p2pnet news view | Movies:- Australian p2pnet reader Tom Koltai is an economist who closely follows the perambulations of the corporate entertainment industry, the movie and music elements of which claim “devastation” caused by file sharers.

But, “P2P file downloader’s are paying for the movies and in Australia at least it equals the same value that the copyright industries are placing on their content,” he says.

Here’s his  analysis »»»

Since 1998, P2P file sharing has grown from an almost insignificant 2.5% of volume to over 75% of all internet traffic.

As bandwidth has grown in availability and decreased in retail value, ongoing internet growth and adoption has been strongly promoted by user developed digital content delivery methods; Napster, Grokster, WIN-FM, Limewire, Edonkey, Emule, BitTorrent.

In the beginning (1998) the modem was the dominant connection method, the available bandwidth 33.6 kbps modems was adequate for the distribution of personal music collections.

By 2001, cable had started to proliferate (read grown affordable) and we started see movie files on Kazaa.

Since the widespread adoption of DSL in 2003, bandwidth has grown to allow encoded lossy movie files to be distributed by at least 20% of Internet users worldwide and this activity accounts for almost 76% of the Internets total file transfer content. By 2005, a report from Internet consulting Company Viant Technologies claimed over 500,000 movies were being traded on P2P networks daily. (1)

Hollywood and the music industry claim their revenues and profits have almost disappeared because of the P2P file downloaders.

But P2P file downloaders are paying for the movies and in Australia at least it equals the same value that the copyright industries are placing on their content.

The other day I purchased a DVD at Woolworths that had three movies on it for $5.95.

Two of the movies were Deep Catalogue (library) (over ten years old), but the lead movie was a recent (within 18 months) Blockbuster.

Movie Aggregation appears to be the latest method for Hollywood to increase perceived consumer value. However, even Deep Catalogue has some value.

So Hollywood expects to receive $3.50 per movie. (This is backed up by the iTunes USA rental price.)

Price Comparison Method #2 – The P2P Model

In Australia, our broadband connections for an industrialized western nation, are a lot slower and are capped at ridiculously low monthly download allowances in comparison to Korea, Japan and the United States. 

P2P file sharing utilizes mainly Emule and BitTorrent clients. The clients operate on the principle of giving to get, in other words, the more you upload, the faster you can download.  For this reason, most P2Pers in Australia leave their computers connected 24 hours per day to build up their “peer credits”.

The prevalence of this is indicated by Australian ISPs introducing upload limits on monthly Broadband plans over the last twelve months.

ADSL2 and ADSL2+ is only available in selected exchanges (constantly being expanded) and then only if you are within a 1-5 km range of the closest (ADSL2/ADSL2+ equipped) telephone exchange.

Therefore, the dominant connection speed in Australia is still 512 Kb, so in that respect, the Australian population is equal in technological Internet connectivity capability to the peoples of Indian and China.

Unfortunately, the news is not quite so good for the movie industry in the USA.

With very high monthly download Caps (or quite often, no caps) the value of a movie in the USA is at the high bandwidth end of the above graph – ie: $1.05.

Price Comparison Method #3

For the purposes of this post, we’ll assume all P2P content downloaded is video (the bulk of Australian P2P traffic – by file size volume) and that most videos are 700 MB in size.

This particular example movie is encoded with the DIV-X1 version 5 Codec

A commercial DVD title which takes 4.7 gigabytes of storage can be converted to DivX technology allowing broadband users to encode and distribute DVD-quality video at 500-700 Kbps. (2)

Therefore, an important consideration in our valuation methodology must be made for the decreased level of quality. If the 700 MB P2P movie file represents only 15% of the DVD quality, then we must discount the DVD price by the same amount.

The minor disparity in accounting can be attributed to file size differentiation, ie : not all movies on DVDs are 4.7 GB, and not all movies on the P2P network are 700 MB.

Price Comparison Method #4 Rent – American, New Zealand and USA iTunes Movies.

In their August 2008 Press Release http://www.apple.com/au/pr/library/2008/08/14itunes.html Apple delineated their pricing policy for Australia and NZ digital movie rentals.

If however we add the invisible “Broadband cost” of downloading the 24 hour rentals, we get a slightly different perspective.

In our costings above, we calculated the downloads based on the P2P “de facto” standard of 700 MB per movie. Unfortunately, standard definition is a little larger and using MPEG2-TS (Transport Stream, the ITunes movies are three to four times the size.

And should a user want the HD version (an extra $1.00) of the movie then his figures will be even higher.

Remember, this is a rental Digital movie that will disappear after 24 hrs.

Obviously iTunes movie pricing policy will force Australian users to source alternative sized and priced movies for economic reasons.

Subsequently, the company will fail in its video digital distribution plans in Australia unless agreements are made with all ISPs, which seems highly unlikely in the face of the AFACTS legal action against iinet.

Price Comparison Method #5 Buy iTunes Movies.

If you want to BUY the iTunes movies, they’re available at around $29.95 for new releases.

Which obviously, if you consider that each DVD has at least seven-nine versions available via BitTorrent or ED2K, obviously tells us that some economist in Hollywood has done the numbers and values the digital version of a movie at (after 10% reseller commissions) $3.50.
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We’ve demonstrated the value of an overnight movie rental 90 minute, 7600 MB movie in Germany, Korea, Japan, Taiwan and the USA is $6.05, and in the technologically, financially or legislatively (read Telstra monopoly) restricted countries like Australia, the value is considerably higher, around $30.50.

Let’s be real Hollywood – NO ONE IS GOING TO PAY $30.00 to view a movie once. !!!!!

The more realistic pricing model for the Antipodes and other bandwidth challenged countries appears to be the P2P model where in the USA the value of 700 MB DIVX movie is $1.05 and in Australia, India, China et al, $3.50.

This appears to be the same value as placed on the iTunes (buy movie) content by Hollywood. In economics, we call this the McDonalds Principle. (3)

Now we just need to ask one more question: Are the shareholders of Hollywood studios also the shareholders of the RBOC carriers?

If that’s the case, P2P is no longer illegal, merely an alternative supply chain solution.

[Authors Note. All currency references in this article refer to the currency of the nominated country. Please note: Statistics in this Blog have been drawn from several sources located in Denmark, Canada, France and Germany. Unfortunately there is no-one in Australia currently capable of providing accurate industry metrics due to legislative barriers.]

[1] Movies on the Net are usually 700 MB in size – not 3.5-4.7 GB as on a DVD. See note 2 for lossy.

[2] DivXR is a popular MPEG-4 compatible (lossy) video compression technology due to its very high
compression ratio which enables DVD-quality video and audio at typically 7-10 times smaller storage requirements than standard DVD/Mpeg2 compression technology.

[3] The burgers appear identical, only the currency and the associated currency hedge are different.

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This entry was posted on Monday, January 12th, 2009 at 12:52 pm and is filed under Movies. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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