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.

[franksands]

I have. I live in Sao Paulo, Brazil. We have dozens of "physical pirates", and I think they are doing pretty well, considering they are open for years. And I'm not talking about Mr. Tony with the CDs on the side walk, I'm talking about whole BUILDINGS with pirate stores, that sells movies and games as they are launched in the US, and sometimes sooner. Ask anyone who lives in Sao Paulo and they will tell you the same thing.

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.

when

[mastershake_phd]

When will people learn that piracy takes money from the pockets of hard working people like Tony?

Re:when

[elronxenu]

Next up ... legitimate pirates (like Tony) join forces with the MPAA and RIAA to battle the scourge of P2P.

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: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.

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!

I would have RTFA...

[lhpineapple]

but I downloaded the audio book instead.

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

[Timesprout]

Exactly. I advocated Linux during the early years and my Karma soared. Now I am in a position to say that Vista is good with out caring what the mods think.

Mod parent up

[Kadin2048]

I have no idea why this is modded 'Redundant.'

The situation outlined in TFA is interesting precisely because it runs contrary to what you might expect, namely that people would be too lazy to actually download multi-GB files themselves. 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'm not sure what the lesson is here. There's a big question in my mind whether lessons from the 'grey (or black) market' can be taken as indicative of movements in the regular 'white market' -- online distribution probably is a lot more attractive to the kind of low-rent geeks who are buying hot software at flea markets than to very busy middle-classers with little time to spare or technical expertise.

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

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:Allofmp3 is almost in a league of its own.

[cp.tar]

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.

I'm not certain where you live, though based on your attitude I will surmise you live somewhere in the developed world.

There are places in the world where the price of software is quite disproportionate - for instance, here in Croatia Photoshop costs about two or three monthly salaries IIRC. And even in the richer parts of the world, there is quite a lot of software which costs a great deal of money, and is still relatively easy to find in the gray/black market.

If the price of the software runs up to several hundreds or even thousands of dollars, and the probability of you getting caught is slim, buying from a pirate is putting a rather high value on your time - it doesn't take more than a few hours, and the savings are vast.

But then, what do I know... from where I stand, capitalism seems to be based on the principle of getting something for nothing as much and as often as you can.

Law suit

[stud9920]

So, when is the PIAA (Pirate Industry Association of America) going to sue p2p networks ?

Way to kick a guy when he's down

[giafly]

Even pirates have some standards.

Re:Don't Be A Tony?

[Blue Stone]

>"Yes, you pirates. You need to find another way to make money by leeching off the honest work of others."

Set up a record company??