Global Mode is just the beginning of the end, or the end of the beginning

Sometimes I think The NZ Herald is being sponsored by Big Tech. Are they even aware of the partisan twaddle their journalists are hacking out? It’s a bit like they’re employing people to piss on their own graves.

But anyway, my concern is not the print industry, but TV and film.

Here’s a link to an ‘article’ (I use the term with some disdain) thatappeared in the NZ Herald.

I really don’t know whether it’s lazy ignorane or bias which informs the skewed nature of this piece, but I felt it needed a balancing riposte, or at least some comment in the margins. So here below is a copy of the article, along with my comments in the margins. My words are italicised. Hopefully some food for thought here.

Game of modes: Legal battle to control what you watch

By Geoff Cumming 5:00 AM Saturday Apr 18, 2015

The word “control” implies that the parties in this ‘battle’ wish to dictate what audiences can watch. That is incorrect. One side has paid significant sums to copyright owners for the exclusive right to show their programmes. The other side has found a sneaky ‘back door’, through which they can direct their customers to circumvent local gatekeepers.

The companies seeking to protect the expensive exclusive rights they’ve paid for cannot in any fair sense be accused of wanting to ‘control’ what anyone watches. What they want to control is unscrupulous competitors circumventing their local exclusivity, and thus eroding their financial base.

  • Back-door internet TV services this week defied a ‘cease and desist’ order from the country’s biggest broadcasters. Geoff Cumming considers what happens now.

It’s the drawn-curtain revolution allowing mums and dads to do in the lounge what their kids are doing in the bedroom.

Yes. What those kid are doing is cheating copyright holders in order to gratify their viewing desires. So we are normalising this behaviour until it is challenged.

For two years, before Netflix’s New Zealand launch and Sky’s Neon streaming offering, a clutch of internet service providers, including Slingshot and Orcon, have provided Global Mode – technology allowing customers to watch programmes on overseas video streaming sites, sometimes months before they are shown by New Zealand broadcasters.

Correct. In what any lay person would recognise to be a clear contravention of copyright law. This is obviously irritating to consumers, who want film and Tv programmes when they want them, where they want them. And there’s the rub. A big one.

In contrast to tech-savvy youngsters’ use of torrenting sites and other shady methods to “unblock” trending programmes in the United States or Britain, Global Mode came with at least a veneer of legitimacy. While the tool is offered free, viewers still must subscribe to the overseas screening site – such as US Netflix or BBC iPlayer – satisfying customers with scruples that the content creator isn’t losing out.

So, if one is paying Netflix or Hulu, albeit while pretending to be living in the USA, where’s the problem? They are legal services, showing licensed product, right?

Wrong. The problem is this – for the most part, these streaming services don’t OWN the shows they stream. They have paid (and not much, for the most part) for limited licenses to exploit titles in limited territories. The owners of the works would rapidly go out of business if they had to rely on a Netflix USA license deal for their operating income, let alone a decent profit margin to attract investors.

Nor does it require technical smarts: there’s no software to download or configurations to change.

This much is true. Sort of. You might make this work without any problems. Eventually.

The claimed world-first technology for internet service providers (ISPs) gets around geoblocking technology, which restricts viewing to the country or region for which the site has screening rights.

Devised by a couple of tech geeks on the fringes of Auckland’s CBD, it works by tricking the overseas site into thinking your internet protocol address is within their jurisdiction.

Their company name is instructive: Bypass Network Services.

So now we can be proud of a pair of internet cheats who have built a business on an utter absence of scruples.  What’s next? A handy software tool that allows you to piggyback on your neighbour’s broadband? 

Encouraged by marketing that promotes it as legal, tens of thousands of New Zealand households have expanded their viewing horizons using Global Mode, watching either on their laptop or plugging it into their smart TV, from premieres and exclusives to the latest Game of Thrones.

Note the way the preceding paragraph is phrased to virtually endorse the product as a way for “thousands of NZ households” to expand “their viewing horizons”. Meanwhile, note the immediate switch to less rosy rhetoric when the opposition is introduced …

Now, broadcasting behemoths TVNZ, MediaWorks and Sky have joined forces with Spark (which both supplies broadband and on-demand product Lightbox) in a bid to squash the upstart. On April 2, they sent “cease and desist” legal letters to BNS and its customers giving them until Wednesday to close the service down. Some smaller internet providers folded; BNS and Call Plus (owner of Slingshot and Orcon) stared them down. Court papers are due to be served and, to no one’s surprise, Hollywood studios are joining the action.

