My Draft Paper on the Digital Media Store (and other info)

The paper I was working on before my travels apparently did end up in the Speed Bumps Conference docs and on the Web, so I might as well link to it.  It explores what I call the Digital Media Store, the evolving means of selling music and movies through services like iTunes, Napster 2.0, and Movielink.  I explore the theory and practice of these systems, considering important variables for their success and failure, along with the effects of a Speed Bumps or Technological Lockdown Scenarios.  I would appreciate any and all comments; it is only a draft, very much a work in progress (btw, apologies for some of the typos, particularly in that first line, which should say “alternative models” – a couple of words got jumbled in transit to the speed bumps page).  Also, I should point out that this is merely one section of what will be a larger paper on digital media biz models – stay tuned.

Also, do check out all the resources listed at the Speed Bumps page, including the overview from Prof Nesson and Sarah Hsia

(Re)Defining Speed Bumps

Prof Felten had a series of great posts post-Speed Bumps Conference.  The first dichotomized speedbumps into two definitions; following that, Ernest suggested a slightly different separation. Let me explain and expand on Ernest’s suggestion, which is the way I have thought of speed bumps.

The larger category is actions and tools that, as Felten puts it, “[try] to make illegal acquisition of content (via P2P, say) less convenient than the legitimate alternative.”  To me, that’s just a general statement about “competing with free” – you make buying legit cheaper in terms of monetary and non-monetary costs.

As Ernest suggests, the speed bump approach is kind of a subset of that broad strategy. The speed bump approach is not about stopping all leakage onto P2P for a period of time.  Rather, it is about making illegal acquisition significantly less convenient and more costly for the initial release period.  It’s not that all people will be prevented from downloading over P2P; it’s that, to do so, they will have to wade through substantial obstructions for that period.  The speed bump scenario, as I conceive it, imagines that the obstructions’ substantiality and the period make a meaningful difference for the affected industries. (One can also imagine this scenario in both terms, as Nesson and Hsia do here.  I tend to think of only the latter as the scenario, because the former is really an extension of the status quo – using spoofing and DRM in an attempt to reduce P2P – rather than a new scenario).

Felten points out that DRM doesn’t seem a particularly good fit here.  Once the file gets onto P2P, the DRM has no effect.  But consider two other technologies typically associated with the speed bumps approach: spoofing and interdiction.

Spoofing’s effects can persist after the initial release period, as the spoof files still hang around the P2P directory.  However, in the initial release period, before legit files have spread far and wide over P2P, the spoof files are more likely to outnumber the legit ones.  Also, counterattacks are less likely to have been implemented effectively.  People are less likely to have identified spoof files and either manually removed them from shared folders or designated them as spoof via a peer-rating system.

By slowing the spread and availability of legit files, interdiction can create an inconvenience during the initial release period.  Interdiction’s impact can persist after the creation of one unencrypted copy, though it certainly degrades over time as legit copies spread and it becomes more costly to interdict more users.

When viewed with these technologies, DRM has a possible, but still uncertain, role.  By limiting the initial number of uploaders, it increases the ratio of spoof to legit files and decreases the costs of interdiction by reducing the number of users who must be interdicted.  Given the ease at which one can evade (through CD burning and reripping or the analog hole) or circumvent DRM, DRM may still have no impact.

Gotta Sue Em All

There’s another bit of interesting info in the Strumpf and Olberhozer study that hasn’t gotten a lot of play, but that I find absolutely fascinating.  Please turn to pages 10-12, particularly this line from page 12: “While the left panel indicates that U.S. users downloaded almost half of their files from other U.S. users, the remainder comes from a diverse range of countries including Germany, Italy, and Brazil.”  Germany ranks at 16.5%, and no other country hits above 6.9%.

It’s obvious that the percentage would be less than 100% US to US, but less than half?  Moreover, who would expect that .7% of US downloads come from Polish users?

This really points out that, if you believe lawsuits are part of The Solution, the new lawsuits overseas are critically important.  At the same time, it demonstrates some serious difficulties.  The RIAA needs to sue in numerous jurisdictions, possibly with slightly different, complicating laws (see Canada).  In the end, how far can you chase people around the world?  If you end up with no US uploaders but still US downloaders, you haven’t done anything.

Liebowitz Critiques Strumpf and Olberhozer

Everyone’s been talking about the Strumpf and Olberhozer study that says file-sharing does not impact CD sales.  Prof Felten summarizes and analyzes it and many other studies nicely.  Don’t have much to add, but here’re a couple things missing from the various posts:

First, Prof Liebowitz, who has a contradictory economic analysis, already has posted a lengthy critique.  Apparently, Strumpf and Olberhozer won’t be providing their data to the public in the near term.  They had some back-and-forth at the Future of Music Summit (see Sivers’ notes), where Strumpf explains why they won’t provide data – somewhat unclear to me.  Liebowitz also mentions the Boorstein study and offers a brief criticism; he will be reviewing Boorstein’s data, apparently.  On all counts, I have no idea, certainly not enough economic expertise, to say who’s right.  All it does is confirm that nobody really knows what’s happening.

What I’m left with is my intuition that, in the long run, it’s reasonable to believe that easy access to free, fairly high quality music files will do more severe harm to the industry.  It’s also reasonable to think that, all other things being equal, the long run will bring easier access, as more people have broadband, P2P evolves, etc.  Does that justify the RIAA’s panic? I don’t think so, and I obviously disagree as to what should be done about the potential harm of P2P.  But I also cannot dismiss their overall reasoning easily.

Second, some people tend to think of the surveys on file-sharing as all opposed to Strumpf and Olberhozer.  But see slide 7 in this InsideDigitalMedia interview as well as this article on a Jupiter study.  That data is contradictory too – just as confusing.

Blogging from Future of Music Coalition Policy Summit

CDBaby‘s Derek Sivers blogged the Future of Music Coalition Policy Summit and has trackbacks listed for other bloggers. Enjoy!