Myth Debunking: Fans Just Want Everything For Free

from the except-when-they-don't dept

The debate between Ben Sheffner and William Patry continues over at Patry's blog, and Sheffner has an interesting piece where he argues (delicately) that sometimes the customer isn't right. He admits upfront that this is a tricky position to defend, and he starts out with a more nuanced view as to why that is, but then he gets to this:
So everyone wants the product -- but too many don't want to pay for it. Hell, I don't want to pay for it. I would love it if I could get all the movies and music I want for free. And I would love it if I could get all the BMWs, houses in the hills, and meals at Urasawa I want for free as well. But of course I realize I can't. Just about everyone is with me on the BMWs and houses part. But too many think that movies and music should be free, and don't see anything wrong with taking them. I'm willing to say they're wrong.

Everyone understands why they can't have all the physical goods they want for free. But they have a much harder time understanding that with intangible goods like movies and music. IP is just harder to understand, and to explain, than physical property. We need theories to undergird it, special laws to define it, and special classes at law school to learn how to fight over it -- not to mention eight-volume treatises to tell us what the law actually is. So when people commit copyright infringement, they may think they're causing no harm -- but they are. They're undermining a system that enables those big, bad companies that everyone loves to hate, to finance the movies and albums that we all love.
This is a myth. It's a popular myth, and I'm quite sure that Sheffner and lots of folks on both sides of the debate think its entirely accurate. But it's a myth. The nature of a good economic transaction is one in which both parties are better off after the exchange. That means the people "paying" don't mind paying. They're happy to pay because they believe that what they have received is better than the cost it took to acquire it. But basic economics plays into the situation here: if the same thing can be made available by others in a better way, it's only natural for people to ask why they should have to pay.

But if you want real proof that there's a lot more at work than the idea that consumers just want everything for free and think that if it's not free they should just take it, look no further than the countless examples we've shown of people paying lots of money to support those providers who don't treat their fans as criminals, who don't try to prevent what the technology allows and who actually work to connect with those fans and give them a true reason to buy.

Everyone wants a good deal, and a fair deal, but people are more than willing to pay if it makes economic sense. Whether consciously or not, there are an awful lot of people who inherently recognize that the economics don't make sense when a good is infinitely available. As much as people have trouble understanding explicit economic concepts like supply and demand, instinctively many do, in fact, understand the very nature of abundance and what it means for pricing. It's not some nefarious story of a bunch of immoral "thieves" wanting stuff for free. It's an inherent understanding of competitive markets.

On top of that, Sheffner takes the position that paying for these things is necessary, because not paying for them "undermines the system," he is once again being misleading. It may undermine one particular way that the system works, but the false statement is implicit in his argument: that this is the only way of funding such creation. That is demonstrably false, as we've shown time and time again. I have no doubt that Sheffner is sincere in his argument, but it's based on a false premise that because the system used to work one way, back before technology changed the basic economics it relied on, that somehow we should all suffer by limiting what the technology allows and by ignoring basic economics.

It would be nice if it were possible, but I cannot find a single example of a modern society being able to successfully hold back or ignore what technology allows when it comes to economics.

Finally, way back when I was in high school, I worked at a bagel shop, which also sold other baked goods. The boss's position was that "the customer is always right" except for one particular issue: the customer could only get the next piece of coffee cake in order. We had this giant sheet cake coffee cake, and many customers didn't want "end pieces," and would ask for middle pieces instead. On more than one occasion, this resulted in angry customers stomping out -- and even once resulted in a fist fight between a customer and the owner's son. Over time, as more competition entered the neighborhood (a Dunkin' Donuts across the street, another bagel shop a block away), we lost a lot of business for our baked goods.

The point, which should be clear, is that you can say the customer is wrong all you want. But, in the end, the market will decide that the customer is right. Always. If you don't provide what the customer wants (a fair transaction) and others are able to do so, you will suffer.

The movie industry and the music industry both have had numerous opportunities to embrace what the technology allows -- and to craft new business models that would be massive money makers in doing so. They have chosen not to do so. They have said that the customer is wrong, and, as Sheffner notes, they have no problem saying so. The problem is that, whether legal or not, the competition is springing up left and right. Sheffner and his former colleagues can stand on whatever principles they want. The market doesn't care. The market only cares for those who serve the customers' needs. Plenty of others are doing so (both legally and illegally). Those who want to survive in business would be smart to take lessons from those who are succeeding and looking to implement smart business models around them. Those who want to insist that "the customer can be wrong" may feel good when they look in the mirror, but they're going to have to contend with a rapidly diminishing customer base.

The customer can be wrong, but focusing on that doesn't get them to pay you.


Reader Comments (rss)

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    Ima Fish (profile), Aug 18th, 2009 @ 11:06am

    "I would love it if I could get all the movies and music I want for free. And I would love it if I could get all the BMWs, houses in the hills, and meals at Urasawa I want for free as well. But of course I realize I can't."

    Yes you can. That's why IP has nothing to do with property. It's a government granted monopoly which exists solely to create a market where none exists. It creates a market by creating artificial scarcity out of a legal fiction. But the scarcity is not real.

    To analogize the sales of imaginary scarcity to physical goods is simply asinine.

     

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      Anonymous Coward, Aug 18th, 2009 @ 12:51pm

      Re:

      First disclaimer....I don not endorse the RIAA or the MPAA.

      However i do agree with sheffner, in that expect evrything should be free, like a divine right.

      Lets side step for second and go to the android marketplace. now I see on a daily basis comments that go like this.

      A. wow, this is totally the bestr app ever, does exactly what I want but it should be free.

      B. hey jerk why you charging $0.99 for this killer app, I thought Android was open source, everything should be free.

      never have I seen people so far removed from reality, to think that these developers owes it the end user to give away the fruit of their labor, and yes ,their IP. Lets not consider that these same people have families and mortgages and bills, and need to eat. or maybe they imagine that google or TMO pays these guys a salary. or maybe they just beleive their entitled to free, I think it was the twelth ammenment or something, thou shall live of the labor of others.

      Now, this is not nearly the same as the DRM debate, but it speaks volumes to the relevancy of why this is a big issue.
      Like the TFA says, people want things for free, people expect things for free. Hell, as long as I can eat who cares about the next guy, I want it for free.

       

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        Mike Masnick (profile), Aug 18th, 2009 @ 1:00pm

        Re: Re:

        However i do agree with sheffner, in that expect evrything should be free, like a divine right.

        So because you found some comments in a single arena you think that means all customers expect all things to be free? Even in spite of all of the evidence presented to the contrary?

        And, the example you used is, again, infinite goods. Goods that are infinitely reproduceable is a situation where people will gravitate *naturally* towards thinking they should be free, because it's basic supply and demand.

         

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        Steven (profile), Aug 18th, 2009 @ 1:36pm

        Re: Re:

        As a developer who is looking at creating applications for Android phones, and possibly other devices, here is my opinion on the subject.

        I personally plan to offer a free, and a paid version of my app, paid would probably a buck. In general yes I would like to charge for the software I create. All this is fine. The current market allows for such things. However I recognize this is artificial and will not last. My completed software has a zero marginal cost to produce. If I want to be successful as a developer I need to find ways to charge for those things that are scare, namely my time and expertise.

        Selling software is not a good business model to bet your future on any more than selling digital copies of music. Even if they work out great now, they are artificial and temporary and if you are in business you need to recognize that and be able to make the transition when (or before) it comes.

         

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          Marcus Carab (profile), Aug 18th, 2009 @ 3:44pm

          Re: Re: Re:

          Well said. I don't think anyone is suggesting that all charging for content must stop immediately. When and where markets allow it, go for it! In the case of apps, a dollar feels worthwhile - not for the individual app itself, but for the convenience of easily finding an app that suits your needs and instantly obtaining it. This is why iTunes will be able to sell songs long after CDs fall entirely off the map, especially if they find ways to lower the price.

           

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    Free Capitalist, Aug 18th, 2009 @ 11:16am

    Losing at record speeds...

    http://arstechnica.com/apple/news/2009/08/itunes-sells-25-of-all-music-in-the-us-69-of-digital.ars

    iTunes basically sucks considering it is a closed system. And yet for all the time the RIAA and their member orgs fighting for protectionist entitlements, their distribution channels of significance are about to be reduced to one man. So much for leverage.

     

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    Chronno S. Trigger (profile), Aug 18th, 2009 @ 11:16am

    Copyright law

    "We need theories to undergird it, special laws to define it, and special classes at law school to learn how to fight over it -- not to mention eight-volume treatises to tell us what the law actually is."

    Wouldn't that suggest there is something really wrong with it? Especially the eight volumes of definition.

     

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      Heya, Aug 18th, 2009 @ 5:31pm

      Re: Copyright law

      That struck me too. If it takes so much time, space and wind for just the professionals to define or understand, how do they expect the average piker to get what they're talking about?

      And when the pikers do get an idea of what it is, they just might see it as merely time, space and wind, certainly not a tangible product they can pay for to drive themselves to a local restaurant.

       

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    Anonymous Coward, Aug 18th, 2009 @ 11:17am

    Bear in mind that the two participants are being tasked to argue specific sides of issues. It would be interesting for Messrs. Sheffner and Patry to change roles and see what comes out of the debate. The results may very well surprise you. I daresay that Mr. Sheffner would present arguments along the lines Patry has presented to date and Mr. Patry would present arguments along the lines Sheffner has presented to date.

