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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  1. identicon
    Tim, 9 Aug 2006 @ 1:20am

    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).

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