History Repeats Itself: How The RIAA Is Like 17th Century French Button-Makers

from the no,-seriously... dept

As regular readers know, I've been working through a series of posts on how economics works when scarcity is removed from some areas. I took a bit of a break over the holidays to catch up on some reading, and to do some further thinking on the subject (along with some interesting discussions with people about the topic). One of the books I picked up was one that I haven't read in well over a decade, but often recommend to others to read if they're interested in learning more about economics, but have no training at all in the subject. It's Robert L. Heilbroner's The Worldly Philosophers. Beyond giving readers a general overview of a variety of different economic theories, the book actually makes them all sound really interesting. It's a good book not necessarily because of the nitty gritty of economics (which it doesn't cover), but because it makes economics interesting, and gives people a good basis to then dig into actual economic theory and not find it boring and meaningless, but see it as a way to better understand what these "philosophers" were discussing.

Reading through an early chapter, though, it struck me how eerily a specific story Heilbroner told about France in 1666 matches up with what's happening today with the way the recording industry has reacted to innovations that have challenged their business models. Just two paragraphs highlight a couple of situations with striking similarities to the world today:
"The question has come up whether a guild master of the weaving industry should be allowed to try an innovation in his product. The verdict: 'If a cloth weaver intends to process a piece according to his own invention, he must not set it on the loom, but should obtain permission from the judges of the town to employ the number and length of threads that he desires, after the question has been considered by four of the oldest merchants and four of the oldest weavers of the guild.' One can imagine how many suggestions for change were tolerated.

Shortly after the matter of cloth weaving has been disposed of, the button makers guild raises a cry of outrage; the tailors are beginning to make buttons out of cloth, an unheard-of thing. The government, indignant that an innovation should threaten a settled industry, imposes a fine on the cloth-button makers. But the wardens of the button guild are not yet satisfied. They demand the right to search people's homes and wardrobes and fine and even arrest them on the streets if they are seen wearing these subversive goods."
Requiring permission to innovate? Feeling entitled to search others' property? Getting the power to act like law enforcement in order to fine or arrest those who are taking part in activities that challenge your business model? Don't these all sound quite familiar? Centuries from now (hopefully much, much sooner), the actions of the RIAA, MPAA and others that match those of the weavers and button-makers of 17th century France will seem just as ridiculous.

If you're looking to catch up on the posts in the series, I've listed them out below:

Economics Of Abundance Getting Some Well Deserved Attention
The Importance Of Zero In Destroying The Scarcity Myth Of Economics
The Economics Of Abundance Is Not A Moral Issue
A Lack Of Scarcity Has (Almost) Nothing To Do With Piracy
A Lack Of Scarcity Feeds The Long Tail By Increasing The Pie
Why The Lack Of Scarcity In Economics Is Getting More Important Now

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  1. icon
    Mike (profile), 17 Jan 2007 @ 12:41am

    Re: Re: Re:

    You can split hairs all you want - illegally making a copy of a movie is stealing intellectual property. This is common sense. No physical copy is taken, but the thing doesn't exist physically, does it? It's information in a digital realm, but no less somebody's work and property.

    It's not splitting hairs. It's an EXTREMELY important distinction. The fact that the original owner isn't missing anything makes all the difference in the world. Don't think for a second that just because someone named it "intellectual property" is has any of the characteristics of traditional property.

    Films are intellectual property, made to be consumed by willing customers. If the customers aren't willing to pay, nobody is forcing them to consume the product. This isn't difficult to get.

    Nope. It's not difficult to get, but it's a bad business model and it will kill your industry. If that's what you want, that's fine... but others will figure out the right business model and you'll be out of business.

    And your solutions are not very compelling, either. You're basically telling filmmakers to adopt the business model of the guy on the street playing a harmonica, with a hat sitting in front of him that you can throw money into. Basically begging.

    Huh? I have NEVER suggested a business model based on begging.

    I have suggested detailed business models that are based on giving people what they want in a way that they're happy to pay for it. I never suggested a model based on begging, and I'm wondering if you even have read what I've written.

    You need to be aware of two things:

    1. Your existing business model is being made obsolete through technology (same as the button makers).
    2. If you learn to embrace what the new technology is enabling, there are much greater ways to profit (same as the button makers).

    That you refuse to see it is really your own problem, but it's going to make life difficult very soon.

    The big difference, of course, is that playing the harmonica costs this guy next to nothing, whereas the average film costs $65 million to make. That's hardly the kind of money anybody is going to be willing to put up if they only way you can make it back is from the charity of strangers throwing money into your hat.

    Pointing to the cost again is just bizarre. I already discussed why sunk costs have nothing to do with this situation, but I suggest you go pick up an econ text book and learn the difference between fixed and variable costs and their impact on pricing in competitive markets.

    It amazes me how much people in the industry like to point to the high cost of making movies (I had a similar debate with someone at NBC Universal, who used $200 million as his favorite number). If you do a search on the site, I have a number of posts explaining why the $200 million excuse (or the $65 million excuse) is dumb for a few reasons.

