Economic Analysis

Economics

Most Bittorrent users currently use the service for free. Recently however, Bit-torrent COO Ashwin Navin announced the creation of a fee based Bit-torrent download service that sells new movies for $3, older movies for $2, and TV shows for $1. There is a 30 day limit to the movies but TV shows can be kept indefinitely on a computer. The question is, how can people be convinced to the economic incentive of paying for items that they already find for free, especially when overseas there are many distributors of this material?

• Need to have a pricing scheme that allows users to think it is actually worthwhile to pay for viewing material. Don’t have something prohibitively expensive.
• In order for users to be held to the idea of buying movies, they need to be able to realize that they could get in serious trouble without a pay service. Perhaps market this is as doing it the legal way keeps you safe from legal action?
• Make the videos on this pay service of a higher quality than those distributed for free. Also, enable encryption on these videos that they can only be downloaded through Bit-torrent users subscribed to the service. Look at the new pay Bit-torrent site for an idea on how to do this.

However, this also has to be economically worthwhile for Apple. They cannot under price their goods but at the same time they need to stay competitive in a market that sells for free.

• Ensure a higher standard of quality for videos so that people have an incentive to pay to use this service. Charge less than a DVD for a movie for a month but give people the option of being able to pay the rest of the price of a DVD at the end of that month if they wish to keep the movie.
• Allow users after that month to burn that movie file once without having to pay extra. This keeps people from ripping off your system.
• Aggressively market the campaign in a popular campaign and emphasize the benefits of a pay service: legal safety, video quality, and a better deal than risking it on free downloads.

By Tariq Mohideeen

Legal Analyst's Outline

Legal Consultant

The question at the heart of this issue is how iTunes and Bit Torrent can ensure movie companies that consumers will not use an iTunes/Bit Torrent movie store to infringe on copyrighted movies.

When beginning to address this question, it is important to look at the status quo of iTunes’ movie store. What film companies does Apple currently have deals with? As of right now, Disney and Lionsgate Films are the only film companies to provide iTunes with full-length feature films. We plan on focusing on the details of the legal wrangling behind the iTunes Disney/Lionsgate deal. Some questions we plan to ask are:

• Does Disney or Lionsgate forbid certain titles to be on iTunes? What about new releases?

• What DRMs are in place? Is Apple or the film companies responsible to enforce them?

• Does streaming video work downloaded on iTunes USA work outside the US like in Asia where iTunes’ movie store purposely operates on a limited basis because of piracy concerns?

• Do the DRMs preclude “fair use” like multiple plays on different iPods, backing up movies, or transferring a movie to another computer?

• If someone infringes the copyright, who is legally accountable, iTunes or the consumer?

• In regards to HD movies, do the film companies allow them to be played on televisions through a computer connection?

• Can users legally swap or exchange movies, although one of them may have paid for another title?

Bit Torrent is popular among consumers and detested by movie companies for mostly the same reason: it greatly facilitates copyright infringement. Still, Bit Torrent has decided to “play by the rules” to an extent by making deals with the MPAA and Warner Bros. to legally place copyrighted movies on their network. However, the structure of Bit Torrent- decentralized and unstructured- raises some legal issues:

• Do the MPAA and Warner Bros. have legal power to shut down P2P sharing of their movies not legally licensed to Bit Torrent?

• Based on Bit Torrent’s structure, how do the MPAA and Warner Bros. ensure that a legal user “shares” his movie with someone who hasn’t purchased it, much the same way someone might loan a DVD to someone else?

• Now that Bit Torrent has some responsibility for copyrighted material on its network, is Bit Torrent held responsible for copyright infringement?

• Is it illegal if someone uses a Bit Torrent “E gift-card” to download a movie for someone in France though the movie has had a European release yet?

If Bit Torrent and iTunes’ movie store were to team up, it would also present some interesting issues. Some of the issues we plan to tackle are:

• Is Apple or Bit Torrent legally accountable for ensuring DRM standards?

• Can users legally share iTunes’ gift cards or season passes over Bit Torrent?

• iTunes allows movie sharing on a limited number of “authorized” computers. Is it infringement if a Bit Torrent/Apple movie store customer uses Bit Torrent to download a movie onto another an “unauthorized” computer although he has already purchased it?

• How does Bit Torrent’s massive P2P capabilities factor into Apple’s spat with Norway over copyrighted material?

• How does iTunes stop Bit Torrent users from sharing movies with Bit Torrent users in Asia where iTunes movies are limited because of piracy concerns?

• How does Bit Torrent ensure that movies show up on iTunes first?

• Under Bit Torrent’s massive structure, how are infringers outside of America prosecuted under the DMCA?

• Are the consequences for infringement more severe in a Bit Torrent/iTunes movie store?

By Steven Sunmonu

Edit:

As the “Guru” of this project, I want to make sure everyone has a fundamental understanding of how BitTorrent works. Here are some basic notes that I think will help:

NOTES ON BIT TORRENT (from the article “Give and Ye Shall Receive!...)

- BitTorrent = a form of peer-to-peer (P2P)

- popular because of fast download rates

ETHICS

Users of P2P software in some EU (European Union) countries can legally download copyright protected materials as long as they don’t upload.

- But the idea of BitTorrent is that all users download pieces of the file and then begin to upload them to each other

- Therefore BitTorrent makes it impossible to just download, and therefore can cause liability for copyright infringement.

- BitTorrent was written by programmer Bram Cohen.

HOW IT WORKS

1. First, download file with a .torrent extension, which contains information about the file you are looking for: length, name, hashing information, and URL of tracker.

2. Next, open the .torrent file in a BitTorrent client software.

3. Then the client software connects to the tracker, which locates all the “peers” in the process of the same .torrent file.

4. Client Software starts connecting to the various peers, called a peer set.

swarm = total number of users downloading the same .torrent file at the same time

5. The BitTorrent client software begins to download small parts (about 256kB each) of the .torrent file in a random order from users in the peer set.

6. Each time a peer completes downloading one of the small parts, BitTorrent client software informs the peer set and uploads these small parts upon request to other peers.

*Basically, “you send parts that you have finished downloading as you request finished parts from others, and vice versa.”

Two kinds of peers:

1. Leecher: peer in the process of downloading the file

- leechers cannot disable uploading to other peers

- As long as someone is downloading, he must upload the file parts to other peers

2. Seed: peer that has finished downloading the entire file

- used as sources that upload parts of the file until their BitTorrent client software is closed

Traditional P2P vs. BitTorrent

· Traditional P2P program examples = Napster, Kazaa and Limewire

- With these programs, the download rate depends on the upload speed of the user being downloaded from (if upload is slow, download is slow)

- The more popular the file, the slower the download rate.

· But with BitTorrent, a user downloads small parts of a file from a great number of other users

- Downloading parts from various sources simultaneously allows for faster downloading rates

- With popular files, there are more uploaders (because more users are downloading and have to upload) and downloading is faster.

-Amy Benzyk

Test

This is the first post of Group 6. We will be using this blog over the next few weeks to analyze Bit-Torrent and how Apple could use this to distribute movies. We will look at the business/economic, ethical, technological, and legal facets to this issue. This will include looking at copyright law, the economics of a big company such as Apple and the ethics behind issues such as these.