question page Hollywood’s New Piracy Problem: 3-D Printers by: Erich Schwartzel
ID: 347434 • Letter: Q
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Hollywood’s New Piracy Problem: 3-D Printers
by: Erich Schwartzel
Jul 21, 2015
TOPICS: Copyright, Distribution Channels, Legal Environment, Technology
SUMMARY: Three-dimensional printers represent a threat to many businesses that thought they were immune from competition caused by disruptive technology. 3-D printers represent a threat because companies do not control manufacturing and production. Designers create digital patterns and templates used on printers to make many different kinds of objects. The issues of distribution, piracy and copyright are similar to those experienced in the music and entertainment businesses. The cost to replicate an object using a 3-D printer can be significantly different than the price you pay for auto parts, a coffee cup or a toy in a traditional retail outlet. Companies that manufacture products understand the threat, but aren't sure how to respond or develop strategies that walk the tightrope between control and alienating users. The issue is becoming more important because patterns and printing are cheaper and more accessible. The legal environment involves some uncertainty. Is the designer, the person who wrote the code or the individual who operated the printer the target of possible legal challenges? Action against 3-D printing currently follows guidelines from the Digital millennium Copyright Act. Websites that host content infringing copyright have to remove it when the rightful owners notify them. One company, Shapeways, prints 3-D orders for hobbyists and merchants. The company responds to takedown notices and asks users if they are the rightful copyright owner when they uploaded design. Companies manufacturing physical products may not have anticipated competition from 3-D printers, they need to understand the threats and consider strategies to meet the threat.
CLASSROOM APPLICATION: As the costs of 3-D printers decline and more users began adopting the technology to print objects ranging from auto parts to toys, companies need to consider how they will protect their intellectual property. Distribution channels in many different industries were affected by changes in technology in recent years. The music business was changed significantly when listeners started downloading digital music instead of buying CDs. More recently downloads decreased as listeners used streaming services. The pay-tv industry was also disrupted because cord cutters can find their shows via alternative distribution channels. Manufacturing companies use technology to gain efficiencies in production, but losing control of distribution because of 3-D printing presents a more significant threat. Intellectual property laws and copyright often don't protect industries when technology offers alternative distribution channels. There isn't an online outlet like YouTube or iTunes to distribute 3-D designs and files. It is more difficult to trace and confirm infringement with 3-D files as compared to movies and music. Manufacturing companies should prepare business models and strategies to address the changes from 3-D printing technology.
QUESTIONS:
1. Do a web search and give a brief explanation of how 3-D printing works.Q 2-4 below.
2. Think back to our Discussion Forum topic in Week 5 about Disney Movie Studios and their desire to create a franchise of goods and services around the movie “Frozen”. How could this 3-D printer issue effect this Franchise business model?
3. What are some of the legal issues involved with 3-D printing?
4. Discuss the Shapeways business model and tell us how the company responds to intellectual property and copyright concerns from companies.
Resourses
video link: Click link to view video on Hollywood’s new piracy problem… http://on.wsj.com/1IeDWZn
Hollywood’s New Piracy Problem: 3-D Printers
Specter of digital piracy hangs over sales of ‘Star Wars’ blasters and other toys long considered immune to such forces
Thankstoaccessible3Dprinting companieslikeShapeways,DIY(do it yourself) hobbyistscanturntheirdesignsbasedon charactersfrommovies,comicsandvideogamesintothree-dimensional objectsandsellthemonline.Andthat’sraisingseriousquestionsabout intellectualpropertyrightsforentertainmentcompanies.Photo: Shapeways.
By
Erich Schwartzel
July 20, 2015 3:33 p.m. ET
Right after watching the trailer for “Star Wars: The Force Awakens” last April, Ken Landrum began building his own Stormtrooper gun. From his home in St. Louis, he cobbled together images of the “blaster” featured in the ad, and then used software on his personal computer to design nearly 40 separate pieces to be 3-D printed and assembled into a near-exact replica of the Walt Disney Co. prop.
“My goal is to make it better than the studio did,” he said. At a minimum, he has done it faster: Mr. Landrum posted photos of his design on a message board for 3-D printing enthusiasts—some eight months before the movie premieres and five months before most official Disney toys hit shelves. As the movie’s opening gets closer, fans have filled his inbox asking for the files needed to print their own. Mr. Landrum said he handed out more than 100 in one week in mid-July, recently deciding to start charging $55 a file. “It’s gone haywire,” he said.
Mr. Landrum’s hobby is part of a looming problem for Hollywood. The steady rise of 3-D printing as an accessible activity for millions means that the specter of digital piracy, which has wreaked havoc on the media business in the Internet age, now hangs over sales of physical products long considered immune to such forces.
The nascent marketplace for do-it-yourself consumer products means the film industry could soon face the same kind of legal quagmire that the music industry waded into over piracy in the early 2000s. At this point, most of the printing is done by loyal fans who want to trade blueprints and products for free. But that is changing as more 3-D printers turn living rooms into mini-factories and piracy sites list 3-D files alongside illegally copied movies.
Among other likely effects, prices for legitimate products may have to go down when 3-D printers crowd the marketplace with viable alternatives to the toy store.
Shapeways, an online marketplace that also handles 3-D printing orders from a facility in Queens, N.Y. Photo: Shannon Stapleton/Reuters
“You used to buy a CD, and the fact that it was physical lent it certain protections. When music was digitized, it became a pure information good and costless to replicate,” said Brett Danaher, a professor of economics at Wellesley College who studies piracy and digital distribution. “I think there’s a direct parallel to be made with 3-D printing.”
