A Lack Of Scarcity Has (Almost) Nothing To Do With Piracy

from the misunderstanding-the-premise dept

Took a week off from my series concerning the economics of abundance, but wanted to jump right back into it this week. I started out with a discussion on how the number zero seems to screw up otherwise sensible people when it comes to economics, and followed that up with a post on the economics of abundance is not a moral issue. I had planned to move on to more about the actual economics, but the responses have delayed that for at least a little while.

Some of the complaints about the last piece highlighted one aspect that perhaps I had not made clear: unauthorized downloads, "piracy" or "stealing content" (if you want to use those phrases) have almost nothing to do with this discussion. People criticizing the posts on this topic keep going back to the idea that this is all some big defense of such practices when nothing is further from the truth. This series is very much written from the perspective of the producer of content, not the consumer. That is, we're trying to make clear the basic economics so that the producer of the content can use that to his or her advantage. So, the lack of scarcity we're talking about is based on the fundamental nature of the content: that it has zero marginal cost to make a new copy once the original is made. That's a simple fact that has nothing to do with whether or not people are making unauthorized copies. That nature of the content is fundamental. So everything that we're saying here applies just as much to content if there were no "piracy" at all. If there were an industry where there was a lack of scarcity, but no piracy, the information here would apply just the same.

Now, I do say "almost" nothing to do with piracy. The way that unauthorized copies play into this discussion is in the realization that they're a fact of the marketplace. That is, they're helping to accelerate the impact of that lack of scarcity, and only helps to highlight why the producers of content need to pay attention and make changes sooner, rather than later. Many of the recent actions taken by organizations like the RIAA, the MPAA and the BSA represent a fundamental misunderstanding of this fact. They believe two things that are absolutely wrong. First, that the lack of scarcity is only due to piracy and, second, that there's some way to really stop piracy. Both of these things are wrong. The lack of scarcity is due to the fact that the content has zero marginal cost -- which is true no matter what, and unauthorized copies are always going to be an issue. So, based on that, why not try to understand what happens when you have a lack of scarcity and how to profit from it, rather than fighting the obvious trend?

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  1. identicon
    Vincent Clement, 30 Nov 2006 @ 7:37am

    Re: things that are wrong...are not

    Content producers have a constitutional right to use their product as they see fit for a limited time, and many use the right to create scarcity to drive up the price of their works.

    I could accept that argument if the length of copyright was never extended and if the DMCA never existed. Content producers have been given a government granted monopoly that most industries can only dream of. Pharmaceutical sink far more into R&D then any member of the RIAA or MPAA spends on development, yet they only get 20 years of protection.

    This has worked, more or less, in this country for 200 years.

    When the Copyright Act of 1790 was passed, it limited the life of copyright to 14 years plus a renewal of 14 years. Now copyright extends 70 years after the death of the creator of that content. Walt Disney created works that were based on public domain works, however, no one can create a work based on Walt's movies until 70 years after his death. How does extending copyright 70 years after someone's death "serve the public interest in promoting the creation and dissemination of new works"? So, no, it has not worked, more or less, in your country for 200 years.

    Content producers have no real choice but to do everything in their power to stop it.

    They have plenty of choices. They could actually make their content more valuable by adding other features, or bundling it with other content or so on and so on. They actually may have to market their content.

    Lack of scarcity IS only due to piracy.

    If, the lack of scarcity is only due to piracy, then media companies would be bankrupt and no store would be selling CDs or DVDs - how could they compete with free? Funny thing is that an overwhelming number of people continue to buy their music on CDs and an ever growing number of people are paying for downloads. People see some value in buying content. I think you'll find many people who 'pirate' are forced down that route because of DRM not because it was free.

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