Extended citations for the economic perspective.
Apple Goes to the Movies by Dan Frakes
“One of the obstacles to using movie-download services has always been bandwidth. You can download a 4-minute music track in less than a minute or a 22-minute TV show in several minutes even on a standard DSL or cable connection, but at 2-hour movie is a different game altogether. Jobs (Apple CEO) suggested that users with 5-Mbps connections could download a movie from the iTunes Store in about 30 minutes. In our first attempt to grab a movie using the Macworld office’s 10-Mps connection-admittedly, at a very busy time just a Pew hours after the movie section of of the Itunes Store opened—it took 1 hour and 10 minutes to download Pirates of the Caribbean: The Curse of the Black Pearl—a film that runs 2 hours and 22 minutes long and has a 1.64 GB file size.”
(Found on Article “Apple Goes to the Movies,” written by Dan Frakes on Macworld, Nov. 2006, Vol. 23 Issue 11, p 14-15, 2p)
Apple Goes to the Movies by Dan Frakes
“Expanding Your Options—Watching movies on your Mac or IPOD is great, but most people prefer viewing video on their TVs bigger screen. Jobs took advantage of Apple’s Movie introduction to show off an upcoming product-a rare sneak peek for the company—code-named the iTV. Although it won’t be available until the first quarter of 2007, Jobs showed the $299 device (which looks very much like a half-height Mac mini), which will let you stream video, audio, and photos from your Mac to a television over an 802.11 wireless connection. But instead of making “listen blind” as you have to do with an AirPort Express, the iTV provides a Front Row-like interface on your TV screen that you navigate using the now-ubiquitous Apple Remote.
The iTV will offer a number of ways to connect it to your home entertainment system: an HDMI (High-Definition Multimedia Interface) connection for video and digital audio; component video; optical digital audio; and analog RCA-type audio. It will also have an Ethernet port (which will presumably let you hardwire I to your network) and a USB 2.0 port (maybe for connecting your IPOD).
(Found on Article “Apple Goes to the Movies,” written by Dan Frakes on Macworld, Nov. 2006, Vol. 23 Issue 11, p 14-15, 2p)
Wal-Mart Enters the Movie Download Wars by Gogoi Pallavi
“When it comes to prices, it’s hard to top Wal-Mart (WMT), even though low prices haven’t helped the world’s largest retailer conquer media sales. Apple’s (AAPL) iTunes store is the leader in music downloads despite charging 11 cents more per song, and in video rentals Wal-Mart conceded defeat to Netflix (NFLX) two years ago. Announcing its entry Feb. 6 into the nascent movie download business, Wal-Mart came out charging not only with the lowest price, but also a potent arsenal of backing from all of Hollywood’s big studios. The company’s beta download site has 3,000 titles, with most new releases costing between $14.88 and $19.88. All the majors have signed on to the venture, lured by Wal-Mart’s market reach and its marketing muscle. Among them: 20th Century Fox, Disney, Lions Gate, MGM, MTV Networks, Paramount Pictures, Sony Pictures Entertainment, Universal Studios Home Entertainment, and Warner Bros… Apple is backed by two studios, Disney (DIS) and Viacom’s (VIA) Paramount Pictures, and will face challenges from Wal-Mart’s deeper roster. Morever, Wal-Mart which holds a 40% share in the face lucrative DVD market—has negotiating muscle with studios that hardly anyone can match. “We are starting with 3,000 titles right now and more will come on a daily and weekly basis, which is more than you can find anywhere on the Web,” says Kevin Swint, divisional merchandise manager for digital media at WalMart.com. Wal Mart’s prices start at $7.50 for older movie titles, compares with $9.99 at iTunes. Most of Wal-Mart’s newer films will be available for $14.88, with a few titles $5 more. TV episodes are available for $1.96, 4 cents cheaper than at iTunes. Downloads are available from the likes of Apple, Amazon.com, MovieFlix, and CinemaNow. Download speed has been a critical bottleneck for many people to adopt the model, but that issue has begun to fade amid greater broadband penetration, newer PCs, and quicker download schemes…
However, Wal-Mart could find an edge in the movie battle, because of its wider selection. Even though Wal-Mart might find it difficult to convert its traditional customers, the appeal of movie offers the company a much broader customer base.
James L. McQuivey, vice-president of media and marketing at Forrester Research (FORR), points out that iTunes music succeeded because it was tied to the iPod’s vast popularity. However, McQuivey believes users can download movies or TV shows into any PC and transfer that into cell phones or a portable DVD. “In fact, there are fewer Apple Macs around than PCs, so the barriers for Wal-Mart’s downloadable shows are lower,” says McQuivey.”
