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Copyright 2005-06 1 ePublishing Business Models in the P2P Era Roger Clarke Xamax Consultancy Pty Ltd, Canberra Visiting Professor in eCommerce, Uni. of.

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Presentation on theme: "Copyright 2005-06 1 ePublishing Business Models in the P2P Era Roger Clarke Xamax Consultancy Pty Ltd, Canberra Visiting Professor in eCommerce, Uni. of."— Presentation transcript:

1 Copyright ePublishing Business Models in the P2P Era Roger Clarke Xamax Consultancy Pty Ltd, Canberra Visiting Professor in eCommerce, Uni. of Hong Kong Visiting Professor in Cyberspace Law & Policy, U.N.S.W. Visiting Professor, Dept of Computer Science, ANU P2P-BM-Bergen {.html,.ppt} Norwegian School of Economics and Business Administration Bergen – 22 May 2006

2 Copyright ePublishing Business Models in the P2P Era Themes What, and why, is P2P? (15) The Political Economy of P2P and Music (8) Can old Business Models survive? (4) Are new Business Models emerging? (14)

3 Copyright Client-Server Architecture mid-1980s Onwards, esp. mid-1990s Onwards Internet-Mediated

4 Copyright Key Developments Since the Mid- 1990s Workstation Capacity (now rivals Hosts) Workstation Diversity (vast, expanding) desktops, laptops, handhelds, smartcards,... phones, PDAs, cameras,... carburettors, fridges,... RFID tags,... Broadband Connectivity (now widespread) This enables dispersion and replication of devices capable of providing services Wireless Connectivity (rapidly increasing) This enables Mobility which means Devices change networks which means their IP-addresses change

5 Copyright P2P – The Motivation Take advantage of resources that are available at the edges of the Internet In order to do so, make each participating program both a Client and a Server and hence each workstation acts as a host as well, e.g. a music playstation can be a mixer too your PDA can host part of a music catalogue your PC can host part of a music repository

6 Copyright P2P Architecture Cooperative Use of Resources at the Edge

7 Copyright P2P Differentiated from Client-Server

8 Copyright Functions of a P2P Server Manage Comms with other devices Manage Directories: of Objects (e.g. files) of Services (e.g. currency conversion, or credit-card payment processes) Manage Repositories of Objects Manage Services

9 Copyright Important Characteristics of P2P Collaboration is inherent Clients can find Servers Enough Devices with Enough Resources act as Servers for discovery, and as Servers for services Single Points-of-Failure / Bottlenecks / Chokepoints are avoided by means of networking dynamics 'Free-Riding' / 'Over-Grazing' of the 'Commons' is restrained through software and psych. features

10 Copyright Why P2P Is Attractive Much-Reduced Dependence on individual devices and sub-networks (no central servers) Robustness not Fragility (no single point-of-failure) Resilience / Quick Recovery (inbuilt redundancy) Resistance to Denial of Service (D)DOS Attacks (no central servers) Much-Improved Scalability (proportionality) Improved Servicing of Highly-Peaked Demand (more devices on the demand-side implies there are also more server-resources)

11 Copyright Technical Concerns about P2P Address Volatility: old addresses may not work (hence trust based on repetitive dealings is difficult) Absence of Central Control (hence risk of anarchy) Inadequate Server Participation (over-grazing) Security Challenges: Malware, embedded or infiltrated Surreptitious Enlistment (at least potential) Vulnerability to Masquerade Vulnerability to Pollution Attacks (decoys)

12 Copyright P2P Applications 1. Of Long Standing ARPANET services generally, from 1969 Message Transfer Agents, since 1972 (SMTP), which perform both server and client functions USENET since 1979, now Internet Netnews Fidonet file/message transfer system, since 1984 Domain Name System (DNS), since 1984, a collaborative scheme, each server also a client

13 Copyright Recently-Emerged P2P Applications 2. Processing Services (cf. Grid Computing) Pattern-Searching of Data (e.g. Data-Space Searching, in particular as part of a collaborative key-discovery process (e.g. EFF's DES cracking project) Numerical Methods, large-scale / brute-force (e.g. fluid dynamics experiments, meteorology) Gaming, multi-player, networked Message Transfer: conferencing/chat/instant messaging cooperative publishing

