The recent publication of Free* has caused a stir online about free stuff on the Internet, and more specifically the ‘freemium‘ pricing model for online services. Meanwhile the fuss about people sharing files containing digital content without copyright holders permission (aka illegal downloads, aka ‘piracy’) seems to continue unabated. In this first part, which I might subtitle ‘crime pays’ I want to take a look at markets in digital content, and how these may eventually supplant traditional media distribution businesses as we find them today.

‘Freetard‘ seems to have multiple definitions, but the one I’m interested in here is ‘one who firmly believes in not paying for e.g. software, films, music. Generally an avid proponent of p2p filesharing’ (hopefully that’s fair use, and the Urban Dictionary won’t be sending me a nasty letter). Clearly there are many P2P users that want to get at content without dipping into their wallets, but I think the price is just one of the aspects for consideration here – price is just one of the ‘8 P’s‘ of services. Let’s take a look at each in turn:

• Product – if I want content (and there are those that argue that what I really want is a service to deliver content – hat tip to JP) then I want it in the appropriate format so that I can play it on the device of my choosing.
  • Paid for online services have done a terrible job on multi format, tending to be specialised to one device type, or viewing each different format as a different purchase.
  • DRM screws portability.
  • If I can get at an open file with no DRM then I can transcode it to whatever format that I like.
  • Transcoding is a CPU expensive and thus time consuming process – the distribution industry is missing a trick by not doing this stuff at source.
• Place (and time) – I don’t just want to have stuff on the device of my choosing, I want it wherever and whenever it suits me. Sure my big LCD at home is great for watching stuff on, but it’s a bit inconvenient for the daily commute on the train. If I can get a seat then my netbook has a good screen, but if it’s standing room only then it’s probably best that I make do with my iPod.
  • This doesn’t work with streaming, which some seem to think is the answer. Maybe if we had infinite bandwidth everywhere streaming would be the answer. But we don’t, and probably never will. Disconnected state management is essential to choice in place and time, and that means having a local cache. Since there’s no practical difference between cached streams and files then this one goes to the files.
• Promotion – I have already asserted that promotion is largely irrelevant in the world of the digital native, but that’s in the context of traditional goods and services. Clearly there’s a place here for content to be used to promote other associated products – the 1000 true fans model and derivatives.
  • When I bought Reiser’s ‘The Well Dressed Thief’ after hearing ‘Rockstar’ on Bloodspell I was buying into the music of an unsigned band that had promoted their stuff through a creative commons licensed piece of work. The good bit for them is that they were getting a lot more of my £7.99 than they would if they had been signed. Given the choice I would happily have paid the same for mp3s.
  • When I bought a second copy for a friend that I thought would like their stuff I wasn’t just buying some music, I was also buying a story to tell.
• Process – the sales process certainly causes friction when buying content online.
  • Even for other ‘free’ stuff like BBC iPlayer I feel that there’s more friction than downloading files from P2P networks.
  • There’s a lot more friction if you find yourself in the wrong place – see the note below about Free, or check out UKiVPN, which seems to exist (as a presumably profitable enterprise) purely so that people can lubricate away some of that media exec friction [yet another arbitrage between the value of bandwidth and the value of content].
• Physical environment – there isn’t a physical environment for online purchases, but there is a look and feel. I declare the paid for stuff the winners here they clearly can afford better new media luvvies than the freetards.
  • Most torrent tracker web sites are awful – typically with poor UI design, and too many questionable ads.
  • P2P clients are either bare and functional (e.g. uTorrent) or a dreadfully confusing mishmash (which is what Vuze has sadly become).
• People – the industry is trying to carve users up into two camps
  • Good people – who pay for content through approved services, and put up with sucky DRM and the limitations it imposes.
  • Bad people – who should be serving hard time in jail, their families cut off from the Internet, and paying $millions in retribution for the immense damage they have done. You don’t want to be a bad person. It’s bad.
• Productivity and quality – since the cost of making unlimited perfect copies is approximately zero this should be a tie between paid for services and P2P. But there are some wrinkles:
  • Content creators/owners and their middlemen should have the best quality source material (and tons of associated metadata that I’ve yet to see used meaningfully – probably the topic of a post in its own right).
  • P2P content is sometimes pulled from poorer quality sources.
  • P2P should be a more efficient distribution mechanism than individual downloads/streams providing a broader social benefit in terms of bandwidth utilisation (making the overall network/ecosystem more productive).
• Price – well that’s free, nil, zero, zilch, $0. No need for further discussion, move on please, there’s nothing interesting to see here. Or maybe not…
  • The popular Torrent tracker sites, home to the freetards, sell an awful lot of advertising. I’m not a fan of this model, as I’ve said before, but somebody’s clearly paying. Somebody thinks that even though the freetards won’t pay for music, movies and TV shows they’ll buy their crap. Somebody thought that this made The Pirate Bay worth $7.8m. Clearly somebody’s monitising thefreetards.
  • But wait… there’s more. Public torrent trackers are just the visible surface of what the current industry considers its problem. There are many private trackers that offer greater availability of back catalogue, and faster download speeds. They do this by enforcing a concept of equity in ratio – you must upload what you download (at least) – your contribution in bandwidth must by symmetrical. Bandwidth is not free – so users can either pay their ISPs more and seed more content, or they can buy ratio from the administrators of the community (often spun as being a donation to the running of the site). The going rate for ratio is in the region of £0.50/GB – approximately the same as physical storage. Let me restate that – people will pay as much for the ability to download content as they will for the empty physical asset to store it on. Also bear in mind that bandwidth is getting cheaper at a different rate to storage – so right now we’re passing the crossover point – the ‘freetards’, or at least people in their community are willingly paying more for ratio (=bandwidth) than they are for disk. There’s certainly gold in ’em hills. This is also an area where the media tend to focus whenever a private tracker gets busted by law enforcement – protraying the admins as making a huge profit from donations, I’m not sure that’s the case – they’re running speakeasies not distilleries – the point is that once we get to the end of prohibition (the present copyright framework) then the opportunity exists for the distilleries to open up.

Wow – that’s ended up being a long post. Let me restate the key points:

• People want open content so that they can choose the device, place and time that suits them.
• People are willing to pay for that content – money is being made in P2P right now, just not on a really industrial scale, and not by the content owners.
• An opportunity exists for services that work like existing P2P to be used for distributing content.

* The book is apparently available (for free) online – provided that your IP is geolocated to the US. Otherwise you see this – ‘Due to our agreements with our publishing partners, the document you requested is only available to users located in the United States.’ Free huh – maybe somebody will put it up on a torrent. The same seems to be true for the Google Books version too. Oddly the Scribd version on Chris’s blog seems to work (at least for me in the UK).