P2P File Sharing Ruining Physical Piracy Business

TorrentFreak has a short post up talking with a former physical data pirate, who sold his wares in flea markets and made buckets of money in the 90s. By the end of the last decade, his money flow had dried up, and he places the blame squarely on the shoulders of P2P file sharing. "Tony is very clear about why his rags to riches story has gone back to rags again. 'File-sharing, P2P - call it what you like. When you asked a customer why he wasn't buying anything, 9 times out of 10 it was BitTorrent this, LimeWire that ...' P2P is a very powerful machine and although Tony could see that his operation was feeling its effects, he admits that he sat back and did nothing about it and consequently, his business has paid the ultimate price. Other industries affected by P2P should take note: Don't be a Tony. Overhaul your business model. Quickly." One would imagine overseas media sellers will have similar issues, as P2P networks become more common outside of the Western world.

Comments

Nonsense.

[Whiney Mac Fanboy]

Utter nonsense - not everyone has the time & patience to download 1 gig files, then the knowledge to convert them to stanard DVD format so you don't have to watch on your PC. Tony should have taken advantage of this gap.

One would imagine overseas media sellers will have similar issues, as P2P networks become more common outside of the Western world.

No, one wouldn't imagine that. You any idea how (relatively) expensive bandwidth is in much of the third world? Much cheaper for one pirate (yarrr!) to download & sell copies to everyone (this is the way real free markets tend to work).

Re:Nonsense.

[rtb61]

Personally I think the most damage being done to 'for profits pirates' (versus happy to give away for free, pirates?, no, hoods as in robin) was by DVD bargain bins at supermarkets.

Pirates were charging $5 dollars a disk, pretty much the same price as a supermarket bargain bin, who would bother with the questionable illegitimate quality.

Yeah, I know you don't get the latest releases, but with the sheer volume of content available on DVD why bother with the latest releases, especially as most of the latest releases basically suck.

Re:Nonsense.

[Kadin2048]

Bingo. I think this is a big part of it. Physical piracy was a bigger industry back when DVDs were more expensive. Anyone remember when those things first came out? They were downright extortionate. When a legit copy ran $25 at Suncoast, a $5 pirate copy looked pretty attractive. But when you can get a wide selection of movies at Walmart for under $10, there's not a whole lot of room for pirates.

Black markets thrive on high markups. When the whitemarket's profit margins collapse, the blackmarket gets squeezed out (well, not hardly -- they move on to other things where the markups are still high).

I suspect that DVD videos would be a tough sell in the First World (probably less so in other parts of the world, where the cost of a movie relative to other goods, like food, is much higher), however, higher-margin information products like expensive software (Photoshop, Logic, etc.) will still be widely pirated and counterfeited, in both electronic/P2P and physical forms.

Re:Nonsense.

[Kjella]

It's quite clear to me what happened: "Inside 30 minutes, 90% of the stock would be gone with some customers taking 2 or 3 cases each, presumably to sell on." They were being wholesale pirates, one step up from the peddling to end-users. Clearly as burners got reasonably priced the bottom fell out of that market, sure there's the guy buying a few discs for themselves but anyone with a CD burner (later DVD burner) could do their own side business. I know several of the first people that got CD burners used that to part finance it.

Oh and bandwidth in the third world is expensive, but there's more to "outside western world" than that. Try going to South Korea for Internet connection, and you'll be pleasantly surprised. Remember that much of the cost is digging up the countryside, and where there's cheap labor ditch diggers aren't expensive either. Some of the poorer skipped phone lines altogether and went directly for cell phones and satellite, when they dig up it's either modern cable designed for Internet service or fiber going in there.

Re:Nonsense.

[Constantine XVI]

I sort of miss the old days, the bootleg vendors were quite knowledgable about their goods and would discuss the pros and cons of Excel vs Lotus, for instance. These days the front men just collect money and have no idea what they're selling.</p></quote>

I remember when the legit vendors used to do that too. Maybe it's not just the people?

sell drugs instead

[Anonymous Coward]

Tony, start selling cannabis, you'll make heaps more money.

until we finally get it legalized, then you'll have to find some other criminalized act to profit off.

Re:sell drugs instead

[Timesprout]

Tut tut. Bad advise. We all know its smarter to start importing cigarettes and booze into many european countries where govt tax has seriously impacted consumer pricing, opening a huge profit potential. The main benefit is you just just get a smack on the wrist if you get caught as opposed to life for drug trafficing.

