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Glare, Grouchy

[Rant] Copyright

As this has been getting discussed in the discussion groups of both Katherine Kerr and Megan Lindholm (Robin Hobb) over the past few weeks, it's been on my mind lately. Today I got a note on a game I help keep running that a couple users were using one of the communication venues in the game to discuss how best to trade around cracked games and whatnot.

Grawwwwrgh.

There are some zealots, I admit, who really do believe that authors should release books for free and copyright shouldn't exist at all, or that all software should be free. Putting aside the question of 'if it's free, you are unlikely to make money on it, and there's no incentive to actually work on it as opposed to getting a different job,' there are other considerations.

Without copyright, for instance, someone could take a book and decide they want to publish their own version of it. They alter it -- cutting scenes, and adding a few they think are better -- and release their own revised edition with the same byline. The author's message is no longer there, and you no longer have any guarantee that you're getting the actual /book/ and not just someone's mutant edited copy.

Add to that the fact that our copyright laws were specifically altered some time ago to adhere to the Berne Convention guidelines, so that our copyright would be enforced and upheld by other countries who are signatories to it.

Really, what it boils down to, I think, is that the majority of people who pirate stuff do it because it's simple (just download something!) and it's free (and people are all about the free stuff). And all the arguments about how it 'doesn't hurt anyone' or how it 'only hurts the publishers' are largely just justifications. And 'I wouldn't have bought it anyway' doesn't really count for anything. If you wouldn't have bought it anyway, that's no excuse for theft. Hey, I wouldn't have bought that DVD player, but that makes it okay to steal it! Bzzt.

If you can convince yourself you're taking a Moral Stand against Big Business or whatever, you don't have to think about the fact that you are stealing from the people who wrote that game you're enjoying so much, that piece of software you use every day, composed and performed those songs you just downloaded in MP3, or wrote that book you just downloaded in eBook format.

The immaturity shows in a number of ways in the pirate community. Witness people who cheerfully accept acclaim and praise for making pirated goods available; the eBook scanners who cheerily accept the acclaim and thanks of the various pirates, acting as if the books were their own work. Hell, think about our Russian hacker friends who have an entire site devoted to Trillian as if it were their work, when all they're doing is distributing pirated copies of Trillian Pro and plugins.

I'm halfway tempted to talk to some of the authors, game developers and so on who I know, and ask them each to write a short essay on copyright and piracy, and collect them into a freely-available eBook to distribute on the net...

Comments

Man, talk about a touchy subject. I've got a whole slew of opinions on this, as an economist, as a technologist, and as a consumer.

As an economist, digital 'property' is in that magical place where marginal cost = 0 (or close enough that the lim MC -> 0). Having said that, free market theory states that a company should ideally sell a product were MC = MR (where marginal cost equals marginal revenue). That would mean that the price for any digital good should be 0. (Obviously, over-simplified. You adjust for R&D costs, advertising, etc.)

Take a look at 95% of the software out there. How many are charging appropriate to what the free market theory tells us that they should be charging? Most of them are price-gouging.

As a technologist, I think wholesale banning of technology, of any sort, is a bad idea. I think when any of the *AA organizations lobby for new laws against new technology, it is a bad idea. I think that industries need to adapt their distribution methods rather than using the club of law to beat-down new technology.

As a consumer, I look at China. One of the most rampant pirating centers in the world. What do movie-makers in China do? They have reached a point where they sell their legit DVDs at a reasonable price (see above re: MC=MR), which is only mariginally higher than pirated versions (something close to 1-3 yuan difference, which equals to less than 50 cents). Once that was done, most people prefer to pay the marginal cost in order to have an legit version/copy.

My thoughts on this were that digital goods are overpriced. Thieves will always exist. By overpricing, consumers (who, for our purposes, is say between 14-25) are being converted into thieves. Adjust the pricing to reasonable levels and most thieves will convert back to being consumers.

I look at MusicMatch and iTunes as examples. Anecdotally, I know that most of my formerly pirating friends prefer to buy them at a reasonable 99 cents per song to downloading. I look to the Chinese DVD market as an example of when distribution is lowered to match the equilibrium price.

