Piracy is often a market
signal that things aren’t working as efficiently as they could be. In the music
business, for example, pirates exist because the majors are still trying to sell
music from a set menu, when everyone has been demanding a legitimate
all-you-can-eat service for nearly 10 years. If we can compete in
markets with free substitutes (cable competes with free TV, the record industry
competes with free radio), why not monetize the free music coming out of the
Internet in the same way?
A more efficient way to
monetize how we consume music online (and other goods with zero marginal
production costs) is not to think about monetizing them in terms of sales, but
instead in terms of licenses. Let people use them more, but charge them less.
Online all-you-can-eat makes more money than set menus, and it poses the
opportunity to create a disruptive, new business model that would turn hundreds
of millions of pirates into paying customers.
This opportunity is a
voluntary collective license for music, which could be as low as $2 a month,
which consumers could choose to pay, or not. This system wouldn’t be a tax;
there would be no cap on the amount of money an artist or label could earn; and
innovation would not be stifled.
Rather than exploring other
options, however, all the labels are doing is exacerbating their problems. When
Rhapsody lowered its prices from $0.99 a song to $0.49 a song, downloads jumped
by 600 percent, increasing sales revenue by 300 percent. The reaction from the majors? In
their infinite wisdom, they put pressure on Rhapsody to return prices to $0.99
a song. By giving people good legal alternatives at fair prices, the
major labels would soon start to make a lot more money than they do today. But
the longer they refuse, the more money they stand to lose.
The record labels aren’t
the only ones suffering. Many of us trying to monetize content online are
confounded by similar problems. Information is getting cheaper
and more expensive at the same time, and a lot of us are no longer sure how
to make it work. We want to spread ideas as information, but capitalize on them
as intellectual property. This problem with information is something I call The
Pirate’s Dilemma.
There isn’t a moral defense
for stealing in most cases, and sometimes fighting pirates is the best thing to
do. But the legal department isn’t a revenue stream, and if pirates are
providing a better service, they’ll keep popping up no matter how many lawsuits
are thrown around. The only way to compete with pirates is to offer the same
service in a way that’s more convenient, usable, and accessible, at a price
that’s fair -- then market the hell out of it.
Some of America’s
greatest innovators were thought of as pirates. When Thomas Edison invented the
phonographic record player, musicians branded him a pirate out to steal their
work and destroy the live music business -- until a system was established so
everyone could be paid royalties, and the record industry was born. Edison, in turn, went on to filmmaking and
demanded a licensing fee from those making movies with his technology. This
caused a band of filmmaking pirates, including a man named William, to flee New York for the then still Wild West, where they
thrived, unlicensed, until Edison’s patents
expired. These pirates continue to operate there, albeit legally now, in the
town they founded: Hollywood.
William’s last name? Fox.
Pirates create periods of
chaos. It’s the responsibility of the industries they disrupt to evaluate what
the pirates are doing. If they aren’t adding any value to the consumer, then
fighting them with the law is likely to keep pirates at bay. But if the pirates
are doing something consumers prefer to the status quo, we must turn this chaos
into a new order and enshrine the new innovation created by pirates in law.
Pirates present us with a choice. We can either fight them in the courts, or
match them play-for-play in the marketplace. To compete or not to compete, that
is the question; that is The Pirate’s
Dilemma.
Here's what makes physical music in album/single form a more difficult topic to tackle when in concerns fair use and piracy: It's physical form allows users to more easily execute their rights of (for instance) first use. Once having bought a CD, it is actual and physical property in your hands, with which you can do whatever you want as long as it remains within the boundaries of what original copyright law allows. However, because copy-protenction for physical CDs and DVDs is either non-existent or a joke, it's much easier to pirate this material. If this happens on a large enough scale, fair use does not apply any more––remember, one of its conditions is that there is no significant damage to producers/distributors.
So to recap, with physical media fair use is supported, but this fair use can be pushed too far easily. This is a paradoxical situation, one of the main problems in contemporary intellectual property studies. With 'de-mediated' music you buy on iTunes, things are different. By default, the iTunes music store forces you to agree with its terms of use, which thwarts virtues of original copyright law like, again, fair use. So I support piracy of this material which enables me to execute my right of fair use. With physical media I'm not sure. Technically speaking, physical media too are included in the DMCA, but at least I don't have to agree with terms of use before buying a DVD in a store...see my point?
Not that I disagree with any of your points, but specifically why is it "more complicated" with physical albums? And in defense not of the big record (and of course now movie) companies, but from the point of view of the creator of a work of imagination, why should the law be different (moral law of copyright, not the abominations passed by legislatures recently) for physical embodiment of a work -- "record" -- vs. the digital version?
Yes, civil disobedients should be aware that they are still breaking a (note, not 'the') law. The DMCA in this case. This law, as you also touch upon, conflicts with the now age old principle of fair use, firmly established in copyright and constitutional law. In the few cases that the DMCA and traditional law have actually crossed swords in the supreme court, fair use to this date has always been upheld. Thank god, and long live fair use indeed. But you're right, few are able to survive the outspending powers of Disney all the way to supreme court.
To be sure though: my legitimizing of piracy concerns digital material with restricting DRM on it. The music you buy on iTunes denies our right of first sale, one of the cornerstones of copyright law. Because I regard this practice as unconstitutional, I'm all for pirating this material. For physical albums, it's more complicated though.
