Every thought about how many parallels you can find between one life experience and another, one business model and another, one product and another? Wherever you look, parallels abound.

Right now the big issue for every Prime Minister, Finance Minister, President.... is the Global Financial Crisis or the GFC for short.

But as a report just prepared for the PM of the UK, Gordon Brown, indicates, the problem is not about the banks - it is about society itself.

The problem that the report highlights seems to also apply to the entertainment industry and its relentless search for greater profitability at any cost. It is like an inefficient virus - that is so successful at growing that it kills its host. If the entertainment industry has its way it will, along with the banks, kill the goose that lays the golden eggs - the consumer!

Here is an excerpt from the story published last weekend:

THE ECONOMIC system is broken, and attempts by governments to fix it by kick-starting growth and consumerism are "delusional" and "pathological", the Westminster and Holyrood governments will be warned by their own advisers this week.

A ground-breaking report by the leading environmental advisers to First Minister Alex Salmond and Prime Minister Gordon Brown will deliver a damning verdict on capitalism and demand a radical shift to a fairer, more sustainable society.

............

The pursuit of economic growth, founded on the increasing consumption of material goods, has failed to bring social justice, prosperity or happiness, the report says.

"The narrow pursuit of growth represents a horrible distortion of the common good and of underlying human values," the report concludes. "The market was not undone by rogue individuals or the turning of a blind eye by incompetent regulators. It was undone by growth itself."

The report presents a fundamental challenge to the economic policies being pursued in London and Edinburgh, raising questions about some of the basic tenets of modern capitalism. We are living in an "age of irresponsibility", it says.

 The fundamental story here is that P2P is the only true social solution for the future of content distribution. Sure, the business models need to be sorted, but the only way to do that is to get started.

We here at Perceptric are constructing an interesting study into why the MPAA and RIAA seem to feel that P2P file sharing is eating into their revenues.

Could it be that the time constraints resulting from the media constructed belief of needing to be informed leave Americans with no choice?

 

Every so often during the compilation of that report I turn up amazing statistics that just cant wait – they need to be P2P’ed (shared amongst my peers) immediately.

 

According to the latest report from the US Census Bureau Americans are overworked and a nation of couch potatoes that do nothing but watch TV, Cable, Read Newspapers, Magazines. and Play computer games.

We added some figures (in blue) to the latest table from the Census Bureau and came up with some interesting conclusions.

Americans in 2000 suddenly found that with all the media options available to them, if they wanted to go to work, eat and sleep they didn’t actually have time to go to the movies (highlighted in yellow) or the washroom and if they crossed their legs for the whole year – could just get through without missing out on eating.

(This may explain the rapid growth of obesity over the last few years)

 Table 1098. Media Usage and Consumer Spending: 2000 to 2010

Item	2000	2003	2004	2005	2006, proj.	2007, proj.	2008, proj.	2009, proj.	2010, proj.
HOURS PER PERSON PER YEAR 1
Television ...................	1,502	1,615	1,620	1,659	1,673	1,686	1,704	1,713	1,733
Broadcast television 3 ..........	812	729	711	679	684	672	666	657	650
Network stations ...........	717	629	612	576	579	567	558	546	538
Independent stations 4 .......	95	100	100	101	105	105	108	110	112
Cable & satellite television 3 ..... Basic cable and satellite	690	886	909	980	989	1,014	1,038	1,057	1,083
television ............... Premium cable and satellite	568	728	753	807	823	840	862	880	902
television 4 ..............	122	157	156	173	166	174	176	176	181
Broadcast and satellite radio 3 ......	784	834	821	805	794	786	785	778	776
Recorded music 3 ..............	259	189	195	189	191	191	188	187	180
Newspapers 3 ................	201	194	191	184	181	177	173	169	165
Pure-play Internet services 3 .......	100	155	165	172	177	180	181	182	183
Out-of-home media .............	118	123	126	130	134	137	141	145	150
Consumer magazines 3 ..........	135	122	125	124	122	121	122	120	119
Consumer books 3 .............	107	109	108	108	107	107	107	108	108
Videogames 3 ................	65	76	78	73	75	78	80	84	86
Total 2 ..................	3,340	3,508	3,530	3,543	3,553	3,567	3,592	3,601	3,620
Washroom (4 x 5 mins per day)	122	122	122	122	122	122	122	122	122
Sleep (8 hrs per day)	2920	2920	2920	2920	2920	2920	2920	2920	2920
Work (40 hrs per week)	2080	2080	2080	2080	2080	2080	2080	2080	2080
Eating (3 meals - ea 30 mins)	547.5	547.5	547.5	547.5	548	548	548	548	547.5
Perceptric Total	9,009	9,177	9,199	9,212	9,222	9,236	9,261	9,270	9,289
Minus Hours	-243	-411	-433	-446	-456	-470	-495	-504	-523

