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
    Richard Hundt, 9 Aug 2006 @ 2:06am

    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).

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