« A Dark Day in the History of Media, Part 1 | Main | I Am A Citizen Journalist »

July 04, 2005

A Dark Day in the History of Media, Part 2

Change Is In The Air
When I say “in the air” I mean literally atomized, and as difficult to see or contain as air. The most interesting fallout from the Grokster case is that it may have provided the blueprint for the development of a P2P community that cannot be killed. I understand why the incumbent media companies have to play whack-a-mole on the technologies that threaten their business models, but the danger of using the courts to do it is that every time a ruling is handed down it has to specify what is illegal. Creative technologists need only create a paradigm that doesn’t include any of the explicitly illegal items specified to force the media incumbents to continue spending their profits trying to lock down their distribution models.

A Blueprint in Four Sentences
Below are two excerpts from the Grokster ruling. To me, they explain the other 55 pages of the decision:

"We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties."

"Despite offsetting considerations, the argument for imposing indirect liability here is powerful, given the number of infringing downloads that occur daily using respondents software [Grokster and Morpheus]. When a widely shared product is used to commit infringement, it may be impossible to enforce rights in the protected work effectively against all direct infringers, so that the only practical alternative is to go against the device's distributor for secondary liability on a theory of contributory or vicarious infringement. One infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise the right to stop or limit it."

So, build a P2P network and don’t promote copyright infringement, and don’t profit from it.

Richard Cotton, executive vice-president and general counsel at NBC Universal said in this article, "Many of the services that were the direct focus of legal proceedings will start to explore whether they can morph into legal operations."

I think he’s right about that. I think the services that were formed as for-profit services will try to pass muster because of their economic interests. But what about the services without any economic interests? What about the fully distributed, open-source developed P2P solutions that don’t promote copyright infringement and don’t ever intend to profit from it?

My concern for the incumbent media companies is that if they continue down the path of locking down their distribution channels, moving link by link on the value chain, (in exactly the same way you would if you were in their shoes) they could push their problem entirely out of their control: To the farthest edges of the network where there is literally nobody to sue. I hope they don’t think that it would be a big win to effectively discourage any enterprise from trying build a business model around P2P. I hope for their own sake that they don’t think that the Grokster ruling will help create “a constructive dialogue between content and technology companies” and that is where it ends.

Edgar is right that the Grokster ruling will bring some parties to the table looking to become legitimate “industry-sanctioned” file distribution services, but I’ll bet there are enough geeks in this world willing to build P2P software who don’t have any interest in engaging in constructive dialog. Then, like I said in my previous post, the incumbent media companies will have to go after other links on the value chain to protect their intellectual property. That won’t be fun for anyone.

The Upside Of Piracy
For a great many artists, P2P distribution networks represent an opportunity to present their content to an audience that would not otherwise be available to them. Digital distribution has made it possible for small music labels to flourish where the incumbent media companies cannot. Even independent artists with no representation are using P2P networks to distribute their content because it builds audience. Every band starts out wanting someone to listen to their music. Only later do they need for someone to pay for their music. The average independent band makes far more money from ticket sales at small venues and selling t-shirts than they do selling albums. Somewhat ironically, the technology of mass distribution may be empowering a resurgence of the independent artist and the value of the local market to music. P2P technology enables trends to be identified faster, and so it is no wonder that even the top music labels use P2P networks to research what’s hot and to push certain bands in their stable.

Not that there’s anything wrong with it. I am just saying that maybe a little piracy is a good thing if you are a major media company faced with spending a certain amount of money on market research and your two options are inaccurate focus groups or highly accurate hard numbers on how many people are downloading what kind of music. And maybe a little piracy is a great thing if you are an independent band trying to build audience and loyalty to your brand by involving your fans in your art.

The Grateful Dead encouraged fans to record their live shows. They built arguably the most rabid fan base of any band in history. I don’t think the Grateful Dead or their record label calculated the negative impact of amateur recordings of their concerts on album sales. I have a feeling that at the end of the day so much money was made in general that nobody really cared from a financial standpoint, and I don’t know a single record executive who wouldn’t love to have a marketing team built into the audience for one of their acts that could even come close to the legions of Deadheads who followed the band around and elevated their shows to near-religious status. If those Deadheads were sharing their tapes of various shows and that was building audience over time, then isn’t P2P software the evolved version of that?

Today’s independent band wouldn’t call their songs being traded on P2P networks “piracy” – they would call it “promotion.” In the music business, the dividing line between the two concepts is simple: If you have a record deal and someone else is trying to profit by selling your music on little shiny discs, then P2P is piracy. If you don’t have a record deal and you are trying to get people to come to your show at the 100-seat venue this weekend, then P2P is promotion. There is no distinction between “user-generated content” and “independent artist,” because by definition independent art is user-generated. So what if the incumbent media companies chase down the various involved perpetrators in the P2P piracy chain to the extent that you cannot get any major-label content on P2P networks? Could the strategy backfire and actually enable the creation of a more efficient way for music fans to discover new “user-generated” music from independent artists that cannot be found anywhere else?

The tipping point will be when the internet is no longer a secondary distribution channel for media. Today, it is more the case that you hear a song on the radio before you hear it anywhere else. You hear it over and over again and then develop an affinity for it, and then you want to own it so that you can weave it into your life. If you are like millions of consumers, you then go to the internet to steal it. But when the tables turn and fewer people are listening to radio compared to people surfing the internet for new music, or when people are receiving new music streamed right to their MP3 players, then the market for all user-generated content will truly blossom. When the internet is a primary distribution channel for new content, there will be no reason to ever sell a compact disc again. Rather, all of the value around the content will be the reason for artists to create, and today’s battle over distribution will seem unproductive. The smart media incumbents are already recognizing this and taking steps to embrace digital distribution. I know I have said it before, but I’ll say it again: The biggest threat to incumbent media companies today is not competition from other media companies, it is competition from their own customers. Media companies beware the 14-year-old girl with a mobile connected camcorder producing her own mobisode-based reality show.

If you are not on the enabling side of the coming wave of user-generated content, there is absolutely no hope of building the media incumbent of tomorrow – a media company focused on participative media, overlapping personal networks as distribution channels, media sharing as promotion and location-based media production and consumption tools that turn media into communication.

Posted by Shawn Conahan at July 4, 2005 10:32 PM

Comments

Posted by: -LiberalFury- at July 7, 2005 12:27 PM