More On Napster

from the like-I-haven't-caused-enough-trouble-today dept

As if I haven’t caused enough trouble on Techdirt today with the Napster article posted earlier. Here are two more articles. The first is about a study done by IBM that suggests people feel guilty about using Napster. That’s interesting until you see how the questions were worded. If someone calls you up out of the blue and asks if you would continue to do something after it was declared illegal, how many of you would answer yes? Not many. The other article is one that supports my point of view on Napster by saying that anti-piracy laws tend to rob consumers of their rights.

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Comments on “More On Napster”

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Duffman says:

how consumers feel

I think that one reason that Napster is so popular is that consumers feel so ripped off buying CDs these days. I don’t know about costs in other countries, but I can remember four years ago CDs were up to five dollars cheaper than they are today. Granted, inflation has to be counted, but I think people still feel that record companies could charge less and still be healthy. This isn’t just for CDs – if customers feel they’re being treated fairly in most circumstances, they will pay for whatever – at least, this is how I feel. When they feel cheated, then they begin copying/stealing/whatever, and justify it by saying they’re being screwed. Sure, you’ll always have people who will copy/steal no matter what the price, and people who will pay no matter what the price, but a good majority follow the preceding mentality. I’m just using the copying/stealing for lack of a better descriptor. BTW, great debating everyone – I think a lot of intelligent people read this site and offer great opinions.

Ed says:

Napster's Purpose

In the other Napster thread Mike and I started going back and forth on whether other incentives exist for people to create music/software/whatever without the current economic rewards made possible by copyright-enforced royalties. I agree that there are other business models that may work someday; there are some that are being used today, which proves that the copyright model and other models can coexist — it doesn’t take the breakdown of copyright to allow other ways of sponsoring creativity.

But one thing that occurs to me this evening is that, for creative work that’s given away freely without copyright restrictions, Napster is not the right tool. There are plenty of musical artists giving away songs; if I want to listen to those, I can go to or find the artist’s web site somehow. I wouldn’t use Napster because I wouldn’t know what to search for. The one thing that Napster seems to be really good at is finding files that can’t be hosted on a regular web site because they’d be taken down once the copyright owner found them.

If we imagine a world where music is given away without copyright restrictions, I’d just go to (or whatever) and download his noise, I mean music. There’s no point to Napster except to distribute material in violation of copyright and I think that is what the courts are ultimately going to say.

I’ll give everyone an opportunity to prove me wrong: show me a freely distributable song available on Napster that I can’t find on a static, indexable site (web, ftp, etc.).

Mike (profile) says:

Re: Napster's Purpose

Hey Ed – not to knock you, because I am enjoying this discussion – but have you used Napster?

What Napster is useful for is a few things. One… everything is all in a single place. The fact that I know exactly where to go to find any song is a big plus. If I had to find each seperate website… what a pain.

Two… there is a community built around Napster. People can find out what other people like, and learn from it. So it’s easier to get introduced to new or different artists that you might like. If you like bands A, B, and C, and you find out that someone else likes A, B, C, and D… There’s a good chance you might like D also.

That’s why I think Napster is a lot more useful than the system you’re discussing.

Ed says:

Re: Re: Napster's Purpose

Yes, I have used Napster, and you would be accurate if you called me a hypocrite because I’ve used it to download copyrighted songs. Napster is indeed very useful in today’s world because it is a single place to go to find everything. If sharing popular music were not a copyright violation, there would be other–probably better–ways of organizing access to MP3 files so you could find everything in one place and listen to new artists you might like. Something like a Yahoo! for music comes to mind. That’s basically what is, but, except for the now hobbled service, it’s limited to tracks that are freely distributable.

There are other potential advantages to a peer-to-peer model, like being able to get files quicker from a host closer to you and being able to publish your own creations without requiring lots of bandwidth, but that’s not why people use Napster today.

Kai says:

What is your position on software piracy?

Do you distinguish, and how, between music piracy and software piracy?

Suppose I sell you a piece of code in perl–with the explicit instructions that you may use this code only for personal, internal uses. Do you feel you have the right to stick a link to the source on techdirt? How about if Microsoft accidentally sends you a CD with the source code for Windows 2000 rather than the binaries?

Suppose I am a musician, and I write some nice song. I sell this song to a music publishing company with the promise that they have exclusive rights to distribute the music. Do you feel, by virtue of having paid $15 for the CD, that you now have more rights than me (e.g. that you can ‘publish’ my music on Napster)?

mhh5 says:

Re: What is your position on software piracy?

Mike seems to have a fairly strong opinion that IP is this infinite resource that has no marginal production cost. So I would assume that he thinks there is no difference b/t music and software since both are creative ventures that have no single physical embodiment…

There was a fairly lengthy and good discussion here last week about Napster and IP… There are obviously some unresolved points that can be classified:
1) legal issues
2) moral issues
3) economic issues.

Maybe there are more? I just summarized it quickly… Anyway, legal issues I think deal with the “piracy” and ownership etc… Moral issues deal with the questions of whether one ought to be able to do this sort of thing in a civilized society yadda yadda. And economic issues just come up b/c people haven’t found a business model yet that seems to maximize benefit for everyone.

So laws are created fairly arbitrarily, and I’m not sure anyone can argue against the observations that under the current laws it pretty much seems illegal to pirate music and software in any way — whether you use napster, gnutella, some warez site, or you enjoy pencil and paper. Legally, you’re probably not in the right if you use Napster… It’s just the way current laws are. Consumer rights are fairly limited right now.

