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New challenges 1 oct 2010



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  • International Federation of the Phonographic IndustryMotion Picture Association of AmericaRecording Industry Association of America


  • 1. New Challenges John Tyrrell 1 October 2010
  • 3. Video
  • 5. PresentationGo
  • 6. Today’s MissionInternet Piracy• What’s your attitude to it and your role in it?• When customers take what they want for nothing, how can businesses make money?
  • 7. PiracyWhat is it?• The unauthorised copying, sale or distribution of ideas or products• The unauthorized or prohibited use of works under copyright• Is it theft?• Not in the eyes of the law
  • 8. PiracyA brief history• Duncan Lamont, lawyer, London: "Medieval scholars used to write curses into their books and if anyone copied, they would also copy the curse and be cursed"• Ever since anything could be copied there has been piracy
  • 9. PiracyA brief history• ‘Pirate’ label used in this context as early as 1603, predating copyright law• First copyright law established in 1709 in UK• Originally designed to protect book publishers• Later laws encompassed plays, songs and other written material
  • 10. Piracy1906
  • 11. PiracyCassettes• First introduced in Europe in 1963• Pre-recorded music cassettes launched 1965• Piracy exploded• First music, then from the early 1980s software and games• Practically no copy protection• UK BPI 1980s campaign
  • 12. Internet piracyDefinition “Unlawfully transmitting software or other copyrighted material; or providing infringing material that enables users to violate copyright protection mechanisms in software over the Internet.”• Now anything that can be copied and transmitted digitally is being pirated• Music, Games, Software, Films, Books
  • 13. PiracyMarketing Mix Hard Mix Product Price Place Promotion Soft Mix People Process Physical Evidence
  • 14. PiracyMarketing Mix Hard Mix Product Price Place Promotion Soft Mix People Process Physical Evidence
  • 15. PiracyHard mixPrice• Free?Place• From the comfort of your own home
  • 16. PiracySoft mixPeople• Indirect contact with BitTorrent ‘seeders’• Pirate Bay Vs MPAA, INFI etc in the newsProcess• Click, click, type, click, wait… donePhysical evidence• Pretty interface, files on your HDD
  • 17. PiracyWhy do people do it?• Desirable (Product)• Free (Price)• Easy (Place, Process)• Better experience (Product)
  • 18. Piracy Pirated Vs Legal Films
  • 19. PiracyVideo 2
  • 20. Attitudes to piracyWho likes it?• Consumers• Commercial piratesWho doesn’t like it?• Rights owners• Some artists, but not all
  • 21. Attitudes to piracyPro piracy• The Pirate Bay, Swedish-based BitTorrent index• 91st most popular website in the world• Founder Peter Sunde: "Today piracy has become more like someone who likes freedom, someone who likes information exchange,"• Author Paul Coelho: “a person who does not share is not only selfish, but bitter and alone.”
  • 22. Attitudes to piracyAnti piracy• Industry bodies: MPAA, RIAA, IFPI• Rights holders: film studios, record labels, book publishers, games publishers• Service providers: MediaDefender, ACS-Law• Governments
  • 23. Fighting piracyMethods• Threats: out of court settlements• The courts: fines, prison – Landmark UK ruling: London iPhone film pirate sent to prison two weeks ago
  • 24. French Anti-Piracy LawToughest in the world• May 2009: Sarkozy legislation approved• Process: email, letter, connection cut off• IFPI (represents WW music industry): "an effective and proportionate way of tackling online copyright infringement"• Socialist Patrick Bloche: "dangerous, useless, inefficient, and very risky for us citizens"
  • 25. Music piracyArtists and new business models• Featured Artists’ Coalition (music): “For those of us who don’t get played on the radio or mentioned in the music media, peer-to-peer recommendation is an important form of promotion.”• Finding new ways to monetize music: – iTunes, Amazon, Deezer, Spotify, LastFM – Live music (eg Live Nation: U2, Madonna, Shakira etc)
  • 26. Music piracyRadiohead• Let consumers choose the price for album ‘In Rainbows’• Tom Yorke: "Most artists, the truth is they dont get paid at all for their digital stuff, they get ripped off *…+ if you feel this is worth something, then thats great, and if you just want to hear it and pass it on, thats great too."
  • 27. Music piracyVideo 3
  • 28. Music piracyEstablished Vs Emerging artists• Lily Allen: "These guys from huge bands said file-sharing music is fine. It probably is fine for them. They do sell-out arena tours and have the biggest Ferrari collections in the world. For new talent though, file-sharing is a disaster as its making it harder and harder for new acts to emerge."
