Friday, March 13, 2009

Piracy is a Hydra

I went to a workshop on copyright the other night. It was extremely informative, but even the lawyer giving the lecture acknowledged that something major needed to be done to address the current situation of massive pirated downloads. Having worked as counsel for Tower Records, she represented them in that famous lawsuit against Napster because Napster had been dumb enough to specify in their business plan, "We're going to put companies like Tower Records out of business." Well, Napster went under, but then so did Tower Records. Ironically, Napster was reincarnated under a subscription-based model.

One attendee mentioned The Pirate Bay, which is an anti-copyright organization run out of Stockholm, Sweden. The Pirate Bay hosts a server indexing all BitTorrent files currently available, which means that if you go to their web site, you can find an "index" link to any film, movie, or song they have. When you use BitTorrent on that index link, it finds all the people who have a small fraction of that song on their computers and assembles all those parts into a complete file for you to watch or listen to. This is called, "hyperdistribution". As an American, by using BitTorrent, you have almost certainly infringed the copyright of the artists and their producers... but that doesn't seem to stop anyone from doing it. The Pirate Bay has gotten a lot of heat from the MPAA and record companies, and their offices were even raided by Swedish police in 2006. After that raid, however, The Pirate Bay was up and running again only three days later.

A few months ago, I discovered a site that goes a step farther— You don't even need BitTorrent to use this site. All you do is go to their site, type in the movie you want to see, and find the file that works the best for you. Invariably, these files are made from illegal camcorders in movie theatres, so you can see films still in general release. The quality is not always high, but if you're willing to sacrifice quality, then you can see practically any movie you want, for free, as long as you have access to the internet. Even though stopped working quite suddenly (due to someone complaining, no doubt), was started up not long thereafter.

A Whois lookup on returned this:

Name: Private Protection Co.LTD
Organization: Private Protection Co.LTD.
Address: NO.1111 Chaoyang Road, Beijing
City: Beijing
Province/state: BJ
Country: CN
Postal Code: 100000

Administrative Contact:
Name: Private Protection Co.LTD. Zhuhai Branch
Organization: Private Protection Co.LTD.
Address: NO.1 Meihua Road
City: Zhuhai
Province/state: GD
Country: CN
Postal Code: 519000

Dispute Contact:
Address: 6B XIHAI Building, No.221 Renmin E Road, Xiangzhou District,
City: Zhuhai
Province/state: GD
Country: CN
Postal Code: 519000
Phone: +86.756-2281763
Nameserver Information:

As expected, is based in China, one of the largest violators of copyright. In doing research for my movie business plan, I learned China permits only 20 foreign movies to be shown annually in their country. If the tables were turned, and the best movies were always made in China, and the American government said I could only see 20 foreign movies per year—of which only a fraction were Chinese—I'm sure that I, too, would be a pirate without any ethical reservations. Since China is still under the yolk of communism, an ideology which divorces the individual from private property, I'm unsurprised when I hear Chinese citizens (proudly) call their country, "The nation of fake."

The ability for companies to brazenly violate copyright reminds me of the Hydra from Ancient Greek mythology. Hercules' Second Labor was to kill the Hydra, but "upon cutting off each of its heads, he found two grew back, an expression of the hopelessness of such a struggle". In this case, the MPAA, music companies, and the world's police are Hercules, and the Hydra is both the Pirates and the consumers who use BitTorrent. Try as they might, authorities can't seem to kill hyperdistribution. Shut down Napster? Here's BitTorrent. Shut down The Pirate Bay? They're up three days later. Shut down They switch domains. Sue consumers? You get a consumer backlash.

Why does piracy continue to flourish despite the continued assault from authorities? Because piracy at its core isn't a legal or technical matter, and thus cannot be solved with legal or technical tools. Piracy is in its essence a social problem only catalyzed by an unenforceable (and thus unrealistic) legal code and an astonishingly efficient delivery system. Rampant piracy is really just a symptom of users who want to consume content, and who aren't particularly interested in the hassle of paying for it. Sure, if it's easier to find content and pay for it than to download it over BitTorrent, they'll pay (thus the success of iTunes). But here's the bitter pill nobody wants to swallow: if a user goes out of their way to watch a pirated copy, they probably weren't a paying customer to begin with. Far from being a curse, users who watch pirated shows and movies and listen to pirated songs possess one unique benefit—a user who watches or listens to a pirated copy might like it enough to buy it on CD or DVD and/or recommend it to others... which is impossible if they never even watched or listened to it.