     

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      Ryan, Aug 18th, 2009 @ 11:29am

      Re:

      The problem with Patry(and with many critical of...file sharing? free products? what exactly is the problem here?) is that they portray contrary arguments as normative and that we merely want them to be free, ignoring that in reality they already are. Whether consumers want them to be free or not is irrelevant--the marginal cost to copy and distribute digital goods is zero. Somebody will always be offering them for free, and there is no way around that. Saying the customer is wrong in consuming goods that are naturally free is like arguing against gravity. Patry and others making his arguments need to recognize that this is not a matter of customers "wanting" free things, but how producers can adapt to the new world.

       

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        Mike Masnick (profile), Aug 18th, 2009 @ 12:00pm

        Re: Re:

        The problem with Patry(and with many critical of...file sharing? free products? what exactly is the problem here?) is that they portray contrary arguments as normative and that we merely want them to be free, ignoring that in reality they already are. Whether consumers want them to be free or not is irrelevant--the marginal cost to copy and distribute digital goods is zero. Somebody will always be offering them for free, and there is no way around that. Saying the customer is wrong in consuming goods that are naturally free is like arguing against gravity. Patry and others making his arguments need to recognize that this is not a matter of customers "wanting" free things, but how producers can adapt to the new world.

        I think you're confusing Patry and Sheffner here.

         

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    Anonymous Coward, Aug 18th, 2009 @ 11:18am

    "The movie industry and the music industry both have had numerous opportunities to embrace what the technology allows -- and to craft new business models that would be massive money makers in doing so."

    Express one of them.

    So far, the only ideas I see on techdirt are trading dollars for pennies. Like selling a DVD of the movie on the same day you release them in the theater. Yeah, let's make it easy for a bunch of people to see the movie cheaper. YEAH! That will make us more money.

    Techdirt: 10 years, and still no idea how to make real money. A profit, perhaps, but not real money.

     

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      Ryan, Aug 18th, 2009 @ 11:37am

      Re:

      A profit, perhaps, but not real money.

      Your post contributes nothing to the discussion. For instance, Wolverine did just fine despite being quite famously leaked online before its release for free. Where were you on that one, dipshit? But then we get to the end and you grant that a profit can be made, despite everything you just said. So what exactly are you bitching about? You think the government should force citizens to contribute artificially high amounts of money so that incumbent producers cannot only effortlessly make a profit, but a very large one? You are a very stupid (wo)man.

       

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        Chronno S. Trigger (profile), Aug 18th, 2009 @ 12:03pm

        Re: Re:

        "Wolverine did just fine despite being quite famously leaked online before its release for free."

        Probably would have done better if the producers didn't completely freak out about it. Is it true that it had three endings when it was released into theaters? I don't know, I didn't see it since the producers completely freaked.

         

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          Trails, Aug 18th, 2009 @ 2:06pm

          Re: Re: Re:

          "Probably would have done better if the producers didn't completely freak out about it"

          Actually I doubt it. IMO, all that righteous indignation was fueled by a desire to keep the free publicity train going.

           

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        Anonymous Coward, Aug 18th, 2009 @ 12:09pm

        Re: Re:

        You think the government should force citizens to contribute artificially high amounts of money so that incumbent producers cannot only effortlessly make a profit, but a very large one? You sir, have hit the nail on the head. The labels aren't worried about making a profit, they are worried about making an artificially large profit. Since distribution costs are nil, price should be greatly reduced (or free?). The old days of raking in the dough are gone. Now it is time for them to work for their money like the rest of us.

         

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          Marcus Carab (profile), Aug 18th, 2009 @ 3:48pm

          Re: Re: Re:

          Indeed. I've often wondered why it seems to go without saying that everyone connected to the movie or music industry deserves to be a millionaire, for some reason.

           

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      Free Capitalist, Aug 18th, 2009 @ 11:40am

      Re:

      So far, the only ideas I see on techdirt are trading dollars for pennies


      It's already too late to do much more than that for Old-Music. Steve Jobs cornered the market.

      If a company cannot now see the way to huge profits, that company should look to survival first. If one can only see things in a fram of the past (i.e. Market Dominance by the entitled few) then atrophy will be their evolutionary road to extinction.

       

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        JEDIDIAH, Aug 18th, 2009 @ 1:55pm

        Singles are nothing new people...

        Singles are nothing new people. They are an ancient part of
        the music market that the labels tried to artificially kill
        off. It turns out that the market wouldn't let them (much
        like the Dunkin Donuts example). First singles returned as
        pirate downloads. Then they returned as the iTunes store.

        You can't extract an arbitrary or infinite amount of money
        from the customer. There is only so much the customer has
        and only so much the customer is willing to spend. Anything
        beyond that was never yours anyways. Inventing inflated
        losses by cooking the numbers ultimately isn't useful for
        anyone.

        Consumers don't understand the amount of work and creativity
        that goes into stuff. No one seems interested in educating
        anyone. The industry seems intent on doing nothing beyond
        declaring piracy bad like some father figure from some
        lame TV sitcom.

        If you don't have a rational and detailed argument, expect
        people to ignore you. Preaching and whining doesn't help
        either. This is especially true if the whiners are people
        that don't make sympathetic whiners (like pop stars).

        The window of opportunity is closing here. A new generation
        is growing up used to digital media. If you don't
        effectively communicate the reasons for patronage based on
        enlightened self interest you are bound to lose the current
        (and all succeeding) generations.

         

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      Anonymous Asshole, Aug 18th, 2009 @ 11:41am

      Re:

      Techdirt: 10 years, and still no idea how to make real money. A profit, perhaps, but not real money.

      Ah, another drive-by commenter.

      You're truly a knowledge master that will be talked about for ages. We need you here more often to gleem insight into Techdirt's 10-year old business and marketing plans.

       

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      Samir Nagheenanajar, Aug 18th, 2009 @ 11:51am

      Re:

      Like selling a DVD of the movie on the same day you release them in the theater. Yeah, let's make it easy for a bunch of people to see the movie cheaper. YEAH! That will make us more money.

      Well, if I was in your business, I'd re-jigger your business to support it. HDMI spec 1.4 looks great! You could be like misguided Cable Exec in the DirecTV ads. "We'll broadcast in 1,000,080p"!

      Or you can see that it's actually coming:
      http://hothardware.com/News/HDMI-14-Brings-Ethernet-3D-4K-Support-To-AV

      It's an underwear wedgie sneaking up on you like an Apache helicopter!

       

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      John Fenderson (profile), Aug 18th, 2009 @ 11:53am

      Re:

      "A profit, perhaps, but not real money."

      And there, we see the essential problem. Merely making a profit is "failure." "Success" only comes with making an obscene profit.

       

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      chris (profile), Aug 18th, 2009 @ 12:45pm

      Re:

      So far, the only ideas I see on techdirt are trading dollars for pennies. Like selling a DVD of the movie on the same day you release them in the theater. Yeah, let's make it easy for a bunch of people to see the movie cheaper. YEAH! That will make us more money.

      you can trade dollars for pennies, and embrace methods of marketing and distribution where those pennies are still profitable, or you can stubbornly wait for the dollars to run out.

      the days of clocking big dollars on big budget content are over and they are never coming back.

      people only pay for content to support creators that they believe in. that means you have to get people to believe in what you are making or they won't give you any money. this is called "connecting with fans". you can't force people to give you money. tricking them into giving it to you doesn't work either.

      what you can do is reduce your distribution and marketing costs by using infinite goods to focus your marketing efforts on the people who are willing pay and then sell them stuff that they want to pay for. this is called a "reason to buy" or you can wait in vain for 1985 to come back.

      1985 isn't going to come back, but you are welcome to wait anyway.

      if you choose to wait, someone else will figure out how to profit in this new market and new economy and you will be out of business because the small number of people who are willing to pay will give their money to people who are selling what they want to buy.

       

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      PRMan, Aug 18th, 2009 @ 12:57pm

      VeggieTales: Easter Carol

      "Like selling a DVD of the movie on the same day you release them in the theater."

      We saw VeggieTales: Easter Carol at a theater showing sponsored by the Fish radio in Southern California (it was technically a DVD-only release, but this was an all-day release party). As we were leaving the theater they were selling the DVD, and almost everyone bought a copy.

      So my question is, "Have you tried it?"

      The reality is, I rarely go see a theater movie unless it's a blockbuster in a franchise I care about (Star Wars, LOTR, Narnia, Superhero, etc.) Otherwise, I wait.

      People will choose what they can afford and what they are willing to pay regardless of whether you stagger it or not.

      My friends and I have a rating system for movies:

      Theater
      PPV
      DVD
      Rental
      Wait for TV

      Notice that what a movie is worth (and what I would pay) would not really change if the times were the same or spread out.

      For example, I can rent from Netflix or buy on the same day (which you guys are vehemently trying to deny me the privilege of doing, thanks for being a customer-hating jerk AGAIN). So, by your twisted logic, I would NEVER buy a movie. And yet I do. Because some movies have enough rewatch value to make it worthwhile.

      I bought Bolt just this last Saturday, even though we have ALREADY rented it on Netflix. Why? With some store credit we were able to get a deal on it and my kids (very much dog-lovers) think it's great (it is an underrated movie).

      I know you have decades worth of contracts that making changing the world nearly impossible, but stop pretending like it would make any difference if you released to all countries at once or to different markets at once, because for me (and most consumers) it wouldn't make a bit of difference.

       

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      Danny, Aug 18th, 2009 @ 1:14pm

      Re:

      Like selling a DVD of the movie on the same day you release them in the theater. Yeah, let's make it easy for a bunch of people to see the movie cheaper. YEAH! That will make us more money.
      That's actually not a bad idea because the lower the price the more people are willing to see/buy/play/etc... it.

