After paralyzing Napster with litigation, the music industry managed to chill out other commercial attempts at unfettered file-swapping. And while a score of companies have come forth with models for P2P systems that respect copyright, none has emerged as a winner.


Analysts Say P2P Info Can Aid Industry Bottom Line—Offline Check-Writers Aren’t So Sure

Napster’s most recent legal trouncing (hitsdailydouble.com, 7/11) could mean the end of its weary, painful saga. But the story of online file sharing as a factor in the new music economy may just be beginning.

With a slew of new peer-to-peer services making the rounds online—most of them not affiliated with a money-making concern and therefore (for now, at least) immune from litigation—can the music industry find a way to profit from underground file-swapping?

That’s the question on the minds of many digital-music experts and observers, especially given the arrival of Gnucleus, a user-friendly new application that utilizes the decentralized Gnutella network. Like Lime Wire, BearShare and scores of other freeware apps, Gnucleus allows users to trade files anonymously. And, without a profit-seeking company to hang the blame on, content holders have few options to halt the flow.

Indeed, a story in online mag SF Gate touting Gnucleus declares "The record industry has met its match." Gosh, that sounds so familiar—didn’t we see the head of the last guy who said that mounted on the wall of the RIAA game room?

Meanwhile, a recent Webnoize report says that P2P upstart Fasttrack, which reportedly accommodates vast increases in users without the reductions in efficiency experienced on most Gnutella-based applications (in geekspeak, it’s highly "scalable"), could match Napster’s popularity very soon.

After paralyzing Napster with litigation, the music industry (and, in the case of multimedia sharing apps, the film industry, too) managed to chill out other commercial attempts at unfettered file-swapping. And while a score of companies have come forth with models for P2P systems that respect copyright, none has emerged as a winner.

Many in the biz assume that Napster’s capitulation signaled the end of file-sharing on a mass scale, and that a smaller, tech-savvy fringe makes up the bulk of users of other programs.

Not so, argues Eric Garland of BigChampagne, a company specializing in analyzing traffic on file-sharing networks for marketing purposes. "The dirty little secret is that the population is undiminished—only the name has changed," Garland insists. "People got on a search engine and found the next thing."

However, Garland adds, "The perception that the Napster problem is gone has eroded. This thing is as vibrant as ever."

For Garland, the constant, high-volume activity over P2P systems provides a unique opportunity to scrutinize and predict consumer behavior with dazzling accuracy and at little expense: "How could starting to get inside the head of the consumer not have an upside?"

Industry receptiveness to such a message has been mixed. "Mining P2P exchanges can yield fascinating statistics with respect to favorite tracks, which could be useful for picking second singles—or for affinity artists, which provide good info for touring, marketing and assessing overall popularity," concedes DreamWorks New Media maven Jed Simon. "However, the harm of P2P use as a method for consuming music rather than sampling clearly overshadows any data-mining benefit."

Garland takes issue with the idea that file trading has simply replaced retail for these users. "People are still very attached to buying CDs," he insists. But more to the point, he asserts, the value of knowing what files are exchanged over what period of time—and who swaps them—can’t be overstated. "It’s a pretty pure statement of demand among a community of tens of millions," Garland points out. "You can track, over time, content being shared, content being searched and how that changes during a designated period. You can track everything through two lenses: the arc of inquiry on a given artist or title—when it’s peaking, how steep is the curve—and actual shared files."

Users can be analyzed by market, or by what additional files are in their share folders. Such data, Garland adds, can be combined with other info to paint a more detailed picture: "The value of the data for marketing that reflects pure demand—in terms of savings—is huge. There’s a tremendous upside in knowing when you have a winner, but an even greater upside in knowing when you don’t."

Despite such arguments, the industry has been squeamish about wading into this particular data stream. This may be as much about emotion and loyalty as profit; rights-holders’ fear and hatred of P2P as an unambiguous threat to the their livelihoods often makes it hard to sell the idea that file-swapping should be analyzed for marketing purposes.

But not all content owners feel threatened by file-sharing, as evidenced by the number of independent labels and artists eager to promote their work by injecting it into P2P systems.

And despite the bruising events of the last year, many players in the digital arena believe file-sharing remains the most viable model for online music distribution. "Now that Napster has burned through $60 million turning itself into something that no one wants, at least a dozen other P2P networking products are filling the void, transferring as many (if not more) files as Napster did in its heyday," says former Napster Director of Marketing Mark Hughes. "The record industry must realize that the future is in providing P2P, access-based and watermarked content—not content that is streamed and offered on a per-transaction or per-download basis. Only this way will the artist be empowered to profit every time their music is played."


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