N.B: Eating includes shopping, preparation and dish-washing - but no laundry.

This table does not include any time allocation for driving to and from the movies, or finding a park.

 

Therefore the real problem is not file sharing – its lack of a time machine to find the 504 hours that every American is short this year.

And short of Inventing a Time Machine – all the content industry have left is to sue everyone.

Although possibly – according to the above, people wont have time to attend court.

 

This article has been brought to you by our Tongue in Cheek cub reporter

War throughout the ages has been traditionally declared for the acquisition by one sovereign state (or Warlord) of another’s (sovereign state or Warlords') possessions.
The legitimacy of the process is provided for by the Charters and Constitutions of nearly all of the World Governments.
Censorship, introduced by those Governments has traditionally been in force to prevent the people from observing that which the Governments decided was not good for them.In this manner, throughout the ages, Governments have prevented their populace from being able to seed revolution.
Unfortunately, the Internet has provided the tools of Global free speech uniting the world, not against their Governments, but against Corporate America.

Definition (US site)DECLARATION OF WAR - An act of the national legislature, in which a state of war is declared to exist between a nation and some other nation. This power is vested in Congress by the Constitution, There is no form or ceremony necessary, except the passage of the act.The public proclamation of the government of a state, by which it declares itself to be at war with a foreign power, and which forbids all and every one to aid or assist the common enemy. A manifesto stating the causes of the war is usually published, but war exists as soon as the act takes effect.It was formerly usual to precede hostilities by a public declaration communicated to the enemy, and to send a herald to demand satisfaction, but that is not the practice of modern times.If the content Industry with its own peculiar accounting systems, offshore bank accounts for the receipt of licensing and royalty fees, international lobbyists (Content Industry Ambassadors) to all Governments isn’t a recognized Independent State, it should be.

SunTzu provides an insight into how the result may turn out.
(Using the Stanza numbering from the web site)

12. Therefore, in your deliberations, when seeking to determine the military conditions, let
      them be made the basis of a comparison, in this wise:--

13. (1) Which of the two sovereigns is imbued with the Moral law?   
      (2) Which of the two generals has most ability?   
      (3) With whom lie the advantages derived from Heaven and Earth?   
      (4) On which side is discipline most rigorously enforced?   
      (5) Which army is stronger?   
      (6) On which side are officers and men more highly trained?   
      (7) In which army is there the greater constancy both in reward and punishment?
14. By means of these seven considerations I can forecast victory or defeat

The answers at the moment are in my opinion,
(1) The Global Internet Community
(2) The Global Internet Community - IF it bands together
(3) The Global Internet Community
(4) RIAA
(5) The Global Internet Community
(6) RIAA
(7) RIAA

Therefore - at the moment we have a slight advantage. In the last week, that advantage started to grow.

Last week my colleague, Chris Gilbey stated that US Corporations were currently in survival mode. “Telcos and Content Companies are going to be squaring off to try to monetise the consumer in any way that they can.”
This week some extraordinary comments started emanating from some of the biggies.
AT&T"We are not under any circumstances going to suspend or terminate any customer's service as a result of a third-party allegation unless they have a court order," Mr. Cicconi said. "The copyright owner has legal rights, and we are not going to be the agent to enforce their rights."
Comcast:"Comcast, like other major ISPs, forwards notices of alleged infringement that we receive from music, movie, videogame, and other content owners to our customers. This is the same processwe've had in place for years - nothing has changed. While we have always supported copyright holders in their efforts to reduce piracy under the Digital Millennium Copyright Act (DMCA), and continue to do 50, we have no plans to test a 50-called 'three-strikes-and-you're-out' policy."