14 Copyright Recently-Emerged P2P Applications 3. Access to Digital Objects Software: Fixes/Patches Releases Virus Signatures Announcements, e.g. of technical info, business info, entertainment info, sports results, promotional messages, advertisements News Reports, by news organisations, and by members of the public Emergency Services Data Backup and Recovery Data Games Data, e.g. scenes and battle configurations Archived Messages, for conferencing/chat/IM, and cooperative publishing Learning Materials, in various formats Entertainment Materials, in various formats

15 Copyright P2P Networks and Protocols peer#Networks.2C_protocols_and_applications BitTorrent network: ABC, Azureus, BitAnarch, BitComet, BitSpirit, BitTornado, BitTorrent, BitTorrent++, BitTorrent.Net, G3 Torrent, mlMac, MLDonkey, QTorrent, SimpleBT, Shareaza, TomatoTorrent (Mac OS X) [2], TorrentStorm eDonkey network: aMule (Linux, Mac OS X, others), eDonkey2000, eMule, LMule, MindGem, MLDonkey, mlMac, Shareaza, xMule, iMesh Light, ed2k (eDonkey 2000 protocol) FastTrack protocol: giFT, Grokster, iMesh (and its variants stripped of adware including iMesh Light), Kazaa by Sharman Networks (and its variants stripped of adware including: Kazaa Lite, K++, Diet Kaza and CleanKazaa), KCeasy, Mammoth, MLDonkey, mlMac, Poisoned Freenet network: Entropy (on its own network), Freenet, Frost Gnutella network: Acquisitionx (Mac OS X), BearShare, BetBug, Cabos, CocoGnut (RISC OS) [3], Gnucleus Grokster, iMesh, gtk- gnutella (Unix), LimeWire (Java), MLDonkey, mlMac, Morpheus, Phex Poisoned, Swapper, Shareaza, XoloX Gnutella2 network: Adagio, Caribou, Gnucleus, iMesh, MLDonkey, mlMac, Morpheus, Shareaza, TrustyFiles Joltid PeerEnabler: Altnet, Bullguard, Joltid, Kazaa, Kazaa Lite Napster network: Napigator, OpenNap, WinMX Applejuice network: Applejuice Client, Avalanche, CAKE network: BirthdayCAKE the reference implementation of CAKE, Direct Connect network: BCDC++, CZDC++, DC++, NeoModus Direct Connect, JavaDC, DCGUI-QT, HyperCast [4], Kad Network (using Kademila protocol): eMule, MindGem, MLDonkey, LUSerNet (using LUSerNet protocol): LUSerNet, MANOLITO/MP2P network: Blubster, Piolet, RockItNet, TVP2P type networks: CoolStreaming, Cybersky-TV, WPNP network: WinMX Other networks: Akamai, Alpine, ANts P2P, Ares Galaxy, Audiogalaxy network, Carracho, Chord, The Circle, Coral[5], Dexter, Diet- Agents, EarthStation 5 network, Evernet, FileTopia, GNUnet, Grapevine, Groove, Hotwire, iFolder[6], konspire2b, Madster/Aimster, MUTE, Napshare, OpenFT (Poisoned), P-Grid[7], and XDCC, used by IRC clients including: mIRC and Trillian, JXTA, Peersites [8], MojoNation, Mnet, Overnet network, Peercasting type networks: PeerCast, IceShare - P2P implementation of IceCast, Freecast, Scour, Scribe, Skype, Solipsis a massively multi-participant virtual world, SongSpy network, Soulseek, SPIN, SpinXpress, SquidCam [9], Swarmcast, WASTE, Warez P2P, Winny, AsagumoWeb, OpenExt, Tesla, soribada, fileswapping, XSC