      Sell an item for $20 with 5 paying customers or sell it for $15 and have 10 paying customers. Which turns more profit? What people are complaining about is the artificial ways by which prices are kept high and you can tell they are artifical by simply looking at clearance or price dropped items.

      Even when an item goes on clearance/price dropped most stores are still making a clear profit on them. You think that World of Warcraft soundtrack at Hot Topic that was clearanced from $30 to $15 is still not making a profit or that when the price on Halo 3 dropped/drops from $59.99 to $39.99 that the makers of the item will suddenly start taking a loss on it?

      People are getting fed up with paying such high prices when we all know good and hell well that making those items costs nowhere near that. Companies smuggly say that they will charge with the customer is willing to pay to explain why they charge high prices. Well now that customers are no longer willing to pay those (often) artificially high prices they want to cry foul and ask for government protection.

       

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      John, Aug 18th, 2009 @ 1:20pm

      Re:

      Here is an idea. Instead of trying to sell single songs, or single dvds, they could come up with reasonably priced collections of media. An example would be the entire run of a television show that is no longer on the air.
      The cost to create these collections is brought to near zero due the the ability of a computer to replicate the bits that make up the media in a digital format. The main cost would be digitizing the media, which is a one-time cost. Therefore nearly any amount of money they make is a profit.
      One example that I would offer would be providing all episodes of a show like Family Matters, or Scooby Doo, for a price somewhere between 20 and 40 bucks.
      This is something that I would pay for, as it would cost me a lot of time to go out and download all episodes of these shows, not to mention that the quality could vary widely.
      I know this is strange, but maybe the content companies should consider selling all of their old media instead of locking it up in a vault somewhere, since it's pretty cheap to digitize it, and there's certainly a niche that would pay money for it.
      Before you say that collections like this already exist, keep in mind that I suggested a reasonable price. I know that what is reasonable to me is different that what may be reasonable to you, however think of it this way: they can sell a lot of collections of a show to a lot of people for less money, and come out ahead, or continue offering incomplete collections (first season only, or what-have-you) for a huge amount of money, which few people will see value in.
      Technology allows them to rapidly create copies with very little cost, they should take advantage of that technology, add value(such as not having to go search for good quality episodes of a show), and sell it.

       

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      Trails, Aug 18th, 2009 @ 2:03pm

      Re:

      Oh noes!! You won't make more money? Damn it.

      Ok people, turn off the internet, the labels aren't able to extract as many profits. Now now, it was fun while it lasted, but David Geffen needs another boat. Let's all go back to smoke signals, and horse-mounted mail carriers. I know you'll miss all the info and ease of communication, and the free porn (who won't miss the free porn, aside from Mormons), but who's gonna pay for Edgar Bronfman's next botox? You? If you can come up with the money, we'll turn the internet back on, but until then, off it goes.

       

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      Anonymous Coward, Aug 18th, 2009 @ 2:56pm

      Re:

      Funny...I always get the DVD quality rips weeks before the release by grabbing "screening only" copies from a friend who works in the movie industry. And I always make sure they're fully seeded.

      Why would I buy a DVD to rip?

      Silly AC, you don't quite realize how pirating works. We either get what we want, or we get what we want. Yes, yes, occasionally a man gets thrown overboard or captured, but in the end, they can't stop us. What are they gonna do? Arrest us all? We're pirates!

       

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      Richard, Aug 18th, 2009 @ 4:07pm

      Re:

      "Techdirt: 10 years, and still no idea how to make real money. A profit, perhaps, but not real money."

      Translate..

      I don't want to work for a reasonable wage I demand a fortune.

       

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        Anonymous Coward, Aug 18th, 2009 @ 4:09pm

        Re: Re:

        translate: I don't want to give up the good paying job for a mcjob just on a moral stand.

         

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          mobiGeek (profile), Aug 18th, 2009 @ 11:24pm

          Re: Re: Re:

          Because that is exactly what most of us hanging around here are advocating?

          I make a living from selling infinite goods. I recognize that my profit margins get cut by dropping my prices, but I also recognize that the opportunities to make Way More Money goes up substantially.

          Now I have to capitalize on those opportunities. It would be easier for us to keep prices high and beat on sales folks to close a couple of whopper deals (while risking starving in between deals). But leveraging the power of low-/no-cost distribution has the phone ringing continually.

          We don't have it all figured out yet, but we're getting there. And no one here is starving or working mcjobs on the weekends.

           

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    John Fenderson (profile), Aug 18th, 2009 @ 11:35am

    Price is only one factor

    An excellent book by Henry Petroski, "The Evolution of Useful Things," mentions something applicable to this.

    "The bottom line is certainly of concern, both to those seeking profit and to those seeking value, but neither can be measured solely by the amount of dollars spent on production or product. The nonquantitative word "quality" conveys countless ways in which a more expensive thing might be more profitable and yet a better buy as well. [...] Even when two virtually identical products are available at different prices, it is rare that price will be the sole criterion for choice."

    This is what the people who say that everyone just wants everything for free misses -- it's simply not true. Price (and free is a price, too) is a factor, and sometimes a large one, but it's far from the only factor involved. Everyone here, I'll wager, has spent money on things they could have obtained for free.

    When it comes to music, other qualities are so obviously more important -- convenience and usefulness, for example -- than price, that I am always baffled at the argument that people just want it all for free. That's self-evidently untrue.

     

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      bigpicture, Aug 18th, 2009 @ 1:01pm

      Re: Price is only one factor

      "Value" is what consumers want, and in the end there seems to be no fixed formula for "value" because it seems to be largely an individually perceived thing.

      In the world of ubiquitous media copy technology, why would I perceive a $20.00 music CD as value when the input monitory distribution is considered. 1 CD

       

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        JEDIDIAH, Aug 18th, 2009 @ 2:06pm

        Re: Re: Price is only one factor

        > In the world of ubiquitous media copy technology, why
        > would I perceive a $20.00 music CD as value when the input
        > monitory distribution is considered. 1 CD

        You've quite literally worn out multiple copies on vinyl or tape.

        What's better for you? Being the mooch? Or the one guy in 10 that actually buys the product?

        Commercialized art can survive the mooches. It just needs to manage to not antagonize the remaining paying customers.

         

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      chris (profile), Aug 18th, 2009 @ 1:12pm

      Re: Price is only one factor

      When it comes to music, other qualities are so obviously more important -- convenience and usefulness, for example -- than price, that I am always baffled at the argument that people just want it all for free. That's self-evidently untrue.

      i would pay for convenience. piracy is easy and fun, but it can be time consuming.

      i used to have a monthly e-music account that i would bottom out on a regular basis. it was a totally convenient way to amass a large collection of old indie, punk, and alternative tunes from my youth, which were kind of tough to find on BT.

      the greatest feature of emusic was the download speed and the ability mark stuff for download later. i could pull stuff down at 500-600kbps which was unheard of on napster, kazaa, or BT, especially with all of the tunnelling and ip blocking i have to do to stay under the radar.

      if there was a service where everything (books, movies, music, audio books, tv, etc.) was available unlimited and without DRM in formats that will play in any player (vlc, xbox media center specifically), i would gladly pay a reasonable monthly fee for it.

      or better yet, just sell me a license to download everything. that way the industry can collect money without bothering to offer a service: no website to build (other than the one to buy the license) no libraries to maintain, just sell me a registration code that i can file with my ISP so they don't have to pull my plug for every infringement letter they get.

      also: with everyone torrenting out in the open, you can collect marketing data on what's hot and what's not on the BT scene.

      this way, i can keep using BT, and the industry can keep spying on file sharers and collect it's filthy lucre from those who pay and we can all get on with our lives.

       

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        JEDIDIAH, Aug 18th, 2009 @ 2:10pm

        Re: Re: Price is only one factor

        > i would pay for convenience. piracy is easy and fun, but it can be time consuming.

        Right now it's more convenient to be a pirate if your thing is Video. Many things aren't available on iTunes. If you want any sort of serious "video ipod" experience that basically puts you in the position of breaking one law (DMCA) or another (Copyright).

        Futzing with DVD decryption and transcoding is more trouble than most people are willing to deal with. Disney movies are especially inconvenient in this respect.

        The guy that leeches off of BT has an easier time of it than the guy that actually buys DVDs.

         

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          chris (profile), Aug 18th, 2009 @ 2:50pm

          Re: Re: Re: Price is only one factor

          Right now it's more convenient to be a pirate if your thing is Video. Many things aren't available on iTunes. If you want any sort of serious "video ipod" experience that basically puts you in the position of breaking one law (DMCA) or another (Copyright).

          agreed. i have a machine with 4 burners set up to do all of that (gordian knot, dvdflick, handbrake, etc.) and even then it's fairly inconvenient.

          it would be nice if i could just download aXXo quality videos from a website, the way i used to download stuff from emusic.

          just being able to run BT in the clear would speed things up quite a bit: no need for rar's, tunnels, blocklists, etc. and everyone would be more willing to seed :-)

           

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    Erin B. (profile), Aug 18th, 2009 @ 11:39am

    @AnonymousCoward #5

    Yes, because watching a movie in my living room is exactly the same thing as seeing it in a theatre with surround sound, a higher quality and larger screen, at a central location where multiple people can converge and share a social experience. Exactly the same.

