Thursday, November 03, 2005

World Telemedia Magaine: Share and share alike?

Peer-to-peer content sharing is key to the entertainment mix, but as users share content they make themselves, how can telemedia players make any money from it?

Author: Stephen Griffiths, Breakthroo
Publication: World Telemedia Magazine
Date: October 2005

We’ve come a long way since Napster first brought peer-to-peer (P2P) in to common parlance, with the hiatus over illicit music sharing. Now we have a virtuous circle, of consumer P2P usage driving broadband adoption, which further drives P2P usage. And for broadband service providers, focused intently on customer acquisition, it is both fortuitous and convenient, as P2P is finally making the broadband buying decision tangible. And they therefore have no rationale for blocking P2P traffic over the short term.

ButP2P represents both download and upload, and as such, the latter requires symmetric broadband speeds in order to avoid a bottleneck. And for service providers, this new user demand for symmetric broadband speeds – as asymmetric services lose their appeal – could drive their next stage of growth, with the promise of faster throughput and improved P2P performance; which, at the moment consists of 11.34% audio and 61.44% video .

So, with broadband providers passively supporting P2P activities, with users hungry for downloadable media, with file sharing making up the lions share of all Internet traffic (consisting of ever larger file sizes, i.e. over 100MB), and with mobile phones having greater penetration than PCs, how will P2P manifest in the mobile domain?; taking into consideration legacy closed networks, slow data rates, no interoperability and under-powered handsets.

Well, Bluetooth file sharing between handsets within personal area networks is straightforward (dependent on rights-protected or user-created content) for savvy user segments, but security issues prevail; smartphones with embedded (or smartcard-based) WiFi can utilise plenty of local area bandwidth and backhaul; transferring or syncing files between computers and handsets (and memory cards) is convenient, and bypasses operators inflated download pricing plans.

However, when it comes to P2P file sharing across cellular networks, technical, usable and commercial constraints persist – and this is a core challenge for operator gatekeepers, that are compelled to extract the majority of data revenues traversing their networks. Some companies are acutely aware of P2P cellular network challenges, such as Nokia who are developing a network that groups users into clusters, enabling any user to serve photos, images and text (and compressed audio in the future) on behalf of other cluster members, in a bandwidth sensitive way (but legal ramifications over media rights remain); and SK Telecom, who’ve developed a mobile handset P2P application for sharing ring tones, pictures, audio and video (over their 3G network), and supports remote PC access.

Mobile P2P usage will undoubtedly correlate with fixed broadband routine, where users’ expectations are to search, locate and download their desired media, then transfer or sync their libraries across multiple devices. Since P2P clients already engender convenience in the fixed Internet space, mobile operators that force customers to pay for content they already own – even if in another format – will possibly drive users to navigate around such artificial barriers. Even if users perceive a benefit to paying for a ringtone while already owning the single, as longer tracks and larger file sizes become the norm, it will have been a tactical exercise and a pyrrhic victory, likely to damage loyalty.

A major challenge for media owners is the super-distribution of their assets, by that I mean, when a user downloads an asset and forwards (or leaves a folder open for sharing) it to a friend. Whereas the recipients of forwarded files get the chance to ‘sample’ (a positive network behaviour) new music, video or games, operators and media companies would interpret those acts of illegality and revenue leakage. And while numerous DRM solutions aim to address this, through encryption, rules and permissions, many problems are yet to be overcome, for example: proprietary incompatibilities, vulnerability to be cracked, format lock-in (with no guarantee of longevity), and so on.

In OMA (Open Mobile Alliance) DRM 1.0, the forward-lock copy protection mechanism was used to prevent assets from leaving the mobile phone, and combined with additional rights, e.g. use only once or use for a week. Whereas the current OMA DRM 2.0 super-distribution standard attempts to pave the way for original reward schemes, for example, by motivating users with kick-back/rewards to make media recommendations within their social networks. And if people are free to share encrypted media ‘samples’ – from audio to video and games – while the full versions are just a few clicks away from being purchased, DRM 2.0 could feasibly re-contextualise super-distribution as just another viral marketing instrument. Albeit, one that is capable of catalysing viral – receive and forward – media behaviour between friends, with the payoff of true person-to-person engagement marketing and/or sales activity, which diametrically opposes the interruptive and ineffective broadcast model.

