Beyond Numbers of Doom: Effects of Film #Piracy, including Economic Benefits, Industry Re-structuring, and #Creativity?

Two fascinating pieces by @CarlBialik about efforts to better understand the effects of film piracy appeared in yesterday's Wall Street Journal.  

"Studios Struggle for Focus on Film Pirates' Booty," details how film studios, primarily through its industry association, the MPAA, is working to update the research basis of their insistent claims of the harmful effects of film piracy on the industry.  In recent years, the conclusions of two 2006 studies that estimated roughly $6.1 billion was being lost by the industry (and $20.5 billion lost by the overall U.S. economy) annually to piracy have been repeated and even used with multipliers to generate larger subsequent estimated losses.  The MPAA is pulling back from citing that number and seeking to collaborate with researchers, many academic, to assess more accurately the complex effects of piracy.  This is a welcome if guarded step by the industry, particularly in that it includes sharing some internal data with outside researchers.

"Putting a Price Tag on Film Piracy" is a separate blog post in the Journal by the same author, Bialik (their Numbers Guy).  In it, he delves more deeply into some of the challenges of trying to fix a single number to capture the effects of piracy on the industry.  These include the rapidly changing film and wider entertainment marketplace, the notoriously secretive nature of industry financial reporting, and the elusively varied practices of piracy itself.  Not surprisingly, identifying the financial costs of piracy remain the primary objective of much of this research.

Yet at the end of the blog post, several other "related research questions" are identified.  In many ways, looking ahead and more broadly, these have the potential to produce much more revealing insights.  For Bialik, they are:

• Potential economic benefits, such as boosting other industries like broadband or creating buzz around traditional film box office
• The relative success, or its lack, of efforts to mitigate piracy
• The effects of piracy on the supply of creative work

Without unduly embracing piracy, the first and third of these questions raise an important -- if, for the industry, unsettling -- possibility: namely, that there may be more to piracy than the MPAA allows in discussing the issue only in terms of declining revenues.  Underpinning both is the new reality, really the new media and entertainment eco-system, in which film is situated.  More research about the future of film and possible business models for film companies is crucial, and some would argue that it is pirates who are, in fact, most actively exploring those futures.  The relationship between piracy and creativity, especially, deserves more attention in a world where innovative productions and delivery strategies are celebrated (and later often co-opted by the industry).  Hopefully the industry will move beyond its halting steps and engage in more open-ended research on its own future -- a future, as it happens, that includes potentially far-reaching new opportunities that have been illuminated by pirates but that the industry itself could lead.

Going Deeper on Dark Social: What the Invisibility of So Many Social Referrals Really Means

I've been thinking about a provocative piece published by Alexis C. Madrigal in The Atlantic online last weekend. "Dark Social: We Have the Whole History of the Web Wrong" makes a simple yet profound point about the social web that has emerged over the last decade to transform interpersonal interactions and communication. Madrigal's assertion is that while we celebrate the measurement of social interaction on Twitter and Facebook, these sites are but "the tip of the social iceberg." The bulk of sharing done online, he claims, occurs through email, instant messages, and chat that are largely invisible to existing analytics. Madrigal calls this mass of social traffic, which one study has constituting 69% of social referrals, "dark social."

For anyone who has already puzzled over how to measure, analyze or monetize social traffic, particularly across multiple platforms and networks, this is a daunting proposition. Madrigal's piece goes on to make an important observation about the structuring of social referrals. Essentially, he says, the ability to measure and analyze social traffic rests on public publication and sharing. Public sharing, in turn, is made possible in exchange for the personal data that we as individuals provide the networks.  That logic is powerful and drives Twitter and Facebook but it doesn't operate as directly with a range of other semi-private networks, again with email and IM being the most obvious examples. The implications of this line of thinking for marketing, brand communication, social media generally and even privacy are immense.

Yet for me the power of "Dark Social" is what it potentially says more broadly about open markets, the visibility and publicness of social interactions, and capitalism itself. That's quite a lot, of course, and I'm currently researching some of the complex connections for a project entitled, "The Age of Piracy." Suffice it here to extend Madrigal's provocations in two comments. First, there's a need to step back from believing that increasing social traffic or digital communication is somehow necessarily accompanied in lockstep by an increasing capability to measure and analyze that activity. The often-defining unwieldiness and dynamism of social technologies and platforms means that neither the hopes of marketers seeking foolproof metrics and monetization schemes nor the fears of civil libertarians wanting to deny ever-greater techno-surveillance and intrusiveness into private lives are being fulfilled today. Social traffic and networks may not be in the Wild West stage of their development but, as systems and networks, they remain largely fragmented, unstable across diverse markets, and obscure to consistent analysis.

