Despite years of debates over the morality, prevalence and impact of mass online copyright infringement, actual hard numbers, backed by statistically rigorous methods, are almost impossible to find.  Most of what passes as “knowledge” about piracy is based far more on pre-conceived notions and anecdotal evidence.  And that really should not surprise, since the fundamental questions about file-sharing generally have less to do with what has happened and more to do with what might have happened.  That is, what purchases did not occur because of the existence of free alternatives, what sales did not take place if the pirate networks had not made sharing so easy. Speculative counter-factuals are really all we are left with, and such questions can never be answered with any sort of definitive confidence.

The Hollywood film industry, or at least its official representatives in the MPAA, likes to talk tough about efforts to combat movie piracy on the internet.  They rabidly support DRM systems to supposedly keep their content locked-down (CSS, AACS, etc.), they push hard for new laws to control how video moves around online (like ACTA and COICA) and they will happily sue sites or individuals they feel to be contributing to mass copyright infringement (too many to name).  Nonetheless, a more objective examination of how movies get onto file-sharing networks, and then how those video files get distributed, would clearly show that the movie studios’ anti-pirate endeavors are fundamentally off-target.

Widespread DRM systems, like CSS on DVDs and AACS on Blu-Ray discs, have absolutely no bearing on how or whether movies end up online, as the primary leaks invariably come from within the production process.  DVD and Blu-Ray sourced files appear online *before* the date those discs are actually made available for sale.  And not just a few days before, but usually weeks if not months before the official DVD release to the public.  Someone in the production chain of Hollywood itself actively puts the video files online for anyone to download for free, and does so *before* any DRM protection can be applied to the film.  It strains credulity to think that the film studios that contract out these services could not increase pressure on their employees and partners to prevent this kind of leak.  Yet, in the decade or so since large-scale online copyright infringement began, they have never done so effectively.

Even more telling as a demonstration of Hollywood’s lack of seriousness about piracy, however, is the annual decision by the film studios to distribute DVD “screeners” to members of the film community in the period before and during “award season” leading up the Oscar ceremony.  Despite explicit knowledge that these critically acclaimed films will immediately be uploaded for mass distribution, and even while the movies themselves are still in theaters, and months before they are scheduled to come out on DVD, the studios continue the practice.  There have been half-hearted attempts in past years to devise a more secure system for distributing these screeners, but they proved unwieldly and ineffective.

Yet the crucial point is that according to Hollywood’s own cost-benefit analysis, the supposed lost sales from the piracy of its own best films is overwhelmingly out-weighed by just the mere opportunity of these films receiving a publicity bump from winning awards.  In their own calculations, Hollywood values the increased revenue an Oscar traditionally generates far more than they fear what a leaked copy loses them.  Such a decision is at minimum an admission by the people who should know movie finances best that what is gained by the screener policy is vastly larger than any fear of possible losses.

And just to underscore the point, I looked at a few of the highest profile films from the recent Golden Globes, that had screeners leak long before their DVD release dates.  In the case of Black Swan, a good quality version of the film from an awards screener appeared on file-sharing networks barely two weeks after the initial limited opening on December 3rd.  The film has nevertheless earned over $73 million in box office revenue and is likely to receive a great deal more publicity when Oscar nominations come out.  Another high profile film, The Fighter, had a screener copy leaked three weeks after its release on December 10th, something that the producing studio, Paramount in this case, had to know would happen if they chose to make screeners available.

The MPAA and its member studios are quick to bemoan their fate in a piracy-riddled internet, seemingly robbed of “billions” of revenue (at least according to the statistics they cite).  Yet it is hard to take their arguments seriously when they routinely chose to engage practices like sending out award screeners that has proven repeatedly to foment illegitimate distribution of high-profile films.  The possibility must exist therefore that Hollywood does in fact realize that the supposed damages from piracy are actually not as substantial as they so often claim.

A provocative headline can generate a lot of readers and a lively debate, but it can also do a poor job of indicating what an article is actually about. A recent example is Paul Boutin’s quite inflammatory article in the December edition of Wired, now available online, entitled rather ambitiously, “The Age of Music Piracy Is Officially Over.” Based on the headline alone, a reader could assume that Boutin was making an interesting but factually incorrect observation about the state of file-trading online today. A quick glance at the comment section on the Wired site would indicate many people took exactly that viewpoint to blast Boutin.

