Assignment 7 P2P Networks Navita Anand (Navitaa)

1. Why have p2p networks been so successful? Why do peers contribute to p2p file sharing networks? Answer: p2p networks have been so successful because of the following reasons: a. No fee: The majority of p2p software programs were free, and aside from the Internet connection, no additional charge was levied for sharing or accessing files. b. User friendly: Individuals were able to find a certain song or movie as easily as performing a Google search. c. Wide variety of content: Users could access a wide variety of content in comparison to traditional distribution channels, including materials such as live performances, rarities, basement recordings, or movies that were not distributed widely. d. No restrictions: There were no restrictions on p2p files; users could use the files as they saw fit. e. Fast and stable: Users find p2p networks to be faster and stable than traditional ways. This is why users find it better to swap or share files rather than purchasing the CDs or DVDs. Peers contribute to p2p file sharing networks because of the few motivating factors: a. Consumer surplus: Users try to maximize their consumer surplus, which consists of the utility derived by participating in the file sharing network minus the costs associated by doing so. Because of the heavy traffic in p2p networks, it becomes obvious that users should benefit from participating actively. b. Positive network externality: Network becomes attractive if it has large number of downloadable files. c. Other benefits like getting points for uploading. d. Example- BitTorrent rewarded users for leaving their software running, and ranked such users higher, which improved future download rates. But if a user tried to leech, then they were pushed down in the ranking and had to endure slow download rates. This way it was possible to motivate users to contribute to p2p file sharing networks. Also, the key to scalable and robust distribution is cooperation. Though the problem of free riders still exists. This causes negative network externality and could cause the collapse of the system. The users who take both the network externalities in consideration are likely to share the file themselves. More the restrictive measures taken for free riders, more likely the users will be motivated to share the files. 2. How many p2p file sharing networks will there be in the long term? \0," \1," \2," \more than 2"? Answer: There will be more than 2 p2p file sharing networks in the long term because technology follows social demand. We can see in the case study that number of users are continuously growing in p2p networks. P2p networks are economically important. Examples like Skype and Wikipedia.org that uses this technology are high on demand and use. These networks are efficient and cost-effective. The future of P2P networks as a technology is as high as it has ever been. Corporations have turned to Torrent technologies to reduce the wear on their server costs while at the same time improving download speeds and reliability.

Blizzard uses P2P technology to allow faster more reliable downloaded for their users while reducing the load on their servers. We also have the opportunity as users of the Internet to share large media files legally in the public domain. The Swedish Performing Rights Society (STIM) released the results of a survey which showed that 86% of the respondents would pay for P2P networks. At the same time 80% said that having music available online was important to them. Legally, however, the future of nearly all non-corporate P2P networks is at risk. PirateBay has had the opportunity to stay alive because of the weak copyright laws of its Swedish home. Networks based in other countries do not have that advantage over copyright holders that PirateBay continues to hold. Distributed networks, like those that Torrents enable create an extremely complex situation when it comes not only to legislating against them in the government but enforcement by the various agencies within the government. It is much easier for copyright to sue PirateBay, than find the millions of individual users who have used the site to illegally obtain copyrighted materials which are the root of the problem. P2p technology is the future of content delivery but it wont completely supplant video broadcasting networks and technologies. 3. Why has iTunes been so successful? Answer: The iTunes music store was launched in 2003 and was the first one to offer music downloads legally. Apple enjoyed the first mover advantage in providing the legal music downloads. Copyright protection: On the wake of Napsters shut down in 2002, Apple embraced the music industry concerns around copyright infringement and developed a proprietary digital rights management (DRM) system that limited the number of computers that could play a downloaded song. However, iTunes tracks were restricted from being played on other MP3 players. More storage of songs: Initially offered for $399 with the ability to store 1024 songs, the iPod exceeded the storage capacities of MP3 players on the market at the time, which offered space for around 50 tracks. Also, IPod encrypted the songs, thereby protecting musicians copyrights. Music synchronization: The iTunes desktop synchronized music between a users desktop, their iPod, and the iTunes Music Store. The Apple experience exceeded any competitive offering, fueling a multidimensional network effect. The increased use of iTunes created an increase in value of the iPod and vice versa. DRM layer of iTunes hacked: This lead to distribution of iTunes songs with no restrictions. Individuals were able to fill their iPods with music from other sources- both legal and illegal. Out of the 40 billion songs that were in flotation in 42 million iPods, only 850 million were actually purchased from iTunes. Although Amazon, Napster reborn, and Walmart started to offer individual song downloads at competitive prices to iTunes and handset manufacturers are bundling unlimited music service, Apple holds a strong competitive advantage consumers cannot afford to switch. 4. Who will win the competitive battle over the long run? p2ps or client-server systems such as Apples iTunes? Answer: Apples iTunes music download service and peer-to-peer music downloads offer two contrasting approaches to delivering digital content to user. Its difficult to say that who will win over the long run.

