Television and how it is evolving in China

What the CCTV Building Really Means

In the Hutong

And back in the proverbial saddle

1136 hrs.

Beyond its visually stunning architecture, Rem Koolhaasnew headquarters for China Central Television (CCTV) is provoking commentary for a range of reasons, not least being the curiosity of an old-media giant spending so much money on an iconic building.

As tempting as it might be to suggest that hubris combined with a sense of monumentalism compelled CCTV to burst into Beijing’s central business district in such a spectacular way, but I think there is actually more to it.

I think we’re seeing the beginnings of a new attitude over at CCTV, one that recognizes the massive challenges the state broadcaster faces as it struggles to sustain growth, and I think the new building is neatly symbolic of that. Check out “The Bowing Tower” at Media’s website and let me know what you think.

Digital Video and the Coming Showdown with Broadcast

The floor of the CASBAA Dome, West Kowloon, Hong Kong

All the TV people are dressed like bankers

1320 hrs.


Just finished my panel at CASBAA 2008 on “Strategies for a Post-Olympic China.” It’s humbling to be on a stage with people like Gehua Senior V-P Li Danyang, Terry Mak from Celestial Pictures, Peter Schloss from BroadWebAsia, Paul Wang of CSM, and to have Cosmedia Group CEO Tony Tse moderate. These may not be household names, but they should be, because each of them has helped lay the foundation for China’s media future by building companies that are testing the edge of what is politically acceptable and commercially viable.

But enough gushing.

We have seen the future, and it is Youku

We were all positive about the prospects for online video companies like Tudou and Youku in China, and not just because the issue of SARFT licenses has been so recently cleared up. What I said I though was exciting about online video is that the medium actually offers the first viable opening for foreign film and television into China on something other than constricted official channels or on pirated DVD. If the video site owners are smart, as their revenues begin to grow, they will cut deals with content owners. Content owners, for their part, will cut deals (probably revenue sharing) with the video sites.

Peter Shloss, whose company is actually deeply invested in one such site, told the audience “I’m ready to license now.”

The audience, clearly moved (or taken aback) by our passion and relative unanimity, used their wireless voting devices to confirm that they saw online video as the most interesting media opportunity in China in the coming three years.

All good stuff. Very exciting. A win for all. Mostly. Because all of this is predicated on three issues:

1. Perfecting the advertising model with better measurement and business models tweaked to prevent things like click fraud; or finding another approach;

2. Convincing the content owners that this is a wise thing for them to do with their expensive programming;

And the one I kicked in:

3. Managing the eventual showdown with traditional broadcasters. Because the reckoning is coming, and it is coming right soon.

Gunfight at the Tudou Corral

Up until now, neither the government nor the broadcasters have seen new media generally and online video in particular as a threat to the traditional TV business in China. Revenues have been small, television ad income has continued to grow, and the people watching those videos had little spending power. Let them have their little games, the broadcasters seemed to say, we have Real Business to do.

But there is another meme growing quietly in the wings of this conference, and Paul Wang hinted at it during our panel. The Annual CCTV advertising auction is coming in two weeks, and three people I have spoken to in the last 24 hours all agree that this auction will break CCTV’s winning streak. If this year’s take (for 2009) beats last year’s (for 2008), it won’t be by much. Whether it’s the post-Olympic hangover, a growing fear, uncertainty, and doubt spurting forth from the world’s financial markets, or something more fundamental and tectonic is the only question.

My bet is on the “fundamental and tectonic.” Which takes us to online video.

The most interesting part of the semi-annual CNNIC report is not the big headline number of how many Internet users China has, but the demographic profiles of those people. For a long time, the overwhelming majority of regular Internet users in the PRC have been of university age or younger, and they didn’t have much to spend. But recent reports from CNNIC make it clear that this is slowly starting to change. As those people who used the Internet growing up are graduating from college, getting jobs, and looking for ways to spend their loose change, the “Internet generation” is turning into a very interesting target audience for a lot of advertisers, and not just the ones selling computer gear.

This demographic shift is happening at a time when many advertisers – including but not limited to the multinational corporations – are starting to worry about what they are getting for their money. Add to this picture the curtain of fiscal conservatism that is descending on marketing officers as a result of the global financial crisis, and suddenly advertising on television no longer looks like the automatic slam-dunk it did at the height of the Olympics.