It would appear that survival is becoming more important than Corporate comradeship.
Governments are also starting to see where the tide is swelling and siding with the voters (filesharers).New Zealand Prime Minister John Key said last Monday:
“We have now asked the minister of commerce to start work on a replacement section [for 92A]… There is a need for legislation in this area. Some progress was made between copyright holders and the ISPs but not enough to agree a code of conduct… In our view there are a number of issues that made it difficult to complete that code of conduct without fixing the fundamental flaws in section 92a.”

And it would seem that even in the courts, the content industry is managing to upset the judges.According to this story recently on P2PNet, the RIAA lawyers basically snubbed Juctice Nancy Gertner and told her to Stick her Decision…... ( a request for additional detail on a motion that the RIAA didn’t want to respond too).

The History of Censorship in Australia.
Many in Australia consider the Governments Internet Filter a methodology of returning Australia to the days of old when Censorship was the norm.
From the 1930 Australian National Yearbook page 760 under the heading........
CHAPTER XXVI.—MISCELLANEOUS.§ 11. Film Censorship.
1. Legislation. The censorship of imported films derives its authority from section 52 (g) of the Customs Act, which is the section giving authority to prohibit the importation of goods. Under this section proclamations have been issued prohibiting the importation of films and relative advertising matter except under certain conditions and with the consent of the Minister. The conditions governing importation are contained in regulations issued under the Customs Act and provide, inter alia, that no film shall be registered which in the opinion of the censor is,(a) blasphemous, indecent or obscene; (b) likely to be injurious to morality, or to encourage or incite to crime;(c) likely to be offensive to the people of any friendly nation; (d) likely to be offensive to the people of the British Empire; or (e) depicts any matter the exhibition of which is undesirable in the public interests.

Therefore the Governments desire to be able to filter P2P content is demonstrably based on the historical methodology of prudent governance of a Nation.However, there appears to be some objection to this being able to occur.

With the Population making anonymous Manifesto threats – there is no doubt, some would say, the world is most definitely at war.
With Corporations and Governments siding with the people does the content industry have a chance?
The financial and voter reality is – probably not.

When Rolls-Royce sells a car, they want the user to have the highest level experience.
For this reason, no matter how old a Rolls Royce is, if it breaks down – the  owner can count on Rolls to turn up to get the car off the side of the road. After all, that’s the Rolls Royce reputation being sullied.
But then Rolls Royce has an industry advantage. Each one of their handcrafted machines have been designed to last – for a long time and most owners reward this quality with careful maintenance and TLC.

For those of us that use the same TLC with our DVD’s and CD’s, we own a product that will most probably outlive us.
An acetate polymer disc will take approximatley 189 years to breakdown to its original constituent particles.  Unlike VHS tapes which suffer from wear and tear and magnetic particle adhesion failure and film breakdown within 15-20 years.

So there is the underlying problem.

Records – wore out.
Reel to reel tapes wore out
Eight track cartridges wore out
Cassette tapes wore out
VHS tapes wore out
Even Ipods wear out (10,000 or 15,000 hours live per SSD disk or Hard disk).

But CD’s and DVD’s? Provided they are handled without fingerprints all over the medium (acid, salt, and other chemical residues)  and kept in their cases (dust and airborne contaminants free environment) – they should last between 5 and 15 generations.

That’s the Problem.
Why would anyone hold onto a DVD that they and every family member had watched – at least three times in the last two years. (Especially if you've just been laid off and are looking around the apartment for items to Pawn.)
The numbers are starting to show that they don’t.
They sell them, via EBay, Cashconverters and garage sales.
Indications from EBay are that there is a solid aftermarket trade in used DVD’s. As high as 14000 titles per month and from Cashconverters, that 33% of all items (Australia wide, an estimated 150,000 titles per month) that walk out of their sales franchises are secondhand DVD’s. (Thats nearly two million titles per annum - just from Ebay and Cash Converters). 
“This is however a relatively new segment of our business,” according to a Cashconverters spokesperson. "We only started to notice the growth in about October last year".

This then adds a whole new dimension to the Industry sales figures.

Normal Movie Sales consist of :
Cinema Release, DVD Release,  Airline and Cable Release, Free to Air Network Release.
Each release spaced at approximate three month intervals to ensure maximum market penetration for each product.