(Wal Mart Enters the Movie Download Wars., By: Gogoi, Pallavi, Business Week Online, 2/7/2007, Business Source Complete)
From Apple iTunes Website: Development of iTV
Your computer is the center of your digital life. Your TV is the center of your entertainment life. But what if you want to watch movies, TV shows, movie trailers, podcasts, and photos from your computer on your TV? At $299, Apple TV brings iTunes to the big screen.
The revolution will be televised.
Say you’ve just downloaded Cars from iTunes. Instead of huddling around your computer to watch, you pop some popcorn while your computer wirelessly syncs your new flick to Apple TV. Then you pull up a seat, put up your feet, and pick up the included Apple Remote to play your movie on TV. Give yourself a hand: You’ve just changed the way you watch digital media.
iTunes to Apple TV, wire free
Apple TV connects to your TV via an HDMI port or component video and audio ports. Its built in, superfast 802.11 wireless capability syncs your iTunes library from any Mac or PC in the house. Best of all, what’s on Apple TV stays in sync: Anytime you change your library in iTunes, it changes on Apple TV.
(http://www.apple.com/appletv/)
Tuesday, March 6, 2007
Saturday, March 3, 2007
Stephen Reading - Technical Liason - Checkpoint 2
My part of the report will be dealing with the problems Apple will have to solve to make this system work, and the ways in which they will need to change the default Bit Torrent protocol in order to make it suitable for their use. First they will have to figure out how to encrypt files in a manner that simultaneously allows users to share the file through the Apple Bit Torrent program, but prevents them from sharing it with any other program. As we all know, in the past Apple added the DRM at the end, which allowed Jon Johansen to crack it by simply preventing it from being added. This will probably not work in a Bit Torrent system, so I will be analyzing other possibilities for encrypting the file.
I will also be looking into the actual Bit Torrent protocol to find potential problems for this usage. One obvious problem is the lack of knowledge of location. In order to send data most efficiently and optimize for traffic differences resulting from time zone differences, it might be helpful if the protocol knew which nodes were close to each other. Consider their future competitors, Joost, whose “big innovation is to carve a sprawling network into more manageable subnets without sacrificing P2P efficiency” [1]. Joost is from the makers of Kazaa and Skype, which means it just might be a good idea for Apple to take some hints from them. Another very necessary improvement is a change in how nodes decide what other nodes to send data to. Currently leechers send data to the nodes that are uploading to them fastest while seeds send data to the nodes that are downloading from them the fastest. This gives too high a priority to people with fast internet connections. If someone is paying for a service they will expect to receive data at a reasonable rate regardless of whether or not their connection is slightly slower than the cable or T1 connections that they will be competing against. Therefore the client might be improved if it were optimized to make sure if at all possible that no node takes longer than a certain amount of time to download the file. Finally I will look at how the client will need to change if they intend to implement user incentives. There will have to be some trustworthy way to ascertain the true amount of uploading that each user is doing, which currently is not available. The makers of Bit Thief not only succeeded in creating a client that does no uploading while still downloading the entire file, but managed to make their sharing ratio 1.4, tricking the sharing community into thinking they had uploaded 40% more than they had downloaded. If users were able to trick Apple in a similar fashion it might not be long before 10 million times more data had been reported uploaded than downloaded and the entire incentive system collapsed under the cheating.
[1] S. Reiss. Here Comes Trouble” Wired Magazine. http://www.wired.com/wired/archive/15.02/trouble.html?pg=2&topic=trouble&topic_set= Feb. 2007
[2] T. Locher, P. Moor, S. Schmid, R.Wattenhofer. “Free Riding in Bit Torrent is Cheap”.
