Category Archives: P2P

The future of recorded music: an asymptotic decline to marginal cost

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Interesting, if slightly utopian, column by Michael Arrington…

The economics of recorded music are fairly simple. Marginal production costs are zero: Like software, it doesn’t cost anything to produce another digital copy that is just as good as the original as soon as the first copy exists, and anyone can create those copies. Unless effective legal (copyright), technical (DRM) or other artificial impediments to production can be created, simple economic theory dictates that the price of music, like its marginal cost, must also fall to zero. The evidence is unmistakable already. In April 2007 the benchmark price for a DRM-free song was $1.29. Today it is $0.89, a drop of 31% in just six months.

P2P networks just exacerbate the problem (or opportunity) further, giving people a way to speed up the process of creating free copies almost to the point of being ridiculous. Today, a billion or so songs are downloaded monthly via BitTorrent, mostly illegally.

Eventually, unless governments are willing to take drastic measures to protect the industry (such as a mandatory music tax), economic theory will win out and the price of music will fall towards zero.

When the industry finally capitulates and realizes that they can no longer charge a meaningful amount of money for digital recorded music, a lot of good things can happen.

Hmmm…. I wonder.

Jam today

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Interesting Technology Review article.

A startup called eJamming claims to have solved some of the problems that have plagued musicians who jam together online. According to the company, its software, called eJamming AUDiiO, is able to let musicians collaborate in near real time with musicians halfway across the world. Additionally, the software simultaneously records each musician, combines and synchronizes his or her input, and creates files with CD-quality tracks, says Alan Glueckman, president and chairman of eJamming.

The main problems with remote jamming are bandwidth and network latency (the amount of time it takes a data packet to travel from source to destination). eJamming seems to have tackled the first with a new compression system, and the second by using P2P technology to put musicians in direct touch with one another rather than being linked through a server. Neat if it works.

Why would anyone want to buy EMI?

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Apparently, people do. Richard Wachman has a good piece explaining both the problems and the opportunities of the music business.

It has taken this long for the record companies to fight back by collaborating with legal downloading sites such as iTunes in a bid to offset lost revenue from plummeting CD sales. But internet piracy is still costing them billions a year and the recorded-music arms of the majors look to be in terminal decline.

According to the IFPI, the international music industry lobby group, 40 songs are being downloaded illegally for every legal download. Put another way, they say 20 billion songs were downloaded illegally in 2006 and the situation is set to worsen following the spread of broadband to eastern Europe and other emerging markets.

The effect of piracy on the industry has been to spur consolidation as the big players scramble to cut costs by merging with each other. There are now only four major music groups: Universal, Sony/BMG, EMI and Warner Music.

Last week, British-based EMI, which has been struggling with falling profitability for years, said it was recommending to shareholders a takeover approach from Terra Firma, the private equity group headed by Guy Hands, which only last month tried unsuccessfully to bid for Alliance Boots…

BitTorrent goes commercial; bye-bye BitTorrent

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From Good Morning Silicon Valley…

BitTorrent has gone legit — signed a deal with movie studies to enable them to use the system to distribute their content.

Unfortunately, getting in bed with the entertainment companies involves a lot of bondage, and that means BitTorrent will limp out of the starting gate. All the content is encased in Microsoft digital rights management and can be played only with Windows Media Player — no Macs, no iPods. And while the service will sell episodes of TV shows, it will only rent movies — they expire within 30 days of their purchase or 24 hours after the buyer begins to watch them. Ashwin Navin, BitTorrent’s co-founder and chief operating officer, told the New York Times the company could have offered movies for outright sale, but the studios wanted to charge prices so high he was afraid to even let users see them. “We don’t think the current prices are a smart thing to show any user,” he said. “We want to allocate services with very digestible price points.” And Bram Cohen, BitTorrent’s co-founder and chief executive, and the inventor of the technology, sounded like he had to hold his nose a bit to swallow the terms. “We are not happy with the user interface implications” of digital rights management, Cohen told the Times. “It’s an unfortunate thing. We would really like to strip it all away.”

Not an auspicious beginning, given the nature of BitTorrent’s core users — males between 16 and 34…

Yep. And it was such a nice technology.

What ironic about this is that BitTorrent is the kind pf P2P technology that the content industries once wanted to see wiped from the face of the earth.

Jams tomorrow

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This morning’s Observer column.

