Comments on: Piracy and the Free Market

By: Dave

Dave — Wed, 11 Jun 2008 21:41:24 +0000

I just finished reading an interview with Cory Doctorow over at The Onion, and he had this to say:

“Rufus Pollack from Cambridge University, who’s a Ph.D. candidate in economics there, conducted it. What he concluded was, for the bottom 75 percent of music, piracy represents a small-to-midsize increase in sales, so it generates more sales than it displaces. For the next 20 percent or so, in the 75 to 98 percent range, it’s a wash. You lose some copies, you get some free publicity, you more or less break even. And then for the tiny minority that would be at the top, that 2 percent, it represents a small loss. And those are the people who can kind of afford it.

“If Stephen King loses a couple hundred bucks to piracy on his latest book, it’s not going to break his bank. Tim O’Reilly says piracy is progressive taxation—the people who can afford it most are the people who suffer it most. And the people who need it the most are the ones who benefit the most.”

Well put.

By: Scrupo

Scrupo — Wed, 11 Jun 2008 00:43:15 +0000

I think we’re all glossing over the fact that Dave admits to spending $20 on a Michael Jackson CD. In 1992 no less.

On a more serious note the idea of cost differentials between quality of digital recordings has taken off a bit on iTunes where you can pay a bit more for a higher quality recording of a few selected songs. I’ve only come across a few but it was worth noting.

Now off to watch some downloaded TV. It’s Australian and thus never available here so don’t judge me!

By: ryan

ryan — Sat, 31 May 2008 07:42:06 +0000

Great post. To add another layer of complication to the price breakdown that you outlined, how does (or how should) the industry distinguish cost between the quality of formats that artists release? Although most people (including myself) strain to tell the difference between 256kbps and 320kbps mp3 files, there is still a relative degradation that exists between the two and, more importantly, the original recording. Should different lossy compressions be valued as the same? iTunes operates under the assumption that they are equivalent in worth (in the case of 128kbps and 256 kbps). Compound this with the fact that most CD burning programs will compress tracks further or create transcode files, and you have a situation of ambiguous sound quality AND price.

iTunes is successful with its price model because their digital content appears to be the same as the physical content found on CD releases (minus the packaging). But, the formula of half the CD price for one fourth the quality doesn’t seem like a bargain (even if one can buy songs in their bath robe).

PS- I pirated a lossless bath robe.

By: Dave

Dave — Thu, 29 May 2008 05:16:08 +0000

David Chartier at Ars writes that Lala is launching a new music-rental model where $0.10 per song gets you unlimited streaming to your browzer. $0.10 for unlimited listening. That's what I'm talking about.

By: Dave

Dave — Wed, 28 May 2008 21:52:39 +0000

It was pretty late when I wrote this … I guess I could have been a lot more concise and just said that neither model represents a free market in the sense that the price is an accurate reflection of the value of the goods. The price of pirated material accurately reflects the costs of copying and distribution, but not the costs of producing the content in the first place. And the price of licensed stuff — whether it’s made unavailable in digital form in order to jack up prices by forcing consumers to buy physical formats, or whether it’s charging as much for a digital format as they would for a physical one — accurately reflects the costs of production, but doesn’t accurately reflect the necessary costs of copying or distribution. Since neither one is truly a free market, depending on which model you prefer, either the producers or the consumers are going to get screwed. I could have just said that. But why say in 132 words what you can say in 2365?