Who Cares If Piracy Is 'Wrong' If Stopping It Is Impossible And Innovating Provides Better Solutions?

from the not-this-again dept

VerBruggen responds by insisting that piracy is wrong. He’s right, but this doesn’t get him as far as he thinks it does. This isn’t just an abstract exercise in moral philosophy. The government has limited resources, and a long list of problems to deal with. The question isn’t “should the government try to stop piracy,” it’s “how many resources should the government devote to combatting piracy as opposed to other problems.”



And VerBruggen never really grapples with this question. He seems to believe that the right amount of enforcement is more than we already have, but he doesn’t offer any principled basis for deciding how much more, or how to tell when we’ve passed the point of diminishing returns. Without such a principle, we’re just going to have this debate over and over again, as each new anti-piracy measure fails and Hollywood comes back for still more restrictions.

When brick-and-mortar bookstores complain about the threat they face from Amazon.com, they are complaining that customers will leave them for a superior alternative; when Hollywood complains about piracy, they are complaining that customers have left them for an illegal alternative. They have stopped paying for Hollywood products yet are still consuming them. These are not even remotely similar situations — morally, legally, or economically.

With this distinction in mind, one might find it rather odd for Salam and Ruffini to insist that the solution to piracy is “innovation” rather than law enforcement. By “innovation,” they mean primarily that Hollywood should make it easier and cheaper for customers to buy their content digitally, citing studies indicating that when digital content becomes readily available through legal channels, piracy goes down. But even assuming Hollywood can discourage piracy by cutting prices and offering its content in different ways, since when do we tell crime victims to appease their tormenters?

Moreover, in no other industry do we allow consumers to force prices down by taking products for free whenever they, personally, think the legal versions are too expensive or inconvenient. Any customer may refuse to buy a product that’s undesirable, or even organize a boycott — but then that customer needs to go without the product.

Salam and Ruffini provide no justification for singling out industries that sell intellectual property — and little evidence that these industries’ disproportionately young, bratty, and entitled consumers are better equipped than the free market to decide what a “fair” price is for an album or movie that cost thousands or even millions of dollars to create and market.

For starters, while making content widely available for low prices does seem to reduce piracy, it hardly eliminates it.

Spotify’s payment formulas are not public, but various leaks indicate that on average, artists and labels are paid around one-third of one cent every time a user listens to (“streams”) a song. By way of comparison, artists and labels make 70 cents when a song is purchased for 99 cents from iTunes. Thus, a user has to listen to a song on Spotify more than 200 times before earning ad revenue for the artist and label that’s equivalent to a sale.

But piracy does “put pressure on profit margins,” as Salam delicately put it on National Review Online recently. By one estimate, per capita, inflation-adjusted spending on recorded music has fallen 64 percent since its peak in the late 1990s, and is lower today than at any time since at least 1973, despite the fact that every other person you pass on the street is wearing earbuds.

The numbers change little when one uses total rather than per capita revenue, and home-video sales are falling as well.

That in itself should be troubling to anyone who thinks the profit motive matters — with less profit, presumably, will come less creative output.

As commentator Eduardo Porter noted in the New York Times, while the total number of music-album releases rose between 2005 and 2010, releases of albums that sold at least 1,000 copies — a rather low standard by which to judge whether an artist is making a significant contribution to the world of recorded music — declined about 40 percent. Of course, like Salam and Ruffini’s, Porter’s data are highly debatable — he relies on the Nielsen sales database, which excludes some independent releases and does not count sales of single songs.

The finer points of entertainment economics aside, if widespread and increasingly popular illegal behavior is costing American companies business, and possibly reducing artists’ creative output, it is first and foremost a law-enforcement problem, not an “innovation” problem. It is entirely reasonable for Hollywood to petition the government for better anti-piracy efforts, even if the industry has lobbied for bad legislation in the past.

