For anyone who follows film, television, publishing and newspapers -- our culture industry -- Robert Levine, the former editor of Billboard and a New York Times alum, has written a must-read book.
In "Free Ride," Levine details how in less than two decades the Internet, dominated by technology companies like Google, has undermined the foundations of venerable institutions such as Warner Bros. and the New York Times.
Not only do movie studios and record labels have to reconsider their business models, but they also have to worry about their very existence.
There is no one-size-fits all solution, but Levine presents a variety of new business models and strategies to rescue these companies – from Hollywood’s UltraViolet to newspaper paywalls to online music streaming services like Spotify.
Levine argues that media companies and technology companies – currently fighting one another – must work together to make people pay for content, preserve artistic creation and help the Internet live up to its potential.
TheWrap spoke with Levine, who lives in Berlin, about why Google probably hates him, Hollywood greed and the knuckleheads over at The Guardian.
TheWrap: Let’s start with Google, since you devote an entire chapter to them. What’s so offensive about how the company operates?
Levine: It’s so omnipresent that people almost don’t realize its there. What’s really interesting is the extent to which our conversation about new media is shaped by Google from its funded think tanks to its human rights council. The extent to which they are everywhere in the debate is sort of spooky.
So should people view Google as evil?
A couple of people have said, what do I have against them? Maybe that’s my fault as a writer, but I don’t have anything against them. Google is a fantastically successful company that makes some great products. They spend a lot of money to lobby and are extraordinarily effective at doing that. I don’t think that’s evil, I think that’s business. But Google influences the world in less obvious ways and people should know more about it.
Has Google improved its stance on intellectual property at all since you wrote it?
Every few months Google will announce it’s improving its anti-piracy practices. I think it’s improving but it usually makes these announcements when it’s under pressure.
The have a lot of people whipped into frenzy about how SOPA [Stop Online Piracy Act] is the end of free speech online. There are a lot of very smart people who make smart points about why bills are flawed or bad, but a lot of those people are funded by Google and that’s kind of bullshit. If we want to have a serious, smart debate, Google is not helping that debate. They are standing in the way of that debate.
Populist sentiment seems to always side with the technology/telecommunications side of the argument. Why is that?
There is something about Hollywood that conveys offensive excess. The amount of money some people in Hollywood make is just absurd and indefensible. On the other hand, there are a lot of people in Silicon Valley that make money that is absurd and indefensible, too, they just don’t spend it in ways as grating on the American public.
The stereotypical guy in Hollywood making $15 million a year has a Ferrari and a list of mistresses. In Silicon Valley, that guy still drives a Prius and wears a denim shirt and chinos. He comes across as more likable and less threatening.
Is that reputation for greed warranted?
They have a bad reputation that they earned, but that’s not a legal argument. The idea that some people are nice and others are not doesn’t really have any effect on the law. Companies are greedy. That’s their job. If a company is not greedy, we call it a badly run company. Venture capitalists aren’t that likable either. I don’t think Jeff Bezos is a sympathetic character; he’s just smart enough to stay out of the newspaper. The tech business goes out of their way not to show how rich they are.
On the topic of Hollywood, almost all the studios are sinking a lot of money into UltraViolet to help solve the piracy problem. Is this the solution?
It’s a really fantastic idea, but I don’t know about the execution. Its debut was inauspicious to say the least; people seem to have had a lot of problems with it. That’s a bad sign. On the other hand, plenty of successful products got off to a bad start. What’s interesting about UltraViolet specifically is how can you offer people something more than piracy and UltraViolet does that.
So how can the “culture business” overcome piracy?
People are more convenience sensitive and less price sensitive than anyone thinks. Companies need to make legal commerce as convenient as possible and illegal commerce as inconvenient as possible. The goal should not be to eliminate piracy; that’s not realistic. The goal is to make it as inconvenient as possible. If you could make it so piracy is only on shady sites to of Russia where you’re risking your credit card, that would dissuade a lot of people.
A lot of businesses seem to be banking on advertising rather than having to charge higher prices though. What’s wrong with that model?
At time when advertising is worth less than ever, it’s being counted on to be worth more than ever? There’s quite a bit of dissonance.
Well Google does just fine. According to a recent study, Google generates 44 percent of online advertising revenue.
So as things go online, basically every other industry that runs on advertising is splitting 56 percent of the pie? That’s not going to work.
When I talk about solution, I don’t talk about slow layoffs. The newspaper business is trying to cut its way to profitability. That’ not a good idea. It could certainly cut to minimize loss, but don’t think you can cut your way to profitability. Finding other sources of revenue is much smarter and charging people radically different prices will be part of future.
Several newspapers seem to have taken to that this year by instituting paywalls. Do all newspapers need to adopt them?
At the higher end for ambitious papers with a national scope it behooves you to charge. If you’re spending a lot of money to generate news, if you have a bunch of international news and are covering the war in Iraq, there’s not enough ad dollars out there at CPMs you can get online to support that. You need to charge for news.
The leading reason why people don’t pay for news online is that few people are charging for it.
This just reminds me of the Guardian, which has a huge global audience but is hemorrhaging money. Don’t they need to start charging?
The Guardian probably could charge. Its editor, Alan Rusbridger has an ideology and is running the paper according to ideology. I respect that, but that ideology is going to cost a lot of people their jobs. The other thing that’s weird is that no one really calls him on it. For a guy who is pursuing what has so far been a ruinous business strategy, he enjoys an amazing amount of respect.
I want to shift gears here since I think when you finished writing Netflix had yet to stumble.
I don’t know how much those Netflix stumbles will mean in the long run. Everyone will always say they’ll cancel but does anyone really cancel? They go back to it. If you like Netflix and you want that service, there’s not a ton of competition out there.
The stock went way down because it was overvalued in the first place by most common metrics. Netflix is a fantastic service for the money. The price will have to go up, but if the price went up, it will still be a fantastic service for the money.