Over The Counter Culture

Spoke to some interesting people at the ContentNext mixer earlier tonight. Of particular interest were some guys from the film distribution industry, not just because it’s something I did some strategy work on in 2007, but because these are the guys (LOVEFiLM et al) that are really suffering from media piracy, no matter what they do (despite this, Amazon is reportedly taking a very strong interest in the aforementioned company).

They’re stuck between pirates who refuse to pay for content, and film studios (publishers) that are used to scarcity selling (shifting low units relative to what could potentially be achieved with the Internet as a distribution network, at high margins) and refuse to drop wholesale prices to LOVEFiLM etc.

The emergent call from the anti-RIAA crowd (Andrew Orlowski of The Register calls them, or us rather, “freetards“) is ‘don’t punish, compete!’

But a moment’s reflection suggests that that may be a fool’s errand. Firstly, how on earth do you compete with the following:

1. Free!
2. Huge catalogs of content on demand - every rarity
3. Available in the format you want (or the open source/freeware tools to convert it) - e.g. losssless audio (FLAC)
4. Leaked content available before it hits cinemas or stores (allowing you to show off in front of mates, and to respond immediately to the strong urges to see a film induced by their prerelease marketing - scratching the itch without having to be patient)
5. Content from different geographies, e.g. hit US TV shows
6. DRM restriction-free - take it anywhere, use it uninhibited exactly as you desire
7. No pesky advertising - we universally HATE advertising, from billboard defacers to DVR/Tivo fast-forwarders
8. No transaction hassle - click and download. Never have to take your credit card out of your pocket
9. Services run by volunteers - tiny running costs, no capex; totally scalable distributed, p2p infrastructure

Honestly. How the hell do you build a viable business capable of competing?

And yet, many people today do the supposedly irrational thing and never actually learn piracy. Once you know how to use bittorrent, you’re unlikely to use LOVEFiLM. But my sisters use it, as they’ve never used bittorrent.

Basically, it’s a cultural thing. The difference 2 years (me vs. my sister) makes: my age cohort (people currently in their 20-30s; the Napster generation) just didn’t have access to content on demand - apart from piracy. Piracy was literally the only way to go for on demand media - there was no alternative! Piracy became part of our cultural habits. You learnt the sites, you adopted the attitude, you got used to the luxuries listed above. But that’s all changed, and unlike me my sister sees LOVEFiLM and the iTunes Music Store as natural sources for ondemand content, not the pirate sites/tools I have become intimate with over the years. Legal services have the benefit of mass marketing (you can’t exactly advertise torrent sites!) so get there first, establish themselves as the natural sources.

The difference between then and now boils down to this: before, EVERYONE was driven into piracy. Now, only the really price-sensitive are driven into piracy. And as we’re often told, this is the first post-scarcity (post war, post baby boom) generation. We have more disposable income than ever before. Check out the price of cinema popcorn or a pair of jeans. The fact is, not many of us are actually so price sensitive as to deliberately avoid iTunes/LOVEFiLM. So LOVEFiLM doesn’t need to directly compete with piracy - it was too late to the scene and it’s lost my age band (we’re too used to the luxury of piracy), but my sister and younger will be the key market constituent and won’t be nearly as piracy-native as we have been. Only total cheapskates and the old Napster/Kazaa ‘freetard’ generation will remain in torrent communities.

So when talking to them, I advised patience, not competition with piracy - they might end up cutting their own wrists to please the unpleasable freetard generation, and end up with rock bottom prices by the time the teens of today hit the market. Music labels were too hasty to jump into iTunes and they killed the album, and thus £9 of revenue per transaction (I exaggerate). Ad-supported high-quality content should be a LAST resort; if by 2012 the market still isn’t paying up front for content, that’s when you use it. For now, clench your arsecheeks - I realise 4 years can be a long time to wait when you’re starving.

I’m currently running an ad hoc survey of torrent site users and their spending on music (I’m a nerd like that). I’m kicking myself that I didn’t ask for their age, too. But if I make this an annual/6 month thing I might see the increasing proportion of cheapskates/reduced ASPU that I predict.

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This entry was posted on Friday, March 28th, 2008 at 1:41 am and is filed under Musings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.