However, that is not at all what the article actually argues. According to Boutin, we all need to “Mark down the date: The age of stealing music via the Internet is officially over. It’s time for everybody to go legit. The reason: We won.” In other words, Boutin contends that if one looks back at what music file-sharers have said publicly to justify their actions, going all the way back to the Napster days of 1999/2000, such as high prices, DRM, poor audio quality, record label exploitation, lack of deep catalogues, etc., that those rationales no longer exist. iTunes and Amazon sell high-bitrate DRM-free tracks at relatively low cost, have massive catalogues, and even allow more of the purchase price to go to the artists themselves. Ultimately, Boutin wants file-sharers to just admit that they have gotten everything they claimed to have wanted, and that the only reason left for pirating music is an indefensible one, that “You’re cheap.”

While the article did generate a lot of angry comments and some more thoughtful responses, I think both Boutin and his vocal readers have missed some larger issues that go much deeper into the on-going dynamic of online music sharing, and explain why any declarations of its eminent demise are wishful thinking at best.

To start, I don’t think anyone should pay attention to what was said by Napster users, or by file-sharers in general about why they download music. Tens (maybe hundreds) of millions of people have downloaded an .mp3 at some point over the last decade, from every country on Earth with a connection to the internet. Why do they do it?  Ultimately, unless one insists on seeing the phenomenon in purely moral terms, I don’t think it really matters what people say publicly about why they refuse to purchase digital music. The fact is, millions of music fans choose to use Bittorrent, digital lockers, Usenet, etc. to get their music. And by their actions, they have created an economic dynamic that is much more important, and has far more long term implications, than endless debates about 128 kbps .mp3’s versus FLAC’s or how exploitative the recording industry is.

In the course of the post-Napster decade, we have come to recognize the profound economic implications of digital media interacting with the internet, and not just in simple notions of “digitial distribution” or the “long tail.” Instead, we now understand that because every single DRM scheme is inherently doomed to failure, and that the marginal cost of copying a digital media file is and will always be essentially zero, then we can only speak of digital media in a context of infinite supply.  I am not a trained economist, but it is patently clear that an infinite good, available to anybody with a modem, will trend very quickly to a price of zero, no matter what the proponents of strict intellectual property regimes would prefer. While there is clearly a large number of people that purchase .mp3’s (or AAC’s) from iTunes and Amazon, they remain a distinct minority in a global online world that simply does not accept the notion of exchanging money for digital music.  I would even say that iTunes customers most likely value the convenience and technical simplicity the shopping experience provided by Apple far more than any true sense of the specific “value” of the files they purchase.

In fact, it is precisely this dynamic of infinite versus scarce goods that points to the future of digital media online. As Mike Masnick of Techdirt has so powerfully demonstrated, once content creators understand the problematics of trying to charge for infinite goods, they can truly embrace the countless possibilities of creating tangible goods, that cannot be copied and can be sold for real money. It is almost a cliche now to speak of how musicians can rely on live performances to substitute for sales of recordings, but that is merely the tip of the iceberg of what content creators can do, by creating non-replicable experiences that allow their fans to connect with the art and artists in ways that are truly worth treasuring.

Streaming services like Spotify also indicate how music can remain a revenue generator in a world of infinite goods, by providing a service and convenience that is of true value even to customers not used to paying for the music they download. Just as Netflix does not have a single film or TV show that is not available online for download for free, but can still build a massive customer base by recommending and presenting video content in a manner that their users love and happily pay for.

So, music pirates are in fact “cheap” according to Boutin’s perspective, which judges music downloading as immoral because it ignores the desires of content creators to charge for digital copies of their work. But outside of this moral framework, examined from a purely economic viewpoint, music file sharers are rational actors that pay for the things they consider of tangible value (iPods, laptops, Internet access, concert tickets, band t-shirts, streaming subscriptions, etc., etc.) and do not pay for the infinitely copyable. And unless the content industries and their government representatives somehow do the impossible, and turn the Internet into something it currently is not, then the future will continue overwhelmingly in that direction.

