P2P File sharing
The market HAS shifted and is continuing to do so
Saturday, 12 March 2005
This document has been written partially on request of the business in response to numerous comments made in project meetings and mostly because I feel very strongly that it is required and will hopefully shape some of the thinking in our approach to content based services, something that is desperately required.
The ability to accurately report on the global P2P file sharing phenomena is difficult at best, there are a number if facts that can be used to draw conclusions:
13 billion files available last year (2004)
2005 CD sales already 10.5% behind last year
RIAA issuing lawsuits against ‘prominent’ file sharers
MPAA shutting down prominent BitTorrent sites
New protocols and modifications of existing technology by open source community
Polarising of illegal/digital music download market
It’s the ‘field of dreams meets Shawshank redemption’ factor
More mp3 files are being deleted from Hard drives than ever before
More legal downloads than ever but the numbers are tiny in comparison
More CE than ever aimed at distribution and playback of digital music
New online stores selling music without DRM measures
New ‘legal’ P2P networks sanctioned by the record labels are appearing
New mobile based P2P applications being built by the creators of Kazaa/Skype
Starbucks setting up instore CD burning and sampling kiosks
It actually means several things, but lets get one thing out of the way first, the technorati, web literate, geeks (choose your term) will always be at the forefront and able to get ANYTHING content wise for free so for the purposes of selling content itself, forget them – period.
Many people dabble with P2P and because they do not have the technical knowledge they end up with a bad experience in terms of virus’s, spyware, wrong files, spoof files, poor performance etc, this is the primary reason along with in some cases the belief that the enforcement of copyright will catch up with them (web and press coverage of RIAA & MPAA action) for the uptake of legal, paid download services in recent months.
These users are the target market for a legal service that helps them discover new music and delivers it simply and easily to whichever devices they want, virus and spyware free, ad free and high quality, there is a willingness to pay if these requirements are met.
P2P networks rise and fall in popularity in a symbiotic relationship to the amount of use and attention they get, currently the ‘king’ is BitTorrent in terms of its ability to deliver content efficiently, this is why the MPAA & RIAA are targeting the forums where the small files that point to large downloads can be found. However the user desire for this to happen is massively greater and more importantly massively more ingenious than any effort the corporations can make that it can be likened to the small Dutch boy trying to block the hole in the dam.
Ultimately anyone with a certain level of knowledge can not only get whatever content exists but can also use open source methods to make sure they are never caught or subjected to a summons to court, as sad as it may be to say only those that don’t really understand the technology get caught no matter what the RIAA & MPAA say.
The same is true for the efforts to ‘spoof’ the networks, this involves corporations hired by interested parties releasing into known P2P networks defective copies of what they believe to be popular files, the theory, and a relatively effective one if you assume a particular user type, is that this will make the P2P experience so poor that people will simply stop using it. For some this is true but as mentioned previously there is a specific type of user for which this simply does not work, and in fact any community site worth its salt will self regulate to eliminate those bad copies. In reality this activity has only really had an effect on Kazaa and the like.
In the near future as in beta products just released then there are two main drivers:
· Allow anyone to listen to anything that anyone else has
· Allow anyone to download anything that anyone else has
There are at least two beta products on the market right now that allow anyone to search for anything and listen to it at their leisure as long as they have a connection (ok you say – but increasingly all devices will be connected all the time)
This is effectively a bigger potential threat than ‘plain’ file trading since it means anyone with a broadband connection can simply stream any music they like at any time so why buy any, why bother downloading and take the risk that someone will try and sue you, just launch a simple client, choose an artist and listen.
The point that it becomes really dangerous is when you link in tools like Audioscrobbler so that recommendations on what you should listen to based on what you have already listened to become plugged in to these new peer services, at this point if WE have not adopted and driven services like this then we will simply be circumvented in the value chain and will be left the role we do not want which is the flat rate bit pipe
As for the download market then some satisfaction may be taken from the fact that scare tactics, virus and spyware worries are taking an affect on those prepared to try P2P file sharing, one caveat is that there is a core set of people that are absolutely dedicated to the free sharing of content and unless ISP’s take responsibility and block traffic on certain ports, cap download amounts, ban certain file types then it will never disappear, in fact it will become more underground, this suits both sides, the ISP can basically ignore the ‘underground’ problem and those in it can continue to share content safely.
What is important though is to offer a safe, simple, easy to use and cost effective solution to those that want music and are prepared to pay in order to avoid the problems listed above, this is the opportunity, plain and simple
The real question becomes what are the important factors in this proposal, it may help to recap two simplified sets of current abilities:
Get any content
In high quality (new 1080 high resolution high definition TV content available)
In a timely manner, i.e. less than 12 hours after original creation
Treat P2P as online backup facility, why worry about local storage if always available
Unlimited online software store, any program cracked for unlimited use
Secure against legal reprisal/attacks
Spyware and virus free (or more than able to deal with effectively)
Uses Google to find P2P software
Tends not to do any research into the proper steps to take
Prone to virus and spyware infection
Prone to downloading ‘spoof’ files
Fail to take appropriate precautions
As mentioned previously, forget the Tech/geeks, there is little to no opportunity
The real opportunity comes with the second group, a desire exists to have new music digitally, the problem is how – the answer is to offer a simple, easy to use system that takes advantage of current technology, if we allow ourselves to not worrying about copyright protection laws and for a brief period allow ourselves to wallow in this legality free, non protectionist zone and simply concentrate on what customers want them the answers become blindingly simple.