Yep. Now we are talking about ‘behemoths’ squashing plucky little “upstarts”. As a kicker, Cumming drags in the dreaded “Hollwood studios”. Oh yeah, them too. Those big mean and evil corporations who are hell bent on preventing anyone from watching their movies for free. Imagine that. How unreasonable of them to expect to break even or make a profit. They should be doing it for art!

The test case looms as pivotal not just for the protagonists: it promises to shape mainstream viewers’ in-home entertainment experience, by either hastening or postponing the rise of internet-sourced film and video and the demise of “catch-all” TV channels.

Er, no, not really. Are there not already four legal video streaming services operating in NZ? Including Netflix?

The battle draws BNS and local ISPs into the global guerrilla war between film and television moguls – we’ll call them Big Media – and internet users, which has seen ISPs in many countries forced to block piracy sites only for newcomers to emerge. The big difference here is Global Mode’s claim to legitimacy.

“Big Media” is a perjorative term, which immediately casts the producers of film and TV content, and traditional distributors – theatrical, broadcast, and cable – as some sort of evil Goliath, squaring off against … who? Who is the David in this epic battle? The author suggests, “internet users”.

And there is the single most egregious piece of misinformation in this article.

No film or TV production company (big or small) wants to prevent people from watching their work. This is an argument about the price of access. Because they obviously can’t give it away for free. Someone has to pay for it, whatever the mechanism used.

The real war here is between old forms of distribution, and new. Bricks and mortar, hard wired delivery, vs online.

But let’s not kid ourselves that the old world distributors are “Big”, and the online companies small and “plucky”. They are anything but small. Google, Amazon, and Netflix are amongst the largest corporations on the planet. Google alone dwarfs all of so-called “Big Media” combined.

And the pawns are the creative workers making ‘content’, on the one hand, who are being steadily disenfranchised of all their rights; and consumers, who have bought into the illusion of ‘free’, and fallen into a honey trap that may enslave them.

Big Media say the technology breaches exclusive rights licensing agreements between overseas content-holders and local broadcasters. They claim this breaches copyright law; that the streaming rights of offshore providers such as Netflix US, Hulu, Amazon Prime and BBC iPlayer do not extend to New Zealand.

Precisely. That is what they say, and they are saying it because it happens to be true.

Those behind the technology say Big Media need to “wake up and smell the internet – it’s called the worldwide web for a reason”.

Slingshot chief executive Taryn Hamilton says internet viewing options make the broadcasting rights model of selling the same product multiple times in different territories “completely out-of-date. The music industry were kicking and screaming about this a decade ago; they wised-up and changed their business model and now there’s a thriving economy for music.

This is an utterly outrageous distortion of the facts. The worldwide music industry has taken a catastrophic hit since the proliferation of web based pirating and illegal file sharing began in the late 1990s. The introduction of iTunes stemmed the flow, but went nowhere near replacing lost revenues. Streaming was heralded as a potential savior, but it’s been a disaster for most artists, concentrating more income into fewer hands, while the overall pot continues to shrink. The largest streaming services, Pandora and Spotify continue to operate at a massive loss, kept afloat with speculative share market floats. So, “a thriving economy?” Hardly. More like a magical unicorn economy.

“The broadcasters need to go back to the rights-holders and say exclusive geographic content is a failed model.”

They won’t do that because it simply isn’t true. Exclusive geographic content continues to be the only viable way for producers of very high value entertainment to recover their huge costs. All the huffing and puffing in the world from ISPs won’t change this inconvenient truth (of course they want you to believe different, they are invested in their own propaganda – the health of their services demands consumers access their content needs online rather than from terrestrial and cable TV!).

Hamilton and others argue the technology is the digital equivalent of parallel importing.

“Global Mode has allowed New Zealanders to watch Netflix as a US citizen would, instead of someone like MediaWorks or Sky putting a premium on it.”

Parallel importing does allow NZ consumers to access certain goods at a cut rate. This is not the same thing as saying it’s right, or a good thing for anyone else. Manufacturers and distributors of many such goods are understandably upset that their ability to distribute their goods and set prices is disrupted, perhaps even affecting their capacity to trade profitably. Like anyone is going to shed a tear for Nike, Apple, or Samsung, but actually if every country in the world allowed parallel importing, even the biggest brands might suffer.