Here is my scenario: either this year, next year, or in 2010 the results of the CCTV advertising auction are bad – so bad that they cannot be hidden. We’re talking like a 10-15% decline, or maybe worse. Meantime, Youku, Tudou, et al are starting to rake it in. They’ve concluded content licensing deals, they’ve fixed (or kind of fixed) the measurement issues, and there are upwards of 300 million users online.

At that point, it is not going to take long for CCTV and its fellow broadcasters throughout China to add things up. They will turn to the State Administration for Radio, Film and Television and to the Publicity (propaganda) Committee of the Party, making the case that these private online companies are not only hurting their business, but, worse, doing damage to the ability of broadcasters to serve their propaganda/social administration function for the state.

At that point, the government’s options become fairly clear: restrict the online video sites, let the broadcasters run whatever content they want, or force some kind of accommodation between the two sides (i.e., compel each of the sites to take on a state broadcaster as a part or majority shareholder.)

Don’t Go Down that Dusty Street

China’s broadcasters wield tremendous political power, (for all the expected reasons and for many others that we won’t go into here,) and they will not go gently into a future where they cater primarily to people who cannot afford an Internet connection. There is just not enough money in it.

The wise thing to do for the online video companies is to recognize – right now – the danger implicit in their own success, and start working to prevent that showdown. But I’m not optimistic. These companies are so focused on the plentiful immediate challenges to their prosperity and existence that they can’t worry about an over-the-horizon threat.

On the other hand, that’s exactly what Boards of Directors are supposed to be for. Once they get done lecturing their management about how important it is to make money, the next topic on the list should be about how to avoid getting sat on.

CASBAA is Proving that Asia is Not a Place

In the VIP Room, CASBAA Dome, Hong Kong

I knew I should have had lunch…or even breakfast

1445 hrs.


Much of the discussion in the opening panel this morning was a focus on how Asia is such a superb market in the face of the changes happening around the world today. I agree with that halfway, but I was amazed at the number of longtime residents of Hong Kong, Singapore, China, India, and other territories in this region who still consider Asia to be a single market.

I’m note sure we can consider China a single market, much less all of Asia.

I’m not just being pedantic

The danger implicit in thinking about Asia as a single market is not that we here in the region might start believing it, but that people sitting in New York, London, or Los Angeles might start believing it, and may start acting on that assumption. It is wrong on the same level that thinking of The Americas – from the Yukon to Tierra del Fuego – is all one market. And I would argue there is more cultural commonality between North America and Latin America than there is among Asian nations.

The problem with this thinking becomes evident when you have a satellite broadcaster trying to run a channel around Asia. There are so many different sets of political and cultural sensitivities around the region that if you want to sell your channel around the region, you need to edit your channel using the standards of the most conservative culture in the region (or what the assembled broadcasters here call “the lowest common denominator.”)

Imagine, for example, having to broadcast The Sopranos, or the movie “The Big Lebowski” across the region. In several markets in Asia, the f-word is verboten, even on pay-TV and late at night. If you strip the F-word from those works, you may clean them up, but you remove a level of authenticity from the material that is going to anger viewers elsewhere in the region.

But if you frame Asia as a region, you have a hard time caring. What’s important is that you are in as much of Asia as possible, not that you are creating a localized experience for everyone you reach. It obscures the real challenges and the most rewarding opportunities.

Brands are Global, Content is Local

Alex Arena from PCCW had the quote of the day this morning when he said that “all content is local.” Heads nodded around the room. Which mystified me. Because if we all agree that all content is local, why do continue to frame our businesses in terms of supra-local entities that are driven by global imperatives (cover Asia) rather than local opportunities (what is happening in India?)

The record speaks for itself. The successful global broadcasters (and online companies) in Asia approach the region as a convenient geographical cluster of diverse markets. This keeps the focus on using the regional organization to support local marketing efforts, rather than trying to push a generic Asian service on 2.5 billion very non-generic Asians.

The Youku Gambit

In the Hutong

Is it mist, or is it fog? YOU decide

1402 hrs.

Youku’s public relations team are pumping out a release claiming bragging rights as the most popular video site in China, based on a survey by the Data Center of the Chinese Internet under the China Internet Society, a government-sanctioned trade group.

I question the impartiality of surveys that come out of trade groups singling out a paying member as a market leader, especially when those surveys just happen to use the success metrics advocated by the company in question. Given that iResearch, Baidu Index and Google Trends apparently confirm Youku’s position, why bother leading with the weaker statistic?

