The name may sound more like a ferry service than a byword for what some consider digital piracy, but Peer-to-Peer (P2P) computing—think Napster, Gnutella, Freenet and many more imitators—is being embraced by tens, maybe hundreds, of millions of people. What started with sharing MP3s, or music files, has rapidly escalated to include DVDs, computer software and anything digital. Imagine sharing files and processing power across all computers on the Net. Heady stuff. As John Patrick, vice-president of Internet technology at IBM has said: “The real issue isn’t, ‘Does Napster win or does Napster not win?’ The issue is that we have the evolution of the Internet really taking hold and it’s putting a lot of power in the hands of people.” So what are the major music labels and movie studios supposed to do about all this sharing of their creative efforts? Here, for their benefit, is a reality check on the options:
Legal Action Your organizations are big fans of it. Witness current court battles against Napster and DeCSS (the DVD decryptor) and remember such long-running, productive campaigns as the Motion Picture Association of America’s attempt to keep VCRs out of North American homes. Strange how movie rentals now account for half of studio revenues and how theatre revenues have increased since the VCR’s introduction. Is there a lesson here? One problem is that these pesky file-sharing applications reproduce like rabbits. Making life even more difficult is the newer P2P offspring that cannot be sued because there is no central company or server that controls the sharing.
Copy Protection Although almost laughable in its ineffectiveness, copy protection must be mentioned. The trouble is that all forms of commercial digital copy protection have been broken quickly and efficiently, and will continue to be hacked. There are very smart people who relish the challenge of breaking what they view as an attempt by big bully corporations (that’s you, I’m afraid) to infringe on their digital freedom.
Digital Monitoring In the not-so-distant past, Intel, Microsoft, Real Networks and many other companies tried to install subtle logic in chips and programs to send information from end-user computers to corporate headquarters. Imagine if you could routinely scan people’s computers for file formats that may indicate pirated music or movies. Wait a second—any company that has ever tried to blatantly monitor someone’s computer has met with a maelstrom of protest and negative publicity. Scrap that idea, guys.
Brice Scheschuk is a chartered accountant and a Torontobased executive at an Internet financial-services company.
Embrace New Technology Although this sounds radical, it may make sense to work with P2E It is painfully obvious that your customers want to use these technologies. Does this destroy the commercial value of your artists? Probably not. CD sales have grown by 20 per cent since the MP3 floodgates opened two years ago. The Net and e-mail have become amazing viral marketing channels—tell a friend, tell two friends, and so on—for companies with a valuable service to sell. Send an e-mail with the latest Kid Rock song to a friend who has not heard of the artist, she likes him so much she buys the album—CD or digital—goes to the concert, purchases merchandise, tells other friends and so on.
Imagine, for a minute, a venture capitalist setting up a Napsteresque service for unsigned artists. The service pays for studio time, provides free downloads to users and opens an artist to the broader market. Once a promising artist is identified by number of downloads, the service funds videos and additional studio time, and both parties profit from radio-station exposure, tours, merchandise and—to whatever extent is left—digital sales (lots of people still want the authorized version). All of this while the music can also be downloaded for free—a true paradigm shift.
German media giant Bertelsmann AG may have shown the way last week when it announced it was dropping its lawsuit against Napster and teaming up with its former nemesis. Bertelsmann will loan Napster money to help it become a membership service while Bertelsmann’s music unit, BMG, will make its music catalogue available to Napster. Could this be the beginning of the end for the $20-billion lawsuit by the rest of the music industry?
The entrenched franchises of your music labels and movie studios are coming under threat from all sides. What happens when high-speed home Internet use increases in the next two to three years and anyone can download an entire CD or movie quickly and painlessly? What happens when artists figure out they can do better handling their own distribution on the Net?
P2P presents the biggest challenge and opportunity ever to face creators of primary works. No longer are we limited to a few friends copying software, a movie or a CD among themselves. Now, the entire population of Net users can share any digital file. Rather than put up temporary barriers that cannot hope to keep up with the advancement of this technology, artists and their labels, studios, software companies and publishers must adapt and embrace it. You folks, in other words, must build new relationships with your customers, based on the marketing power inherent in sharing. After all, it’s something we’ve been taught to do since we were kids.
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