I originally published this post on Medium. I thought you might enjoy it.
Sony Could Test Pay What You Want (PWYW) Pricing with ‘The Interview’
Undoubtedly, you probably have heard that North Korean hackers have compromised the network security of Sony in an effort to censor the release of the film “The Interview.” Sony appears to have acquiesced to the threats and pulled the movie from theaters — a decision that even was questioned by President Barack Obama.
I’ve labeled these hackers as extortionists, because that’s what they are. They graduated to “terrorists” because with the threat of terror, it changed the normal and expected behavior from an American business. For the same reason why we take shoes off at the airport, we have become scared because of the actions of one person. Even without a shoe bomb going off, without any lives hurt, terror was inflicted. Our behavior has changed.
Sony’s act of pulling the movie from theaters is no different. When we give into a threat, we validate it. By deciding to not distribute the movie, everyone was hurt. Who was hurt?
Sony: They spent $44 million producing the film that won’t be able to recoup costs.
Americans: They have been silenced by the actions of a nation state.
Movie Studios: They will now think twice when producing a film that criticizes another nation state.
Local Theaters: One of the major movies expected to appear on Christmas won’t be available to attract and drive customers.
This isn’t the American way. No matter how much we disagree with the contents of a film, we respect and protect the rights of others to have free expression. We are a nation that believes in the arts and the free agency to either watch a movie or not.
We have millions of Americans who are incensed by the fact that an American business was just damaged by a compromise by another country and a movie was censored from being played. This market condition makes it ripe to sell and distribute the movie. Many people want to watch the movie not only for curiosity, but to exercise our rights and freedoms to watch any film. Americans do not take kindly to the infringement of our guaranteed rights.
We have a content distribution system available that bypasses movie theaters. We have Netflix, Amazon, Hulu, iTunes, Google Play, etc. While these typically require these online distributors to pay a premium license for playback, it could be cost prohibitive for a “new release.” I don’t believe these licensing fees would amount to $44 million just to break even.
Another content distribution system is BitTorrent. This peer-to-peer file sharing protocol enables secure and insanely fast distribution of content. While many associate torrents with “theft,” they neglect that for quality content and other motives, they tend to be willing to support intellectual property owners through the sales of merchandise (shirts), attendance to live performances (concerts), and advertising (word of mouth). For instance, even while I have torrented every Eminem album, I have also purchased every one, too. The purchase is an act of my support and my allegiance to the artist, even though I know he’ll only see about 6% of the proceeds.
If even one-third of Americans are in support of watching this film, that market size is 105M people. And let’s be conservative and say that half that actually will watch the film, 52.5M people. I’ll come back to this in a moment.
A business model that some businesses have adopted before is Pay What You Want (PWYW). It doesn’t work for everything, but for sales of nonprofit merchandise or other cause-oriented sales, it banks on the hearts and passions of customers. While “free” is an option, a good number of people contribute revenue because of usage and loyalty to the producer.
Sony has an opportunity to try this PWYW model, optionally donating the proceeds to the Electronic Frontier Foundation, American Civil Liberties Union, or other organizations that support free speech and free expression. Price anchoring is a good strategy to get into the conscience of consumers, so they can start at $0 and go up to $40 (or a custom ‘name your price’ option) in $5 increments.
Sony can tell their story. Seek public support and apologize for having such an insecure network. They learned their lesson. They neglected to take corporate security seriously. But that is no excuse for a nation state to threaten the will and freedom of Americans. It’s okay to tug on the patriotic strings to promote sales. A simple landing page encouraging the donation, collect an email address (lead generation) and ask people to share it on social media would work. They could offer a direct download via Amazon CloudFront for instant streaming, as well as a Torrent file (packaged with instructions to visit the landing page).
Let’s look at the numbers and possible revenue that I mentioned earlier.
With 52.5M viewers, Sony could drive revenues to be more than 4X the cost of the film. And this doesn’t count any possible sales from merchandise like shirts, stickers or posters.
With a shared passion among Americans to see the film, it could be a wise and prudent decision to offer the film under a PWYW model. This assumes that 40% of viewers would be willing to pay to watch the film. The 60% of free-loaders aren’t total losses; their support of watching the film drives even more demand among people to pay to watch.
This could actually be a good experiment that could set the precedent for how other movies can be released. It’s my theory that I don’t think they can do this with every film — but only a handful of their produced films per year would be eligible for PWYW. This ensures it doesn’t cannibalize the existing movie distribution model.
While I am a supporter of using BitTorrent for legitimate purposes, I could understand why Sony wouldn’t use it. The cost of Amazon CloudFront is a bit pricier than Amazon S3. Torrents require a bit higher technical skill to use than just clicking a link to watch the movie. The point is that for the free-loaders, no expense should be offered to deliver the movie free. Let them use the ‘slower’ P2P system. Likely, the market would do this anyways, just call off the DMCA enforcement team for the film.
This could amount to a great success story, not just for Sony, but for filmmakers everywhere. It could also be a great success story in how Americans don’t cater to threats against free speech. It could also be a success story in how movie studios can leverage progressive, different distribution models that don’t use DRM or other anti-consumer technologies.
