Mike, I agree with you on where the market is going, and I think that most of the content industry agrees as well. It isn’t that they don’t see the future, it’s that they see the solution differently.
While you see the change as a requirement that they will need to update their business models, they see it as a requirement that they need to control the technology through new laws and DRM.

Record companies are/were in the business of selling entertainment, not media. They call[ed] it ‘product’. That they controlled secondary uses of the entertainment by the high cost of devices to reproduce the media (not the content) was convenient and that is the convenience they’d like to legislate back into existence (cost passed on to taxpayers via FBI salaries).
Thus the pay-per-play technologies they love and the market hates.
The Big Problem to me is not that the cost of reproducing the media is near zero now, but the ubiquity of “music” – you can’t go into a store or many other public places without pervasive background music; as a nation we’ve lost comfort with silence. People prefer even radio commercials to quiet – quiet makes many nervous. With music everywhere, it’s hard to think of it having any intrinsic value (oversimplified but the point is there). So who can blame a music publisher for trying to collect cash for an instance of enjoying the music, rather than a piece of plastic that enables that experience?
We the market are accustomed to paying once for the privilege of enjoying some music whenever we want – that’s the deal we’ve had ever since Edison. The music marketers are trying to change that deal but we are mostly not buying, instead clinging to the original model which has served us well. Why else would we pay $18 for a lump of plastic that cost less than a dollar to make?
Well now we don’t necessarily have to. It’s the pricing that’s wrong, not the distribution technology. I can make a pretty good copy, packaging and all, of a DVD, but unless I pay myself nothing it’s worth more to me to buy it than to copy it, because most DVDs are priced reasonably. CD’s have always been priced too high. Now a whole generation has come along with no interest in CDs. Can’t think of a way to put that genie back in a bottle.

I think that perhaps some of the problem is that there IS very much a market for CDs and other media. There is still a minority of people who actually want to buy a digital version of a song or movie. Our current state of technology is such that digital copies are often harder to deal with and share than our hard-copy media (it’s easy to lend a friend a puchased DVD, but a lot harder to give them a 2GB movie file – unless you have a DVD burner).

Until the hardware catches up with this digital new world, we will still see a market for hard-copy media. Most of the complaints you hear are probably from people who currently make money off this distribution network, who wonder why you’re loudly yelling for their livelihood to be made redundant – not realising that the fuiture is rushing towards them (or sometimes creeping as hardware is still not usable/portable/cheap).

My point is that if the artists cannot control their content, then in the future someone like Mike S. who likes music, but not the ‘extras’ (t-shirts, cups, etc) will potentially find themselves having to choose from an inexpensive LEGAL ‘pirate’ CD (if we removed the criminal aspect of copyright infringement) and a more expensive version of the same CD sold directly by the band. The value is in the portable access to the band’s music – the problem is that the profit ends up in the hands of the CD manufacturer and NOT the artist.

The end result may be lots of poor, but popular, artists and a few rich CD manufacturers.

That won’t happen if digital content becomes easier and cheaper to buy, backup and take with you – but at the moment the technology (IMHO) does not make this possible for most of the shopping public.

Nice to see that someone in the technology sector understands economics. I used to be ignorant on
the subject, like many other propeller-heads,
but have learned a lot about the
truths that economics teaches us. One of
those truths is that economics and commerce
are not moral per se. Interestingly enough,
my continuing economics education has
largely
taken place from the Internet,
and from blogs in particular.

Keep up the good work.

I’ll reference the concepts in the previous part of this series:

When an artisan or corporation or whatever makes a physical product, they can sell it. They no longer have it. They cannot sell it again (legally). If they want to make more money, they must invest the costs into making another item and selling that one. This is marginal cost. A certain fixed cost goes into the concept that produced the original item. After that, everything is a marginal cost (until improvements are made to the item).

When an artist or record label makes media, they can sell it. They still have it. They can sell it again. If they want to make more money, they do not have to invest any more money. The marginal cost is zero. After the fixed cost (of time and overhead costs) that goes into making the music originally, there is no additional cost.

The difference? When there is no marginal cost, but one continues to charge for the product/content, one can theoretically make an infinite profit. This is part of what Mike is addressing.

A person who creates does not have any ‘right’ to make profit from that creation. Granted.

But under most morality systems, that person does have the ownership of that creation. That means that he can share however he wants, and if he hasn’t authorized you to have that thing he owns, then taking it anyway is a crime.

Additionally, although there are indeed many different marketing schemes, and although no one has a ‘right’ to any one scheme, could it not be argued that society has an interest in a particular marketing scheme, if it encourages the creation of high-quality products? Not everything has to be a ‘right’ for it to be a law, or even a policy.

