File Sharing: A Model Business for Industry Use

File sharing, one of the earliest internet applications, is a generic term used to describe any instance when a content provider hosts a file (or files) for others to access and transfer to their own system (i.e. download) via the internet or other networks. While this description is in itself innocuous enough, it is what the masses did with file sharing that garnered all the attention and pushed the technology to the forefront of media coverage – a marvel which still gets headlines today.

Step back in time for a moment: It is the early commercial internet boom, the first wave, and companies are beginning to explore how to monetize internet usage. Many models were tried and discarded, while other models developed a mind of their own. (When the idea for file sharing was conceptualized, it’s highly likely the original specification developers did not envision what was to come.) Who could have predicted that internet file sharing would force the evolution and complete re-evaluation of media content distribution, changing the way consumers around the world receive content? Whether or not he’s ever consciously used file sharing technology, each individual media consumer has been affected by its aftermath, because media companies (and independent content producers) all had to adjust to it, and consider whether to embrace or fight against file sharing. (Warning to media companies: Ignore the implications of file sharing at your own peril.)

There are several methods of file sharing, including the old standby, File-Transfer-Protocol (FTP), but the Peer-to-Peer (P2P) model and its offspring has proved the thorn in the side of the media industries. P2P first took off when people realized that you could share anything – large files, music, movies, etc., quite effectively. On P2P networks, files are generally transferred via a single (or multipart) stream with the data being piped through in one direction – from the host to the recipient. (Yes, there are the occasional upstream confirmations, (handshakes) and the like from the recipient’s end, but for the most part data leaves the host and heads to the recipient). Because this connection is from terminal to terminal directly there was initially very little (if any) monitoring of what was being transferred. It was only a matter of time before…

Human ingenuity being what it is… creative individuals began to share anything that wasn’t tied down, including the proverbial kitchen sink. Companies (and individual programmers) sprang up that created ever more sophisticated software to facilitate this enterprise. And a huge network of piracy emerged, some of it unintentional. (Many users just thought the idea that anyone could share files was a cool one and began sharing items in their possession, never giving a thought to who owned the right to said items. Other realized they were infringing upon the rights of the content owners and simply did not care.) Whereas piracy has always been an issue for those offering content commercially, the beast had previously been concentrated in countries that either ignored or was lackadaisical in enforcing copyright, patent, and trademarks. The media industry was caught sleeping on this one, however.

It seems as if overnight a whole enterprise developed online to facilitate the sharing of pirated content. And a number of companies whose business models were based upon file sharing got swept up (and often over swept) in the maelstrom that followed. Companies like Napster, the poster child of P2P music file sharing, rose to prominence by tacitly and at times overtly encouraging users to share whatever, whether or not the users owned the rights to the content. The internet was booming, and so was its underbelly. As sales of music and movies tickets plummeted, the media industries began to take notice. Grumbles could be heard in media outlets across the board. Every media executive who’d ignored the implication of file sharing technology scrambled to cover his assets.

Around this time, P2P had a brainchild, called torrent. A torrent is a specific methodology of P2P file sharing. In a torrent, files are broken down into many bits and transferred via these small chunks to the recipient, as small bits move through networks easier, then reassembled on the other side (i.e. content distribution). The beauty of this idea comes in that the chunks do not all have to originate from the same host; torrent software searches for the necessary chunks to complete a file within the entire connection of peers wanting to get this file. Chunks are appropriated from who ever has it, based upon factors like physical closeness (the shorter the distance physically the faster the data arrives at its end destination), and available throughput.

The complete file resides with a host or seeder, who offers it for sharing. Users (called leechers) connect and the file starts getting distributed. As pieces move to and fro, other users can join in or leave as suits them. Once a user finishes downloading a specific file, he is encouraged to stay connected to seed (host) his version (seed) of the file. Obviously the more seeds available the quicker downloading occurs. By its very nature torrent is difficult (but not impossible) to track, as pieces flow to and from many locations all at once. And because torrent made the transfer of very large files not only more feasible but largely automated, it wasn’t long before movie piracy joined music piracy at the forefront of media industry gripes. (Movies had been pirated via straight P2P but downloading movies this way were not efficient, and caused a huge drain on the provider/host.)

