I recently got into a conversation with a work colleague regarding piracy. Specifically, the basic assumption that I came to is that internet piracy of media is that we do not value the artist’s effort in production, nor do we comprehend the inherent monetary value of art (I positioned it as a symptom of post-modernism, that art is for art’s sake, and art-for-monetary’s sake is blasphemous.) He stated that the cost of media is just too high, and he also opposes (much like a lot of things) certain studios so refuses to give them his money, but still wants to enjoy the media produced under their umbrella. My question is, knowing that you have written on this before: What are your initial thoughts on the MegaUpload extradition? And what are your thoughts pertaining to the idea of media piracy— why do we do it? Ultimately, I’m not trying to understand why the government is wrong in trying to push SOPA and PIPA through, nor am I trying to figure out which one of us was right, if any, just your opinions on the subject.

—Nikolai

As a content creator myself, I think people should pay for their art.  (Except sometimes; see below.)

But in general, I think ‘piracy’ is a sign of market failure, and disappears when providers make it easy to get content in whatever form is desired.  My best argument for this is the enormous success of Steam.  Steam is at root a DRM system, but it’s so packed with features for the gamer that it’s actually a pleasure to use, and I don’t buy games any other way now.  You can buy your games there, see what games your friends are playing, chat with them, use games on multiple computers and platforms.  There are frequent sales, so those $60 games will soon be available for half that— or wait a year and get them for under $10.  You can review games or get links to other reviews before you buy.  You automatically get updates and patches.  I recall an interview with Gabe Newell where he said people thought Steam was crazy to get into Russia, which is notorious for piracy, but they’ve done very well there.

The music industry earned a lot of hatred for attempting to continue its lucrative old model— selling physical CDs for $20 a pop— well into the electronic age.  Their business model had very little to do with helping artists; they wanted the profits of the manufacturer / distributor… precisely those costs that go away with electronic distribution.  I don’t know the figures, but I’d guess that most people are pretty happy buying single songs from iTunes for a buck.

The next battleground is movies.  Why haven’t the studios come up with a Steam-like service where all movies are available on all platforms, at reasonable prices?  Instead of tracking down pirates and alienating customers, they should be figuring out a feature-packed, cheap distribution system of their own.

During the SOPA fight many people pointed out the absurdity of the jobs claims made by the industry, which were based on the idea that any pirated viewing represents a full theater admission lost.  Of course it doesn’t.  If someone wasn’t able to pirate the movie, he would probably have skipped it, or waited till it was free on TV or at the library.  Or maybe he’d pay $1 for a used DVD, or $2.50 for an iPad version.

Many businesses have discovered the joys of variable pricing— Tim Harford’s The Undercover Economist goes into detail on this.  Econ 101 tells you that there’s a single price— let’s say $17.95— where the supply curve and demand curve intersect, and which maximizes sales and profits.  Econ 101 is wrong!  All those consumers who’d happily pay $10, or $5, or $1, don’t get what they want, so their sales are lost.  And those consumers who’d pay $50 or $100 aren’t being milked for enough simoleons!

It’s not easy to work up a pricing scheme where everyone pays the maximum they’re willing to… but plenty of markets do their damnedest to try.  Airlines are very good at this— it’s almost the case that no two flyers get the same price.  Books are a good example: you can get a hardcover for $25, a trade paperback for $15, a mass market paperback for $9, a Kindle for $5, a used book for $3, a library book for free.  Steam approximates this for video games, the chief variables being willingness to wait, and assiduousness in checking sales.  (Game companies have even figured out how to get the really motivated customers to spend more, largely with premium editions and DLC.)

And note, there’s a role in this model for free.  I don’t mind if you lend your copy of the LCK to a friend, or donate it to the local library!  A certain amount of free distribution builds recognition and good will, and in the long run increases sales.  (Neil Gaiman has experimented with giving books away for a limited time; it always increases actual sales as well.)

Plus, art needs art as a source of ideas and inspirations— it would be a bad thing if the heirs of Shakespeare controlled performance of his plays.  It’s right there in the Constitution: copyright is a balance between the interest of creators and consumers.  The sign that the balance has gone too far toward the consumers would be that artists are starving and not producing any art— and they’re not!  We’re awash in art!

If I read anti-industry people too much, I start to sympathize with the conglomerates.  People make all sorts of rationalization for what sounds like entitlement and miserliness.  But really such things are a reaction to the obvious greed and stupidity of the distributors (who aren’t even the creators).  If your friend doesn’t want to pay $17.95, that doesn’t justify him in paying $0, but if they were smart the distributors would find a way to get him to pay $5, or whatever.

I also think we’re going through a slow transition from a system dominated by middlemen, to one where artists handle their own production and distribution, and of course the middlemen are squawking.  But it’s their own fault for not adapting.  Books and music, and even indie movies, could easily be produced by their creators.  Maybe not blockbuster movies, but somehow I don’t think we’ll ever have too few of those.

 

 

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