In the summer of 2009, I found myself invited to a small party in an old bourgeois apartment with breathtaking views of the Champ-de-Mars and Eiffel Tower. The gathering was meant to be an informal discussion among media people about Nicolas Sarkozy’s push for the HADOPI anti-piracy bill. The risk of a heated debate was very limited: everyone in this little crowd of artists, TV and movie producers, and journalists, was on the same side, that is against the proposed law. HADOPI was the same breed as the now comatose American PIPA (Protect Intellectual Property Act) and SOPA (Stop Online Piracy Act). The French law was based on a three-strikes-and-you-are-disconnected system, aimed at the most compulsive downloaders.
The discussion started with a little tour de table, in which everyone had to explain his/her view of the law. I used the standard Alcoholic Anonymous introduction: “I’m Frederic, and I’ve been downloading for several years. I started with the seven seasons of The West Wing, and I keep downloading at a sustained rate. Worse, my kids inherited my reprehensible habit and I failed to curb their bad behavior. Even worse, I harbor no intent to give up since I refuse to wait until next year to see a dubbed version of Damages on a French TV network… In can’t stand Glenn Close speaking French, you see…” It turned out that everybody admitted to copious downloading, making this little sample of the anti-Sarkozy media elite a potential target for HADOPI enforcers. (Since then, parliamentary filibuster managed to emasculate the bill.)
When it come to digital piracy, there is a great deal of hypocrisy. One way another, everyone is involved.
For some large players — allegedly on the plaintiff side — the sinning even takes industrial proportions. Take the music industry.
In October 2003, Wired ran this interesting piece about a company specialized in tracking entertainment contents over the internet. BigChampagne, located in Beverly Hills, is for the digital era what Billboard magazine was in the analog world. Except that BigChampagne is essentially tracking illegal contents that circulates on the web. It does so with incredible precision by matching IP numbers and zip code, finding out what’s hot on peer-to-peer networks. In his Wired piece, Jeff Howe explains:
BigChampagne’s clients can pull up information about popularity and market share (what percentage of file-sharers have a given song). They can also drill down into specific markets – to see, for example, that 38.35 percent of file-sharers in Omaha, Nebraska, have a song from the new 50 Cent album.
No wonder some clients pay BigChampagne up to 40,000$ a month for such data. They use BigChampagne’s valuable intelligence to apply gentle pressure on local radio station to air the very tunes favored by downloaders. For a long time, illegal file-sharing has been a powerful market and promotional tool for the music industry.
For the software industry, tolerance of pirated contents has been part of the ecosystem for quite a while as well. Many of us recall relying on pirated versions of Photoshop, Illustrator or Quark Xpress to learn how to use those products. It is widely assumed that Adobe and Quark have floated new releases of their products to spread the word-of-mouth among creative users. And it worked fine. (Now, everyone relies on a much more efficient and controlled mechanism of test versions, free trials, video tutorials, etc.)
There is no doubt, though, that piracy is inflicting a great deal of harm on the software industry. Take Microsoft and the Chinese market. For the Seattle firm, the US and the Chinese markets are roughly of the same size: 75 million PC shipments in the US for 2010, 68 million in China. There, 78% of PC software is pirated, vs. 20% in the US; as a result, Microsoft makes the same revenue from the Chinese than from… the Netherlands.
More broadly, how large is piracy today? At the last Consumer Electronic Show, the British market intelligence firm Envisional Ltd. presented its remarkable State of Digital Piracy Study (PDF here). Here are some highlights:
- Pirated contents accounts for 24% of the worldwide internet bandwidth consumption.
- The biggest chunk is carried by BitTorrent (the protocol used for file sharing); it weighs about 40% of the illegitimate content in Europe and 20% in the US (including downstream and upstream). Worldwide, BitTorrent gets 250 million UVs per month.
- The second tier is made by the so-called cyberlockers (5% of the global bandwidth), among them the infamous MegaUpload, raided a few days ago by the FBI and the New Zealand police. On the 500 million uniques visitors per month to cyberlockers, MegaUpload drained 93 million UVs. (To put things in perspective, the entire US newspaper industry gets about 110 million UVs per month). The Cyberlockers segment has twice the users but consumes eight times less bandwidth than BitTorrent simply because files are much bigger on the peer-to-peer system.
- The third significant segment in piracy is illegal video streaming (1.4% of the global bandwidth.)