16 Copyright P2P Multi-Protocol Applications peer#Networks.2C_protocols_and_applications eMule (Edonkey Network, Kad Network) (Microsoft Windows, Linux) aMule (eDonkey network) (Linux, Mac OS X, FreeBSD, NetBSD, OpenBSD, Windows and Solaris Op Environmt) Epicea (Epicea, BitTorrent, Edonkey Network, Overnet, FastTrack, Gnutella) (Microsoft Windows) GiFT (own OpenFT protocol, and with plugins - FastTrack, eDonkey and Gnutella) and xfactor (uses GiFT) (Mac OS X) Gnucleus (Gnutella, Gnutella2) (Microsoft Windows) Hydranode (eDonkey2000) (Microsoft Windows, Linux, Mac OS X) iMesh (Fasttrack, Edonkey Network, Gnutella, Gnutella2) (Microsoft Windows) Kazaa (FastTrack, Joltid PeerEnabler) (Microsoft Windows) Kazaa Lite (FastTrack, Joltid PeerEnabler) (Microsoft Windows) KCeasy (Gnutella, Ares, giFT) MindGem (Edonkey Network, Kademlia) MLDonkey (BitTorrent, eDonkey, FastTrack, Gnutella, Gnutella2, Kademlia) (MS Windows, Linux, Mac OS X, Palm OS, Java) mlMac (BitTorrent, eDonkey, FastTrack, Gnutella, Gnutella2) Morpheus (Gnutella, Gnutella2) (Microsoft Windows) Poisoned (FastTrack, Gnutella) Shareaza (BitTorrent, eDonkey, Gnutella, Gnutella2) (Microsoft Windows) WinMX (Napster, WPNP) (Microsoft Windows) XNap (OpenNAP, GiFT, Limewire, Overnet, ICQ, IRC) (Java) Zultrax (Gnutella, ZEPP)

17 Copyright The Predominant Use Consumer Sharing of Entertainment Materials: recorded music, in MP3 and other formats video, as bandwidths increase Copyright-owning corporations assert that a large proportion of those file-transfers is being performed in breach of copyright law There is evidence to support the assertion

18 Copyright The Political Economy of P2P and Music

19 Copyright Copyright-Owner Perspective – esp. RIAA, increasingly MPAA Serious Risk of Loss of Control over © Objects (appropriation / theft / piracy) Serious Risk of Cannibalism i.e. killing existing high-margin revenue (CDs) by substituting low-margin revenue (digital) Lack of Clarity about ePublishing Business Models Exploitability of Market Concentration and Power

20 Copyright Use of Legal Action to Destroy Napster Napster was P2P-with-a-chokepoint It relied on a central directory of file-names and host-identities Court action by RIAA resulted in closure of the directory, and hence the collapse of the service Many P2P applications have some central facility that can be attacked in such a manner, incl. AOL Instant Messenger, ICQ, DNS (Replication does not remove central control)

21 Copyright But... File-Sharers Are Adaptable Renegade file-sharers: started on Napster ( ) as it came under attack, they gravitated to Kazaa/FastTrack ( ) as that became a target of legal action, they moved to BitTorrent (2004) now thats seen as too centralised, theyve moved to eDonkey (esp. in Korea), and Gnutella-2 (esp. in the USA) (2005)

22 Copyright Subsequent Legal Action Any critical central service represents a chokepoint. If its within jurisdictional reach (and the US is highly aggressive in extending its laws beyond its territories), then it can be attacked through the courts Gnutella, FastTrack and many other P2P services decentralise their directories as well as their storage Court action intended to preclude such P2P services will need to gain injunctions against production, dissemination and use of the tools and/or protocols RIAA v. Kazaa, and RIAA v. Grokster and Morpheus

23 Copyright Challenges for Copyright-Owners Identification of Copyright Objects Identification of Devices that store those objects and that traffic in them Demonstrating: Unauthorised Reproduction, Publication, Adaptation and/or Authorisation Identification of the Person Responsible for a breach Association of the Person with the Device used to perform the act that constitutes the breach Location of the responsible Person Bringing Suit (e.g. jurisdiction) Collection and Presentation of Evidence sufficient to win even civil, let alone criminal cases Proposing Interventions that could be awarded by court injunction

24 Copyright Avenues of Copyright-Owner Fightback Legal Lawsuits Publicity Political Copyright Expansionism Criminalisation / Cost Transfer Technological Digital Rights Management Reduction of the Power at the Edges