     

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    Martin Richmond { MRDC }, Aug 18th, 2009 @ 11:45am

    I agree with Mike

    In fact I loved the video presentation of CWF+RTB = $$ and I have been working on a version of this for my own Artist Blog @ mrdc-music.com with a subscription model to distribute my mp3's. I will not be distributing any more of my new albums with iTunes etc. As commented above they are closed systems built on old music distribution models that don't really work unless you have a major marketing push behind you.

     

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    Anonymous Coward, Aug 18th, 2009 @ 12:02pm

    i like free stuff

     

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    diabolic (profile), Aug 18th, 2009 @ 12:08pm

    Fans do not want everything for free, they are willing to pay. When there is infinate supply the price will be pushed down. When there are artifical restrictions on access and use it does not add value, that does not drive up the price. When there is a free alternative that does not have restrictions on access and use then the market will shift that way. But the free alternative is not the problem - the problem is the high price and artifical restrictions. Cut the artificial restrictions and offer the product at a reasonable price, you will find more buyers.

     

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    John Doe, Aug 18th, 2009 @ 12:14pm

    I would gladly pay if the price was right.

    The labels have vaults full of music dating back decades. Put it out in high quality MP3 format for $.25 to $.50 and I would buy tons of songs. As it is now, I don't buy (or download) at all. Even a $1 per song is way to high. I would bet that many downloaders would buy if the price was reasonable if for no other reason than being legit.

     

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    Anonymous Coward, Aug 18th, 2009 @ 12:14pm

    copy everything you can

    but don't steal.

     

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    Dale Sheldon, Aug 18th, 2009 @ 12:17pm

    Another context

    To paraphrase another take on "the customer is always right," shamelessly stolen from a different context:

    Whatever the seller says, goes.

    And if they say enough stupid stuff, the customer goes too.

     

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    Anonymous Coward, Aug 18th, 2009 @ 12:21pm

    I guess I don't quite understand how leap can be made from "something can be reproduced for no cost" and "that things is produced for no cost." Just because there is an infinite amount of something doesn't mean that it doesn't have value, or that it was created for free.

    I have a real issue with the way the copyright system has been abused, but there really is something to making innovation profitable, and in the age of almost cost-free duplication, why create anything new?

    If I am an inventor, and I spend a million dollars creating a new form of pain reliver which is incredibnly effective. The moment Irelease it, anyone else in the world can make it and give it away for free, or 1 dollar. Why would I ever have sunk my money into something which I have no chance to ever see a return on?

     

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      Chronno S. Trigger (profile), Aug 18th, 2009 @ 12:48pm

      Re:

      You're mixing patent with copyright and infinite goods with finite goods.

      Just because a product can be reproduced at 0 cost doesn't mean that the value is 0. Price and value are two different things. What one has to do is provide value to make the price more appealing. Suing your clientele and forcing them to limit how and when they use your product is not adding value. Having respect for your clientele, providing good quality copies, providing finite goods are all ways to add value to justify the price.

      And I'm not even going to go into the drug thing.

       

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      Mike Masnick (profile), Aug 18th, 2009 @ 12:51pm

      Re:

      I guess I don't quite understand how leap can be made from "something can be reproduced for no cost" and "that things is produced for no cost." Just because there is an infinite amount of something doesn't mean that it doesn't have value, or that it was created for free.

      You are confusing value with price. Price is determined by supply and demand. Value is a component of the demand. Air is free, yet you value air. If people didn't value free music, they wouldn't download it. Just because something is free, it does not mean it has no value.

      And to be clear, the statement that because something can be reproduced at no cost it will be pressured to be priced at zero is not a moral statement. It's a factual statement. So, rather than complaining that you don't like it, why not focus on how to take advantage of it?

      I have a real issue with the way the copyright system has been abused, but there really is something to making innovation profitable, and in the age of almost cost-free duplication, why create anything new?

      There are a few fallacies implicit in your statement above:

      * Fallacy 1: That the only way to profit from innovation is via artificial gov't granted monopolies.
      * Fallacy 2: That the only reason innovation is created is for profits.

      Neither is true. The second one is less important. But the first one is a big deal. There are all sorts of way to profit from innovation that don't require a gov't granted monopoly. In fact, we talk about them here all the time.

      If I am an inventor, and I spend a million dollars creating a new form of pain reliver which is incredibnly effective. The moment Irelease it, anyone else in the world can make it and give it away for free, or 1 dollar. Why would I ever have sunk my money into something which I have no chance to ever see a return on?

      You don't think that by creating such a miraculous drug you'd have your pick of any high paying job you want? You'd be able to score all sorts of research grants. You'd be famous and could quite easily cash in on that fame.

       

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        Marcus Carab (profile), Aug 18th, 2009 @ 3:54pm

        Re: Re:

        I'm glad that you skim past Fallacy 2, Mike, because otherwise I'm sure you would be branded an idealist and routinely ridiculed. And in terms of economics, #1 certainly is the important point.

        But I just wanted to say that I'm also very thankful that #2 is a fallacy. It is nice to look at history and know with full confidence that, no matter what might happen in the world, people will continue creating things of use and things of beauty out of their natural inclination to do so.

         

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        Anonymous Coward, Aug 19th, 2009 @ 7:57am

        Re: Re:

        You don't think that by creating such a miraculous drug you'd have your pick of any high paying job you want? You'd be able to score all sorts of research grants. You'd be famous and could quite easily cash in on that fame. That's saying that the reason for working is to become famous. That's not true the reason for working is to put bread on the table often, and sometimes to create something new and wonderful. As an author, I don't write my books hoping that someone will read them, think I'm awesome and offer to pay me for doing soemthing else. I write books because I love to, but also because it's my job, and I need to get paid to do it. I agree that there are many new business models and selling tagible items in a brick and mortar store just doesn't cut it anymore. But it just seems that your basis for saying I could make money by being famous seems to be based on in the very system (ideas even tho they are intagible can be worth money) which you think is outdated and needs to be thrown away.

         

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          Anonymous Coward, Aug 19th, 2009 @ 8:40am

          Re: Re: Re:

          But you've fallen straight into the "entitlement" fallacy. Just because you did work doesn't mean you get paid. It's sad, but true.

          Putting in years of effort with a massive cash investment upfront with no thought to how you're going to profit from it is stupid, to be blunt. Especially if you never even create this miracle drug, and end up with absolutely nothing.

          The world should not compensate you for your bad decisions.

          And to be more specific for your research example, in most parts of the world, researchers are paid to do research, and don't get to make millions off of their discoveries. The better their discoveries, the more funding they get.

          To repeat, if you made a bad business decision, it's not the world's job to bail you out.

           

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      Anonymous Coward, Aug 18th, 2009 @ 1:02pm

      Re:

      The problem is that you're inserting morality into economics.

      The cheaper production is, the cheaper it can be sold for. That's not to say that it should be sold for less, but that someone will sell for less, because the cheaper prices get the customers.

      In a truly free market, prices are set by companies undercutting one another until the price that is set is no longer sustainable.

      And, as has been pointed out many times on this site, just because one part of your product is "free", it doesn't mean that everything must be free. That's what CwF+RtB, Mike's advocated business model, is all about. When people are perfectly willing to pay for "authenticity", or ease, convenience, etc., saying that you can't make money is a blatant cop-out.

      As for your inventor example, there are already systems established for funded research, including ones where copyright and patents are not involved in the end results. Spending a million dollars out of your own pocket in an attempt to invent something is stupid on its own, but when you've already made that financial mistake, yelling and screaming at everyone else won't make things better. Even then, there are still ways to make money afterward, like selling your research, or using your results to get funding for future products.

       

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      giorgios, Aug 18th, 2009 @ 1:10pm

      Re:

      "If I am an inventor, and I spend a million dollars creating a new form of pain reliver which is incredibnly effective. The moment Irelease it, anyone else in the world can make it and give it away for free, or 1 dollar. Why would I ever have sunk my money into something which I have no chance to ever see a return on?"

      Then don't! Nobody is forcing you to invest your money that way. You're free to invest it in any other endeavor that would prove more profitable for you. Maybe investing in your painkiller would be better for the society as a whole, but you're not forced to work for the benefit of the society if you don't want to.

      Your argument is a fallacy because the problem isn't that you don't have the right to control your invention but that you don't have the means to control your invention (because legal means haven't discouraged anyone yet and the trend doesn't seem to be changing anytime soon). It all boils down to a sense of entitlement of the IP owners which feel that they are entitled to revenue streams which aren't there anymore.

      What you are suggesting is that if you think that your painkiller is worth $100 a pill but the market drags its price down to $1 a pill, then the state should enforce the $100 a pill no matter what the market says? (A bit anti-free markets/anti-capitalist too, isn't it?) If it's like that, why spend 1 million for research when you could bribe someone well connected with 500k to push through a law saying that everybody must buy and use your $100 pill and then start handing out placebo pills for $100? You'd make a nice 500k profit that way (to begin with). The example is a bit over the top, I agree, but that's what it the "IP industry" probably dreams and prays for.

       

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      chris (profile), Aug 18th, 2009 @ 1:27pm

      Re:

      If I am an inventor, and I spend a million dollars creating a new form of pain reliver which is incredibnly effective. The moment Irelease it, anyone else in the world can make it and give it away for free, or 1 dollar. Why would I ever have sunk my money into something which I have no chance to ever see a return on?

      one of the things that needs to change along with copyright/patent is how drug trials work.

      but as far as spending a million to research something goes, why would you do that?

      why not do a small amount of research, publish it, let others steal it, make their improvements, and then steal it back.

      this way your competitiors benefit from free research, and you benefit from their improvements, plus being the first to market is a real competitive advantage.