With a few exceptions e.g.: The Star wars Trilogy and digital remasters, movies are then forgotten about and relegated to back catalogues to be written off as non-movers – and then impossible to obtain except through P2P or the evolving secondary CD/DVD market..

The problem is – the content industry doesn’t currently have the foresight of its forefathers;  here I refer to the purchase of the GTV9 Australian Television Broadcasting license by Hoyt’s, Greater Union Theatres, J.C. Williamson’s Theatres, 3XY, 3UZ, 3KZ and Cinesound Productions in 1957.


It doesn’t own shares in what appears to be the two fastest growing segments of the content industry – Used CD and DVD content and P2P content.

And the indications are that both have a longer lifespan than all the previous Medias.

The proposed amendment to New Zealand's copyright laws that was to come in place originally several weeks ago have been put on hold. The amendment, entitled Section 92A, dealt specifically with the impact of new technologies.

The Prime Minister of New Zealand has apparently asked the Justice Minister to rewrite the amendment from the ground up. There is no precise time frame for this that has been announced.

What the content industry wanted was for Section 92A to give them the ability to make the ISP's the responsible party, and therefore the proxy taxman, in the fight by content companies to monetize content in the wild west world of the Internet.

By positioning themselves in this way, the content industry, unfortunately took a tactical approach to their rhetoric, leading to the consumers becoming aware and concerned about their position in the ecosystem (quite reasonably).

Clearly the ISP's don't want to be a taxman. Any increase in price point makes them less competitive. And the consumer finds it hard to discern how a monthly connection fee is distributed. So the ISP's were easily able to focus and build the community into a well focused and irate group, rather than a mob.

If the content industry wants a win on the board somewhere in the world - they are going to have to first start to think strategically. And then they are going to have to figure out how to get on the right side of the argument with the consumer.

When the content industry bleats that consumers are ripping off artists, and then rewards top executives with literally tens of millions in bonuses while crying that the industry is rooted, they just look like the bankers who are getting bonuses in spite of driving their companies (and the global financial system) into the ground.

First we need a little bit of humility from the content industry. Then we need to see a real flow through of funds raised through these endeavours going to developing new creative talent. Perhaps that could be through the endowment of a number of chairs relating to content at universities? Perhaps the music industry could fund its own social networking site for unsigned artists...? Perhaps the movie industry could provide scholarships at the Film and Television School? A few moves in the right direction to help people discover their own talent would be a pretty good start....

I know that APRA does this to a certain extent, but the record business in Australia does nothing to help talent get started. I suspect that NZ is no different.

Time to wake up and smell the coffee.

Yesterday, I presented a lecture to a first year class of media students. The topic was “The Future Of Content Distribution”.

I asked for a show of hands at the beginning to find out what proportion of the room (about 250 students) had downloaded music for free at sometime. About 85% of the room raised their hands.

Just prior to the lecture beginning there was an announcement on the do’s and dont's of copyright in the use of images in course work with the need for attribution being paramount.

Toward the end of the lecture I was talking about movie and TV program downloads.

Show of hands again – only one person had downloaded a TV program.

Almost all had downloaded movies.

I explained that all downloading was probably illegal, regardless of arguments about the morality of the action.

A further show of hands to establish how many would no longer download material - one hand went up.

This is the culture shift that has taken place. It is irreversible.

The only way that the content and media industries can work with this is to get on the "right" side of the tide. You can't surf against the wave, only with the force of the wave. P2P is an unstoppable wave.

More interesting is to get a sense of how the students think about the elements that make up demand for content, and how they understand the changes in the ecosystem. So at the end of the presentation I spent quite a lot of time with the class asking them what questions they wanted to raise about the topic.

One of the most insightful questions was asked by a student who clearly knew his way around torrents.

He asked what I thought the cultural impact might be from the fact that the way that P2P works the more popular a piece of content, the more efficient the network functions to deliver the part files. With art house movies, there is limited exposure in the cinema, limited demand from consumers, and therefore the distribution of the movie is very slow – sufficiently slow as to make it too frustrating for the downloader to continue an engagement to download. So again to the question: “What is the cultural impact over time of access to blockbuster entertainment (i.e. from Hollywood) and non-access to rarer kinds of movies (i.e. foreign films, small budget local movies etc).