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It appears that the same arguments that many of us have been fighting for many, many years are suddenly playing themselves out again in the National Review Online. It started with a really fantastic article by Reihan Salam and Patrick Ruffini arguing that legislating to deal with "piracy" doesn't work and is the wrong approach anyway , because innovating and providing better solutions simply. If you're a regular Techdirt reader, you won't be surprised by the Salam/Ruffini piece -- it hits on many of the key points we've raised. However, it is nicely packaged up in a single article that should be required reading for anyone trying to understand why fighting piracy through legislation is the wrong approach.In response, Robert VerBruggen, an associate editor at the National Review decided to write a rebuttal that isn't so much a rebuttal at all. As Tim Lee rightly points out , the two sides appear to be arguing totally different things. Salam and Ruffini are pointing out that enforcement isn't working (and isn't workable), while also leading to collateral damage. But, at the same time, innovating and providing solutions that people want do seem to work -- and create new opportunities for content creators and consumers alike. VerBruggen, on the other hand, is pulling out the famed "but... but... piracy!" argument we've seen too often -- as if the fact that "piracy exists" suddenly makes all logic pointless. As Lee notes:This is a key point, and I don't know if VerBruggen is just new to this debate and therefore trotting out silly, long-dead tropes because he doesn't know any better -- or if that's just the best the "other side" can do these days. Either way, I wanted to dig a bit deeper into a few of VerBruggen's really questionable claims.VerBruggen says this as if "an illegal alternative" and "a superior alternative" are mutually exclusive. They're not. And that's the issue. History has shown, time and time again, that infringement is a way for consumers to express that they're not satisfied with the official versions and have found "a superior alternative." That the said alternative is "illegal" is an issue, but it doesn't necessarily mean that the best response is a legal one. Why VerBruggen makes these assumptions is unclear.As far as I can tell, this is the craziest part of VerBruggen's argument. It is, effectively, "As we've pointed out for years, if you have a solution where everyone is better off, there is no moral argument . It seems silly to be arguing what VerBruggen seems to be arguing, that it's more moral to have everyone worse off with no piracy, than to have everyone better off with some piracy. It just doesn't add up.The problem here is easy to spot. It's in the word "take." That's not what's happening here. The truth is that, as inother industry, consumers force down prices by finding "a superior alternative" as he suggested earlier. Taking implies something is directly taken from the creator and they no longer have it. That's simply not true.I won't even bother discussing the fact that he appears to be calling the industry's, who they're supposed to be trying to win over, as "young, bratty and entitled," and just focusing on his bizarre definition of "free market." He seems to miss that thisthe free market. Setting up a centralized government-granted set of artificial monopolies over non-rivalrous, non-excludable goods is a price restriction on a free market. A "fair price" is what the actual market sets -- and that means the market of everyone, not just the customers that VerBruggen likes.Er. Enforcement and new laws every two years has hardly eliminated it either -- in fact, it's been shown to increase the rate of piracy. So, I'm at a complete loss here. If VerBruggen is arguing that the only proper solution is the one that "eliminates" infringement, well, then he's living in a fantasy land, becausesuch solution exists. The argument that Ruffini and Salam made (which is backed up with pretty significant evidence) is that innovating and providing "a superior alternative" doesto reduce piracy than enforcement (which doesn't appear to work at all beyond an initial hit until people scramble and find alternatives). Again, we're back to VerBruggen basing his entire argument on "piracy is wrong wrong wrong," without taking into account what his preferred solution actually does compared to Salam and Ruffini's alternative.Comparing a Spotify play to an iTunes purchase is meaningless, because they're not the same thing by any stretch of the imagination. I mean, why not compare Spotify to radio? In some ways, that may be more comparable. In the US, musicians get paid a big fat nothing for radio plays. Yet, somehow, it's been pretty damn important for artists to get on radio. Because it helps them make money elsewhere. Looking at Spotify in isolation misses the point... but VerBruggen does that again and again:Again, he's looking at one small aspect of the music business in isolation: how much is spent on recorded music. But he leaves out every other aspect of the music business -- including things like live -- which has grown at an incredible rate over the same time. More importantly, he leaves out that artists earn a larger chunk of revenue from live than they do from recorded music sales -- most of which go to the labels, not the artists. Why focus on that anyway? It's like complaining that automobiles are terrible for transportation because fewer buggy whips are selling. When you have dumb metrics, you're going to get silly results.Oh come on. Home videoif Hollywood had its way and banned the VCR 30 years ago, so I'm sorry if I find complaints about the home video market shrinking as evidence of a problem. As we saw with the VCR,, and they seem to develop against Hollywood's own wishes -- and then become a huge revenue driver for Hollywood. The best solution, if we look historically, is to get Hollywood out of the way and just let those new models develop to save Hollywood from itself.Thing is, we don't need to "presume" anything. We have data. And the data shows thatmusic is being created and releasedthan ever before. And the data shows thatfilms are being created and releasedthan ever before. You can presume all you want until the cows come home, but if reality says you're wrong, it's difficult to take those presumptions seriously.It doesn't just exclude "some" independent releases. It excludes tens of thousands (potentially hundreds of thousands) of independent releases. If you just look at TuneCore and CDBaby alone, you'd realize how silly relying on SoundScan is as a proxy. And, once again, this is only looking at "recorded music" sales in isolation. The fact that fewer albums sold 1,000 copies ignores the massive explosion of new music (which just paragraphs earlier, VerBruggen "presumed" was impossible), meaning that there's a ton more competition. Furthermore, it ignores that recorded musicthese days, and looking at it in isolation is pretty pointless. Finally, many of those artists who sold less than 1000 albums would have made a big fat $0 under the old system, because no major label would have bothered with them and they wouldn't have had any other outlet. Aren't we all (including, most importantly, the musicians) better off in a world where a whole bunch of artists get to makerather than? But, again, the "but... but... piracy!" argument blinds VerBruggen to this reality.Almost nothing in this paragraph is supported by... anything. If law enforcement, how is this possibly a law enforcement problem? This is yet another example of someone trying to be right rather than realistic. It's a recipe for disaster, but it's the same recipe that the legacy entertainment industry has been cooking up for decades to no effect. Who would ever double down on that strategy?

Filed Under: business models, copyright, innovation, morality, piracy, reality