       

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      Richard, Aug 18th, 2009 @ 4:05pm

      Re:

      "If I am an inventor, and I spend a million dollars creating a new form of pain reliver which is incredibnly effective. The moment Irelease it, anyone else in the world can make it and give it away for free, or 1 dollar. Why would I ever have sunk my money into something which I have no chance to ever see a return on?"

      Because you want it to exist! You might want to use it yourself.

      Some years ago I spent what was (to me) a significant sum of money buying shares in Eurotunnel (the channel tunnel) at its launch.

      I guess I will never make any money from those shares - they are now worth a lot less than I paid - but the primary purpose of my purchase has been fulfilled. The tunnel has been built and I am able to use it.

      Not everything has to be justified in purely financial terms.

       

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    Pawz2142, Aug 18th, 2009 @ 12:34pm

    I hear free music on the radio all the time and if i like it enough I'll download the CD...for free. If i decide the whole cd is good enough I'll go out and buy it.
    Why? Because the quality of the tracks are better than radio or MP3. People don't understand that cds are better than MP3s, an incentive to buy the product though not a huge one, there lays the problem.

    If the music industry and Hollywood think I'm gonna go out and buy a movie or cd cause i liked one song or one commercial...oops wait they do think that don't they...Stupid, stupid companies...

    The problem isn't with people like me, it's the ones that don't buy what they like...some...most(?)...poor people/college students....???? Not that i blame College students. :) Tired of ranting. Peace.

     

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    Anonymous Coward, Aug 18th, 2009 @ 12:53pm

    I refuse to buy anything from WalMart...

    I do, however, buy products from local producers - furniture, produce, food stuffs, etc...

    It is often less convenient, but, like most middlemen (that means you, MAFIAA and record labels), I think WalMart is the DEVIL and deserves to dry up and die!

    Buy local...buy from the real producers of the goods you consume!!

    I use the same logic for my entertainment purchases...

    But that's me...YMMV

     

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    NullOp, Aug 18th, 2009 @ 1:04pm

    NOT!

    Free movies & music is NOT going to happen, not should it. Both are real products worthy of purchase. I believe what gripes most peoples ass is the restrictive licenses put on by the production companies. The way I feel is that if I paid you for it, it's mine, period. However, that does not include the right to show a movie and charge admission nor does it include the right to sell or distribute the product freely. But not allowing me to back up my product or place it on all my computers is a huge load of crap! The production companies want ALL the marbles ALL the time. Which is, obviously, greed, greed and more greed!

    Once again, brothers & sisters, I encourage you all to leave the media on the shelves and servers this Christmas. Lets let Old St. Nick bring the productions companies a piece of coal this X-mas!

     

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      The Infamous Joe (profile), Aug 18th, 2009 @ 1:20pm

      Re: NOT!

      Free movies & music is NOT going to happen

      *sigh*

      It's already happening. It's been happening. It will continue to happen more and more.

       

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      Anonymous Coward, Aug 18th, 2009 @ 1:43pm

      Re: NOT!

      Free movies and music have already happened.

      What is laughable is that most of the time, the "free" stuff is higher quality and preferable to the non-free stuff.

       

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    understand, Aug 18th, 2009 @ 1:15pm

    what i don't

    is how people keep slamming techdirt.
    Christ, if they wanted to make money, wouldn't they charge for this service?
    They provide this outlet of information and allow anonymous users to post on their topics.
    Hm... sounds like it is staying alive but not by raping the user.
    Ad-supported.

    So, lets stick to the topic, not to who wrote the topic.

     

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      chris (profile), Aug 18th, 2009 @ 2:55pm

      Re: what i don't

      is how people keep slamming techdirt.
      ...
      So, lets stick to the topic, not to who wrote the topic.


      you must be new here. welcome to techdirt and enjoy your stay. bathroom's down the hall and on the right.

       

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    Anonymous Coward, Aug 18th, 2009 @ 1:24pm

    Infringe Everything Intangible

    " The old days of raking in the dough are gone. Now it is time for them to work for their money like the rest of us."
    ---------------------

    Your class envy is showing.

    And most producers work through the weekend, almost assuredly putting in more hours than you and probably by a wide margin.

     

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      Anonymous Coward, Aug 19th, 2009 @ 9:47am

      Re: Infringe Everything Intangible

      Hm. I had hoped rebuttals of this sort stopped after age 12. Also, it is not the producers working through the weekend who make the absurd profits, rather it is the middlemen companies raking it in. It is with those middlemen (who do NOT work long hours on weekends) that the grievance lies.

       

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    Anonymous Coward, Aug 18th, 2009 @ 1:41pm

    So everyone wants the product -- but too many don't want to pay for it. Hell, I don't want to pay for it.

    If the choice is no pay so the RIAA/MPAA has no income AND I don't get 'the product' - I'm OK with that option.

    Ya see, after having bought 'the product(s)' over the years, I decided that what is being pimped as 'product' isn't all that good. Thus my desire to stick it to the RIAA/MPAA created a 'don't need' status for 'the product'.

    The only vote I have is where I spend my money. And so long as the 'talent' who creates 'the product' has parasites - I see no need worry about 'the product', and thus no worry about spending money in the cycle of abuse that is 'the product'

     

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      Trails, Aug 18th, 2009 @ 2:22pm

      Re:

      "If the choice is no pay so the RIAA/MPAA has no income AND I don't get 'the product' - I'm OK with that option."

      Exactly. One of three things will eventually happen:
      1) the suppliers will die off and be replaced by something more efficient
      2) the suppliers will become more efficient
      3) people aren't willing to pay enough to cover the cost of producing the good or service, hence it will evaporate from the market place

      If people are willing to pay enough to cover the cost of production, someone will produce it and sell it. There's money to be made.

      What the MPAA, RIAA, newspapers, etc... are complaining about is that the internet is now the defacto means of distribution for their product, and they;ve lost substantial control. They're also able to greatly reduce their costs, but overall their profit margins have dropped cause their positional power is effectively reduced.

       

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      John Fenderson (profile), Aug 18th, 2009 @ 3:58pm

      Re:

      This is exactly correct, and this is the choice I made as well. I haven't given a dime to a RIAA label in over a decade, and am not likely to start again, for the same reason I don't spend money with a lot of other businesses:

      When you give money to a company, you are approving of the way they do business. You are voting for them to carry on as they have been.

       

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    Richard, Aug 18th, 2009 @ 1:46pm

    Music has been Free for many years

    If you look at the history of music on the radio (in the UK that is - it seems to have been more enlightened in the US from the start) you will see that at first the music industry thought that it should restrict the amount of music that was played on the radio by forcing the BBC (then the only legal radio broadcaster here) to limit its use of recorded music via "needle time", The result was the pirate radio stations (that word again!) which were eventually closed down - but in the process needle time was abolished and commercial radio was legalised.

    At that point the music industry effectively stopped selling music because it became possible to listen 24-7 for free - provided you weren't too fussy about exactly what you heard.

    So "free" has been around for 40+ years in the UK - and longer in the US. It isn't a new thing.

    What the music industry was left selling was control - the right to choose exactly what you wanted to hear.

    However the many to many aspect of the internet - vs the one to many model of radio gives the consumer a lot more control.

    So what can the industry sell now?

    Well I reckon that the basic model of the future has got to be fund and release. The music fan becomes the commissioner of the music. He/she doesn't pay for a copy of the music but instead pays to bring it into existence in the first place.

    This is really just an enhanced form of control - which is what the industry has actually been selling for years anyway - so what's the problem?

     

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    Eric, Aug 18th, 2009 @ 2:19pm

    they already lost

    The only way the big companies are going to win now is if the government comes down on tons and tons of people with fines and whatever else they can and make an example out of people. Get people scared to DL this stuff. But with everything people can do to their IPs like spoffing and anything else I dont really see that happening and people are going to keep riping and uping the stuff out there and people will keep getting it for free.

     

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      Trails, Aug 18th, 2009 @ 2:26pm

      Re: they already lost

      It's also especially difficult for the gov't to control. Consider how hard a time the gov't had fighting prohibition. And that was a scarce good.

      More than anything else, the case against prohibition applies to and dominates this argument; the sheer impracticality of fighting against this activity.

       

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        chris (profile), Aug 18th, 2009 @ 3:08pm

        Re: Re: they already lost

        Consider how hard a time the gov't had fighting prohibition. And that was a scarce good.

        also, consider the incentive for the gov't: legalized alchohol is tax revenue. bootleg liquor was making people cash by the truckload, so legalizing alcohol meant a tax windfall for the government.

        almost all piracy is non-commercial, so there is little revenue to be taxed, and since people expect stuff on the internet to be free, there probably won't be much revenue either way.

        the government proper won't really benefit from fighting piracy, however, the individual politicians that make up the government probably get more lobby money for passing laws to fight piracy, so i would imagine that there won't be much change made in IP law until the content industries run out of money to buy legislation.

        More than anything else, the case against prohibition applies to and dominates this argument; the sheer impracticality of fighting against this activity.

        i couldn't have said it better myself. file sharing costs users nothing, yet there are very real costs associated with trying to combat file sharing.

        i have said it before, this is a war of attrition and one side is fighting with infinite resources, and the other is fighting with finite (and dwindling!) resources.

         

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          Richard, Aug 19th, 2009 @ 4:21am

          Re: Re: Re: they already lost

          It's worse than that.
          Like prohibition, copyright now creates a massive criminal business opportunity. The result is to channel more money and hence resources into the hands of those who don't care what the law says. Prohibition built up the infrastructure of organised crime with results that we still have to live with today. If copyright isn't abandoned soon then it will all happen again on an even bigger - global - scale.

