Every time I listen to my Ipod I remember Napster.

The record industry treated Napster like the Taliban of Piracy – they sued, fought and closed it down.

But wasn’t Napster actually ‘iTunes’ way before iTunes really came on the scene?

What would have happened if the Music Labels – the Virgins, EMIs, etc., had gotten together and invested in Napster or just bought it outright and made it their industry ‘digital music’ distribution channel? A Sony ‘walkpod’ a la iPod would have complemented the business: The music guys cranking out music, and the hardware guys making the stuff to play it on.

The moral here is that piracy needs to be understood before it is fought. Ask me about it: I run a casual games company that produces 15 games a month and has a library of over 350 games. So far, I know of 8900 websites that have stolen or as they politely say ‘scraped’ our games.

Honestly, after the initial shock, I am quite glad about the situation. It proves that what we create is valuable – since only valuable things get robbed. And we have creatively leveraged piracy to help us succeed. More on that below.

Recently, I asked a 13-year-old teenager if she would ever walk into a CD store, lift a CD from the shelf and take it home without paying for it. She clearly said that she would not. Yet the same girl was zapping MP3s and singles to her friends across the web… when I explained to her that she was actually ‘stealing’ – she just didn’t get it.

Piracy is the new consumer ‘speak’ and ‘do’, and it’s here to stay. Like it or not, piracy or not, music and all forms of entertainment is going to be zapped all over the world without any restrictions.  It’s the job of the industry to capitalize on it rather than squander it away.

This is what is good about Piracy and the Pirates behind it and where value possibly lies:

  • Piracy creates economies of scale-

Distribution by agencies and companies is history. Consumers distribute content amongst themselves – leading to almost tsunami like waves of consumption and distribution. So, in effect, the cost of digital entertainment is actually reduced, thanks to the non-hired help.

Creators can price their wares very aggressively given this new economic dynamic.

  • Piracy creates democracy-

It’s no longer a chance meeting with a music czar  or a gaze by a producer at a bar that creates stars today. Digital distribution is the ‘lowest common denominator’ that anyone with creativity gets noticed and famous. Pirates are the best advertising agents out there. And they come for free.

The stars in the making need to partner with this global tide rather than fight it.

  • Piracy creates innovation-

The big gaming-console companies did not succeed in markets like China due to rampant  piracy. Their game CDs were copied and sold in the black market. They felt cheated and held back. That created a massive vacuum in the market that was filled by the online game companies that created games that were meant only for the browser that required subscriptions and virtual goods purchases. This was the stepping-stone to games like Farmville and Mafia Wars.

How to win

It’s painful to be robbed of what’s yours. Yet if one thinks beyond the hurt, there may be a bigger opportunity out there.

  • Upcoming artists now make more money from concerts and live appearances than selling CDs. Pirate marketing is the new currency of value. They tell fans about new bands without spends on ads. Pirates can be the new career launchers.
  • Shouldn’t the big music companies still create a competitor to the iPod and iTunes?
  • Make everyone in the eco-system win. Our secret sauce to leverage piracy was something called ‘inviziads’ – we placed invisible ads in our games that went with our games when the pirates took them. These ads automatically become visible on pirate websites. The interesting concept is that the content remains pristine. The consumer wins (gets content without paying), the pirates win (become popular thanks to evergreen content) and we win (thanks to the ads in the content).

The next battle starts when the e-book readers like the Kindle begin to get high penetration. Original books, new and old, will begin getting zapped across friends and families. Authors, publishers and booksellers will be on the receiving end of the tsunami – they will not be paid in this round. Let’s see how many of them try and fight the flood and drown vs. those who swim with the tide and survive and win with innovation.

**********

Originally posted on November 4, 2009 on rodinhood.com

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