Report: Businesses Must Embrace Web’s P2P Trend

The use of peer-to-peer networking among Internet users — for example, on controversial music file-swapping site Napster — is changing the way people exchange information, and companies ignore the trend at their peril, according to a report released Thursday by IDC.

The rise of Napster shows that “virtual communities” have the potential toaffect the pricing, packaging and marketing of Internet content, IDC said.

“Communities of e-customers empowered by peer-to-peer (P2P) computing are changing the use, distribution, and value of intellectual capital,” the report said.

IDC Canada country manager Michael O’Neil, who co-authored the report, said that marketers “need to understand this sea change now, so that they can build strategies that tap the power of the e-customer affinity and avoid being run over by the unharnessed capacity and enthusiasm of legions of P2P-powered enthusiasts.”

Change is Here

As the Napster phenomenon proves, the change has already occurred in music, and “it’s pretty much here in video,” O’Neil told the E-Commerce Times.

O’Neil pointed to the new movie “Planet of the Apes,” which opened in theaters July 27th. The day before it opened, he said, “you could pick it up off Morpheus,” a software program that allows the downloading of files.

“Software’s just around the corner,” the analyst said, adding that “it’s only a matter of time before, for example, drug formulas start getting swapped over the Internet,” allowing Third World countries to avoid paying exorbitant prices for AIDS treatments and other drugs.

Napster Example

“Napster was much more than just a means of ‘sharing’ music,” O’Neil said. “Napster was the first expression of how peer-to-peer networking enables communities of customers to exchange value and information, and change the structure of an entire industry.”

IDC’s study, based on a survey of 2,000 Canadian adults, concluded that successful marketers will find ways to work with prospective customers, “while losers will attempt to force their e-customers to follow well-worn distribution strategies of businesses’ brick-and-mortar past.”

Canada, he said, is a good barometer of the peer-to-peer trend because of the country’s heavy broadband penetration. With the growth of broadband, as well as improvements in playback and other technologies, P2P content distribution will only grow, he said.

‘Knee-Jerk Reaction’

Among companies, “the knee-jerk reaction is, let’s shut down piracy, use the best protection technologies we can, and prosecute, prosecute, prosecute,” O’Neil said. “It’s more important that suppliers segment their markets, identify those markets they can make money from online, and then build online offerings.”

Offering Internet products does not have to come at the expense of companies’ traditional distribution venues, according to IDC. Movie production and distribution companies, for example, have an advantage, in that “Planet of the Apes” is much more enjoyable to watch in a big theater than on a small screen, he said.

A substantial portion of the potential audience “would prefer to pay for content that is of reliable quality, and may prefer to observe the laws around copyrights,” said O’Neil. If companies recognize this, he said, they can turn the trend to their advantage. Denying it, on the other hand, just shuts off a potential revenue stream.

“Just saying, ‘We would rather not do this,’ is not going to prevent it fromhappening, as music companies found out quite clearly,” O’Neil said.