           

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    Jason, Aug 18th, 2009 @ 2:55pm

    Healthy economics

    Whether free or paid, any good produced has human value attached to it. Simply, someone took the time to create and produce goods that users enjoy, but time equals money right? So, if a product exists, say the latest Beyonce song, and there is the iTunes $1 download and a free version available on Limewire and users flock to the free P2P site - well, that's morally wrong b/c their enjoyment comes at a negative cost, as in the artist, producers and music label all suffer from fans not paying. That equates on a larger scale to lost jobs, lost artist incentive, on and on. A counter argument says that business deserves to die b/c the market chose not to support it with dollars toward a profit. But the song has value to listeners, but the market in this case is acting counter to what users want and what economics supports.

    I work for a company that offers paid software but our competition is free software. We make a profit by not only providing outstanding value and software enhancements beyond the free offering, we also provide 24hr support which does not happen with open source. We engage our paying users frequently with newer software offerings thereby accomplishing the up-sell, but remember the users want it - they want our software b/c the value provided over open source and the support available (that's especially true for enterprises).

    In the end I say pay for it if you like it. If it's free then remember the people who created get a paycheck from somewhere else. If it's not free and you're debating the purchase, then consider the mature approach and think about the jobs you will support by paying for it.

    This debate continues to rage on, but I agree with the author; we need clearer laws.

     

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      Mike Masnick (profile), Aug 18th, 2009 @ 3:09pm

      Re: Healthy economics

      Whether free or paid, any good produced has human value attached to it

      Well, there may not be any value to customers/users, but if that's the case then the market dies pretty quickly.

      So, if a product exists, say the latest Beyonce song, and there is the iTunes $1 download and a free version available on Limewire and users flock to the free P2P site - well, that's morally wrong b/c their enjoyment comes at a negative cost

      Whoa... wait. That's not true at all. If it were true that there was automatically a "negative cost" then no band would ever embrace giving their music away for free. But *tons* do, because they know that as a part of a larger business model, there isn't actually negative value. The free music expands the size of their market for other goods.

      I work for a company that offers paid software but our competition is free software. We make a profit by not only providing outstanding value and software enhancements beyond the free offering, we also provide 24hr support which does not happen with open source. We engage our paying users frequently with newer software offerings thereby accomplishing the up-sell, but remember the users want it - they want our software b/c the value provided over open source and the support available (that's especially true for enterprises).

      You seem to be proving the point here. It's absolutely to build a business model that gets people to pay, rather than automatically going for the free option. There's no "negative value" for you in having to compete with free. You've figured out how to build a better business model.

       

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      mobiGeek (profile), Aug 19th, 2009 @ 12:09am

      Re: Healthy economics

      I work for a company that offers paid software but our competition is free software. We make a profit by not only providing outstanding value and software enhancements beyond the free offering, we also provide 24hr support which does not happen with open source.

      So now ask yourself: if you were to offer your software at no cost (i.e. go head-to-head with free software), would you be losing money, or would the opportunities to sell support/services/t-shirts/expanded functionality/etc. grow enough to equal (or go well beyond) the current licensing revenue?

      It is an involved question, but essentially you need to weight the profit margins of support and services, and your ability to grow those business units, against your current model and trying to grow licensing sales against a no-cost opponent. You also need to consider that having a free product might pull your product into markets you could never get into with traditional software sales/development models.

       

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        Gmerric, Sep 15th, 2013 @ 7:46pm

        Re: Re: Healthy economics

        Wait a minute...why are you telling him "how to do" his job..or what business model the software company needs to do when their current model is not only working well, but their customers are highly satisfied and the workers are getting paid for labor/production. The message of the article was that most people "don't expect" everything for free, but will pay for things that they feel are worth paying for.

        I feel that you are kind of going against the "customers will pay for things that they feel are worth their dollars" by suggesting that this company shouldn't continue with an already successful business model..even though customers value their product enough to pay for it. This software company obviously knows much more about how to satisfy their target market than most of us..and that's okay...its not our job to do that since we don't work or receive a paycheck from them.

        It is just sad that we can't applaud businesses who successfully build a business model that is strikes a good balance between profit and giving the customers what they are already willing to pay for.I am sure that their customers are smart enough to know what is worth their dollars. Plus, not everyone wants or needs to sell t-shirts as part of a business model. I know that you are just trying to help and express your ideas for improving a business model, but your ideas don't fit every businesss and it doesn't fit all customers..even if it does involve free products. I do think that you would make a good entrepreneur and you should take your ideas and start your own business where people will actually benefit from them and your business model.

         

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    RecycledBottle, Aug 18th, 2009 @ 4:31pm

    Myths are like a box of chocolates

    "The nature of a good economic transaction is one in which both parties are better off after the exchange."

    How does it benefit the music industry - including musicians - if the people don't buy their music? After all, the initial transaction between the artist and the industry is a promise of economic compensation. If you and everyone one else are circumventing that compensation - all parties are not benefiting.

    "Benefiting" is subjective. The pirates don't get to determine if the victim benefited.

     

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      John Fenderson (profile), Aug 18th, 2009 @ 5:14pm

      Re: Myths are like a box of chocolates

      "How does it benefit the music industry - including musicians - if the people don't buy their music? After all, the initial transaction between the artist and the industry is a promise of economic compensation. If you and everyone one else are circumventing that compensation - all parties are not benefiting."

      I think people will continue to buy music. They do right now, after all! And, but, also, music can be a catalyst for other forms of business and perhaps is not directly purchased, but brings revenue indirectly. The future will include both of these, my crystal ball tells me.

      By "industry," do you mean "record labels"? It sounds like it, and if so, then perhaps the labels (as they currently operate) don't benefit at all.

      But so what? If the labels do not add value to the music (and I argue that as they currently operate, they don't), then why should they benefit? Keep it between the fans and the artists, cut out the useless middleman. Let the labels find a way to add true value, or go out of business. That's the way the free market is supposed to work.

       

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    herodotus (profile), Aug 18th, 2009 @ 4:48pm

    "I don't want to give up the good paying job for a mcjob just on a moral stand."

    Did someone ask you to?

     

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    Anonymous Coward, Aug 18th, 2009 @ 9:06pm

    "This is a myth. It's a popular myth, and I'm quite sure that Sheffner and lots of folks on both sides of the debate think its entirely accurate. But it's a myth."

    Just like the myth you are peddling, Mike. The one that delibreatley focuses on basic economics, ignoring every other market force or variable.

    "The nature of a good economic transaction is one in which both parties are better off after the exchange."

    How do you define better off? Usually in terms of money. So, if the seller is not being paid directly by the consumer, how can this statement be justified?

    "That means the people "paying" don't mind paying. They're happy to pay because they believe that what they have received is better than the cost it took to acquire it."

    Not quite. People are happy to pay because they WANT the good. A Nike shoe may have been made in a Vietnamese sweatshop, but people are still willing to pay 10 times the cost simply because they value it. Buyers usually don't give a damn about basic economics.

    "But basic economics plays into the situation here: if the same thing can be made available by others in a better way, it's only natural for people to ask why they should have to pay."

    Same thing or copy of same thing? There's a crucial difference, you know. Now that everyone can produce a copy of any damn band, no one stops to think if they ought to be doing it, which is pretty much what Sheffner's saying here.


    "But if you want real proof that there's a lot more at work than the idea that consumers just want everything for free and think that if it's not free they should just take it,"

    Look around Mike. It's there everywhere. Most people just want everything for free. The ones who are paying are in a microscopic minority, and they are being forced to subsidize the rest by buying overpriced "scarce" goods like Tshirts, hoodies and concert tickets.

    "...look no further than the countless examples we've shown of people paying lots of money to support those providers who don't treat their fans as criminals, who don't try to prevent what the technology allows and who actually work to connect with those fans and give them a true reason to buy."

    You only connect with a small minority of fans...the rest are too busy downloading you for free.

    "Everyone wants a good deal, and a fair deal, but people are more than willing to pay if it makes economic sense."

    People are willing to pay for a variety of reasons, all of them a variant of placing value on the good. It may not always make economic sense.


    More later...

     

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      Mike Masnick (profile), Aug 19th, 2009 @ 12:46am

      Re:

      Just like the myth you are peddling, Mike. The one that delibreatley focuses on basic economics, ignoring every other market force or variable.

      Economics means including all the meaningful market forces and variables. I'm not sure what you mean by the above statement, because it's not economics if you're ignoring the significant forces or variables. And I fail to see where I've ignored them.

      How do you define better off? Usually in terms of money. So, if the seller is not being paid directly by the consumer, how can this statement be justified?

      No, quite rarely in terms of money. It's in terms of marginal benefit.

      Not quite. People are happy to pay because they WANT the good. A Nike shoe may have been made in a Vietnamese sweatshop, but people are still willing to pay 10 times the cost simply because they value it. Buyers usually don't give a damn about basic economics.

      The reason they're willing to pay 10x is basic economics. The reason for the price is supply and demand. I'm not sure how much more basic it gets.


      Same thing or copy of same thing? There's a crucial difference, you know.


      It's no difference at all. The product is functionally identical.

      Look around Mike. It's there everywhere. Most people just want everything for free.

      I've seen no such evidence whatsoever. I've seen many industry people claim that, but the economic evidence is quite the opposite.