There are three ways to fight piracy: endless legal actions, legally blocking access, or creating alternative legit offers.
The sue-them-untill-they-die approach is mostly a US-centric one. It will never yield great results (aside from huge legal fees) due to the decentralized nature of the internet (there is no central servers for BitTorrent) and to the tolerance in countries in harboring cyberlockers.
As for law-based enforcement systems such has the French HADOPI or American SOPA/PIPA, they don’t work either. HADOPI proved to be porous as chalk, and the US lawmakers had to yield to the public outcry. Both bills were poorly designed and inefficient.
The figures compiled by Envisional Ltd. are indeed a plea for the third approach, that is the creation of legitimate offers.
Take a look at the figures below, which shows the peak bandwidth distribution between the US and Europe. You will notice that the paid-for Netflix service takes exactly the same amount of traffic as BitTorrent does in Europe!
US Bandwidth Consumption:
Europe Bandwidth Consumption:
Source : Envisional Ltd
These stats offer a compelling proof that creating legitimate commercial alternatives is a good way to contain piracy. The conclusion is hardly news. The choice between pirated and legit content is a combination of ease-of-use, pricing and availability on a given market. For contents such as music, TV series or movies, services like Netflix, iTunes or even BBC iPlayer go in the right direction. But one key obstacle remains: the balkanized internet (see a previous Monday Note Balkanizing the Web), i.e. the country zoning system. By slicing the global audience in regional markets, both the industry (Apple for instance) and the local governments neglect a key fact: today’s digital audience is getting increasingly multilingual or at least more eager to consume contents in English as they are released. Today we have entertainment products, carefully designed to fit a global audience, waiting months before becoming available on the global market. As long as this absurdity remains, piracy will flourish. As for the price, it has to match the ARPU generated by an advertising-supported broadcast. For that matter, I doubt a TV viewer of the Breaking Bad series comes close to yield an advertising revenue that matches the $34.99 Apple is asking for the purchase of the entire season IV. Maintaining such gap also fuels piracy.
I want Netflix, BBC iPlayer and an unlocked and cheaper iTunes everywhere, now. Please. In the meantime, I keep my Vuze BitTorrent downloader on my computer. Just in case.
—frederic.filloux@mondaynote.com
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25 Comments
Nice article. Wrong target. Apple doesn’t care about the price of the videos and songs sold on iTunes. All that matter is that customers keep on buying devices (see Jean-Louis’ article this week). Same for the zone distribution system. Apple would certainly prefer to have an unified system.
As an example: it is today very difficult for an american customer to buy the last Goncourt for his Kindle. Why? Because the french editor doesn’t have the rights for US distribution, and Amazon has to restrain downloads to France. Sad, but true.
The issue here is that media company are very, very slow to adapt to the current world. Amazon and Apple are just the messengers.
I agree with Marco : Apple and Amazon would rather have no DRM and no boring DRM to deal with. Apple fought for the removal of DRM on music files… Frederic, please have a look at this post I wrote not a long time ago regarding the ridiculous limits and incredibly difficult method Warner put in place to access the videos I should be able to access legally : http://blog.gete.net/2010/12/13/les-joies-du-telechargement-legal…/
Pricing is an issue, and as you notice, the region limitations are an issue. But ADVERTISING is also a big problem. Let me explain : for people who want to watch their favorite TV shows, there are LEGAL methods to do it in France, as Free (the ISP) or TF1 propose to watch them in English (with French subtitles !) ONE DAY after they have been broadcast in the US. Alas, very few people know about it and prefer to download the episodes on the Internet. Annoying…
As usual, yours is a robust reliable fact-checking advocacy to the widely spread opinion about Digital Content Smuggling aka Piracy.
Pity that you keep to the usual “consumer claim” for affordable digital content (Sustained !) without revisiting the creation payback… it would be just as interesting to learn from you how the RIAA ou MIAA gradually fail to address their global audience content paybacks to the real authors (remember the 2008 Writers Guild of America strike), when they are mainly manufacturers and channels…
Just the way it is for media editors to repay journalists in a digital environment I assume?
Frederic,
The challenge you’re going to encounter is that even if services emerge, Hollywood won’t license content to them. Whether it is successful movies ( http://www.tnl.net/blog/2012/01/14/internet-vod-2011-movies/ ) or TV shows ( http://www.tnl.net/blog/2012/01/21/the-2011-state-of-internet-vod-tv/ ), it appears that LEGAL online availability remains elusive.
