By Mike Lee and Christophe Jammet

We’ve spent quite a bit of time thinking about the current state of content distribution in the digital world today. Today’s content distribution systems disseminate media in myriad formats: movies, TV, books, music, games, magazines, newspapers, photography, and more.  It’s hard to quantify how much money goes through all these industries, but considering that Apple, Amazon, and Google all have skin in the game, it’s easy for it to be a multi-billion dollar industry.

When we discuss content distribution and the experience of consuming content online, we constantly come back to the topic of piracy.  Sure, bootlegging has been around for ages in other media formats-   who here (above 27) hasn’t ripped a CD to tape back in the 90′s? Back then, however, the reliance on physical media hindered piracy to a degree.  Today’s digital media formats are easily downloadable, and with a good connection, an entire artist’s discography can be had in a few hours.

Leaders of myriad creative industries shout from the rooftops about how piracy is destroying their livelihoods and taking money out of their pockets.  The MPAA and RIAA aggressively prosecuted individual perpetrators for years before setting their sights on the actual file sharing platforms instead.  And don’t even get us started on SOPA.

So what’s the problem?   Are people really that immoral? or is there something more to the issues of digital content piracy?

Yes, yes there is.

Simply put: Most content piracy in this day and age is a service issue. User experience gaps and poor distribution arrangements are the two leading causes of digital piracy in entertainment.

The role of emerging platforms and new user behaviors

Today’s sought after content consumer is a digitally enabled one.  More and more people are “cutting the cord” and abandoning cable TV.  In fact, over 1 million cable subscribers cut the cord in 2011 alone.  Watching movies in theaters have deteriorated,  with ticket costs rising and attendance falling to 16 year lows.
While those stats are jarring, it’s doesn’t mean that people are consuming less content. They are just shifting to newer distribution platforms:

• More swedes under 35 listen to Spotify than commercial radio
• ebooks are outselling paperbacks in the US
• Three times more people watch music videos on youtube vs. downloading music

Digital Content and the advent of popularized streaming services enable increased content consumption across all major entertainment verticals.  You don’t have to look long to find examples:

• Itunes (Music, Movies, TV, Books)
• Amazon ( Music, Movies, TV, Books)
• Youtube (Video)
• Hulu (Movies, TV)
• Steam (Games)

The fact is, digital content distribution platforms are a boon for all of the entertainment industry verticals. The prospect of being able to sell a product to the consumer without the cost of physical media is at the core of today’s shift in user behavior.

So why is piracy such an issue? It’s a complicated answer, and we’d like to start our answer with a visual explanation from internet comic sensation TheOatmeal:



While humorous, we truly think this is how most people, including ourselves, behave. Now that almost anything is available to stream on Amazon, we barely pirate anymore. However, one month ago Christophe wanted to watch “Das Boot” and was looking to purchase it from a streaming service provider. It wasn’t available anywhere except as a DVD. Checking a torrent site revealed that it was readily available to download as a torrent, which would have taken less than 15 minutes to download.

Again, the content distributors’ failures to distribute their copyrighted content in a seamless manner across media types caused their represented artists to lose money. Piracy is largely a service issue.

Most people don’t download to avoid paying, they download because the incumbent content distributors were beaten to the punch in the digital arena by pirates.

The most glaring examples of this are in the TV and Movie industries.  Content rights are tied to both advertising revenues and outdated media delivery methods (cable TV, DVD).  This creates a conflict of interest between distributors, content creators, and the consumer:

• Cable companies rely on people to pay them to deliver content via cable boxes.
• Streaming services, which would bypass the need for cable TV subscriptions, are a threat to the status quo revenue model that cable companies take in, both on the subscription side as well as advertising.
• TV networks have begun working around this model, with most offering their content online.  This was due largely in part to networks finally figuring out how to properly monetize streaming content through ad revenues.
• Movie studios and their distributors have relied on the theater release/dvd sales path of revenue for their new releases.

The tipping point for this era of piracy occurred on the day digital downloads and streaming became technologically viable.  At that moment, content distributors became responsible for putting infrastructure in place that enables users to consume their content in a seamless manner.  Failure to do so results in pirates filling the gap by creating efficient distribution methods, and content owners missing out on revenue.

Want to Beat Piracy? Look at Video Game Distribution

Content distributors in TV and Movies have largely been reactive instead of proactive.  They could learn a thing or two from another industry: PC Gaming.

The PC gaming industry is no stranger to piracy issues.  It was especially vulnerable to software piracy back when games were sold exclusively via physical media. The last few years have brought rise to streaming video game services, which bypass the need for physical media.

Christophe doesn’t hide the fact that he is a huge fan of Valve’s digital game distribution service, Steam.  The service is an (almost) one-stop shop for PC games, from AAA-titles to independent games.  Think of it as an itunes for games. And it’s a big industry:  with over 35 million users, Popular game titles are able to quickly rake in hundreds of millions in sales.
Steam’s founder, Gabe Newell, has spoken before about Steam’s successful introduction into markets where piracy runs rampant:

“We’re a broken record on this,” Newell told me,. “This belief that you increase your monetization by making your game worth less through aggressive digital rights management is totally backwards . It’s a service issue, not a technology issue. Piracy is just not an issue for us.”

And it’s not because Steam avoids regions of the world known for their software piracy, they actually embrace them. “When we entered Russia everyone said, ‘You can’t make money in there. Everyone pirates,’” Newell said. But when Valve looked into what was going on there they saw that the pirates were doing a better job of localizing games than the publishers were. “When people decide where to buy their games they look and they say, ‘Jesus, the pirates provide a better service for us,’” he said. So Valve invested in getting the games they sold there localized in Russian.

Now Russia is their largest European market outside of the UK and Germany. “The best way to fight piracy is to create a service that people need,” he said. “I think (publishers with strict DRM) will sell less of their products and create more problems.

Mr. Newell’s candid point is the key to solving a majority of piracy issues across the rest of the entertainment industry. It’s a point that’s hard to make to people who work within the rest of the entertainment industry.  We’re not here to whitewash the moral implication of piracy-  the answer to that is obvious.  What’s important is to recognize the circumstances that cause the average person to resort to that behavior. If demand for original content is high and the people selling it don’t offer it in an ideal or convenient way, then someone/something will arise to meet that demand in a better way. You can chide consumer behavior all you want, but that’s how it is.

Going after individual pirates and even the platforms that they use is treating the symptom, not the disease. The key to suppressing average users from pirating content is to hold content distributors responsible for doing their job properly.  Imagine how content distributors would run their businesses if they didn’t have the right to sue people pirating in mediums that they don’t service.

Content distributors have a responsibility to both creators and consumers to be at the forefront of content distribution services.  It’s intrinsically linked to the rate at which technology progresses as a whole.  If content distributors continue to drag their feet when technology offers new avenues of content consumption, then the same thing will happen again.

Maximal revenue potential lies in having distributors be responsible for offering the best and easiest ways to consume content. Because if they don’t, someone else will.