http://dcg.ethz.ch/publications/hotnets06.pdf
I will also be looking into the actual Bit Torrent protocol to find potential problems for this usage. One obvious problem is the lack of knowledge of location. In order to send data most efficiently and optimize for traffic differences resulting from time zone differences, it might be helpful if the protocol knew which nodes were close to each other. Consider their future competitors, Joost, whose “big innovation is to carve a sprawling network into more manageable subnets without sacrificing P2P efficiency” [1]. Joost is from the makers of Kazaa and Skype, which means it just might be a good idea for Apple to take some hints from them. Another very necessary improvement is a change in how nodes decide what other nodes to send data to. Currently leechers send data to the nodes that are uploading to them fastest while seeds send data to the nodes that are downloading from them the fastest. This gives too high a priority to people with fast internet connections. If someone is paying for a service they will expect to receive data at a reasonable rate regardless of whether or not their connection is slightly slower than the cable or T1 connections that they will be competing against. Therefore the client might be improved if it were optimized to make sure if at all possible that no node takes longer than a certain amount of time to download the file. Finally I will look at how the client will need to change if they intend to implement user incentives. There will have to be some trustworthy way to ascertain the true amount of uploading that each user is doing, which currently is not available. The makers of Bit Thief not only succeeded in creating a client that does no uploading while still downloading the entire file, but managed to make their sharing ratio 1.4, tricking the sharing community into thinking they had uploaded 40% more than they had downloaded. If users were able to trick Apple in a similar fashion it might not be long before 10 million times more data had been reported uploaded than downloaded and the entire incentive system collapsed under the cheating.
[1] S. Reiss. Here Comes Trouble” Wired Magazine. http://www.wired.com/wired/archive/15.02/trouble.html?pg=2&topic=trouble&topic_set= Feb. 2007
[2] T. Locher, P. Moor, S. Schmid, R.Wattenhofer. “Free Riding in Bit Torrent is Cheap”.
http://dcg.ethz.ch/publications/hotnets06.pdf
Thursday, March 1, 2007
Economic Perspective
Hey everyone! This is an informal overall presentation of how I am going to present my arguments.
Apple’s Itunes distribute files from a central bank of computers. This can lead to lengthy waits for files when many users are trying to access the servers. In addition, Apple has to pay huge amounts for the bandwidth utilized. As a result, it is not only costly for Apple, but inefficient for consumers.
In top of this, “BitTorrent, Inc” has joined the legal movie download industry. BitTorrent was used by Web surfers to download illegal copies of movies and other content into their computers. However, in November 2005, BitTorrent agreed with the Motion Picture Association of America to help stem illegal copying by removing from its site links to pirated companies. In May last year Warner Bros. agreed to sell movies and TV shows using the BitTorrent software. Since then, BitTorrent Inc has established contracts with 20th Century Fox News Corp, Warner Bros. Home Entertainment, Lionsgate Entertainment Corp, Metro-Goldwyn-Mayer Inc, Paramount Pictures and MTV networks. BEN will offer a simple pricing structure of $3.99 per movie for new releases, $2.99 for older titles, and TV shows will be sold for $1.99. “Everything's copy-protected using Microsoft DRM and will only play in Windows Media Player 11; movie rentals will expire 30 days after you buy them or 24 hours after you start watching. There is no definitive on whether you'll be able to transfer video to other devices, but if so, it'll presumably only be to ones that support Microsoft DRM--for which read ‘almost everything but the iPod.’" [1]
BitTorrent Entertainment network has already a base of 135 million clients. The software’s popularity is due in large part to its velocity, a huge comparative advantage against apple’s Itunes. An article by Yahoo Finance states:
"Digital distribution represents a significant new revenue stream for the entertainment industry, but up until now, it has been hindered by the combination of long download times and the lack of good content for people to download," said Rob Enderle, Principal Analyst for the Enderle Group. "BitTorrent has aggressively addressed both problems; first with their unique technology, which moves content closer to the customer and dramatically lowers the amount of time it takes to acquire it, and second with their unusually strong content library. In addition, the fact that they start with 135 million existing clients is incredibly powerful and makes them, at launch, a real force to be reckoned with in this market." [2]
Evidently, BitTorrent could pose a huge threat to Apple’s future digital movie download industry. As a consumer, you are always looking for the fastest downloading software. If BitTorrent provides faster downloading rates than Apple, Apple may loose consumers. In order for Apple to successfully launch its digital movie download service, it should adopt BitTorrent software. By adopting BitTorrent software, Apple will provide faster download times and as a result compete against BitTorrent. In addition, Apple should concentrate on its establishment on the market. Unlike BitTorrent, Apple has already established an entire download service infrastructure. Consumers are already used to downloading songs using the Itunes software and its store. As a result, Apple should focus on its established services as a way to defend its products. Itunes is user-friendly and convenient. Another important factor that would lead to the success of Apple’s movie download industry is the ability to view the downloaded movies on TV. As a result, Apple should try to offer more features with its downloads.
[1] H. McCracken. “BitTorrent: Buy, Rent, or Steal?” PC World. http://blogs.pcworld.com/techlog/archives/003790.html. Feb. 25, 2007.