      The ones who are paying are in a microscopic minority, and they are being forced to subsidize the rest by buying overpriced "scarce" goods like Tshirts, hoodies and concert tickets.

      If you honestly believe this then you will never understand the issues at play. The point is that the "free riders" aren't an issue. They're not doing any harm, and if utilized right can do an awful lot of benefit. So why even focus on them at all?

      You only connect with a small minority of fans...the rest are too busy downloading you for free.

      I'm not sure why this is a problem?

      People are willing to pay for a variety of reasons, all of them a variant of placing value on the good. It may not always make economic sense.

      It always makes economic sense... if you understand economics.

       

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      mobiGeek (profile), Aug 19th, 2009 @ 12:51am

      Re:

      The one that delibreatley focuses on basic economics, ignoring every other market force or variable.

      Since when does basic economics ignore market forces and other variables? Aren't all of these just factors of basic economics? Either you need to explain what you think "basic economics" is or you are trying to throw some sort of emotional rhetoric into a discussion that really is just about economics.

      How do you define better off? Usually in terms of money. So, if the seller is not being paid directly by the consumer, how can this statement be justified?

      I don't believe that "better off" necessarily means money, but for now let's say that indeed it does. How does a customer paying middlemen that specifically place taxes and other inefficiencies in the process make either the consumer or the producer any "better off"?

      Additionally, good sellers establish a long term relationship with their customer base. They accept that some transactions will have them reap less money (or even lose money) but that the long term customer will more than make up for that in time. So the smart artist leverages the zero-cost product they have (digital copies of music), giving it away as a form of marketing, and the long term customers pay quite handsomely for scarce resources (concerts, private performances, souvenirs, etc.)

      Yes, the ineffective middleman gets squeezed out in this case, but are you suggesting propping up market inefficiencies? You label the consumer seeking zero-cost products as "pirates". I would suggest the inefficient middlemen are "trolls under the bridge".

      Buyers usually don't give a damn about basic economics.

      Yes, customers absolutely do care about basic economics. Why does Nike charge only $100 and not $1000?? Supply, demand and the price the market will bear (basic economics!).

      But there is also the difference between a product that has a marginal cost to it vs. one that has zero marginal cost. Throwing zeros into monetary equations tends to lead to more zeros. If the shoe cost $0.10 to make, they absolutely could not charge $100 for it (or their marketing team would have a hell of a time trying to convince everyone that their item had a value 1000 times it cost).

      Now that everyone can produce a copy of any damn band, no one stops to think if they ought to be doing it.

      So you believe that society and government should put into place artificial barriers specifically limiting a non-life-threatening technology? The telephone operator unions made similar arguments when consumer dialing was introduced.

      The ones who are paying are in a microscopic minority, and they are being forced to subsidize the rest by buying overpriced "scarce" goods like Tshirts, hoodies and concert tickets.

      I'm not sure how to address this emotionally charged rant. I don't know what you mean by "microscopic minority", and "everything for free".

      As for overpriced goods, if the seller is happy with their business results (income/profit) and the buyers are happy with their results (experience, cloths) then who is at a loss here? Are you trying to indicate that Beyonce, Def Leppard, U2 are all on the verge of starvation since only a "microscopic minority" are willing to pay?

      You only connect with a small minority of fans...the rest are too busy downloading you for free.
      Most musicians make their money touring. In order to make those concerts successful, they need to advertise LOTS. So they spend money to get word out as to how good they are, including paying off radio & TV stations to play their music and mention their concerts.

      Why not take ALL of that advertisement money and invest it into themselves? They could take that money, pay themselves to produce some music, give that away on a website while mentioning details of their tour.

      Heck, why not take the music they produced to give away as a promotion and put it out as an album!

      Heck, why not make that album be the one they are touring! And since they did this with all their music, they have TONS of opportunities to drum up interest in their concerts.

      Just saying.

      People are willing to pay for a variety of reasons, all of them a variant of placing value on the good. It may not always make economic sense.

      See, your issue here is that you don't have a good definition of "economic sense". They ALL make economic sense specifically because economics is the study of the product, distribution and consumption of goods. Price is one factor of that.

      Your view is that at the core, "economics" is about price and money. Those are factors, but they are not the only ones. And just because something behaves differently now than it did before, doesn't mean that "economic sense" is wrong or that populations "don't get economics".

       

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    Anonymous Coward, Aug 18th, 2009 @ 10:15pm

    "It may undermine one particular way that the system works, but the false statement is implicit in his argument: that this is the only way of funding such creation."

    If it isn't that good a way, why hasn't this become the mainstream way of doing things? Why do you still have to post gleefully whenever some obscure band tries out an experiment? Going beyond music, we have yet to see any such example in cinema. Since it's basic economics at work, why is it so difficult for people to just give away infinite goods for free and sell scarcities? Why don't you produce a movie, Mike? And blog about it, once and for all sealing the mouths of all naysayers?

    "The point, which should be clear, is that you can say the customer is wrong all you want. But, in the end, the market will decide that the customer is right."

    Yeah, like customers and the market are totally in control! If that were the case, then Windows should be free, iTunes shouldn't be charging for their song downloads, concert tickets shouldn't cost a bomb...

    "The movie industry and the music industry both have had numerous opportunities to embrace what the technology allows -- and to craft new business models that would be massive money makers in doing so."

    Massive money makers? Why are you asking for someone to pay you $100m to shut you up? Why don't you put basic economics to work and produce a movie? After all, the industry has been stupid enough to ignore the opportunities that you, the visionary, have spotted? Go ahead, change the world.

    "They have said that the customer is wrong, and, as Sheffner notes, they have no problem saying so. The problem is that, whether legal or not, the competition is springing up left and right."

    Where? What competition? Who is competing with Hollywood, please tell me. The pirates aren't competing with them, because if they truly were they'd be producing movies. The pirates are merely using technology to engage in illegal activity. That's not competition, no matter how you twist the facts.

    "Sheffner and his former colleagues can stand on whatever principles they want. The market doesn't care. The market only cares for those who serve the customers' needs. Plenty of others are doing so (both legally and illegally). Those who want to survive in business would be smart to take lessons from those who are succeeding and looking to implement smart business models around them. Those who want to insist that "the customer can be wrong" may feel good when they look in the mirror, but they're going to have to contend with a rapidly diminishing customer base."

    The market will suffer as studios scramble to generate extra profits, resulting in higher cinema tickets.


    Sometime I think you are the Dean Kamen of tech blogging, Mike. And Techdirt the Segway. Blinded by your great golden idea you are unable to look at the real world. Just like the Segway guys point to the mall cops and some nutty nerds, you keep pointing to stray incidences of adoption of the brave new philosophy, and pronounce that it will rule.

    Sorry, Mike. The world still prefers cars.

     

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      Mike Masnick (profile), Aug 19th, 2009 @ 12:53am

      Re:


      If it isn't that good a way, why hasn't this become the mainstream way of doing things? Why do you still have to post gleefully whenever some obscure band tries out an experiment?


      Because the specific experiments are still new and evolving. Economic change doesn't happen overnight. But it does happen.

      Going beyond music, we have yet to see any such example in cinema.

      Actually, it's always been true in the movie business. It's always been a business of selling scarcities (seats) rather than content.

      Since it's basic economics at work, why is it so difficult for people to just give away infinite goods for free and sell scarcities?

      They are. Many just don't realize it.

      Why don't you produce a movie, Mike? And blog about it, once and for all sealing the mouths of all naysayers?

      Because I wouldn't make a very good movie. I'm not sure what this comment has to do with anything.

      Massive money makers? Why are you asking for someone to pay you $100m to shut you up?

      Because it's funny. Dude, learn to laugh.

      Why don't you put basic economics to work and produce a movie? After all, the industry has been stupid enough to ignore the opportunities that you, the visionary, have spotted? Go ahead, change the world.

      Because I'm not a movie maker and wouldn't make a very good movie. Again, I don't understand the point you're trying to make here.

      And, as I said, the movie business has always been pretty good at selling scarcities.

      Where? What competition? Who is competing with Hollywood, please tell me

      Heh. Do you work in Hollywood?

      The pirates aren't competing with them, because if they truly were they'd be producing movies. The pirates are merely using technology to engage in illegal activity. That's not competition, no matter how you twist the facts.

      Not in the eyes of the customers. And, the customer is always right in the marketplace.


      Sometime I think you are the Dean Kamen of tech blogging, Mike. And Techdirt the Segway. Blinded by your great golden idea you are unable to look at the real world. Just like the Segway guys point to the mall cops and some nutty nerds, you keep pointing to stray incidences of adoption of the brave new philosophy, and pronounce that it will rule.


      Fair enough. We'll see, won't we? Too bad you want to stay anonymous. Otherwise I'd like to see if you'd want to put money on your prediction.

      Sorry, Mike. The world still prefers cars.

      Yes, and at one point, when the Model T was first being made, the world preferred horse and buggies. How are your buggy whip investments looking these days?

       

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      mobiGeek (profile), Aug 19th, 2009 @ 1:13am

      Re:

      Since it's basic economics at work, why is it so difficult for people to just give away infinite goods for free and sell scarcities?
      and
      If that were the case, then Windows should be free

      You are missing a key point about economics. Economics is about market forces. Just because one element is pulling something one way doesn't mean there isn't inertia or resistance to that force.

      The underlying principle is sound: in a competitive market prices tend to their marginal costs. Why is this so hard for you to accept?

      We don't have truly competitive markets right now for much of the entertainment industry. There are TONS of laws and regulations in place specifically to block competition. An entrepreneurial musician cannot simply burn their own CDs and start competing with the labels as they'd be blocked (and banned) at every turn. There are artificial barriers, taxes, licenses, "potential infringements", etc...

