In the summer of 2009, I found myself invited to a small party in an old bourgeois apartment with breathtaking views of the Champ-de-Mars and Eiffel Tower. The gathering was meant to be an informal discussion among media people about Nicolas Sarkozy's push for the Hadopi anti-piracy bill.

The risk of a heated debate was very limited: everyone in this little crowd of artists, TV and movie producers, and journalists, was on the same side – that is, against the proposed law. Hadopi was the same breed as the now comatose American Pipa (Protect Intellectual Property Act) and Sopa (Stop Online Piracy Act). The French law was based on a three-strikes-and-you-are-disconnected system, aimed at the most compulsive downloaders.

The discussion started with a little tour de table, in which everyone had to explain his/her view of the law. I used the standard Alcoholic Anonymous introduction: "I'm Frederic, and I've been downloading for several years. I started with the seven seasons of The West Wing, and I keep downloading at a sustained rate. Worse, my kids inherited my reprehensible habit and I failed to curb their bad behavior. Even worse, I harbour no intent to give up since I refuse to wait until next year to see a dubbed version of Damages on a French TV network ... I can't stand Glenn Close speaking French, you see ..."

It turned out that everybody admitted to copious downloading, making this little sample of the anti-Sarkozy media elite a potential target for Hadopi enforcers. (Since then, parliamentary filibuster managed to emasculate the bill.)

When it come to digital piracy, there is a great deal of hypocrisy. One way another, everyone is involved.

For some large players – allegedly on the plaintiff side – the sinning even takes industrial proportions. Take the music industry.

In October 2003, Wired ran this interesting piece about a company that specialised in tracking entertainment content over the internet.

BigChampagne, located in Beverly Hills, is for the digital era what Billboard magazine was in the analogue world. Except that BigChampagne is essentially tracking illegal content that circulates on the web. It does so with incredible precision by matching IP numbers and zip codes, finding out what's hot on peer-to-peer networks. In his Wired piece, Jeff Howe explains:

BigChampagne's clients can pull up information about popularity and market share (what percentage of file-sharers have a given song). They can also drill down into specific markets - to see, for example, that 38.35 percent of file-sharers in Omaha, Nebraska, have a song from the new 50 Cent album.

No wonder some clients pay BigChampagne up to $40,000 a month for such data. They use BigChampagne's valuable intelligence to apply gentle pressure on local radio station to air the very tunes favoured by downloaders. For a long time, illegal filesharing has been a powerful market and promotional tool for the music industry.

For the software industry, tolerance of pirated contents has been part of the ecosystem for quite a while as well. Many of us recall relying on pirated versions of Photoshop, Illustrator or Quark Xpress to learn how to use those products. It is widely assumed that Adobe and Quark have floated new releases of their products to spread the word-of-mouth among creative users. And it worked fine. (Now, everyone relies on a much more efficient and controlled mechanism of test versions, free trials, video tutorials, etc.)

There is no doubt, though, that piracy is inflicting a great deal of harm on the software industry. Take Microsoft and the Chinese market. For the Seattle firm, the US and the Chinese markets are roughly of the same size: 75m PC shipments in the US for 2010, 68m in China. There, 78% of PC software is pirated, versus 20% in the US; as a result, Microsoft makes the same revenue from the Chinese as from ... the Netherlands.

More broadly, how large is piracy today? At the last Consumer Electronic Show, the British market intelligence firm Envisional presented its remarkable State of Digital Piracy Study (PDF here). Here are some highlights:

• Pirated contents accounts for 24% of the worldwide internet bandwidth consumption.

• The biggest chunk is carried by bittorrent (the protocol used for file sharing); it weighs about 40% of the illegitimate content in Europe and 20% in the US (including downstream and upstream). Worldwide, bittorrent gets 250 million UVs per month.

• The second tier is made by the so-called cyberlockers (5% of the global bandwidth), among them the infamous Megaupload, raided a few days ago by the FBI and the New Zealand police. On the 500 million uniques visitors per month to cyberlockers, Megaupload drained 93 million UVs. (To put things in perspective, the entire US newspaper industry gets about 110 million UVs per month). The Cyberlockers segment has twice the users but consumes eight times less bandwidth than bittorrent simply because files are much bigger on the peer-to-peer system.

• The third significant segment in piracy is illegal video streaming (1.4% of the global bandwidth.)

There are three ways to fight piracy: endless legal actions, legally blocking access, or creating alternative legit offers.

The sue-them-untill-they-die approach is mostly a US-centric one. It will never yield great results (aside from huge legal fees) due to the decentralised nature of the internet (there are no central servers for bittorrent) and to the tolerance in countries in harboring cyberlockers.

As for law-based enforcement systems such has the French Hadopi or American Sopa/Pipa, they don't work either. Hadopi proved to be porous as chalk, and the US lawmakers had to yield to the public outcry. Both bills were poorly designed and inefficient.

The figures compiled by Envisional are indeed a plea for the third approach – that is, the creation of legitimate offers.

Take a look at the figures below, which show the peak bandwidth distribution between the US and Europe. You will notice that the paid-for Netflix service takes exactly the same amount of traffic as bittorrent does in Europe!

US Bandwidth Consumption:

Europe Bandwidth Consumption:

Source : Envisional Ltd

These stats offer a compelling proof that creating legitimate commercial alternatives is a good way to contain piracy. The conclusion is hardly news. The choice between pirated and legit content is a combination of ease-of-use, pricing and availability on a given market.

For content such as music, TV series or movies, services such as Netflix, iTunes or even BBC iPlayer go in the right direction. But one key obstacle remains: the balkanised internet (see a previous Monday Note Balkanizing the Web) – ie, the country zoning system.

By slicing the global audience in regional markets, both the industry (Apple for instance) and the local governments neglect a key fact: today's digital audience is getting increasingly multilingual or at least more eager to consume contents in English as they are released.

Today we have entertainment products, carefully designed to fit a global audience, waiting months before becoming available on the global market. As long as this absurdity remains, piracy will flourish.

As for the price, it has to match the ARPU generated by an advertising-supported broadcast. For that matter, I doubt a TV viewer of the Breaking Bad series comes close to yield an advertising revenue that matches the $34.99 Apple is asking for the purchase of the entire season four. Maintaining such gap also fuels piracy.

I want Netflix, BBC iPlayer and an unlocked and cheaper iTunes everywhere, now. Please. In the meantime, I keep my Vuze bittorrent downloader on my computer. Just in case.

frederic.filloux@mondaynote.com