Probably the biggest, most central question, though, remains the decision to pursue a traditional publishing route or to self-publish instead.  All of the other issues fall into line very quickly once that key point is decided, for traditional publishing houses will likely have very strict guidelines over how and in what form their books appear both in stores and online.  While BackMyBook has very clear preferences towards self-publishing, we fully understand the allure of the traditional model for first time authors, or really for anybody daunted by the challenges of working outside an established system.  Regardless of one’s particular stance, however, there will be inevitable challenges to overcome if you decide to self-publish.

Eric Karjaluoto, a successful marketing guru, does an excellent job of laying out some the most pertinent issues to the question of self-publishing, as he examines his own experience putting out his book Speak Human by himself.  It is far from a resounding endorsement of self-publishing, as he ran into a number of obstacles he never anticipated, and came to realize some of the advantages the traditional publishers still retain.  As he says, it is important when thinking about self-publishing, “to avoid falling into some kind of a fantasy of ‘easy riches’” since most self-published books in his estimation do not end up profitable.  Karjaluoto even declares that for his next book he wants to try the traditional route, in order to take advantage of what he feels publishers are still able to do effectively, professional editing, marketing and the handling the logistics of review copies.

But just as interesting as Karjaluoto’s experience with self-publishing is the response of his commentators, many of whom make clear that even in the areas traditional publishers claim expertise, far too often the reality is much less than the promise.  Editing can be obtained in a number of ways, at a wide variety of professional levels depending on the genre and the goals of the book.  Logistics will likely be a challenge for any self-publisher, to some extent, and does need to be realistically factored into any plan for a self-published book.  However, it its Karajaluoto’s faith in the publisher’s commitment to marketing their books that really needs to be examined most carefully.  From what we’ve observed, this is exactly the area where faith in the publishers is most misplaced.  The reality is that marketing budgets for any book outside of a publisher’s roster of superstars have been tumbling in recent years. More fundamentally though, authors today, especially unknown ones are caught in a catch-22 situation when it comes to publishers and marketing.  Publishers today will seemlingly only sign authors that already have an audience of likely readers (buyers).  They do not have the resources or patience to try and build an audience that does not already exit, even for authors they believe have great books to sell.  And if you are an author that has already constructed a community of fans, then you really don’t need a publisher to market your work, especially as they are going to want to take a huge percentage of revenues in order to do it.

We certainly do not want to raise unrealistic expectations for self-publishing, but no analysis of this choice is accurate without a sober and unflinching examination of what traditional publishing actually is today.  And that picture is a far from rosy one, even when it comes to their historic strengths of editing, logistics and especially marketing.

(This post also available at BackMyBook)

So much of recent discussion about the tumult in the publishing world has focused on the challenge for publishers to find new business models in the face of rapidly changing technology and customer habits.  Quite a bit less attention has been devoted, however, to the effects of those trends on authors themselves, without whom the publishers would have no content to actually print.  As the industry continues to thrash around, grasping for quick solutions while also cutting costs frantically, authors less popular than Rowling or Franzen can find themselves essentially abandoned by their supposed advocates in large publishing houses.

Noted technology writer Douglas Rushkoff shares his recent experiences with publishers and how those disappointments drove him to make the radical step of leaving his publisher and embracing an entirely new model of 21st century authorship.  What could have inspired such a move?  Shouldn’t authors desperately grab for the security of a big publisher, especially in uncertain times like now?  Won’t the sheer size and expertise of the big companies provide an essential lifesaver in the rather choppy waters of the book marketplace currently?

Well, actually no, at least according to Rushkoff.  In his view, “Authors and readers no longer need Big Publishing to find and engage one another. The sooner we all realize this, the better off we’ll all be.”  Based on his experience, publishers now utterly fail at the two roles authors have traditionally relied upon them for, editing and marketing.  As just about any author can tell you, having an intelligent and engaged reader critique your work is incredibly helpful.  But editors can no longer play that role anymore, as they must now focus entirely on new content acquisition.  Even worse in Rushkoff’s view, publishers no longer provide either necessary resources or expertise in marketing.  If anything, they tend to get in the way of the authors’ own attempts to publicize their work.  The writers, after all, usually know far more about their subject matter and the likely audience for their own books, and what the best methods of outreach might be.

