Friday, October 21, 2011

Thoughts on the Case for Piracy

I just read a very good article by Nick Ross on the case for piracy.

It deals with contempt for consumers, with broadcasters focusing less on viewer experience and more on advertising revenue. It also looks at DRM, lawsuits and the chilling effect that has been used to destroy fair dealing.

The author presents the positive ways in which piracy rectifies the artificial issues that the copyright and broadcasting industries create.

There is one of his conclusions, however, with which I unfortunately disagree. It's to do with the future of how content will be consumed. Nick predicts that "we'll all be using on-demand subscription models and the notion of buying content to keep will feel archaic." I agree that in the medium term, this is where we are being led.

As it is, the copyright industries are generally still trending upwards. Within these industries, there are companies benefiting from stellar hits, and those who are not getting by. There are lots of opportunities for growth in the current state of innovation and market expansion.

But in 10 to 20 years, let's say we all subscribe to content services. We pay our $20 per month to have unlimited access to everything. People are hesitant to make multiple subscriptions, when they can just subscribe to the biggest guy with the largest catalogue. There are no more than 3 major players in the content delivery space.

It's the dream of today's content industries, but...

From where comes growth?



In a system like Steam, individual producers still live and die by what they produce. They make goods and they sell goods. In a subscription system, the dynamics are different. It's all about eyeballs and clicks. There's no commitment of the consumer to the content. People will listen to Britney Spears or play Duke Nukem Forever for a laugh, but that doesn't mean they would pay good money for that specific content.

So in this system where we're all already paying our subscription costs, maybe there'll be the equivalent of a pay-per-view for new releases of movies and games, but overall, there will be a very high, very stable amount of revenue being pumped into the industry through a low number of distribution channels. Nobody but retirees want to own shares in a company that just maintains its position. If the market stops growing, there will be greater competition for the subscription funds among content producers, until an equilibrium is reached, which eats into the profitability of the producers. There will be more low-budget movies, and self-produced music, in order to keep costs down, but technological advances should mean that quality won't be harmed.

Still sounds pretty good to me, but the content industry as it now will not stand for it. As there is progress towards this equilibrium, there will be cycles of disruptive effects by the industry. I can only guess at what they will be, but they will occur.

I think there will be concerted attacks on distribution channels by content producers, in order to destabilise the market place. An example would be multiple record labels pulling content from iTunes in order to regain control over how their products are merchandised. They'll occasionally build their own subscription services, until the balance needs to be upset again in a giant turf-war. There'll be lock-out of indie producers, so the indies will band together into their own collective labels. Those labels will grow into giants and start excluding the new indies. Wash, rinse, repeat.

Customer lock-in will be determined not by the actual subscriptions themselves, but by the metadata stored in each walled garden: "Sure, you can leave, but what about all those song rankings and playlists you've spent years building?" They won't let you walk out with that. For the companies that try to build on openness, the labels pulling their content will still destroy the usefulness of the playlists and other metadata.

In the rise and fall of, and other interactions between, content producers and distributors, which will all occur in the pursuit of growth, the consumers will be casualties, expected to eat what they're told.

Piracy will still have a place.

So, that's my rambling prediction.

Am I too pessimistic?

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