But let’s leave that aside for the moment, and grant that Youku may in fact be in the lead. What is more important is why, and what that means for Youku’s future.

Quick, get the popcorn – Youku is loading

Youku is particularly happy about that the statistics suggesting that people spend more time on Youku than on its competitors’ sites. There is a good reason for that, as Senior Analyst Elias Glenn at Pacific Epoch pointed out on Twitter today. Youku acknowledged in its release the importance of “professionally produced” long-form content (i.e. movies and TV shows) to the company’s performance.

What is unclear is whether some, most, or all of that long-form content is being show without prior permission of the copyright owners.

There are two possibilities.

Is that the Union Jack or the Jolly Roger?

First, that Youku has reached agreements with all the copyright holders of the content on its site, including 20th Century Fox, the distributors of the Cameron Diaz movie “What Happens in Vegas” that I was enjoying on Youku (sponsored by 51jobs) just a few minutes ago. Or Universal, who kindly allowed Youku to show me “Leatherheads” with George Clooney, and this year’s blockbuster, “Iron Man,” courtesy of the generous folks at Paramount.

If that is the case, they are to be commended, and I will happily join the line of people seeking stock when Youku goes public. Somehow, I don’t think that’s happened yet.

The second is that Youku has not reached those agreements with all of the copyright holders, that its vaunted filtering systems are failing to pick up the pirated videos (despite being able to filter politically objectionable content), and that Youku is building its spectacular user numbers based on its role as a pirate multiplex.

That is going to be a concern to both investors and advertisers.

While China may not enjoy a reputation as an ardent defender of intellectual property rights, the time where a company with Youku’s profile can openly operate as a copyright scofflaw are rapidly coming to an end. Baidu and others have learned that China’s intellectual property laws are slowly growing teeth, and Youku, laying claim to the mantle of the most popular site of its type, would be an ideal chew-toy.

There’s something happening here

As discussed in a post at the beginning of the month (“The online video Hail Mary”), it would be unwise to discount the collective wisdom of Victor Koo, his advisors, and his investors. These are not foolish people. They knew their license was in the bag, and they invested more money.

Similarly, I believe they know that a rights reckoning is coming, that at some point Youku will cross an invisible line in the sand and battalions of television copyright attorneys will descend from the sky, spewing paper death in the form of cease-and-desist letters, or worse.

There is a strategy afoot, one that could never work in the U.S., but can work in China because of the very restrictions the government has placed on conventional media.

I’m not sure what the strategy is, but here is my scenario:

The aforementioned regiment of airmobile copyright attorneys shows up at Youku, girded for battle. Victor Koo opts to parley. Koo suggests that the two sides are in a position to help each other. Content providers – especially the foreigners – need a way to provide access to their content to Chinese people that will help undercut DVD piracy. Youku needs content offered in a format that does not overtly threaten the broadcast powers-that-be.

Youku has the audiences, a decent relationship with regulators, and growing advertising revenue. For a cut of the revenues earned on their content, the copyright owners agree to hold off for a period of time on pressing any claims. Meanwhile, Koo and company engage in a vigorous four-way discussion involving Youku, regulators, advertisers, and content owners to evolve into the country’s leading online TV outlet.

Youku then cuts similar deals with the local broadcasters, very few of whom have had much success building their own online offerings, and would be just as happy letting Koo do all the work in return for a cut. After all, 50% of something beats 100% of a cost center.

This would never play in the U.S.

But here? Where legal music goes for $0.15 a track and where Batman can’t make it past the censors?

It might just work.

The Online Video Hail Mary

Jiaodaokou Road, enroute to Gehua Dasha

No sign of the Olympics here

1221 hrs

Steve Schwankert at IDG covers off on Youku’s recent US$ 30 million capital infusion, and treats the event with an appropriate dose of optimistic caution.

China video sites have been taking in a lot of cash lately, over US $100 million total in the past few months. The digerati have been understandably cynical: the State Administration for Radio, Film, and Television (SARFT) and the Ministry of Industry and Information Technology (MIIT) have done little publicly to hearten investors in the sector. Regulations passed last year make it seem at first glance that the sector is closed to all but state-owned broadcasters, while not documenting an alleged promise that current web video sites would be “grandfathered.”

More ominously, a recent list of licensed broadcasters was issued, but Youku, Tudou, 56.com, and YouTube were conspicuously absent, and 56.com has found itself shut down, with no word as to why or when (if ever) it will return. When you put all of that against what is arguably the most conservative media regulatory environment in a decade, you can start to understand the cynics.