Now morally, the issues are more unresolved… Is it really evil or bad to pirate software and music? That’s totally debateable. Some could say that the MS monopoly was created b/c early pirated versions of MSDOS created a huge user base that made MS the de facto standard, and so pirating actually helped their business. So was MS wronged by pirating in the early 80’s? Some might argue that the ends don’t justify the means, and that they _were_ wronged even if MS benefitted from MSDOS pirates. I’m sure that’s MS’s position. But since it’s really hard to exact revenge on those pirates, and the statute of limitations is probably long gone in this crazy high-tech world, not much can be done at this point about those early pirates. But the question of wrong still remains; is it wrong to copy an idea? If no one ever copied an idea, civilization might not ever have occurred. And China should start claiming rights to the printing press and gun powder more vehemently as being “stolen by the white man”. So it’s really up to individuals right now to decide on whether it’s right to copy IP. There’s no general concensus on that issue that I know of. (ie. continue debating that if you wish, trolls.)

As for economic issues, this is also unresolved — mostly b/c (as I mentioned earlier) no one has come up with a really satisfactory model to maximize the monetary benefits. Personally, I think this is the key to everything– Figure out how to make everyone happy, and all the ethical and legal questions will be forgotten. If micropayments worked well, this whole issue would go away. If “voluntary contribution” methods (eg. Tipping) were actually more widely accepted and practiced, this whole issue would go away…. But unfortunately, there is no current method that satisfies the greed of the music/software industry and the rights of consumers (if any).

So, my opinion is that this whole “Napster” issue is fundamentally an economic issue of how to maximize benefit in the “new” realm of infinite supply, minimal production cost, and questionable (or variable) value.

The question we must ask ourselves is: How are things priced? Mike has stated one component, namely production cost, which in this IP realm is near zero. In infinite supply and finite demand, the price also tends to zero. So we’re left with value. What is valuable to one person may not be valuable to another– hence the existence of The Price is Right. You and I may have very different ideas of how things are valued that are independent of production cost and supply. (Eg. I might pay more for a mac b/c I like macs, whereas Mike thinks mac’s suck and should be the same price as all other PCs.) So how do we resolve this? Well, I don’t think we do, really. Other than to create a crazy “airline seat” economic model (?) — where people pay vastly different rates for basically the same product depending on crazy variables such as timing, luck, economic class (business, economy, coach), etc etc. Once you can differentiate the service behind the IP, you can start doing weird schemes that are dependent on random variables that people will accept. Maybe we should have a “Backwards lottery” system, where most people can use Napster for a nominal fee, but every once in a while someone loses and has to pay full price? I don’t know. It sounds crazy, but then, valuation is a crazy sort of beast to deal with….

Anyone out there better at economics? I think whoever figures this economic quandary out deserved a Nobel Prize in econ….

Just my (very long) two cents…

Mike (profile) says:

Re: Re: What is your position on software piracy?

I think the economics are pretty straight forward. If there’s real competition (no matter what the value) price gets driven down to marginal cost to produce. Here’s why: if I’m a competitor and I can produce something for a buck and I see you’re selling the exact same product for $1.50, I’m going to undercut you and sell it for less so I get more business and still make my profit…

Now, the obvious problem is that once you cut it down to marginal cost – then there’s no profit any more!

That’s where businesses have to get smart. That’s the job of a good business. What you have to do is one of a number of things to add profit margin to your offering – and that’s doing something that can’t easily be copied. This could be figuring out a way to produce more efficiently. So, if your marginal cost to produce is $1 also, but I can improve my process to produce it for $0.90, then I can still sell my product at $0.99 and make my profit, while you’re in trouble.

Or, you can try to add something else of value to the product (bundling) or at least convince (perception) the consumers that there’s something more valuable about it. People pay more for a Toyota Corolla over a Geo Prizm due to perception – when the reality is they’re the same damn car. Marketing can certainly change the perceived value of something and allow the producer to sell it at a higher rate over marginal cost.

So, my economic arguments on Napster and music simply say that I don’t care what you do. The economics say the end result (if competition is allowed) is going to be a marketplace where music costs its marginal cost to reproduce – which will be zero.

NOW – the important part is that businesses need to find a way to make money on top of that. That’s what smart business people should be working on. As for mhh5’s idea of dynamic pricing – the concept is nothing new. It’s certainly the best way for a seller to maximize profits *IF* he/she has an inexpensive way of determining the buyer’s marginal utility of a good. However, real life tests (see Amazon’s attempts) at dynamic pricing tend to show that they piss people off a lot if it’s known. Hell, even with airlines, people hate to know that the person sitting next to them paid half of what they did. It just doesn’t seem fair.

However, what the people who disagree with me on Napster seem to be arguing is that this is not something that smart business people should have to figure out (and my cynical side thinks this is because these very people can’t figure this out themselve – and thus might not be very smart business people). Instead they want the government to step in and make this a regulated (inefficient) market – where the government has set up a law (intellectual property law) to regulate the market and create these false barriers to an efficient market place.

In some areas perhaps regulation is justified. I don’t think it’s true in music production. I think the world needs more smart business people who need to figure out ways to make money off of music. They don’t need the government denying rights to consumers in the name of HUGE corporations.

I still think the idea of the “commission” system where an artist is commissioned to do a work after a certain number of people pay upfront is an idea worth thinking about. I’m sure there are other ways that I have not thought of – but just because I haven’t thought of them, doesn’t mean they don’t exist, and doesn’t mean that I want the government to create silly laws that make it harder for me to listen to good music.

mhh5 says:

Re: Re: Re: What is your position on software piracy?

Okay, the economics may be simple, but coming up with a satifactory process to maximize benefit is not. Otherwise we’d have one by now….

Mike, you seemed to miss my point about “value”, but then re-word it when you bring up marketing. Oh well, you say “perceived value”, I say “value”… I’ll defer to the MBA…

Anyway, we pretty much agree. Let’s hope the US legal system will see it our way….

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