Sadly, regardless of the supposed ‘size’ and ‘strength’ of being Europe’s largest integrated operator as soon as innovative ideas like “allowing our customers to share their music with each other and leverage our strengths to nurture this and derive revenue from it” come to light they are passed by, ignored, thrown out.
The even sadder fact is that independent companies have now done exactly this, they are hammering our flat fee access and deriving ad revenue which we get nothing from, their main problem is introducing customers to the network, 2.5 million customers after 6 months, no marketing spend, no ads, is impressive however so perhaps this wont be a problem to them, after all they make no investment into the infrastructure, that is left to us.
It seems the major labels are developing a double standard perhaps, on the one side they refer to P2P as “a means for people to steal our music, a home for thieves plain and simple” and on the other they are increasingly inking deals with new ‘legit’ P2P networks, perhaps they finally recognise the sheer power of these networks for doing one simple and very important thing, delivering content efficiently.
With the advent of SnoCap and the likes the power of these networks will be realised whilst at the same time turning in some revenue, as Napster recently stated in the Super Bowl (but for different reasons) “Do the Math…..”
13 billion files available for download in 2004
unknown actual downloads but let’s assume an average of two = 26 billion
charge $0.02 cents per download = $520 million
Apple has sold 250 million tracks for $0.99 = $247,500,000 (less substantial costs)
In the simplest possible terms charging 2% of what apple and others charge for online client to server music download services if applied to P2P ‘known’ traffic could yield a massive revenue increase. This is a strategy also proposed by
Canada who suggest that if all online music was reduced to $0.05 then the volume would compensate for the loss, hardly surprising that the labels and copyright guardians are throwing the idea out, they are dedicated to protecting the way things have worked for them for many years after all.
In understanding potential solutions and the proposals behind them it is important to understand where the current threats are and where they have come from. This is not all based on empirical data but also represent the views and thoughts of the author.
The major influencing factors taken in to account are:
· Increasingly connected devices
· Wider bandwidth across all platforms
· Greater local storage
· Simplification of programming tools
· Open source and community driven development
· The New Civil War – the fight for rights
The new age of software development means that as long as you have a good idea it is relatively cheap and easy to get it developed, many of the new stars of the web have been created by anything from 1 to 5 people using standard methods, open source and free tools (LAMP – Linux, Apache. MySql, Php), add to this cheap hardware, cheap hosting and a willingness to accept it isn’t going to be perfect from day 1 and that including the users in the development process is not just ok but fundamentally leads to a better product and is actively encouraged. Organic product development has lead to some very successful services that all share a common methodology, it can be argued that Google has shown this can even be done by large companies with their labs and beta philosophy (Yahoo labs and recently announced Ask Jeeves labs) however the smaller operations are the best examples (Del.icio.us, flickr, bootcamp, Odeo, Myth TV).
The main point is that they can take advantage of the fact that ISP, carriers and MNOs have built them a global sandpit in which to try their new service ideas, they extol the virtues of IRC, IM and self built tools to develop and be in touch with their users (who happen to be our customers) it is a self building, viral pit that uses previous success’s to help build (RSS feeds from blogging bring the interested, they invented blogging and the RSS feeds in the same way)
The biggest issue they have is mainstream adoption, billing need not be a problem with paypal or funding from Adsense (or both) but the service needs to grow to make it more useful, there are pockets of metadata (information) growing like moss on a lawn, left unchecked it will take over and destroy the lawn leaving only moss….
There are a lot of things we should do, a lot of which are outside the scope of this document but have been referenced here to help understand our threats.
It has been clearly stated that we do not want to be a bit pipe for others so how do we avoid this when all that those who threaten us need is a connection between our customers?
We could try and block all the relevant ports and traffic but I hope that anyone reading this needs no further reasoning for why this would be the worst idea possible.
What we should do is continue our investments in making our infrastructure the best available (in terms of coverage, speed, reliability), in creating a flexible environment for our customers to operate in (billing, tariffing, service choices, self serve), these are all basic things we need to do better than anyone else.
With regard to content services it is imperative that we look at what is happening in the market around us and react quickly, it is undisputed that FT has the resources and capability to do these things but it is also very clear that we seem to be focussing on the basics while the world moves on around us.
Some will argue that we have our own labs a la Google but ours are just too different to be as effective, they are part of an organisation that is too big, too unwieldy and cumbersome to such a degree that the rate of innovation and delivery of services is simply too slow, many organisational changes have been made recently to address this but moving the pieces in the jigsaw around is not going to make it any less complex or easier to do, make a simpler jigsaw.
· Form a lab for content services
· Develop new services and release in beta
· Encourage feedback and act upon it
· Don’t worry if its not carrier class from day one
· Be prepared to take it down/throw it away
· Copy and use open source ideals
Use our resources to their strengths
· ~67 million customer relationships
· integrated networks
· server and storage capacity
· make a stand – major labels or our customers
· be the glue that connects every customers pockets of information
· be the natural home for all that information and use it
As mentioned in a previous paper on Next Gen Music Services simply doing the basics is not enough, the future in content services is in the wealth of data generated around content consumption and what our customers do with it, how they want to interact with it, discover it and make new relationships through it FT is in a unique position to capture and use this data in new ways that will make our service stand out above the others no matter what the actual content is.
Recommend, find, tag, share, discover, chat, WWW (wherever, whenever, whatever)