Sites like and with its own media viewer show how the entertainment industry is evolving to come to viewers. Instead of not showing content online and "forcing" viewers into downloading episodes illegally, they're creating user-friendly parameters to make it easier for people to get the content they want, whenever they want it. The theory goes something like, if they're going to dally about with a mistress, at least we want to control who and where that mistress is... because we can make money off of that.

Lawrence Lessig makes an excellent point about copyright. The way the law is currently set up makes it too hard for providers to let users share, remix or use content. In an internet digital culture where sharing is the norm, copyright law is so restrictive that it's now stifling creativity. That's why I've become a fan of the Lessig's Creative Commons License.

My friend Nik said it best when talking about the pervasiveness of spam: "As long as you have a backwater country that doesn't crack down on spammers, you're always going to have spam. The only way to really fight spam is to manage it." Maybe one day, every country in the world will indeed have a police authority able and willing to protect the rights of every content producer around the world. I fear, though, that such a day will be long after my children have already grown up... and during that time, our culture will have since become accustomed to violating copyright as the norm.


Paul H. said...

Since most people don't have their own PC's in China, Internet cafes are everywhere. At any cafe in China you will find that they have thousands of movies and TV shows for streaming - Chinese, American, everything including the in-theater camcorders you mentioned. They pretty much have everything you could possibly want to see.

In China today it's not possible to legally open your own Internet Cafe. All new cafes must be operated by one of a handful companies which are all subsidiaries of larger state owned companies. This allows them to strictly monitor what people do online, but it also means some people in government are getting very rich off all the piracy.

As for the 20 movie per year quota, at least 5 of those movies must be from countries other than the United States. Movie attendance in China is increasing, but with maybe one new American movie shown a month against every American DVD ever released being pirated for $1 - it doesn't look like things will change soon.

Just thought you might like some more info on the China piracy scene from someone who lived there.

I watched pirated DVDs for years until I got so sick of movies I almost went off them.

Ross Pruden said...

Wow, that's really enlightening! Thanks.

I had no idea that the government has such an iron fist over all the PC's. That's incredible.

I wonder if the Chinese have a viable alternative to monetizing digital content if they are getting so much of it for free... on our current course, professional producers are dying a death of a thousand cuts. I'm not advocating that's a bad thing, per se; markets always evolve and the fittest of the business models will survive. The question is, is there an end-game in mind for where rampant piracy is taking us all, or is the market just mindlessly glutting itself?

Paul H. said...

I think with poverty in their recent history - and still today in parts - Chinese in general aren't inclined to pay for things they can get for free. Attitudes are harder to change than laws.

But for the rest of us, most people are still willing to pay for something if it's good. The iTunes model (customers only buy the songs they want at a low price) proves we don't expect things for free just because technology has changed. We just need fair and reasonable business models.

Things may never be business as usual again. New media requires different ways of thinking. Hopefully the business models that survive will be the ones consumers want.

Ross Pruden said...

Yeah, that makes sense to me about China. They're simply not used to paying... yet.

In my view, Apple's success with iTunes is more about how Apple has focused their selling tactics on convenience over product. For example, if product were easy to find and to download, but still expensive, people would continue to pirate. If the product were cheap to buy online, but still hard to find, people would prefer to pirate. Only when producers and distributors lower the price point and the obstacles to a sale below the complicated crap involved for pirating a copy, people stop pirating. That's why ABC is posting all their content online with minimal advertising, but free to viewers. Before piracy, media moguls could have gotten much more money by selling content on DVDs exclusively, but that model is failing. Now, unless they offer content in a format that competes with piracy, people will always choose to pirate. Media moguls can still make money off of DVD sales, but only if they nurture a faithful audience who already watch their content online, for free.

The question is, given what you've said about China is true, can this attitude ever be successfully nurtured in China? If not, Hollywood should just cave to the inevitable and start giving away DVDs of their content... but with ads on it.

Great discussion.

Will Entrekin said...

See, the thing is, where you see piracy as a problem (which it legitimately is, in a certain way), I think there's something bigger there. Whenever one gets involved in a new business venture, one must ask one's self "Self, what function am I fulfilling, or more accurately, what problem am I solving? Is it a problem many people have? Will they seek my solution." Because if you consider how very many people pirate and you consider the user (instead of the studio or the industry), you realize:

Piracy is in fact a solution to restrictive copyright problems. When Napster first came around, the industries viewed it as a problem, certainly, but users viewed it as a solution to get the music they wanted the way they wanted it. Borne out by the fact that it's now a subscription-based model; people were even willing to pay for the music, because it solved a problem for them--namely, how they could get digital music more cheaply, and how they might find new music.

