You Compete With Free Because You Have To

from the welcome-to-the-marketplace dept

One of the frustrating things in discussing intellectual property issues around here is that every time we suggest a company is making a mistake in its business model, such as by treating its customers as criminals, someone steps up to yell at us for “defending piracy.” That’s not true at all. We do not, and will not, defend piracy in any form. What we will do, however, is note that most attempts at fighting the piracy are wasted effort that is bad for business and often alienating to legitimate customers. That has been our point all along. Piracy is in the market place and it’s simply a fact of the market.

There’s increasing evidence to suggest that the best way to “fight” it isn’t to lock everything down and limit your legitimate customers, but to change a business model and provide a compelling offering at a reasonable price that people want to pay for. Over time, we’ve discussed numerous examples of how that works. The simple fact is that some amount of piracy is a market reality — and there are two strategies to dealing with it. One is to try to fight it directly and lock everything down. That’s the path the recording and film industries have chosen, and it hasn’t done much to help at all. The other is to admit that not only can you compete with “free” by offering something of value, you can often use the “free” stuff for promotional value — leveraging that aspect that others in the industry see as a weakness. It’s always good to see when companies at least recognize this market reality. Take, for example, this quote today from the head of an Israeli company: “The goal of the world is to beat the Chinese. They don’t care about intellectual property. We have to develop something that will take two to three years to copy.” In other words, he’s recognizing that the market reality is that you have to compete where some element of the market simply won’t respect intellectual property laws. That doesn’t mean it’s impossible and you shut down, but that you adapt to the market and figure out ways to compete anyway.

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Comments on “You Compete With Free Because You Have To”

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JackAlias says:

My God. That’s spot on. Everyone in business should do just that, and we won’t ever have to talk about this again. In fact, anytime someone has to explain this idea to some person who doesn’t understand, they should just copy/paste what Mike just said. It would save all of us a lot of time, hopefully he will let us do this for free.

James says:

A different point of view...

So what about the businesses that do offer stuff of value and still get individuals who think they should get it ‘free’ because of some idealistic (or imho diabolical) notion that infomation wants to be free?

If an individual takes time to create something of value, they should get paid (preferrably what they want to sell it for)

Maybe I’m missing something here, because your logic is not making sense, perhaps you can explain it in a bit more detail (btw I’m a business administration and computer science double major) so I speak both geek and money speak.



Sailorette says:

Re: A different point of view...

If an individual takes time to create something of value, they should get paid (preferrably what they want to sell it for)

From where I stand, the article is basically saying you should put int. property on the same level as physical.

If I make something of value, there’s no assurance that someone will buy it– it has to be something they want, and they have to believe it’s worth the price they pay.

As much as I’d love to get paid what I think stuff is *worth* for things I make, I have to work within the market.

If I’m making pizza, and there’s a guy giving away pizza down the road– even if he stole the idea, I have to make a way to get folks to buy mine instead. Add green peppers, make a Free Pizza drawing, get cute girls to serve the pizza– whatever.

not james says:

Re: A different point of view...

you are a moron james. the logic makes perfect sense. since you know that there will be people that attempt, often sucessfully, to pirate your intellectual property, you need to create a product that has value that cannot be pirated or use the fact that it will be pirated as a way of promoting some other product you have that can’t. think about it.

Tim (profile) says:

Re: A different point of view...

“If an individual takes time to create something of value, they should get paid (preferrably what they want to sell it for)”

That’s a perfectly legitimate point of view – as long as you don’t mind the possibility that if people don’t agree with the price you set they won’t buy. Market economies are complex things – I don’t understand what makes certain pieces of art worth millions of pounds, but I recognise that the market is willing to pay that price. If I throw some paint at a canvas and put a price of £1m on it that is absolutely my choice. It is also absolutely the choice of consumers not to pay that.

In the same way, the music and film industry are absolutely allowed to set the price for their DRM filled, no value added downloads at the same price (or higher) than the physical CDs. But they need to realise that consumers can make the choice not to pay that. This is not saying that piracy is the solution. It is saying that the consumers and the sellers have a fundamental disagreement about what the correct selling price for a product should be at the moment. However, rather than react to that, the seller is currently trying to dictate to the market. Until they change this approach consumers are going to continue to find alternative methods to get the product they want at a more agreeable price, which happens to currently be free (and, unfortunately, illegal).

JackAlias says:

You already answered your own question. The missing part is possibly your not fully understanding what is behind the idealisic, or diabolical, as you said idea that information wants to be free. For one, I don’t think many people actually think that information has actual needs, and or wants, and two I would recommend some reading on the topic, such as HACKERS, by Stephen Levy, which is a fine read, and goes into a lot detail on the history of computing, and the ethics that are related to information technology, or the many online resources, and THE HACKER ETHIC by by Pekka Himanen, Linus Torvalds, Manuel Castells, or any of the stuff by the Swedes at Pirate Bay, or any Swede really. Also I would suggest trying hard to put away pre-concieved notions while you look into that, it will be difficult psychologically becuase you have so much personally invested in being able to make a living in the areas of Business and IT. Try to pretend that the idea of information being free wouldn’t put you out of a job. Not because it won’t, but so you can think clearly on the subject.

iker says:

More like too few for our money

They [try] to compete with free because their products are too expensive.

It’s not about added value anymore, it’s about realistic prices. The cheaper they sell the more they’re going to sell (and the more they will work, though).