I think there is another morale to this story

[rolfwind]

This guy was clearing almost $2,000 a week at the peak for a couple years, now he has to get a job. He said he enjoyed fast cars and a nice house - where does the money always go? Why can't people be satisfied with a nice new but still economical honda or something when they make it big? Why always blow it out on frivolous shit?

This is the old tale of the ant and the grasshopper. Tony still could be living well today if he actually squirreled away some of it. I wonder how many people in the late 90's early 00's tech boom were blowing money the same way that have very little to show for it now.

Re:I think there is another morale to this story

[Anonymous Coward]

And just like ammunition, you want to fire in short bursts. You don't want to hold the trigger down and waste it all. Spend your ammo when it counts.

Re:I think there is another morale to this story

[geminidomino]

That's funny. I always thought the purpose of money was to make yourself capable of living, maybe even happy and comfortable. Fuck the socialites. I'd rather spend my money on my rig, motorcycle, geeky toys, and other things that help me enjoy life, even if the frisbee-deep sky-nosed douchebags can't see it (ok, they can see the motorcycle, but even that one I didn't get a HD to save money).

Re:when

[DigitAl56K]

To quote myself from another site on the same topic:

Maybe nobody feels bad for Tony, but think about what will eventually happen to the genuine distributors and consequently developers. If Tony couldn't even sell pirate software any more then how will anyone sell software?

Sure, there is that old argument, "the people buying from Tony probably wouldn't have bought it retail anyway". But stop and think about what's happened here: He had a big house, fast cars, expensive holidays, rented a warehouse, employed several people - that's all money that the real developers never saw a penny of. And you have to wonder - we live in a world where the younger generation (of which I count myself part) just tends to pirate everything. It has become the common culture. Apparently these days the majority of people under 30 "wouldn't have bought it anyway" all of the time - yet look at the masses of stuff they have pirated over time.

First Tony will go out of business, followed by the software houses we know and love, if it hasn't happened already. The article ends "Overhaul your business model. Quickly.". This assumes that there will still be enough people around who will be willing to pay at all. I know many people who go out of their way to pay for nothing - be it software, music, or movies.

Basically, if you're writing commercial software, you better have an online service or technology licensing program attached to it to make decent profits.

Re:$5 for a hard copy current movie= good model

[Technician]

In Russia, Ukraine etc. you can get a DVD in a plastic sleeve with a color photo of current release movie or software for about US$5.

Now if the legal copies were about this price, that market would not exist. $20 for a copy of Open Season? What are they thinking. It's high prices that cause a piracy market to exist.

Bunch-O-Crap

[DumbSwede]

What a bunch of crap. Having been to China where piracy is a big time moneymaker they know how to do it right. High quality product in attractive packaging with a rock bottom price. Why would I download a DivX compressed file when I can get the original mpg for 50 cents to a dollar?

P2P only makes sense when there isn't an affordable convenient alternative. Tony just priced himself out of business evidently. It's all about volume and price point. If Tony had focused on improving his productivity so he could lower his sale price he'd probably still be in business. Even in the black market you have to continue to innovate.

Tony got in when he thought he could make money easy, he wasn't bothered by the ethics of his choices. I have no trouble believing he'd be too lazy to work harder and charge less to give the same product. Even so I am highly disinclined to believe this story at face value. There may be a high volume of Slashdotters out there doing P2P for video, but Joe-6-pack is just barely able to share mp3s and spends a lot on DRM products. Joe would easily plunk down two dollars for a bootleg DVD if Tony where selling them.

No different than America

[WindBourne]

Tony is simply the punk on the street. There are LOADS of pirate who work out of regular businesses selling Windows based software, DVDs, and CDs. Funny thing is, that if the RIAA and MIAA were smart, they would allow the net the gut to the brick based businesses FIRST, and then go after just the net. But alas

Re:No different than America

[Seumas]

And remember, according to all the do-gooders, little johnny downloading a $1,200 copy of Photoshop via bit torrent so he can play with photos on his blog is just as evil and bad and harmful to corporations as the middle aged guy manufacturing and distributing tens of thousands of copies of the $1,200 application for a hundred bucks a piece. Or whatever.

Allofmp3 is almost in a league of its own.

