Sunday, May 9, 2010


What would you think if you heard the following three


- A computer company in the Home Theatre PC business admits the main use of their product is watching illegally downloaded movies.

- Consumer electronics companies admit that downloaded music and movies are driving gadget sales, like videotape and cassettes did it a generation


- A venture capitalist admits in private that the technology wiz kid of the

decade should not be Apple or Google but trailblazing music sharing

service Napster.

Do you see a common thread in all this? The interesting bit is that if you

look at most of the decade's technological developments, they include

some sort of wrongly appropriated content. Take for example the iPod.

Though the iTunes store sells a good amount of music, it is nowhere close

to even 10% of the total amount of music on iPods across the world. What

the iPod does is makes it very easy to play downloaded music. And as a

result, Apple has a market capitalization of $175 billion, almost as much as


Other examples may not be as clear. But take a look at the connection

between downloading and sharing services and the increasing speeds of

broadband. The two have grown hand in hand, allowing kids to access the

latest movies within hours of their release. And the Kindle, an e-book

reader will very likely do to books what has already happened to music

and movies. Is it a wonder that content creators hate the very same

technology companies that the rest of the world loves?

The last decade's digitization of entertainment has made it almost

impossible to control content any longer. Companies like Rupert Murdoch's

Newscorp are starting to put up barriers, with subscription compulsory to

access content on their site, but how long will these barriers stay up? Take

movies for example. A family would most likely watch a movie once, and

for that a downloaded movie works out just as well as a rented DVD. If

Hollywood could find a way to do that, it would save the industry from

losing millions of dollars in revenues.

The one thing that industries affected by the piracy wave should not be

doing is alienating the very customers they depend on. And Newscorp's

example is exactly that. If you charge for content through lock-in

subscriptions, readers will go elsewhere to find the content. A number of

new generation news sites do not have the cost structure of Newscorp,

and they will welcome these readers. Also, information elsewhere is freely

available, since it can be sourced from a number of different locations.

In the words of one executive, there is little that can be done to turn back

time. They have no right to be self-righteous if they are the ones that

developed the technology that has made today possible. How will they

evolve to a point where they can make money from content is the key to

their survival.

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