Why Piracy Happens: Because No One In Mexico Thinks Tron Legacy Is Worth Paying $136

from the economics dept

Earlier this year, we wrote about the absolutely wonderful, detailed and insightful SSRC Report on "Media Piracy," which made it clear (through actual research and data) that "piracy" is almost never a legal or enforcement problem, as many industry folks insist, but rather a business model problem. To drive this point home, Joe Karaganis, who put the report together, has written up a short article for the Huffington Post, putting the economic realities into clear and easy to understand terms:
This may seem like an obvious conclusion but it is strikingly absent from policy conversations about intellectual property, which focus almost exclusively on strengthening enforcement. Nowhere in the industry literature or in major policy statements like the US Trade Representative's annual Special 301 reports will you find an acknowledgement of piracy's underlying causes: the fact that, in most parts of the world, digital media technologies have become much much cheaper without any corresponding increase in access to legal, affordable media goods. DVDs, CDs, and software in Brazil, Russia, Mexico, or South Africa, for example, are still priced at US and European levels, resulting in tiny legal markets accessible to only fractions of the population. Would you pay $136 for a Tron Legacy DVD (the relative price in Mexico, adjusted for local incomes)? How about a $7300 copy of Adobe's Creative Suite? I didn't think so.
Karaganis explains why these firms may have incentive to do this, but notes that this completely goes against the official policy positions of those pushing for laws like PROTECT IP. What becomes clear is that PROTECT IP isn't at all about protecting content. It's about protecting and propping up the legacy business models of a few companies who don't want to adapt.

Filed Under: business models, economics, piracy

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  1. icon
    Prashanth (profile), 1 Jul 2011 @ 1:06pm

    Part 1 of rebuttal to Rick Carnes

    So there's a commenter on that post named Rick Carnes who is supposedly a Huffington Post blogger, and he has put out some of the most misinformed tripe I've seen in a comments section on this sort of article; it's on the same level as some of the Anonymous Coward posts here. I've put together a line-by-line rebuttal which I hope to post (but may feel too lazy in the end, I don't know) there, and I'd like to post it here too.

    "Get the facts... the loss from piracy is in the billions each year. "
    [citation needed - that too, a citation from a REAL, independent study, not from an RIAA/MPAA-funded study]

    "This is absolutely wrong... Read the bill, not propaganda." [in reference to the PROTECT IP Act]
    THAT is absolutely wrong. Read the bill, not RIAA/MPAA-funded propaganda (which sadly resulted in the creation of that bill, in a way).

    "In order to have a sustainabl­e content creation eco-system you can't lower the price of the product below the price of creating the product. Beyond that, what are the ethics involved in allowing thieves to set the value of content? As a profession­al songwriter who has the price of the sale of my work set by the US Government via the Compulsory Mechanical license, and as a citizen who pays taxes on the earnings from my work, I expect the Government to protect my property by law and by enforcemen­t. The "Simple Economics of Piracy" are this: Without property rights the fair value of goods cannot be establishe­d in the market place. So don't lecture creators about pricing until Intellectu­al property rights are enforced.Your argument is moot. "
    It is true that in a market economy, you can't lower the price of the product below the price of creating the product. The problem is, the price of creating the product is actually the marginal cost of creating an extra copy of the product, not the fixed cost of producing the initial product. The marginal cost is essentially 0, so the price should be 0. It's up to you to figure out how to make money from related items in a market economy; if you say that you depend on an artificially inflated price set by the government to make money, frankly, you don't belong in a market economy. Also, you're putting two totally unrelated things together in the hopes that people will believe you: property protections and fair value for a product. As evidenced by the other sane comments, this won't work.

    (This was part 1. Part 2 is coming right up.)

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