Entertainment & Entrepreneurship

The Broadway League announced the financial statistics for the official end of the 2008-09 Broadway season which runs from May 26, 2008 to May 24, 2009. Although attendance was slightly down, revenue increased by 0.6% despite the recession to a record $943.3 million.

According to the League, paid attendance at Broadway shows was 12.15 million, as compared to 12.27 the season before.  This season, 43 shows opened (10 new musicals, 8 new plays, 4 musical revivals, 16 play revivals, and 5 special performances), which is the highest number of shows since the 1982-1983 Season when 50 productions opened.

The Broadway League is the national trade association for Broadway producers and theaters, including "theatre owners and operators, producers, presenters, and general managers in New York and more than 240 other North American cities, as well as suppliers of goods and services to the theatre industry."  

The Tony Awards were created by the American Theatre Wing, which now presents the award in conjunction with The Broadway League.

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A study released last week by NPD Group stated that 63% of Americans have played a video game in the past six months, higher than the 53% who went to the movies during the same period. (The study notes that 94% of those surveyed listened to music, but does not report what percentage saw a movie either in a theater or at home.) The financial impact is that gaming accounts for one third of the consumer's average monthly spending, according to NPD survey data.

The statistics explain why companies selling video game systems and high-cost premium games are faring somewhat better in the economic downturn. Given Blockbuster's difficulties (see my previous post), the company's recent announcement that it will begin experimenting with the addition of video games to its subscription service should come as no shock.

Blockbuster intends to add the service to its online rental service, initially testing it for existing subscribers. The company has yet to announce the fee structure, but expects to add both an additional charge for the game rentals and count the games against the number of rental items the subscriber has "at home."

GameStop has been one of the more successful companies in the current economy, with its first quarter sales rising 13%. Ironically, the game company did not play the Wall Street game particularly well and lost some value because the sales were below analyst targets. Despite the analysist expectations and the potential of Amazon entering the used game market, GameStop's quasi-rental model of easy resale may be a better model than Blockbuster has in mind.

There are two problems with a game rental service. First, the demongraphics may put the gamers as younger members of the household. Parents will join Netflix for the family, and they will have as much benefit as the children in the household. Parents tend to buy game consoles and games for their children, and tend not to admit to being the primary consumer of these games.

Second, games should have a longer home-life than DVDs, so the idea of churning through 2-4 games per week seems less likely than doing the same with DVDs. Of course, in actuality, many of the DVDs sit in Netflix subscriber homes for weeks or months, but no consumer would buy the service if they intended this result. In other words, the upside of the video game subscription does not have the value that a DVD subscription can have.

If Blockbuster (or Netflix, Amazon or GameStop) changes to a pricing model based on quarterly rentals or a guaranteed return price, then consumers will see the potential to save if they play enough and consider trying the service. Like club discounts, subscription services are built on the differential between what the consumer thinks is possible and what the consumer actually does.

There is more money in gaming than ever before. But Blockbuster still has yet to understand the market.

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Both CD Baby and TuneCore announced expansions of their services enabling bands increased access to national distribution without the need of even a pressing and distribution agreement. CD Baby allows bands to create packaged CDs or digital offerings. They have expanded the service to allow for digital singles to be sold in addition to the digital albums, given greater flexibility for musicians pushing singles or adding cuts between albums.

At the same time, Digital Media Wire reports that TuneCore has expanded the services it provides through Amazon.com, and will provide a new pressing and distribution service for the nominal charge of $31.00. CD Baby has a $35.00 membership fee.

The two services are slightly different, with CD Baby having a larger revenue base, but TuneCore offering more international options and advanced production services. Since iTunes and Amazon have moved to dominate sales of music, the access to these markets by both services makes either a good choice for most bands.

For example, I love the TuneCore tee-shirt service. Having the tee-shirts made along with the CD artwork is a stroke of marketing brilliance. Mixing services, banner ad campaigns and other add-ons can push the costs up, these services represent the bits and pieces of the traditional music industry. The radio service Jango goes a step further, offering paid airplays - the Internet version of payola. Other services offer to promote songs to radio stations.

These new services reflect the unbundling of the traditional music industry. Musicians have the ability to select which services they want and what price they are willing to pay. The trend will likely result in each of these discrete services being unbundled from the label - only to be offered again on a package basis for the band. The choices seem to be growing quite rapidly.

