As a followup to my previous blog post, where I claim that the EFF is pro-piracy.

There are a number of articles on the EFF website that make me think they are pro-piracy, or, at least, indifferent to the issue. For example, this article, posted a few weeks ago (and linked to all over the internet by pirates):

EFF: Most Pirated Movie of 2009 … Makes Heaps of Money

According to TorrentFreak, last summer’s Star Trek movie was the “most pirated movie of 2009.” So it seems that Paramount Pictures was prescient when it gave testimony before the FCC that used Star Trek as an illustrative example of how “Internet piracy” is poised to devastate Hollywood and (though the nexus here is less than clear) undermine residential broadband in America.

Funny thing is, Star Trek is on course to make more than $100 million in profits.

Here’s the financial breakdown, courtesy of The Numbers.com, which gathers financial data for movie industry analysts:

Production costs: $140m
Promotion costs: ~$100m
Global box office revenues: $385m
U.S. TV syndication rights: $30m
DVD & Bluray revenues (anticipated, based on sales and rentals since Nov. 2009): >$100m

When I first read the EFF’s article, my thoughts were that the movie studios picked a particularly bad example to cite as a victim of piracy. But, I also had doubts about judging the health of the industry based on one movie, and thought about the fact that Star Trek was highly rated by viewers, so maybe they can legitimately claim it should’ve made more. (Box Office Mojo readers gave the movie an “A-”.)

But, then I checked the EFF’s numbers, and I became less convinced of their argument. So, to clear up some of the sketchy numbers: According to BoxOfficeMojo, the production budget was $150 million (rather than $140 million). More importantly, “Global box office revenues” is the money taken by the movie theaters. I’ve read elsewhere that Movie studios and theaters split that money 50/50 (*see update). This means that, from the movie-production studio’s perspective, the box office revenues that they see are half of $385m.

When “DVD & Blueray revenues” say $100m, I believe that’s the amount of money paid by customers to retailers (e.g. Best Buy or Amazon), not the amount of money seen by the movie studios themselves. Like the movie-theater numbers, the movie studios might be seeing half or less of that $100m, because stores like Best Buy typically make half of the money from each sale. Plus, there’s some small packaging costs.

The updated numbers, from the movie studio’s perspective, should say:

Production costs: $150m (not $140m)
Promotion costs: ~$100m
Global box office revenues: $192.5m (not $385m)
U.S. TV syndication rights: $30m
DVD & Bluray revenues (anticipated): >$50m* (not $100m)

Using these updated numbers, then things look like this: Costs: $250m, Revenue: $272.5m. Total profit: $22.5m or 9% return on investment. And that 9% mostly disappears once you consider inflation and interest rates.

The EFF’s numbers suggest that Star Trek made a 115% return on investment. More importantly, the EFF article contains this:

As 2009 comes to a close, there is no evidence out there that “Internet piracy” is leaving us with fewer creators or fewer copyrighted works

I think that shows the EFF’s attitude towards piracy: it isn’t a problem despite what people say; it’s a non-issue, it needs no remedy, creators need no protection from piracy. Honestly, this sounds like something that the Pirate Bay could’ve written.

Update:
* I’ve seen a number of contradictory claims about how movie theaters and movie studios split the money on ticket sales. Whatever the case, it is misleading for the EFF to use the $385m “Global box office revenue” number without qualifying the fact that studios do not see 100% of that money, which is what the average reader will assume.
Source #1: “This percentage will vary from movie to movie depending on the specifics of the individual leasing deal. For instance, 2 movie theatre managers told me that for Star Wars Episode II: Attack of the Clones, the studio took 100% of the box office take for the first week of release… Now, as you move into the second and third weeks of release, the percentage starts to swing to anywhere from 45% – 55% that the theatre gets to keep. It gets better after the fourth week when theatres generally can keep up to 80% or better of the ticket sales.”
Source #2: “Except for a small operational fee paid to theaters, for the first two weeks that a movie was playing in theaters, 100% of ticket revenue went to the studio. In the third week, the studio would take about 90% of ticket revenue, while the theater would earn 10%. The fourth week, they’d split revenue 80/20, then the next week 70/30, then 60/40, until the level reached 50/50, where the division of money stayed until the end of the movie’s run.”
In response to Source #2, one commenter writes: “I study the industry and have 2 years of contract data between theaters and movie distributors. The average rental fee paid on all movies in that time period was 52%. In the first week, the highest it ever is is 70%, and it goes down from there. So you’re wrong when you say that theaters barely make any money on the tickets. They keep 48% of it on average.”
Source #3: “Upon initial release, for the first 10 days of a movie, the box office is split 80/20 in favor of the studio. For the next 10 days, it is split 60/40 in favor of the studio. For the next 10 days, the split is 50/50. For the next 10 days and usually a films final week in theaters the split is 30/70 in favor of the theater. If a movie makes it to almost 2 months in theaters the split goes to 20/80 (theater favor) for the remainder of the film’s time at the theater. For most films - this ends up being a 50/50 split over the entire run of the movie in theaters.”

It would be nice to get the numbers from some typical theater - something like “in 2009, we took in X dollars of revenue from ticket sales, and paid-out Y dollars to movie studios”.

The EFF (Electronic Frontier Foundation) does some decent stuff, and does some work to help protect freedom of speech on the internet. But, once you know that pro-piracy crusaders like Cory Doctorow and Lawrence Lessig are associated with their organization, then it should raise some red flags. Doctorow, for example, has sold “I pirate music” t-shirts on his website, and promoted books teaching people how to pirate and not get caught. Looking at EFF’s stance on issues, it becomes clear that they are (as an organization) taken a pro-piracy stance on things. This is the reason I could never actually support their work. It would be great to see a more moderate version of the EFF, one that doesn’t take a pro-freeloader / anti-creator stance.