Absent their ability to edit and market, Rushkoff just does not see a valuable role for publishers any more, and has decided to eliminate these middlemen (and their not insubstantial costs) for his latest book.  It is a new very journey, without the usual signposts, but 21st century authorship does open up vast new potential audiences and opportunities to engage with ones readers.  As Rushkoff says, the new methods he now embraces are daunting, but writers today really have no other choice, “The good news and bad news here is that we must create new ways of doing things that meet our real needs.”

BackMyBook is excited to help authors of all kinds discover their own paths to success, that meet their own particular needs.  They won’t be the same as Douglas Rushkoff’s, nor Stephen King’s, but they will be what works for you.

(This article is also published at BackMyBook)

One of the frustrating issues for analysts of the file-sharing phenomenom is that so much of what we know, or think we know, about it rests not on any real numbers but on our beliefs and suppositions.  Statistics thrown around by the rights-holding organizations like the MPAA, the RIAA or the BSA are notoriously unreliable, while the illegal and highly fragmented nature of P2P networks themselves makes it impossible to get any dependable numbers from the sharers themselves.

Each side of the argument have their own facts and ideologies, ranging from “you can’t compete with free” or “each download is a lost sale” to “P2P users buy more than any other fans” or “file-sharing increases awareness.”  Nonetheless, it is always interesting when a situation arises that allows for some real-world testing.

On Friday October 15 the film “Red” was released, a relatively big budget action film starring Bruce Willis.  Unusually, earlier in the week a “screener” copy of the film had appeared on popular P2P networks.  Normally, the major film studios go to great lengths to prevent this kind of leak.  In their view, the availability of a film “for free” inevitably means that no one will pay to see it in theaters.  However, in this specific case, that proved incorrect, as Red did reasonably well at the box office, earning $22.5 million for the weekend, with a per-theater average of almost $7,000, coming in second to the surprisingly strong Jackass 3-D.

As we said above, there is no real way of knowing how many people downloaded the free copy of Red in the week leading up to its release.  The evidence suggests, however, that it was a large number.  According to the well-respected TorrentFreak, Red was the number one downloaded movie for the week of October 10-17on Bittorrent.  And a quick peek at the Pirate Bay shows that just one of the many competing versions of Red available currently has over 10,000 seeders right now.  So, while we may not know how many people could have seen Red for free, it is likely to in the tens of thousands at least.

Is there anything compelling we can take from this unintended experiment with the film Red?  For one thing, it is clear that the studios are still quite capable of competing with free, as Red’s decent box office does demonstrate.  According to the LA Times analysis of Red’s opening weekend, the movie did especially well with older audiences, and the word of mouth for the film was strong, as shown by a 26% increase from Friday to Saturday sales.  Of course, we have no way of knowing what the box office might have been without the leak, but it seems that the film did about what was expected of it, irrespective of the leak’s existence.

Ultimately, even with a unique case like Red, though, what we don’t know far outnumbers what we do.  Are there people out there that might have gone to see the movie in theaters if the option of watching it at home for free did not exist?  Are there viewers who watched the free copy but enjoyed it enough to go see it in theaters anyway?  Did home viewers help to spread the good word of mouth about the film, which may have resulted in higher box office?  Is a film with an older skewing audience more immune to P2P effects?

None of these questions are easily answered, even if they seem to fit into widely-held “common sense” suppositions about file-trading, as we just don’t have the necessary hard data to clearly prove things one way or the other.  We should definitely be very wary of what data we do see, and be even more careful about any conclusions that are drawn from those numbers.

(This article is also published at Zeropaid)

I have started doing some blogging over at Zeropaid, so if you are interested, please check out some of my work over there:

http://www.zeropaid.com/news/author/bruce/

Expert on piracy?

Late last month, Frederick Huntsberry, the COO of Paramount Pictures, gave a talk at an FCC workshop on the future of broadband policy in the U.S.  He gave a ten minute Powerpoint presentation about the problem of piracy of media content, particularly the unauthorized distribution of Hollywood produced films.  Huntsberry’s contribution to the workshop received a good deal of coverage, some focusing on the odd sight of a studio executive giving an almost “how-to” guide to downloading unauthorized copies, but also from Paramount’s attempt to prevent Huntsberry’s talk from being distributed itself, for fear it would teach some would-be pirates how it’s done.

