Tuesday, June 28, 2005

U.S. Supreme Court File Sharing Verdict Changes Few of the Facts

In a unanimous decision the U.S. Supreme Court sent lawsuits targeting Grokster Ltd. and other file sharing services back to lower courts for trial [Bloomberg coverage], a decision warming the hearts of media companies and putting illegal file sharing in the spotlight again. Media companies should have much to celebrate, as should mainstream technology innovators not trying to induce illegal actions. But while encouraging illegal activities is hardly admirable and worthy of legal action, user behavior will continue regardless of the entertainment industry's assaults in all venues. As shown in our recent survey of small and medium businesses sharing copyrighted content is frequent in the business world, with large percentages sharing content with their peers on a regular basis. The facts on the ground seem to indicate that many publishers and content services providers continue to take an unrealistic approach to electronic content licensing and the technologies that make their persistent views of content licensing obsolete.

In the greater scheme of things the issue is not whether technology can be used to violate copyrights: if this were the case then media companies ought to be suing companies such as Microsoft for software features such as "cut and paste." The greater question is why content licensing is not packaged in a way that takes natural and valued behavior into account and makes it convenient for content purchasers to exhibit that behavior legally and simply. Single-user, "lock box" licenses for electronic content make it hard for people to spread the news of what's good content to one another, limiting the most valuable electronic distribution network - trusted peers - from doing their job. Distribution is no longer the primary mission for most forward-thinking content companies: the primary mission has become making content as valuable as possible in whatever user-defined context it finds itself, regardless of how it got there. In this environment preventing distribution reduces the potential for revenues.

While this phenomenon tends to favor ad-oriented monetization models in the short run, the emergence of sophisticated XML-based packaging of content objects is likely to favor content companies that move aggressively to define packaging that makes it easy to facilitate premium shared and single-user services for content once it finds a valuable context. Traditional product-oriented content marketing will be replaced over time by efforts to push content into the hands of audiences that "get it" for a specific item and to encourage them to spread its use as quickly as possible to people who will demand premium services. Subscriptions will still be a part of this mix, but they will move away from distribution management towards other services, as they have already with publisher-provided "workflow" content applications.

So have at it and bash the Groksters of the world: they deserve it. But don't mistake the initiatives of clever if misguided software developers with the opportunities in the content marketplace that their efforts underscore. Until publishers move far more aggressively to monetize contextualized content better than anyone else they will continue to lose the battle for leading revenues. There are good reasons that Google and Yahoo! dominate with revenue growth: it's time for publishers to respond to those reasons and to produce products that adapt well to those reasons.
Post a Comment