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The New York Times reports that the bitter lawsuit brought by Woody Allen against American Apparel and Dov Charney has ended on the courtroom steps with a $5 million settlement in Mr. Allen's favor. The settlement was half the initial amount sought by Mr. Allen.


According to the Times, statements by the two men showed the bitter personal nature of the dispute:

“Threats and press leaks by American Apparel designed to smear me did not work and a scheme to call a long list of witnesses who had absolutely nothing to do with the case was also disallowed by the court,” commented Mr. Allen. “I suspect this dose of legal reality led to their 11th-hour settlement.”

Mr. Charney, was unrepentant, explaining that "his insurance company had forced him to settle."

“I’m not sorry for expressing myself,” he said. “I wish him the best with his career, and I am looking forward to his next film.”

The arguments by Mr. Charney ignores both federal and state law, which generally prohibits the false and misleading inference of endorsement and the use of a person's identity for the commercial sale of products.

New York's privacy statute is the oldest statute of its kind in the U.S.:

    § 50.  Right  of privacy. A person, firm or corporation that uses for advertising purposes, or for the purposes of trade, the  name,  portrait or  picture  of  any  living  person  without  having first obtained the written consent of such person, or if a minor of his or  her  parent  or guardian, is guilty of a misdemeanor. 
 
    § 51.  Action  for injunction and for damages. Any person whose name, portrait, picture or voice is used within  this  state  for  advertising purposes  or for the purposes of trade without the written consent first obtained as above provided may  maintain  an  equitable  action  in  the supreme  court  of this state against the person, firm or corporation so using his name, portrait, picture or voice, to prevent and restrain the use  thereof;  and  may  also  sue  and recover damages for any injuries sustained by reason  of  such  use  and  if  the  defendant  shall  have knowingly  used  such  person's name, portrait, picture or voice in such manner as is forbidden or declared to be unlawful by  section  fifty  of this  article, the jury, in its discretion, may award exemplary damages.

Of course, even commercial content is protected by Free Speech. A true parody advertisement would be protected speech, even if it were used in connection with the sale of goods or services, but it is rare for a a product campaign to be true parody.

Particularly given Mr. Allen's history stopping such parody ads by other companies, the choice by American Apparel was odd and the decision to settle made sense - for the insurance company if no one else.

The contours of publicity rights are among the least defined in U.S. intellectual property law, but using a celebrity on a billboard to hock clothes is not. It comes with a $5 million price tag.

 

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In its weak quarterly earnings report, Blockbuster blamed some of the weakening sales declines on improved movie house attendance.

As reported in the LA Times, Blockbuster said "we estimate nearly 3 million more people are going to the movies each week in 2009" than in 2008, he said on a conference call with analysts. "This has been pulling traffic from Blockbuster stores."

The same article noted that Netflix revenue has not been damaged by the 14% increase in movie ticket sales. Netflix gained almost one million new subscribers.

The business model is shifting. People do not like to be reminded of costs each time they listen, read, or watch. Netflix understands the changing market. Blockbuster is tied down to a retail infrastructure that will not help them without dramatic restructuring.

For all its size, Blockbuster reports only $27.7 million net income on $1.12 revenue. Stock prices are tumbling.

Blockbuster needs some quick innovation. Perhaps becoming a retail showroom for Amazon as it launches its Kindle 2 and Kindle DX, or Sony and its stuggling line. Better yet, add a subscription model that is more generous than Netflix and add an e-book subscription service as well.

The time for incremental change is gone. Blockbuster must cannibalize itself or prepare to join the list of nostalgic names that people used to visit when getting their entertainment.

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Europe is headed for an internal culture clash as French politicians endorse an industry-backed proposal to battle online piracy by barring people who repeatedly download illegal content. Known as three-strikes laws, the proposed policies would allow an ISP to remove customers who have repeatedly ignored notices to stop illegal downloading.

The French proposal is more circumspect than some similar proposals in the U.S., though it is often described as more far reaching. As a law, the system has some procedural safeguards in place to provide for a hearing prior to the enforcement of the provision. At the same time, if enacted the rule will be positive law rather than merely a policy of a particular Internet provider. Potentially, this gives its adoption a much more powerful impact.

Even as France is moving in this direction, the European Parliament is moving to ban such laws. In fact, the EU went a significant step further, adding language stating that "internet access is a fundamental right such as the freedom of expression and the freedom to access information."

Despite my deep concerns over Internet piracy and its real impact on jobs in the U.S. and development of new artistic works in the U.S. and abroad, the Internet has simply become too integrated into the public's access to news, governmental services, and social interactions to adopt this policy approach.

