The World of P2P: What is P2P, an Economics Perspective

From a Economics Perspective

For a P2P system to be viable there must be a one to one equal share of work between peers, the goal should be a balance between consumption and production of resources with the goal of maintaining a singe class of participant on the network, sharing the same set of responsibilities. Most P2P systems have a hard time creating incentives for users to produce (contribute), and end up generating a pyramidal (or multiples, tree like) scheme, as users interact within making the systems dependent on the network effect created. The more users the system has, the more attractive it is (and the more value it has) as any system that depends on the network effect, it's success is based on compatibility and conformity issues.

The digital revolution has created a wave of changes some are yet to be fully understood. One of the most important in regards to economics, and that commercial goods producers are fully aware is the dilution of value due to the increasing accumulation and durability of older creations. Digital media has made not only old creations more durable but also more easily accessible and visible and cheap to accumulate.

Even if rarely anyone defends works on the public domain, those works continue to move consumers from the need to acquire new one. It fallows that this makes our common cultural historic records a prime target for the dark forces that arise from basic economic interests.

The popularization of the production and distribution of Cultural goods

P2P radically shifts the economics of distribution and business models dealing with intangible cultural goods (intellectual property). Since most content is virtual, made only of information. This information can be any type of non material object that is made from ideas (text, multimedia, etc.). In this way content is also the myriad ways ideas can be expressed. It may consist of music, movies, books or any one single aspect, or combination of each.

Music

The digital revolution has forced to music industry to reshape itself in various ways. From the promotion, to distribution passing.

Radio

Radio had been for a long time the way that the industry managed demand for its products. It was not a question of quality but of product "visibility" and a easy way to generate revenue from royalties.

The advent of the transistor and the walk-man should have clued-in the industry to the changes to come. Even here the simple digitalization and the possibility of moving radio from the airwaves to the Internet has caused much pain in the industry and eroded considerably how it had managed to shape demand.

From Tape to MP3

Another front of attack came from the very media where the content was sold. Something that should also been foresaw since the advent of the 8-track tape, that culminated in compact Cassette was another revolutionary change to the business model, as revolutionary to the music industry as it was to the video. Adaptation led to the CD and mixed content offerings. In fact it seems that all pressure and incentives to change were being dictated by the consumers and the industry economic effort to reduce production costs but those that had decision power over the industry continued to remain blind to the technological changes they were fostering themselves.

Here the move to the digital not only permitted even easier reproduction but ultimately made the product completely virtual and independent from the media it was sold on. The walk-man, evolved into the portable Cd-player and ultimately died silently as solid memory and portable players took over the market.

Internet

Sidenote

Dan Bull's D.O.A.C.T.A (Death of ACTA) being ACTA the Anti-Counterfeiting Trade Agreement, in it the creator explains concisely how independent music creators see this continued call for intellectual property control policies.

The need for content intermediaries continues its rapid decline. Most intermediaries do not add much value to the product besides being able to provide better marketing orientation and general business knowhow to the content producers.

The time where volume would permit record companies to offer better production facilities is over, as the price for producing an audio work is now accessible to all, even if in physical form. Intermediaries in fact are becoming to costly for the perks they can still provide. They create unnecessary barriers between the producers and consumers.

In todays interconnected world the distribution channels are so diversified that creating artificial control schemes for digital distribution (physical or virtual) will only degrade the level of satisfaction of consumers without increasing product value but incrementing the costs to the sanctioned distributors.

If costumers are faced with a product with DRM, then unauthorized copies if made publicly available, will create a competing product without limitations, thus creating a better product with a better price tag. In fact the use of DRM creates differentiation and promotes the creation of a parallel markets (if one can call it that because most offerings are gratis, but multiple DRM schemes would fragment the market in the same way), this results from the consumers wishes are not being satisfied by the primary offer or by simply enabling more choices.

Today radio, TV and the press as a publicity vehicle is becoming increasingly infective in relation to the interactive media that the Internet permits and it can be utilized as a direct distribution channels. More and more artist are becoming aware of the advantages of controlling the copyright of their productions and taking the responsibility of distributing their own works, this has also increased the level of communication with the consumer.

This has become quickly evident in the music industry, mostly because the medium has always been extremely volatile and consumers have had a great number of ways of utilizing the content, reducing the freedom of movement for the content have always been attempted and failed, the same is becoming true for video and with time even books will have to deal with this new reality, as is now seen with the written press. As the medium for the content becomes ubiquitous, cheap and acceptable to consumers, producers will have to adapt.

Video

Movies

TV

Recently some television networks are rethinking their approach to audiences, this has resulted from the level acceptance and interest that DVD show collections were having and several online attempts to improve distribution. Since now anyone can easily illegally download their favorite shows, a problem similar to the fragmentation of the distribution channels as seen in the music recording industry with the rise of alternative delivery technologies will have a similar result if television industry fails adapt and fill the audiences expectations of quick and easy accessibility to new fresh content.

ISPs

ISPs have been shaping/throttling P2P traffic, especially the more popular networks for years, resulting on an ongoing cat and mouse game between ISPs and P2P developers. In the US the network neutrality discussion and recently the evidence of this actions by ISPs against P2P traffic has turned this matter into a political issue.

In November 2007, Vuze, creators of Azureus (a Bittorrent application), petitioned the FCC, resulting in a FCC hearing held in December 2007. One of the issues raised there, was the level of data available on BitTorrent throttling. This lead to a statement by the General Counsel at Vuze, Jay Monahan; “We created a simple software “plug-in” that works with your Vuze application to gather information about potential interference with your Internet traffic.”

This plugin has been gathering more hard data on the actions of ISPs, resulting in a growing list of ISPs that interfere with P2P protocols is maintained on the Azureus WIKI ( http://www.azureuswiki.com/index.php/Bad_ISPs ).