British band Coldplay have recently run a Bluetooth marketing mechanic for their new album release, which Netimperative covered: “…fans downloaded free pre-release video clips, interviews, audio samples and exclusive images onto their mobile, via Bluetooth technology from giant Transvision screens… More than 87,000 unique handsets were “discovered” and 13,000 people then opted-in… delivering a response rate close to 15%.” While this is a strong response, it could feasibly be diluted if Bluetooth direct response evolved from novelty to mainstream channel.

For service providers obsessed with ARPU (average revenue per user) increases, the OMA super-distribution facility is an enticing opportunity to capture – previously unobtainable – revenue from the sharing, or ‘sampling’ of media. But media companies and aggregators won’t push this facility until they feel their IPR is secure, that payments can be processed, and platforms are relatively interoperable. Then, and only then, will they make their move. Media companies have a legacy of moving at a glacial pace, and the development of standards in super-distribution is certainly no panacea.

However, the BBC intends to shake things up with its Creative Archive and iMP (interactive media player), the latter of which will begin field trials any month now. Similar to the BBC RadioPlayer, the iMP is an application with an EPG that will allow users to catch up on radio and TV shows they’ve missed (up to 7-days after broadcast), by legally P2P downloading them to their computers. Once you’ve downloaded an asset, other users can then upload them from you. And counter to older P2P architectures, the more an asset is downloaded, the more efficient its distribution becomes. Then 7-days after transmission, DRM software prevents a show from being downloaded, emailed or shared via discs.

Further augmenting the iMP will be the Creative Archive, which aims to enable users to P2P consume and super-distribute - certain rights - BBC archive assets. With the ability to super-distribute media assets, end users will be able to consume, re-sample, and distribute (virally) person-to-person; a distinct manifestation of which is that a secondary asset market - of re-mixed work - could be created and exploited.

While the iMP pertains to the Internet in its present incarnation, mobile must be firmly on its radar, when one considers mobile penetration levels and demand – latent of otherwise – for anytime, anywhere consumption of media, now being mainstream stimulated with stationary services such as Sky+ (which confers to users greater control over their consumption, as their relationship to media evolves from passive to on demand). Mobile phones take this scenario a step further, enabling users to place-shift, i.e. control where and on what device they consume media; and P2P provides an infinite selection of media conduits.

In terms of innovation, a number of mainstream P2P clients are being mobile enabled, with WinMobile Torrent (based on BitTorrent) and KaZaA Wireless (based on KaZaA), Symella (based on Gnutella for Symbian smartphones). These developments are geared to take advantage of more powerful smartphones and OS/client environments, small and inexpensive memory cards, and free WiFi hot spot growth (which supplement 3G networks, and in the future, alternative fixed wireless networks like WiMAX and proprietary systems).

Changing our focus from P2P clients to the innovation of new P2P services, Mercora and Grouper are two prominent initiatives. Mercora is a P2P radio service where users find, communicate, play, webcast and share content with friends and family. And Grouper is a service for friends who want to open-up their collection of pictures, films, music and files; but, instead of music downloads, it only permits ‘streams’, while allowing downloads of other content, e.g. their own photos or files. Both services are strides towards creating an alternative, more intimate (not open to all Internet users) network approach, which look favourable in comparison to the demonised KaZaA, and in contrast to more generic subscription services.

Taking a macro-view, there are a number of ways to commercialise P2P activity across the value chain, including: mobile operators capturing data charges and super-distribution transactions, or price-discriminating by provisioning premium-QoS (quality of service, based on bandwidth and throughput) packages; media companies and aggregators splitting revenue with network gatekeepers for super-distributed transactions, or going direct-to-consumer and relying on viral marketing; software developers creating new P2P clients and services which extract purchases and subscriptions, respectively; etc. And commercial opportunities that could be co-ordinated across multiple value segments include: enriching the P2P user experience with new awareness features (i.e. presence, proximity, messaging, etc.); innovating around alternative media compensation models; and enabling creators to sell direct to users (instead of combating it and provoking dis-intermediation).

About Breakthroo
Breakthroo is a consulting boutique that helps broadband and mobile clients develop their strategy for convergence (web, mobile, iTV and IPTV) and innovation (identify/exploit new propositions, products, and markets). Breakthroo’s strategic reports can be downloaded free at http://www.breakthroo.com

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