It's funny that you bring up the example of crop farming. It reminds me of the recent discussion on patenting of seeds by agricultural industries, and the subsequent suing of farmers whose soil happened to contain plants from these seeds through the accidental travel of patented seeds through the air––this happened in Canada though...
Hey Emiddio. OK so I found out, you're right, that tool will not work with a Safari browser. The good news is, if you download Firefox on your Mac, you will be able to use the tool.
Re: Bunny... umm, that's my friendly pet bunny, Whiskers. I created him out of squirrel DNA and radioactive chemicals. Fun for the whole family. :)
I believe that both the indutries that are involve in this piracy war are now facing the reality that the "stick" approach is not doing them any good. I fully agree with you that piracy is driven by market forces and i'm happy the music industry is realizing this. Now they are begining to be creative rather than holding on to legal approach which does not guarantee them any future success:
The digital landscape is changing fast and if they want to be see the financial reawrd of their efforts, they have get to be really innovative to come up "carrot" ideas along side their "stick" approach.
I agree completely with Matt, and I agree almost completely with Jasper. Matt is saying that when the markets are badly structured, piracy will thrive.
And Jasper is saying, when the laws are badly structured, piracy is legitimate. The thing about breaking the laws you don't like ("civil disobedience") is that you have to expect to get consequences. Obviously the goal is to fix the law, and perhaps a defense can be mounted on constitutional grounds. Expensive, although perhaps not as expensive as outlobbying the Disneys of the world. Note that Disney is not quite a member of the creative class, but an owner of creative property. As a sometime member of the creative class, I appreciate the rights of the artist or creator in his or her own creations -- with the limits that permit appropriation or building on the work of others. Long live fair use!
Organic farmers have mastered the piracy issue: when you accept that the goal is to achieve an optimal balance of crop yield, pest management cost, and loss to pests, then you stop trying to reduce pests to zero, and accept a small loss. This ends up having longterm benefits, because you stop the forced evolution of the pests towards pesticide resistance.
The only little issue is calculating the optimum level of piracy loss.
To add links to your text, like this, just highlight the word, click the little picture below of the link, next to the picture of the broken link, paste your URL where it says "Link URL," and then click Update. (And if you want to get really jazzy, change the target field to "open in a new window.")
Matt -- some really great ideas in here. What do you think the real chances are of the stuffy suits in the music industry adopting this sort of policy? Do you think, even with an all you can eat model, users would still go out of their way to find free music without having to pay a license?
Nice post. I'm considering of buying the book also since I'm an active musician highly interested in the music industry.
Indeed you seem to claim that piracy is wrong. Indeed, I also find it as a sign indicating some sort of malfunction in the musical industry in general. Considering how Internet has developed in the last decade I'm not surprised that these malfunctions arose with it as well. It seems to me though that Record label companies need to find new ways to promote the music through the Internet and catch up. Your example seems to work just fine.
I'd like to bring up another example though and this is coming from a true appreciator of quality music.
The day Radiohead pre-released their album "In Rainbows" for free on the Internet letting the customer to pay as much as he wanted everyone found tis action peculiar. Economists went right ahead and formulated this action and they've resulted into something quite interesting. The notion of "tipping". The idea of "if something is good enough I'll pay for it". Music should be free, on the Internet at least and if worth it, then people would pay for it. The reason why markets can be predicted 100% is due to a reason we tend to forget. The human nature. This is what happened with in Radiohead's case.
I know this is not tangible, but what can i do...I'm a dreamer. I believe in a world where quality music would be purchased by it's supporters (as it does already) and weekend hits of other genres can be downloaded off the internet for free. (That way Spears and Timberlake will end up being really rich instead filthy rich.)
P.S. Can anyone please explain me how to add links into words rather than copy pasting the websites? Please don't judge me.
Thanks for this post. It's great to see another publication coming out in the emerging field of intellectual property studies, and I'm looking forward to reading your book.
It's a bit of a venture on thin ice to assess your argument on this blog post only without having been able to read The Pirate's Dilemma––but here goes: it seems like you approach the issue of piracy from a more economic perspective, in addition to the many studies focusing on law. What I like about your ideas is that you choose the middle ground between optimistic and pessimistic accounts on piracy––a more realist stance. For indeed, piracy is a phenomenon that's here to stay, so we might as well learn from it. I very much agree with your main point therefore: only if the industries provide an alternative to 'illegal' file sharing that is commodified in a better way, will consumers consider switching to the institutionalized outlets. The iTunes movie rental feature is a good example here, at least for me. The ease of use and extremely short download time to me are worth the cost of 4 Dollars––and has greatly diminished my torrenting. Being able to buy movies without DRM on iTunes, so I could repeatedly use stuff in presentations would be even better, yet I doubt this will happen soon.
Where I don't agree with your these––at least, again, without having had the opportunity to read your book––is that you still seem to regard piracy as morally wrong, at least in some cases. As long as pirates don't sell the stuff they pirate I don't see why anyone would be against it, apart from the creative industries of course. Piracy in my opinion allows us to exercise our right of fair use in copyright law, a right that been severely thwarted by the DMCA and related legislation. I don't want to romanticize piracy here, but given the current restrictive legal boundaries on digital cultural products, it seems to be a tendency of dissent against the privatization of culture by keeping it out of the public domain and disallowing creative re-working of copyrighted material. With Siva Vaidyanathan and Kembrew McLeod I argue that most innovation comes through appropriation of existing material. This is what you also state, so how then can you regard piracy as immoral? Looking forward to your reply!
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