[2] G. Gentile. “BitTorrent to Launch Movie, TV Downloads”. AP Business Writer. http://biz.yahoo.com/ap/070226/downloading_movies.html?.v=2 Feb. 26, 2007.
Hey everyone! This is an informal overall presentation of how I am going to present my arguments.
Apple’s Itunes distribute files from a central bank of computers. This can lead to lengthy waits for files when many users are trying to access the servers. In addition, Apple has to pay huge amounts for the bandwidth utilized. As a result, it is not only costly for Apple, but inefficient for consumers.
In top of this, “BitTorrent, Inc” has joined the legal movie download industry. BitTorrent was used by Web surfers to download illegal copies of movies and other content into their computers. However, in November 2005, BitTorrent agreed with the Motion Picture Association of America to help stem illegal copying by removing from its site links to pirated companies. In May last year Warner Bros. agreed to sell movies and TV shows using the BitTorrent software. Since then, BitTorrent Inc has established contracts with 20th Century Fox News Corp, Warner Bros. Home Entertainment, Lionsgate Entertainment Corp, Metro-Goldwyn-Mayer Inc, Paramount Pictures and MTV networks. BEN will offer a simple pricing structure of $3.99 per movie for new releases, $2.99 for older titles, and TV shows will be sold for $1.99. “Everything's copy-protected using Microsoft DRM and will only play in Windows Media Player 11; movie rentals will expire 30 days after you buy them or 24 hours after you start watching. There is no definitive on whether you'll be able to transfer video to other devices, but if so, it'll presumably only be to ones that support Microsoft DRM--for which read ‘almost everything but the iPod.’" [1]
BitTorrent Entertainment network has already a base of 135 million clients. The software’s popularity is due in large part to its velocity, a huge comparative advantage against apple’s Itunes. An article by Yahoo Finance states:
"Digital distribution represents a significant new revenue stream for the entertainment industry, but up until now, it has been hindered by the combination of long download times and the lack of good content for people to download," said Rob Enderle, Principal Analyst for the Enderle Group. "BitTorrent has aggressively addressed both problems; first with their unique technology, which moves content closer to the customer and dramatically lowers the amount of time it takes to acquire it, and second with their unusually strong content library. In addition, the fact that they start with 135 million existing clients is incredibly powerful and makes them, at launch, a real force to be reckoned with in this market." [2]
Evidently, BitTorrent could pose a huge threat to Apple’s future digital movie download industry. As a consumer, you are always looking for the fastest downloading software. If BitTorrent provides faster downloading rates than Apple, Apple may loose consumers. In order for Apple to successfully launch its digital movie download service, it should adopt BitTorrent software. By adopting BitTorrent software, Apple will provide faster download times and as a result compete against BitTorrent. In addition, Apple should concentrate on its establishment on the market. Unlike BitTorrent, Apple has already established an entire download service infrastructure. Consumers are already used to downloading songs using the Itunes software and its store. As a result, Apple should focus on its established services as a way to defend its products. Itunes is user-friendly and convenient. Another important factor that would lead to the success of Apple’s movie download industry is the ability to view the downloaded movies on TV. As a result, Apple should try to offer more features with its downloads.
[1] H. McCracken. “BitTorrent: Buy, Rent, or Steal?” PC World. http://blogs.pcworld.com/techlog/archives/003790.html. Feb. 25, 2007.
[2] G. Gentile. “BitTorrent to Launch Movie, TV Downloads”. AP Business Writer. http://biz.yahoo.com/ap/070226/downloading_movies.html?.v=2 Feb. 26, 2007.
Brett Aresco
As a consulting group for Apple, Inc., our task in this project will be to evaluate the pros and cons of using the Bit Torrent system as an appropriate way to supplement legal downloading of movie files through the iTunes store. In this evaluation, legal matters are of the utmost importance, especially considering the histories of both the iTunes Store and Bit Torrent, Inc. p2p technology. From Apple?s standpoint, they would be adopting a technology that has come under fire for its questionable legality. Speaking strictly in terms of efficiency, the Bit Torrent client is a great alternative to normal, central source downloading off of which the current iTunes Store model operates. Downloads using the Bit Torrent client, because of its superior, bit by bit uploading and downloading of large files such as HD movies from many different servers, makes it a client that can more easily handle demanding files that would then generate more interest in the Apple Store. The only issues with this incorporation come from the legality of the Bit Torrent client.
