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The loss of LimeWire has P2P pirates on the run.  (Source: Walt Disney)
But are pirates turning to YouTube and elsewhere

The NPD Group, a top market analytics research firm has released a new study [press release] that might surprise some.  It claims that in 2010 the rate of users who pirate content on peer-to-peer (P2P) networks dropped to 9 percent, down drastically from 16 percent reported in 2007.  This marks a dramatic reversal of the trend of increasing piracy rates in recent years.

The report argues that piracy is not a "fundamental" problem for the media industry, given the relatively low levels.  This stands in stark contrast to statements in the Digital Media Report 2010 [PDF] by the International Federation of the Phonographic Industry (IFPI), the parent organization of America's RIAA.  The IFPI stated in the report, "[The industry will] struggle to survive unless we address the fundamental problem of piracy."

Warner Music, a RIAA member takes a bit more conservative approach.  In a recent presentation to the U.S. Federal Communications Commission, Warner suggested that only 13 percent of Americans pirate.  The Warner report also offers some disclaimers about the harmful impact of pirates, stating that most pirates do spend money on content and that they "tend to drive high discovery for others".

The numbers from the NPD Group are admittedly slanted, though, due to a significant event in the industry.  They were taken from the final quarter of 2010, when the RIAA scored a major lawsuit win that forced the U.S.'s most popular P2P client, LimeWire, to cease distribution.  Thus the dip in P2P filesharing may be only temporary, due to the loss of one of the highest profile clients.

States Russ Crupnick, entertainment industry analyst for NPD, "Limewire was so popular for music file trading, and for so long, that its closure has had a powerful and immediate effect on the number of people downloading music files from peer-to-peer services and curtailed the amount being swapped. In the past, we've noted that hard-core peer-to-peer users would quickly move to other Web sites that offered illegal music file sharing. It will be interesting to see if services like Frostwire and Bittorrent take up the slack left by Limewire, or if peer-to-peer music downloaders instead move on to other modes of acquiring or listening to music."

Today, many of the most used clients are unofficial community releases of past P2P clients that were banned by lawsuits.  Examples include Kazaa Lite and WireShare (formerly LimeWire Pirate Edition), etc.  According to the NPD Group's data, FrostWire (traditional P2P) and uTorrent (Torrent P2P) increased in use, as well, in the wake of the Limewire shutdown.

While the study did consider BitTorrent traffic (a specialized P2P protocol), it did not consider new forms of illegal content distribution, such as one-click downloads, illegally streamed content, such as unauthorized posts to video sharing sites like YouTube.  The latter seems particularly prevalent, as you can go to YouTube and find virtually any song you can imagine -- mostly from unofficial user-submitted uploads (though the major label industry does maintain an official presence on the site via channels like Vevo).

Media organizations have tried unsuccessfully to sue YouTube's owner Google over such posts.  The television industry championed the biggest such case, when Viacom sued Google, demanding $1B USD in damages for pirated content hosted on YouTube.  The media giant's case fell apart, though, after it came out that Viacom employees uploaded content under fake screennames to make it look like infringed content.

The study also only surveyed those 13 and up.

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RE: Forget being a "fundamental" problem...
By Ben6821 on 3/24/2011 2:18:10 PM , Rating: 1
If it is your aim to say that content producers overestimate the amount of revenue lost, I would agree. If someone pirates 1 million songs, they would not have paid for them all (as another poster noted).

That said, you have a few major errors in your other comments. If we assume the "pirates" are rational people, then a few simple conclusions arise.

1) They do it because it yields a benefit as compared to the alternatives. In a world with Grooveshark, Rhapsody, Napster (legal version), Youtube, etc., it is possible to try out almost any song in existence without paying anything. These services are probably easier and more reliable to use as well. Why pirate then? Well, besides profound ignorance of the alternatives, it would allow one to try out the song out anywhere (car, mp3 player, etc.) before buying, for example. How many of these vaguely conscientious people do you think there are? (pirate to try, but ultimately buy)

2) If trying music out is not a legitimate or common reason, then they do it because they obtain something that has value to them. How can something so simple be so often overlooked? I am tired of this nonsense that people pirate stuff cuz its free. If it was truly worthless, they would not take it. They spend a lot of time searching out sources of content and then enjoying that content, and then complain that there is nothing of value to be found. Again, if people are rational, they will pirate because they recognize the value of it for them. (otherwise it is a waste of time)

3) So what would people actually buy? They take it cuz its free, but they wouldn't buy it otherwise argument... So clearly pirated content has some value or you wouldn't take it at all. However, some would claim the content is not worth the current selling price. When something is free, it is impossible to judge the actual value, since any value greater than zero will motivate piracy. Of course there is some lost revenue, and of course the "pirates" will tell you otherwise. How much, probably more than you think and less than RIAA says. Yes, some people would do without any of it if it wasn't there. But this type of person is more likely to not pirate in the first place since they are capable of being honest with themselves.

4) It just bits, not physical property. While this is technically true, the conclusions are naive, misleading, and ignorant. Music may be represented as bits, but someone who has music has something ultimately tangible. In other words, they can hear it. True, if taken, it is not like the loss of physical property. However, the revenue loss argument is valid. The only reason people can pirate at all is because most people do pay for music. If everyone believed this silly argument that taking bits is not wrong, there would be not be much music available at all. If you think most income is from concerts, then the small minority of concert goers would effectively subsidize everyone else. You think that is fair?

5) Once someone has obtained content freely, they have no incentive to buy it unless there is even more value to be obtained. If someone wants a CD because of the insert or the sound quality, then they might still buy one (a small percentage of pirates do this I would argue). On the other hand, if the pirated content has everything you want, you won't go buy the same thing, cuz that is just dumb.

