MITR Business Case #7: Impact of File Sharing | Tim's Blog

Part of a series of business cases. More explanation?here

Prompt

1. Explain the term ?time-shifting? with respect to electronic recordings and why is this concept important?
2. Explain why the advent of digital content has changed copyright, piracy, and the distribution of media.
3. The case suggests four different approaches (scenarios) for the media industry to fight piracy.? Choose the one approach that you think would be most effective and provide justification for your selection.

Answer

?File Sharing? Business Case

ITWS 4310

Timothy Chambers

11/16/2012

?The Impact of Illegal Peer-to-Peer File Sharing on the Media Industry? Case

??????????? ?Time-shifting? is the means by which a user can record visual and/audio streams for use at a later point. The reason why this concept continues to hold such importance even today is because one, it set the precedent for future landmark cases involving digital copyright, and two, because it inspired and enabled technological advances in the field of consumer recording. ?Originally, legislative acts such as the Copyright Act of 1976 strictly protected the right of intellectual property, enabling copyright to owners ?to file civil lawsuits and for the government to file criminal charges against infringers.? (Goel, p.14) The first exception emerged from the Betamax case, in which the Motion Picture Association of America sued Sony over its hardware ability to copy programming off the airwaves. The Court ruled in favor of Sony, stating that the prosecution did not sufficiently prove that they were being ?damaged? by the time-shifting, thereby setting a precedent for subsequent legal cases filed by media companies against peer-to-peer developers (Goel, p.15). Though Napster and several less legitimate companies were unable to obtain a similarly friendly judgment, the trial served as the basis and point of interest from which other copying consumer file-sharing technologies to take hold, such as commercial DVR, VCR, and later, P2P.

The advent of digital content has revolutionized copyright, piracy, and the distribution of media. Copyright is perhaps the most affected among these three, since it is now impossible for companies to enforce universal copyright protection without regressing to pre-digital approaches, or resorting to the blatant force of law (Goel, p.19). Thanks largely in part to Gilder?s law, every user with a decent internet connection has the ability to download whatever proprietary software they desire; be it a copy of Windows, Adobe?s Creative Suite, etc. This free reign extends easily to less complicated, non-executable media-files like blu-ray ?rips?, or entire seasons of television shows; the only ?constant? barrier to consumers is simply if they are technically savvy enough to do so. As a consequence, most users rely on the efforts of more skilled hackers and crackers to obtain their media. Regardless, thanks to speed and ease at which digital content can be downloaded, Piracy has become both rampant and an accepted part of internet culture (Goel, p.20)

Distribution of media has also seen an enormous shift in activity from brick-and-mortar stores, like Best Buy, to the online marketplace, like ITunes. Instead of purchasing physical albums in the form CDs, consumers are now mostly free to choose individual songs or songs, in formats according to their specific technological needs, e.g. mp3 or m4a. Some online digital media marketplaces have gone ever further, Bandcamp for example, has disinter-mediated the recording studios from the distribution process, so that the artist has a considerable portions of the earnings as opposed to a small percentage (Diamond, p1).

Thus it is with the described sea change in mind that, of the fourth approaches mentioned by the case, the third would be the most logical way for the media to fight piracy. That is because it is the only one which?s fundamental premises are correct, that copyrights can be protected and that the current industry?s model business is obsolete. Though the former statement may appear to be a contradiction of the prior assertion that copyright is unenforceable, the distinction is that it can still be ?protected? to some degree, without having to impose stiff restrictions upon its users.? Attempts with hard digital rights management (DRM) technologies, like for example, ensuring that certain media files will work only one digitial device, have proved less than successful in practice, and much maligned by consumers (Goel, p.10). Yet attempts at using either no DRM or less for certain media types, e.g. music, have proven not only successful but irrelevant to piracy, which will continue to exist, no matter how strong copyright control mechanisms become. Not only has Apple proved that digital distribution can be made profitable without unfairly targeting the consumer: a cursory look at the Steam online marketplace offers insight as to how soft DRM can be implemented in the gaming market. While the video games sold through Steam?s content delivery system are easily obtainable for free, doing so would negate many of Steam?s advantages; access to its community, hacker-free multiplayer game servers, and other features unique to its largely consumer-friendly service (Kohler, p.1). As a further example, Hulu and NetFlix show how new video-streaming services can entice normal users away from committing acts of piracy (Lomas, p.1.)? In other words, this soft DRM approach can be seen as akin to both the ?web portal? and the ?strategic alliances? strategies described by the text.

Despite the value in this approach, the business model of the media industry has yet to recognize and harness these disruptive forces. Proof in point is with SOPA and PIPA, two bills introduced by congressmen affiliated with the MPAA (McCullagh, p.1). Notwithstanding their stated motives, it is clear that the conventional media industry feels threatened by the growth of the internet, which it has. As indicated by the porter five forces analysis in the text (Goel, p.11), the intra-industry oligopoly use to possess enormous leverage over its consumers and suppliers. The business model that took hold was one that promised high profit margins without need for much innovation; both are premises that are simply unsustainable when considering that their products can now be (freely) obtained through alternative (illegal) sources. Yet the media industry?s intransigence does not necessarily imply that they are now useless and redundant in today?s transformed economy, or that they should engage in ?creative destruction? as the fourth scenario claims. For example, the BetaMax case which was feared by the MPAA to be the ?death knell of their business? actually became a necessary part of their business model over time, due to intense consumer demand (Ackman, p.1). Thus, provided that they refrain from abusing copyright law to maintain a rapidly shifting status quo, the media industry may yet adapt to the demands of its increasingly savvy and powerful buyers.

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Works Cited

Ackman, Dan. ?Movie Studios Get Hip With The Future.? Forbes. Forbes Magazine, 17 Aug. 2011. Web. 15 Nov. 2012. <http://www.forbes.com/2001/08/17/0817topnews.html>.

?Diamond, Ethan. ?Bandcamp Blog.? Bandcamp Blog. Bandcamp, 3 Jan. 2012. Web. 15 Nov. 2012. <http://blog.bandcamp.com/2012/01/03/cheaper-than-free/>.

Goel, Sanjay, Miesing, Paul, and Chandra Uday. The Impact of Illegal Peer-to-Peer File sharing on the Media Industry. A Case Study. California. University of California, Berkely, Hass School of business. 2010. Web. September 6, 2011

Kohler, Chris. ?Valve Brings Hit Games, Steam Service to Mac.? Wired.com. Conde Nast Digital, 06 Mar. 2010. Web. 15 Nov. 2012. <http://www.wired.com/gamelife/2010/03/steam-mac/>.

Lomas, Natasha. ?Hulu, Viacom Expand Content Partnership; SpongeBob (And Nickelodeon Friends) Join Hulu? Plus.? TechCrunch. Aol Tech, 9 Oct. 2012. Web. 15 Nov. 2012. <http://techcrunch.com/2012/10/09/hulu-viacom-expand-content-partnership-add-spongebob-squarepants-and-friends-to-hulu-plus/>.

McCullagh, Declan. ?How SOPA Would Affect You: FAQ.? CNET News. CBS Interactive, 18 Jan. 2012. Web. 15 Nov. 2012.

Source: http://www.timschambers.com/blog/2012/12/20/133/

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