There is a plethora of Bit Torrent clients on the Internet right now. Many have come under fire from the Motion Picture Association of America and the Recording Industry Association of America due to massive amounts of file sharing being illegally perpetrated on these sites. Examples of popular Bit Torrent sites that have been shut down are such as suprnova.org and LokiTorrent. In response to legal pressure, Bit Torrent Inc. recently signed a deal with the movie industry to reduce unlicensed copies of movies on its main site, bittorrent.com. This has reduced some of the liability on the main purveyor of the Bit Torrent system. If Apple were to adopt Bit Torrent?s system, allowing people to purchase movies and download them using Bit Torrent technology, the legal issues would be lessened for Bit Torrent but increased for Apple. Apple, Inc. would assume a large liability if it were to acquire Bit Torrent, due to the possibility of free riders exploiting the system through low upload times and ?optimistic unchoking.? However, adopting Bit Torrent technology would come with more ability for the Apple Store, which, in turn, may generate more customers. Bit Torrent technology, due to its ability to harbor large files, may be one of Apple?s only hopes if it were to want to put things such as HD movies and other large files on its site. Without incorporating Bit Torrent, Apple could face declining customers and a significant challenge from Bit Torrent for people who want to download. These legal issues and potential opportunities for Apple must be weighed against each other and looked at under a legal lens before Apple is able to make an informed decision about whether to
employ Bit Torrent technology.
LokiTorrent case:
http://news.com.com/LokiTorrent+fights+MPAA+legal+attack/2100-1025_3-5508073.html
http://boingboing.net/2005/02/10/mpaa_shuts_down_loki.html (including other
links on the page like the MPAA press release)
http://www.afterdawn.com/news/archive/6141.cfm
Suprnova.org case:
http://www.slyck.com/news.php?story=1177
http://www.internetdj.com/article.php?storyid=514
http://torrentfreak.com/suprnovaorg-two-years-since-the-shutdown/
There is a plethora of Bit Torrent clients on the Internet right now. Many have come under fire from the Motion Picture Association of America and the Recording Industry Association of America due to massive amounts of file sharing being illegally perpetrated on these sites. Examples of popular Bit Torrent sites that have been shut down are such as suprnova.org and LokiTorrent. In response to legal pressure, Bit Torrent Inc. recently signed a deal with the movie industry to reduce unlicensed copies of movies on its main site, bittorrent.com. This has reduced some of the liability on the main purveyor of the Bit Torrent system. If Apple were to adopt Bit Torrent?s system, allowing people to purchase movies and download them using Bit Torrent technology, the legal issues would be lessened for Bit Torrent but increased for Apple. Apple, Inc. would assume a large liability if it were to acquire Bit Torrent, due to the possibility of free riders exploiting the system through low upload times and ?optimistic unchoking.? However, adopting Bit Torrent technology would come with more ability for the Apple Store, which, in turn, may generate more customers. Bit Torrent technology, due to its ability to harbor large files, may be one of Apple?s only hopes if it were to want to put things such as HD movies and other large files on its site. Without incorporating Bit Torrent, Apple could face declining customers and a significant challenge from Bit Torrent for people who want to download. These legal issues and potential opportunities for Apple must be weighed against each other and looked at under a legal lens before Apple is able to make an informed decision about whether to
employ Bit Torrent technology.
LokiTorrent case:
http://news.com.com/LokiTorrent+fights+MPAA+legal+attack/2100-1025_3-5508073.html
http://boingboing.net/2005/02/10/mpaa_shuts_down_loki.html (including other
links on the page like the MPAA press release)
http://www.afterdawn.com/news/archive/6141.cfm
Suprnova.org case:
http://www.slyck.com/news.php?story=1177
http://www.internetdj.com/article.php?storyid=514
http://torrentfreak.com/suprnovaorg-two-years-since-the-shutdown/
Monday, February 26, 2007
Joan Vor Broker- Guru
In beginning our BitTorrent project there are many issues to consider. First and foremost, the implications of creating a union between Apple’s iTunes network and service and a distribution source like BitTorrent. As it stands, the legal and ethical issues surrounding BitTorrent are vast and it seems risky, to say the least, for a respected and legitimate company like Apple to foster a business relationship with BitTorrent.
