Pirates Firmly In Control Of Digital Web Waters - Forrester 09/19/00
CAMBRIDGE, MASSACHUSETTS, U.S.A., 2000 SEP 19 (Newsbytes) -- By Kevin Featherly, Newsbytes. Digital music pirates resemble nothing so much as cockroaches in nuclear winter - they simply will not die.
That, at least, is the message of a new Forrester Research [NASDAQ:FORR] report by entertainment analyst Eric Scheirer, who maintains that neither digital rights management watermarking technology, nor the threat of lawsuits will be enough to dissuade digital content hijackers from pushing the industry to the brink of collapse.
It's a situation affecting not only the music business, but also book publishers, the report indicates, though movie studios and game manufacturers have less to fear and more time to build bulwarks against the e-piracy onslaught.
The pain felt by music labels and book publishers will be enormous, however; labels will lose $3.1 billion by 2005 and publishers $1.4 billion, as consumers embrace piracy and artists go independent, the report states.
"Consumers will continue to embrace peer-to-peer file sharing in lieu of legitimate, useful services," Scheirer writes in his report, "Content Out of Control." Adding to the industries' pain, he writes, "Bands and authors will break away from big companies to produce and distribute their content independently. This combination will be devastating."
All this will happen at the same time music artists and authors - and the service companies that help them get to market online - begin reaping the rewards of Internet sales. Scheirer indicates that musicians and authors collectively will gain more than $2 billion in income, while content-service providers become a $3.3 billion industry in a new, streamlined marketplace that offers subscriptions, paid and pay-per-listen downloads, advertising and merchandising opportunities - all without the participation of long-established companies.
"(It) isn't just about Napster and piracy," Scheirer said in a brief interview with Newsbytes late this morning. "(It's) also about the prospect of artists feeling unserved ... and going independent to pursue their own interests online."
Scheirer's report is based in part on interviews with 50 executives from companies producing music, movies, books, videogames and pay cable offerings. The talks were intended to determine how companies plan to use digital rights management (DRM) in their online initiatives.
From those, Scheirer writes, he learned that almost three-quarters of the companies interviewed are pursuing digital delivery aggressively. They project digital sales growth to 20 percent of their overall revenues by 2003, and believe that moving onto the Internet will prepare them for new consumer demands for flexible delivery of content.
But even as the companies embrace the Internet, they are frightened by it, namely because of services like Napster - the notorious peer-to-peer file-sharing service that allows users to upload, share and download relatively high-quality MP3 files of just about any music a consumer might want - without paying for it. Such worries are affecting business' better judgment, the report suggests.
"Napster's file-sharing service terrifies content owners," Scheirer writes. "The specter of mass copyright infringement clouds their plans for a careful, deliberate rollout of digital services. Content companies in all sectors worry about 'Napsterization' - if not now, then soon."
Hoping to protect their long-held turf, music and book-publishing companies are pinning their hopes on two strategic fronts, the report says.
First, they are awaiting the emergence of dependable watermarking technology. But no watermarking standard has yet emerged. "The record labels and book publishers especially view the digital rights management as central to their success going forward, and they're predicating a lot of their business models around that," Scheirer said. "That strategy is not going to work."
Failing that, the industries' second hope is to rely on lawsuits and congressional action. However, lawsuits against 16-year-old music downloaders are likely to result in venomous public backlash, and will not be worth the cost, Scheirer suggests. And some politicians like Utah's Republican Sen. Orrin Hatch, perhaps sensing their constituents are themselves Napster users with votes to withdraw, have signaled that copyright remedies the music industry seeks from lawmakers may not be forthcoming.
Movie- and game-makers need not worry as much, because their sectors in the entertainment business are not yet subject to the do-it-yourself ethic that the music and the publishing industry is exposed to. It is still technologically harder, Scheirer writes, for anyone to be a moviemaker or video game producer than it is to be an independent musician or author. Also, their products tend to be bigger, more time-consuming downloads for consumers. And in any case, their products are used differently than are the products produced by, for instance, music labels.
"The consumers want to use Napster to make flexible use of content; to build their collections, make mix tapes and things," Scheirer told Newsbytes. "And there's not a similar kind of demand for movies (or games)." The same thing will be true for publishers when digital book piracy services - Scheirer labels them "Bookster" - come down the pike.
The answer for beseiged music and book publishers is to change the entire focus of their businesses, Scheirer said. They need to stop thinking of themselves as manufacturers whose prime chore is to shift physical products, and to begin thinking of themselves as service providers.
"They need to be offering services to artists as partners in the Internet distribution, rather than thinking that they can only help with artists that they control," the analyst said.
The issue of control is pivotal to the report's theme. In short, for music publishers, control is a dead issue, the analyst said, while for book publishers it will be, and soon.
"Control is collapsing," Scheirer said. "That's already happened for music and it will be happening for books. ... What they need to realize is that they are fundamentally in the service business and not in the manufacturing business and start to run themselves as though they're service companies."
He concluded, "That's not to say it's going to be an easy transition to make, but it's a transition that's going to be necessary if they're going to survive with the same importance in the world of music and the world of publishing as they have now."
Forrester Research is on the Web at forrester.com
Reported by Newsbytes.com, newsbytes.com
12:59 CST Reposted 13:00 CST c2000 copyright Post-Newsweek Business Information, Inc. |