Commentators knowledgeable about the P2P world pointed out the numerous technical inaccuracies contained in Huntsberry’s presentation, particularly in his list of piracy assisting offenders that included such Internet giants as Google, Yahoo, but also promising technology start-ups like Drop.io and Boxee, not mention electronics makers like Apple and Sony. The heavy-handed nature and basic cluelessness of the talk, now widely distributed by YouTube, has received a great deal of mocking, yet the comedy has obscured the larger issues that the workshop discussed and Hollywood’s stated analysis of piracy.  Now that the entire transcript of the workshop is available, I thought it would be worthwhile to dig a bit deeper, and look at not only what Huntsberry’s presentation reveals, but also examine what the other Big Media representatives had to say.  (although, if anybody has a copy of the Powerpoint deck Huntsberry showed, I would love to get a copy)  What we see is both more damaging to Hollywood’s credibility when speaking about piracy, but also raises disturbing questions about their vision of the Internet more broadly.  In part 1 of this post I’m going to look at the scenario Hollywood paints of current piracy, while in Part 2 I will show how far off the mark they are and why their prescriptions should be dismissed as both inaccurate and likely to cause more harm than good.

The speakers from Hollywood included not just Huntsberry from Paramount, but also Dan Glickman, CEO of the MPAA,  along with representatives from the Director’s Guild, the Copyright Alliance and the Writer’s Guild (Gigi Sohn from Public Knowledge presented a more civil liberties-oriented perspective).  Not surprisingly, the Hollywood consensus was that any future government involvement in broadband policy must address what Glickman termed “the tidal wave of piracy” online.  The Hollywood speakers however went beyond the mere fact of copyright violations to emphasize how the problem is actually growing worse.  The emphasis of what Huntsberry in particular demonstrated was what he called the shift from “Geek to Sleek” in video piracy, or how technological and business developments online have made it markedly easier to both distribute and receive unauthorized content.  As he put it, “What we’ve seen now that there’s been a huge development shift in piracy — if you go back a few years it was strictly — you know, you have to be computer-literate as a user. Today, anyone can pirate a movie.” (emphasis mine)  According to Huntsberry and Glickman there has been a crucial move away from downloading to the streaming oftpirated movies, a fundamental change in their view.  No more confusing software to install, no more waiting for lengthy downloads to complete.  In Hollywood’s nightmare, it is no longer only tech-savvy geeks sealing content, but potentially everybody with a computer, a fast Internet connection, and a desire to see the latest blockbuster film for free.   New gadgets can even get that illegitimate content off the computer and into the living room.

Even more disturbing to Glickman and Huntsberry are the multitude of ways legitimate companies are seemingly supporting the pirate infrastructure, making it easier for users to participate by lending a kind of legitimacy to the outlaw operations.  Pirate websites often make money from advertising, including from respectable companies, or can employ Paypal to generate revenue from their “customers.”  Internet connected devices from Apple and Sony, innovative software from Boxee and Yahoo, even seemingly innocuous services like Facebook and Drop.io all contribute to what Glickman called a “lawless environment” with “no rules of the road” or clearly defined distinctions between what is allowed and what is not.

The underlying, though generally un-stated, argument that Huntsberry, Glickman and the other media lobbyists put forth was that the neither the FCC nor any other government agencies should prevent ISP’s from taking on a monitoring role to prevent the trafficking of pirated content through their pipes.  In fact, what the copyright owners would love to see are laws that mandated ISP’s become copyright enforcers with the ability kick offenders off the Internet entirely, as has been promoted in a handful of countries recently.  Any expansive notion of “network neutrality,” that might actually limit the ability of ISP’s or other proposed monitors from examining or manipulating Internet traffic is anathema to organizations like the MPAA and is a constant target of their lobbying efforts.  Huntsberry’s presentation, that also included a giant banner depicting the massive flow of unauthorized copies of the most recent Star Trek film, was purely to alarm government regulators of the apocalyptic scale of the piracy problem and overwhelm any lingering reservations about possible negative effects of monitoring.

