Copyright 2005-06 1 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 http://www.anu.edu.au/people/Roger.Clarke/EC/... P2P-BM-Bergen {.html, .ppt} Norwegian School of Economics and Business Administration Bergen – 22 May 2006 QuickTime™ TIFF (Uncompr are needed t QuickTime™ and a TIFF (Uncompressed) decompressor are needed to see this pictur
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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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Copyright2005-06
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ePublishing Business Models in the P2P Era
Roger ClarkeXamax 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
http://www.anu.edu.au/people/Roger.Clarke/EC/...
P2P-BM-Bergen {.html, .ppt}
Norwegian School of Economics and Business
Administration Bergen – 22 May 2006
QuickTime™ and aTIFF (Uncompressed) decompressorare needed to see this picture.QuickTime™ and a
TIFF (Uncompressed) decompressorare needed to see this picture.
Copyright2005-06
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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?
• Broadband Connectivity (now widespread)This enables dispersion and replicationof devices capable of providing services
• Wireless Connectivity (rapidly increasing)This enables Mobilitywhich means Devices change networkswhich means their IP-addresses change
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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 Serverand 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
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P2P ArchitectureCooperative Use of Resources at the
Edge
Server & Client
inWorkstation
Server & Client
inWorkstation
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P2P Differentiated from Client-Server
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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
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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
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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)
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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)
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P2P Applications1. 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
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)
• 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
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Use of Legal Action to Destroy Napster
1999-2002
• Napster was P2P-with-a-chokepointIt 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)
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But ... File-Sharers Are Adaptable
• Renegade file-sharers:• started on Napster (1998-2002)• as it came under attack, they gravitated
to Kazaa/FastTrack (2002-2003)• as that became a target of legal action,
they moved to BitTorrent (2004)• now that’s seen as too centralised, they’ve
moved to eDonkey (esp. in Korea), and Gnutella-2 (esp. in the USA) (2005)
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Subsequent Legal Action
• Any critical central service represents a chokepoint.If it’s 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
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Challenges for Copyright-Owners
• Identification of Copyright Objects
• Identification of Devices that store those objects and that traffic in them
• Active• Notification of Rights• Identification of licensees• Authentication of identities• Destruction / Disablement of the data object• Client-Side Enforcement
(Recording, Prevention, Reporting)
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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 (SDSL’s 1:1 ratio cf. ADSL and cable’s 2:1, 4:1 and even 8:1)
• Prevent software from being stored, and requireusers to download a copy each time it is used (the Application Service Provider – ASP – model)
• Upgrade / Replace the Internet Protocol Suite
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3. Adaptations of Old Business Models
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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
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A More Constructive Approach• Give Away (a little of) your content, and charge for:
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 2005-06, they’re asking for:
• more money• more
flexibility
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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:
• Collateral, and More ...• Papers• Postings• Blogs
• Hence Brand, Sub-Brand Value
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Open Content Business ModelsStrategic Opportunities
2. Market Building• ‘Freeware’ – use it now, become habituated, and
buy something later – to build a future market
• Engage Toffler’s ‘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
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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 theoperators of participating client-servers)
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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?
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ePublishing Business Models in the P2P Era
Roger ClarkeXamax 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
http://www.anu.edu.au/people/Roger.Clarke/EC/...
P2P-BM-Bergen {.html, .ppt}
Norwegian School of Economics and Business
Administration Bergen – 22 May 2006
QuickTime™ and aTIFF (Uncompressed) decompressorare needed to see this picture.QuickTime™ and a
TIFF (Uncompressed) decompressorare needed to see this picture.
Copyright2005-06
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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)
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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 email 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
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Who To Sue?Protocol – Owners? Originators?
Publishers?
• BitTorrent (BitTorrent Inc. and/or Bram Cohen)
• eDonkey (“FileHash.com
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)
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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?)
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Broader Strategic Impacts
The I.T. Industry
• IAPs – The Nature of Internet ConnectionsDemand for Relative Bandwidth Symmetrye.g. SDSL not ADSL
• ISPs – ServersDemand switches from central servers to dispersed devices at the edge of the net
Society
• Non-Commercial LeaksWhistleblowingHypocrisy Revelation Political StatementsReligious Tracts...
• NewsNo longer controlled by Media, Government, and Big Business
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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
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P2P Architecture’sResilience 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 Gilmore’s words:
“The Internet treats censorshipas damage, and routes around it”
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• 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
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• 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
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U.S. Court of Appeals 9th CircuitAugust 19, 2004MGM v. GroksterFull Court DecisionOpinion 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
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4. 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