When the Media Industries Really Need to Start Worrying About Piracy (and it’s not yet)

I’ve been a digital media analyst pretty much as long as mainstream music piracy has been around.  I’ve tracked the rise and fall of many sites, services, networks, applications and protocols, including MP3.com, Napster, Music City Morpheus, iMesh, Audio Galaxy, Bear Share, eMule, Gnu Network, Kazaa, Limewire, Pirate Bay, Rapidshare, Megaupload etc etc.  The point I’m trying to make – other than my career’s slightly concerning alignment with the rise of music’s grey market – is that the sector is built upon reinvention.  And that power of reinvention is the key reason why the music industry has a bigger piracy now than it has ever had before.

Of course there are statistics that suggest the file sharing is on the wane in a few markets – notably Germany – but overall the problem is getting bigger because:

  • Non-network piracy is in the ascendency. P2P is declining in importance as a medium for piracy.  Non-network sharing (hard drive swapping, darknets, Bluetoothing, mini-nets, digital lockers, forums, binary groups, Instant Messaging, music blogs) are collectively more widely adopted than P2P in many major markets and are growing fast.  All tactics of course which are much more difficult to track and police than P2P
  • P2P is getting smarter.  And for those who still do use P2P there is an ever growing array of tools at their disposal that make it harder for their activity to be tracked, ranging from encrypted versions of mainstream P2P apps through to the Pirate Bay’s current shift from Torrents to Magnets

Of course media industries are upping their game too, with major legislative efforts in the US, UK and France, though all with mixed levels of success.   The lesson of the last decade plus though, is of course that whatever actions the media companies take, the piracy problem will be more than a step ahead.  Legislation, judiciary process and enforcement are all slow moving beasts.  Typically by the time media industries catch up technology and consumer needs have moved on.  For example the Pirate Bay looks like it could be blocked from consumers in the UK but a quick search on Google for the name of your content of choice followed by the word ‘torrent’ will serve you up an exhaustive list of alternatives.  Pirate Bay simply isn’t needed anymore.

Do we have the right services?

All of these dynamics are probably familiar to most, but I think we may be on the verge of something very different and of far greater concern for rights holders.  One of the key reasons – some would argue *the*key* reason – piracy is still growing is because the $0.99 cent download and the heavily delayed movie release  simply don’t appeal to most digital consumers.  US VC Fred Wilson recently stated in a Paley Centre debate that ‘we are all pirates’ and that if ‘99% of people are breaking the law then it is the wrong law’.  My twist on that statement would be that if ‘99% of people aren’t using the services that they are the wrong services’. (Of course more than 1% use legitimate services but we are still talking about a nice minority).

Don’t get me wrong, we have some absolutely fantastic services out there for the current installed base of digital music customers, but they are patently not the right services for majority of consumers who account for the 95% of total downloads which are illegal (according to the IFPI).  Regular readers will know that I have been building a case for a music format revolution (you can download my Music Format Bill of Rights report here for free).   There are some really promising first steps happening from some promising start ups but rights complexities are acting as a major decelerator on innovation in this space.

What happens if digital piracy starts to learn from the mobile App revolution?

Of course the grey market has no such problem.  They only ever concern themselves with rights issues if they get taken to court or decide to try to go legit (Napster, Limewire, iMesh, Kazaa etc).  To date the focus of piracy technology has been evading the music industry.  But now, with the revolution in high quality user experiences that the App market has created, there is a very real risk that much of this ethos will bleed through to the grey market.  Indeed there is undoubtedly some direct overlap between the App developer community and the piracy developer community.

The nightmare scenario for media companies is that the pirates turn their attentions to developing great user experiences rather than just secure means of acquiring content.  What if, for example, a series of open source APIs were built on top of some of the more popular file sharing protocols so that developers can create highly interactive, massively social, rich media apps which transform the purely utilitarian practice of file sharing into something fun and engaging?  If you though the paid content market was struggling now imagine how it would fare in the face of that sort of competition.

In the longer term one could hope that such a scenario would act as an accelerator for liberalization and innovation of rights owner practices, but in the nearer term it would be a death knell for many of the current services that have worked so hard to get achieve what they have within often suffocating confines.

Content monetization strategies need reworking too

I’ve said it many times before and I’ll say it again now, and many times again: fighting piracy requires a big fat carrot to go along with the stick.  More than 300 $0.99 download stores in Europe and North America alone is not a carrot.  Now is the time to give the legitimate sector the tools, licenses and support to innovate like never before.  It is also time to recognize that just because piracy users don’t always spend money does not mean that they are not spending.  In the digital age consumers transact in three equally valuable currencies:  Money, Data and Time. Those currencies however are not equally valuable to all industries (e.g. TV broadcasters value time more than record labels, online newspapers value data more than book publishers etc) But it is time for those three currencies to be equally tapped by digital content strategies across all industries (regardless of whether that currency is valuable to them), with supporting ‘virtual commodities’ trading marketplaces in the backend to ensure that all stakeholder ultimately end up getting paid in the currencies they value most.

