A study was published today that shows how people who download music from peer-to-peer networks are actually the biggest spenders on legal music. Most media reports characterise this as "surprising", but I am just surprised at everyone's surprise. My own experience shows this to be true - the same people that download music and video from P2P sites are the ones that buy CDs, legal downloads and DVDs in large quantities. The explanation is simple - though price is a factor, most people download from P2P sites not because doing so is free, but because it's more convenient, and usually the only option.
I've often said that the music industry has offered no credible alternative to P2P sites, and I stand by that statement. Many people bring up iTunes, Hulu, Amazon MP3 et al as counter-examples, but these services can never compete with P2P because they are horribly crippled. In order to get the majority of P2P users off the file sharing networks and back into the world of paid music and downloads, you need to offer everything P2P networks offer, and a few things they don't, and can't.
Nobody likes using P2P services. They're slow, they cripple your internet connection (because unlike legal sites they use the upstream part of your broadband connection which is normally several times slower than the downstream part) the files are mislabeled and hard to find, you often get trojans, and although the availability cross-section is different to the legal sites, they're still a lot of stuff that's hard to find. Not to mention, it's illegal, and this matters to a lot of people because of personal ethics as well as an increasingly realistic fear of prosecution.
Here are the three simple things that digital download services need to offer to be competitive with P2P:
1. Sell globally, sell instantly
All the legal download services are initially offered in the US, then slowly trickle down to major European and Asian countries, and (we hope!) eventually to the rest of the world. To compound the problem, all of these services have regional variations in availability - some things are available in some countries but not in others. Meanwhile the vast majority of music consumers have to go to P2P sites because legal downloads are still unavailable in their country. Big Content needs to offer a service that sells to anyone with an Internet connection regardless of which country they live in.
Also, forget about this nonsense of staggered releases. If you release to CD first and to MP3/iTunes second, or to pay-per-view first, DVD second and iTunes third, then everyone will just go to a P2P site and download the rip instead of waiting for you to release it in the format he wants.
2. Lower costs and offer bulk price plans
There's no two ways about it, digital download services are too expensive. Way, way too expensive. I can get a satellite subscription from Sky for £16.50/month and watch, say, two hours of TV every evening - doing the same by buying content off the iTunes Store will cost me about £130/month. I can pay an extra £17/month and watch, say, one movie a night (ad-free!) on Sky Movies. Renting these movies on iTunes will cost me around £150 a month. Of course, nothing's stopping me from watching even more on Sky for the same £17-40/month - in which case iTunes goes from being 10 times more expensive to 20 or 30 for someone who really likes his TV. Yet somehow Sky seems to be profitable for everyone, but still several times cheaper than iTunes.
Additionally, what Sky offers me that iTunes doesn't is the ability to sample content at no incremental cost. If I want to check out a show or a movie I'm not sure about, I can do that without paying for something I might not like as long as my subscription is active. What I should be able to do in iTunes is sign up for a monthly price plan where I can get, say, 50 TV episodes and 20 movies a month at a cheaper price than if I paid for them individually - similar to the way your mobile phone bill works. This way I would be able to spend my unused quota on sampling new things that I am now reluctant to buy. Heavy users would opt for a monthly plan, while occasional users can still cherry-pick content and pay per download.
3. Remove copy protection
Copy protection (what Big Content euphemistically calls "Digital Rights Management" or DRM) is the most ridiculous idea ever. As any computer scientist will tell you, preventing copying is impossible - you can only make it convoluted and hard, but any determined person will eventually circumvent this because playing a file is, as far as a computer is concerned, the same thing as copying it, and you can't prevent one without preventing the other. The only result of offering files with DRM is that users will be unable to copy them between their own devices - portable music players, set-top boxes, their second computer or whatever comes up later on - or use them with their own choice of software, which means they'll just go download the same file, DRM-free, from a P2P site instead.
In 2009, the music industry finally woke up to this fact after a decade of fighting with failed DRM scheme after failed DRM scheme. All music purchases from major online stores are now DRM-free, but videos are still encumbered with the same stupid schemes. Why can't I play iTunes videos on my Playstation 3? Why can't I watch Hulu.com shows on my Apple TV? Because of DRM, which stops me doing all these things with my legally purchased videos but has spectacularly failed to stop these same videos being available on P2P sites - in formats that allow me to play them anywhere.
These three simple things have to be done before legal download services offer a credible alternative to P2P networks. There's more you could do (for instance, iTunes could remember which movies I've bought so that they can stop taking up space on my hard drive, and I can just download them again when I decide to re-watch them) but these three things are absolutely essential in order to de-cripple legal download services.
Until Big Content wises up to this, people will continue to flock to P2P sites that offer them content they can't get from a legal service in a usable format at anything approaching a reasonable price - if at all.