Yarrrr…Pirates!

Recently, we looked at the impact of piracy on the music industry. Today, we're widening our lens to look at piracy as a transformative force across all digital content producing industries.

Digital piracy is selective evolutionary force acting on the digital sphere. Being able to pirate anything from textbooks to movie trailers has forced the digital content industry to rethink the way that they operate. The content industry has to be smoother, faster, more clever, and most importantly, offer value.

Isn’t that a novel argument?

Like we previously stated, piracy on the Internet is not a new phenomenon, nor will it disappear into antiquity anytime soon. In fact, piracy over the Internet existed almost from the outset of the Internet as we know it. Commercial internet service providers began operations in the late 1980s, along the same time that Usenet, one of the first internet discussion systems, was founded. Usenet quickly became a underground web of peer-to-peer file sharing – the first digital “ring of piracy.”

Fast-forward through the last decade and a veritable mine of piracy programs come to mind; Napster, Kazaa, Morpheus, and finally BitTorrent. Despite the various legal and personal risks of file sharing, digital piracy is still around and it is here to stay. Attempting to stop consumers from obtaining free content is as futile as keeping people away from free samples at Costco.

It just isn’t going to happen.

But piracy has inspired a new generation of content distribution models that understand that free and open sells – a new system that could eventually challenge the reason the popularity of piracy.

The Pirates Aren’t Somali

There is a disproportionate skew in perception of the public about the identity of online file sharers. While the advent of mainstream file sharing was in part due to college students and Napster, the perception that teenagers, college students, and young adults are more likely to file share is no longer valid. According to a study done in 2008 by the Pew Internet and American Life Project nearly ”15% of online adults admitted to downloading or sharing files using peer-to-peer or BitTorrent.”

The study also looked a file sharing globally and discovered that more than 200 million computers are setup with at least one peer-to-peer file sharing application. The Swedish based Pirate Bay bittorrent tracker has also identified more than 25 million users of the tracker, who go through Pirate Bay to trade files with other “peers.”
The results only capture a portion of the file sharing populace, many of whom are hidden from sight. The numerous ways of file sharing, from peer-to-peer, to the legacy Usenet, to the various Bittorrent trackers, makes it impossible to pin the entire populace that shares files.

Paper Trail

The MPAA and RIAA have fought the slow defeat with the stance that file sharing is detrimental towards creators of content. Their calculation of the economic loss stands between $200 and $250 billion per year, and the loss of 750,000 American jobs – an unbelievable amount. The figure is so unbelievable that it has been verified to be an arbitrary number, as opposed to the reality.

So how much does piracy cost?

The truth is that there are no statistics that accurately quantify how much piracy actually costs. Some experts estimate that there is an economic cost to digital piracy, although not as extreme as the 200 billion dollar estimate of the MPAA and RIAA. Other experts have opined that piracy may in fact help producers of content. Recent studies have found that piracy and early leaks through pirating may in fact boost a popular artist’s sales and maintain their music chart dominance.

Piracy has changed the landscape of content sharing – and it’s going to be the death of the middleman.

The Future of Content

Piracy is an immediate and easy way to get the latest content for free, but there is an obvious legal risk. Companies like Hulu, Netflix, and Spotify offer a compromise, serving up an “unlimited” limited catalogue of content to users for a fixed price. The appeal of these commercial content systems are obvious; users can get the latest content they want without risk, without delay, and without an onerous fee.

But piracy has pushed content distribution models even farther, and are putting the power back into the hands of the creators. Pay what you want sites like Bandcamp or Noisetrade allow musicians to publish and distribute their work to the Internet without a major record label. Freemium games models allow game developers to court users without going through the hassle of pushing out a physical product to a store.

And these models work; bands like Nine Inch Nails, Radiohead, and Wilco have all used pay what you want systems to their benefit – generating buzz and creating sales. Game companies like Valve and Turbine have seen their gaming community expand under the freemium model.

As newer distribution models continue to empower creators to make fresh content, piracy will begin to see a decline in popularity.

Welcome to the new mode of file sharing.