Both are different and new business models operating in the same market. The choice between p2p and iTunes is not trivial. Both differentiate from each other on multiple dimensions beyond price. World is full of individuals with varied needs and valuations, these dimensions are evaluated idiosyncratically, allowing both models to co-exist. Legal considerations play a crucial role as many p2p users have been sued by record companies, but other aspects, such as content availability, cannot be ignored. Music from Led Zeppelin, The Beatles, or Radiohead, for example, was available on p2p networks before it came to iTunes. Packaging of the content - Digital rights management (DRM) technologies, for example, are used to limit the playback of music purchased on iTunes, while music downloaded from p2p networks has no such restrictions. Although record labels are increasingly experimenting with DRM-less music sales, p2p is superior in this respect. Metadata (data about datathe indexing data contained in media files such as artist or album name) is superior on iTunes. This allows music collections to be consistently organized by author, album, or genre, and provides a better navigation experience. Digital encoding quality varies widely in p2p networks, but it has continued to improve over the years and in many cases surpasses that of iTunes. Obtaining content, an important part of the experience, also differs. ITunes provides a unified interface that seamlessly integrates the location, purchase, and consumption of content. Users of p2p networks, on the other hand, must navigate a complex environment and endure varying levels of congestion that hinder the quality of the process. ITunes certainly has the upper hand in this area. Congestion: The client-server model allows the operator to manage congestion by simply adding more servers. Congestion in p2p networks, however, depends on the number of peers in the network, the amount of people that share, the state of broadband infrastructure, and the "resolution" of content. p2p Pros Cons Free Legally attacked by big industry players Variety of content is Downloading time available varies depending on the available seeds for a particular download No restriction on Congestion in network content (no DRM) due to high traffic Constant improvement Spoof files at times/not due to technological anonymous advancement Pros Legal iTunes cons Paid Restrictions on content (DRM)

Better user experience

High reliability Metadata is available about the files which makes navigation better

Less variety -

As we can see in the above chart, if the cons of the p2p networks are overcome that is if the internet infrastructure of p2p improves then client server networks need to compete effectively against p2p. They will have to strive to become accessible and attractive to consumers.

The client server architecture provides better customer experience so there is scope of record companies to charge positive prices, make a profit and compete effectively against unauthorized file sharing. But as of now, both models co-exist and to compete with another model, one has to make improvements. 5. How should the music and film industries react to p2p? Answer: Though there is negative impact on the sales of legal digital content due to availability of content on p2p networks, it also helps to spread the content. Due to the accessibility to illegally copied CDs, labels and musicians earned major revenue from live performances. To attract the customers, music and film industries have to become more accessible. Digital download services: Music retailers should provide digital download services to the users. This will attract users because of the reliability, better navigation and user experience it will offer. Retailers can also start providing monthly subscriptions to the users, for example- users can download a certain number of a songs in a given period for some minimal amount. This will avoid the copyright infringement and also at the same time provide better user experience. Digital Protection: Music and film industries should use protection system on any type of digital media. This include encrypted codes on DVDs and CDs, which restricted copying or playing in certain regions. Two common types of DRM are digital watermarking, whereby the purchasers information would be logged into the digital medium, and product activation, whereby the product could not be used until legally registered. Competitive pricing: Music retailers should keep competitive pricing to attract users. Because of the quality offered which is difficult to obtain over p2p networks, users will be willing to pay a nominal price. Content availability: Availability of the content should be improved. Considering the huge market for music and films, content availability is important to reach all types of customers.

References: http://www.warsystems.hu/wp-content/uploads_bodo/beckerDynamics%20of%20Illegal%20Participation%20in%20file-sharing%20networks.pdf https://wikispaces.psu.edu/display/IST432SP11Team17/The+Future+of+P2P http://community.mis.temple.edu/mis5801sum2011/2011/07/06/key-factors-behind-the-success-ofitunes/ http://hbswk.hbs.edu/item/5594.html