First one must examine simple the legality of the situation at hand, the biggest issue begin copyright infringement. BitTorrent’s notorious reputation as a peer-to-peer network used for sharing music and other data files poses a threat to the reputation of Apple and their already existing relationships with copyright holders. Secondly, the posed threat of security to a network using BitTorrent is severe. Because of the shared database driven nature of the program, Adware, Spyware and many other harmful programs risk being spread to users computers leaving them unhappy with their services – especially if they are paying for those services as with iTunes. In addition, one must consider the grave ethical issues posed with such a merger. On a network like BitTorrent, there is a lack of monitoring and control over the information and traffic. For example, pornography and other such undesirable forms of traffic and file sharing can easily occur under the nose of the administrators.
Before a company like Apple and BitTorrent could enter into any form of Business agreement or network merger, these issues and many more would have to be closely examined and BitTorrent would have to show serious dedication to the legitimacy of Apple’s business practices and adhere to more stringent legal and ethical protocols.
First one must examine simple the legality of the situation at hand, the biggest issue begin copyright infringement. BitTorrent’s notorious reputation as a peer-to-peer network used for sharing music and other data files poses a threat to the reputation of Apple and their already existing relationships with copyright holders. Secondly, the posed threat of security to a network using BitTorrent is severe. Because of the shared database driven nature of the program, Adware, Spyware and many other harmful programs risk being spread to users computers leaving them unhappy with their services – especially if they are paying for those services as with iTunes. In addition, one must consider the grave ethical issues posed with such a merger. On a network like BitTorrent, there is a lack of monitoring and control over the information and traffic. For example, pornography and other such undesirable forms of traffic and file sharing can easily occur under the nose of the administrators.
Before a company like Apple and BitTorrent could enter into any form of Business agreement or network merger, these issues and many more would have to be closely examined and BitTorrent would have to show serious dedication to the legitimacy of Apple’s business practices and adhere to more stringent legal and ethical protocols.
Sunday, February 25, 2007
Stephen Reading - Technical Liason: First Analysis of Costs of Peer to Peer Distribution
This post will use rough math to show that switching to Bit Torrent is a bad idea.
Let’s start with the myth of the long tail. “March data for the 1.1 million songs of Rhapsody, [a streaming music service], shows a 22% no-play rate; another 19% [of songs] got just one or two plays” [1]. This is 41% of songs that are almost never being streamed. Let’s assume that since Rhapsody charges a subscription fee but doesn’t require users to pay for each song they stream that users are more likely to stream a less popular song on Rhapsody to try it out than they are buy it on iTunes. Using that logic it’s probably fair to assume that 50% of songs get no more than two downloads each month on iTunes. Let’s also assume the ratios roughly correspond to Rhapsody with 25% getting no buys, 12.5% one buy, and 12.5% two buys. At 100 kB/s it will take about one minute to download each song.
365days/12months*24hours/day*60minutes/hour=43800 minutes per month.
2 minutes/43800 minutes/month = .0045 is the percent of time that 12.5 percent of the library is being downloaded
1 minute/43800 minutes/month = .0023 is the percent of time that another 12.5 percent of the library is being downloaded
And 0 is the percent of time 25% of the library is being downloaded.
Overall this is .0017 %.
This means that on average, for 50% of the iTunes catalog you have a .0017% chance of having anyone else also be downloading the file to give you any of the benefits of a peer to peer system. I won’t even get into the chance that they will have a good enough connection to help noticeably.
Another quote from the article makes the situation even bleaker. “Ecast told me that now, with a much bigger inventory than when Mr. Anderson spoke to them two years ago, the quarterly no-play rate has risen from 2% to 12%” [1]. This means that iTunes’ library of 3.5 million songs [2] probably has a much higher rate of songs with extremely low demand than we just assumed compared to Rhapsody’s library of 1.1 million.
Given how low that percent chance is I believe it is fair to guess (and it is just a guess because I couldn’t find data) that at least 75-80% of the music available would get no benefit from peer to peer because it is downloaded so infrequently. Indeed iTunes is probably more like Amazon where “2.7% of Amazon's titles produce a whopping 75% of its revenues” [1] which would put the percentage at 97.3 percent of music that would get no benefit from peer to peer delivery.
Let’s calculate Apple’s current bandwidth costs. Last year they sold just over 1 billion songs according to their reports. We will keep it at exactly 1 billion songs and balance it by counting all of the tv downloads as being last year even though it started in October 2005.
1 billion songs x 5 MB = 4,800TB
50 million TV shows x 350 MB = 17,000 TB
1.3 million movies x 1.25 GB = 1,600 TB [3]
Gives us an estimate of somewhere around 24000 TB of bandwidth used last year. At $.65 per gigabyte [4], we get 16 million dollars in bandwidth fees.