Increasingly, government documents, public records, and other essentials are available only on the Internet. The Internet is an essential tool used by most educational institutions. Arguably those cut off from their ISP can rely on public libraries for their access, but those cut-off without water and electricity can also be directed to public shelters.

The question is not whether shutting off the ISP is appropriate, but whether it should be done without some significant oversight. To the extent that the French proposal requires an administrative hearing, such a system might work. To be viable, such a hearing must put the burden on the ISP to demonstrate that the person abusing the ISP is guilty of the misconduct and allow for the accused misuser of the ISP to enter evidence in his or her defense.

In the modern information age, the ISP has taken on the role of a public utility, and like electric companies, water suppliers and gas companies, the utility should have a heavy burden before it cuts users off. Also, the ban must be limited in time. The British proposal, for example, caps the ban at one year. Three  months would probably be sufficient for a first time offender unless the specifics were egregious.

The present proposals in the U.S. call for ISPs to control and regulate their users. This allows for none of the critical safeguards. The time-frame in which ISPs could have privately operated a three-strikes policy in the U.S. has probably passed. While Internet access has not been declared a fundamental right in the U.S., most of the public treats the Internet like a utility and any attempt to take self help will likely result in some form of utilities regulation.

The debate on this issue may continue for quite a while, but as the implications of a three-strikes policy gain attention, the popularity of this solution will likely erode.

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The Los Angeles Times reported a major "glitch" in the software used by its servers lost a significant amount of data collected for the May sweeps - the tracking which sets advertising rates for the upcoming television period.  In fact, the article reports that the glitch was really the second significant failing by Nielson during the sweeps. Nielson also reportedly admitted that its users generally do not know how to use the set-top 'people meters' designed to track their viewing patters.


So why rely on Nielson for ratings? Google has already established it can predict the geographic distribution of flu by tracking its search engine data can probably predict the viewership of particular television shows based on audience reaction. There is no question that the data can be used to track very particular responses from viewers.

Of course, general viewership interest is not precisely the same as minute-by-minute viewership tracking. But then again, the 12,000 homes tracked has its own sample problems. In particular, it has long been known that the home patterns miss the university living environments for a large segment of the 18-25 demographic and may paint a distorted picture of the growing online viewership. Rather than people meters, surveys, e-mails, and other less-instrusive tools could be used by the 12,000 volunteers to gain far greater data. (But please, let's be sure those surveyed are participating volunteers.)

As a side note, television news does not even report on its viewership, with a recent study by the University of Pennsylvania's Annenberg School for Communication reported only 22 news reports related to television viewership trends in the past nine years.

Perhaps the two stories have something in common. The data regarding television trends is probably troubling to television executives. Revenue is down, but so is viewership. Perhaps its not the economy ... stupid.

Neilson's technicial glitches only remind us that television is an aging medium trying to keep to its traditions. Perhaps that's why there is such a good musuem dedicated to its history.

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As reported by DigitalMediaWire, Warner Music is stopping all plans for future capital investments in digital distribution after being required to write down $33 million in its recent investments. As reported, Warner CEO Edgar Bronfman Jr. said he is "disappointed" with the MySpace Music joint venture, because it "has been slow to create monetization tools and to be able to impact revenue-generating way, the massive audience that they have been able to attract."

Having complained about MySpace failure, he signaled the retreat of Warner Music from its ownership model of digitial distribution in comments made to investment analysts:

"We do not intend to make more digital venture capital investments. The intention was to (invest in) young companies pursuing innovative business models. Some of these digital venture capital investments have not met expectations. It makes sense to recognize the very different valuations these companies are receiving in the current economic environment," said Bronfman.

In the print financial report, Bronfman sounded a different note: "We are laying the foundation for future growth by extending our digital presence and increasing the number of expanded rights agreements to now include about one-half of our current global artist roster."


In the weakened financial environment, the warchests of traditional media have been tapped, leaving Apple, Microsoft, and Google to fund - and control - the future of digital media content.

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Just as the Red Flag Rules were about to go into effect, The Federal Trade Commission announced another delay, stating that the agency would delay enforcement until August 1, 2009.

As noted by the FTC, however, "announcement does not affect other federal agencies’ enforcement of the original November 1, 2008 compliance deadline for institutions subject to their oversight."