As P2P networks became more proliferate, and the use of torrents took off, piracy reached new levels. It was now possible to find pretty much everything in creation available for (illegal) download. Why wait for something to air on television or go to the movies, when one could download the same thing and watch it when he wanted? Media industries began to suffer catastrophic losses. (And yes, some of these losses are attributable to the amount of tripe passed off as saleable content these days, but a good lot of it is due to piracy, too.)

Soon advertisers began to gripe, too, as viewership at both movie theaters and television screens was seen to be in decline. (The loss of eyeballs pointed at ads on television screens is likely also due to the advent of time-shifted viewing through services like Tivo(R), but this is another story.) People were buying less CD’s and going to fewer movies. (DVD sales coming so quickly on the heels of theatrical movie releases also contributed to the decline of the latter.) All in all, however; piracy was taking a toll on the content production enterprise. If people were just going to download illegal copies of work, then why even make it available?

You cannot be seen to constitute a drain on the pocketbooks of large industry for long before it fights back. Online piracy became a rallying cry. The media industries started joining P2P networks as “users” and tracking exactly who (are least who’s computer or IP address) was precipitating these infringing transfers. The RIAA (the music and recording industry body) and the MPAA (the motion picture industry body) began to collect the internet protocol (IP) addresses of high ticket offenders and subpoena their records from ISP’s. Armed with data seemingly proving illicit activities were occurring en masse, and who was perpetrating them, the organizations began to sue not only individual file sharers but also the companies that produced the software and hosted the files on their networks. The media industry was vigilant filing suits left and right. Many file sharing businesses were sued out of existence. Others regrouped and made the effort to legitimize their business. (Napster and BitTorrent, an early torrent software developer, were among these.) With such big pocketbooks behind them, it would only be a matter of time before internet piracy was stamped out, right? Keep reading…

The fight became more difficult for several reasons. First, modern day P2P Networks (the ones which arose after the first generations were sued out of existence) generally have no centralized storage space, as files reside on the hard-drives of the individuals sharing the files, the networks simply act as a conduit. Users register with the network, often times this requires downloading and installing specialized software, make available any files they wish to share, and look for files (residing on other users systems) that they would like to download. The software precipitates the entire process, handling everything from “marking” files available to share, sharing said files, searching for files on other users systems, and downloading those files. The problem comes from the fact that because most current P2P networks have no centralized hub (on purpose) there is no easy way to track what is being shared. (As a result, the modern day networks have, in many cases, become a “last bastion” of online piracy.) It became more difficult for the bucking litigants to locate the people to sue.

Additionally, because these new day P2p model businesses do not actually host any files, but only advertise where to find them (in the case of P2P directories) or provide software to do so, they have argued that they cannot be held liable for what users choose to do with their products. (These arguments have some merit. Simply because something can be used illegally, this should not mean that the item itself is made illegal. But more on this later…)

Second: The RIAA and MPAA in many cases seemed not to perform any due diligence. The organizations did not verify (or seemingly care) who the end-user actually happened to be. They simply collected IP and in some cases Machine Access Code (MAC) addresses, and presented subpoenas to ISP’s based upon them. Once the account holders of these electronic addresses were named via ISP records, the presumed offender was sued, and quite a few of them were guilty as charged.

Unfortunately however, for the RIAA and to a lesser extent the MPAA, many of the biggest individual file sharers were minors, or minors using their parents or grandparent computers. (Youth tend to be some of the earliest adopter of new technology, especially because we’re now witnessing the generations that have never known a world without the existence of the personal computer.) Some were people whose networks had themselves been pirated. (If you were going to intentionally download illegal materials would you use your own network which could be easily traced back to you? Not.) There was even a contingent of the naive, both adult and child, who simply did not realize the implications of what they were doing. (They swear that it did not occur to them that giving someone else a copy of something, that they had bought or got as a copy from someone else, could be considered theft.)

