An Incentive Based P2P Marketplace

By Eric de Fontenay (Founder & Publisher) (more articles from this author) 2003-06-06

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In a presentation I gave at Net 2001 in Paris, I claimed that "[the] lack of structure/tools [to create a viable marketplace] has resulted in classic free-rider problem. New p2p markets will need to establish a value exchange system throughout the production process." I followed up the claim by proposing that an incentive-based model would be necessary to the development of an actual p2p marketplace versus a free-for-all. "A viable p2p marketplace depends on members having a vested interest in its existence and prosperity."

Digital technology has already fundamentally changed the recording industry's production chain, from production/post-production, to manufacturing & distribution. But technology does not simply transform old processes and methods, it can also marginalize certain links of that chain as it creates new ones.

One important way that digital technology has affected the traditional production chain is in the after-sale market. Due in part to the technological limitations of the time as well as the First Sale Doctrine, the production chain - I use the term in the large sense - ended at the retailer. In the past, if I purchases a CD, I owned it, could resell it, and while I could copy and redistribute it, it's scale was insignificant and usually fell within some reasonable concept of fair use. A sale therefore was a final transaction transferring significant, though not total under copyright law, ownership to me the buyer.

Through the use of DRM & copy-protection technology, that retail transaction is no longer the final link in the chain, but a first step in an ongoing transactional relationship over the access and use of the purchased product. This effectively represents an expansion of the traditional production chain by the music industry.

But the Internet has a far more dramatic impact on the producer/consumer role by empowering consumers into assuming more roles of the production chain traditionally controlled by the industry. Newspapers implementing weblogs are in fact relinquishing a portion of their editorial control to the reader. In the music industry, CD manufacturing is a perfect example where the home PC/broadband/burner is replacing large-scale manufacturing facilities. The "problem" with peer-to-peer is that it transforms the passive consumer into an active redistributor, not only threatening its own expansion in the after-sale market, but also traditional distributors from offline/online retailers, broadcasters,... The publishing industry is already very conscious of the distributive value of its readers as it distinguishes between actual sales and value

An incentive-based model regards the changing consumer as simply an additional distribution node in the overall production chain. The imperative for the producer is to enter into a relationship with that node that maximizes its potential value by sharing in its benefits. In my model, this would be achieved through a self-selection licensing system where a menu of licensing conditions would be offered, whether for a single, multiple/group as well as the presently licensed institutional users. The license can be as restrictive as a ¢15 track that expires in an hour. But it could also be as expansive as a license to redistribute a set number of preview tracks for a flat fee and collecting fees from any ensuing purchases. Or giving an open license download where the 10 top file sharers can win a free trip to the artist's concert in Rio. You get the picture.

Well it seems Altnet has taken this point to heart as they announced the development of Peer Points Manager, "a new platform to provide incentives and reward consumers for sharing licensed digital content" by monitoring file uploads among Kazaa Media Desktop users. Kazaa users sharing Altnet's TopSearch gold icon licensed music files get a shot at plasma TVs, MP3 players, concert tickets, and more.

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