CS155a E Commerce Lecture 8 October 2 2001 Business Models for Online Content Distribution Napster Client Server Interaction Client1 hello ack Client1 s IP address Names of MP3s on Client1 s Machine Request MP3 file1 MP3 file2 IP address of online user MP3 filen client2 who has requested file repeat goodbye ack Searches a db of currently online users for one that has previously stored the requested MP3 Adds client1 and its list to db Removes client1 and its list from db Notes on Client Server Interaction Proprietary protocol and db search No MP3 files stored on server Don t need usernames Could have made the service anonymous No need to save IP addresses between sessions Many are assigned dynamically Discussion point Are anonymity and memorylessness threats or opportunities for business Napster Client Client P2P Interaction Client1 Client1 s IP address Request Client2 Requested MP3 Note This part uses standard Internet protocols e g FTP Napster History 1987 MP3 format developed by Karlheinz Brandenburg of Fraunhofer Gesellschaft CD ripping now feasible 1999 Shawn Fanning develops Napster believing he has bypassed copyright law Napster has 25M users in its first year Dec 1999 RIAA sues Napster for contributory and vicarious copyright infringement April 2000 Metallica sues Napster Yale Indiana Univ and USC Yale bans the use of Napster within a week Napster History continued July 2000 US District Judge Patel grants RIAA s request for an injunction The injunction is temporarily stayed soon thereafter October 2000 Napster announces a partnership with Bertlesmann AG one of the major labels in the industry whose trade association is suing it January 2001 Napster and Bertlesmann say that they will roll out a subscription service by early summer and will use DRM technology Napster History continued February 2001 Ninth Circuit upholds lower court s findings that Napster is guilty of contributory and vicarious infringement Summer 2001 Napster and Bertlesmann fail to roll out subscription service September 2001 Napster reaches a settlement with music publishers but not with RIAA record labels However CNET com reports the number of users has dropped from tens of millions to almost zero Napster R I P Gnutella P2P File Sharing Pure Peer to Peer Peers are called servents Servents communicate over standard HTTP Goal is total decentralization In particular no Napster like server that directs traffic collects data and otherwise centralizes control A Generates a Gnutella Request Creates Search String S Unique Request ID N Time to Live T Sends A S N T to all of its Gnutella neighbors B Receives Gnutella Request A S N T If B has already received request N or T 0 B drops this request and does nothing B looks up S in its local file system and sends N Result to A B sends B S N T 1 to all of its Gnutella neighbors and it records the fact that A has made the request N When B receives a response of the form N Result from one of its neighbors it forwards this response to A Gnutella Advantages and Disadvantages Main Advantage Search for S can be done in many ways e g structured database search simple text matching fuzzy text matching etc Result can take many forms Main Disadvantage Inefficiency Flood of Requests If average number of neighbors is C and average TTL is D each search can cause CD request messages Natural evolution into many barely connected subnets not one user community Other Disadvantage Request monitoring Comes with standard HTTP Gnutella History Gnutella was written by Justin Frankel the 21 year old founder of Nullsoft Nullsoft posted Gnutella on the Web March 1999 Nullsoft acquired by AOL June 1999 A day later AOL yanked Gnutella at the bequest of Time Warner People had already downloaded and shared the program Gnutella continues today run by independent programmers Freenet P2P File Sharing Works similarly to Gnutella Exceptions include Intermediaries store all results Diffuses responsibility Uses proprietary protocol Eliminates HTTP monitorability Launched by Ian Clarke Univ of Edinburgh in 1997 Explicitly anti censorship anti copyright and pro anonymity in its goals RealNetworks An Internet Media Delivery Solution Full Name RealNetworks Inc Employees 1 000 Stock Price RNWK 5 04 at close 10 2 01 52 week range 3 26 to 42 Earnings Per Share 0 68 Provides client and server software for streaming multimedia content over the Internet RealNetworks Overview Founded by Rob Glaser as Progressive Networks in 2 1994 Acquired Vivo Software in 3 1998 Xing Technology in 8 1999 and Netzip Inc in 1 2000 Went public in 11 1997 reached an all time high adjusted price of 93 share in 2 2000 Over 200 million registered users as of 6 2001 RealPlayer is installed on 95 of home PCs Time Sep 01 Jul 01 May 01 Mar 01 Jan 01 Nov 00 Sep 00 Jul 00 May 00 Mar 00 Jan 00 Nov 99 Sep 99 Jul 99 May 99 Mar 99 Jan 99 Nov 98 Sep 98 Jul 98 May 98 Mar 98 Jan 98 Nov 97 RealNetworks Stock Chart 100 90 80 70 60 50 40 30 20 10 0 RealNetworks Quarterly Revenues 80 70 60 Millions 50 40 30 20 10 0 Q4 1997 Q1 1998 Q2 1998 Q3 1998 Q4 1998 Q1 1999 Q2 1999 Q3 1999 Q4 1999 Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Time RealNetworks Business Model The basic RealPlayer software is free Users may pay a small fee 20 for an advanced version with more features Roughly 13 of the RealNetworks revenue stream comes from this Roughly 35 of its revenue stream is from services and advertising Roughly 50 of its revenue stream is from charging broadcasters of streaming data for the RealServer software In summary the slightly oversimplified business model is Give away the player sell the server Competition in the Market Microsoft s Windows Media Player WMP has become a competitor it now offers functionality similar to RealPlayer Microsoft has been very aggressive in its attempts to gain market share By bundling WMP with Windows Microsoft incents users to use it instead of RealPlayer it s one fewer program to download By signing Windows only deals with various radio stations including Boston s WGBH and New York s WNYC Microsoft is forcing users to use WMP if they want to access these resources RealNetworks Maintains Dominant Market Share RealNetworks has successfully maintained a dominant market share over 85 of the streams on the Web are RealNetworks encoded Unlike what Netscape did with its browser RealNetworks gave away the player for free from the beginning This was crucial in establishing such a large user base in the first place While Microsoft