The FTC explained its action as follows:

“Given the ongoing debate about whether Congress wrote this provision too broadly, delaying enforcement of the Red Flags Rule will allow industries and associations to share guidance with their members, provide low-risk entities an opportunity to use the template in developing their programs, and give Congress time to consider the issue further,” FTC Chairman Jon Leibowitz said.

Time will tell.

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Having previously posted on the demise of the print newspaper, in March, I discussed the recommendation that newspapers give away book readers as part of subscription contracts. (In fact, I went further, urging pharmacies to brand the readers, put in applets to remind/confirm daily medication schedules, and give them to their heavy users as a way to improve medical delivery.)



There are two surprises in the most recent announcement. First is the speed with which Amazon is scheduling the creation and obsolescence of its reader formats. I have often been impressed with Amazon's use of social networking for reader feedback and both impressed and concerned regarding its vertical integration of self-publishing, but the realization that it must move from format to format in a few month will press all other developers in the field. If Amazon has a real shipping date for the new device, it will steal the serve from News Corp and Hearst, leaving the media publishers behind yet again.

The other surprise comes from the competing technology to digital ink, namely the netbook market. Apple has decried the netbook market, labeling it "junk." At the same time, however, reports have Apple in talks with Verizon Wireless regarding a large-format iPhone. Not precisely a netbook, not precisely a book reader, but potentially a new format ideally suited to the market.


The battle between Apple and Amazon will focus on the most valuable publishing space - student desktops. Newspapers may be fading, novels are entertainment, but highschool and college students consume millions of dollars in very expensive and very cumbersome print products.

While serving as a law school dean, I tried to advocate switching our materials to digital formats using netbooks. While I like netbooks very much, Apple is right - they simply did not deliver the necessary quality at a price to make the system work. The large-format digital book or iPhone will solve the problem. And Apple has some advantages. Students care less about the eye fatigue, they want color, and they want a fast browser. Moreover, since both devices are based on wireless phone networks, they free the academic institutions from the bandwidth problems of laptops. Students and schools have both been waiting for these technologies.

I expect Pearsons and other educational publishers to be scrambling to make themselves relevant. Ubiquitious classroom tablets will further energize social authorship of school texts. An academic Wikipedia on a classroom tablet will transform the market. It is too early to know whether Apple or Amazon will dominate, but everybody else has a lot of cramming ahead if they hope to catch up.

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A number of events have begun to reshape the Good Books proposed settlement. In a recent ruling, District Court Judge Denny Chin extended the fairness hearing by four months, until September 4, 2009. Judge Chin's order noted requests from authors and from Professor Pamela Samuelson from Berkeley School of Law as some of the parties requesting the extension to review the merits of the proposal.

In an e-mail from the Authors Guild, they continue to urge their members to stay in the class. "We don't recommend opting out -- this settlement is a good deal for authors, bringing their out-of-print books back to commercial life (while leaving the marketplace for in-print books alone...)."

Professor Samuelson's concern is not for the authors represented by the Authors Guild or works in the public domain but rather for the "orphan works," those out of print works where the copyright owner cannot be found or no longer exists. For example, if a copyright was assigned to a company that went out of business, it may not have transferred the copyright when winding up its assets. The copyright owner is therefore extinguished. Authors who have died without heirs knowing they have been given the copyright or rights escheating to the state also result in orphan works.

An orphan work cannot opt out of the settlement. For the public, this creates legal access to these works. But for other publishers, libraries and those concerned about Google's unique position in the new book marketplace, the settlement provides it a significant legal advantage over other archives. Of course, owners of orphan works are highly unlikely to sue. The risk of liability may be overstated by the other archives, but immunity is a wonderful thing. The Internet Archive attempted to benefit from this immunity by joining the suit as a defendant, but the court was unwilling to allow the claim. (How must it feel to fail to even be sued!)

The economic advantage is less clear. Despite the potential for 'the long tail' in publishing, Amazon is betting that the marketplace for published works is new works. But the breadth of the catalog may provide a strong market edge. Readers will use Google - allowing it ever more ad revenue. And as Google partners with Sony or others, it may leverage the scope of its collection into the sale of new works.

This leverage has raised concerns in the Justice Department. Concerns raised by Pearson and four other publishers regarding Google's use of the settlement to create a legal monopoly in publishing has triggered a Justice Department review into the settlement. 

Ultimately, the case should generate a statutory amendment to the Copyright Act, giving other archives and libraries the ability to publish the same content as Google on similar terms, subject to opt-out provisions. There are some implications to such legislation and U.S. compliance with international treaty, but that can wait for another blog - or for someone to introduce the legislation.

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