Yo-Ho! A Pirate’s Business Model For Me!

I’ve blogged a lot in the past about piracy and its various implications, mostly because it makes for good blog fodder. It’s one of those issues that you can wax on for hours since the rules are pretty well defined (I.E. it’s illegal) but the social norm is completely the opposite. A great conversation to have with someone, who has downloaded files from such nefarious means, is their justification for doing so. It usually comes down to “everyone does it” or “I couldn’t be bothered paying for X for Y reason” and watching them squirm under their way out of the question. The main reason I see is that the pirates providing the services are doing a damn good job of it and in fact, it seems that even when a court topples a pirating giant the service was still up and running with higher availability. I’d like to see any business claim they could do that:

The temporary closure of the Pirate Bay had the unforeseen side effect of forcing torrent sharers underground and causing a 300% increase in sites providing access to copyright files, according to McAfee.

In August, Swedish courts ordered that all traffic be blocked from Pirate Bay, but any hope of scotching the piracy of music, software and films over the web vanished as copycat sites sprung up and the content took on a life of its own.

“This was a true ‘cloud computing’ effort,” the company said in its Threats Report for the third quarter. “The masses stepped up to make this database of torrents available to others.”

This got me thinking, the pirate business model is obviously working for a lot of people so what’s stopping the rights holders from beating them at their own game? I mean the investment in the technology would be minimal since most of the bandwidth is handled by the clients, they more than likely have all of their material available in a digital form so it seems like a pretty low cost option. The only problem we have is the monetization of the service, which is currently done using online advertising. I’m not going to pretend a service like this would be as profitable as some of their current endeavours but if they’re serious about taking these guys down there’s only one way to do it: beat them at their own game.

Suppose there was a service like the Pirate Bay but was sanctioned by the rights holders. In exchange for using their client and their website you’re guaranteed all content on their is yours to use as you see fit. I make the distinction that you use their client as it gives them another revenue opportunity. They could then offer a premium service where you could get access to content before the wider audience for a certain fee per month. This gets your material out to the wider world whilst still giving you ample revenue generation streams. Plus you still have the live performances that are the real cash cows.

It’s not your traditional business model but that’s why the pirates are succeeding in the digital world and the rights holders are floundering. Most of them seem caught up in the idea that they need some way of protecting their property no matter what the medium it is on. Even though DRM in the past has proved to be useless and only a burden on the legitimate consumer companies still cling to it in the hopes that it will somehow keep their sales up. What they need to do is to rethink their strategy for the demographics that are consuming their product regardless of its origin and target them with a service like this. Us Gen-Ys are getting older and more cashed up so the market for this kind of product is definitely growing but the value-add is currently missing from the legitimate providers, so the pirates are still winning.

Each new technological revolution requires companies to rethink their strategies to work in the new world. It’s no secret that rights holders have typically been quite adverse to any new revolution which has the potential to impact their current business model and that’s with good reason, their livelyhood is at stake. We could well be heading into an era where large corporations are replaced by many smaller companies which are more capable of responding to the fast pace technologically driven world we live in today, as the article up the top shows. Who knows maybe these pirates will one day be considered the pioneers of the new digital revolution for media and held up as heroes rather than criminals.

I think it may be a long time before that happens. 😉

2 Comments

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  1. I pirate my share of things. Always have, always will.  My reasons for it have changed over the years but the thing I have always stood by is:
    1) Make it a fair price (That is a personal judgement there)
    2) Make it easier to get it legally than to get it free.
    For example, lets take a game I have been pouring my time into recently, Borderlands.
    1) If I went out and bought the game from EB or Game it would cost me ~A$90. No way, too expensive. Off steam, ~A$35. Fair price. I am happy to pay that.
    2) Pirating it, I saw borderlands crop up on my torrent site. So I could add the torrent, download, unpack the Rar’s, install, crack it. If a patch comes out, I have to uncrack it, patch it crack it again. Or I could click “add to cart” on steam, confirm the purchase and I am done.
    This should not be a hard question. This should not even be an ongoing debate. It is so unfathomable that content makers are decrying piracy while Valve sits there making more money than they know what to do with, occasionally rousing themselves to say “Sorry? Piracy? huh?”
    I understand that not everyone can create the next Steam but that shouldn’t stop people from learning those lessons.

  2. Exactly, the value from that you derived from the legitimate copy was far above the pirated copy so you went for it. Steam was ahead of its time when it came out (and in fact back then it was more a hinderance than a help) and Valve is now reaping the benefits of a distribution platform that meets and in most cases beats out the pirated alternative. For someone like me who gets all his steam content for free (thank you Internode!) it makes the legimate versions that much more appealing, although I’m still a sucker for collector’s editions 😉

    We’ve yet to see this be replicated through other copyright based industries and I’d wager that its mostly due to their track record of opposing technology. The games industry as a general rule has grown as rapidily as the technology has allowed it and thus so have their business models. Publishers are now becoming more and more aware that slapping DRM on something does nothing to help their sales. Even more interesting is the experiments in price reductions that have been rampant on Steam, which have always lead to a massive increase in real sales (not just units moved).

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