How make Money in a Pirated Market?


In the last years, there were a lot of debates about P2P torrent-networks and copyright infringements. In particular artists and software developers suffer from less income and thereby a tougher market. Or is P2P a welcome shift to another business model in, in this case, the music industry?

According to the Cambridge Dictionary internet piracy is “the practice of using the internet to illegally copy software and pass it on to other people”. Before the internet existed, information piracy appeared as the selling of recordings of performances for less than the market price. Since information goods are this easy to copy and distribute, where the price of an album was significant, this was a profitable market for the ‘pirates’.

The internet enabled people to share data more easily, what meant an enormous increase in (illegal) sharing of music. The P2P networks enabled all users to share (and thereby download) music for free, what led to less people buying the actual product. In an article of Cooper (2013), the shift from 1999 to 2012 is clearly visualized. Where the artists first received about two thirds of the total income with the ‘contract royalties’, this is now less than a quarter of the total income. Concerts are nowadays a majority of the income in this sector.

But the last few years, P2P music sharing is decreasing. With relatively new initiatives as Spotify and other streaming services, the need for downloading pirated music is declined. A 2012 research of the NPD group found a decline of 17% of illegal sharing of music in 2012 compared to the previous year. The consumers’ need for free music is met with an ad-based or subscription-based business model.

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This means no end to the P2P music sharing, but artists and companies are anticipating on that: the vast network of P2P users is an opportunity as well. The P2P protocol BitTorrent offers a way to share a ‘bundle’ via the P2P network. A bundle can only be downloaded if the recipient pays for it, the network is only used for the efficient distribution. Thom Yorke, leadsinger of the band Radiohead, just released a new album through this channel. A single with videoclip are available for free, the album can be acquired for $6.

This shift and hunt for new revenue models clearly exists in the music industry, as well as the “Software as a Service” models in the software industry. Another large market, a 93 billion dollar revenue worldwide market, is subjected to illegal sharing. How can the gaming industry be revolutionized further?

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