25 Copyright Digital Rights Management (DRM) Technologies Passive Object-Protection Tracing ('Watermarking', 'Fingerprinting' Active Notification of Rights Identification of licensees Authentication of identities Destruction / Disablement of the data object Client-Side Enforcement (Recording, Prevention, Reporting)

26 Copyright Ways to Reduce the Power at the Edge Insert in every consumer-device: Identifiers Location and Tracking Technology Make workstations diskless or thin Connect remote devices via asymmetric links, high-bandwidth downwards, low upwards (SDSLs 1:1 ratio cf. ADSL and cables 2:1, 4:1 and even 8:1) Prevent software from being stored, and require users to download a copy each time it is used (the Application Service Provider – ASP – model) Upgrade / Replace the Internet Protocol Suite

27 Copyright Adaptations of Old Business Models

28 Copyright Conventional Proprietary Approaches Exploit the Monopoly through High Prices Leverage the Monopoly Extend the Brand Cross-Promote Sustain the Monopoly Lock-in through Switching Costs Very Tight Licence-Terms Technological Protections Lawsuits to stop behaviour and to chill behaviour: Commercial Violations Single-Purpose Technologies Incitement (Authorisation) Multiply-Usable Technologies Consumption

29 Copyright A More Constructive Approach Give Away (a little of) your content, and charge for: convenient access repeat access other-party access enhanced versions searchability/navigation timely access archival access... But recognise when to let the market grow itself Shapiro & Varian – Information Rules, 1999, Ch. 4 pp : Rights Management

30 Copyright A Sustainable Proprietary Approach Identify customers price resistance-point (by finding out what the market will bear) Set prices accordingly (and thereby sustain payment morality) Discourage and prosecute breaches where the purpose is commercial Take no action over breaches by consumers (time-shifting, format- change, even sharing?) The Evidence Since 2003, Apple iTunes charges USD 0.99/track!? Copyright-Owners get USD 0.70 In , theyre asking for: more money more flexibility

31 Copyright Publishers Need to Re-Discover Confidence in Their Ability to Value-Add Conception Pre-Promotion Expression Copyright Clearance Preparation for Publication Quality Assurance Promotion and Marketing Logistics Payment Collection Contingent Liabilities, in any jurisdiction whose courts deem publication to have occurred: Copyright Infringement Breach of Confidence Defamation Negligence Negligent Misstatement Misleading or Deceptive Conduct Contempt of Court Breach of Laws relating to: Censorship Discrimination Racial Vilification Harassment Privacy

32 Copyright Beyond Evolutionary Business Models

33 Copyright A Business Models on the Web Taxonomy Rappa ( Brokerage Marketplace Exchange, Buy/Sell Fulfilment, Demand Collection, Auction Broker, Transaction Broker, Distributor, Search Agent, Virtual Marketplace Advertising Portal, Classifieds, User Registration, Query-based Paid Placement, Contextual Advertising, Content-Targeted Advertising, Intromercials, Ultramercials Infomediary Advertising Networks, Audience Measurement Services, Incentive Marketing, Metamediary Merchant Virtual, Catalogue, Click&Mortar, Bit Vendor Manufacturer (Direct) Purchase, Lease, Licence, Brand Integrated Content Affiliate Banner Exchange, Pay-per-click, Revenue Sharing Community Open Source, Public Broadcasting, Knowledge Networks Subscription Content Services, Person-to-Person Networking Services, Trust Services, Internet Services Providers Utility Metered Usage, Metered Subscriptions

34 Copyright The Interpretation Adopted in this Analysis An eBusiness Model is an Answer to the Question: Who Pays? For What? To Whom? And Why?

