Lion’s Gate, an independent film producer, is promoting its forthcoming film Rules of Attraction on the peer-to-peer (P2P) file sharing system KaZaa, as reported in this LA Times article (free registration required) . In Living Networks I noted how Capitol Records – part of EMI – had used the feared and hated P2P system Aimster to promote Radiohead’s Kid A. Content firms will find it very hard to succeed unless they get their wares flowing freely through the networks, as just a few are starting to realize. Other major movie and music companies are suing Kazaa. Interestingly, Microsoft is picking up the tab for the P2P promotion campaign, presumably to help promote Windows Media. In a related article, Wharton professor Peter Fader says “record companies are shooting themselves in the foot” by trying to stamp out peer-to-peer file sharing. A fine balance, or rather integration of protection and promotion is required, but they are definitely pursuing sub-optimal strategies at the moment.

I am at the tail end of 6 days in the land of “Honk OK Please”. That is what is printed in large and jolly letters on the back of most trucks in India (or sometimes simply “Honk Please”), and many are only too glad to oblige. Too much intake to do a quick braindump, but it was particularly fascinating to spend a couple of days with Tata Consultancy Services (TCS), India’s largest technology services firm, including at their global R&D center in Pune. “IT-enabled services” are a massive industry here. I passed through one flourishing area on the outskirts of Mumbai which I was told was not so long ago miserably poor. The transformation was due to a whole series of international call centers being set up in the area, bringing direct and flow-on employment to many.

TCS and its major competitors get most of their revenue in the US and sometimes European markets; TCS eked out gains around 25% even during the downturn. Clearly these firms are competing primarily on price, but they also have to do top-notch work. Their challenge is to demonstrate to their clients that they can work on a par with the more traditional consulting names. TCS’s vision is to be “global top 10 by 2010” in IT services. Tough, but possible. One of the emerging issues is competition from even lower cost centers than India. China is rapidly rising, and in fact TCS has set up software development centers in both China and Hungary. Its positioning is no longer just tapping low-cost high-quality Indian engineers, but running offshore centers, wherever in the world there is competitive advantage. More musings on some of these aspects of the global network economy anon – time to hop on a plane…

This article on Salon.com describes how Microsoft and China, after tough negotiations, came to a three-year $750 million “memorandum of understanding”. Despite the 92% software piracy rate in China, the agreement contained nothing about enforcing Microsoft’s intellectual property. In Chapter 8 of Living Networks I used the example of how Disney has become a dominant cultural force in China, only because its intellectual property was freely copied for a couple of decades. In the case of Disney, they can look back in hindsight and be glad they were ineffective at protecting their IP in China. Disney simply wouldn’t have a presence there otherwise. By now Microsoft understands the game. If everyone in China starts using Windows and Office as their platforms, then as China’s economy develops and as IP protection is tightened up – as it will do in time – Microsoft could see their China revenues rival those in the US. Playing this kind of network game requires a long-term approach, but in any case short-term profit maximisation can often have a severe negative impact on the long-term. As I describe in my book, maximizing profit from content requires integrating protection and promotion, and sometimes that means neglecting protection for a while.