As a parade of innocent victims, naive offenders, and children were paraded before the court of public opinion a backlash brewed. People wondered how these industry organization could be so callous, and in many cases so silly as to sue the wrong person. Even when children were obviously guilty of infringement, many people excused it, because they were children. The industry organizations did not excuse any of it though. They held children responsible, they held parents and grandparents responsible, they made business providing the means to file share accountable. And in so doing, they made enemies.

The final problem arose when media companies (and the bodies that represent them) decided not to only fight illegal file sharing, by suing those doing it, but to argue against the use of the technology period. Instead of making use of the technology for their own purposes and distributing content legally, the industries (for the most part) decided they would rather have the technology “legislated” out of existence. Both the RIAA and the MPAA had been very aggressive in their lobbying efforts to shape the laws that control where, when and how media content may be distributed. And their large wallets have done a lot of talking, so to speak. This move cost them even more revenue in the long run.

People who had stood on the sidelines in the previous fight began to mobilize. It’s one thing to go after people who are breaking laws and pirating materials; it’s quite another to tell people who aren’t breaking any laws or even considering doing anything wrong that they are suspected criminals simply because they possess the technology to be one, if they so choose. It’s like some form of extreme profiling run amok. “You are hereby deemed a criminal, because you have the wherewithal to become one.”

There are many lawful uses for P2P networks. For instance, a torrent is (perhaps the most) effective way to move large files from place to place and person to person via the internet without taxing network resources, and requiring copious amounts of bandwidth (for the content provider). Technically a content provider (legal or otherwise) would only have to provide a file once to another person via P2P, and the file could perpetuate indefinitely via P2P sharing of the file whether as a torrent or direct P2P transfer.

So for an industry as whole to say, “We want and expect you to give us money for our content, but even if you do legally buy a copy of the item, instead of pirating one online, we still can’t trust you with our content, because you may have technology at home that will allow you to illegally distribute it. We have to protect against that possibility. We have to insure against it.” So methods were devised to restrict what people who had legally acquired content could do with it. In many cases, these methods used means that were in themselves questionable, mimicking spyware and other harmful applications. An average computer user who would never consider using file sharing, legal or no, could go to a store and purchase a CD, come home and decide to play the CD on his computer only to find that it was impossible to do so, or worse that he is required to install proprietary software to play the disc. Nothing upsets consumers more than feeling that they have been taken advantage of. The little man does not like to be put upon by the behemoth, it in our nature as individuals. It’s why we love rooting for an underdog; why we love the story of David and Goliath.

Once the media industry began to treat every user as a potential thief, locking files with ever intrusive DRM, surreptitiously installing rootkits to prevent the sharing of files and limit the playback method of files, installing proprietary software to restrict the playback of files; well, the sh*t hit the fan. People who had never considered swapping files illegally swapped them out of spite. If they were going to be treated like criminals out the door, then why not commit the crime of which they were being preemptively accused?

Some began grass roots organizations to fight “big industry” at Congress, and other still joined the fight. Programmers created ever-better methods of encrypting transfers to make it harder to track them. If P2P and torrent had been popular before, in certain arenas they became positive celebrities. A new underground spread out determined to fight back against the RIAA and MPAA and their cronies, on principle. Citizen versus big business war broke out. And in a case like this, the consumer must win out, must succeed, or else the industry will eventually fail, as its offended customers go elsewhere.

At some point, the big players in content distributed must have recognized this. For while, they are still trying to push through legislation favorable to their cause, (and what industry isn’t?) they have begun to see the light and embrace the technology for their own usage. It had to happen. How else would the media conglomerates distribute their wares, other than though such methods as already have been proven reliable, cost effective, and near imperturbable to even their own rallying against?

Why just a few days ago a deal was announced with Warner Brothers to legally distribute film and television (WB Network) via BitTorrent, a former enemy. File sharing will continue on, as it is an integral sector of internet traffic. It will adjust and re-form, but it will remain. After all, it is now a viable (and proven) business model.

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