Owners of intellectual capital who serve the needs of the growing peer-to-peer computing community will reap financial rewards while those who offer online consumers only traditional distribution methods will suffer, according to a new series of research released Thursday by IDC Canada.

The research, which covers the growth of peer-to-peer (P2P) computing and the Napster file-sharing service, claims the P2P community is having a profound effect on the use, distribution and value of intellectual capital.

For copyright owners “to say forget it, we’re not playing, that’s stupid,” said the report’s co-author Michael O’Neil. “It assumes users can be dictated to by suppliers.”

O’Neil said the strength and size of the P2P community is shifting the control of intellectual property distribution way from suppliers and towards consumers. He said the upcoming PressPlay and MusicNet services from the major record labels will miss their targets because they offer label-specific catalogs and therefore aren’t directed towards the needs of consumers.

“PressPlay and MusicNet fundamentally do not respond to demand-side interests,” he said. “It’s just beyond (the major labels) why they should have to change.”

O’Neil said the main change consumers want to see involves intellectual capital owners offering more choice.

Of the 2,000 Canadian adults surveyed by IDC, 20 per cent, or 400 hundred, use Napster. (The surveying was done in April, just before the effect of court rulings in the United States relegated Napster to an also-ran among the growing legions of P2P networks, O’Neil said). A full quarter of Napster users pegged the incredibly diverse selection of music available through the service as their main reason for using Napster.

Another 20 per cent said their primary reason for using Napster was packaging. In other words, O’Neil said, they wanted their music by the song rather than the album-oriented-format favoured by record labels. Only 10 per cent cited cost as their number one reason for using the service.

“Choice, rather than price, as the RIA (Recording Industry Association of America) would have you believe, is the key driver,” O’Neil said.

One of the more interesting findings of the IDC research was that the ratio of Napster users to Internet users was higher among those who first language is not English that by those for whom English is their primary tongue.

“If you’re from a small country from far away and you live in some community in Canada, the likelyhood is the local record store doesn’t carry content that echoes with you,” O’Neil said.

Eleven per cent of respondents cited convenience as their prime reason for using Napster, while the remaining 36 per cent said they use the service mainly because they viewed Napster as being like the public library.

“They view it as public access for public good,” O’Neil said. He stressed that while Napster was a main focus of the survey, film and software copyright holders should hear the music as well as their wares are becoming increasingly popular among P2P users.

The pervasive public-good belief doesn’t bode well for owners of intellectual capital. But on the positive side, O’Neil said, half of those surveyed said they’d be willing to compensate a record label for their Napster use and 66 per cent of respondents said they would pay the artist responsible for the work they download.

According to O’Neil, there is no magic solution for successful online distribution. But he said the first step for record labels looking to take advantage of this willingness to pay is to turn attention away from contemporary pop on the Net and towards more niche genres like bluegrass, folk, jazz and classical that aren’t served well by traditional distribution.

“It turns out the people who like contemporary pop aren’t likely to pay,” O’Neil said. “Focusing your presence on contemporary pop isn’t a winning strategy if people are looking for choice.”

Record labels also need to provide consumers with reliable and speedy downloads and communicate the benefits of their services, O’Neil said. While investing in security of their online catalogs is important for labels, security remains just one factor of a successful cyber strategy.

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