Why the RIAA ISP-Route is Likely to Fail

The latest news out of the RIAA is that they are ending their war on the consumer, instead focusing on ISPs in their pursuit of three-strikes types of rules where repeat offenders would be kicked off the internet. There are several important implications of this type of behavior, but I think the biggest thing to talk about is that the chance of this working are very slim indeed.

The biggest reason, I believe, is that ISPs will fight any types of policing laws. First, it’s not in the interest of an ISP to be held accountable for the actions of their users (something I find akin to saying that the transportation department is liable for drug traffic on the highways because they built and service the roads). Second, why would ISPs want to force users off the internet? Each lost subscriber is business they can theoretically never get back, which over time would be hugely detrimental.

There’s also the fact that this type of effort requires legislation. In order to get any type of traction on a three-strikes law, there would have to be a tremendous lobbying effort and an even greater effort to avoid the backlash that creating such a law would entail. That’s not to say that this wouldn’t be the most effective angle, it would just require an enormous sum of money. That’s money that I don’t entirely believe the RIAA is capable of producing at this point. Big ISPs and probably some major internet players would be lobbying on the other side, and the only thing of value will probably be that a bunch of lawyers would make a bunch of money. The fight will probably be very long, too, and time is certainly against the RIAA as fewer consumers buy traditional media anymore.

How are you supposed to enforce a three-strikes law anyway? Why can’t I just go to a coffee shop every time I want to do some illegal downloading? What’s to keep me from going to a new ISP? Who’s going to foot the bill for enforcement? How will those without internet access be able to hold jobs? Is it a permanent or a temporary ban?

Even given that any type of legislation passes, it’s so unlikely that it can be properly enforced that it’s fairly laughable. That is, unless it wasn’t so serious. If you have a minute, you should let the RIAA know what you think. Send them feedback, or even better, just stop buying their products until they come to their senses.

Business Models that Work: Netflix and TiVo

Netflix and TiVo are two companies that are constantly evolving their business models in an effort to not have their markets leave them behind. Let’s take a look at each.

Netflix, when it began, specialized in the DVD-by-mail business. This was a great model at the time (and was supported by a great website), but the inevitable time has come to where streaming content is replacing physical media. So, instead of dying with the DVD, Netflix has rolled out a browser-based streaming product with a ton of content behind it. Not only that, they’ve gone on to bring their services to consumer devices through partnerships with the likes of Microsoft (the upcoming update to the XBox 360) and TiVo. In short, Netflix saw a problem, tackled it head on, and are now reaping the rewards of being an early entrant into an emerging market. Their monthly subscription model is perfect for access to streaming media, all of which is only a web browser away.

TiVo is a provider of DVRs and the associated program lineup services that, like Netflix, relies on a monthly subscription service to make money. TiVo is essentially a company that provides a value-added service (time-shifting of TV and program-subscription services) to an existing industry (television). TiVo has in the past (and still does) face stiff competition from the likes of cable and sattellite companies that can develop their own DVRs to sell to their customer base. TiVo has had to evolve rapidly to keep their position as a premier player in order to stay competative. They’ve done so through their additions of HD DVRs, their partnership with NetFlix to enable streaming through TiVo boxes, and by creating a top-notch DVR. They’ve also kept subscription costs low to keep customers.

Of the two companies above, the one with the murkier future is TiVo. There’s nothing special about DVR software – free alternatives exist, and they’re only going to keep getting better. Also, as programming shifts online, their set-top market will shrink and eventually disappear. In order to have them around for the long term, expect them to evolve still.

Now, let’s look at an industry that have all but failed to change their business model, and now is withering away – the music industry. CD sales are in the tanks and the major record labels are in a terrible position since their core product strategy revolves around the CD. They failed to pioneer the online subscription model, and consumers have reacted by finding illegal alternatives. DRM has been a debacle – customers avoid it like the plague nowadays. To make matters worse in this case, though, the absolute most boneheaded response to a shifting market is to sue your customers. That’s just asinine.