Coincidentally, in another part of the forest, entrepreneurs Niklas Zennstrom and Janus Friis, the guys who founded Kazaa and later Skype (which they sold to eBay in 2005 for $2.6bn) announced their particular variation on IPTV. The service is to be called Joost and combines aspects of file-sharing software and regular broadcast television. Like Skype, Joost requires users to download and install a free ‘client’ program which enables them to browse the internet for channels and clips they’re interested in.

The Joost website is deliciously opaque, riddled with PR-speak about how the new service is, apparently, ‘powered by a secure, efficient, piracy-proof internet platform that enables premium interactive video experiences while guaranteeing copyright protection for content owners and creators’.

In the ordinary course of events, one would be inclined to dismiss this as hype, were it not for the fact that Zennstrom and Friis have a track record of unleashing not one but two disruptive innovations on an unsuspecting world. So let’s suppose for a moment that Joost is for real. What then?

One implication is that if it spreads like Skype (putting on 150,000 new users a day), Joost could eventually strangle the net. Or, more realistically, it would provoke dramatic action from the world’s ISPs to fend off that outcome…

What’s really going on in cyberspace?

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One of the most interesting companies around is Cachelogic. They’ve developed some technology for doing deep analysis of the data traffic passing through ISPs’ servers. Last year, they revealed the extent to which P2P traffic has come to dominate the Net.

Now comes a new presentation by company co-founder Andrew Parker on “Peer-to-Peer in 2005”. It makes for riveting reading. Some highlights:

  • The 2004 study showed that BitTorrent was the biggest P2P service, and revealed a shift away from music sharing towards video. By the end of 2004, BitTorrent was accounting for as much as a third of all Internet traffic. But then came a legal crackdown on major BitTorrent sites, and the Supreme Court’s decision in the Grokster case.
  • The Supremes’ verdict, however, did not result in a rapid decline in P2P usage. In fact, at the end of 2004, P2P accounted for 60% of all Internet traffic. Parker says: “P2P outstrips every other communication and distribution protocol and is still growing”.
  • In many regions of the world, the traffic has shifted away from BitTorrent towards an alternative — eDonkey. And although BitTorrent traffic levels have been dramatically affected by the closure of the key tracker sites (which made it easy to find torrents), a fully-decentralised version of BT called eXeem is spreading.
  • 61% of P2P-shared files are video. Only 12% are audio.
  • Of the audio files, 65% are MP3 format, 23% are Windows media files — and a surprising 12% are in Ogg format.
  • Shared video is overwhelmingly (76%) in Windows media format (only 15% are MPEGs)
  • All of this is putting terrific pressure on ISPs. P2P is THE dominant protocol now, so ISPs cannot afford to block or restrict it. Furthermore, “P2P is driving consumer broadband uptake — and broadband is driving P2P uptake”.
  • P2P will become the distribution medium for most information goods. This will have significant downsides for ISPs — essentially relegating them to the role of mere conduits. The consumer relates directly to the service providing the content, not to the conduit.

    • Lots more. If you’re intrigued, it’s well worth viewing the whole presentation. Ed Felten has some interesting comments on all this.

    Filesharing traffic continues to dominate

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    According to a Macworld UK report…

    A new study that looks at the impact of peer-to-peer (P2P) traffic on service provider networks shows file swapping forges on unabated.

    CacheLogic of Cambridge, England says the practice shows no sign of slowing down despite court rulings that have shut down some popular sites such as Suprnova, a BitTorrent tracking service that offered links to pilfered television and movie content.

    CacheLogic’s global monitoring network shows 60 per cent of all Internet traffic is the result of peer-to-peer file-sharing platforms, with eDonkey taking over the top spot from BitTorrent.

    “The Whack-A-Mole game continues,” says Andrew Parker, CacheLogic’s CTO. “The authorities go after one [peer-to-peer] system and another one pops up.”

    At the end of 2004, BitTorrent accounted for 30 per cent of all Internet traffic. But after the Motion Picture Association of America’s moves to shut down BitTorrent tracking sites, centralized servers for locating distributed content, swappers began moving to other less-publicized services. Today, eDonkey, a system that uses no centralized servers or tracking sites, consumes the most bandwidth of any application on the Internet, particularly overseas, according to Parker. In the US, Gnutella has seen resurgence in popularity among swappers.

    Of the files being swapped on the four major file-sharing systems (eDonkey, BitTorrent, FastTrack and Gnutella) 62 per cent is video and 11 per cent is audio, with the rest being miscellaneous file types, according to the study.