This is a generalized comment. ;) Please don't think this necessarily applies to the makers of Trillian. :) I wouldn't know - I haven't studied your company.
Problem here is that the idea of MC=MR exists in a vacuum. MC=MR means very little revenue for the company doing the creating? In the vast majority of cases, MR is not sufficient for CL (Cost of Living). If CL > MR, and MR = MC, then very shortly, you have a lot of homeless engineers who can't pay their bills. This, granted, already happened in the dot-com crash, but that was because many were living outside their means. If you charge the absolute minimum above cost, you still have to pay your employees, because they tend to be fond of things like paying rent, eating, etc.

I agree that in general software is overpriced. However, I think in general, MOST things are overpriced. To say that $99 for Adobe Photoshop Elements is too much may be true, but Adobe still has to have the money for their employees from somewhere. Free (-as-in-beer, as opposed to speech) software is an absolutely wonderful concept in general, but the vast majority of OSS folks I know make money in addition to their OSS work, at some other company. Sometimes they're lucky enough that the company they're at uses the OSS project and gives them a paycheck to work on it. Sometimes they got the job /because/ of their work on the OSS project. But rarely does the OSS project /itself/ provide them a paycheck, or if it does (like bug bounties) it's rarely enough for them to live on.

This is why, for instance, my friend Justin Karneges just finally quit the Psi team; Psi is an OSS Jabber client that Justin created and wrote for years... but he needs income to actually have a life, and so he's finally called it quits and is looking for a real, paycheck job. In order to have that paycheck, the company has to make a profit.

So while MC=MR sounds absolutely wonderful in the abstract, it starts to fall apart when you accept that a digital 'property,' even if it is very cheap to distribute once it is produced, still has /people/ who produced it, and those people tend to want to eat. :)
Ok, I'm replying in pieces. ;)

I agree. MC=MR is a theoritical threshold. Let's add a few more real-world situations into it, like cost of maintenance and cost of R&D. You figure that your average software product will sell about 100,000 copies over its lifetime (maybe optimistic for some projects, and very pessimistic for others). So, if you send 6 months developing it, figure out your cost for that period of time, divide over 100,000 copies, add in some marginal maintenance costs (or perhaps move to a subscriber-based platform - I shell out my 15 bucks a month to PlayNC for City of Heroes, after all. ;))

I know that OSS folks don't make money. :) It's a field that is borne by love of the software. I know that. But, they /choose/ to release that under GNU, BSD, Artistic, etc licenses. Maybe that's the only way to attract users, maybe that's what they want to do, etc, but it was a choice. There are plenty of OSS companies (RedHat, VA, Sourceforge, Mozilla) who are surviving, even if they are not living the life of luxury. :) But, I know of this field only by association, and I don't feel entirely qualified to comment too deeply into it. :)

Suffice to say, I believe that most people would rather pay a small amount for a good product, than steal that same product, because most people know the right from wrong. Or maybe I'm hopelessly optimistic. :P

Hence, I think we can boil it down to the fact that software is overpriced. If software was priced realistically, where we can estimate MC to be something reasonable to include cost of production, maintenance, etc., I think most people will not steal.
Yes! Exactly! OSS software is done out of a love of things. It's a /hobby/. Something you do in your spare time, /in addition/ to whatever lets you pay the rent.

This is why I don't buy the arguments that movies, books or software should be available for only the cost of distribution, or for free. If you do that, the people who make those movies, who write those books, who develop that software are forced to do those things as a hobby. They have to get some other job to pay the rent and bills and suchnot.

And when you turn these things to a hobby, then you have people whining that things aren't done fast enough or aren't done to the same quality; imagine if 'the Matrix' was filmed in someone's garage, or if Peter Jackson had been forced to record Lord of the Rings in some city park with donated materials.
I agree. I am not arguing that it should be done at the cost of distribution. I am saying that you should estimate total costs, divide by the number of items you intend to sell, and figure out what your price should be set at. Since there is no (or minimal) marginal cost, you can take the cost of living for X of months, plus car payments, etc, divide, and set your price to that level. Which I am guessing is lower than current levels.

However! This doesn't apply to books. Books have a concrete marginal cost (cost of printing + paper) that software and movies do not.
I have a question to contribute to this conversation.

