"It would be in your best interest to accept our generous offer"

The guys at Torrentfreak do a terrific job of covering the torrent and p2p scene. I’m always amazed at the stories they break and the excellent writing. And if I understand it correctly, they do it in their spare time when not at their day jobs.

Last weekend they broke another story that I found particularly interesting. Torrentfreak’s Ernesto reported on DigiRights Solutions (DRS) a German company that published a powerpoint sales and marketing presentation to push its anti-piracy services.

After initially running through some pretty mundane stats about how much online piracy is costing copyright owners, the DRS presentation goes through their process of finding and pursuing users who illegally download songs and movies. They explain that after they find the alleged downloader, they send out an email demanding a payment of 450 euro ($650) per file. DRS keeps 80% of whatever they collect thus leaving 20%, or 90 euro ($130) per download, for copyright holders.

Then suddenly the presentation turns into a pitch comparing the profitability of legal and illegal downloads. Ernesto goes on to report :

“A legal online purchase of a song brings about €0.60 into the pockets of the copyright holders compared to the €90 per alleged file-sharer that pays up. So, the copyright holders get 150 times more from pursuing filesharers than from selling actual music, the company claims.

However, not everyone who receives a letter will pay up, but DRS says that an impressive 25% of all recipients do without asking questions. This figure is much higher than most people assumed previously.

DRS states that it’s realistic to track and pursue about 5,000 filesharers per month per title. Considering that 25% of those people pay the €90, then the copyright holders would have to make about 150,000 online sales. Which is equal to the number of sales that are required for a Gold record award in Germany.”

Needless to say, this is absolutely bizarre and outrageous. Rarely are such blatant attempts made to turn piracy into a profit center, especially when the labels do not have to share this type of revenue with the creators.

Evidently DRS is currently successfully operating in the UK and Germany at the moment, but are clearly looking toward other territories. The fact that the UK government, or any government in fact, would allow such legalized extortion is beyond the pale. I understand that European governments are moving quickly to quash illegal downloading and that’s fine. But to allow and condone the organized extortion of its citizens by a private for profit company heralds new lows in the war against piracy.

This brings to mind the famous confrontation between Joseph Welch and Senator Joe McCarthy at the Army-McCarthy Senate Hearings in 1954 when Welch effectively put an end to McCarthy’s reign of terror when he said “Have you no sense of decency, sir, at long last? Have you left no sense of decency?”

© 2009 – 2010, Wayne Rosso. All rights reserved.

The study was commissioned by Wiggin, one of the top media and technology law firms in the country. Firm partner Alexander Ross told the BBC “A letter would not be enough. It does take an ultimate sanction.” (By the way, Alexander is not only a great guy but brilliant too.)

The survey also revealed that ISP’s would rake in bigger profits if they switched from flat rates to a metered plan. A sort of pay as you go model.  Heavy consumers of video and online games would pay a premium to maintain their access to these sorts of content, according to Ross.”The suggestion is that if ISPs develop content services of their own and tier their access there are ready and willing customers for it.”

Consumers apparently are getting more and more comfortable with watching on demand TV on a PC.  The survey shows that use of the BBC iPlayer and similar UK TV web services has exploded in the last year. However the leap from laptop to family room TV set is still a bridge too far for many consumers, saying that it is still to difficult to make the PC to TV set connection. But once TV manufacturers and  device makers simplify the process and actually begin to build wi-fi connectivity into sets, the demand for services will skyrocket.

“The distinction between the sit back experience of scheduled broadcasting and the sit forward experience of on demand access is becoming ever more blurred, and consumers are driving the convergence,” said Mr Ross.

So will this convergence actually ignite more illegal downloading of movies and other video content? Could it become so second nature that the masses just won’t know the difference between what’s legal and what isn’t? The flip side of the coin is that ISP’s certainly don’t want to go around disconnecting their customers. Next week the British government is releasing a final version of the Carter Report, which will tackle the issue of web piracy and possible “technical solutions” to the problem that could involve slowing down connection speeds for habitual offenders.

In light of the Wiggin report, it will be very interesting to see what the government comes up with. The odds are better than 2 to 1 that it will be something goofy.

© 2009, Wayne Rosso. All rights reserved.