Cookin' With P2P: Recipe for Success or Flash in the Pan?

P2P companies generally have the view that DRM is a client choice, and they are certainly willing to provide a framework for it, but most believe DRM ultimately has a negative impact on business. For instance, Abacast’s Michael King says, "DRM is a business choice really. It’s not a technology problem. We can provide as much security as you would like for this, but it will limit your audience," he says. BianRosa agrees and says Azureus will allow the content owner to secure the content in any way it sees fit, but he doesn’t necessarily think DRM is the best path to take. "Our stance is to let publishers make decisions and, quite frankly, make mistakes about whether DRM is the right decision," he says.

In fact, BianRosa believes there is a better approach than DRM. "I’m a big believer in a passive DRM system," he says, "which is one that does not assume every user is a thief. Instead, it fingerprints the file, and it’s a flat file so that you can move it everywhere, but [you can also] control it should that file come back into the system in an illegal way," BianRosa says.

Les Ottolgenghi, co-founder and SVP of content development at Intent MediaWorks, takes that concept even further. His company will also protect files should the content owner require it, but he thinks content owners need to look at new ways to monetize the content and attract new users, and in his new-world media view, DRM does not have to be part of the equation.

"We are advocating that they take a different point of view," Ottolgenghi says, "but their economics don’t let them roam freely without supervised management." So he says they are working with smaller independent companies who are willing to take more risks in working with what he calls a "Media 2.0 business model"—one which uses the media to create bundled licensing opportunities such as merchandizing, electronic commerce, and other opportunities such as fan clubs where fans pay a fee for certain privileges such as pre-release tickets or the ability to view a film online before the general public. "We’re seeing a pretty high success rate for companies [following this model] because they are not creating a friction between themselves and their customers." As a result, Ottolgenghi says, the take rate for these types of content is much higher than corresponding content protected with DRM.

Not everyone agrees with this view, however. Starz Media’s DeBeviose doesn’t understand why consumers would even question the presence of DRM. To him, for the consumer it’s part of the cost of using the content. "Does DRM hurt the legitimate consumer?" he asks. In his view, the consumer paid for a right do something with the content, such as watch it for 24 hours. They downloaded the file, watched it, enjoyed it, and it expired. He doesn’t see that the consumer has anything to complain about in this regard. He adds that content is expensive to make, and if consumers want quality content they have to both pay for it and expect that content owners are going to do whatever it takes to protect their investments.

Measuring Success
To achieve the level of monetization that Ottolgenghi envisions requires that media companies can track information about their users and then use that information effectively for advertising, merchandizing, or other opportunities to make money off of the content being distributed over the P2P network. Forrester’s James McQuivey takes a more jaundiced view, however, thinking that media companies are less concerned with monetization opportunities, at least for the time being. "Honestly, right now when people in the media business think analytics, they think how can they track people to sue them if they have to, but in reality, the better way to think of analytics in the future is if we can track people’s views, we can understand how valuable content is to them and then we can figure out how to monetize."

The DCIA’s Lafferty says that metrics can work just as well on P2P as on any other system. "Each file can carry with it a licensing requirement and phone home. Before it plays, it sends a message back to the rights holder to get clearance. Steps have to be taken for a file to open and play." He says a file on a P2P network reports back with just as much accuracy and detail about the path it’s taking and where it’s going as any other file transfer technology.DeBeviose at Starz Media sees tracking as an absolute essential. "We wouldn’t do it if it weren’t one hundred percent trackable. It’s not just out there. These are all DRM-protected and trackable files, and we get reports of what was sold and rented, typically on a monthly basis," DeBeviose says.

Beyond pure analytics and the ability to monetize based on the information, there is a cost savings associated with using P2P, based on the efficiency of the delivery method. For instance, Michael King says that because Abacast uses P2P to stream some of its broadcasts, it can pass on the bandwidth savings to customers and maybe give them something better for the money than they believed they could afford. For instance, King says, a content owner may be concerned about the quality in a 300Kbps video stream, but believes that’s all he can afford with a conventional delivery method. King says he can tell customers, "Tell you what, with P2P we can do an 800Kbps stream for the same cost." In this scenario both the content owner and the consumer win, he says, because the content owner gets higher quality at a lower cost and the consumer gets to watch a higher-quality stream.

Phil Kaplan, chief strategy officer at Internap (which recently purchased CDN VitalStream) says P2P companies are certainly not the only ones to pass on cost savings to high-volume users. "If something is more popular on our CDN, we are able to drive volume pricing. There’s no CDN that wouldn’t exchange higher volume for a better price," he says.

Final Words
As broadband proliferates and the lines between the computer and the television continue to blur, it is only natural that media companies will be looking for new markets and new and cheaper ways to distribute long-form video content. This means these companies must not only establish new markets, but also find ways to deliver the content in a cost-effective and high-quality fashion. As Turner Broadcasting’s Monty Mullig points out, "We look at P2P as a pipe, just as a pipe," but because it offers the promise of cheaper delivery options, it opens up a whole range of possibilities for content owners. The problem, say King from Abacast, is the accountants look at the cost savings and drool, but the lawyers look at the risks to the content and put on the brakes. Companies need to find ways to look at the costs and benefits and figure out a way to navigate this new way of doing business.

If they are able to achieve this and finally come to terms with P2P, and it really ends up driving down the cost of content delivery, consumers will be the long-term winners because they will get the video they wanted delivered quickly, efficiently, and in a format they enjoy. Ultimately, consumers care little about the content delivery mechanism or the minutiae of DRM debates and whether the content owner can measure its sales effectively. Nor do consumers want to discuss players and codecs or anything else related to the delivery technology. The consumer just wants to watch a movie, plain and simple, and if the media companies build a system that makes it easy and cost-effective for them to do that, whether it’s P2P or something else, the consumers most definitely will come.