Econ Checkpoint 2

Economic Checkpoint 2

After having researched much of this Bit Torrent problem, I have concluded that there is a fundamental prisoners dilemma that must be dealt with. This multiparty prisoners dilemma involves people who will defect (or in this case, use illegal torrent websites) and people who will take part in the new pay torrent sites. According to Ashwin Navin, a co-creator of the original Bit-Torrent and a main proponent of a new pay site, 90% of people will feel compelled to use the new pay site while 10% will try and hack through protections and keep the old method going. The key is to make it worthwhile to people in that 90% to not cooperate with that 10%. What can be done to ensure this is fair pricing structures that do not punish people for obeying the law, and also a large amount of free programming that is paid for with advertisements, much like television.

A new pricing structure put forth by Bit-Torrent and Navin has new movies at $3.99, old movies at $2.99, Live TV shows at $2.99 and recorded shows at $1.99. This is quite a competitive pricing structure and Apple would do well to be similar to this. However, Apple could also offer much more variety than the new Bit-Torrent service due to the many connections and licenses that they already have within the entertainment community. Currently as well, the Bit-Torrent site only offers movies for rental, and perhaps Apple could offer movies for sale as well, with the same rights protection that limits the ability to burn or distribute these films.

In order to really sell people on the idea of sale, an ad campaign must be organized that emphasizes the legality of legal downloading and the trouble downloaders who download illegally can get into. This, along with the cheap prices, should help convince current illegal down-loaders to switch to a pay system. The key is really measuring incentives and trying to get people to change their mindset about downloading, from being able to do what they want without restriction, to being able to do more than ever before but within the means of the law.

http://www.reghardware.co.uk/2006/05/02/apple_osx_leopard_bittorrent/

http://torrentfreak.com/bittorrent-vs-apple/

http://en.wikipedia.org/wiki/Ashwin_Navin

http://yro.slashdot.org/article.pl?sid=06/10/27/0119226&from=rss

http://www.isohunt.com/

http://www.asiamedia.ucla.edu/article-us.asp?parentid=64527

http://news.bbc.co.uk/2/hi/technology/6396733.stm

http://ce.seekingalpha.com/article/9980

-Tariq Mohideen

Edit: It is also necessary to consider just how many customers would actually switch to using an Apple sponsored torrent service. Currently, though movie downloads are on the rise, they are still a small minority in comparison to illegal downloads. Furthermore, much of the movie-download market rests amongst the younger generation, who, specifically tend to download these movies because they do not have the money to pay and watch them. Those with money will tend to be older (and by older I mean in their mid to late 30s and above) and trying to get these individuals to download movies via Bit-Torrent is a stretch. It is true though, that Apple has created a legal download market with iTunes, but I believe it is quite difficult to expand that market much further than where it is, unless it becomes a better choice for consumers to use legal downloads. Also, while a torrent system would allow Apple to have faster download speeds (theoretically) and carry more movies, there is still the risk of piracy through torrents.

Also, in terms of availability of movies, Bit-Torrent is dependent upon the presence of seeders and leachers for people to be able to actually receive files. Esoteric works then are unlikely to be found and it might be more conducive for these movies to be on a large server a la iTunes. Also, the advent of movie rental services such as NetFlix has made rental all the more cheaper and convenient for people. This coupled with burning softwares that enable people to rip movies on their own leads to almost a redundancy with downloads. Also, these downloads (as with the recent Bit-Torrent pay service) are temporary, and with DRM they cannot be played after a 24 or 48 hour period, making them not much better than rentals. The incentives to such systems is that the capacity to pirate is limited, however, the consumer is also hurt, and the incentive to download illegally is only heightened.

http://arstechnica.com/news.ars/post/20061227-8500.html