Why? Why does a company need to make so much money? I get having to pay your engineers enough so that they can live comfortably, but from what (limited) amount of knowledge I have about Cerulean, the company makes enough cash to adequately support themselves and their future growth. Enough, in fact, that you could probably lower the cost of Pro and still be in the black.

The arguments upthread of this all have a valid point -- that the areas where the pirating is occurring most regularly are areas where the cost of the property is typically vastly inflated in order to generate the most amount of revenue. Theft, in many ways, is a corrective market force that _makes_ for profit industries adapt in order to survive.

Morality has no place in economics. At all. The faster companies realize this, the faster they'll turn around and adapt to a profitable business model. And if it means the death of the record companies and the musical clones they create? So be it. Music existed before major record publishing and before radio and before television and it'll exist after those mediums are dead and gone. Let them die, if they can't figure out how to work the new system. They can't turn back the clock.

That said, it -is- annoying when people steal your work. And you are perfectly entitled to be pissed about it. :) But it's nto going to change.
There's a vast difference between investment and profit, Jen. To try and boil it down to the basics, though, profit is what you make selling your products after you've paid costs. Investment is money given to you by others to let you make the products in the first place. Now, if you are a small company who keep costs down, you can stay safe in terms of operating budget for a long time off of having gotten investment capital, even if you never show a profit. But there's a difference between "we can pay our bills for a long while if we keep costs down" and "we're in the black in profit." :)

But if you don't make a profit, sooner or later your investors go away, and your company goes buh-bye when you run out of money. So 'why do they need to make so much money' is easy to answer, at least for smaller companies; you need to get enough money that you can either pay the investors back or survive without their flow of cash.

Witness Quicksilver, for instance. Had a lot of money in the bank, investors loved us. But the company was badly mismanaged, we never managed to show a profit, and after a while people stopped investing. Poof. Quicksilver is no more.

People like to make the argument that software is /hugely/ overpriced. It's not. People like to show that distribution could be cheaper if it was all done online and not in stores. That may well be true (though I think people with dialup would scream), but that vastly oversimplifies it. The cost of paying folks to create the software, paying folks to continue to maintain it and create patches, is a real thing. You don't get a paycheck only when a new version comes out, or else you'd never be able to pay bills; that means you need money in the budget to hire people and keep them paid /between/ releases, since any software sales drop off right after a release.

So, no. Software may be slightly overpriced, and it may be able to cut costs by distributing entirely online, but you can't slash prices to like $5 a copy for Microsoft Office as some folks like to claim. Not and still pay the developers, the QA testers (and people whine if stuff isn't heavily tested!), the folks who the company contracts and pays to do phone tech support (like wonderwombat, who probably likes getting a paycheck, even if she hates her job), and so on. People like to ignore those costs.

And even if you feel something is overpriced, that /still/ doesn't change the fact that to then go and steal it is not justified. Period.
Er, to address a couple of other points... China's an excellent example. If the movie companies put out movies at barely higher than cost, they'll be able to cover distribution and manufacturing easily. China's cost of living is vastly different than ours in general, however.

Plus, the real problem in piracy is not the ones who are charging for bootlegs, but the ones who are giving it away for free on the Internet. The movie studios will /never/ be able to get down to free, even if they require all the folks who make a movie to work for free, and all the employees at the studio, and charge just for the cost of disc and casing.

As for the other problem, iTunes is a good example. I use it constantly, and I know a few others who do it. But I also know a lot of people who go, 'feh, sure, I can get a single track for $0.99, but why pay the $9 whole-album fee for an 18-track album when I can just get it for free?' Even if you can solve the problem that MC=MR doesn't equate to real-world costs for the creators of the product, and even if you reduce things in cost to just cost and make zero profit, a lot of people will still choose the pirated one, because eh, $0.99 may be very little, but $0.00 is even less.
True. You can't beat free. But compare the quality of a movie that some guy shot in a movie theater, with children crying, people coughing, walking around, etc, to a digitally mastered legit copy. Now, if the price difference was between free and 5 dollars? ;) Or let's say 8 dollars for the real copy and 5 dollars for the bootleg? I'll pay the extra bit.

