The Interview’s Missed Opportunity

A step forward that still pulls defeat out of the jaws of victory for internet business models

The Interview is being hailed as a success for online video-on-demand launches. I believe it was a good step in the right direction but still an abject failure for missing the obvious point of global same-day distribution via the internet.

If I were a Sony shareholder I could learn to forgive senior executives over the email hack. I could probably grudgingly learn to look past the initial decision to capitulate to the hackers since it was such a unique and novel force of nature. But missing out on another $15m million dollars is unforgivable on an $80m budget. Good stuff for showing the film on YouTube, the $15m headline is good — but you still messed up and $15m is not $30m.

Here are the facts:

  • $15m dollars in (gross) revenue after a week of VOD streaming in the US
  • About 2 million people either purchased or rented it. We aren’t given breakouts of exactly how many “Sony did not reveal how many of those 2 million video-on-demand transactions were rentals versus purchases
  • Journalists give up pretty easily if they can’t source their facts from Wikipedia

If renting cost $5.99 and purchasing $14.99 and we know that 2 million people either rented or purchased and the total gross revenue generated was $15m then we have two equations: rented * 5.99 + purchased * 14.99 = 15 and rented + purchased = 2, i.e. there were probably about 1.65m rentals and 0.35m purchases in the US during this period.

We also know there were about 1.5m pirated downloads two days in so we can safely assume roughly 2m downloads (probably more) hit during the same period that those 1.65m rentals and 0.35m purchases were made.

At best, you can assume none of these pirates would have purchased or rented the movie.

Let’s be conservative and assume all 30% of those 2m pirates would have purchased or rented. Let’s assume they’re cheap and more than 82.5% of them rented — let’s go with 95% renters, 5% purchasers. That makes $3.9m in gross revenue Sony decided it didn’t want or need.

There are no meaningful data available yet on where these pirated downloads came from. Part of them must have come from the US. But I’d wager a meaningful part came from overseas since Sony intentionally restricted the release geographically.

Even if only half of these 30% of 2m pirates are overseas, that’s still close to an extra $2m in gross revenue in the first week with extremely conservative assumptions.

Let’s be alarmist and assume 100% of the 2m pirates would have purchased or rented, that the proportion of renters and purchasers would have been 82.5% like in the US and that all of them were overseas. At worst, Sony left $15m of gross revenue on the table for absolutely no good reason.

The internet business model for media lives and dies by global day 1 distribution.

It works for video games. Even music eventually came around. But movies are still stuck in a horse-and-carriage era where they need to tread carefully around hay dealerships around the world before launching motorcars properly.

So yes, The Interview is a grand experiment and it does appear to have worked ($15m in online revenue eclipses the $2.8m box office sales theatres made which should frankly come as no surprise). But in half-assing it and limiting the geographic release, Sony left a fortune on the table just when it needed it the most.

Which is the only real reason in this whole affair why shareholders should be sharpening their pitchforks.