Someone could probably download Disney movies for free
Just like someone could probably use a friend's Netflix account. Or log into another person's subscription for New York Times digital access.
This afternoon, someone could probably find The Lion King somewhere on the dark web. Or hack into the new Disney+ platform when it launches in November. Someone could also walk into a Wal*Mart, pocket a Disney DVD. If the alarm goes off, they could just sprint to their car. Security probably won't chase after them.
The elusive and nameless "someone" could do a lot of things that cost the publisher/media company a little bit of money. And, if there are a lot of someones, that can really make a dent in the overall profits. Take, for example, the music industry's battle against Napster back in the late 1990s. At its peak, Napster had 80 million users. That's a whole lot of someones.
So, there's a natural tendency to work really really hard beefing up the security systems in place to make sure someone doesn't take advantage of any possible loopholes. It's like if you ever have flies or ants in the house; we become obsessive until each and every one of those insects is officially gone. It's annoying to find another one sneak through the front window.
The problem? All of that effort on defense takes a whole lot of energy. It's time (and money) that could be better spent on building a brand or creating a new solution.
For example, what if Metallica used the same amount of money they ultimately spent on their lawsuits against Napster (even just half of it) and went to the smartest student at Michigan Tech, asked them, "Hey, could you build something like Napster but where our fans can download our songs for 99 cents per song?" Let the ideas snowball from there. "Oh! We could release exclusive content. Videos of us rehearsing songs. Videos from concerts. That'd be sweet. Could you build us something like that?"
Metallica didn't do this. Record companies didn't do this. So Apple swooped in with iTunes. Apple's viewpoint: Sure, there are a lot of someones who can find, download, share music for free, but I'm betting there are even more people who will gladly spend 99 cents per song or $10+ for an entire album. Over time we can gradually raise those prices. Add all of that together and Apple has a juggernaut in iTunes that generates over $25 billion per year.
Seth Godin makes the point (and if you've read Godin's work you can definitely tell he's my teacher and inspiration for this post) that record companies should have created Spotify long before Spotify. "The New York Times should have created Google, not Google," Godin says on one of his Akimbo podcast episodes. Point being, they shouldn't have tried to kill Napster, they shouldn't have fought the change of everything moving online, they should have figured out how to adapt.
Imagine if Atlantic Records beat Apple to the finish line. You'd login to an Atlantic Records app, just like iTunes, and be able to buy songs from any of their artists. You'd be able to sample songs. Discover artists on their label you didn't know about. That'd be an awesome experience for the listeners and I have to imagine top musicians would want to sign with Atlantic because of all the efforts they'd be putting into getting new music out there.
But now Spotify is doing that work instead and they will likely end up making 100x more money than the top five record labels combined.
One more round of examples. Let's compare newspapers against Netflix.
When print subscriptions began to decline and content was all moving online, the newspapers took over a decade (in a lot of cases, they're still trying to figure this out) fighting the change. When they did build their websites, they put up pay walls like this:
Or made it so pop-up ads jumped up in the middle of an article. Or a big banner ad across the top of the page. This experience was even worse on a cell phone.
What if, instead, we could read every article on the newspaper's website for free but at the bottom you had the option to leave a monetary tip for the writer. Chinese Publishers have started to do this approach. "Some authors offer free books and illustrations, gain a loyal user base, and then collect money through tips. At the end of each chapter, an overlay button for tipping authors allows readers to tip from $0.15 and up." (note: This is an awesome article. read the full thing here)
The money in newspapers was always more on the advertising side than on the readers. The old school model was based on a million people paying $50 - $150 a year for the paper and then the advertisers paying billions to get in front of that audience. Pay walls, sign-in, subscribe to read the full story, these are all unnecessary barriers to the customer. Too much time playing defense.
On the advertising side, you could say to the companies, "Hey, we're not doing banner ads, it's a lousy experience for our readers. They don't like them. But if you want to write a compelling story about your brand, an in-depth look at a new product, or why you started the company in the first place, we will run that for X amount of money." People will be way more interested in reading a thoughtful piece from an advertiser vs. a pop-up ad.
The newspapers could do more in-depth journalism. Release books in serialized forms. More feature stories. They could create a site, call it "New York Times Publishing" where people can self-publish ebooks. Build this whole community of readers and writers. They could also take the classified job ads from the physical paper and move all of that online; create a social network where people could network, find new jobs, help companies hire faster.
But the newspapers didn't build these platforms. Amazon built the ebook store. LinkedIn built the job site.
Remember when Netflix sent out physical DVDs? It wasn't their long-term plan, but it was good enough for the time being as they slowly built their brand and strong user base for their bigger vision of streaming shows and movies.
Now Netflix spends north of $10 billion a year on developing content. Goldman Sachs estimates that number will reach $22 billion in 2022 (if you click this link, watch out for the dreaded paywall on The Economist's site).
Which means Netflix is looking to buy a ton of content and the checks are enormous. Just look at the staggering numbers in this article talking about the deals with the Obamas, the creator of Glee (Ryan Murphy), and creator of Grey's Anatomy (Shonda Rhimes)
When Netflix (and now Amazon, Apple, Disney, Facebook, Google) are out there writing $100 million checks, think about how silly it seems for newspapers to be putting up $25 paywalls to new interested readers. Or asking companies for $10,000 to run a banner ad that everyone wants to X out of. Why not start selling your stories to Netflix! Newspapers have a wealth of talented writers and they still have these big iconic brand names - Chicago Tribune, New York Times, Washington Post - attracting top writers, photographers, videographers will not be difficult. Focus on making great compelling journalism and allow Netflix to repackage it into formats people are currently consuming. This is why I was not surprised to see The New York Times documentary "Diagnosis" on Netflix a few weeks ago. This is a step in the right direction. There should be a thousand more of these newspaper created shows out there.
And at some point, maybe you no longer need to rely on Netflix. Disney is a great example of this. Disney collected the money for their shows and movies over the last decade and now it makes sense financially to launch their own competitive service. Disney will end up making billions of dollars more by doing it this way vs. continuing to license things out (or, honestly, they could do both).
However, Disney would have never reached this point if they were too busy looking at the ants crawling into the house.
Because yeah, someone could probably download Disney movies for free. There's probably someone doing it right now.
But there are way more people who will pay for Disney +.
This ended up being a way longer post than I expected. Didn't want to add to it, but I have a part two in mind that ties all of these concepts together in terms of what they mean to the individual author or for small independent publishers (even applies to local bookstores too). Stay tuned!