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IP Protocols Part II: Gatekeepers' limitations and the power of composability

This is the Part II of the IP Protocols Series. If you'd like to read Part I, click here.
And if you don't want to miss Part III, subscribe below:

As we said before, Disney and other studios restrict access to their IP Protocols, such as Star Wars or MARVEL because they want to keep control over the content quality and be able to make money.

This approach, though, comes with a price.

Few in, few out

One of the consequences of keeping production centralized is that it’s very hard to get anything produced. How hard?

According to The Atlantic:

"Roughly 50,000 screenplays are registered with the Writer's Guild of America each year. Hollywood studios release about 150 movies per year. All things being equal, an unproduced screenplay has a .3 percent chance of being made into a feature film by a studio."

To give you a perspective, the acceptance rate at Harvard is 4.7%. So you might say that you have 15.6X higher chances of getting to Harvard than getting to Hollywood.

Since it’s so hard to get in, gatekeepers hold enormous power that can make or break your career. That’s one of the reasons why so many Harvey Weinstein’s victims have been silent for so long

But giving these people so much power makes studios & publishers also very vulnerable to their mistakes. At the end of the day, these people just try to predict what titles the audience will like, which is a very hard thing to do.

Their work is similar to being a Venture Capitalist, where an investor has to predict if the company pitching him will become the next Facebook. But it’s even harder. When you evaluate companies, at least you have some objective metrics like the number of users, growth rate, and revenue. Art is much more subjective.

To make matters worse, studios and publishers typically invest much bigger sums than early-stage VCs: a $250k check won’t make any Hollywood movie, so they have to invest millions of dollars in pretty rough ideas.

That’s why “Harry Potter”, one of the most successful series of all time, got rejected by 12 different publishers before it went into print.

And screenplays for movies like King’s Speech, Slumdog Millionaire, Social Network, The Hangover, and Juno (which received 4 Oscar nominations and won one for… Best Original Screenplay) were also rejected at first. 

That's also why making a movie that earns money is so hard.

Graph taken from this article

It’s not that publishing and movie execs don’t know their job. As we stated in Part I, thanks to them, we have tons of great movies. But it’s just hard to run a centrally planned economy.

I have a personal anecdote here since, over 10 years ago, I invested in publishing one book. It looked like easy money.

My business partner knew the niche target group since he hung out with them for years. He was sure they were going to love the title. We also got ads and distribution to the best bookstores. And we got the media coverage - both niche and nationwide. But we sold only 20% of the printed copies and lost tons of money. We couldn’t understand why since all these things supposedly added up.

So years later, my friend had a coffee with an executive from one of the top publishing houses. This guy published thousands of titles in his life, so my friend spent a few minutes describing our story and asked him why he thought it didn’t work. 

The exec sighed and replied, “I have no idea. We publish tons of things every year, and it’s very hard to predict which one will become a hit”. 

That’s how unpredictable it can get.

And because of this subjectivity and top-down control, we see fewer fresh and creative movies. When faced with such a big financial and reputational risk, many producers take safer bets. And we end up rolling our eyes at another boring Disney and Netflix offering.

It also means that producers - like kings or generals - are subject to many inside and outside pressures. And if they get swayed or are just plainly wrong, the artistic merit will be lost. That's why we ended up with such terrible outcomes as Apple's "Foundation", Amazon's "Rings of Power," and Netflix's "Cowboy Bebop".

Every fan of these series knows what's wrong with these adaptations, yet somehow, film crews made of hundreds of people couldn't spot the problem. As the saying goes: "Camel is a horse designed by committee".

So if the fiction world is restricted by gatekeepers, how would the permissionless creative world look?

Non-fiction summer

Our bookmarks are so full of insightful blog posts, interesting YouTube videos, and deep podcasts that even if we lived for 500 years, we would never consume them all.

But it hasn’t always been this way.

Before the Internet, the non-fiction world was quite similar to the fiction world today. If you wanted distribution, you needed to get past the gatekeeper: join a well-respected newspaper, radio, or TV station. Other options were mainly limited to publishing your thoughts in industry-specific reports and academic publishing.

Getting past these gatekeepers wasn’t as hard as getting to Hollywood, but it wasn’t easy either. And - just like in the fiction world - it resulted in less great (and less crappy) stories to read. I remember in the late 90s and early 2000s that after reading the weekly newspapers, I just... had nothing to read. A feeling I haven't experienced in a long time.