BNS commercial director Matthew Jackson says geo-unblocking is not illegal and the product provides access only to legitimate subscription services.

At this point, if Matthew Jackson proclaimed his belief in unicorns and the healthful benefits of fairy dust, I might not be surprised; but there is no need to lend any weight to his pronouncements. Of course he says his sneaky little service is not illegal. What else would he say?

“The accusation is that we are breaking an exclusive agreement – but that’s between [the NZ broadcaster] and the content owners,” Jackson says. “We are not a party to any of their agreements.

That’s great. Now he moves onto some really thin ice. He thinks its okay for him to offer back door entry for rights that are locked in NZ. It’s classic ‘disruption’ strategy in action. Ignore ethics, scruples, and maybe even the law. Just do it. By the time anyone does anything about it, you’ll already be rich. And there will be an army of entitled consumers ready to back you up with chapter and verse on why something they now regard as ‘normal’ must also be legal and right/

We are not trying to get around some loophole in the internet or circumvent laws – we don’t need to. It’s more about the fact people can choose what they want to watch, when they want to watch it.”

The rhetorical back flips going on here might cause serious injury to anyone less adept at kidding themselves. No, Matthew, no. Actually you ARE just trying to get around a loophole in the internet, and circumvent laws. That’s exactly what you are doing. There’s no denying the fact people want to choose what they watch and when they watch it. That’s always been the driver for internet companies that offer this promise to consumers. But you can’t use consumer wishes as an excuse for violating the rights of copyright holders.

The upstarts got eyebrow-raising backing this week from Consumer NZ CEO Sue Chetwin, who branded the legal threat “simply protectionism of old content distribution models”.

Yes, it is eyebrow raising in its sheer ignorance. And incredibly short sighted. Chetwin thinks she is backing consumer rights. In the long run, consumer choice and affordability will be eroded, not enhanced, by enabling actions that attack the fiscal base of film and tv production.

Consumers could end up paying more, Chetwin warned. “Consumers will always look for the best deal and if that isn’t offered by a New Zealand company, then they shouldn’t be stopped from looking overseas for a better deal.”

No, agreed. But they should look overseas for a legal service that is licensed to offer content to New Zealanders. These do exist.

Both camps concede there are grey areas around the legality of Global Mode: it’s not possible for copyright laws to keep up with technological advances. But Tech Liberty co-founder Thomas Beagle says copyright law becomes useless if consumers can’t access things.

“Parallel importing is legal and it says New Zealanders have the right to access the same items for the same price as those overseas,” Beagle says.

It is legal for some products in NZ. Yes. But this makes NZ rather unpopular with some companies. To hell with them, right? But there is always a quid pro quo in these matters. When it comes to relations with our bigger trading partners, don’t be surprised if the terms are less than favourable.

“Is there still a real market for New Zealand suppliers to sell content produced overseas to New Zealanders? In 20 years time we won’t be having this discussion.”

It’s likely that NZ suppliers are indeed facing a sunset future. Which makes the reality of this discussion even starker. Really, what we are talking about is one lot of middle men taking over from another. Instead of TVNZ, TV3, and Sky buying and packaging overseas content, and earning a whole lot of money from advertising and subscriptions; it’ll be whatever internet equivalent is left standing at the end of a messy feeding frenzy.

Most likely, it won’t be a local concern. It’ll be the biggest, most cashed up international corporation. Netflix? Maybe. But most likely, some as yet undeveloped variant of YouTube, or an Apple equivalent. And guess what? There will be tiers and windows of service, and none of it will be free, and maybe not even all that cheap.

Industry insiders, including Netflix CEO Reed Hastings, believe on-demand screening will usher in an even shorter sunset for traditional networks but Big Media aren’t letting go just yet. One key distinction between, say, the music industry and film and TV is the vastly different scale of production costs: this transition could be even more calamitous.

Yes. So what does this actually mean? The writer sweeps it under the carpet rather quickly. At worst, it’ll mean an end to any kind of sustainable local broadcasting of scale and ambition. The cynical might chime in now and say this devolution has already occurred, and there is unfortunately some truth to that.

Sky TV and other broadcasters pay big money to secure the local rights to air overseas and local content; they admit geo-unblocking technology threatens the sustainability of their businesses. That could flow on to local content producers and to the Government tax take, says Sky spokeswoman Kirsty Way.

