P2P File Sharing Ruining Physical Piracy Business

TorrentFreak has a short post up talking with a former physical data pirate, who sold his wares in flea markets and made buckets of money in the 90s. By the end of the last decade, his money flow had dried up, and he places the blame squarely on the shoulders of P2P file sharing. "Tony is very clear about why his rags to riches story has gone back to rags again. 'File-sharing, P2P - call it what you like. When you asked a customer why he wasn't buying anything, 9 times out of 10 it was BitTorrent this, LimeWire that ...' P2P is a very powerful machine and although Tony could see that his operation was feeling its effects, he admits that he sat back and did nothing about it and consequently, his business has paid the ultimate price. Other industries affected by P2P should take note: Don't be a Tony. Overhaul your business model. Quickly." One would imagine overseas media sellers will have similar issues, as P2P networks become more common outside of the Western world.

Nonsense.

Utter nonsense - not everyone has the time & patience to download 1 gig files, then the knowledge to convert them to stanard DVD format so you don't have to watch on your PC. Tony should have taken advantage of this gap.

One would imagine overseas media sellers will have similar issues, as P2P networks become more common outside of the Western world.

No, one wouldn't imagine that. You any idea how (relatively) expensive bandwidth is in much of the third world? Much cheaper for one pirate (yarrr!) to download & sell copies to everyone (this is the way real free markets tend to work).

Re:

Utter nonsense - not everyone has the time & patience...

OK, that's your speculation. But a real pirate who used to make good money at it, no longer does. Something has changed. And to quote the summary, "When you asked a customer why he wasn't bu

Re:Nonsense.

I have. I live in Sao Paulo, Brazil. We have dozens of "physical pirates", and I think they are doing pretty well, considering they are open for years. And I'm not talking about Mr. Tony with the CDs on the side walk, I'm talking about whole BUILDINGS with pirate stores, that sells movies and games as they are launched in the US, and sometimes sooner. Ask anyone who lives in Sao Paulo and they will tell you the same thing.

No different than America

Tony is simply the punk on the street. There are LOADS of pirate who work out of regular businesses selling Windows based software, DVDs, and CDs. Funny thing is, that if the RIAA and MIAA were smart, they would allow the net the gut to the brick based businesses FIRST, and then go after just the net. But alas

Elements

And remember, according to all the do-gooders, little johnny downloading a $1,200 copy of Photoshop via bit torrent so he can play with photos on his blog is just as evil and bad and harmful to corporations as the middle aged guy manufacturing and distributing tens of thousands of copies of the $1,200 application for a hundred bucks a piece.

And due to the statutory damages rule, little johnny downloading a $100 copy of Photoshop Elements is just as bad as little johnny downloading a $1,200 copy of Photoshop full version. (Bring out the GIMP?)

Clever Sao Paulo pirates!

They're operating out of BUILDINGS while, for all these years, HRS Copyright has been searching the high seas.

Re:Nonsense.

I agree, the speculation about the end of time for the "physical pirates" is pure bullshit. I am from Mexico, and, the prime example is the Tepito Market [wikipedia.org] where people sell copies of movies and DVDs before they are available even at the cinema. They even sold the Xbox360 *before* it was out in Mexico (and the release time was the same in Mexico and the USA, usually what they do is assault trailers with merchandise).

If anyone wants to practice their spanish, here [geocities.com] is a really good description of what the Tepito market is famous for in Mexico. Gosh, one of the main reasons why no one makes anything against it is that usually the heads of those markets (and the people moving the money) are the same of the people from the government!

So yeah, there is still *plenty* of demand for pirate DVDs and CDs (and even VHS!!) in the street.

Re:

I can't talk about Saõ Paulo (never been there), but about Recife in the Northeast of Brazil.

And there is something called a middle class. They might not be that large in numbers, but they go shopping at Carrefour (the one I was talking about had a de

Re:

<quote><p>
I sort of miss the old days, the bootleg vendors were quite knowledgable about their goods and would discuss the pros and cons of Excel vs Lotus, for instance. These days the front men just collect money and have no idea what they're

Mod parent up

I have no idea why this is modded 'Redundant.'

The situation outlined in TFA is interesting precisely because it runs contrary to what you might expect, namely that people would be too lazy to actually download multi-GB files themselves. But the story shows that this indeed is the case; at least the people who are cheap enough to buy pirated software at flea markets put a low enough value on their time to download the stuff themselves in order to avoid even the minimal cost of pirated discs.

