First Piracy, Then Profits

Mention peer to peer and file sharing, and you can almost hear the collective groan of the entertainment executive businesses. They are quick to press the speed dial button for the $1000-an-hour law firms, who in turn work with groups such as RIAA and MPAA to sue single mothers, and kids. Well, little do they realize why people are resorting to file sharing, and that after a brief initial pain, it actually turns out to be an opportunity.

David Choi and Arturo Perez, two academics make that point in a research paper they just published and point out that online piracy is a precursor to widescreen adoption of new technologies and emergence of new markets.

For example, they have made a significant impact in the evolution of file-transferring technology, which has created breakthroughs in information distribution for both illegal and legal uses. Second, the piracy communities have been the source of invaluable market insight to the business world. Third, online pirates have contributed to new market creation.

As argument, they offer Napster as an example. Many feel that Napster was all about free music, but Choi and Perez argue that it helped establish not only the music download business, it also pointed out that most consumers wanted to buy single songs not albums. Apple’s iTunes store capitalized on that and became the pasha of digital music. Similarly, the BitTorrent and Kazaa are leading to the emergence of what we like to call the personal P2P apps.

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