As Napster fades away

December 9, 2011
For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment 

Thirteen years after the launch of the once-demonised peer-to-peer (P2P) file sharing service Napster, it has been subsumed in the US into the entirely legal Real Networks music-rental service, Rhapsody.

Best Buy, the owner of the Napster name since 2008, clearly has other things on its mind, as has co-founder Shawn Fanning, who now shares his expensively obtained expertise on the board of Spotify with founder Daniel Ek.

For all the battles that Napster fought with the Recording Industry Association of America (RIAA) and with copyright lawyers around the world, P2P sharing has not become the default method of music distribution – Apple’s iTunes and the iCloud have come much closer to the mark. Although revenues of many millions have been lost to illegal copying, in the longer term the distribution of content through the cloud has achieved a momentum that Fanning claims he always knew was there.

In fact, what broadband network specialist Sandvine refers to as real-time entertainment on the internet overtook P2P two years ago. The most recent figures show that in mature broadband markets, Netflix, Spotify, BBC iPlayer, YouTube and similar streaming services account for up to 40% of downstream traffic to users. In North America, this figure rises to 60% in peak viewing hours, up from 50% in 2010. Netflix by itself represents 27.6% of total daily data compared to 9.0% delivered through the BitTorrent P2P distribution model.

Not all P2P traffic is entertainment content, of course, since it is an efficient way to distribute data of any kind. For example, the successful voice-over IP (VOIP) application Skype, which relies on P2P for efficient connection, ranks fourth in its use of upstream bandwidth in the US. To put that in perspective, while BitTorrent takes a 47.5% share of upstream bandwidth in peak periods, Skype contributes just 4.27%.

A report commissioned by NBC Universal and published in January estimates that just under a quarter of internet traffic (23.76%) is “infringing” data. Cambridge-based technology researcher Envisional analysed data from the top 10,000 valid “torrent swarms” on a single day in December 2010.

The researcher combined this data with estimates for downloading from “cyberlockers.” These paid-for file depositaries, usually accessed through a password, are among the most popular websites in the world – MegaUpload is at 67th place in the global ranking – and Sandvine estimates that Rapidshare and MegaUpload between them contribute 5.1% of all internet traffic. Envisional suggests that more than 90% of the content found on these sites is copyright material, made up of films, television episodes, music, software, and games.

By combining the cyberlocker data with the volume of P2P activity, researchers were able to calculate a figure for the infringing use of internet bandwidth.

Film and television content together added up to 47.9% of all the available P2P torrents and Japanese animé contributed a further 1.5%. Discounting pornography (which was the largest single genre and comprised 35.8% of all the torrents analysed), almost 50% of the torrent swarms were infringing video. The balance comprised other copyright material, including music, books, games and application software.

The Envisional report is a very thorough document that earned the endorsement of the MPAA. To assess the volume of infringing internet traffic, it examines the methodology of Sandvine beside comparable studies from Cisco, Arbor Networks and the German organisation iPoque. Although it concludes that none of the four studies can be accepted without reservation, the Sandvine data appears to command the greatest confidence. The data that the researchers used were for 2009, the latest Sandvine statistics are from the autumn 2011 report.

With this background information, the BitTorrent advocacy website Torrentfreak.com looked at the published data from Envisional and concluded that running the Motion Picture Association of America costs Hollywood more than it loses through piracy. It asks, half-seriously, what would happen if all BitTorrent downloaders switched overnight to Netflix and there was an end to IP theft.

On the generous assumption that all BitTorrent traffic is infringing, the author used the Envisional figure of 47.9% of valid film and television swarms as a basis to calculate the volume of video traffic. Because video files are much larger than those for audio, the size of the film and TV data was proportionally greater, around 85% of the total. Using Sandvine figures, this leads to the conclusion that almost 7.5% of all internet traffic in the US in the survey period originated from BitTorrent video downloads. Data from the same source show that Netflix accounted for approximately 22.5% of the traffic, a figure that is three times larger than the total of P2P sharing.

According to the Torrentfreak, if this traffic were to accrue to Netflix, the company’s revenues would increase by one third to $198 million (£127 million), based on the Q4 2010 shareholders report. Netflix paid Hollywood $181 million (£116 million) in licensing fees in the full year 2010, which hypothetically would have increased by approximately $60 million (£38.5 million) had there been no BitTorrent.

As the author points out, this is just an exercise in mathematics, since BitTorrent users would not necessarily pay for Netflix. It does, however, quantify potential losses from infringing content using data that the industry itself has signed up to, and the figure is some way short of the “billion dollars” that is often talked about.

At the end of November, the Swiss Federal Council in Berne issued a communiqué to announce the adoption of a report that claimed that there is no need for additional legislation to outlaw the downloading of copyrighted content for personal use. The report says, “Almost a third of young people under 15 have downloaded films, music or games, but despite numerous articles in the media, it seems that they do not know which sites are legal and which are not.”

According to the Swiss legislators, these young file-sharers have a fixed disposable income allocated to the entertainment sector and money that otherwise would be spent on CDs and DVDs goes instead on concert tickets, visits to the cinema or merchandise. “It is mainly large foreign producers that suffer from these changing patterns of consumption. They will have to adapt to it. Any fears that there would be a negative impact on the cultural life of Switzerland have proved unfounded,” the report concludes.

Meanwhile, the Napster name will live on in the UK and Germany – at least for the present. It is hard to assess how it will fare when every real-time entertainment provider, from Samsung and Sony to YouTube and Dailymotion, crowds the field. The name Napster had traction once upon a time but bankruptcy and multiple owners have diluted the brand almost to vanishing point.

On the film front, legal and outwardly “free” streaming video services such as the Blinkbox/Tesco Clubcard venture and UltraViolet will soon blur the line between the packaged media version and the online file. The “buy once, play anywhere” message might encourage friends and relatives to pool their resources. It will no longer be necessary to lend the physical disc to your neighbour, just pass on your Clubcard number and they will be able to stream the video from the cloud directly to their own connected TV, wherever they might be at the time.

Except perhaps in Tennessee, where the state General Assembly has finally caught up with the digital challenge of the age and made it illegal to share passwords for online content-subscription services such as Napster. 

Unfortunately, that horse has already bolted.