  • 29. Music piracyConclusion• Everyone agrees that music sales are down• No one can agree on how to monetize music or tackle piracy• Musicians divided on the issues• New business models are emerging• Still very easy to not pay for music
  • 30. Recording Industry Association of AmericaKnows what to do…Thousands of lawsuits against ordinary people
  • 31. ButSo do consumers…The lawsuit campaign ended over a year ago
  • 32. Book PiracyEmerging problem• Small but growing problem• Driven by Kindle, Sony Reader and now iPad• In 2009 Amazon sold more downloads of latest Dan Brown book than hardback copies• Within 24 hours it had been downloaded 100,000 times via file sharing sites• BitTorrent book downloads up 78% after iPad launch
  • 33. Video game piracyDRM• Digital Rights Management for PC games• Objective: protect the rights and the revenue of creators and publishers• Different systems: Tages, SecuROM, Steam etc• Methods: limit # of installs, require internet authentication• SecuROM permanently installs software on PCs
  • 34. Video game piracyCase Study: Assassin’s Creed II• Smash hit game released Feb 2010 by Ubisoft• PC version DRM required internet connection to play• Ubisoft: “some players will not be able to connect to the internet but the majority of people can connect most of the time”• “When I buy a game I expect to be able to play it whenever I want”• DRM ‘crack’ released April 2010
  • 35. Video game piracyCase Study: Spore (EA)• PC title released September 2010 with SecuROM• After 10 days 91% of Amazon reviews gave it 1/5• Most cited the DRM as the reason• DRM-free crack was released before launch• Result: the most pirated game of 2008, and global lawsuit against EA• Relaunched DRM-free Dec 2008
  • 36. Video game piracyCase Study: Crysis (EA)• Hit PC game released Nov 2007 with SecuROM• 4th most pirated game of 2008• Cevat Yerli, founder of Crytek: “While we are certainly concerned about piracy and copy protection, we are also concerned about the potential opposite problem, inconveniencing legitimate buyers with measures that interfere with their enjoyment.”• Today 70% of Amazon reviews for Warhead are 1/5: “packaged with an invasive, draconian DRM scheme *…+ This would not be acceptable in the case of a DVD or CD, so why *…+ in a game?”
  • 37. Video game piracy• Video 4
  • 38. Video game piracyCase Study: The Witcher• Award-winning PC game released 2007• Developed in Poland• Over 1.5 million sold WW• First released with DRM, removed with patch• Later editions had no DRM
  • 39. Video game piracyCase Study: The WitcherTomek Gop, Senior Producer, CD Projekt RED
  • 40. Video game piracyCase Study: The WitcherWho decides to put DRM on the game?• “It’s pretty much always down to negotiating. If it was only up to us we go straight and we don’t put anything on, but on the other hand it wouldn’t be totally fair to the publisher. So we said OK let’s do something in the middle. You have to respect both players and the publisher.”
  • 41. Video game piracyCase Study: The WitcherHow many pirated copies of The Witcher are there? “One day we all talked and we guessed that it was around the same number that had been sold (1.5 million) but it was a pure guess.”
  • 42. Video game piracyCase Study: The WitcherDoes the Central / Eastern Europe location affect your approach? “We definitely are applying a non-standard approach toward giving people more and not binding them to anything. We’re trying to make piracy the disturbing possible. One day we might release a game with no DRM at all and very rich physical content. It might not be common in the rest of the world, but we are all aware of the fact that you cannot fight piracy and be effective about it.”
  • 43. Video game piracyCase Study: The WitcherWhat’s more important, DRM or keeping fans happy? “Definitely the latter one. We are thinking about richer physical editions of our games. The advantage is what you have in your hand and not how difficult it is to crack the game.”
  • 44. Video game piracyCase Study: The WitcherCan you imagine piracy putting CD Projekt out of business? “No, we have 1 million community users. We approached things in the right way and people appreciated it. There are companies that are doing weird things that I wouldn’t do myself.”
  • 45. Video game piracyCase Study: The WitcherWhat’s the one thing that you want to say about piracy? “I think we prosper in a market that has been brought up with piracy, we live with it. I think that you cannot assume that it’s ever going to be gone by any means, it’s not going to happen ever. You’re just going to have to make your way living with it, and the way you do it, this is what defines good or bad developers in Europe for me, how people cope with piracy, how they get along with it.”
  • 46. Video game piracyWhen anti-piracy goes wrong• Games publisher Atari employed law firm to collect money from ‘pirates’ using IP address evidence• Letters demanding £500 sent to thousands• Unreliable evidence: many falsely accused• PR disaster: national BBC TV story “In a case highlighted by consumer magazine Which, an elderly couple accused of downloading an Atari racing game said they had no wireless hub and had never even played a video game.”
  • 47. Video game piracyWhen anti-piracy goes wrong• Questionable tactics: is the objective to reduce piracy, or to make back some money?• Atari forced into embarrassing climb down: "The lost revenue caused by the widespread illegal copying of games causes much damage to our industry*…+Taking action to defend our rights is necessary, but it is important to us that any action taken is fair and appropriate. We believed that the methods were reliable and accurate. We were shocked and disappointed when we found that they had incorrectly accused one household of illegal copying. As a direct result we told Davenport Lyons to take no further action on our behalf."