Let’s assume Apple is going to switch to Bit Torrent, what are their costs now? Bandwidth is $.45 per gigabyte and storage $.2 per gigabyte [4], and 75% of the library has to be downloaded entirely from Apple, but that 75% makes up only 25% of the total downloads. 24000 TB *1024 GB/TB *$.2 + 6000 TB *1024 GB/TB*$.45 = 7.7 million dollars. This means that if Apple gives no incentives to users to upload from their machine, and impossibly spends nothing on bandwidth seeding the files, they will save 8.3 million dollars. To put that into perspective, raising the cost of a song from $.99 to $1 would make them 10 million dollars a year. $8.3 million is also roughly equal to 3% of what they spent on advertising the iPod in 2005 [6] or their revenue in 2 and a half hours, if you prefer [7].
However if they want the scheme to work they should expect to give incentives to upload. Since bandwidth used to cost $.45 per gigabyte after storage fees that is the maximum we can expect Apple to pay. This means at best a user would have to upload over 450 songs before they got a single one free.
Now consider what rate a customer would be willing and able to upload at, given that a higher upload speed will limit their download speed and that incentivizing uploads with money will lead to a situation in which there are far more uploaders than downloaders, leaving no one to send data to even if it’s desired. Consider that for every person who gets a free song from uploading, we need 100 people to download a song without uploading a single bit. For convenience let’s say I’m on a decently fast connection that the program connects people to and I manage to upload at 12 KB/s. At that rate it will take me about 24 hours to upload 1 GB (how convenient!), earning me $.45 a day and taking me two and a third days to earn my first free song. At 130 watts to power my computer and about $.15 per kilowatt hour, it costs me about $.02 an hour to have my computer running [5], or $.48 a day. At that cost, Apple will not even pay me back what it costs me in my electric bill to upload for them.
As technical liason I think it is very clear that Apple should not switch to Bit Torrent anytime soon, unless they naively expect users to be willing to upload files for free. I will, however, be spending the rest of the project trying to think up ways to make this switch work, under the assumption that Apple is not worried about the fact that it won’t save them any money, will in fact cost them money to develop a new type of DRM that works with peer to peer networking, and is just generally a dumb idea.
[1] It May Be a Long Time Before the Long Tail Is Wagging the Web. Wall Street Journal reprinted at http://www.ntoddblog.org/connected/2006/07/index.html. Jul. 26, 2006.
[2] http://www.apple.com/itunes/store/
[3] http://www.apple.com/pr/library/2007/01/09itunes.html
[4] M. Ratcliffe. “YouTube wildly profitable?” http://blogs.zdnet.com/Ratcliffe/?p=186 Oct. 4, 2006.
[5] http://michaelbluejay.com/electricity/computers.html
[6] I. Fried. “Apple spends a bundle on iPod ads.” http://news.com.com/Apple+spends+a+bundle+on+iPod+ads/2100-1047_3-5978598.html Dec. 1, 2005.
[7] “One billion: Apple's first quarter profits soar”. http://www.thinksecret.com/news/0701q1earnings.html Jan. 17, 2007
Let’s start with the myth of the long tail. “March data for the 1.1 million songs of Rhapsody, [a streaming music service], shows a 22% no-play rate; another 19% [of songs] got just one or two plays” [1]. This is 41% of songs that are almost never being streamed. Let’s assume that since Rhapsody charges a subscription fee but doesn’t require users to pay for each song they stream that users are more likely to stream a less popular song on Rhapsody to try it out than they are buy it on iTunes. Using that logic it’s probably fair to assume that 50% of songs get no more than two downloads each month on iTunes. Let’s also assume the ratios roughly correspond to Rhapsody with 25% getting no buys, 12.5% one buy, and 12.5% two buys. At 100 kB/s it will take about one minute to download each song.
365days/12months*24hours/day*60minutes/hour=43800 minutes per month.
2 minutes/43800 minutes/month = .0045 is the percent of time that 12.5 percent of the library is being downloaded
1 minute/43800 minutes/month = .0023 is the percent of time that another 12.5 percent of the library is being downloaded
And 0 is the percent of time 25% of the library is being downloaded.
Overall this is .0017 %.
This means that on average, for 50% of the iTunes catalog you have a .0017% chance of having anyone else also be downloading the file to give you any of the benefits of a peer to peer system. I won’t even get into the chance that they will have a good enough connection to help noticeably.
