What has pissed me off royally lately is the amount of ignorance and “knowledge” in every damn discussion about piracy lately – and on both sides of the fence. I have made my living mostly from copyright fees and in TV and media for about a decade. In spite of that I’ve been very very critical about the current copyright systems, the mostly inefficient fight against piracy with block lists and ruining school kids’ lives with multimillion euro fines, and generally how outfits like MPAA, RIAA and their local counterparts function. Internet has been a game changer and the media industry dropped the ball in a pretty epic way.

One could talk about the cluelessness of the media industry, many artists and most politicians about how internet works ’till the cows come home, but that coin has an other side too. The internet is full of people who “know” how this is a golden time of income for the artists and the media industry, how bands (including lyric writers and the studio crew, apparently) could function just with throwing gigs and selling merchandize, how films are really mainly funded with product placement, how the only thing preventing film makers from selling movies as direct downloads with Paypal links is stupidity, etc. There’s a whole lot of “knowledge” in the other side of the issue that is actually total bullshit. I know this, because I kind of used to be one of those guys. For example before my stint working in the film business I was kind of wondering why the heck don’t the filmmakers sell the movies directly as downloads, because I certainly would be a buyer. To my defense, I should say that this felt like a thing that looks really simple to an outsider, but once you enter the sausage factory, things turn out to be quite complicated. And that’s of course exactly what it was.

Here’s the part where I blame the victim. You hear a lot of bitching from media industry and artists that these filthy internet people don’t understand the realities of the work. And whose fault is that, hmm? They don’t understand the realities of the work, because nobody has fucking told them. If one percent of the energy that is spent calling downloaders filthy thieves was spent educating the public about how the business model works now, maybe, just maybe someone would’ve already come up with viable alternatives. People don’t need platitudes and generalities anymore, people need numbers: how much does it cost to produce an album, how is it funded and where does the money come from, how does the money from gigs get divided between the people involved, how much does it cost to publish a novel and an e-book version of it, what goes into making a TV series or a film, etc.

It is not the customer’s job to come up with a working internet era business model for the media industry, but that doesn’t mean that there aren’t people out there who are willing to try and to and to give suggestions. If nothing else, understanding how things work could give some sympathy to the industry that looks like a good enemy for an ever growing amount of customers.

Ten points to a Finnish band called CMX who did exactly this right when I was thinking about this entry.

Funding Films In Finland And Europe

To put my mouth where my money is, here’s something I’ve learned about the film business in the last couple of years. The reality of funding films in Finland and generally in Europe was far more byzantine I even suspected, and it made me appreciate the problem of fixing this system which – in my opinion – is pretty badly broken in the internet era.

Important note: this is not meant to be a 100% accurate and detailed explanation of the system, it’s meant to demonstrate what kind of an interconnected messy spool of yarn the whole issue is.

Grants, Funds And Tax Breaks

First of all, a big part of the film funding comes from different kinds of organizations, funds and tax breaks, which aim to support local film culture and to bring in foreign multi million euro film projects, which will then proceed to dump those euros in the area by hiring everything from film professionals to carpenters and caterers. Some of this money has to be paid back, some of it is for the film makers to keep, with the logic that it pays itself back through the money the film project dumps in the area. These funds and grants also have different kinds of requirements, for example the main fund in Finland requires the backing of a TV network.

The Distributors

Then we come to the actual money shot, the distribution companies, whose money forms the lion’s share of the film’s budgets. These distributors work in a certain area, like Finland, Australia + New Zealand, German speaking Europe, etc. It varies a bit. The aim of the film project is to sell the distribution rights to as many distributors as possible even before the film is completed, and the money coming from distributors forms an important part of the cash-flow. You can’t necessarily sell the rights everywhere until the film is finished, and in any case many distributors won’t pay before they have received the finished film. If you have a completion bond, which is sort of a guarantee that the film will be finished, you can use these agreements as a backing to get a bank loan, and so on – there are incredibly difficult loops to jump through here.

Filling The Gaps

Then there’s product placement, sponsors and other such things, but they are mostly about plugging the holes in the budget. Important, but not as important as many people seem to think. As far as I know, product placement doesn’t depend on the amount of views of the film, but it’s an one-off, a clump of money the filmmaker gets. I can’t really see how it would work dynamically, as some people seem to think.

Dividing The Loot

When the film is finished, it’s hopefully paid in full, but if the film went over budget, it’s nail biting time. By this time the distributors have paid the filmmakers a certain agreed sum, called Minimum Guarantee. They have sold the films to cinemas, DVD-outfits and so on in their area, and they start recouping the MG from ticket sales and such. When the Minimum Guarantee is recouped in full, the film makers and distributors are off the red, and it’s the time for actual income and profit. Yay. This is divided according to certain pre-arranged percentage, and usually the film makers spend the money to pay the last outstanding expenses of the film, and use the money to finance the pre-production of their next project.

So What Gives With Global Digital Distribution?

So, why no direct global distribution of the film, or day-and-date multiformat release? Problem number one is that if the film makers distribute the film directly online by themselves, they stomp on the foot of their distributors – who, as you might remember, bring in most of the budget. No distributors, no money to make the film. So, why don’t the distributors do this? Here the main problem are the movie theaters, who want to show the film first, and don’t want to compete with digital distribution or physical discs. Bam, that’s a huge amount of income out from distributors’ hands.

What about a company that distributes the film globally? Here we run into resources. For a feature film distribution rights for a single country could bring in anything from thousands to millions of euros to the budget. Multiply that sum with 100 and that’s the sum a single company would need to be able to put into the film – and take the risk that it never makes it back. That narrows the playing field a lot.

Complex Solutions For A Complex World

So, that was in a nutshell and approximately how films are funded in Finland and generally in Europe. In US things work very much differently, since many of these functions are handled by the studios themselves in the big films, and in the indie films (ie. not backed by a big studio) there are investors and such in the mix. As you can see, it’s not as easy as to “we’ll make a film, put it up for a download, pay it with Paypal donations and jump in the jacuzzi”. Dismantling or altering a system like this is hard. I’m not saying it’s impossible, or that it’s the customer’s responsibility to do it, I’m just saying that it’s harder than most people realize.

I’m predicting a ton of replies about how piracy is not the main culprit of the loss of revenue with media industry, as opposed to the amount of entertainment exploding and peoples’ money being spread thinner, how statistically speaking those who download entertainment illegally spend more money in it than those who don’t, how the artist has to become an marketer and a salesman, how this and that. Yeah, yeah, yeah – I’m not disagreeing with that, I’m agreeing with it a whole lot. But the thing is, that’s not the point in here.

So, artists and media industry: unless you want to look like whiners or the evil empire, how about speaking openly about how things work and the difficulty in adapting the business model to the modern era. And to the opponents, unless you want to come across as clueless nerds who are easy to ignore, how about demanding those answers, getting to know the industry and methods you protest and sticking to the facts, instead of hyperbole about every rocker swimming in money, hookers and cocaine. What this situation needs is some fucking constructive dialogue between the artists, their companies and the modern customers.

This is a challenge to everybody who works in a creative industry: instead of whining about piracy and people not understanding, educate them. Tell them how you make your money and how much a people in your area earns, and how things have changed. Also, listen to them when they tell you why the current methods of fighting piracy by block lists don’t work, and join the fight. This is a discussion that needed to happen a decade ago.

In the end, what this builds down to is the fact that we have a group of people who want to make art and entertainment and need to pay their rent, and a group of people who want to consume and support it. Can’t we all just work together to make this happen?

(thanks for brain bounces to Jarmo Puskala)