While some may say one service or another is worse, the truth is that streaming services don’t appear to be given access to content.
So studios may actually be happy with the current state of affairs as piracy becomes a convenient scapegoat for what is failing in their industry.
I’ve always wondered how estimates of lost revenue due to piracy are made. I suspect that somebody at, say, Microsoft looks at the 78% of users in China that have pirated versions, and calculates how much more they would make if all those people had purchased legit copies. That would of course be absurd, since the alternative to pirating Windows or Office is not purchasing it, but using something else.
Suppose a foolproof way was found to prevent all piracy. What proportion of pirates would then purchase the material? This is the only legitimate way to estimate revenue lost to piracy.
It wouldn’t surprise me if the “revenue lost” number turned out to be negative. That is, products that are pirated more often are also ultimately purchased more often.
As a producer, I should feel bad if my products aren’t pirated, because that indicates that they aren’t in high demand! If 20% of my products are pirated, that means 80% are purchased. I should view piracy as a marketing cost, and figure out how to entice a portion of today’s pirates into tomorrow’s purchasers.
And since my marginal unit cost of digital products is close to zero, it is essentially free marketing.
mvh
The Netflix bandwith example is fascinating.
It reminds me of the NRKbeta doctrine; The only way to control your content is to be the best provider of it.
This course of action seems to have worked for the music industry: In countries where Spotify is established, fewer people bother with piracy. Because mainly, they just want to listen to the music – not to juggle audio files. A fair share of Spotify users are even paying (37% of Spotify users paid €13 per month for Spotify Premium here in Norway, as per Q3 2011, according to TNS Interbuss) to avoid the ads.
Can someone please do a good analysis of “unique views” vs. traffic? 24% of internet traffic going to torrents doesn’t mean 24% of internet users. The 250 million unique views figure also needs backing up and explanation. I know many a BitTorrent user on multiple IPs with multiple machines to maximise their downloads.
Couldn’t agree more. I’m currently living in Italy and it’s so hard to access the content.
TV – Italian tv shows or italian dubbed american shows (try watching House MD in italian)
iTunes – only italian artists
Netflix – crap
If at least the kindle fire was here… But no! these people are not willing to do an investment, they’re dinosaurs and it’s like we’re just gonna have to wait another 30 years for the folks calling “the internet users” NERDS to die to stop making retarded decisions.
Great article, I couldn’t agree more.
In Poland most of the stuff available in the States becomes available after months if not years. If I could buy access to say, Dexter on-line directly from showtime, I wouldn’t have to stream it. I wouldn’t even mind the ads, or paying for the content. In fact I’ve been looking for it on blu ray but it’s just not available. So in the mean time I watch it as it’s aired on-line… I’m going to buy the film on blu ray or DVD when it eventually comes out anyway – so I don’t see it as stealing… I just care about time.
Although on another note I do believe it’s really unfair that companies that distribute content don’t take into account purchasing power parity when deciding on pricing strategy for their products on foreign markets. In fact most of the time, products that originate in the USA (even if production is taking place in China) are actually twice more expensive in much poorer countries, like Poland. The Polish currency is 3 times weaker than the US dollar, plus purchasing power makes the difference even larger. Recently I tried to purchase a legal version of photoshop on-line. I found the site, the price in dollars – 600 and when I tried to log in to download it, the currency conversion plus the additional margin made my product 6 times more expensive!!! That’s ridiculous! I mean it’s the same product, downloaded from the same website so why this ridiculous price…?
This argument applies to the whole Microsoft loosing money in China thing… If Chinese Microsoft sold it’s products at a price more adjusted to Chinese realities I’m pretty sure they’d make up for the loss from the reduced price by sheer volume.
I really do hope these acts don’t go through in the EU…
Given that Filesonic and Fileserve have both caved and others are about to as well, you’ll have good use for that BitTorrent client now. I’d still like someone to make a case for my episodes of subtitled Braquo taking money out of someone’s pocket when that series isn’t being shown here in the U.S. and is probably very unlikely ever to be shown. The same for Forbrydelsen 1 and 2 (AMC’s The Killing? Puhleeze!). In my case, it’s Halite as client. And I’ll be damned if I’ll ever apologize for it.
Oh please. What do you think Microsoft would prefer: having Windows pirated in China, or having everyone start using Linux in China, and drop their market share by 30%?
It might not be Microsoft’s ideal scenario, but they sure prefer it to 30% or more of the world using Linux.