The Internet changed it a little with online magazines, but the real change came with the beginnings of Web 2.0 and the promise that everyone can become a creator.

  • You didn’t need to be a professor to work on an encyclopedia. You could become a Wikipedia editor. 

  • You didn’t need NYT editorial board permission to publish your op-eds. You could start your WordPress blog in 10 minutes.

  • You didn’t need a get into TV to create TV programs. You could start your own YouTube channel with a digital camera.

Although we take it for granted now, making publishing permissionless has been a huge revolution. It took the non-fiction world from a "centrally planned economy" phase to a chaotic but energetic free market.

And like all revolutions, it has its critics.

Here’s what Andrew Keen said about this in 2007:

"Instead of creating masterpieces, the millions of exuberant monkeys are creating an endless digital forest of mediocrity: uninformed political commentary, unseemly home videos, embarrassingly amateurish music, unreadable poems, essays and novels."

Worse still, the supposed “democratisation” of the web has been a sham. “Despite its lofty idealisation it’s undermining truth, souring civic discourse, and belittling expertise, experience and talent,”

In a sense, Andrew Keen was right. The Internet let millions of “amateurs” publish their low-quality content. I still remember how unreliable Wikipedia was in its early days.

But it also resulted in a flood of high-quality content.

Wikipedia, led by anon editors, became as relatable as Encyclopedia Britannica, edited by Nobel Prizes winners. Independent bloggers like Tim Urban or Scott Alexander are more popular than most New York Times journalists. And do you remember the last time you turned on the TV instead of YouTube to search for something funny to watch? 

As a result of this permissionless design, we have bookmarks full of great non-fiction: blogs, YouTube videos, and podcasts. And if you look closely, many of them are pretty niche. Why?

We live in the era of long tails

The mainstream studio & publishing production is focused on big numbers:

You spend millions

to reach millions

and profit millions.

Even if they wanted to, they couldn't produce smaller games, movies, or books.

If a studio has to generate $1B in revenue and they focus on projects making $100k, they'd have to run 10,000 of them to reach your revenue goal. That’s an operational nightmare. So mainstream content production companies prefer to focus on 10 projects worth $100M or 50 projects worth $20M.

But if they want to reach these goals, they need to bet on safe productions that are going to be liked by as many people as possible. Every quirk that might put off some audiences is a potential business risk.

And fans? Well, we have more varied interests. We like mainstream, but we like niches as well.

Let’s take books. Amazon famously started selling books because - contrary to bookstores - the Internet had an unlimited shelf space. Instead of listing the top 130,000 books like Barnes & Noble, they could list millions of titles. 

And it worked:

"The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon's book sales come from outside its top 130,000 titles. 

Consider the implication: If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is larger than the market for those that are"

Netflix, in its DVD-rental era, had the same tactic. Because their movie offering wasn’t constrained by shelf space, they could offer DVDs that weren’t available in most rentals. And thanks to these niche long tails, they made a significant percentage of their revenue.

Pozycjonowanie Long Tail, Fraza Na Długi Ogon (seo Szerokie I Wartościowy  Ruch) - UniqueSEO

Long tail means betting on less popular products and content

Non-fiction summer worked in a similar way.

There were, of course, big creators like Seth Godin, Tim Ferris, or Mr. Beast. But there are also thousands of niche YouTube videos, blogs, and subreddits. Each one of them might not have a big audience, but if we combined their distribution, they’d reach billions of people.

And their production wasn't organized in a top-down manner. Millions of people have been incentivized to create because they want money, fame, or to express themselves. And they produce new content every day to compete in this giant Internet-powered free attention market.

So let's see the difference here.

Mainstream production: Big studios take a few big bets, and the decisions "What to bet on?" are made by execs in a top-down manner.

Long tail production: Millions of small creators take many small bets, and the decisions "What to bet on?" are made by each creator.

Since small creators (as a group, not as individual creators, of course) make 1,000X more bets than big studios, they learn faster "What works," and the content they produce better matches users' needs. As the competition in this Internet Red Ocean is tough, they often target more niche audiences that would be hard to reach by bigger creators.

User needs take irregular shapes, and mainstream content is like a big regular-shaped Band-Aid.
Niche content can fill in the remaining gaps.