I have to admit, my first reaction was something like “I wonder what they were putting in the bottled water at the negotiating table.”

Who knows what?

But there are indications that the investments – while certainly not on the “low risk” side of the portfolio – are not as ill-conceived as they might appear. (Disclosure – I have zero interest in any of these sites, and have no client relationships with them or their investors.)

First, my informal poll of the media people in the capital suggests that Youku and Tudou will get licenses at some point in the not-too-distant future. Chances are pretty long against it happening before the Olympics or even before the annual Party meetings in the fall, but I’d say it is in the offing.

Second is what I call my “wiser fool theory.” We who have lived a long time in China have a tendency to believe that anyone who has less experience in China than we do is more likely to be taken to the cleaners on a given deal. Annoyingly, we’re usually right. But not always.

One of the things that keeps China so interesting for both investors and business people is that unlike more transparent societies, information flows unevenly here. I’d say it is possible – if not likely – that the investors who just put their cash into Youku have information that is germane to the regulatory situation that is not public. They may have received what they feel is adequate assurance that a license is forthcoming.

At this point, you are probably remembering Samuel Goldwyn‘s legendary line that “an oral contract isn’t worth the paper it’s written on.” You would be right to do so. Assurances from policymakers – however high in government – about future events are only good if the situation does not change in the interim. But a senior official in a position to know – or even decide – may well have helped (unofficially, of course) to assuage investor concerns. I would be floored if this was not the case.

There are also probably some other mitigating factors, such as agreements with local broadcasters, that give Youku additional regulatory air-cover.

The point is this: I’m willing to grant the investors the benefit of the doubt because they see the little picture more clearly. I only hope they’re seeing what they think they are.

Contrarians at the gate

Third, the subjective value of Youku as a company is probably pretty low right now. This is the ideal time to invest, when Youku needs cash and the hardware to manage its growing traffic, when there is no license, and when a similar site has been forcibly shut.

I find it fascinating that no mention is made in Schwankert’s coverage or the press release about what the VCs are getting in return. I’d bet Maverick Capital, Brookside, Sutter Hill Ventures, Farallon Capital, Chengwei Ventures, and Western Technology Investment all cut a pretty fair deal for themselves.

Playing the long game

So I figure licenses are coming, and the investors got in at a good time. None of that eases the uncertainty around the sector in the longer term, however.

This remains a profoundly sensitive environment for media – especially foreign-invested media – and the Internet is no exception. Among all types of Internet sites, the government is most cautious with online video: giving the people the power to broadcast makes conservative officials (who are used to total state control over the communication of information) feel like they’re getting a wedgie.

No matter how much care Youku, Tudou, Ku6 and others take with what gets posted, a cold northern wind – a “crackdown” in response to a political crisis of some sort – could spell an instant change of fortune.

There is also the implicit competition problem. Broadcasters are state owned, these sites are not. Some very desirable viewers with money to spend are spending more time watching Internet stuff and less watching TV, and few broadcasters have demonstrated much skill in creating compelling online video offerings of their own.

At some point, broadcasters are going to begin howling about these sites that are showing video, are not state owned, and who are taking away their most prosperous viewers (and their advertising revenues.)

Either a change in the political environment or broadcasters falling into dire straits might be enough to foment a change in policy. But if both happened at the same time – and if that situation coincided with one or more of the sites running a video or two that stepped beyond the pale – you would wind up with a perfect storm that would see the government “re-examining the structure of the industry.”

Caveat investor

None of this means that the VCs made a bad investment. I am certain they do not think everything to be smooth sailing after getting past the license problem. After all, we have not even discussed the problem of actually turning all of those unique visitors into ordinary cash.

What it does mean is that they – and we – should expect there to be problems in the future. What will determine the ultimate fate of the companies is how well they (and their investors) prepare themselves for and respond to The Perfect Storm when it finally does come.

Cable TV in China: Invest Elsewhere

In the Hutong
Yes, dear, toast is dinner
1938 hrs.

Earlier this month, I was honored to sit on a panel on the future of China’s cable television industry sponsored by the American Chamber of Commerce, joined by my friend Kris Kender from CMM Intelligence (the guys who publish the China Media Yearbook & Directory), Leo Austin of Augus Partners, and Tao Libao of China Multimedia Networks. The panel was expertly guided by Jeremy Goldkorn of Danwei.org.