[Kadin2048]

This is a valid point. Although, allofmp3.com is in a fairly unique situation -- they offer not an inferior product to legitimate versions, but an actually superior one, at a better price, with an interface that's arguably as easy if not easier to use, than most legitimate services. The black/grey market rarely has the white beat on so many fronts at once. Usually, in order to get the cheap price, you need to compromise on quality or convenience (need to go to sketchy part of town / flea market, etc.), so that it's only a certain segment of consumers (usually, those who place a low value on their time) who get the pirated version. But allofmp3.com has the legitimate outlets so thoroughly beaten -- or rather, the legitimate outlets suck just that damn badly, and cost so much -- that it can draw consumers from all across demographics, and not just the downmarket (cheap) segment.

Re:when

[DigitAl56K]

Okay, but think about the consequence of this behavior - you're consuming several forms of entertainment yet financing only one industry.

The same problem exists even if one parent company funds branches in two or more industries - nobody wants to finance a loss. The same problem even exists if you download software and pay for only what you consider the best of it, because this means that you will tend to fund only the biggest players, and startups won't have as much of a chance to break through. If we're really being honest, many people who claim they pirate to "try" software are full of it - ever hear of a demo? Demo's are a section of the game or an otherwise limited version that the distributors actually want you to try out legally, and base your purchase decision upon.

Now, believe me when I tell you that in my opinion the MPAA and RIAA are full of crap in most statements they make regarding piracy statistics. But based on the attitudes of many people I know in real life I actually believe we may end up in a situation where the populace is simply taxed at some flat rate for piracy, beyond what we have already seen for blank media in certain countries, simply because there will come a breaking point where the practice of piracy is so widespread that we'll face at least a partial collapse of certain industries. I already believe that if you ask most people about piracy today you'll simply be told that "everybody does it".

I do make an effort to pay for the software, music and movies I use. In the sense that many people I know simply download the same products you could say this makes me foolish, "wasting my money". On the other hand, when I put myself in the position of the developers, artists, and producers, I look at a real problem they're facing, no matter how inflated it may be in the industry stats presented to us by the media.

My main gripe, however, remains with the freeloaders - people who seem to see no value in any of the products they consume, or who delude themselves into believing that by simply "making a copy" they aren't "stealing" anything. Okay, so piracy is not quite the same as theft, but developers, musicians, and so forth produce works that contribute to society and culture. In that sense freeloading is most equivalent to not paying your taxes - those people who do pay are essentially funding various works from which you benefit. At some point the burden that is shifted onto the shoulders of those who do pay will become too great.

Tony was not a pirate, just a leech.

[GuyFawkes]

I've been around this scene since the 5.25" floppy days, and there were always leechers who would sell you something, and true warez people who would give or trade you something.

Tony won't have been cracking anything, creating anything, "value added" anything, Tony is a leech.

It's easy, always was, beige box FTP server on a decent pipe and start couriering, what Tony was trading on was usenet and a stack of dupe burners, and don't forget to take other groups work and rebrand it with your own nfo file tone....

I applaud the fact that another leech has bitten the dust, and can no longer make an easy living selling the fruits of other people's works to noobs and lusers.

Re:Tony was not a pirate, just a leech.

[shudde]

I've been around this scene since the 5.25" floppy days ...

I'm really hoping that you're not still in the scene, most of us got over it before we were 20.

I applaud the fact that another leech has bitten the dust, and can no longer make an easy living selling the fruits of other people's works to noobs and lusers.

I'm going out on a limb here and presuming you're referring to the work of suppliers/crackers/couriers rather than the people who created the stuff. Warez scene != work. It was and is a game, race some other kid to up a release on a top 10 site for rankings and bragging rights.

It's not like the scene was ever as pure as people made it out to be. Plenty of the bigger groups were giving out carded hardware for suppliers or shell boxes.

Re:when

[Tom]

No, it's a story about a business model failing due to evolution taking over.

I don't buy many games anymore. Frankly, I'm sick and tired of being hyped up for a year by some paid-for ads-cloaked-as-previews and then sitting down to play the game for all of 2 or 3 hours before it starts to suck because it was launched early, is full of bugs and the gameplay was never quite finished.
It isn't worth the 50 or so uros they charge these days.

On the other hand, I have bought great games after playing the pirated copy halfway through. I've bought the entire DVD series of Hellsing after having seen them all in ripped-from-TV downloads. A few years ago, I watched most new movies in my home theatre courtesy of bittorrent, mostly because I enjoy original versions over (often) crappy localisations, and the originals launched 3-6 months earlier in the US than the localised versions showed here. Nowadays, with simultaneous worldwide launches, I find myself going to the cinema again quite often.

