Response to Cory Shields

I just sent Cory Shields the following email in response to his recent statement.

From: Mark Fischer
Subject: Source for estimated piracy levels on iPods
Date: September 1, 2007 9:30:12 PM MST
To: cory.shields@nbcuni.com

Dear Mr. Shields,

I am greatly interested in the source for your comment recently:

"In addition, we asked Apple to take concrete steps to protect content from piracy, since it is estimated that the typical iPod contains a significant amount of illegally downloaded material."

I would very much like to investigate the piracy levels on portable music and video devices, but have been unable to find a relevant study. If you have access to, or know of such a study that was the basis for your statement, I would be grateful if you would let me know.

Sincerely,
Mark Fischer

NBC To Pull Shows from iTunes

I'm sad today, because I just found out that come December, I won't be able to watch Battlestar Galactica anymore. Oh NBC will still be airing new episodes, and it will be available on SciFi, but NBC announced today that they will be pulling their content from iTunes.

See here's my problem. I'm a new father. I work full time. This leaves me precious little time to spend on entertainment. That time doesn't necessarily fall Friday nights at 10:00pm. I know, I should just get digital cable and a TiVo. However a digital cable runs me about $50 / month, and a minimum 1yr TiVo contract is another $300. That's $900 / year (plus taxes, fees, media access charges, etc) to watch what, maybe 24 episodes? That's about $37 per episode. I can wait until the season is over and buy the episodes on DVD, but that's a long time to wait.

No offense, but I preferred the $2 I paid to get each episode off iTunes the day after it aired. (Even cheaper if you get a season pass).

Media companies are facing a hard future. And they seem to be ignoring basic economics.

Demand is Dropping
I have limited time and dollars to spend on entertainment. Frankly, there's just a lot more compelling entertainment options out there today than a decade ago. In the olden days before the internet, you had basically Television, Movies, Books Music, and the Arts. Today you have YouTube, World of Warcraft, Facebook, Xbox, PS3s, Wiis, the list goes on. The overall supply of entertainment is increasing, and as a result, demand for any one of the options will be diluted.

Faced with falling demand, the large media companies are desperately trying to cling to their old profit margins the only way they know how, try and wring every last dime out of anyone they can. Yet this is exactly the wrong thing to do, as any first year Economics student will tell you. If you have infinite supply, and you want to raise demand, you lower prices.

I like Battelstar Galactica, but after the birth of our first child, I canceled our cable subscription. I just don't have the time to sit down and watch television anymore. Somehow I don't think I'm alone in this decision. The shows I really do enjoy, I try and buy off iTunes and watch them here and there as I find time. I'll be sad if I can no longer watch these shows because large media companies feel I'm not giving them enough money. It looks like instead of getting $2 per episode out of me, they'll be getting zero. Oh well, I have a lot of good books to catch up on.

[Update]
It looks like Apple decided to just cancel NBC's contract now, rather than leave consumers with only half a season. Just another example of Apple looking at things from a constomer perspective. Wouldn't it be great if more companies did that?

Apple's Press Release on the topic.

Network Neutrality vs Getting What You Pay For

There is a lot of talk these days about Network Neutrality, and all sides of the debate use the term to mean different things. Ars Technica has a great article about Network Neutrality and Deep Packet Inspection, and it has me wondering the same thing I've been wondering each time I hear Network Neutrality brought up.

It seems to me we have three primary players.  One is me, the end user.  Two is the other end of the 'tube', lets pick on Google since they're big and have more money than they probably need.  Three is the network owner, I'll pick on AT&T for this example.

AT&T is in the business of selling bandwidth on this big 'ol network that it owns, or leases, or cobbles together from a bunch of OTHER people who own networks etc, but for my example, I'll deal with the simplified AT&T.  So AT&T owns a network with a certain maximum bandwidth, and it makes money by selling people small slices of bandwidth on its network.  Google is a huge company that is ravenous for bandwidth, and it buys a huge chunk of it from AT&T.  I'm a little guy on an iMac in my living room, and I pay AT&T for a really tiny slice of bandwidth.

Once AT&T sells the bandwidth, why should it care if I talk to Google?  If I hit my bandwidth cap, I get throttled.  I paid for 5Mb lets say, and when I hit 5 that's it.  If I keep requesting more and more connections, either my new connections get refused, or my old connections get throttled back to make space in my little 5Mb slice for the new connections.

Google should be the same way.  Now Google's numbers are huge compared to me, and if too many of Google's connections are being throttled because Google hasn't bought enough bandwidth, then Google's customers might start to get upset with bad performance, and Google will be forced to either buy more bandwidth or deal with unhappy customers.

However, lets say that Google has purchased plenty of bandwidth, and in fact is doing a great job of serving its customers, so much so that Google is making money hand over fist.  I have heard the argument made that 'Google is getting rich on the backs of the networks', AT&T in my example.  Should AT&T be allowed a cyberspace version of a stage coach hold up?   Pay us a percentage of your ungodly profits or we'll throttle your bandwidth?  Google has paid AT&T for a certain bandwidth slice, as long as they don't exceed that limit, why should AT&T have any expectation of getting money out of Google?  Is it just that Google is better at making money with a given allotment of bandwidth than say Yahoo?  Isn't that like saying FedEx is better at making money on highways than UPS, so we should charge FedEx more to use the roads?

In my simple mind, packets are packets.  If I have an agreement with AT&T that they will deliver to and from me a certain rate of packets, then they better live up to their end of the bargain, or we'll be talking to the BBB.  Now if AT&T has oversold their available bandwidth, and too many people are actually using what they agreed to such that AT&T actually CAN'T provide each user with the bandwidth they agreed to, well that's a problem AT&T needs to deal with by either increasing its maximum bandwidth, or by not overselling what they can actually provide as much.  Similarly, if I've paid for a 5Mb connection, I better not get upset when I can't download 10 iTunes movies at the same time, each at 5Mb.  I can buy more bandwidth if I want to.

I know the real situation is much more complex than this, however this seems to be the fundamental question.  People are afraid of AT&T making deals with Yahoo to give Yahoo traffic priority, presumably at the expense of traffic from people who have not signed up special deals.  As long as that doesn't mean depriving Google of the bandwidth that Google has paid for and AT&T has agreed to provide, then I don't see the harm.  Yahoo is getting more and paying more, they're getting what they paid for.  The moment AT&T denies Google the bandwidth they have agreed on, AT&T needs to be taken to court for breach of contract.

I've never known anyone to complain about getting more than what they've paid for.  But I certainly know that customers will not stand by long and put up with not getting what they've paid for.