    1. You make it out like the world owes you money because you spent money. Considering how many movies lose money, you'd think you would have figured out by now that spending money doesn't entitle you to anything. Learn to deal with it.
    2. The costs are decreasing. The largest single cost of movies are actors -- and yet a recent study showed that stars have no statistical impact on how well a movie does. In other words, you guys are throwing money away by spending way too much on actors. If the market were more competitve, you'd start to realize this, and start paying actors less.
    3. The costs of the technology is decreasing. Film making in general is getting cheaper every day. From the actual filming process to the special effects, they can be done much more cheaply. If you guys were actually efficient you could make better movies for less money.

    In other words, the "cost" is a total red herring. It's basically the industry asking the world to subsidize them for their bad spending habits. Sorry. No can do.

    The idea that it's wrong to expect people to fairly pay for a film if they want to view it is just mind-boggling to me.

    No. It's not wrong at all, and I never said it was wrong (seriously, I'm wondering if you read my post). I said that it's wrong to feel entitled to that money. If you stop thinking of yourself as charging people to "see a film" and start thinking of yourself as charging people "to entertain them" the market opens up wide before you.

    People go to the movies as a SOCIAL EXPERIENCE. They go OUT to the movies. They go with FRIENDS to enjoy the EXPERIENCE. In other words, no matter how much people download movies, they're never going to be able to recreate those huge SELLING POINTS of going to the theater. Your job should be to focus on making the EXPERIENCE an ENJOYABLE one -- and people will come and they will pay.

    I can watch local baseball games for free on my TV, but I LIKE to go out to the park and pay a lot more to watch it in person, because of the EXPERIENCE. I go with friends and we eat hotdogs and drink beer, because it's FUN. It's ENTERTAINMENT, and even though I can watch it at home, there are incentives to make me go out and pay a lot more.

    The same is true with movies. The fact that you seem totally unable to recognize this makes me wonder how you've gotten as far as you claim you have in the industry.

    "Piracy is ALWAYS wrong. Just because you can download a movie without paying for it doesn't mean it is now you're right. Taking something without paying for it is wrong."

    Ah, well, there's your problem. You're still making this into a moral issue. Well, according to the button makers, making cloth buttons was "wrong." It was taking away their ability to sell buttons and that was just "wrong."

    I will agree that piracy is often (though, not always, based on fair use laws) illegal. But that's a separate issue.

    What I'm trying to get you to understand is that:

    (1) Whether you like it or not, "piracy" as you call it (though, it isn't really piracy) is here to stay. You simply cannot stop it. Every attempt to stop it makes it worse. It's just a fact. It's what the market is giving you.

    (2) Given that, every attempt to stop it is wasting money that could more profitably be spent elsewhere.

    (3) Sooner or later someone (it appears not you) is going to embrace business models that don't care about unauthorized downloads. They're going to figure out ways to use those downloads as free publicity and they're going to make a lot of money out of it.

    (4) Then when you sit there whining about piracy, and others start making gobs of money by NOT pissing off their customers, NOT running to the gov't to protect their business model and actually DELIVERING WHAT PEOPLE WANT AND WHAT THEY WANT TO PAY FOR, you're going to realize that there was a better way, and it was available to you all along.

    I'm just trying to help speed you along that process before you become road kill.

    People seem to be saying it's okay if others steal our work without paying for it, and that because it's technically possible it then becomes their "right" to do so. This is ridiculous.

    I already pointed out why this is wrong. I am not saying it's their right. I already said this. Why do you insist on putting false words in my mouth.

    I said that this is the market you face and there are ways to embrace it so you don't have to worry about it. And, if you don't, others will, and then NO ONE will care about your whining when they see that others have successfully routed around the problem.

    Sure, file sharing sucks for your current business model. But the problem isn't to whine and try to hold back the tide. It's to GET A NEW BUSINESS MODEL.

    Then others come on here and say that films should cost less. No doubt. I know a little something about that. I launched my career on an ultra-low budget feature film.

    Already discussed this above. There are many reasons films should be getting cheaper, but the cost of films isn't an issue. For those who learn to embrace these new business models, they'll be able to make money with expensive films too. I don't care what the budget is. I care about the business model.

    Nobody will be able to sustain a business model making films under $1 million for very long. And without the possibility of something better on the next one, very few are going to put themselves through what I did just to make a film. Like any endeavor, you do it because of the rewards that could come later if you succeed.

    And nobody is going to invest millions in an industry that is essentially the same thing as the guy with the harmonica begging on the street corner.

    Nor should they. But by now you should realize that I never suggested such a business model.

    I'm not going to keep repeating myself here. I'm willing to discuss this with you, but your insistence on (a) not responding to what I actually write, but setting up straw men and knocking them down (b) calling things by loaded (and wrong) words like "theft" and "piracy" makes this discussion difficult.

    I'd suggest if you step away from those two things, we could have a much more productive conversation that we'd both learn from (and I actually think, on your side, it could help make you very, very rich).

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