P2P a phenomenon business must face: analyst

Consumers will get what they want on the Internet and suppliers should start to not only live with it, but take advantage of it, according to new research on peer-to-peer computing.

What’s more, this phenomenon has never been so apparent, said Michael O’Neil, Canadian country manager and co-author of IDC Canada’s latest research that finds that peer-to-peer (P2P) computing will significantly impact the future of intellectual capital.

“At this point, the e-customer affinity movement is a demand-driven, not supply-driven, phenomenon and it is inevitable,” O’Neil said from his Toronto office. “At day’s end, it is not to the suppliers community’s advantage to dictate terms. They should try to understand how to work with this growing and morphing demand.”

For example, he said entertainment suppliers tried to choke off Napster because it didn’t fit the vision of how demand should take shape. Once the suppliers suppressed the famed music download site, it gave rise to dozens of others to take its place.

“Morphius is ten times worse for the music industries and a whole bunch of other industries than Napster ever was,” he said, referring to one of the most recent Napster-replacements. “As people start to use these things, the phenomenon starts to grow organically and logarithmically and exponentially in all sorts of directions.”

No one knows that phenomenon as well as John Caliendo, chief financial officer at Hotline Communications Inc., a Toronto-based Internet company. Just last week, Caliendo’s company was in the news when copies of American Pie 2, in theatres this week, were traded through his service. But, he said, this is nothing new to Hotline.

“Pre-Napster, many people used Hotline for MP3 exchange,” he said. “This is not a phenomenon that is new to us. Then Napster, which was designed overtly to trade music files, exploded.”

P2P, Caliendo continued, is designed to help build communities of interest and it goes back to the genesis of the Internet, which was always to exchange information.

“The genie is out of the bottle and this is not going to go away,” Caliendo said.

He added that the challenge for a company like his is trying to help the film and music industry understand that while it may be a double-edge sword, there are ways to make this technology work to the industry’s advantage.

“The most powerful form of marketing is word of mouth and everyone knows that. But the irony is that this is ultimately what they are fighting,” he said. “What they need to do is harness it and realize they will never completely control it.”

O’Neil said that chances are that those who downloaded and traded American Pie 2, and even more recently, Planet of the Apes, are relatively well-educated Internet users who have a high investment in the ability to enhance what they downloaded. That, or they are “techie-geeks” who just like to know they have the power to get things for free, he added. The idea-based industry needs to open up the Internet as an option for customers right from the launch of the product and charge a premium for those who want to download it, he said.

“This is not strictly about price and it is not about theft and piracy,” O’Neil said. “This phenomenon is about choice. If you look at the reaction of the music industry they are going about it exactly wrong. They are trying to restrict choice and add fees and they offer content that the people who don’t want to pay fees are interested in and they choke the content that the people may actually pay for.”

That will fuel the underground trades, he added, which is detrimental to not only the packagers and producers of content, but also to the artists. His research, which surveyed 2000 Canadian adults, shows that with the rise of Napster and programs like it, virtual communities have the potential to impact the pricing, packaging and marketing of content distributed over the Web, he concluded.

“At day’s end, the distribution angle is not the choice of the supplier – it’s the choice of the consumer,” O’Neil said. “If the consumer wants to get product that way, they will.”

Find more of IDC Canada’s research at http://www.idc.ca. Toronto-based Hotline Communications Inc. at http://www2.bigredh.com/hotline3.