6) When someone creates content like music, a book, a film, or even a news article, they are entitled to reap the benefits of that effort. This right is balanced with the benefit society obtains through "fair use." Money is not the only driving factor, in truth. If you pirate and share music, then you clearly should not have a problem reproducing on your website free content from another website. Lets suppose I published opinion articles on a blog. I made no effort to make money (i.e. no ads etc.). If you copy my article verbatim (as opposed to sending people to my blog), you can claim that you are not causing loss of revenue for me, which is true. However, you thought there was some value in the article, and that is why you copied it. Whatever it might be (even if it isn't money), I should have that benefit because I did the work of writing the original article. Artists and their representatives are entitled to reap the benefits of their efforts, and we are not allowed to take it from them because they have "enough benefit" already.

Sorry for the long post...

By Solandri on 3/24/2011 4:31:31 PM , Rating: 4
3) So what would people actually buy? They take it cuz its free, but they wouldn't buy it otherwise argument... So clearly pirated content has some value or you wouldn't take it at all.

This is only partially right. It's not just the demand side which is driving piracy, it's also the supply side. The RIAA and MPAA by being paranoid about piracy and refusing to implement a digital distribution system, have actually contributed to piracy. The success of the iTunes store, the Amazon MP3 store, and Netflix show that if the song/movie is reasonably priced, people will still buy it even if they could pirate it. If the RIAA and MPAA had embraced digital distribution when Internet use first exploded back in the 1990s, there would be less piracy than there is today. Often times, people began pirating because it was the simplest way to rip their CD or DVD collection into a portable digital format, not because they wanted stuff for free.

4) It just bits, not physical property. While this is technically true, the conclusions are naive, misleading, and ignorant.

This too is a problem of the RIAA and MPAA's own making. There are two conceptual models for paying for a product - a purchase, and a license.

In a purchase, you pay for something and it becomes yours. You can do whatever you want with it. You can sell it, you can loan it to friends, you can give it away if you want. A car is a purchase. So is a blender.

In a license, you pay for the rights to use something but it is not yours. There are certain things you can't do with it, like loan it out or sometimes even resell it after you're done using it. Computer software is typically a license. But since you're not buying the product itself, just the right to use it, there are a couple other logical extensions. If a new, updated version of the software comes out, most software companies let you upgrade at a discount. They recognize that you've already paid to license most of the features in the new version, and so let you pay a reduced amount to license only the new features. If the media the software is distributed on becomes damaged, lost, or destroyed, they will send you a new copy for the cost of the CD/DVD. You bought the rights to use the software, not the arrangement of bits on the physical CD/DVD itself.

But here again, the RIAA and MPAA have screwed themselves in their quest to extract more money from their customers. The software (music, movies) they sell isn't a purchase, and it isn't a license. It's some weird hybrid which has all the disadvantages of both for the customer, and all the advantages of both for the *AA. If a blu-ray version of a movie you have on DVD comes out, they won't give you a discount. They expect you to pay full price as if you're buying a completely new license as if you were buying a product. If you damage/destroy/lose the disc, they expect you to pay for a completely new license as if you were buying a product (except Disney - they will replace damaged discs). So it seems they think you're purchasing to own when you buy music/movies. But if you try to use the product as if you owned it - at a public performance or sometimes if you try to resell the product - they will tell you no, it's a license, so you're not allowed to do that.

So there's really no ambiguity between buying bits (a license) and buying a material goods (a purchase). The ambiguity in music and movies is entirely one of the RIAA and MPAA's own making.

5) Once someone has obtained content freely, they have no incentive to buy it unless there is even more value to be obtained.

You're assuming that price is the only factor here. It is not. There's also convenience and reliability. Downloading stuff is often inconvenient (downloads can take days), and unreliable (the source you're downloading it from can disappear before you finish). iTunes and Netflix make billions of dollars in sales despite the availability of the very same music and movies for free. They do so because their paid service is more convenient and reliable than downloading. And the price they charge for the music/movie, convenience, and reliability is worth it for most people.

6) When someone creates content like music, a book, a film, or even a news article, they are entitled to reap the benefits of that effort.

This argument is ineffective in most people's minds because of the way the RIAA and MPAA have abused content creators - contracts with demonic terms, and creative "Hollywood accounting" whose only purpose is to deprive content creators of the money they rightfully deserve.

Right now, if you're a budding musician and sign a record contract with a major label, you'll be lucky to see more than a few percent of the money from each CD sale. The *AA companies have gamed the system so that they are the beneficiaries of nearly all the revenue from sales and licensing, not the artist. In fact many musicians find themselves stuck in contracts where they produce songs which make millions of dollars for the studios, but by the studios' accounting the musician still owes money to the studio for recording expenses.

So quite often, piracy actually works in the musician's favor. People who normally wouldn't hear their music listen to it, become fans, and go to their concerts. A significant amount of the revenue from merchandise sales at concerts actually does go to the musician. And so they end up making more money from piracy, than if there were no piracy and more revenue was directed towards CD/MP3 sales.

See, the overall problem is that the music studios (and to a lesser extent the movie studios) aren't the creative force behind their industry. They're merely the distributor, yet they've gamed the system so that they get the lion's share of the revenue. Along comes the Internet which is a perfectly neutral and almost free distribution medium, and suddenly there's no need for a distributor anymore. The studios are no longer necessary, but they're fighting tooth and nail to hold on to their position of power by making progress and the natural evolution of content distribution illegal.

"It looks like the iPhone 4 might be their Vista, and I'm okay with that." -- Microsoft COO Kevin Turner

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