on our Merchants, and we apologize for any inconvenience this may cause you.

Sincerely,

The Google Shopping Team