A second extension or, really, expansion of Madrigal's thinking is the topic of the project I mentioned. Piracy today can be understood to embrace familiar acts of criminality and violence on the high seas, infringement of digital rights and other intellectual property, and the financial machinations of rogue traders, black markets and off-shore banks. Unlike terrorists, whose attacks rely on media amplification to instill fear across wide populations and to create platforms for political and economic critiques, these apparently disparate behaviors are driven by many of the same strategies: their actors want to remain invisible before the glare of media, they care little about conventional nation-states or legal regimes or religious values, and they seek to participate in unfettered capitalism. A final twist, ironically, and as I've previously written here, is the moniker of "pirates" adopted by the creators of the MacIntosh computer led by Steve Jobs at Apple and, in years since, by other innovators wanting to think differently. 

Piracy, in this sense, is more than the cyber-criminality that Misha Glenny and others have written about or even the cyber-threats made to both national security and individual privacy. Instead, it is the shadow of twenty-first century global capitalism that thrives precisely by exploiting the system’s digital and global connectedness, uncoordinated regulation, penchant for risk-taking, and pursuit of quick and massive profits. While that may seem an intellectual leap from Madrigal's invisible emails and instant messages, I would contend the difference is of scale and complexity rather than kind. For social traffickers and economic pirates alike, the informality and lack of metrics that have emerged around the boundaries of new technologies, networks, and markets allow for enormous opportunities to operate in the dark. Our challenge in response may therefore should not simply be to strive to create new tools for shedding light on what's currently invisible (emails, again, from Madrigal) but to re-think the structures of emergent networks and markets such that their boundaries (say, of intellectual property regimes) don't create such dark shadows.

More on Nurturing Innovation and Celebrating Piracy: Will the Chinese Steve Jobs be a Pirate?

If the challenge of making sense of (and advancing) innovation I raised in my last post is evident anywhere today, it is in China.  Christopher Beam's current column in Slate, "The Chinese Steve Jobs is Probably a Pirate" deftly probes which types of innovation we celebrate, which we condemn, and the murkiness of trying to distinguish them.

In the case of China, an important layer is obviously nationalistic: while we lionize our own pirates (of Silicon Valley, for instance), we readily demonize others, especially when they may seem to play in an economic system with different rules.  Yet Beam's piece is particularly useful for its reference to venerated American innovations, from Thomas Edison's phonograph to Hollywood movies, that were copied or at least adapted, updated, and improved for the mass market.  The Chinese, by this argument, have learned well the priority of implementation over invention long employed with great success by American innovators.

Put differently, the Chinese have recognized the potential value of being a second- or late-mover and tweaking existing products to exploit opportunities in the current market rather than seeking merely to invent entirely new products or markets.  As many commentators, notably including Malcolm Gladwell, noted following Steve Jobs' passing last fall, it was just this kind of re-thinking, packaging and marketing of others' inventions at which the Apple co-founder was a virtuoso.  Not unrelatedly, the other feature of successful Chinese innovation has been the use of the country's massive labor force to manufacture products cheaply.  Again, citing only the example of Foxconn as a crucial link in Apple's (and other "Western" corporations') supply chains, we can observe how blurred and uneasy are any boundaries we may want to draw between pioneering innovation and piracy.

Nurturing Rebels and Unlocking Innovation: The Creative Turn in Business and Leadership

The CMO of frog, Tim Leberecht, recently wrote, "How to Nurture Your Company's Rebels, And Unlock Their Innovative Might" http://bit.ly/Uz6btM (the same piece appeared at FastCo. Design). Despite its brevity, the post gathers a range of examples and sources, from innovation communes and Ashoka Changemakers to Roger Martin and U2, of a telling shift underway today to embrace oppositional thinking in business. Both in cultivating internal opposition to enhance innovative outputs and in driving a more fundamental resistance to business as usual across industries, leaders and organizations are increasingly supporting varied creative processes that seek to disrupt the status quo.