The phenomenon is likely to go far beyond entertainment, he added, affecting everything from auto parts to coffee cups. “It’s not going to be a geek thing,” said Mr. Danaher. “It’s going to be part of our everyday lives.”
The online marketplaces for 3-D printed objects resemble a Wal-Mart aisle full of comic-book heroes and well-known cartoon characters—including “Shrek” statuettes, a recreated prop designed to resemble Angelina Jolie’s headdress in “Maleficent” and a snack dish modeled after the “Star Wars” Millennium Falcon (lightsaber toothpicks included). Gandalf, Homer Simpson and Walt Disney’s head also make appearances.
Hobbyists peer-review designs until they arrive at a professional grade of precision and can respond faster than the studios to a product opportunity. When “Star Trek” actor Leonard Nimoy died in February, a fan uploaded a file that can be used to print a statuette of his trademark “Spock” hand gesture that day.
The nascent market has the potential to eat into one of Hollywood’s most important moneymakers.
DreamWorks Animation SKG Inc. has built out its consumer-products division to help when a movie underperforms. Consumer products can also turn a hit movie into a yearslong financial windfall. Disney’s second-quarter consumer-products revenue was up 10%, to $971 million, in large part thanks to “Frozen” toys selling at a fast clip more than 18 months after the movie’s release. (Rudimentary versions of that movie’s Elsa and Olaf characters are available for download on several 3-D printing sites.) Spokespeople at both studios declined to comment on the fan creations available online.
So far, Hollywood has avoided taking significant legal action against 3-D printing enthusiasts, careful not to re-create the fallout that occurred when the music industry sued fans for sharing songs online. Several consumer-products executives at major studios said they’re monitoring the trend with a watchful eye, even if it is unclear how exactly to respond. Some in the industry, like Viacom Inc.’s Paramount Pictures, Disney’s Marvel Studios and Time Warner Inc.’s Warner Bros., have released sanctioned 3-D designs to promote fan creations ahead of a new movie’s release.
“It’s a tightrope walk between maintaining control…and not getting in the way of the passionate fan embrace,” said Marty Brochstein, senior vice president of industry relations at the Licensing Industry Merchandisers’ Association.
The tools needed to join the printing community are getting cheaper and more accessible by the day, even as the process of building an object layer-by-layer remains time-consuming and expensive. About 217,000 3-D printers are expected to ship world-wide this year—more than twice the number of units last year, according to Gartner Inc. That figure is expected to double each year between now and 2018, and cheaper models costing less than $1,000 are also becoming more prevalent. Free software can be used to design the schematics used to print the objects.
Knowing who to pursue in a court case can be a challenge for studios. Many hobbyists trade designs for free, while others charge hundreds of dollars and accept bulk orders for products. And because a 3-D printed object exists in the digital ether before becoming a tangible item, legal experts say it is hard to know who exactly to target: The person who conceptualized the design, the person who wrote its code or the person who operated the printer.
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“Right now, counterfeit products are made from a handful of countries and imported and then sold,” said Michael McCue, an intellectual-property lawyer at Lewis Roca Rothgerber LLP. “[New printing technology] lowers the barriers to entry for counterfeiting and makes it possible for anyone with a 3-D printer to be a counterfeiter.”
Studio action against 3-D printing has followed guidelines set out in the Digital Millennium Copyright Act, which calls on websites hosting copyright-infringing content to remove it when notified by the rightful owners.
Shapeways, an online marketplace that also handles 3-D printing orders for hobbyists and merchants, said it responds to such “takedown notices” from a studio or other company. Shapeways asks users if they are the rightful copyright owner when uploading a design, but says its marketplace is too expansive to police every item. In a recent search, several hundred products currently for sale on Shapeways were inspired by Marvel properties, including an Avengers logo ring ($10), Incredible Hulk figurine ($170) and wearable Iron Man helmet ($1,847).
One new company, Source3, is in negotiations with several major studios to manage 3-D licensing for fan creations. The company envisions a system that allows rights holders to set rules on how 3-D files are made available.
But there are hurdles: It can be harder to trace 3-D files, and confirm that an infringement is occurring, than it is with music or movies. And no major online outlet like Google Inc.’s YouTube or Apple Inc. ’s iTunes Store yet exists for the format.
Still, the Source3 believes it is tapping a growth market. In a presentation to studios, Scott Sellwood, Source3’s vice president of business development, shows a photo of a group of elementary school students who printed 3-D toys as part of a class project. Many hold replicas of their favorite action figures and cartoon characters. “Are these kids infringers?” he asked. “Or extensions of your brand?” End
Explanation / Answer
3d printing works from a digital construction of the model which is broken down into small pieces which then, by the process of additive creation is created layer by layer till the entire model is developed in its 3d representation or form.
Since the 3d-printing industry is a threat to all the other manufacturing industries, Disney would have had a problem competing in the market which would essentially have been a huge loss of profit for Disney. Therefore, Disney would have had to alter their business model accordingly to allow cheaper manufacturing process and therefore easily compete in the market with 3d printing technology.
Legal issues involved with 3d printing include the problem of piracy of content because there are no specific laws guarding the IP of companies by 3d printed models. And the issue of liability since companies do not make the product themselves.
The Shapeways business model allows people to 3d print whatever they like and ship it to them. They offer their services and help people get their own models printed for a competitive price. They have rules and regulations about the things that you can print which includes your own personal models and things that have a CC license but they do not allow people to utilize their service to promote or print models that are intellectual copyrights of other company.
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