opinion Ah, the Internet. After discovering that articles I thought no one in their right mind would republish suddenly appear on APCMag.com and iTWire, one of the readers on APCMag.com asked: “What about piracy?”

Ok. One reason I have been tapdancing around the whole piracy argument is that I am trying to get established in the eBook marketplace, and I don’t want to make the industry feel about me the same way my managers and directors feel about me. However, piracy is always going to be a presence in the marketplace, so I need to deal with it bluntly and coherently (no sniggering Renai!).

Piracy of eBooks is real. It is also an element of the Australian eBook marketplace and is market forces at work.

In simple economic terms, there is an assumption that there is always demand for any product. Demand is modelled on the assumption that the cheaper the price, the higher the demand. Supply is modelled on the assumption that the dearer the price, the greater the supply. Supply and demand is the point where demand at a price is met by suppliers willing to meet that demand.





This model shows us a few things. There will always be unmet demand, as the model assumes that there is a demand for a product at a price that is too low for suppliers to willingly meet. Even if a product is being sold at 10c, there will be people not willing to pay this amount.

Now looking at the above graph, we can see that if price equilibrium is set at P1 (Lets say $5 for illustrative purposes) we can see that there is a lot of unmet demand for the product (every point on the Q axis from Q1 onwards). You will capture demand from those who are willing to pay more for a product, but the D line (representing demand) is accumulative, showing people willing to pay the price equilibrium and above. There is more demand for the product at below $5, but there is less suppliers willing to supply at that price.

This is also why the music industry’s assertion that every download is a lost sale is insanely stupid. There will always be people not willing to pay even a token amount for music, and no effort by the music suppliers will ever get them to pay for music, as they have no desire to pay for it. Of course, this assumption is based on the belief is that supply/demand modelling is close to real-world behaviour (but this is high school economics, so I trust my teachers more than I trust the RIAA/ARIA).

So the unmet demand is satisfied in part by piracy. I say in part because you get what you pay for. If you download that big 1000 book torrent file from those BitTorrent pirates (ahoy ye matey!), the price you are paying is not cash, but time, resources and opportunity costs (that is, what you could be using your time and resources on if you where not committing piracy). This is modelled on the supply/demand graph as well, as you do not have infinite demand when a price is zero, as some people do not ever want the product, or are not willing to commit the resources to get the product.

So, we can argue that piracy is only partially meeting the unmet demand for a product. Now add in the opportunity costs and resources needed after the download and the price of that free book increases. For example, say for theoretical argument’s sake, I downloaded a large torrent file of eBooks. After downloading the file, I would likely find that many of the books in the collection were under some sort of Digital Rights Management (DRM) schema, preventing me from accessing the files without stripping the DRM, something I would not be willing to do.

I would then need to spend a couple of nights cataloguing, repairing, downloading covers, converting formats and importing it into Calibre for managing. The time and effort committed in this activity would show anyone that nothing is for free, we just pay for it in different ways (for example, manual cleanup efforts of many hours).

Now an eBook is just text formatted in a way to allow machines to read the text in a way that it is rewarding (or not painful at least) to read by people. So it is insanely easy to copy an eBook an infinite amount of times. In its basic form, Digital Rights Management is a way of preventing copying. One valid reason for this is that while it is trivially cheap to copy a file, there is a real and substantial cost in making the original file.

And the reward for creating the file (and yes, it is called profit) is also the major incentive to making the file available in the first place. So while every unauthorised copy of a file in not a lost sale, in real terms it is a loss on the potential sale. Why I say this, is that a person who was willing to pay for a copy gets a free copy, that demand is sated — however, no payment is made to the supplier.

Now DRM is a factor on the demand of a product. Lets illustrate with a scenario: You are willing to pay $5 on an eBook. However the supplier is not willing to supply the eBook in the format that is appropriate to your particular demand. It may be because it is in a format you do not have a device to read it with, the DRM schema is not supported on your device, or the DRM prevents you using the book the way you want to use it (for example printing hard copies).

This is where I say piracy is a market competitor to the normal supply chain. There is real and unmet demand for a product and the supplier is not willing to meet that demand with an appropriate product. Piracy become more attractive now as it can supply the desired product in a way that the user wishes to use it!

Can you make money out of a free product? Yes. Baen.com has for years supplied free, DRM-free eBooks in a multiple of formats. The Baen Free Library has proven to be an excellent way to promote the Baen catalogue of authors and books. Things like offering the first book of a series for free, or the first few books of a prolific and popular author have increased the paper book sales substantially. Eric Flint wrote an interesting series of articles about the Free Library — the first one can be found here.

So what can I say without another bunch of crazy graphs and economic gobblygook occluding my words? Simple. DRM prevents sales as it imposes a barrier to sale for people who would be willing to give the supplier money for the product. Piracy will always be there to meet demand for a product that is not met by the supplier. The best way to minimise piracy is to make it simple and easy to get and consume the product at the lowest affordable price. Any attempts to gouge prices will only encourage more piracy.

In short, just like normal books.

Darryl Adams is a government worker and internet tragic. A former IT worker, he still pines for the days of IBM keyboards that go CRUNCH and the glow of green screens. He can be found on on Twitter or on Facebook. Check out his site oz-e-books.com for more articles about e-book readers, retailers, formats and news (or will have when Darryl can be drawn away from reading Delimiter).

The views expressed here do not reflect the views of his employer, the ATO.

Image credit: Creative Commons, Matthew Schubert, royalty free