Converting Pirates Into Paying Surfers

Stephen Yagielowicz
Talk to anyone in the digital content business and you will learn that rampant piracy has taken a dramatic toll on revenue streams. This is due in part to consumers seeking a discounted or free alternative to what they often characterize as “overpriced” material — even to the point of actually breaking the law to obtain it.

Sometimes their piracy motivation is format or access based, for example, wanting an MPEG clip when all you offer are embedded Flash videos; or only wanting a single scene rather than a recurring paysite membership. Music industry execs have long grappled with this problem, with consumer demand for easy single-track sales instead of having to purchase overpriced CDs leading to the launch of iTunes and other distribution channels.

These distribution channels evolved as legitimate outlets, which provide high quality alternatives to the often poor-quality content freely available from illegal file sharing, showing that if you give customers what they want, at a fair price and with easy terms, then piracy may become less of a problem. Robust iTunes and other music website sales demonstrate this, even if those sales do not meet past expectations.

“Past expectations” are part of the problem for rights holders — some of whom fail to realize that rather than a temporary blip, recent market changes signal a fast and profound realignment of “business as usual” — requiring a basic rethinking of digital content price points and marketing approaches.

Is it as simple as playing slice-and-dice with your video clips or other content and then offering it at “almost free” prices, or are more sophisticated approaches required by those seeking to convert pirates into paying customers?

One company attempting to answer this question is Rapidshare.

Rapidshare, a file-hosting service that is no stranger to the controversies surrounding online piracy due to its use by illegal file-sharing fans who value anonymous, one-click hosting services and other providers of infrastructural needs, is testing an innovative way of earning revenues while minimizing the unauthorized use of its services by what it calls “criminals.” The company has launched an initiative to court the principal players within the mainstream entertainment industry in order to develop marketing partnerships where the traffic destined for copyright infringing material is redirected to an online storefront offering a licensed version of that content. As part of its antipiracy agenda, TorrentFreak reports Rapidshare is terminating the accounts of users uploading copyrighted material.

“RapidShare’s supervisory board has decided to not just rely on the filehosting business but to extend our company’s efforts to officially distribute licensed content,” Rapidshare General Manager Bobby Chang stated, outlining the company’s plans, which include competitive litigation as a business model.

“For quite a few weeks and months we have seen changes in the filehosting business. Several new players are trying heavily and with shady or unfair business practices to get into the market. I am convinced that most of those new players are trying really hard to gain the favor of those users, who rely on cyberlockers to spread and distribute copyright protected content,” Chang stated. “RapidShare has decided not to participate in this battle and not to fight for the favor of criminals. Instead we would rather like to agitate against these activities and — if possible — to institute proceedings against those competitors of ours, who are intentionally supporting criminal activities.”

“If a user finds out that several attempts to download an illegal copy of a DVD are in vain and if his several attempts to ‘steal’ this DVD have just brought him to an online-store,” Chang offers, “he may finally be frustrated and willing to purchase a licensed version of this movie.”

This approach is equally applicable of course to games, music and other digital media — including adult media, where an opportunity exists for licensing aggregators seeking to work with such business models.

“RapidShare is seeking the partnership of the content industry to generate new models that make piracy obsolete,” Chang wrote. “One of these models is to redirect users to legal content on our own website, which is provided by content owners. This redirect has been in place since beginning of 2010 and well perceived by users so far.”

“We experience that many users seek the content in the first place and are very often not aware — and cannot find out — if any content is pirated or not,” he added. “That is why they prefer to consume it from a reliable and safe source, instead of risking [involvement] in piracy.”


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