139 Million What? I’d Like Some of That…

On the minds of many of the people in our audience was when and how it would be possible for foreign companies to make some money on the 139 million cable TV subscribers (that’s households, not people) in China.

The hopes of the industry are pinned upon some valid commercial and economic truths:

– After nearly two decades of development, cable TV in China is little more than basic cable, a depressing collection of 40 or so look-alike channels with content that is occasionally superb but more commonly mediocre;

– Cable operators make a pittance – maybe RMB 14 per month per subscriber on average;

– Getting cable operators out of this low-end rut means adding more and better programs, new channels, more services, and putting in the systems that will allow operators to charge for them;

– The country (i.e., the nation’s cable operators, taken collectively) has invested billions of dollars on fiber-optic and cable networks, and would clearly want to get the most economic value out of all of that wiring;

– Chinese people love home entertainment.

All of this would seem to spell endless opportunity for companies, both foreign and domestic, seeking to make fortunes selling networking equipment, head-ends, set-top boxes, software, expertise, and even programming to China’s cable industry.

Funny, It Didn’t LOOK Like a Mirage

There is only one problem:

Cable TV in China is not an industry.

At best, it is a highly regulated utility.

At worst, it is a technological laboratory for engineers.

Chinese law and policy state emphatically that foreigners cannot own or control cable TV stations or channels – that is reserved of Chinese organizations, and only those so authorized by the State Administration for Radio, Film, and Television (SARFT).

Some of the world’s largest media organizations – News Corp. and Viacom not least among them – have repeatedly attempted to work around the letter of the law, only to find themselves each time face-to-face with the law’s intent in the form of agitated, vengeful aparatchiks.

The vast majority of the air time and cable bandwidth available to the operators remains unfilled, hampered by party-enforced restrictions on the local creation of programs and import of content. And value-added services? Cable is rapidly losing out to the Internet and mobile.

Indeed, with operators eking out an operational living from the narrow, shallow stream of subscription revenues and their shares of advertising, they can barely contemplate investing in the network upgrades that would enable them to provide the premium content and value-added services that not only don’t exist, but are unlikely to leap into existence as long as the industry is constrained from taking outside investment.

Are there experiments taking place in high-definition television, IPTV, digital, and premium channels? Sure. But these experiments and others like them have been going on for over a decade. And the government seems content to allow experiments to continue, but commercial rollouts have yet to happen.

There is more to it, of course, but that’s the gist.

The painful consensus of the panel was that among the multitude of Chinese national treasures we evil foreigners want to get our claws into, the cable TV business is not only among the least accessible, it is also among the least appealing.

Jeremy Goldkorn asked me if I had money to invest in cable television in China, what would I invest in. I wasn’t much of a sport. I told the truth: if I had money to invest, the last place in China I would invest it is cable TV.

The End of Cable

Cable television will continue to lumber along for some time in the future, for a couple of reasons. First, the growing appetite for television advertising time – ANY television advertising time – will ensure that revenues continue to pace economic growth. Second, China’s urbanization plays right into the hands of cable operators, although returns will decline as they make investments to service the growing urban working class.

But unless something significant changes about the way the sector is regulated, at some point in the future, things are going to turn ugly for the operators. With no means at their disposal of significantly improving revenue streams or financing the hardware that would enable new revenues, cable will become what radio and terrestrial television are today – lowest common denominator entertainment. It’s what everyone will have, but everyone will want more.

From a macro-policy level, the course of action that makes the most sense, that will allow the country to get the most out of its cable networks and to use them the way they are most needed, is a radical one:

• Set a basis for fairly valuing the networks.

• Have the local municipalities and the provinces sell them to the telcos after the anticipated round of telecommunications industry restructuring is complete.

• Separate out the channel production and advertising sales functions, spinning them into independent entities that will continue to be regulated by SARFT and the Party.

• Lay out must-carry regulations that ensure that current channels have grandfathered carriage.

• Let the telcos invest in the networks as both programming delivery and service delivery systems, parallel with other broadband but aimed at consumers who want alacarte services, not raw Internet coming into their TVs.

Is this a radical solution? You betcha.

Will it happen tomorrow? No.

Is this the likely eventual fate of the cable networks? Absolutely.

Hollywood Icon Comes East

In the Hutong
Rolling with the changes
1842 hrs.