Same with pirating. Many users of torrent sites don't want to go to a theater: way pay fifteen bucks to watch something once when you can pay half that to own a disc of the content? Nevermind that you don't have to deal with screaming kids and seat kickers. Plus, snacks at home are less expensive, as is parking.

If you look at what people seek pirated content as a solution for, you start to realize what they perceive as a problem.

And isn't it? How much does a musician get paid per CD? A single dollar out of twelve? If a writer gets, say, 12% royalty (which is high) on a hardcover, that writer is still looking at only a dollar or two for every $25 book sold.

Which further muddles the problem if only because it demonstrates that the only people who are actually profiting, and profiting well, from the current system are labels/studios. Not the actors, not the writers, not the musicians, not the grips and sound guys.

I disagree that any consumer who pirates probably wasn't a paying consumer in the first place. I think, given the choice, most consumers would simply rather choose the way they consume content and then pay the artist accordingly. I think Radiohead demonstrated that pretty well.

Ross Pruden said...

@Will: Great response. We actually agree:
—and finally Lawrence Lessig's lecture at TED perfectly expresses how restrictive copyright laws have only polarized producers and consumers.

If anything, I see piracy as a free market solution for a demand the market hasn't yet monetized. Can't find Desperate Housewives on Australian broadcast TV? Get it on Bitorrent. Mark Pesce's lecture is very apropos.

However, I have one disagreement, and one clarification.

My disagreement: (most) people don't seek pirated content as a solution to how much a musician gets paid (or doesn't get paid), but seek pirated content to simply get what they want conveniently for the least amount of money. Sure, some will support models where the musicians keep 90%–100% of all royalties, e.g., Radiohead, but the masses basically don't care about that—they just want to consume content quickly, easily, cheaply, and—as a bonus—legally. Whom their money goes to, be it a vast corporate conglomerate or a lone garage band is really more of an afterthought.

And my clarification: you misread me when you said, "I disagree that any consumer who pirates probably wasn't a paying consumer in the first place." I actually said, "if a user goes out of their way to watch a pirated copy, they probably weren't a paying customer to begin with." This doesn't include the casual watcher of pirated content, just the people who only watch pirated content. These kinds of people are the ones big media companies fear the most because these Uber-Pirates have made it almost a religious code not to pay for anything; if all users were like them, the market would indeed bleed out from lack of CD and DVD revenue.

My point is that those people actually don't equate to lost income because they probably wouldn't have been paying customers to begin with. In fact, quite to the contrary, these "pirates" actually add value to the product by becoming a megaphone to everyone they know (of course, that's only IF the product is any good!). In an age where word-of-mouth recommendations are ten times better than ads, these "pirates" end up being a massive, scattered group of unpaid salespeople for the product.

Anonymous said...

I don't get the idiots that do illegal downloads. Firstly who wants to watch some crappy quality movie recorded through camcorder?? I think I would rather juts pay the relatively small amount it costs to go to the movies or get a dvd because in my opinion I think that the artists who are creating this entertainment fro us deserve to be paid. Second , Im not interested in downloading illegal software that will spread files all over my computer that are difficult to completely remove and that cannot be updated. I will happily pay the people who create software because I appreciate their work. Its despicable that piracy has become something that young people think is ok just because other people are doing it. IS stealing ok if everyone does it? NO Its sickening that in a rich western society people are doing this.

Ross Pruden said...

"who wants to watch some crappy quality movie recorded through camcorder??"

The best downloads are not, so clearly you don't know enough about piracy. But, to answer your question, for some people, watching "crappy quality movie recorded through a camcorder" is the essence of disruptive innovation: something comes to market that isn't high quality, but is "good enough" and it satiates customer need.

"Im not interested in downloading illegal software that will spread files all over my computer that are difficult to completely remove and that cannot be updated."

Again, you don't know what you're talking about. There is virus software to counteract that concern.

"Its despicable that piracy has become something that young people think is ok just because other people are doing it. IS stealing ok if everyone does it? NO Its sickening that in a rich western society people are doing this."

I'd stop judging piracy, and start thinking about piracy critically. WHY are people pirating? WHY has it become so commonplace? WHY is it so socially acceptable? Answer those questions and you can stop piracy dead in its tracks. Despicable or not, it's now a market reality and the businessmen who have figured out why people pirate have profited immensely, like Gabe Newell: