It's Rishi

Seeqpod is a music search engine that crawls the web and finds music files. I have used it a few times recently and was pleasantly surprised with the results. Many of the songs that I was looking for were found. Full DRM-free mp3s. Where does Seeqpod find these files? From what’s often called “open directories”. Open directories are typically user directories on web servers that have inadvertently been made public. They often aren’t publicly available for long since once they are found, they are leeched like crazy by users, which drives up bandwidth usage on the user account (which eventually leads to the account being suspended).

Savvy users have been finding open directories for years. With the right search parameters, Google is a great tool for finding such open directories. However, Seeqpod is an ideal tool for this. Not only is it laser focused on finding music, it mashes up relevant discography data and can even stream the search results so you can listen before you download.

The problem is that Seeqpod is essentially a Napster for the Web. Whereas the real Napster searched people’s own local computers for music, Seeqpod searches the Web for music that people have uploaded to servers. While there may be some legitimate content that Seeqpod is crawling, I think it will be very difficult for the Company to defent itself against a new lawsuit from Warner Music which claims that Seeqpod directly contributes to copyright infringement by helping people locate pirated content.

As usual, I think the record labels are picking the wrong battles and need to focus their resources on figuring out how they can add value, and build closer relationships, with music listeners. The recent developments at Last.FM makes me hopeful that the record labels are in fact seeing the light.

One of the hot news bits of the day was that the mega popular rock band Radiohead shocked the music world by announcing that not only will they not distribute their upcoming album, “In Rainbow”, via a record label (this fact had been known for some time), but also they will make the album available only on their own website for the shockingly low price of….free! Well, “free” doesn’t really capture the spirit of what Radiohead is trying to do. Instead of assigning a fixed price to the music download, they tell the customer that the price is “up to you”. The customer decides the price, no strings attached.

This marketing & distribution strategy that Radiohead can best be described with two words: brilliant and revolutionary.

Some points to consider:

1) The majority of consumers who were planning on getting a pirated copy of the album were never going to buy the album. Piraters are going to pirate…that’s just a fact. You can take measures to curb it but they’re generally ineffective. So, instead of trying to damn these people, people who want to listen to your music, instead why not embrace them. Give these people access to a free, high-quality download and hope that they will become concert-going, album-buying fans in the future.

2) Radiohead creates an incredible amount of good karma with their fans and, really, the music community as a whole. They’re basically saying to the world: “we create music for the sake of creating music and we want it to be enjoyed by as many people as possible.” There are people who truly can’t afford to spend the money for an album and others – each one a potential Radiohead fan – who may never become familiar with Radiohead’s music because they were not compelled to spend money to acquire it. By removing the cost barrier, these people can now listen to the album. Some will hate it, others will love it. Some will eventually pay full market price, others won’t pay a cent. Either way, the net effect for Radiohead is their music will capture some ears and some wallets from a new segment of music listeners.

2) Radiohead is essentially saying that they’re so confident that their album is great, their confident that music listeners will hear the music and feel compelled to compensate the band for the great product.

3) Radiohead will receive a tremendous amount of free PR for their new album from news organizations around the world. Again, the PR isn’t going to affect those people who were already awaiting the new album. Instead, the PR will pique the curiosity of millions of non-Radiohead-listeners.

The upshot of the prior 3 points is that more listeners = more fans = more concert ticket and memorabilia sales = more $ for Radiohead.

4) No record label = no revenue split. No iTunes = no revenue split. By making the album available only via their website, 100% of album revenue will go to Radiohead. (Actually that’s not entirely true..Radiohead will be selling a standard CD in record stores next year but you can almost bet that the vast majorify of people who buy the CD will be those people who had already downloaded – and loved – the digital version). For each CD sale, even a top name like Radiohead will only earn a small fraction of the selling price after everyone else in the supply chain has reaped their cut.

If Radiohead is successful with this expirement, what does this mean for the future of music?

1) This could be the final nail in the coffin for the record label industry. The Time article mentions the following:

“This feels like yet another death knell,” emailed an A&R executive at a major European label. “If the best band in the world doesn’t want a part of us, I’m not sure what’s left for this business.”

Couldn’t have said it better myself. What is left? It’s becoming increasingly clear that artists can promote themselves and their music independently from labels and, if this experiment proves successful, can even distribute and sell their music independently. Even iTunes will need to re-think their strategy. The role of the radio station music dj/director and the corner record store as marketing vehicles is dying rapidly as every iPod is sold and digital music track downloaded.

One question that has has been mentioned in many news articles is that if Radiohead, a top band, is allowing consumers to get their music for free, then how can lesser known, or more specifically the upstart, band compete? I would argue that it’s not as . Most fans who seek out new bands do so not because they can’t access (don’t want to pay for) music from more popular groups. Fans generally do so because they have already exhausted music from popular bands and are in search of something fresh and different. In this likely scenario, the upstart band will not be directly competing with well-known bands for consumer dolllars.

I’ll be eagerly following this story. Hopefully Radiohead will make an effort to be transparent about the various sales/revenue numbers for the new album. No matter what happens though, it is a real possibility that in a decade we will look back on this move by Radiohead as the crack that broke the dam in the record industry.

While browsing around tonight I stumbled upon a discusson thread about imeem. The thread starter was “addicted” to the site even though he was never into other social networks like MySpace. Seeing the imeem name caught my surprise. It’s been atleast 18 months since I’d last heard heard anything new from the company. Apparently they have completely re-strategized and launched a new site with a new focus:

IMEEM is an online community where people and groups can upload, share, tag, and playlist the media they care about.

The new imeem is a very nicely done site. The site design, flash widgets, and profile customization tools are beautifully done. As the quote above suggests, the core of the site is that users can upload music and video (and photos of course) and directly share them on their profile. With imeem’s embedded flash players, you can stream music and video directly through your browser. You can also create your own playlist containing any songs and video you find on the site. As you would expect, there is an imeem flash widget which is embeddable into any other webpage (MySpace pages are the obvious one but I have a hunch this will get blocked by MySpace since this directly competes with MySpace’s own music and video widgets).

The first click I made on imeem was to view the most played songs of this week. As you might expect, songs from hot artists like Nelly Furtado and Justin Timberlake were in the top 10. Not too surprising right? Well I wasn’t surprised that those artists were amongst the most viewed, but then I looked at who uploaded those songs. As you might have suspected, it wasn’t the artist or label. It was just random users who uploaded the mp3’s of those songs. My first thought was “holy crap! if this is legal it’s pure genius!”. After all, imeem already has a impressively large library of popular songs that has been uploaded by users. In addition, unlike iTunes and other music services, you get to listen to the full song, not 30-second previews. All of this for free.

I dug a little deeper on the site and sure enough on the upload page, I saw this message: “Only upload your own music and video, or stuff you have permission to share. Uploading media that you do not own can be a violation of the artist’s copyrights and against the law if you do not have legal permission from the copyright owner. Your account may be shut down if you don’t follow the imeem terms of service.”

In the site’s Terms of Service, a statement to the same effect is found including this: “Uploading copyrighted media or content without the explicit consent of the copyright owner will result in cancellation in any and all of your accounts.” Judging by the countless number of users that have uploaded commercial music and whose accounts remain active, it’s clear imeem is not enforcing this.

And, really, why should they? As YouTube’s story proves, it’s best to just give your users what they want – free access to commercial content – and place the burden on copyright holders to enforce their rights over the content that’s uploaded to the site. As is now well-known, according to the DMCA Title II: OCILLA, as long as online services promptly remove infringing material upon notification by the copyright holder, the service has a safe harbor against copyright liability. As you can see from the Alexa graph above (both Quantcast and Compete.com show a similar pattern), this strategy is working great. imeem’s traffic stats have blown up in just the past four months.

What I find most strange is the company’s VP Marketing is a guy by the name of Steve Jang who, prior to joining imeem, was Director of Digital Business Development at EMI Music. So I think it’s safe to assume imeem’s management is well versed in digital rights. Which leads me to wonder what the heck is going on then? I was hoping to find some recent news articles about imeem but found none. With imeem’s tremendous growth of late, there is bound to be some buzz soon. Hopefully, along with the buzz there will be a conversation about the copyright issues concerning imeem. Until then, I’m confused…

NOTE: I should point out that just like YouTube, imeem does have plenty of legitimate content as well. In fact, the #1 played song in the past month, with over 1.6m plays, is Body Rock by Mike Relm. In this case, Mike Relm himself uploaded the song onto his own imeem profile page. There are other songs by independent artists which have made the most played chart. So clearly imeem, like MySpace, is a proven venue for artists to promote their music.

It has been estimated that over 50% of the total Internet bandwidth (~2 terabit) in the world is consumed by BitTorrent traffic. It has also been estimated that about 50% of BitTorrent traffic is video. That’s a whole lot of video. In fact, that’s 2tb/sec / 8bits x.0.5 x 0.5 * 3600sec = 225 terabytes of video files downloaded every hour! From my experience, virtually all video files are DivX/Xvid avi files (I have yet to see a video torrent that isn’t) that seem to average about 7-10MB/minute. This means that every hour, about 20-30 million minutes of video are downloaded. Based on these numbers, it is very reasonable to conclude that tens and possibly into the hundreds of millions of people around the world are illegally downloading video via BitTorrent.

Don’t get me wrong now, I’m not writing this to incriminate anyone. BitTorrent has been very good to me also. It has essentially saved me the cost of a Tivo every month. Any TV show I want, I have in a matter of minutes and with a little RSS magic, what I want is automatically fetched for me as it becomes available. Of course, a significant percentage of this video is movies, not TV. But let’s put that aside for now and focus on TV.

My roomate and I pay about $60 to Comcast every month just for cable television. I personally feel like that’s a good amount of coin and as such I don’t necessarily feel that horrible when I download torrents of shows that I miss. Without a doubt Comcast is getting hurt by BitTorrent. If the estimate is correct, half of their bandwidth is being used up by BitTorrent traffic so they have surely had to pay hefty amounts to accelerate the upgrading of their capacity. However, my guess is that very few consumers have cancelled their cable TV subscription due to the availability of TV content through BitTorrent. So, while the impact of BitTorrent on Comcast’s ISP business may be significant, I doubt their cable TV business has been affected much.

So who’s the big loser? The TV networks of course. Torrents of TV shows have all the commercials stripped from them to make the file smaller in size and for the downloader’s viewing pleasure. As of last fall, ABC’s Lost had an average 30-second spot rate of $328k (Ad Age chart). At that time, Lost had about 10m viewers. Back in October ‘06, it was measured that over a span of a week, torrents of the latest episode of Lost had been downloaded over 500k times and as much as 1m times. That represents 5-10% of Lost’s total viewership. A 1-hour show like Lost has about 30 30-second paid ads which at the rate of $328k per ad, ABC brings in almost $10m per episode in ad revenue. For the sake of simplicity, let’s say that the ad rate is directly proportional to the audience size. In the absence of BitTorrent, if half of those 5-10% of downloaders would have watched the regular broadcast of the show, that would haev added about $.25-.5m in ad revenue per episode. For a 20 episode season run that’s $5-10m per season in lost revenue for ABC from the show Lost alone.

It is important to point out that at the time of measurement, Lost was the most downloaded TV show on BitTorrent. Also, looking at the chart, Lost’s $328k 30-second ad rate is amongst the highest in primetime. With these two factors combined, the revenue impact of Lost is probably an order of magnitude higher than the typical show. Overall, though, I can definitely see a major network like ABC losing out on about $25m of ad revenue across all of its shows this year. And that is $25m of pure top line since the cost of that additional revenue is essentially zero.

So what can the networks do about this? Plenty. Moreover, just as p2p has sparked tremendous growth in the long-tail of the music industry and created new opportunities, the same is happening in TV and film. I’ll talk about what the networks and new industry players have been up to and sort out some of my thoughts in my next post.

Danny Sullivan interviews Gabe Rivera – Gabe is the creator of memeorandum.com/TechMeme, one of the premier blog/news aggregators on the Web. Ever since I first found memeorandum a couple years ago, I have been a multiple-times-per-day reader. My routine is: open laptop, check e-mail, check RSS reader, check TechMeme. You may also notice that Memeorandum is the only company besides Google and Yahoo that has its own tag on my blog! It’s indispensable for me. I’ve also had the opportunity to meet Gabe at various geek social events and he’s always struck me as someone who is purely focused on methodically building the perfect product. He keeps a low-profile and is easy to approach. On more than one occcasion I’ve rambled off my ideas for to him and he’s always been kind enough not to interrupt and beg me to stop boring him. =)

The second interview worth reading today is TorrentFreak’s interview of Bram Cohen, the creator of BitTorrent, the now ubiquitous P2P file distribution protocol, and the founder of BitTorrent, Inc (recently in the news for purchasing popular BitTorrent client, uTorrent). If you are a frequent torrent user, you owe it to yourself to learn more from the man who brought about the current revolution of P2P file-sharing.