The Hollywood Reporter, long essential morning reading for the entertainment industry in the United States, Europe, and elsewhere, has had permanent roots in China for a couple of years now, with an official bureau led by Jonathan Landreth. The THR staff have provided a much-needed addition to the coverage of the music, film, television, and new media industries here in China. With occasional exceptions, however, much of the fine reporting coming out of THR in China has been trapped behind a firewall.

That all changed today, when THR launched The Hollywood Reporter Asia, a website that not only allows us to see the superb coverage coming out Jonathan and his team here in China, but also regional and global industry news. One other thing I really like about THR-Asia is that it is edited right here in Beijing, underscoring Beijing’s growing role as the media center of the region.

Give it a look. Personally I’m adding it to Danwei.org as part of my daily routine. If I have one quibble, it is the lack of an RSS feed, but I understand that with THR offering their content for free, they want you in the site for the ads. A small price to pay.

Picture 2

eKarma: Have a Little Virus, Pirates

Third Ring Road East
Breathing deep the inversion layer
1022 hrs.

Steven Schwankert of Village Grouch fame wrote an excellent piece for IDG (picked up here in The Washington Post) describing how Chinese fans seeking to download illegal copies of Ang Lee’s excellent film “Lust, Caution” are finding on their hard drives not a copy of the film, but with software that pops a nasty little trojan virus into their systems.

There are several interesting aspects to this story.

Virus? What Virus?

First, it was apparently found and addressed by Kaspersky Lab and Rising Software well before it came up on the collective radar screens of Symantec, McAfee, and TrendMicro. One wonders why this is the case, particularly given that Symantec and McAfee tout the value of their software in part based on their global scanning for viral threats. I am especially concerned about TrendMicro, who have a huge presence in China and who make a great deal about their expertise as an “Asian” security company.

It also suggests that the malware threat in China is growing and diversifying. From dorm rooms filled with budding software engineers, to the challenges facing the country’s law enforcement teams, to the quiet but rapid growth of China’s cyberwar military-industrial complex, the country has become as much a haven and spawning ground for creators and distributors of Malware as the United States or any other country. This would seem to argue for greater investment by the computer security vendors in local labs who can not only find but anticipate new threats.

As an aside, it would also seem that companies like Symantec are destined to become major defense contractors. But we digress.

The Empire Strikes Back

Second, it seems that Hollywood (including the music and TV people as well as the film side of the business) and the software industry may have inadvertently discovered a way to slow online piracy and perhaps even the growth of downloaded content. All the studios – or, better yet, the MPA and the Business Software Alliance – need to do is hire a few good hackers to come up with some particularly nasty viruses and spread them around online disguised as illegitimate digital copies of random applications, movies, and music files.

Sure, the viruses would not deter the most determined or careful downloaders, and the anti-virus companies would inevitably come up with fixes. But imagine, for a moment, the fear, uncertainty, and doubt this would wreak among the less-expert. The mere possibility that these files would include viruses would be enough to drive a lot of marginal downloaders away from illegitimate downloading (and probably a few away from legit downloads as well).

Naturally I would expect clearer heads in the PR and legal departments of these organizations to prevail, ensuring that neither Hollywood nor the software industry would ever actually subsidize – or even publicly condone such practices. But you can easily imagine how such an option must tempt some people in places like Redmond and in the Black Tower.

Indeed, if the matter of digital rights management has proven anything, it has proven that Hollywood and many large software concerns believe that extremism in the defense of intellectual property is no vice, and that goodwill is readily sacrificed in that battle. If anything will keep hackers from high-powered lunches at the Ivy or the Fulton Fish market, it is the fear of court costs.

Nonetheless, it is fascinating, if not a bit disconcerting, to think that there is a commonality of interest between the creators of malware and the creators of movies.

Engineer, Engage the FUD Pump

What I do expect is that the IPR-driven industries will kick into gear a semi-coordinated propaganda effort to ensure that stories like the “Lust, Caution” become as widely known as possible, so that the threat is seen as being far larger and more serious than it really is. This costs them little, supports their goals magnificently, and enables the studios and developers to position themselves as defenders of the public interest.

Which, frankly, is the smarter way to handle it. You steal, you pay. Or, you pay, we protect.

For all the failings implicit in Hollywood’s approaches to the IPR issue and digital entertainment, let’s not lose sight of the most important fact – downloading illegal files is theft, theft is wrong, and anyone who does so willfully probably deserves a hard drive filled with malware.