I had never really taken a great interest in economics and looked at it from Mike’s POV, of at least how he describes it, but its given me alot to think on.

After sitting here for about an hour, i must say Mike is a very clever and thought prevoking guy…….

I don’t want to seem like Mike seduced me into a way of thinking….. but i really do agree and didnt really have the right angle to look at things from, but Mike you done me a favour bud…… i feel more at ease with my own thoughts on the several moral and non-moral issues discussed through-out the comments.

So basicly, i’m just saying……… its a very good read, not just your own words, but even those of others…. thank you all……. best thing i’ve read from a webpage in a while.

How about a real world example. I am a music lover. I have amassed a 7000 disc music collection (CD and LP) which I paid for (new, used, and promos) It’s cost me about $50,000!!! Now I wake up one day to dicover that music (almost all music) is free for the taking and as an additional bonus it no longer takes up shelf space in my over cluttered house, well game over man! I want to support the artists but only the artists – not the indifensable evil and greed of the “music idustial complex”. So when there is a new and fair (to consumer and artist) business model I’ll play ball, but until then I say death to the “muisc industrial complex” go see live shows buy direct from the artist.

Before dealing with the economics of scarcity or abundance, we must deal with the question whether it is licit or criminal for one person (or corporation) to give away (make a gift of) somebody else’s property. Examples:
— Do-gooders take away from the rich and give to the poor.
— The governemnt takes part of a worker’s income and gives it away to non-workers, to political friends, and to countries hungry for money.
— Business corporations sponsor radio or television programs (to advertize themselves), which they pay for, not out of their personal income, but out of money extracted from the customers [in the addition to the legitimate payments for their sold products]. They do not give away this extracted money; they use it to pay the broadcasting coorporations. A program of a broadcasting coorporation may consist of recorded music. Said broadcasting corporation pays the music recording industries for the use of their records. The recording indusrties own the physical records, the media on which the music exists. But the music is owned by those who pruduced the music. So, while the music producers do not sell or give away their product to the recording instrustries, the latter sell it. So eventually the broadcasters (as well as the internet broadcasters) give away the musicians’ property.

Analogous situation: I buy a book; that is, I am paying for the physical medium in which a poet’s work exists. This happens to be a rare book. So, a broadcasting company pays me for the use of this book. A televison station takes it upon itself to advertize for a philarmonic company (from which it gets paid) and diplays, free of charge, page after page the book on the screen so that anybody may read it (and can make himself a video-recording of). The broadcasting company is giving away somebody else’s property, namely the poet’s texts. (If I, a private individual, were to make copies of my book and sold them, I would end up in jail, either because I sold re-prints of the printe’s property, or because the author never sold his text to me or give away his text to me.)

The issue as to whether it is licit or criminal for anybody to give-away away somebody else’s property is to be answered jurisprudentially [by reasoning about Rightness], not in terms of whether the proprietors get any benefit or not from the give-aways, whether the broadcasters are entitled to make money or not by engaging in selling [the use of their broadcasting faciulities], or in terms whether the away-givers are the new do-gooders for the entire population of a country, the praiseworthy philanthopists of our times.

“Economics,” namely BUSINESSMEN AND MERCHANTS, may not operate in terms of what is right or criminal, when they deal with somebody else’s properties, but when a criminal property offence is done unto them, then they practice jurisprudence.

To all of the ‘morality vs. economics’ people out there.

It doesn’t matter what moral arguments you make. They’re ALL irrelevant. The simple fact is that most young people don’t buy music on physical media anymore… they copy it from their friends and from the internet. This is only becoming easier as time goes on. Suing people is making little difference, and eventually the RIAA will tire of it (or run out of lawyer money). DRM has also clearly failed.

You can stand there and bang-on about morality and who’s owed what until the cows come home, and it won’t make a lick of difference to those trying to sell CDs. Their market is disappearing from under them, and the rate that it’s disappearing is increasing; this is a simple, demonstrable fact, and all the moralising in the world won’t change it.

This is why the economics argument presented trumps all morality arguments. The morality arguments are about what people ‘should’ do. The economics argument is about what people ‘actually’ do.

Y’all can call me a thief, a communist, a crack-pot libertarian, immoral, or whatever label makes you feel good. It won’t change the reality one whit.

It’s hard-boiled realists vs crackpot idealists. Any bookie could give you odds on whose right (hint: it ain’t the crackpot idealists).

and PERFECT censorship possibilities, not only for nation states.