As this edition of FJI went to press, a House of Representatives committee was poised to debate a bill of great significance to the motion picture industry and many other businesses. The Stop Online Piracy Act (SOPA) would give the U.S. Attorney General more power to take action against rogue websites (many based outside the United States) that enable consumers to illegally download movies, TV shows, music and other copyrighted intellectual property. The House legislation and a similar Senate bill called the Protect IP Act are being hailed by the Motion Picture Association of America and the U.S. Chamber of Commerce, and denounced by the American Civil Liberties Union and an array of Internet entrepreneurs like Google co-founder Sergey Brin, Yahoo! co-founder Jerry Yang, PayPal co-founder Elon Musk, and eBay founder Pierre Omidyar.

The rhetoric has gotten heated. An open letter to Congress from the Internet pioneers warns that the pending legislation would have “a chilling effect on innovation, deny website owners the right to due process of law [and] give the U.S. Government the power to censor the Web using techniques similar to those used by China, Malaysia and Iran.” On The Huffington Post, MPAA CEO and chairman Senator Chris Dodd bristled at the comparison to repressive regimes. “I served on the Senate Foreign Relations Committee for 30 years,” he wrote. “I know what authoritarian and totalitarian censorship looks like. And the comparison is badly false.” Quoting a Washington Post column by First Amendment lawyer Floyd Abrams, he added, “Chinese dissidents do not yearn for freedom in order to download pirated movies.”

An existing law, the Digital Millennium Copyright Act of 1998, safeguards online providers as long as they agree to shut down users who violate copyright laws, and indeed thousands of takedowns are applied each year. But the MPAA and others argue that the U.S. government and rights-holders are currently limited in their legal options to pursue the mostly foreign websites that steal American-owned (and others’) intellectual property. The proposed legislation will give anti-piracy enforcers more teeth.

The fear among the technology community is that the legislation will go too far, that websites like Google and Yahoo! and payment processors like PayPal could themselves be shut down over a violation by one of the millions of sites they link to. Steve Tepp, chief intellectual property counsel for the U.S. Chamber of Commerce, claims that’s not the case: “The targets are the rogue sites, the real bad actors,” he insists.

Dodd argues that “the theft of intellectual property (which costs our nation 373,000 jobs and $58 billion in economic output each year) is itself the true threat to free speech, because it threatens to silence the artists whose creations—and livelihoods—are being stolen.”

Clearly, there’s a need for tougher measures against the online thieves who continue to prosper and rip off the creative community. But our legislators should also take care in crafting these bills that innovation isn’t stifled and the brilliant online entrepreneurs who’ve changed the world aren’t unfairly punished for the actions of outlaws who exploit their services. Somewhere between these battle lines, there’s a rational compromise.

End of an Era
A recent Summit of top exhibitors in the Asia marketplace was held at CineAsia in Hong Kong, and the major topic of discussion revolved around when the studios will end the distribution of movies in 35mm. No one could have predicted this conversation at such a gathering ten years ago. But it’s true: Cans and 35mm reels are being replaced by hard drives and digital files. Digitization has become a major part of everyone’s lives, and now it has taken its course in the cinema industry.

More than a decade ago, Texas Instruments introduced the new technology of digital projectors and it made quite a splash at ShoWest. Everyone showed great interest, but no one truly believed that this technology would revolutionize the motion picture industry.

35mm celluloid has been the format of choice for the movie industry since it was patented in the late 1800s by George Eastman. Now, at the end of 2011, there are more than 55,000 digital screens around the world. By the end of 2012, those numbers will swell and nearly two-thirds of all screens worldwide will be digital.

The transition to digital since its early introduction has taken a slow route, but the key catalyst for this switch and spurt was led by the resurgence of 3D and was then supplemented by the major cinema circuits choosing to convert all their screens.

The rise in digital cinema installations has conversely affected the demand for 35mm prints. This has caused major ripples in the film-processing labs, where the amount of film processed has declined drastically. The two major film labs, Deluxe and Technicolor, have decided to manage this decline by joining forces to handle bulk release and delivery, something that would have been unheard of even several years ago. Their goal is to pare down the cost in line with what the market can sustain.

So the real question facing studios is: When is the right time to stop providing 35mm prints? It appears this will be decided market by market and country by country. But do the distributors wait until a country reaches 100-percent digitization or when it reaches 80 to 90 percent? The studios will have to carefully examine the economics of providing 35mm. The one definite conclusion is that 35mm prints will cease to exist in the future.

Virtual Print Fee arrangements have been the vehicle to drive the transition. As more of the larger and important circuits reach maturation, the studios have lesser incentive to maintain the VPFs.

Let’s face facts: The VPFs will be ending soon. If you are an exhibitor and have not made the transition to digital, you better get on the bandwagon immediately or surely you will be left behind.