For those in the creative or some R&D-intensive industries, especially, this approach and attitude to gaining competitive advantage may not seem new. But there are at least a couple significant developments in play here.  The first is nothing less than an historical transformation of the status of creativity and innovation in business. That's a far-reaching claim, of course, and one I've developed in my own teaching and consulting on creative leadership (and that Chris Bilton has also made). Essentially, the idea is that the last two to three decades have seen a dramatic reversal of the longstanding containment - or even marginalization - of innovation within organizations whose priority had been increasing efficiency, lean operations, and rational problem-solving. The change in mindset, epitomized by innovators in Silicon Valley and outlined most familiarly in the writings on disruptive innovation by Clayton Christensen, is now embraced across industries and beyond, including the non-profit and public sectors (think "creative cities").

Leberecht's post offers a range of examples of successful contrarian practices, small and large, as noted, and concludes by recommending three possible actions for those wanting to make internal oppositions within their organizations productive.  They are:

1. Create safe spaces
2. Make sure that internal opposition is constant
3. Embrace passive and active opposition 

These are sensible enough, though anyone wanting think more deeply about how to develop and deliver on this capability for this creative internal opposition should read Roger Martin's The Opposable Mind.

As important as is the call for more creative and productive internal opposition, it's a second development that I find potentially even more provocative and consequential. The image introducing Leberecht's post is a Jolly Roger and the spectre of piracy threads through his examples of creative opposition. Yet in celebrating the misfits and the rebels whom organizations and even project teams rely on for daring innovation and value-creating differentiation, the old challenge of successfully containing and incorporating oppositional thinking re-emerges. When Leberecht urges launching the development of creative opposition by asking such questions as, What is your company's black market?, in other words, one can easily extend the answer beyond that which is productive for particular organizations. Consider hacking, for example: while there are now "hackers for good," this has become a safely contained and manageable (and, by some individuals, often profitably self-marketed) subset of a larger category of creative rebels, many of whom are not "good" and indeed have proven themselves menacing.  

This is more than semantics. To think more deeply about disruption or opposition leads to the discussion of how essential creative destruction is to genuine innovation in organizations, industries and markets. Even more, though, to speak of creative leadership or innovation in terms of piracy and rebellion should necessarily take account of the boundaries of those organizations, industries and markets -- and also acknowledge the hackers, pirates, rogue traders, dark pools, black markets and more that exist beyond them. Their global rise over the last two to three decades of technological change and globalization has been every bit as dramatic - and illuminating about the nature of innovation - as that of loyal opposition whose work remains internal to corporations or industries.  

Terrorists versus Pirates

Introducing a book published four years ago, I acknowledged the quandary of defining terrorists and terrorism. Not only is one man’s terrorist another’s freedom fighter; taking a longer view of which actions or groups should be understood under the label of terrorism and which not tends to cast as much light on those doing the labeling as those committing the acts. As an analyst, I was thus left to choose between two poor choices: plunging into a definition that would seem tendentious and emphasize certain aspects of action or ideology, or sidestepping such emphasis and thereby fail to provide a useful critical frame for the subsequent discussion.

There are patterns, though, that have emerged over time and multiple studies of different violent actions labeled as terrorism. For the sake of orienting my readers, I condensed these to five:
1. The deliberate deployment, or threat of deployment, of violent action against persons or property;
2. The production of anxiety and fear, and the disruption of social routine, by this action;
3. The pursuit of this action by individuals, sub-state groups, or states motivated by criminal, political, or religious reasons including the desire to demonstrate their power;
4. The intimidation of, or impact on, individuals who are neither directly involved in the violent action nor the primary targets of the actors’ motivation; and,
5. The often clandestine or semi-clandestine nature of the action and responsible actors.

While a useful starting point, what’s largely left out of this list is the importance of anti-Capitalist violence to understandings of terrorism, at least in Europe and the U.S. since the late 19th century. From the Haymarket bombings and Italian anarchism to Bolshevism to the Red Army Fraction and ultimately Al Qaeda’s bombing of the World Trade Center, the violent actions mounted against property, especially private property, and the capitalist system it represents offer a continuing if quite varied thread linking so-called terrorists. Like any broad categorization of terrorist groups, of course there are exceptions; the point is that violence or its threat against property and the capitalist-system organized around and protected by nation-states has been a mainstay of the actions labeled as terrorism over the last century and a half.