Again, I think most people will. You will not get everyone to do so. There will always be thieves. :)
Your argument fails, however, on the grounds that what you describe is only the early in-theater bootlegs. Where piracy is particularly bad is when the choice is between say, $8 for the real legitimate copy or free for that .iso you can find on BitTorrent and just burn to disc yourself.

Especially with the new dual-layer DVD writers coming out, where you can now burn to a real production-style DVD that all DVD players can play. And which holds the same amount as production DVDs. Now people don't even have to DVD-rip, they just can make .iso files and distribute them.

Free, or $8, where the only practical difference to the consumer is that one is a hand-labeled DVD with no pretty box. But if you lower that $8 anymore, perhaps you can't afford to pay all your employees, and they don't get to eat, etc... so (to bounce replies) until the market prices decrease on other things, companies /do/ have a problem.

After all, if you start trying to pay someone lower than minimum wage, people start to whine and scream. If you move personnel overseas where you can pay pennies on the dollar, people start to whine and scream. (And both tactics /do/ hurt the economy, and I don't like either.)

In short, people want to be able to live a comfortable life. (Roof over their head, able to afford food, etc.) And China's government has a very different view on economic and market realities than ours does. So I really don't think any amount of piracy here in the States is likely to produce any result except for (as piracy gets worse) killing off the smaller end of the market.
First, minimum wage, economically, is bad. ;) It causes deadweight loss. Second, moving jobs overseas is a factor of free trade. There are downsides as well as upsides to it, and it simply means that more Americans need to move to service-based industries that are not movable (such as lawyers). But, in general, if one is a proponent of free trade, one must accept that a certain sector (or combination of sectors) will lose in order for the whole economy as a whole to gain.

Well, really, most pirates don't even bother with the physical cost of a DVD-burner and/or blank DVDs. They just emulate DVD drives and load up an .iso, and they are off and running.

The point is that unless the .iso is from a production DVD, the origination point must be some guy in a movie theater. When the .iso is from pre-release screeners, stolen DVDs, etc, that is where the argument breaks down. But, for the industry as a whole, it should be easier to dedicate their resources to protect /those/ points of origination.

I think I've segued somewhere...
And one last clarification (sorry, I'm on the phone, so doing these replies in pieces): I'm not defending the outlawing of technology or the legal strong-arming that the RIAA and MPAA use.

I am, however, absolutely decrying the mentality that because the RIAA and MPAA use those tactics, it's /all right/ to pirate. I am decrying the people who try to justify piracy because it's moral, or tell themselves they're not really hurting people.

If someone wants to pirate, they had best know that they /are/ stealing, they /are/ hurting people, they /are/ breaking the law, and no moralistic justification of 'it's not REALLY stealing' or 'it's not REALLY hurting anyone' or 'it's alright to do because the RIAA takes stupid approaches to laws' can change that one simple fact.

Done now. :)
People will try to take the moral highground for anything. ;) I mean, people who murder abortion doctors take the moral high ground, for chrissake. ;) (to use an extreme example)

On the other hand? The /reason/ that China's DVD market normalized to the new low price for legit items is because people just flat-out refused to pay the higher prices. They stole, they copied, they borrowed, and they bootlegged, until the industry in China finally agreed to their terms.

I'm not saying the same things needs to happen here for that to happen, but I certainly think something drastic needs to happen for the prices to normalize. :)

(PS: This debate is one I'd love to have sitting in a diner with a cup of bottomless coffee at 2am. :P Ah, the good old days before responsibilities. ;) Man, I feel so ooooold.)
Yes, but I -enjoy- hurting the RIAA and the MPAA. Because Jessica Simpson doesn't need another Cadillac SUV and the head of FOX deserves to go bankrupt for cancelling Firefly.

:)

Artists exist to create art. For the most part, those people in the multimillion dollar pop machine aren't making art anymore. They're making crap. The stuff I'm willing to steal? It's stuff that isn't worthy of buying, and if that theft forces people to develop better and more worthy things in order to pry my hard-earned dollars out of my cold hands, fine. Yes. I'm hurting them. I'm twisting the screws in order to make those service people dance to my wishes and stop making crap and selling it to me for 50% margin. :)
There's a difference between saying "I'm morally in the right for breaking the law" and saying "I am doing this because I want to, even though I know it is illegal."

The latter, while odd, is at least true. The first one is just a rationalization to remove guilt.