Fact is, if services like NetFlix were available to other countries, the piracy levels would drop. Unfortunately though, these services are still blocked off from the rest of us non-US citizens, enforcing idiotic draconian censorship/publishing rights laws. The loser at the end of the day is us, the user, so we are stuck with two choices. 1. Download a pirate copy. 2. Wait X (up to months in some cases) amount of time for your local broadcaster to take their thumbs out of their collective asses, to watch shows, that are actually old.
I’m not sure that’s the point. It’s like saying copying people is part of homework. You’re not taking anything away from them, but it’s also unnecessary and not right. According to Slate and others, the US doesn’t have a big piracy problem costing billions of dollars as lawmakers are saying, partially because they are estimating all the people downloading content, and also deciding those people would have bought their overpriced products, both wrong.
I do believe fair use is a right that was whittled away by the RIAA and other big players. I’m not saying copying people is right, but taking away constitutional due process from everyone just because you want taking anyone down to be easier and own a few politicians is just corporate fascism at its finest.
Re: “Worldwide, BitTorrent gets 250 million UVs per month.” What the heck is UV? Uninvited Viewer? Unintentional Verbiage? Unauthorized Vagrant?
UV might just mean User Views, though I’m not sure. It would mean that many people clicked on a page or accessed content. You probably have greedy MIAA, RIAA execs who don’t think the feds have cronied quite enough for them, even though websites got taken down for a year with no due process, trying to calculate all those views are people using BitTorrent should have bought something from them, and calculating billions in losses not forcing them to go through them for all content.
I figure if they got millions to throw around at Congress, like the millions used to lobby for SOPA and PIPA, they got plenty of money and don’t need to squeeze us more, getting rid of that pesky due process and requirement of proof before shutting websites down China-style.
UV is a Unique Visitor / Unique Viewer – a measure used when counting users of web services. It is based on putting an information cookie on the users’ computers. As long as the cookie isn’t removed (most people don’t bother) until the next visit, it makes sure that the same user isn’t counted several times.
Stopping pirating is easy. LOWER YOUR PRICE to a level where it becomes ‘inconvenient’ to pirate vs just paying for the product. I’ll bet my left leg you can find a price point where you actually make MORE money by lowering your price and having more people purchase your products.
Huh, another ‘I sinned but so did you’ article?
Well, for what it’s worth, there are less hypocrite people out there, which are stung by others like you.
Guess putting yourself in the favourable social party didn’t make you all that invulnerable to criticism did it?
Yes, you are one huge hypocrite, congratulations.
I don’t think of it as “We all sinned”. I just can’t believe the people that have no idea what was in the bills other than the filtered news spin. This completely ignores that Congress sat on its butt for 6 months, finally put a payroll extension and short term budgets out, going on long early vacation, and couldn’t agree on anything for us. Then the first thing they do back, after a multimillion dollar RIAA, MPAA lobbying effort, put out bills from both houses and parties to bypass due process and attempt a China style internet censorship and seizure of domains that might link or are accused by the media MAFIAAs of enabling connection to blacklisted foreign sites or material MAFIAAs want censored… And now the argument is if stealing copyrighted stuff is wrong? It’s against the law for a reason, the argument should be is it right for current attempts to shut down independents or “enablers” before due process.
For the one of you able to read french, here is an interesting article about the link between “Hadopi” (french law to protect artists’ production from theft and piracy) and the rise of iTunes sale :
http://www.lemonde.fr/technologies/article/2012/01/24/hadopi-source-de-la-croissance-d-itunes_1633919_651865.html
And here is the US study from with the conclusions come up :
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1989240
The conclusions of the Amercian Researchers go somehow in Frédéric Filloux’s direction too ; I’ll translate it that way : “Everyday easy access to content is more valuable than occasional simple free content”.
Hmm it appears like your site ate my first comment (it was extremely long) so I guess I’ll just sum it up what I submitted and say, I’m thoroughly enjoying your blog. I too am an aspiring blog writer but I’m still new to everything. Do you have any tips and hints for beginner blog writers? I’d certainly appreciate it.
@seo
My first advice to you: Always save your post before you hit Submit.
Mike Van Horn – you are answering a spammer, I’m afraid. If you google his text, you will find the exact same wording entered 1580 times all over the internet to do some kind of search engine optimisation (SEO) scam. My tip to Fréderic is just to delete it… (along with this comment, if you like)
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