“This product threatens the livelihoods of the thousands of Kiwis employed by our companies and our investment in local content,” Way says. “If our investment in content cannot be recouped, we are not in a position to support the local production industry.”

This is disingenuous and self serving. Sky’s commitment to local content is minimal. License fees offered to local productions could be described as risible, if TVNZ and TV3 didn’t offer even worse rates. Sky have had a license to print money in NZ for many years. What have they contributed to local culture? Nothing. The impact of their presence on local broadcasting has been to cannibalise and split audience share, and thus contribute to the degradation of a formerly healthy broadcasting culture. In the space of a generation, we went from having the best TV in the world, to some of the worst.

So it is a bit rich for them to cry foul now, when the same morbid process is about to overwhelm them.

That raises the question of who would pay for local productions if everyone’s using a global service: “I wouldn’t expect NZ On Air are going to fund content for foreign platforms.” Way says the technology threatens local production revenues as viewers watch them on overseas streaming services.

It’s already bad enough that a lake of taxpayer money is spent annually on supplementing the revenues of commercial broadcasters, so yes, this is a highly pertinent question to any of the thousands of people who are currently employed in the local production sector. We can’t all be employed on The Hobbit or Avatar. So, yes. What about NZ stories? What about NZ news? When our local variants on “Big Media” wilt and die, what will Google Inc offer in their place? The most likely answer is, nothing. Maybe a bunch of web cams? Some keen local bloggers knocking together jazzy bulletins in their spare time?

“Global Mode is created and marketed to specifically trick software to lie about a person’s whereabouts in order to access overseas content, we believe illegally.”

For good measure, she adds, Global Mode clips the ticket just as local rights-holders do.

Using legal avenues to clamp down on competitors is, of course, a time-honoured corporate recourse and Big Media have copped a vicious social media backlash. Why single out an open target when the volume of clearly pirated traffic is far greater?

As Jackson maintains: “Global Mode decreases piracy and increases consumer choice.”

Gee, but this fellow is a whizz at rhetorical smokescreens. Global Mode ‘decreases piracy and increases consumer choice’. Both positive things. Therefore, Global Mode must be a Good Thing.

Let me say this quite slowly. Matthew … no, stop splitting semantic hairs and raising irrelevant concerns; the fact is, you are profiting at somebody else’s expense, without license or consent. This is not a Good Thing. It’s actually quite a Bad Thing.

Way: “We acknowledge other forms of piracy are of concern but this is focused on Global Mode.”

Exactly. The activities of pirates may be pernicious, but doing something that’s a bit less evil doesn’t make it right.

But even those who merrily watch and download programmes via illicit channels feel sympathy for the networks – well, some.

“If they’ve paid for the rights it seems a no-brainer to try to close it down,” says music production whiz Josh, who accesses both music and video by fair means and foul.

Josh is an elder statesman of the generation who grew up with the internet; for them, tools such as Global Mode which require a fee to be paid are anathema.

Josh is also of the generation that acts out of such a massive sense of entitlement, that even when they know and understand their actions are morally and legally wrong, just go ahead and do it anyway.

It’s become progressively easier to get around geoblocking, he says, by accessing torrent files or streaming sites. “People know it’s technically illegal but we are so used to it; it’s normal. Occasionally, sites like Pirate Bay get closed down but they soon pop up again. They can only clamp down on it so far.”

“Technically illegal” means, it’s of no concern to break this law, because we think we can’t be caught, and there wont be any consequences.

At the younger end of the internet generation, university student Murdo Mackellar downloads everything from the latest blockbusters to timeworn classics his mother likes (“It’s how we watch TV,” he says). Internet users learn to judge which sites are safe – the overriding drive is that it’s free.

Though there’s a smidgen of guilt that content producers may suffer financially, Mackellar, 18, says people are “a bit cynical about internet companies nowadays. Eighty per cent of people on the internet use ad-blockers, so the idea that it’s generating revenue [for copyright-holders] doesn’t really work.”

This boy takes the big biscuit prize for tortured circular reasoning. He suffers a “smidgeon of guilt”, but rapidly dissociates himself from any responsibility for harming producers of the work he steals by saying that they’re not getting any revenue anyway, because he and his mates use software to remove the ads that might otherwise help to replace revenue lost from traditional models of distribution.

Big Media may be defending a still-valid model; they may find a helpful clause in the Copyright Act – but it looks to be a finger-in-the-dyke stance. Tech commentator Peter Griffin says the only real option for the networks is to make content easier to access.