I'm not sure what the lesson is here. There's a big question in my mind whether lessons from the 'grey (or black) market' can be taken as indicative of movements in the regular 'white market' -- online distribution probably is a lot more attractive to the kind of low-rent geeks who are buying hot software at flea markets than to very busy middle-classers with little time to spare or technical expertise.

Re:

But the story shows that this indeed is the case; at least the people who are cheap enough to buy pirated software at flea markets put a low enough value on their time to download the stuff themselves in order to avoid even the minimal cost of pirated disc

Allofmp3 is almost in a league of its own.

This is a valid point. Although, allofmp3.com is in a fairly unique situation -- they offer not an inferior product to legitimate versions, but an actually superior one, at a better price, with an interface that's arguably as easy if not easier to use, than most legitimate services. The black/grey market rarely has the white beat on so many fronts at once. Usually, in order to get the cheap price, you need to compromise on quality or convenience (need to go to sketchy part of town / flea market, etc.), so that it's only a certain segment of consumers (usually, those who place a low value on their time) who get the pirated version. But allofmp3.com has the legitimate outlets so thoroughly beaten -- or rather, the legitimate outlets suck just that damn badly, and cost so much -- that it can draw consumers from all across demographics, and not just the downmarket (cheap) segment.

Re:Allofmp3 is almost in a league of its own.

The black/grey market rarely has the white beat on so many fronts at once. Usually, in order to get the cheap price, you need to compromise on quality or convenience (need to go to sketchy part of town / flea market, etc.), so that it's only a certain segment of consumers (usually, those who place a low value on their time) who get the pirated version.

I'm not certain where you live, though based on your attitude I will surmise you live somewhere in the developed world.

There are places in the world where the price of software is quite disproportionate - for instance, here in Croatia Photoshop costs about two or three monthly salaries IIRC. And even in the richer parts of the world, there is quite a lot of software which costs a great deal of money, and is still relatively easy to find in the gray/black market.

If the price of the software runs up to several hundreds or even thousands of dollars, and the probability of you getting caught is slim, buying from a pirate is putting a rather high value on your time - it doesn't take more than a few hours, and the savings are vast.

But then, what do I know... from where I stand, capitalism seems to be based on the principle of getting something for nothing as much and as often as you can.

Re:Mod parent up

But the story shows that this indeed is the case; at least the people who are cheap enough to buy pirated software at flea markets put a low enough value on their time to download the stuff themselves in order to avoid even the minimal cost of pirated discs.

I, for one, don't avoid pirated discs because of the cost issue, but because it's less hassle and faster to download a movie [1] than to have to go out, find a physical pirate store (Hell, I wouldn't know where to find one) and buy the movie I want.

1: Sure, the actual downloading takes a few hours, but the only effort for me is a few minutes on thep(cough)ay.org or somesuch.

Re:

...people who are cheap enough to buy pirated software at flea markets put a low enough value on their time to download the stuff themselves in order to avoid even the minimal cost of pirated discs.

Could you clarify what you mean by this? P2P seems like i

Re:Nonsense.

Personally I think the most damage being done to 'for profits pirates' (versus happy to give away for free, pirates?, no, hoods as in robin) was by DVD bargain bins at supermarkets.

Pirates were charging $5 dollars a disk, pretty much the same price as a supermarket bargain bin, who would bother with the questionable illegitimate quality.

Yeah, I know you don't get the latest releases, but with the sheer volume of content available on DVD why bother with the latest releases, especially as most of the latest releases basically suck.

Re:Nonsense.

Bingo. I think this is a big part of it. Physical piracy was a bigger industry back when DVDs were more expensive. Anyone remember when those things first came out? They were downright extortionate. When a legit copy ran $25 at Suncoast, a $5 pirate copy looked pretty attractive. But when you can get a wide selection of movies at Walmart for under $10, there's not a whole lot of room for pirates.

Black markets thrive on high markups. When the whitemarket's profit margins collapse, the blackmarket gets squeezed out (well, not hardly -- they move on to other things where the markups are still high).

I suspect that DVD videos would be a tough sell in the First World (probably less so in other parts of the world, where the cost of a movie relative to other goods, like food, is much higher), however, higher-margin information products like expensive software (Photoshop, Logic, etc.) will still be widely pirated and counterfeited, in both electronic/P2P and physical forms.