The other aspect of terrorism worth highlighting is more familiar: the media. My contention has been that the production of anxiety or fear and intimidation of individuals distant from direct involvement in violent action requires mediated communication of information about that action to be effective. In other words, for a violent event to be terrorism, that is, qualitatively different from just another violent event (as traumatic as that may be), requires a certain framing, communication and interpretation of the event to those who did not experience it firsthand. Depending on one’s political leanings, then, parallels might be seen between a capitalist-media-system organized around and protected by nation-states and the resulting labeling of actions or events as terrorism. Put differently, as I did in Terrorism, Media, Liberation, media communication heightens the visibility of violent actions even as the violent groups themselves seek, at least most of the time, to remain invisible.

These two highlighted issues, anti-capitalism and mediated visibility, seem relevant not only for groups designated as terrorists. Both capitalism and media also raise questions about that other spectre of non-state group violence, pirates. Piracy, of course, is millennia old. Indeed, arguably a golden age, was in the seventeenth and eighteenth centuries when capitalism was emerging – along with nation-states and global trading systems.

Today, piracy has evolved along several tracks. The Somali pirates in recent headlines have primarily seized ships in the Indian Ocean and held them, and their kidnapped crews or passengers or cargo, for ransom. Elsewhere, in the waters around Southeast Asia, for example, the physical theft of cargo is more common. In both instances, the legal language around piracy entails violence and, tellingly, the use of “war-like acts” of violence or criminality – in other words, acts reserved in the inter-national system for nation-states. The status of “non-state actors” and their violation of the right to employ violence ordinarily the monopoly of states is as critical for the legal characterization of pirates as for terrorists.

(As a sidenote, the fuzzy status of airplane hijacking is intriguing here: there would seem to be a parallel with the seizure of ships at sea for which the term piracy is typically invoked, yet that same term is rarely if ever used for actions against airplanes. This might have to do with the apparent distinction between financial and political motivation for such action. The French use the term, pirate de l’air for the hijacker of a plane, and pirate de la route for the hijacker of a truck or bus.)

Many contemporary pirates are adept at the use of modern technology. But the more compelling connection between technology and piracy involves the illegal infringement of copyright or theft of copyrighted material. Digitalization has enabled the ready manipulation and circulation of such materials, with the internet, in particular, allowing unauthorized sharing. Probably the most famous example of this process was the appearance in the late 1990s of Napster and the illegal downloading and proliferation of audio files in mp3 format. Despite the successful shutdown of Napster by the Recording Industry Association of America in 2001, the episode altered the basic business model – and dominance by a handful of longtime corporate players – in the music industry. In the roughly decade since, the film industry has feared similar downloads of its productions, causing, as some see it, a delay in the implementation of widespread internet- or broadband-delivered digital film.

Like piracy on the seas, the piracy of copyrighted material has a longer history. The latter phenomenon dates at least to the early 17th century – again, the time when capitalism and the private property underlying it were assuming what are for us recognizably modern forms. The linkages between these notions of private property and intellectual property remain underdeveloped, however. Moreover, as my friend Martin Roberts has put it to me, both kinds of property speak to the emergence of commodities created and regulated not only by capitalism but the legal orders of nation-states.

Piracy of both kinds also relies on minimizing the visibility of its perpetrators. Terrorism, recall, depends for its success on the ever-increasing visibility of events to influence those not having immediate proximity to events. Pirates, on the other hand, not only employ stealth and invisibility in order to carry out their actions but generally seek advantage by denying visibility or awareness to those beyond immediate events. Anthropologist Carolyn Nordstrom and others have referred to the enormity of the “hidden economy” existing outside or on the margins of the official capitalist economy, and many groups identified as pirates are directly involved in its operation. The role of media in increasing or denying visibility thus becomes crucial for the continuing success of pirates.

The juxtaposition of terrorism and piracy turns on this different relation to visibility. Even more important, though, is their shared if still different relationship to capitalism and the nation-state system underlying it. Terrorism, at least of the Al Qaeda strain, is in its attack on and critique of capitalism, in ways a double for that ideology. Piracy is different. As an extreme, violent version of the ever-growing pursuit of self-interest and private control of capital, piracy is finally guided by the same logics of political economy, however exaggerated. It is a shadow of capitalism. In this age of increasing circulation of global capital – not to mention of global media – the renewed prominence of that shadow should be unsurprising.