I think this is a very interesting question and one that needs to be examined over time to get a read on its impact.

My sense is that this also has economic consequences that need to be examined.

The content industry has been promoting the meme that piracy is killing their business and that it should be stamped out.

Our belief, based on revisiting all the available data, is that P2P acts as a promoter of the brands that are most active in the P2P networks, regardless of the revenue leakage that takes place. This equates to more word of mouth which leads to more ticket sales, more DVD sales of the blockbuster. In other words P2P may quite possibly disadvantage small budget movies by making them rarer.

On the other hand maybe the scarcity increases their value.
In terms of cultural impact, we have undertaken a fair bit of research into the Chinese marketplace. Because of the clear language differences, the scarcity of volume production of Chinese movies, the small number of theatres, and the relatively high price of tickets, it is not surprising that a huge amount of western movie P2P download activity takes place in China. What is interesting is what the cultural impact of western movies will be on the Chinese population.

This will only be seen over time, perhaps over a generation or more.

A few weeks ago, I wrote about the benefits of Peer to Peer  Ecommerce  using Ebay as my model. It appears that the numbers are proving me correct.

I said…..
1.         Consumers don’t trust big business.
2.         Consumers trust other consumers.
2.         Social Networking (P2P) sells more products faster.

The economic Downturn doesn’t appear to be affecting online commerce numbers.
A look at Global visitors per minute to E-Commerce sites shows that approximately 3,168,000,000 requests were made for e-commerce web pages in the last 24 hours.

That’s 2.1 requests per day from every DSL user on the planet.

Global 24 hour Snapshot – 24th March 2009

Source Akemai

And this trend appears to have increased slightly during Oct/Nov to its current leveled off position showing that even if traditional bricks and mortar establishments are feeling the pinch - on the Internet – people are still interested in at least Window Shopping.

Global Five Month Snapshot – 24th October 2008 - 24th March 2009

Source Akemai


Comparing the peak visitors over the last 24 hours amongst the five continents shows Europeans are the most avid online shoppers followed by North Americans and then Asians.

Europe	3,288,141
North America	2,323,876
Asia (Pacific)	323,296
Australia	221,054
South America	90,964
Africa	17,147

If more Internet users are spending Euros than US Dollars, I’m afraid the US balance of Payments might be out of whack for a little longer. But for the rest of the world – the news is extremely good.

Is this the beginning of the Worlds Consumers talking the needed recovery action into their own hands ?

There seems to be a sense in some people that the GFC is happening somewhat remotely and only affects the way that funds can be raised to run businesses, or affects consumers' interest in spending money...

The GFC is not what is at the heart of the matter. It is the manifestation of the illness, that became visible through the symptoms of increased temperature of the housing market among other things.

The real root cause of the GFC is digitization. The ability to convert information into zeros and ones made it easy to move around the planet using, of course, digital telecommunications technologies. It also made it incredibly inexpensive.

The lowering of the barriers to entry to acquiring technology was like the invention of the printing press by Gutenberg. It enabled knowledge to flow to those who wanted it, to use in whatever way they chose.

And just as business has used information technology to strip costs out of manufacturing and maintenance of inventory etc, so too is the public using digital technology to strip costs out of content, among other things.

The way that the public is doing that is probably illegal in many cases. Whether that should be the case or not is not the issue. The problem that arises is that it is very hard, as the content industry has found out, to sue all your customers.

So the problem that arises is one of business models.

The content industry wants to stop revenue leakage from online distribution. They have several choices:

1. Sue everyone (too expensive and may cause unfortunate precedents where judge's side with plaintiffs)
2. Tax ISP's (the enterprises that facilitate the distribution of the content)
3. Tax digital memory devices (problem here is that the content industry doesn't want to be seen to have implicitly legalized the copying and storage of content)
4. Introduce "paid for" business models such as the "all you can eat" ones that are being used in the UK.

The problem with number 2 is that the content industry is trying to introduce the taxing concept one sector at a time. So at the present it is the music business that is trying to get a payment system in place. ISP's see this as the thin end of the wedge, where if the idea becomes a precedent and a music levy is introduced, next there will be a movie levy, a games levy, etc. And that could increase the costs to consumers by an order of magnitude that would cause consumers to cut back on Internet usage, thus shrinking the market.