Unless user experiences and monetization strategies are innovated beyond recognition then the grey market will do it instead, creating a wave of digital piracy that will do for media revenues what the iPhone did for Nokia’s smartphone business.

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7 thoughts on “When the Media Industries Really Need to Start Worrying About Piracy (and it’s not yet)

  1. Hi Mark,

    Again, a good and insightful read. With reference to the paragraph, ‘What happens if digital piracy starts to learn from the mobile App revolution?’ and you closing statement ‘what the iPhone did for Nokia’s smartphone business.’ I believe a possible future statement could read – What the Android Platform did for the Iphone business, in this grey area.

  2. “Services like Kazaa flourish in the absence of competitive alternatives. I confidently predict that once the music industry provides a service that provides access to all the same songs, freedom from onerous copy-restriction, more accurate metadata and other added value, there will be hundreds of millions of paying subscribers. That is, unless they wait too long, in which case, Kazaa itself will start to offer (and charge for) these advantages. (Or would, in the absence of legal challenges.)” – Tim O’Reilly, 2002

  3. Adam – yes, the Android threat to Apple is very real. 700,000 daily activations is going to hurt sooner or later…

  4. Pingback: Piracy on the high seas of ones and zeros: A story of nostalgia, doom and hope. | Intentious

  5. Let’s try a little reality. At least a couple of generations think they have a “right ” to music, especially if it’s “free” , which the pirates are more than happy to provide, and these “consumers don’t care about copyrights and any one elses’ intellectual property or content (although they whine and cry like punks if someone takes something from them.) This is massively destructive to any form or genre of artists trying to survive in the face of ever diminishing royalties, if their creations can be turned into a computer file. If it is possible to ever create a un-hackable, un-copyable, un-file sharing encryption to protect the artists creations, where only the artist and publisher get to determine how many copies a purchaser is allowed, this would help. The problem with that is, do we really want Al Queda, Aryan Brotherhood, Crips, Bloods, MS-13 or Chinese Military Intelligence or Wall Street or the Banks, Mortgage companies and Insurance companies to also have access to such encryption and make it even harder for our Military and Law Enforcement to investigate them and stop things like terrorist attacks and corporate or political or theological or Oil company or any other Institutional criminal conspiracies and acts? All of the Pirates versus Industry maneuvers also don’t address the fact that the record labels were ripping off the royalties of artist/composers and their publishers for decades before the internet and Its pirates came along, and still are. I don’t have any sympathy for the labels, but I do for artists and creators like you and I. I don’t see anyone offering any real solutions to any of this. Until a solution arrives that Terminates Piracy With Extreme Prejudice (figuratively speaking, or course…or not) our Ships of Creativity and our Intellectual property and artistic creations will continue to be Assaulted, Boarded and raped with no vaseline by theft, repeatedly, by pirates and their accomplices and accessories after the fact (the illegally downloading consumer) while our royalties and income that we need to survive and thrive disappear. I am a Musician, Composer, Arranger, Recording Artist, a Writer of screenplays, short stories, poetry and a Vietnam Veteran and a Retired Police Officer. Witnesses take all the fun out of revenge. There It Is.

  6. Your entire industry is waaaaay behind the times. It’s not 1950 anymore. Anyone under 25 knows that downloading music, movies, TV shows etc… is not piracy and we never will see it as piracy. Real piracy is when you take a song, movie or TV show and then sell it for your own profit as if it were your own product. That is illegal and that is the stuff that the corporate powers should be fighting against because that is the only thing that actually has any impact on sales. But to download something for your own use or share free with friends is completely legal and moral. This is why MPAA and RIAA will never win in their battle to destroy freedom. The efforts these organizations are taking to silence free expression all for the sake of the almighty dollar is appalling! It’s even more shocking considering the industry was responsible for creating file-sharing in the first place. How can any industry create a product to download music/movies, encourage the practice, and then sue anyone who actually does it? That’s evil. So in the minds of our generation this isn’t about “well, singer XYZ deserves to be paid” blah blah blah – it’s about the evil intentions, actions and deceit of corporate powers. You will not win, no matter who you sue or attempt to destroy because freedom always overcomes oppression, especially when that oppression is motivated by greed.

  7. Pingback: Hotfile, the Wolf in Sheep’s Clothing of the Safe Harbour Debate | Media Industry Blog

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