That has NEVER been in doubt. The people running these companies are not stupid. They’re not willfully fighting the future. They do NOT hate new technology, and anyone who says they’re against innovation is an idiot.

The problem has always been that productive corporations like studios aren’t ever going to willingly surrender profit margins to suit the aspirations of new entrants. Why should they accept a business model that has the capacity to destroy them?

As things stand right now, if a Hollywood studio releases its work simultaneously online, the potential profit from such an exercise is well south of even the most modest likely return from traditional theatrical, DVD, and territorial broadcast windowing. A glance at a recent experiment – Sony’s somewhat forced release of The Interview – bears this out.

More than likely the workings of history will push the business online, and we will see theatres, DVD, and broadcasting wither away. But on current trends, the results won’t be pretty. First of all there will be a sinking lid effect as overall profitability of the sector plummets. The music business has already been there. The worldwide value of the music business today is only a third of what it was a generation ago. The income share is also way more polarized, with far fewer artists doing well – alarmingly many of them being legacy acts. It’s a bleak prospect for new entrants.

Bottom line bad news is there is very little scope for optimism when 30-40% of consumers get their music ‘free’ from illegal sources.

There is no reason to think the same fate isn’t already overtaking the film and TV industry.

This small local spat over Global Mode is just a blip on the radar. The really significant storm is the war between Old Media and Internet Monopolies.

Old Media companies are productive and competitive, they’re profit oriented, and they employ lots of people. They try to satisfy market demand, but they also allow some creative license.

Internet Monopolies are not interested in being either productive or competitive. They have no institutional memory, so they believe that ‘content’ can be anything, and everything, and they do not need to create it. Rather, their business model is to just take it, or point at it, and clip the ticket as customers go past. Competition is for losers. These companies play ‘winner takes all’ , and they play hard. It’s hard to count much past the fingers of one hand when considering the players in this universe – Google, Apple, Amazon, Netflix …????

The likely winner, unless there is some massive change in current legislation is going to be Google, who are tracking to become the biggest monocultural institution the world has ever known, by far. The prospect of a Googleized world is frankly terrifying, if their corporate record is any indication. Never before has a company trading on media been so outrageously disrespectful of creators rights, nor so exploitative of its customers.

“The companies will say they are still the simplest way to access content, but viewer demographics are changing and viewing habits are changing.”

Griffin says the options now available with smart TVs, including streaming and on-demand services, didn’t exist two years ago. In a couple more years, accessing worldwide content could be just a click of the remote away. Even Global Mode will become redundant as geoblocking collapses, he says.

Sky’s attempt this week to live-stream the first episode of the latest Game of Thrones as it aired in the US (though thwarted by gremlins) points to where broadcasters must head, Griffin says. “International simultaneous release on both broadcast and digital platforms, potentially with the same company doing it – that is the future. It becomes irrelevant where you are in the world and what market it’s serving.”

See my notes above regarding the likely economic implications of such platforms.

Culturally the impact could be extremely deleterious for the film and TV sectors of countries outside the USA and UK. The ability of smaller and foreign language producers to adequately promote their work will dictate how any simultaneous, international release will fare. Th best that might be expected is that whoever runs such a platform (hello again Mr Google??) might curate and promote quality work. Faint hope in an ever more homogenous world, where everyone in the world wants to see the same movie or TV series at the same time – too bad for the all the others they might like, but never bother to check out.

The big question, he says, is the future of free-to-air channels. He believes their only option will be to offer high-quality local content instead of paying big dollars for overseas shows. “There could be a renaissance for local content because that’s their only point of difference.”

The optimism of this prophecy is undermined by history. NZ had no local content production worth the name until the 1970s, and then it was only made possible by an act of parliament and state funding (NZ Film Commission) and TV channels that were operating at a healthy profit, with large local audiences. That latter condition does not apply today. The local free to air channels are already trying to hold viewers with local shows that rate. It’s not working. The problem is not that people don’t want to watch local shows. They do. But the audience, already too small to generate big profits, is fractured. It’s been smashed into a bunch of micro audiences. And now anyone under 30 doesn’t believe in paying for their viewing fun. Why should they when the internet offers cheap, easy, or free alternatives that have the benefit of huge promotional spend.

NZ Herald

About Costa Botes

I'm a freelance film maker based in Wellington, New Zealand. I make mainly long form independent documentaries about characters I find interesting.
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