35 Copyright Internet-Era Business Models Lessons from Open Source and Content Who Pays? For What? TO WHOM? And Why? DirectIntermediated Retailer Franchisee Value-Adder Bundler Transaction Aggregator

36 Copyright Internet-Era Business Models Lessons from Open Source and Content WHO PAYS? For What? To Whom? And Why? Providers Third Parties Customers: for the Good/Service for Complementary Goods/Services A Fairy Godmother

37 Copyright Open Content Business Models Who Pays? A Fairy Godmother Subsidy / Patronage Funding from external sources Deprecated as a gift, unless market failure Cross-Subsidy Funding from internal sources Deprecated (but less so), because its distortive Portfolio Approach Mutual Cross-Funding from internal sources How business works – cash cows fund the rest

38 Copyright Internet-Era Business Models Lessons from Open Source and Content Who Pays? FOR WHAT? To Whom? And Why? Goods & Services Value-Added Goods & Services Complementary Goods & Services Data Information Expertise / Knowledge An Idea in Good Standing Timeliness Quality

39 Copyright Revenue from Complementary Services Installation Infrastructure Customisation Education and Training Consultancy Network-building Search for Network Effects Viral Marketing The After-Market Accessories Upgrades Enhancements Extensions Replacements

40 Copyright Lessons about Sales Revenue Direct, Immediate Reciprocity Volume Sales at low rates per access or copy Differentiated Services for higher prices (taking into account short shelf-life) Indirect and/or Deferred Reciprocity Advertising Shareware – use now, maybe pay later (esp. for breakthrough by new artists, genres)

41 Copyright Internet-Era Business Models Lessons from Open Source and Content Who Pays? For What? To Whom? AND WHY? The Negative Resource Control Switching Costs (capture, lock-in) Grief Avoidance The Positive Perceived Value (the genuine article) Cost Advantage (incl. Time) Quality Advantage (incl. accuracy, security, timeliness, completeness, complementary services)

42 Copyright Open Content Business Models Strategic Opportunities 1. Reputation Reputation-Establishment, -Building, -Maintenance Collateral, and More... Papers Postings Blogs Hence Brand, Sub-Brand Value

43 Copyright Open Content Business Models Strategic Opportunities 2. Market Building Freeware – use it now, become habituated, and buy something later – to build a future market Engage Tofflers prosumers, who will provide: feedback to enable quality assurance feedback to enable product refinement (market research and focus groups for free) enhancements and extensions 3. Customer Engagement

44 Copyright Strategic Opportunities – 4. Costs Cost-Reduction: Reproduction and Transmission are hugely less expensive for Digital cf. Physical Media Cost-Transfer to Consumers: Product Conception (prosumer participation) Pre-Promotion (e.g. fan-zines) Production (e.g. prosumer mixing) Promotion (e.g. viral marketing) Distribution (P2P shifts transmission costs away from the corporate server, to the operators of participating client-servers)

45 Copyright ePublishing Business Models in the P2P Era Themes What, and why, is P2P? The Political Economy of P2P and Music Can old Business Models survive? Are new Business Models emerging?

46 Copyright ePublishing Business Models in the P2P Era Roger Clarke Xamax Consultancy Pty Ltd, Canberra Visiting Professor in eCommerce, Uni. of Hong Kong Visiting Professor in Cyberspace Law & Policy, U.N.S.W. Visiting Professor, Dept of Computer Science, ANU P2P-BM-Bergen {.html,.ppt} Norwegian School of Economics and Business Administration Bergen – 22 May 2006

47 Copyright

48 Copyright Categories of P2P Pure Functions, objects and the catalogue are distributed across all nodes. No one node is critical to the network's operation. Control is very difficult – USENET, Fidonet, Freenet, Gnutella-1 Compromised / Two-Tier Functions and objects are highly, not fully distributed The index is highly, not fully distributed – FastTrack, Gnutella-2 Hybrid Functions and objects are fully or highly distributed The index is not, e.g. it may be hierarchical (the DNS), centralised (Napster), or independent from the repository (BitTorrent)

49 Copyright Indicators of Scale In Sep 2002, 31m Americans used P2P to share music In 2003, FastTrack peaked at 5.5m users and 60% of the market, then fell due to publicity about lawsuits By 2004: P2P data volumes estimated at 10% of traffic (Web 50%, all incl. spam 3%) simultaneous users c. 10m c. 50 m searches per day FastTrack still had 4m users (40% of market) and enabled access to 2m files, >10 terabytes 50% of files audio, 25% video, 25% other