      What we are seeing is that the consumer base now understands that a bunch of bits on a hard drive costs NOTHING to get there. So they are doing what economic theory says they will: they are ignoring artificial barriers and seeking the right price for the wares they are getting.

      Your examples of iTunes and Windows only highlight that economics is in full effect. iTunes has effectively cut the price of a CD in half and with time we'll see further reductions in price. Windows has dropped from being more than $200 per copy to being less than $50 per copy and Microsoft has done everything in its power to hide the cost of Windows from the consumer. They are making it appear as though the OS is "just part of the computer" and essentially "free". I know many people in the IT industry that say they "haven't paid for Windows in years", all the while working away on their brand spanking new Dells.

      The pirates are merely using technology to engage in illegal activity. That's not competition, no matter how you twist the facts.

      The fact that the activity is illegal is irrelevant to the economic reasoning. The pirates(sic) are simply taking a bunch of bits and making them available to others. They aren't competition to film makers, they are competition to DVD sellers.

      These dudes aren't competition to the cinemas. They don't provide a movie-going-experience.

      Just like musicians, film makers need to start looking to getting paid for the creation of their works, not going off and looking to get paid after the fact. There are lots of ways of doing this, but film makers today spend far too much energy fretting over how things are not like they used to be...

       

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      John Fenderson (profile), Aug 19th, 2009 @ 10:30am

      Re:

      "Yeah, like customers and the market are totally in control! If that were the case, then Windows should be free, iTunes shouldn't be charging for their song downloads, concert tickets shouldn't cost a bomb..."

      The only systems where the customers and markets aren't totally in control are monopolies -- and this is the real problem the RIAA crowd has: they have had a monopoly, or oiligarchy, really, in the business for so long that not only feel they have a right to it, but there is no other way for the business to be.

      The point that you're missing here is that customers are perfectly happy and willing to pay a fair price for the goods and services they receive. The thing that RIAA folk seem to miss is that the labels have been actively degrading the value of their product through their actions. The value of a product is not solely determined by the product itself, but also by the ecosystem around it, after all. Because the value is being degraded, the price that consumers consider "fair" has been falling.

      The arguments that are being made here are for the benefit of everyone, including the music industry -- they are the discussion of methods of increasing the overall value of the product. I would think that everyone in the industry (outside of the traditional labels themselves) would be happy to find a way to increase value, thus increase price or volume, thus increase profit.

      But it seems not. The industry people here are mostly of the mind to describe the way the world should be, in their eyes at least, rather than confronting the way the world is.

      And this is why the music industry as we know it now is destined to dry up and blow away. It won't be the end of commercial music, not by a long shot, because the artists to rise from the ashes will be the ones who know the nature of the market they're addressing as deal with it accordingly.

       

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    Gregory, Aug 19th, 2009 @ 1:38am

    Proof of the pudding

    Most people who do not think it is possible to make money by giving away your talent for free, here is a refutation for you:

    http://www.daybydaycartoon.com/2009/08/17/

    Chris Muir provides a political webcomic which updates daily on his site. This is his full time job, and he charges nothing.

    Every year he hosts a fundraiser to get him through to the next year. He sweetens the deal with a couple of giveaways (but nothing you would think was worth the monetary amount of the donation).

    In a coupla weeks, he's done. He's got enough money (30-50K at least, I'm thinking) to keep him going until the next year.

    This is called the patronage system, and it has worked for countless centuries. Except now, it's not just the rich who are patrons, but regular folk as well.

    That is the way of the future. Well, one of many, but it's one that does work.

     

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    Nick Coghlan, Aug 19th, 2009 @ 5:33am

    One exception

    "The customer can be wrong, but focusing on that doesn't get them to pay you."

    I realise this is slightly tangential to the main point of the article, but there are some cases where you have to say that at least *some* of your customers are wrong. This is in cases where a vocal minority are clamouring for changes that you know would annoy the vast majority of your customer base that are relatively happy with things the way they are currently. In situations like that, you're better off ignoring that minority and continue working to keep the rest of your customers happy.

    (Specifically, you see this a lot with online games like World of Warcraft - if Blizzard implemented every dumb, overpowered idea that people suggested for their classes the game would have been ruined a long time ago).

     

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    David (profile), Aug 19th, 2009 @ 6:39am

    Everything free? Not me, anyway

    Of course, it would be nice to wave a wand and get everything free, but I don't expect it and don't mind paying for things I perceive to have value.

    Case in point, I have given money to artists for music (Flashbulb) and movies (Sita Sings the Blues), even after getting the items for free. However, I did not pay anything for Radiohead's album after download, because I think their music sucks.

    If it has value for me, I'll pay. I shop at Target instead of Wal-mart because even if I'm paying more, there is value in giving money to a less-evil corporation.

    I think the "get everything free" culture is mostly "kids", who don't understand how the world works.

     

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      iNtrigued (profile), Aug 19th, 2009 @ 8:22am

      Re: Everything free? Not me, anyway

      "I shop at Target instead of Wal-mart because even if I'm paying more, there is value in giving money to a less-evil corporation."

      I would like to point you to an episode of South Park where a "Wallmart" opens and puts the small businesses out of business. They eventually destroy the "Wallmart" and all start shopping at a small business, which eventually becomes a "Wallmart" itself. There in lies the problem, given enough business any corporation could potentially become a Walmart itself.

      Sorry, couldn't pass up a chances to reference South Park.

       

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    Anonymous Coward, Aug 19th, 2009 @ 8:25am

    People are greedy

    Unfortunately, people suck.

    From a sociological perspective, we are trained to maximize the amount of “wealth” we can accrue, and only give up things when we have to.
    A system of “donation,” never works on the large scale because even if someone thinks something has value, they really won’t pay for it most of the time if they don’t have to. You can line up 50 people here who tell me otherwise, that they donate when they like something that they pay for it. But I’ll find 1000 people who despite what they tell you about always paying when they find something they like, still “steal” for convenience and because despite the item having value, they just didn’t want to part with their money if they didn’t have to. Museums would love to be donation only, but obviously they aren’t and can’t be. And those typically attract a higher level of people on the social responsibility scale (not better, not richer, just people who are more likely to think about the world around them). Many of them opt for trying to entice you to membership by dangling things you can’t get for free (parking on site, special events). But even parking, special events, limited engagements, and VIP activities are really artificial scarcity. But that is what is required to make ends meet. You have something, it could be free for everyone, but you charge money for it. And people pay because they want to use it. That’s supply and demand.
    Parking is a good example. You have the space, it cost you nothing to produce a parking space each time someone want to use it, it’s already there. Yes, you have upfront costs, but so do movies and music. If people could, they would park there for free, and reuse it over and over. If more or less infinite for the purposes of its use, it can theoretically be filled up, but often isn’t. However, people charge you money to use the spot(garages and street parking). Do these groups hold an unreasonable market, simply because they do charge for the service, and people pay them? How is that different from DRM, in that someone has something that can be used many many times, and they think it’s worth money and want to get paid for people using it, and so they control access to it.

     

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      Anonymous Coward, Aug 19th, 2009 @ 10:27am

      Re: People are greedy

      I cannot think of a more accurate way to describe the rationale behind treating customers as criminals. This attitude contributes more to piracy than anything else. When are treated like a criminal long enough, what do you have to lose in actually becoming a criminal? Why steal a lamb when you would similarly be hung for stealing a sheep?

      You bring the idea of infinite into your parking lot analogy in terms of its re usability, and on that count it is sufficiently similar (barring pavement maintenance etc) to compare to music. However you ignore the fact that an infinite amount of people can have use the music at the same time if only a single track is produced. On the other hand a single parking lot would be hard pressed to accommodate an infinite number of people. Another point about this analogy is that the market would become unreasonable if the lot had an infinite number of spaces that had no cost other than the initial production attached to them. There is no 'service' in this, just as there is no service in the act of distributing something over P2P

       

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    bshock, Aug 19th, 2009 @ 10:05am

    they always miss a basic points

    If someone doesn't want to pay you for something, he's not your customer.

    If you've got something that an infinite number of people can take without paying, that's not your product.

    If you're suing people in order to make money, you're not a business.

     

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    Gene Cavanaugh, Aug 20th, 2009 @ 4:48pm

    Copyright and IP in general

    Pegging in either direction doesn't help.
    IP (and especially copyright and patents) are massively abused today, mostly because of the funds they provide to legislators.
    However, the founding fathers (in the US Constitution) were right; there is a place for it, just not the way it is done now.

     

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    Lee, Sep 7th, 2009 @ 6:21pm

    Wow, some of these responses are scary as hell. Goodbye innovation. Hello dark ages.

    The future does not bode well. Some of you guys are really deluding yourselves.

     

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    Steve, Jul 1st, 2010 @ 9:15am

    I don't agree at all

    I will bet on it, you're about to see this change within the next 2 years. Watch. There will be a reverse of this. When there is to much content or product and that can be video, music, or candy bars and you keep giving it away, eventually it will collapse down. This is a pseudo trend that will end. There is to much choice at this point, it's saturated. So much product. I don't agree. What I'm seeing on the indie market are bands and musicians that are more broke then ever despite this chatter about exposure and merchandise. I have seen the trend where bands are turning over at a higher rate, faster than before, without money, without management and in turn, not very good music to boot. I'm seeing more bands ask for donations, sticking Paypal buttons to help us out. This won't continue

     

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