Re:Nonsense.

It's quite clear to me what happened: "Inside 30 minutes, 90% of the stock would be gone with some customers taking 2 or 3 cases each, presumably to sell on." They were being wholesale pirates, one step up from the peddling to end-users. Clearly as burners got reasonably priced the bottom fell out of that market, sure there's the guy buying a few discs for themselves but anyone with a CD burner (later DVD burner) could do their own side business. I know several of the first people that got CD burners used that to part finance it.

Oh and bandwidth in the third world is expensive, but there's more to "outside western world" than that. Try going to South Korea for Internet connection, and you'll be pleasantly surprised. Remember that much of the cost is digging up the countryside, and where there's cheap labor ditch diggers aren't expensive either. Some of the poorer skipped phone lines altogether and went directly for cell phones and satellite, when they dig up it's either modern cable designed for Internet service or fiber going in there.

when

When will people learn that piracy takes money from the pockets of hard working people like Tony?

Re:when

Next up ... legitimate pirates (like Tony) join forces with the MPAA and RIAA to battle the scourge of P2P.

Way to kick a guy when he's down

Even pirates have some standards.

Pirates VS. P2P

Pirates useful against file sharing ?

I feel a great disturbance in the MAFIAA.
As if thousand of lawyer's head exploded and then suddenly disappeared in a puff of logic.

Re:when

To quote myself from another site on the same topic:

Maybe nobody feels bad for Tony, but think about what will eventually happen to the genuine distributors and consequently developers. If Tony couldn't even sell pirate software any more then how will anyone sell software?

Sure, there is that old argument, "the people buying from Tony probably wouldn't have bought it retail anyway". But stop and think about what's happened here: He had a big house, fast cars, expensive holidays, rented a warehouse, employed several people - that's all money that the real developers never saw a penny of. And you have to wonder - we live in a world where the younger generation (of which I count myself part) just tends to pirate everything. It has become the common culture. Apparently these days the majority of people under 30 "wouldn't have bought it anyway" all of the time - yet look at the masses of stuff they have pirated over time.

First Tony will go out of business, followed by the software houses we know and love, if it hasn't happened already. The article ends "Overhaul your business model. Quickly.". This assumes that there will still be enough people around who will be willing to pay at all. I know many people who go out of their way to pay for nothing - be it software, music, or movies.

Basically, if you're writing commercial software, you better have an online service or technology licensing program attached to it to make decent profits.

Re:when

No, it's a story about a business model failing due to evolution taking over.

I don't buy many games anymore. Frankly, I'm sick and tired of being hyped up for a year by some paid-for ads-cloaked-as-previews and then sitting down to play the game for all of 2 or 3 hours before it starts to suck because it was launched early, is full of bugs and the gameplay was never quite finished.
It isn't worth the 50 or so uros they charge these days.

On the other hand, I have bought great games after playing the pirated copy halfway through. I've bought the entire DVD series of Hellsing after having seen them all in ripped-from-TV downloads. A few years ago, I watched most new movies in my home theatre courtesy of bittorrent, mostly because I enjoy original versions over (often) crappy localisations, and the originals launched 3-6 months earlier in the US than the localised versions showed here. Nowadays, with simultaneous worldwide launches, I find myself going to the cinema again quite often.

Quality still sells. Listening to market demands still sells. Crap doesn't sell as well anymore.

Re:when

Hey Tom,

I understand what you're saying - but you have to realize that this isn't about what you do, or what I do, it's about the behavior of the overall population. If you believe that the overall population tends to follow your habits, then that is one argument. If, on the other hand, there is a growing population of freeloaders, then that's another problem.

Although I'm essentially replying to you here, I make this point more globally because I see similar responses everywhere the topic of piracy is discussed, and I think that except in very few circumstances they mask the real issue.

P.S. "Crap doesn't sell as well anymore.", agreed!

Re:

mod parent up, please.

It gets better, even. I'm very sure Adobe realizes very well that
a) lots of students copy Photoshop
b) many of them will buy it later because they're used to it

Looking around, there's a lot of software that is strong in its segment and

Re:when

Okay, but think about the consequence of this behavior - you're consuming several forms of entertainment yet financing only one industry.