50 Copyright Who To Sue? Protocol – Owners? Originators? Publishers? BitTorrent (BitTorrent Inc. and/or Bram Cohen) eDonkey ( is a search engine. Pardon? Meta Machine Inc., NY?) FastTrack (Niklas Zennström?, Janus Friis?, Jaan Tallinn?, and/or Consumer Empowerment?) Freenet (Ian Clarke?, Matthew Toseland?, the Freenet Project?) Gnutella (Justin Frankel?, Tom Pepper?, Nullsoft?, the Gnutella community?) Gnutella 2 (Michael Stokes?, the Gnutella2 community?) Joltid (Niklas Zennström and/or Joltid, Stockholm) Skype (Niklas Zennström and/or Global Index)

51 Copyright Who To Sue? Providers of Applications/Client-Server Packages? Kazaa Media Desktop (Sharman, Vanuatu and/or Altnet, Sherman Oaks CA and/or Nikki Hemmings and/or Kevin Bermeister and/or Anthony Rose) Grokster (Grokster Ltd, Nevis in the Caribbean) Morpheus (StreamCast, formerly MusicCity) Kazaa Lite (Sharman??) iMesh (Elon Oren of Israel?) MLDonkey (Fabrice Le Fessant?, INRIA?) WinMX (Frontcode Technologies?)

52 Copyright

53 Copyright Broader Strategic Impacts The I.T. Industry IAPs – The Nature of Internet Connections Demand for Relative Bandwidth Symmetry e.g. SDSL not ADSL ISPs – Servers Demand switches from central servers to dispersed devices at the edge of the net Society Non-Commercial Leaks Whistleblowing Hypocrisy Revelation Political Statements Religious Tracts... News No longer controlled by Media, Government, and Big Business

54 Copyright Business and Government Concerns about P2P Address Volatility, plus Inadequate Identifiers, hence: difficulty in identifying and locating users reduction in user accountability Absence of Central Control, hence: reduction in technology-provider accountability no single point for a denial of service attack Challenge to Authority: of Copyright-Owners over Users of Censors over Users

55 Copyright P2P Architectures Resilience and Robustness A Direct Implication The removal of a device as a result of the execution of a warrant or injunction is indistinguishable from other forms of denial of service attack In John Gilmores words: The Internet treats censorship as damage, and routes around it

56 Copyright We live in a quicksilver technological environment with courts ill-suited to fix the flow of internet innovation The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well established distribution mechanisms

57 Copyright Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be: a player piano a copier a tape recorder a video recorder a personal computer a karaoke machine, or an MP3 player

58 Copyright U.S. Court of Appeals 9th Circuit August 19, 2004 MGM v. Grokster Full Court Decision Opinion by Sidney R. Thomas Thus, it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude

59 Copyright Criteria for Selecting Between Modern Proprietary and Open, Sharing Modern Proprietary is a tenable model, provided that a number of conditions hold: a pure for-profit corporation, with shareholders, who are expecting ROI customers expect to pay full price the organisation has unique competency, market leadership and/or high reputation the materials require significant investment

60 Copyright Pre-Conditions for Any IP Business Inbound Materials Clearance Check Material Sources Acquire Licences for © Materials Productisation Defined Discrete Deliverable Dependable Appropriate Copyright Licence

61 Copyright Open Content Licensing Choices Ownership Exclusivity Sub-Licensing Integrity Protection Entirety Copyright Notice Reproduction Control Permission Use(s) / User(s) Republishing Control Permission Use(s) / User(s) Format(s)/Media Incorporation Tech. Protections Adaptation Control Permission Review Distinguishability Copyright Vesting Usage Territory Purposes Person-Types Fields of Endeavour Liability Management Warranties Indemnities Pricing One-Time Fees Repetitive Fees

62 Copyright Categories of Creative Commons Licence

63 Copyright Categories of AEShareNet Licence INSTANT LICENCES End-user – E MEDIATED LICENCES Commercial – C Free for Education – FFE Unlocked Content – U Share and Return – S Preserve Integrity – P

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