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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… I 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 comes 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 (NSDQ: ADBE) 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 (NSDQ: MSFT) 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 percent of PC software is pirated, vs. 20 percent 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 percent of the worldwide internet bandwidth consumption.>
— The biggest chunk is carried by BitTorrent (the protocol used for file sharing); it weighs about 40 percent of the illegitimate content in Europe and 20 percent 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 percent 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 percent 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 content in English as it is 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 Average Revenue Per User (ARPU) generated by an advertising-supported broadcast. For that matter, I doubt a TV viewer of the Breaking Bad series comes close to yielding 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.
Based in Paris, Frédéric Filloux is the GM of the French ePresse consortium. He also edits the Monday Note, where this was first published. It is posted here with his permission.
This article originally appeared in The Guardian.