The same problem exists even if one parent company funds branches in two or more industries - nobody wants to finance a loss. The same problem even exists if you download software and pay for only what you consider the best of it, because this means that you will tend to fund only the biggest players, and startups won't have as much of a chance to break through. If we're really being honest, many people who claim they pirate to "try" software are full of it - ever hear of a demo? Demo's are a section of the game or an otherwise limited version that the distributors actually want you to try out legally, and base your purchase decision upon.

Now, believe me when I tell you that in my opinion the MPAA and RIAA are full of crap in most statements they make regarding piracy statistics. But based on the attitudes of many people I know in real life I actually believe we may end up in a situation where the populace is simply taxed at some flat rate for piracy, beyond what we have already seen for blank media in certain countries, simply because there will come a breaking point where the practice of piracy is so widespread that we'll face at least a partial collapse of certain industries. I already believe that if you ask most people about piracy today you'll simply be told that "everybody does it".

I do make an effort to pay for the software, music and movies I use. In the sense that many people I know simply download the same products you could say this makes me foolish, "wasting my money". On the other hand, when I put myself in the position of the developers, artists, and producers, I look at a real problem they're facing, no matter how inflated it may be in the industry stats presented to us by the media.

My main gripe, however, remains with the freeloaders - people who seem to see no value in any of the products they consume, or who delude themselves into believing that by simply "making a copy" they aren't "stealing" anything. Okay, so piracy is not quite the same as theft, but developers, musicians, and so forth produce works that contribute to society and culture. In that sense freeloading is most equivalent to not paying your taxes - those people who do pay are essentially funding various works from which you benefit. At some point the burden that is shifted onto the shoulders of those who do pay will become too great.

Demos

If we're really being honest, many people who claim they pirate to "try" software are full of it - ever hear of a demo? Demo's are a section of the game or an otherwise limited version that the distributors actually want you to try out legally, and base yo

This is severely damaging the freemarket system!

I say he should sue the P2P services for restraint of trade. How is he supposed to sell his pirated wares when they're just giving it away?

I would have RTFA...

but I downloaded the audio book instead.

Don't Be A Tony?

Don't be a Tony. Overhaul your business model. Quickly.

Yes, you pirates. You need to find another way to make money by leeching off the honest work of others. Art forgery perhaps? Maybe consider a payday loan business... legally charge loan shark interest rates by calling them "service fees".

- Greg

Re:Don't Be A Tony?

>"Yes, you pirates. You need to find another way to make money by leeching off the honest work of others."

Set up a record company??

bread and cheese for the whine?

You should reconsider what you're doing, if your target-customers are ruining your business.

Yeah

Who would have thought, customers of your illegitimate and illegal goods would leave you out in the cold when a better, cheaper opportunity comes. Especially when they buy said goods from you only because you are cheaper than the real thing, not that you

sell drugs instead

Tony, start selling cannabis, you'll make heaps more money.

until we finally get it legalized, then you'll have to find some other criminalized act to profit off.

Re:sell drugs instead

Tut tut. Bad advise. We all know its smarter to start importing cigarettes and booze into many european countries where govt tax has seriously impacted consumer pricing, opening a huge profit potential. The main benefit is you just just get a smack on the wrist if you get caught as opposed to life for drug trafficing.

I think there is another morale to this story

This guy was clearing almost $2,000 a week at the peak for a couple years, now he has to get a job. He said he enjoyed fast cars and a nice house - where does the money always go? Why can't people be satisfied with a nice new but still economical honda or something when they make it big? Why always blow it out on frivolous shit?

This is the old tale of the ant and the grasshopper. Tony still could be living well today if he actually squirreled away some of it. I wonder how many people in the late 90's early 00's tech boom were blowing money the same way that have very little to show for it now.

Re:I think there is another morale to this story

Exactly. I advocated Linux during the early years and my Karma soared. Now I am in a position to say that Vista is good with out caring what the mods think.

Re:

That's funny. I always thought the purpose of money was to make yourself capable of living, maybe even happy and comfortable. Fuck the socialites. I'd rather spend my money on my rig, motorcycle, geeky toys, and other things that help me enjoy life, even i

Bunch-O-Crap

What a bunch of crap. Having been to China where piracy is a big time moneymaker they know how to do it right. High quality product in attractive packaging with a rock bottom price. Why would I download a DivX compressed file when I can get the original mpg for 50 cents to a dollar?

