Posts Tagged‘piracy’

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. 😉

Pirates, Perceived Value and Pedantry.

The digital age that we live in has brought us something that we weren’t accustomed to before: desirable products that have no limits on production. All forms of digital media can be reproduced essentially for free, and this leads to their supply being apparently infinite. This doesn’t work well with traditional business models as the normal rules of supply and demand would dictate the price would drop to near nothing if this was the case. What this has led to is a constant arms race between those who wish to profit from the digital age and those that wish to exploit a near limitless resource for their own game. I am of course referring to the pirates, or more accurately copyright infringers.

The reasons that people pirate are as varied as they are numerous, but the common thread I see throughout most of them is that there is an almost zero cost and risk associated with pirating something. When the barrier to entry is so low that almost anyone can get on and get whatever computer software they want for free with very little risk of being caught the perceived value of the product drops dramatically. In essence these pirates view the digital media as being worth a lot less than what it is being sold for commercially, and the risks associated with illegally downloading copyrighted material are small enough to be written off as well.

Most of the mechanisms that have been used thus far to combat piracy have been blunt and ineffective. The most traditional form is a Digital Rights Management (DRM) system which attempts to regulate access to only those who have purchased a copy legally. In all my years of working in IT I have not seen one program that has managed to resist the efforts to break its DRM, with the record standing at a mere 2 weeks if memory serves me. Personally when I pay for a game or application that dares to throw more then the most basic DRM at me I do feel like I’m being treated like a criminal for doing the right thing, whilst the pirates get away without having to worry about it.

However, despite all this bellyaching there are a few glimmers of hope. Stardock made headlines late last year for releasing a Gamer’s Bill of Rights outlining what they believe to be 10 rules that all game development companies should adhere to. In essence it was all about improving the value of the product for the customer, I.E the ones who are actually paying for the software. Whilst there has been no solid research done thus far into how DRM systems affect sales (although historically any draconian DRM scheme is met with strong customer disatisfaction) it comes as common sense that if people percieve the value of a product higher when they get it for free then you’re doing something wrong.

You can then understand my excitement when I saw Ubisoft talking about how they are going to combat piracy:

“Altogether on console, the piracy is low,” Guillemot said. “On the PC the piracy is quite a lot. We are working on a tool that would allow us to decrease that on the PC starting next year and probably one game this year.”

Guillemot didn’t say what that solution would be, but it since he talked about it as if it were a new tool and not an existing form of digital rights management, like SecuRom, it stands to reason that it may be an internal solution.

The topic of piracy came up during Ubisoft‘s quarterly earnings call after Guillemot pointed to it as part of the reason that their DS games haven’t been selling well.

He said that piracy on Nintendo’s DS is strong, though oddly not as bad on the DSi, and that the company has learned that they can reduce the impact of illegal copies of the game by including physical extras like figurines, with their titles.

This is exactly the way they should combat piracy. Improving the value of a store bought copy through things the pirates can’t get their hands on and duplicate is what will draw people away from the world of pirated software. History has shown that DRM is ineffective in preventing people from obtaining a product they want for free and recent forays into reducing the price (hence increasing perceived value) have worked to increase total sales.

With 2 of the big names starting to come around perhaps soon we’ll be rid of the DRM bugbear.