Another quote from the article makes the situation even bleaker. “Ecast told me that now, with a much bigger inventory than when Mr. Anderson spoke to them two years ago, the quarterly no-play rate has risen from 2% to 12%” [1]. This means that iTunes’ library of 3.5 million songs [2] probably has a much higher rate of songs with extremely low demand than we just assumed compared to Rhapsody’s library of 1.1 million.
Given how low that percent chance is I believe it is fair to guess (and it is just a guess because I couldn’t find data) that at least 75-80% of the music available would get no benefit from peer to peer because it is downloaded so infrequently. Indeed iTunes is probably more like Amazon where “2.7% of Amazon's titles produce a whopping 75% of its revenues” [1] which would put the percentage at 97.3 percent of music that would get no benefit from peer to peer delivery.
Let’s calculate Apple’s current bandwidth costs. Last year they sold just over 1 billion songs according to their reports. We will keep it at exactly 1 billion songs and balance it by counting all of the tv downloads as being last year even though it started in October 2005.
1 billion songs x 5 MB = 4,800TB
50 million TV shows x 350 MB = 17,000 TB
1.3 million movies x 1.25 GB = 1,600 TB [3]
Gives us an estimate of somewhere around 24000 TB of bandwidth used last year. At $.65 per gigabyte [4], we get 16 million dollars in bandwidth fees.
Let’s assume Apple is going to switch to Bit Torrent, what are their costs now? Bandwidth is $.45 per gigabyte and storage $.2 per gigabyte [4], and 75% of the library has to be downloaded entirely from Apple, but that 75% makes up only 25% of the total downloads. 24000 TB *1024 GB/TB *$.2 + 6000 TB *1024 GB/TB*$.45 = 7.7 million dollars. This means that if Apple gives no incentives to users to upload from their machine, and impossibly spends nothing on bandwidth seeding the files, they will save 8.3 million dollars. To put that into perspective, raising the cost of a song from $.99 to $1 would make them 10 million dollars a year. $8.3 million is also roughly equal to 3% of what they spent on advertising the iPod in 2005 [6] or their revenue in 2 and a half hours, if you prefer [7].
However if they want the scheme to work they should expect to give incentives to upload. Since bandwidth used to cost $.45 per gigabyte after storage fees that is the maximum we can expect Apple to pay. This means at best a user would have to upload over 450 songs before they got a single one free.
Now consider what rate a customer would be willing and able to upload at, given that a higher upload speed will limit their download speed and that incentivizing uploads with money will lead to a situation in which there are far more uploaders than downloaders, leaving no one to send data to even if it’s desired. Consider that for every person who gets a free song from uploading, we need 100 people to download a song without uploading a single bit. For convenience let’s say I’m on a decently fast connection that the program connects people to and I manage to upload at 12 KB/s. At that rate it will take me about 24 hours to upload 1 GB (how convenient!), earning me $.45 a day and taking me two and a third days to earn my first free song. At 130 watts to power my computer and about $.15 per kilowatt hour, it costs me about $.02 an hour to have my computer running [5], or $.48 a day. At that cost, Apple will not even pay me back what it costs me in my electric bill to upload for them.
As technical liason I think it is very clear that Apple should not switch to Bit Torrent anytime soon, unless they naively expect users to be willing to upload files for free. I will, however, be spending the rest of the project trying to think up ways to make this switch work, under the assumption that Apple is not worried about the fact that it won’t save them any money, will in fact cost them money to develop a new type of DRM that works with peer to peer networking, and is just generally a dumb idea.
[1] It May Be a Long Time Before the Long Tail Is Wagging the Web. Wall Street Journal reprinted at http://www.ntoddblog.org/connected/2006/07/index.html. Jul. 26, 2006.
[2] http://www.apple.com/itunes/store/
[3] http://www.apple.com/pr/library/2007/01/09itunes.html
[4] M. Ratcliffe. “YouTube wildly profitable?” http://blogs.zdnet.com/Ratcliffe/?p=186 Oct. 4, 2006.
[5] http://michaelbluejay.com/electricity/computers.html
[6] I. Fried. “Apple spends a bundle on iPod ads.” http://news.com.com/Apple+spends+a+bundle+on+iPod+ads/2100-1047_3-5978598.html Dec. 1, 2005.
[7] “One billion: Apple's first quarter profits soar”. http://www.thinksecret.com/news/0701q1earnings.html Jan. 17, 2007
Subscribe to:
Posts (Atom)