  • 48. Video game piracyConclusion• Publishers and developers have the right to defend themselves from piracy and loss of revenue• However, DRM… – Only delays piracy (and increases challenge to hackers) – Alienates paying customers – Diminishes experience – Tarnishes publisher’s reputation• DRM-free avoids negatives, but does it also lead to lower sales?
  • 49. Your attitudes to piracyQuestions• For?• Against?• Should it be stopped?• Can it be stopped? If so, how?• Does it support or destroy creativity?
  • 50. SummaryReport: Part 1• Outline the basic arguments for and against internet piracy• Explain what your attitude is towards controlling piracy and why• 15 minutes, Q&A
  • 51. New Business Models• Assuming piracy cannot be stopped, how can content owners make money?• How can artists and the creative economies survive?
  • 52. Break• 15 mins
  • 53. New Business ModelsNew ways to deliver and monetize content• Old rights holders have been left behind• Big business struggling to find ways to grow• Small startups with new ideas are taking over Vs
  • 54. New Business ModelsNew ways to deliver and monetize content• Music• Film• TV• Books• Video Games
  • 55. New Business ModelsExamples• Music• Film• TV• Books• Video Games
  • 56. New Business ModelsMusiciTunes / Amazon• Download individual tunes at a lower price than the retail price of a single• Artists receive % of sales
  • 57. New Business ModelsMusicDeezer / Spotify / LastFM / Imeem• Stream music free• Paid for by advertising and subscriptions• Artists receive royalties
  • 58. New Business ModelsMusicYoutube• Stream music videos• Paid for by advertising• Artists receive royalties (since 2007)
  • 59. New Business ModelsMusicIdea from Matt Bellamy of Muse:• Internet service providers pay artists and other rights holders• Fans have access to any music file on the web as part of their broadband subscriptions
  • 60. New Business ModelsExamples• Music• Film• TV• Books• Video Games
  • 61. New Business ModelsTV / filmHulu• Free US-only streaming TV service• Joint venture with NBC, Fox and ABC• Exclusive content deals• Paid for by advertising revenue split with content owners
  • 62. New Business ModelsTV / filmiTunes• Worldwide film / TV download and streaming• Advertising free• Paid-for content• Sync with Apple devices
  • 63. New Business ModelsTV / filmAmazon• US-only TV / film streaming and download• Advertising free• Paid-for content
  • 64. New Business ModelsTV / film4OD / BBC iPlayer• Free UK-only streaming TV services• Limited ‘catch-up’ and archive services• Minimal ads / licence payer funded• Service extensions rather than standalone
  • 65. New Business ModelsExamples• Music• Film• TV• Books• Video Games
  • 66. New Business /• Sell digital books• Amazon also produces Kindle e-reader• Prices lower than retail RRP
  • 67. New Business ModelsBooksGoogle• Controversially want to digitize all books• Their aim: “make it easier for people to find relevant books”• Traffic on Google = ad revenue
  • 68. New Business ModelsExamples• Music• Film• TV• Books• Video Games
  • 69. New Business ModelsVideo gamesSteam• WW download, DRM and multiplayer service• 1,100 games, 25M active accounts• Estimated 70% of download market
  • 70. New Business ModelsVideo gamesOnLive• US cloud-based game streaming service• Game runs remotely requiring fast internet• Monthly subscription plus price of games• No download so no piracy
  • 71. New Business ModelsVideo• DRM-free, low cost download service• From CD Projekt, Poland (The Witcher)• Old, classic games only• You own the game entirely: “we hate draconian DRM schemes just as much as you do”
  • 72. New Business ModelsCommon characteristics• Content often streamed• Lower price, un-packaged good• Advertising funded• Pay lower royalties than traditional media• Remove or side-step the problem of piracy
  • 73. New Business ModelsVideo 5
  • 74. Different approachCanada• Levy (tax) on blank media (DVDs, CDs)• Tacit understanding that media will be used to burn downloads• Money used to pay rights holders and artists• Noël St-Hilaire, RCMP, Canada: “Downloading music for personal use, or non-profit use is no longer targeted, and is legal.”
  • 75. Your business modelReport: Part 2• Work in groups of 2+• Choose one of the following: – Video game – TV / film – Music• Propose a brief outline of an original business model to monetize your content
  • 76. Your business modelReport: Part 2• Organise your business model as follows: – What is the content? – How will you deliver it? – How will you sell it? – How will you make money?• 30 minutes, Q&A
  • 77. My business modelA1 Acme Music Co.• Partner with popular, credible music website, eg NME, Fader• Offer low-price new music download service• Target new music which record labels want to promote cheaply• Use revenue from ad sales to reduce cost of music to consumers• Editorial about the music helps sell it• Paypal makes it easy and painless for consumers to pay• Offer monthly subscriptions for unlimited downloads• Revenue split with rights owners and partner
  • 78. Your business modelReport: Part 2• Organise your business model as follows: – What is the content? – How will you deliver it? – How will you sell it? – How will you make money?• 30 minutes, Q&A
  • 79. The final wordVideo 6
  • 80. The end