Competing with Free

by on December 12, 2005 · 2 comments

I have to admit I’m surprised and a little saddened to see that Overpeer is being shut down. Overpeer worked for the recording industry to pollute peer-to-peer networks with bogus versions of its songs. Apparently, the peer-to-peer networks have instituted new user-rating systems that have made Overpeer’s tactics increasingly ineffective.

I’m surprised it happened so quickly. It was of course inevitable that the peer-to-peer programs would adapt by offering users ways to filter the bad songs out of the system, but I would think Overpeer could take countermeasures, such as automated positive rankings of the bogus songs. But it seems the peer-to-peer networks won this particular arms race in just three years.

This, I think, is one more data point in favor of the thesis that the record labels need to focus less on the stick of preventing piracy (although they should certainly do some of that) and more on the carrot of providing users with easy-to-use, convenient, and affordable legitimate download options. They’ve made some baby steps in the right direction, but they still mostly sell low-quality audio files encumbered with irritating and restrictive “digital rights management.” Improving the quality of the songs they sell online, and abandoning digital rights management, would be important steps toward enticing customers back into the legal fold.

In the long run, I think they’re going to need to be more radical. Google is probably the best model. Google gives away online services worth billions of dollars and funds their efforts with ads. So here’s one model: imagine if the recording industry set up free, ad-supported Internet radio stations. They could do things that ordinary radio stations could never do. For example, users could be required to fill out a survey giving some basic demographic information (age, zip code, industry). Then the ads on each Internet radio stream could be targetted at that individual user. Advertisers could also buy up ads to play with particular playlists, of which there could be thousands. The Britney Spears playlist might have ads targetting teeny boppers, while the oldies playlist would have ads targeted at middle aged people. This could conceivably generate considerably more revenue than traditional radio stations, since advertisers will pay more for precisely targetted advertising.

To be clear, I’m not claiming that peer-to-peer infringement is acceptable, or that the RIAA should stop trying to prevent it. But I also think they have to face the fact that, sooner or later, this is a war they’re likely to lose. So they need to be thinking about what they’re going to do if that happens. You can, in fact, compete with free, (Google has made billions doing just that) but it requires more creativity than the recording industry has shown to date.

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