So that's how we ended up with a huge amount of non-fiction content.

Another factor that was pretty important here is composability. The beauty of non-fiction is that ideas are generally free to remix and build upon - that’s how our civilization was built in the first place. Someone invents the wheel, the other one adds two wheels to the frame and creates a bicycle, the other one adds a motor to the bicycle and creates a motorcycle, and so on.

And the unspoken rule of the Internet is that collaboration is okay. Bloggers quoting each other. YouTubers shooting episodes together. Podcasters doing cross-promo. Millions of people co-create their content every day, which sometimes leads to weird but funny outcomes.

So not only does Internet Hive produce thousands of pieces of content every day, but it also remixes them in search of the next blockbuster.

And although it’s easier to co-create in the non-fiction world, which has looser IP rights, we have already seen some great examples in fiction as well.

Power of co-creating fiction

One of the most popular books of the last 20 years is Stephanie Meyer’s “Twilight”. This teenager-oriented series has sold over 120 million copies worldwide, with translations into 38 different languages around the globe. Although its artistic value might be criticized, it’s definitely been a huge commercial success.

And surprisingly, its remix became even more popular. 

The novel called “Master of the Universe” started as a highly sexualized “Twilight” fan fiction. Since “Twilight” fans were concerned with a radical version of their favorite characters’ stories, the author changed the characters' names, adopted the plot, and renamed the story. The new book was titled “50 Shades of Grey” and became even a bigger hit than “Twilight”, selling over 150 million copies.

So the “50 Shades of Grey” author basically forked the “Twilight” IP protocol and built her own app on top of it.

These forking examples are not limited to romance, of course, and can also take more sophisticated shapes like Eliezer Yudkovsky’s Harry Potter and Methods of Rationality, an educational novel about rationality and scientific thinking built on top of J.K. Rowling’s world. 

The movie world is also familiar with this concept, mainly in the form of remakes. Most of us watched “Scarface” with the memorable Al Pacino, but few of us remember that it’s a remake of a movie of the same title, produced by Howard Hughes in 1932. Same with Ocean's Eleven or Casino Royale. In all these cases, directors built new "apps" on top of existing IP Protocols.

The gaming world, though, might be the best example of successful remixing.

Remember Warcraft III? It has been a massively popular game, but in 2003, most players stopped playing Warcraft in the classic RTS manner and focused on a new mod released by the pseudonymous designer Eul. The mod was called Defense of the Ancients, also known as DotA, and turned Warcraft III into an RPG game. 

Very quickly, most players preferred DotA to traditional Warcraft III gameplay. In 2009, DotA became a main inspiration for League of Legends, which to this day, is one of the most popular games in the world. 

Half-Life - one of the biggest gaming hits of the 90s - followed the same path. The game was a success, but the fan-created mod got even more popular. As you probably know, this mod was called Counter-Strike, and since its creation in 1999 up to this day, it's been one of the world's most popular video games.

Mods aren’t a new thing, of course. Here’s the story from the early days of id Software:

In Quantico, Virginia, in 1995, a project officer in the Marine Corps Modeling and Simulation Management Office named Scott Barnett created a modification called Marine Doom—complete with realistic military soldiers, barbed-wire fences, and marine logos. The game was perfect for training real-life soldiers in teamwork, Barnett’s supervisors agreed. Barnett contacted id, who gave their blessing, though they thought the idea of someone using their game to train soldiers was a joke. 

But it was the real deal. The game made its way across the Net and would be used by the marines for years. Id decided to jump into the game after discovering that WizardWorks, a publisher in Minnesota, had releasedD!Zone—a collection of nine hundred user-made Doom mods (which id obviously did not own); the D!Zone CD-ROM had, remarkably, surpassed Doom II to top the PC games sales charts, earning millions of dollars.

As we see, remixing and building on top of existing IP Protocols holds huge potential. It has already led to enormous results in books, movies, and games.

So what would happen if we doubled down on co-creation and treated Universes as permissionless IP protocols, and encouraged other creators to build on top of them? How exactly could we do it?

We will cover that in Part III.


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PS2: I'm also writing a serialized cyberpunk novel called Cael Mux. The idea of this "choose your own adventure" story is to explore the boundaries of IP Protocols.
You can read Chapter 1 here.

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