Advertisers certainly frown on pirate sites ads, but companies like Mochi have pioneered sales in this business. Also, Google has convinced 1 million + advertisers to put their brands on ‘blind’ networks - the reason is because the ads are not ‘brand thematic ads’ but rather ‘call to action’ - so Ford Motor Co may not like its new cars to be shown as ads on pirate sites, but if the ad says - sign up for a free test drive here and submit your license number - they wouldn’t have a problem. It leads to a lead that may sell a car - without compromising the brand book guidelines of the brand.

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Steve - you are right in your rejoinders. Its an entrepreneurs challenge to try and the market to respond. Thanks for the best wishes!

Alok,

Thanks for the response. I agree with the central theme though I still believe some of the points made are debatable and the "real success" model has not been outlined.

** 1) The Napster point was to highlight that the Napster platform was what the big music labels should have built on to create a legitimate digital music platform - and given that they owned the music rights, they could have even thrown in a couple of free songs to excite consumers about the artist or album. The engine of Itunes was there..

—> a. Technically speaking the engine of iTunes is very different from Napster - server-controlled content v/s peer-to-peer sharing with no DRM

b. Bertelsmann did try to make a deal with Napster in 2000 - however, it's harder to create success out of these deals than most people can imagine. The pressures in large companies create the true Innovator's Dilemma - they would rather refine existing business models than explore new, untested ones. As an entrepreneur you probably shake your head at what would obviously be considered ludicrous behavior but for the large companies this is a protective mechanism - stay away from risk, let someone else take it and buy them if they succeed.

** 2) The Chinese consumers would have happily played big console games as ‘online versions’. As late as 2008 EA released FIFA ‘online’ - free to play with virtual goods in place - buy players clothes etc… so if they would have moved fast, they could have been the rightful owners of the space captured by Shanda and the likes.. (check out the original games of Shanda - you will be shocked at the quality levels)

—> I still think the overlap between casual/social games and the console game audience is very thin - they make up very distinct verticals. Having said that, some of the online MMO's do appeal to console gamers but many of them are subscription-based.

** 3) I think the IStore is the new media entertainment outlet. Mix that with a Planet Hollywood flavor - memorabilia, surprise visits by artists etc etc - selling digital music and real merchandise. May be that would work? If not – probably the business model of legacy entertainment outlets is dead.

—> I agree, the iTunes Store comes the closest to looking like a financial model that will encourage convergence, at the same time remove the need for piracy. Think of this - ABC makes all its recent television episodes available online for free!

** 4) Advertisers certainly frown on pirate sites ads, but companies like Mochi have pioneered sales in this business. Also, Google has convinced 1 million + advertisers to put their brands on ‘blind’ networks - the reason is because the ads are not ‘brand thematic ads’ but rather ‘call to action’ - so Ford Motor Co may not like its new cars to be shown as ads on pirate sites, but if the ad says - sign up for a free test drive here and submit your license number - they wouldn’t have a problem. It leads to a lead that may sell a car - without compromising the brand book guidelines of the brand.

—> Most advertisers opt out of the Ad Sense partner network unless they are targeting specific publishers. I'm not familiar with Mochi but my sense is that advertisers will target ads where they are certain of meeting objectives and therefore will go after ads where metrics are clearly available - i.e. legitimate sites.

I checked out your site - looks interesting - keep up the great work in the trenches - its models like yours that will force innovation more than the pirates -:)!!

Steve, thanks for your response. My replies:

1) The Napster point was to highlight that the Napster platform was what the big music labels should have built on to create a legitimate digital music platform - and given that they owned the music rights, they could have even thrown in a couple of free songs to excite consumers about the artist or album. The engine of Itunes was there..

2) The Chinese consumers would have happily played big console games as 'online versions'. As late as 2008 EA released FIFA 'online' - free to play with virtual goods in place - buy players clothes etc… so if they would have moved fast, they could have been the rightful owners of the space captured by Shanda and the likes.. (check out the original games of Shanda - you will be shocked at the quality levels)

3) I think the IStore is the new media entertainment outlet. Mix that with a Planet Hollywood flavor - memorabilia, surprise visits by artists etc etc - selling digital music and real merchandise. May be that would work? If not – probably the business model of legacy entertainment outlets is dead.

4) Advertisers certainly frown on pirate sites ads, but companies like Mochi have pioneered sales in this business. Also, Google has convinced 1 million + advertisers to put their brands on 'blind' networks - the reason is because the ads are not 'brand thematic ads' but rather 'call to action' - so Ford Motor Co may not like its new cars to be shown as ads on pirate sites, but if the ad says - sign up for a free test drive here and submit your license number - they wouldn't have a problem. It leads to a lead that may sell a car - without compromising the brand book guidelines of the brand.

Curious, as to what you would say about the following:

** The record industry treated Napster like the Taliban of Piracy—they sued, fought and closed it down. But wasnn’t Napster actually ‘iTunes’ way before iTunes really came on the scene?

—> Wouldn't you say unfettered P2P sharing is different from legalized distribution where you get a share of the revenues?

** 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.

—> By your own admission the big games were pirated and were available so isn't the birth of social games and their popularity more on the need for such a vertical than on capturing market share from larger gaming platforms? i.e. Aren't they two coexisting game verticals that target different audiences?

** Piracy creates economies of scale.

—> Could you outline a financial model for legacy traditional media outlets to succeed in the New Media world? A lot of the music publishers will tell you the move away from CD's has shrunk the market instead of growing it. Also, the "need" is created by the original marketing of the content - the only place where this may differ is in content which had quick viral or social uptake - but then why do you need the pirates in the first place?

** 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.

—> Would advertisers place as much value on games that are stolen as they would for your legally distributed games? Would you have access to the same metrics allowing you to command an equivalent ROI?

** Piracy creates democracy.

—> If you believe content is king and that great content will always float to the top then the pirates aren't doing anything more than giving unfettered access to content. I accept this may work for some artists in the very early stages of their career but not thereafter.

All in all, your piece makes a valid point - not "Piracy is good" but "the need for traditional media outlets to embrace New Media" - here, I admit Piracy will force innovation.

I'm concerned about the quantity and quality of content that can be supported by "inviziads" or similar.  Considerably more production resources go into a book than an online game.  Hard to see a book financed by inviziads.

guy in suit states obvious. offers no insight.

"Recently, I asked a 13-year-old 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."

Yes, because even 13 year olds know that downloading MP3s is not the same as stealing. Downloading a -copy- is copyright infringement, not stealing. When you steal you take that product. When you download you take a copy.

I'm not saying its any worse, but there is a huge difference.

This is a nice article, and a nice change of pace from the "we lose money to piracy" rant, however the last paragraph is quite disturbing:
"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."
This is absolutely absurd. Books have been borrowed forever between friends and family. Never mind Libraries. Book sellers and authors don't get a cut of that action either, and until companies recognize that general right of first sale, there will be no high penetration of digital book readers out there.

TV has proven, that the customers need not pay for content.

Internet is slow to embrace it.