Recently, the EFF began promoting “Real Net Neutrality”. Here’s what they say:

“Tell the FCC: Don’t let Hollywood hijack the Internet”

Already with the title, the EFF is drumming up fear-tactics with words like “hijack the Internet”. What does that mean? It sounds scary. I can imagine all kinds of terrible things. What it actually means in this context is “Content creators are unhappy with rampant piracy on the internet. Current legislation would permit ISPs to not-deliver internet packets when they contain copyright-infringing material”. That’s a whole lot less scary, but the EFF clearly wants to use a scary phrase.

Last fall, the Federal Communications Commission proposed rules for “Net Neutrality” — a set of regulations intended to help innovation and free speech continue to thrive on the Internet.

But is the FCC’s version of Net Neutrality the real deal? Or is it a fake?

Buried in the FCC’s rules is a deeply problematic loophole. Open Internet principles, the FCC writes, “do not… apply to activities such as the unlawful distribution of copyrighted works.”

The net-neutrality bill would allow ISPs to throttle the unlawful distribution of copyrighted works? Gee, it’s a good thing the EFF has stuck out their neck to fight against this. Based on the phrasing, it almost seems as if the EFF thinks that piracy should be permitted as a part of “free speech”. Personally, I actually find it “deeply problematic” that the EFF thinks throttling copyright-infringement is a problem.

For years, the entertainment industry has used that innocent-sounding phrase — “unlawful distribution of copyrighted works” — to pressure Internet service providers around the world to act as copyright cops — to surveil the Internet for supposed copyright violations, and then censor or punish the accused users.

And the EFF uses the scary-sounding phrase “copyright cops” to describe the action of not delivering or slowly-delivering packets when people are involved in copyright violations. Since Net Neutrality is only concerned with the speed of the internet, it seems that slowing down/stopping the delivery of copyrighted material is equivalent to “censoring” and “punishing”. Stopping copyright infringement is not censorship. The fact that the EFF would describe it as censorship tells you a few things about where the EFF stands — and it’s against the creators.

From the beginning, a central goal of the Net Neutrality movement has been to prevent corporations from interfering with the Internet in this way — so why does the FCC’s version of Net Neutrality specifically allow them to do so?

The claim that “from the beginning, a central goal of the Net Neutrality has been to prevent corporations from interfering with [piracy]” is historical revisionism. I support net neutrality, but not when it involves copyright infringement. (To use a page from the EFF’s playbook, perhaps we could say that the EFF is attempting to hijack the Net Neutrality legislation to make the world safer for piracy.)

Besides, if the EFF believes that the goal of Net Neutrality is to let everything flow freely, then they should take a real stand and tell us that child pornography is part of “free speech” and ISPs should never be allowed to interfere with its transmission. At least then, they would be consistent.

“Tell the FCC that if it wants to police the Internet, it first needs to demonstrate that it can protect Internet users and innovators by standing up to powerful industry lobbyists. Sign your name here to demand that the copyright-enforcement loophole be removed.”

This is clearly a false dichotomy. The EFF wants to make the internet safe for piracy, but it does this under the cloak of saying that the FCC isn’t standing up to “powerful industry lobbyists”? Whether you think big-business has too much influence in government doesn’t mean you can just trample over the legitimate rights of copyright holders. That’s the equivalent of saying that Oil Companies have too much influence on the government, and therefore, people should be allowed to steal all the gasoline they want until the government stands up to “big oil”.

The EFF really needs to straighten out their act and stop going out of their way to side with freeloaders.

Addendum, January 16:
Please see my recent post about the EFF’s attitude towards piracy where they say: “there is no evidence out there that “Internet piracy” is leaving us with fewer creators or fewer copyrighted works”. (In other words: piracy is not a problem; there is no need to address the piracy issue.)

EFF: Piracy Not the Problem - “Piracy is the red herring of the digital music distribution debate” (Ironically, that statement was made at the peak of the Music Industry’s sales - in 1999. The past ten years have seen music sales decline by over 50%.)

EFF releases tool to detect if your ISP is throttling BitTorrent.

EFF defends the makers of Morpheus, Grokster, and KaZaA against a lawsuit brought by the record companies. (Admittedly, I’m doubtful that the creators of P2P software should be held liable, but I wouldn’t want to support them in court, nor could you argue that they were naive about creating anything other than software for the purpose of sharing copyrighted material.)

At Wired magazine: “The EFF vigorously urged the Copyright Office to authorize jailbreaking, which in this case is hacking the phone’s OS, and hence allowing consumers to run any app on the phone they want, including [pirated applications and] those not authorized by Apple.”

Dave Winer, an early supporter of the EFF:

I gave $5000 to the EFF when they started, I think it was in 1990, with the noble goal of protecting freedoms as our technology and culture move online. I think I have supported every cause the EFF has adopted since then, but that’s no longer true. I gave this a lot of thought, believe me, and had a long email exchange with Brad Templeton, the chairman of the EFF board of directors, and think they have become as radically polarized as the entertainment industry, and like Hollywood are now working against the interests of those they were meant to serve. The issue appears to be copyright, and it appears that the EFF believes there should be no copyright….

The problem with the EFF position is that in order to remain consistent, they have had to say that copyright doesn’t exist — if a policy or law restricts what a user can do on the Internet then that is a bad policy or law. The courts can’t agree with the EFF. I don’t agree with the EFF.