The Hollywood Numbers Game

Originally published here.

"P2P robs artists of their rightful income", says the MPAA.

It would seem the movie studios themselves are pretty good at that.

Peter Jackson, who won the hearts of millions of geeks for his masterful film depiction of Tolkien's "The Lord of the Rings," is suing the film's distributors, New Line Cinema.

Why?

According to CNN, New Line is responsible for, "... improperly deducting certain home video costs that were not spelled out in the agreement, paying an incorrect royalty rate for DVD sales, delaying the reporting of certain licensing revenue and failing to audit sub-distributors, including those affiliated with New Line. The latter claim goes to the broader issue of self-dealing, in which Wingnut accuses New Line of allowing its sub-distributors to charge a higher fee than would be expected from nonaffiliated companies."

The skeptical among us would say that New Line lacks basic math and accounting skills. But then again, with a multi-million-dollar-a-year business, one would think they were able to hire someone who can add up properly.

Any other business who can't work out where the decimal point REALLY goes would be in big trouble, at least from the tax man. But as the The Fellowship of the Ring alone has pulled in over $850 million world wide, the studios can afford to make expensive mistakes.

Anyone else think that Hollywood will come to an "arrangement" with Jackson? We can probably expect this to be "all a big misunderstanding" in the end.

This case has larger implications, though.

If New Line Cinema (owned by Time Warner Inc) simply made a mistake how do we, the public, know that this type of dodgy numbers game isn't going on in other places in Hollywood? If studios can't even add up the money they DO make, how can they possibly estimate the money they claim is lost from P2P?

Unfortunately, it's to be expected that the MPAA will come out with a statement from its well-oiled propaganda machine well before the facts are established. For decades, content providers have claimed new technology will ruin their businesses:

• Late 19th century - Book publishers claim the new public libraries will destroy all incentives to take on new authors, as people will stop buying new books if they can read for free. Book sales increase dramatically over the next century.

• Mid 20th century - AM radio monopolies try to suppress the new and superior FM technology. FM operates on different frequencies which are un-regulated and therefor uncontrollable. FM radio inventor commits suicide after more than 10 years of legal battles over the new technology. Revenues increase dramatically over the next few decades.
  

• Early 1980s - Movie studios claim in the famous "Betamax Case" that Sony's new VCR will put them out of business. They enjoy a new multi-billion dollar per year industry supplying movies on tape and DVD.
  

• Late 1990s - The music industry shuts down Napster citing that it allows wide scale piracy of recorded music. Sales and profits increase despite a hundred-fold grown in P2P.
  

Perhaps the fact that content providers have been wrong in every single one of these cases has made the public skeptical?