They are rich already so what’s the urge in getting richer so fast.

Richard Hundt says:

classic examples...

When ID Software released the first episode of Wolfenstein as shareware, back in the day, everyone thought they were nuts for doing so. They charged for the sequels, but only very little. They did the same with DOOM. Their “guerilla” marketing was genius and highly controvercial at the time.

DOOM2 wasn’t free, but enough people didn’t mind spending a few dollars to buy a copy – even though it was being pirated left and right. They had so many people playing the game, that if only 10% of people actually bought a copy, then the guys who produced the game could (and did) each buy a Ferrari.

It becomes a numbers game instead of an iron grip on your precious IP. I’ve often looked at software companies like Macromedia and Adobe (now the same), and wondered how much of their success wasn’t contributed to the fact that their software was pirated.

I suspect that there are a lot of Flash and developers, for example, out there who’ve honed their skills at home on illegal copies, to then get themselves a job working for a company who actually does pay for their software licences. I wonder weather Flash would be as ubiquitous as it is today if it weren’t for this.

Similar things have been done with books released under the Open Publishers Licence. Enough people still end up buying a physical copy because they’d rather have one to put on their laps (as I have done with such a book).

The band The Arctic Monkeys came out of nowhere to make UK music history as the fasted selling debut album for the first week after it’s release. Their success was in no small part due to the fact that they gave away their demo CDs to fans who ripped them and distributed them freely on the Web with no intervention from the band (mostly due to ignorance on the band’s part).

Louis says:

A different point of view...

I completely agree with everything Sailorette said (and what most people here agree on). This is such an amazingly simple concept, what surprises me is that so many people/companies are still *trying* to get their minds around the concept.

I guess its like explaining to someone from the 15th century that the Earth is round. Simple and true, but contrary to everything the person was taught since childhood.

Albatross says:

THe idea is not to allow theft to become legitimiz

The attempts by RIAA,NMPA,SGA and others in congress and in the courts has everything to do with

not allowing the legality of piracy to go unchallenged.

There are now and have been numerous attempts tp

compete with ‘free’ but none of them have been succesfull to date… The idea of adding value has been discussed for YEARS but no one has an actual

business model that is working so it is not time to

change focus away from litigation and legislation.

Once that magic bullet has been fired I will be more inclined to believe that piracy can be addressed in better ways than the RIAA lawsuits… Until I see it it is all just talk talk talk…

GraphiX says:

i just dont get it.

i dont understand all this i really dont.

there shouldn’t be a need for any piracy there shouldn’t be a single reason to DRM everything if only the idiots did it like it was ment to be but no they have to try and complicate everything all the time.

it’s as simple as ABC

1. supply content on BT or p2p in a subscription

everyone in that group/subscription can only share the files from that community without dRM.

they stop paying the monthly subscription

they cannot continue to share but they keep everything they once traded or downloaded.

or option 2.

sell media at a fair price without restrictions tada!!

how hard is that really? hell that is how it is ment to be in the first place but they had to go and screw everything up as per usual.

if online services just did what allofmp3 do what more can people ask for as everyone understands that service just works you get what you want when you want for a really good price without restrictions.

why can’t the industry just understand this

instead of treating everyone as criminals and then moaning and bitching when its not going their own way.

FaJu says:

Piracy Issues

Musicians are allowed to sell their own music. The problem is that most people go for big labels and brand names. So the independant musicians end up with no business.

This has been said countless times before – if the companies stop restricting their customers, and start charging a realistic price for their products, then maybe they could put a dent in the world of piracy. But, sadly, I don’t see that happening any time soon.

I don’t want to pay $250 – $300 for Windows Vista. From where I’m sitting, it looks like just another theme for XP. I don’t see any real need to upgrade to the new version, and what I don’t understand is why it needs to cost so much. Vista won’t become the norm for another 4-5 years, anyways, so why bother? That’s the big question.

I go down to the mall, and I see movies on sale for $30 – $40. And these are not Collectors’ Edition, or Director’s Cut, these are just the movies with a few deleted scenes which nobody cares about. With $20 I could go down to the cinema, buy a large popcorn and drink, and enjoy the movie on a big screen. If I can have that for less than the price of the DVD, then what is the point of even buying the DVDs? If I want to watch the movie again, I could just download it, and not have to sit through those idiotic MPAA anti-piracy commercials.

Piracy has more convenience, plain and simple. Its easy, and its free. Companies need to get their heads around that, if they want to compete.

P Matiure says:

Cultural policy to blame on piracy

When I suggested that the solution to piracy was that musicians should sell their own music I thought I found the culprit with their nap down,but tell you what the crime seems to be magnifying every minute.Now I am back on the drawing board.I think I am now redirecting my bullets towards Cultural Policy makers. Do we have it?If there, what does it say?Is it protecting the artist.What about Culturo-polical issues? Are they addressing the issue of piracy.Surely we can not afford to have great musicians like Oliver Mutukudzi of Zimbabwe crying fowl over the selling of his unreleased album which he recorded in SA.This clearly shows the magnitude of the seriousness of the issue.We upcoming artist are now hunting with salt in our pockets.We do not know whether we will enjoy the fruits of our hunt alone or with hyenas.Please let us dialogue over this issue.The scholars,artists,sponsors,non-governmental organizations and governments, lets protect our respected celebrities’ intellectual properties.

By P Matiure (University Of Kwazulu-Natal)

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