One of the key problems in the whole modelling that is being done is that music companies, such as publishers and record companies, are fighting to ensure that the payments that they receive are not reduced on a per unit basis.

Historically, publishers have always been the poor cousins in the music industry. They stand at the end of the line with their begging bowls, and get paid by the record company and receive pennies while the record company gets dollars. With the advent of digital distribution record companies were able to successfully argue that music publishers should get the same quantum of a digital download as they did from a physical record sale, even though, in reality, there was no manufacturing, inventory or other cost component for the record company such as those normally associated with a manufacturing business.

In retrospect that push back has probably been extremely damaging for the record companies - and because of the precedent, for other content owners.

The push back is in essence all about the protection of a "per unit" revenue model.

That "per unit" model was developed in a different age and a different modality. Manufacturing physical goods is all about scarcity. Digital distribution - particularly in an age where P2P is a reality, fortunate or not - is about ubiquity.

In an environment of ubiquity, what needs to happen is for the marginal unit cost to reduce to a sufficiently low number so that all people in the business ecosystem become agreeable to owning content that they very probably will never consume. That way ubiquity can rule rather than demand.

In such a system where all content is present on all available hard drives, people will choose to consume locally whatever they want, and will enable to continuing ubiquity to rule.

But to do this means that the record companies need to be prepared to drop the quantum of revenue that they require down to the same level as the publishers receive now. That would reduce the cost per unit of acquisition to about 15% of what the current sale price is. (Still too high in my opinion, but a step in the right direction). That would encourage more people to be prepared to pay for legitimate acquisition of content, or put another way, to purchase an insurance policy against being sued). 

This is essential for the content industry to adopt if it wants to survive, just as it is essential for other industries which benefit from the potential to make their products more ubiquitous need to reduce their expectations of margins in order to make consumption legal and enticing rather than illegal and exciting.

Back on Nov 6th last year I predicted that Obama would make a big comittment to funding electric vehicles. Well, yesterday he announced that he was committing $2.6 Billion to help develop the next generation of plug in and hybrid vehicles. I thought he would spend more than the 2.6 B but there you go... In the mean time he has had to spend close to a Trillion on a wunch of bankers..... all of whom had to get paid their bonuses.

In the mean time will our predictions for P2P come true?

Every day that goes by sees us moving to a more interesting P2P environment. In a scenario such as the one that we are moving to right now - where there is depression in the US (that is right I am using the "D" word, not the "R" word) it is going to get very ugly in the corporate sector. When competition between industry sectors is for survival rather than just profitability, you can expect businesses to get down and get dirty in terms of their tactics.

Telcos and Content Companies are going to be squaring off to try to monetise the consumer in any way that they can.

The one thing that the content companies have going for them in this game is that they are the kings of propaganda. No one does it better than the movie studios.....

Having said that, my prediction is that within 18 months so much content will be shared in P2P networks that it will be impossible to stop. (as if that isnt the case already!)

In December last year, I predicted to a leading copyright body that by April 2009, 30% of P2P would be invisible.
It’s about to get a whole lot worse.

The latest IETF Draft to hit the streets details P2P caching as a primary function of edge cache servers similar to Akamai.

Some of us have known about this for sometime – but not talked about it because what the black hats don’t know confuses them.

If all ISP’s follow this model and now install edge caches for P2P traffic, both the end user and the ISP benefit from the localization of popular file traffic.

This will result in companies like Media Defender et al beginning to get extremely lowered P2P connections to their honeypot fake file distributors and noise makers and show up on statistics as negative growth for P2P.

If ISP’s or CSP’s implement the concept.

If for example, Telstra were to implement this RFC, transparently, approximately
53% of Australian traffic would disappear from the international links.
Replicated by all ISP’s, would produce an increase in customer satisfaction in the order of 25-35% (caching expectation being 32%) and an effective decrease in P2P bandwidth utilisation costs of between 5-53%.

I can see that edge caching, here-to-fore a tool only for Internet 2 will rapidly be come a valuable add-in tool for all ISP’s and the new bane of the Content Industry.