Yet neither Huntsberry, nor Glickman, or any of the other speakers, were able to present any hard evidence that piracy has in fact grown recently, or has indeed shifted to a new more dangerous form, or even that it fundamentally threatens their current business models in a profound way.  We’ll examine the veracity of their claims next week in part 2.

Although I was pretty tardy about getting pre-registered for the DEMO Fall 09 conference in my home town of San Diego, I was able to check out the start-ups presenting there with the help of some friends (thanks Dan and Jami!).  There’s been quite a bit of press from the show already, but there were a few stand-out companies for me that deserve a bit more attention.  It was an impressive show, generally, both in how it was run and in what was presented, although with so many start-ups on one place it’s hard not to be a bit overwhelmed by the sheer breadth of ideas.  Most of the concepts were great, some of them were down right stupid, but I have to give credit to all the entrepreneurs there for having the gumption to have even gotten as far as they have.  I found it pretty inspiring actually, that so many people were willing to take a risk on a good idea and the chance to do their own thing.

From just the “that’s a great idea” stand point, Micello took high honors from me.  Promising to create “Google Maps inside a building,” Micello brings GPS mapping to public spaces (airports, malls, hotels, etc.).  Simple, but incredibly useful, especially for anyone who has found themselves utterly lost in an airport or some other massive building.  They told me that Google itself is not interested in doing it, so I’m glad to see someone recognizes the utility of this internal mapping, not to mention the business potential.

Lunchster is a fun product that I could see being really useful in certain specific contexts.  It automatically creates lunch dates for you with people already in your social networking circle.  Sounds easy, but if it can really foster relationships by taking the hassle out of lunch dates, and can get enough critical mass to make it a popular thing to do,Lunchster could actually be a great thing.  If I was working in a dense office-rich area like the Financial District in San Francisco, or in Lower Manhattan, I could see using something likeLunchster a lot.  [Total disclosure: the Lunchster team are friends of friends]

I also liked Radioweave very much, although it is currently only available for the iPhone, leaving us Android users out in the cold.  Similar to other audio streaming solutions such as Pandora, Last.fm, Slacker, etc. (and the not available in the U.S. but super awesome Spotify), Radioweave allows you to bring music to your smart phone, but it also integrates other audio sources including podcasts, tweets, news updates, messages from friends, etc.  Radioweave essentially brings one’s entire social network to their mobile device in an audio format.  As someone who spends a good deal of time in my car, and loves to listen to both .mp3′s andpodcasts but would love to get other more dynamic content as well, Radioweave seems to be a great solution..  As good as Radioweave is, however, it does share some negative aspects with a number of the more disappointing start-ups at DEMOfall 09.  That is, there were a number of companies whose entire value proposition seemed to be providing a slight improvement to, or nice but minor tweak to already established services and sites.  I would think thatSpotify could, without too much difficulty, add the base Radioweave functionality to their service if they wanted to.  I hope they do, but that does make me question somewhat the value of many start-ups I saw atDEMOfall09, that seemed to be essentially interface extenders for Facebook or Twitter, when you really boil them down.

One product did really intrigue me, although I have yet to actually decide if it’s truly genius or flat-out stupid.  A-List from Traackr is very slick and impressive, and absolutely fills a major need right now.  A-List promises to aid marketers and PR professionals in reaching the trulyimpactful social media “influencers ,” while also numerically measuring outreach.  One the one hand, what the CEO showed me was quite good, both in how A-List searched and indexedinfluencers from a variety of perspectives.  On the other hand, as a PR professional, I would have to think long and hard how much I would be willing to pay for something like A-List, as, theoretically, I should be able on my own to create media lists that are as good, if not better, than whatTraackr could provide.  After all, I live in and breathe the stuff of my particular industry, and bring an experience and nuanced touch (hopefully) thatTraackr’s algorithms could never automatically replicate.  From a business perspective however, I think Traackr probably has a very bright future, as the enormous hunger for finding and targeting those elusive “influencers ,” not to mention the demand for tools that can demonstrate some kind of PR “ROI” likely ensures a very steady stream of customers toTraackr’s doors.