P2P only makes sense when there isn't an affordable convenient alternative. Tony just priced himself out of business evidently. It's all about volume and price point. If Tony had focused on improving his productivity so he could lower his sale price he'd probably still be in business. Even in the black market you have to continue to innovate.

Tony got in when he thought he could make money easy, he wasn't bothered by the ethics of his choices. I have no trouble believing he'd be too lazy to work harder and charge less to give the same product. Even so I am highly disinclined to believe this story at face value. There may be a high volume of Slashdotters out there doing P2P for video, but Joe-6-pack is just barely able to share mp3s and spends a lot on DRM products. Joe would easily plunk down two dollars for a bootleg DVD if Tony where selling them.

Hungh?

P2P File Sharing Ruining Physical Piracy Business Man, I thought I hit the wrong link and was looking at The Onion for a second there. I know it makes perfect sense, but that obviousness was part of the reaction.

As a student

I may have done something similar, although on a much smaller scale - it may even have been where my name came from.
Never really made any money, but came out the other end of two degrees with only a modest amount of debt (not that I'm defending it) and am now a good tax paying little legit drone.
I was never part of the scene, so all my stuff used to come in as trades and I still remember the joy of opening jiffy bags with foreign stamps to see what weird and wonderful contents they would contain. I'm sure part of it was an aspergers like desire to try to collect everything there possibly was available - whether or not I or anybody else actually wanted/needed it.
Had a fun time and it's left me with all manner of fond memories - playing a pre-release version of MGS throughout the night as we couldn't work out how to save the game, or what was actually going on (I've still not quite grasped Japanese), realizing ThrillKill wasn't released as it 'wasn't actually any good' to nervously opening my door to a car-load of scarey looking people in the small hours and them asking very sweetly if I could chip their PS.
I stopped (assuming I'd started) all this many years before the guy in the article threw in the towel (I never made it onto DVDs). The premise of the article that P2P killed physical piracy is probably right. I doubt it's that everybody has know learnt how to download whatever they want and make their own copy - it's more that pretty much everybody knows a friend or colleague that can. Towards the end I used to temp in offices over the holidays - and every single one of them would have the guy who'd come in with a pile of disks in the morning for people (and get a pint if anything returned to him at lunch).
Death of LikSang reminded me of their initial incarnation as supplier of DrV64s (I could never afford a Z64) and the fun I'd had resoldering the guts of what they delivered into a working machine and trying to track down a CD drive that didn't gulp enough power to max out the piss-poor PSU it came with. Dug out my old folders of disks and had a nostalgic trip down memory lane. Most of them were dead, cheap ones had flaked and I'd managed to eat through a load using a big solventy magic marker.
All in the bottom of a landfill now.

Re:

Congratulations! You write in such a random and confusing a manner as to make me certain you could become a novelist.

to Wit:

William Gibson, is that you?

This just in

For the benefit of the RIAA and MPAA, here's a picture of your typical filesharer [nyud.net].

Law suit

So, when is the PIAA (Pirate Industry Association of America) going to sue p2p networks ?

Tony should move to Ukraine

Piracy of DVDs and CDs is flourishing there. Most people don't even have a computer , never mind an internet connection and if you go down the local markets you will find tons of pirated material (most of it done badly it must be said). Its about time people in IT whether media types or coders really wrenched themselves out of this western mindset where they seem to believe that because they have broadband and a flash PC then the whole world does.

Newsflash: most of the people in the world don't even own a radio never mind a computer.

Re:$5 for a hard copy current movie= good model

In Russia, Ukraine etc. you can get a DVD in a plastic sleeve with a color photo of current release movie or software for about US$5.

Now if the legal copies were about this price, that market would not exist. $20 for a copy of Open Season? What are they thinking. It's high prices that cause a piracy market to exist.

Re:

Now if the legal copies were about this price, that market would not exist. $20 for a copy of Open Season? What are they thinking. It's high prices that cause a piracy market to exist.

Sure, but then you're competing with the margin on blank DVDs. Where th

Re:

I've been around this scene since the 5.25" floppy days ...

I'm really hoping that you're not still in the scene, most of us got over it before we were 20.

I applaud the fact that another leech has bitten the dust, and can no longer make an easy livin

Re:

I've been around this scene since the 5.25" floppy days, and there were always leechers who would sell you something, and true warez people who would give or trade you something.

Tony won't have been cracking anything, creating anything, "value added" anyth