Quality still sells. Listening to market demands still sells. Crap doesn't sell as well anymore.

Re:when

[DigitAl56K]

Hey Tom,

I understand what you're saying - but you have to realize that this isn't about what you do, or what I do, it's about the behavior of the overall population. If you believe that the overall population tends to follow your habits, then that is one argument. If, on the other hand, there is a growing population of freeloaders, then that's another problem.

Although I'm essentially replying to you here, I make this point more globally because I see similar responses everywhere the topic of piracy is discussed, and I think that except in very few circumstances they mask the real issue.

P.S. "Crap doesn't sell as well anymore.", agreed!

Re:$5 for a hard copy current movie= good model

[startled]

Now if the legal copies were about this price, that market would not exist. $20 for a copy of Open Season? What are they thinking. It's high prices that cause a piracy market to exist.

Sure, but then you're competing with the margin on blank DVDs. Where the REAL inroads to piracy are to be made are the fact that people are buying movies at all.

If you REALLY want to fight piracy, just make a product that no one wants at any price. It's a desirable product that causes a piracy market to exist. Extra bonus: if you're trying to ensure nobody wants your product, think of all the money you'll save in marketing!

This just in

[deblau]

For the benefit of the RIAA and MPAA, here's a picture of your typical filesharer.

Haha...

[Vr6dub]

Everyone point and and laugh at the dork!!

You are soooo l33t

I applaud the fact that another leech has bitten the dust, and can no longer make an easy living selling the fruits of other people's works to noobs and lusers.

I hope you see the hypocracy in your statement.

Re:Mod parent up

[hcdejong]

But the story shows that this indeed is the case; at least the people who are cheap enough to buy pirated software at flea markets put a low enough value on their time to download the stuff themselves in order to avoid even the minimal cost of pirated discs.

I, for one, don't avoid pirated discs because of the cost issue, but because it's less hassle and faster to download a movie [1] than to have to go out, find a physical pirate store (Hell, I wouldn't know where to find one) and buy the movie I want.

1: Sure, the actual downloading takes a few hours, but the only effort for me is a few minutes on thep(cough)ay.org or somesuch.

Elements

[tepples]

And remember, according to all the do-gooders, little johnny downloading a $1,200 copy of Photoshop via bit torrent so he can play with photos on his blog is just as evil and bad and harmful to corporations as the middle aged guy manufacturing and distributing tens of thousands of copies of the $1,200 application for a hundred bucks a piece. And due to the statutory damages rule, little johnny downloading a $100 copy of Photoshop Elements is just as bad as little johnny downloading a $1,200 copy of Photoshop full version. (Bring out the GIMP?)

Demos

[TFloore]

If we're really being honest, many people who claim they pirate to "try" software are full of it - ever hear of a demo? Demo's are a section of the game or an otherwise limited version that the distributors actually want you to try out legally, and base your purchase decision upon.

I have a problem with demos. You aren't really supporting what I'm complaining about, but I'm going to complain anyway.

My major problem with demos is that, by their very nature, they *require* a clean uninstall procedure. I have yet to see one that has one, though. Most least cruft lying around all over. Some through simple incompetence (which inspires such confidence in the full version...) and some on purpose. After all, for a timed demo, they have to leave something behind to say "you installed this once already, you can't uninstall/reinstall and reset your timer".

For software that is explicitly try-before-you-buy there has to be a clean way to choose not to buy, within the rules of the game.

This is a generic problem with a lot of Windows software, I admit, and not just with demos. But it is more obvious with demos, because you are supposed to try them out and them get rid of them after some (usually short) time period.

Now, admittedly, this doesn't make any sense for the "I'll pirate it instead" argument, because if you pirate it, you still have the program installed and its crap all over your drive. And the full version is unlikely to have a better uninstaller than the demo version. But it does make the demo option less tolerable.

Re:Mod parent up

[Matt Perry]

...people who are cheap enough to buy pirated software at flea markets put a low enough value on their time to download the stuff themselves in order to avoid even the minimal cost of pirated discs.

Could you clarify what you mean by this? P2P seems like it would take less time, and therefore be a better use of time, than going out to purchase a physical pirated copy. It's not as if the person has to pedle a bicycle to keep bittorrent or limewire running. They click a link and walk away until it's done. The computer is working, not the person.

Re:As a student

[harborpirate]

Congratulations! You write in such a random and confusing a manner as to make me certain you could become a novelist.

to Wit:

William Gibson, is that you?