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Piracy is a Market Correction.
- andrewljohnson 17y agoNo, that's way too deep to be correct. Piracy is just an externality caused by an out-of-date copyright law that doesn't take computers into account. People "steal" the content because they want it, it's easy, and there are no consequences (regardless of what the MPAA would have you believe). It seems to be a big issue right now because there is an industry built around the old copyright system. Eventually, those companies will perish or transmogrify into something useful, and people won't even talk about piracy.
- thasmin 17y agoPeople are willing to pay for creative work. The copyright holder should realize that rampant "theft" would indicate that their price is too high, and they should lower the price or create higher value work that people value at their desired price. Copyright law may be outdated in that copyright holders are able to shout "piracy" instead of obeying the laws of economics, but I don't believe it is the main problem.
- jacoblyles 17y ago>"The copyright holder should realize that rampant "theft" would indicate that their price is too high, and they should lower the price or create higher value work that people value at their desired price." No, I think you're wrong. I think most pirates would continue to pirate media, even if the author increased the value of the media. They just take the extra consumer surplus and enjoy it.
- thasmin 17y agoThose pirates perceive the work to have no value. Possible reasons include that the pirate has no money, doesn't expect to use the work for long, or doesn't think they'll enjoy the work very much. The copyright holder loses no money when these people pirate their work and should not complain when they do so. It's difficult to recognize why a person is pirating. For all I know, copyright holders have priced their works correctly and are complaining about people like this.
- anamax 17y ago> The copyright holder should realize that rampant "theft" would indicate that their price is too high, and they should lower the price or create higher value work that people value at their desired price. And if the copyright holder doesn't realize or doesn't lower her price, then what?
- thasmin 17y agoThen the copyright holder's work get pirated and they don't get compensated.
- robryan 17y agoI don't see how this differs from a physical good in this way, say I don't like your price so I'm just going to take it can be applied to anything. I think if piracy was completely stamped out people may be willing to pay a price point that they previously wouldn't have.
- thasmin 17y agoPhysical goods have a higher perceived value because you can touch and resell it. PC games are on their way to essentially ending piracy with services like Steam. Some people may be willing to pay a higher price point, but games at discounted prices are still tremendously popular.
- patio11 17y agopeople won't even talk about piracy No, producers will move to platforms where it is difficult to impossible. Care to guess how many people have pirated the SaaS version of Bingo Card Creator versus how many have pirated the downloaded version? I am not the only person to have done the math here. Look at the sales of, say, MW2 on consoles (where piracy is hard) versus PCs (where piracy is trivial). Look at the PC games which actually sell, where World Of Please Pirate This Shiny Flat Paperweight is probably, what, 4 of the top 20 SKUs at any given time. There used to be a thriving PC games market. It has, predictably, shrunk to those sectors where it is actually profitable, avoiding sectors where 90% of the "customers" steal the product. Every time I hear the online crowd whinging about nickle-and-dime models like microtransactions, and not being able to "own" the software they planned on stealing, I have a brief moment of that very hard to spell German word.
- moe 17y agoproducers will move to platforms where it is difficult to impossible. That works only for software, not for media.
- mikedouglas 17y agoAvatar was shot in 3D for more than purely artistic motives.
- moe 17y agoWell, and? The big screen experience has always been different to what you could get at home. That apparently didn't stop people from watching pirated hollywood content on their small tubes. Likewise 3d screens will dripple into homes the same way radios and tv sets have.
- dkersten 17y ago3D capable TVs are already available. Its just a matter of them becoming mainstream.
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- mikedouglas 17y agoWhat changes to copyright law would decrease piracy, yet still incentive content creation? I'm genuinely interested if anyone here has any ideas; it seems like a very difficult problem.
- thwarted 17y agoI think first we must ask if content creation truly needs to incentived. That content would go uncreated, and that we'd somehow lose out on content that needs to be incentived in order to be created, and that said content is somehow more valuable than content that doesn't need an incentive to be created, seems like a pretty big assumption.
- jacoblyles 17y agoPirates go after the multi-million dollar Hollywood blockbusters moreso than art school film projects. Revealed preferences seem to suggest that people often prefer media which has a non-trivial cost of production. Pirates dig Avatar, too. And there will be no Avatar when they can no longer charge for it.
- actf 17y agoI don't I buy that argument without data to back it up. I'd hypothesize that the amount of piracy a title gets is directly proportional to its popularity. Sure with an indie title you have fans that are more sympathetic to the producer, but with mass market titles you have the entire mass-market demographic. Do you really think that the number of people in the mass-market who are too lazy, dumb, or otherwise choose not to pirate out-weigh the ratio that sympathize with indie producers? Show us some statistics please if you're going to make this argument.
- jacoblyles 17y ago>"I'd hypothesize that the amount of piracy a title gets is directly proportional to its popularity." I'd hypothesize that its popularity is directly related to its production values and budget, with a few exceptions. That is, the more popular media is the kind of creation that needs to be incentivized, because its expensive. I've seen people who aren't even particularly tech savvy pirate Hollywood movies and major label music. It seems to me that pirates are killing the very content makers whose products they most enjoy. I don't have any statistics or evidence beyond the unanimity of my personal experience and observation. Could you give me statistics that show people pirate low-budget content more than the reverse?
- chrischen 17y agoAgreed. And from my experience the willingness of a person to pay depends on the person, no their objective evaluation of the fairness of the price. In other words if you're filthy rich you'll be more inclined to pay for even overpriced software, and if you're dirt poor you'll be more inclined to pirate even cheapo software. I saw this firsthand in a friend who, after getting a job, decided to start paying for software. I do the same thing. If I have money, I'll pay for a song, otherwise I listen on youtube and keep the tab there for the next 6 months.
- mschy 17y agoOr perhaps copyright is a valid idea, and is not going to be abandoned. Perhaps the government will simply increase the costs and risks associated with breaking that law until they are so extreme, and the risk of getting caught so high, that large-scale piracy will cease to be a worthwhile endeavor. I know that HN is fond of the view that IP will be abandoned, but I see no compelling reason to believe your vision is more likely than mine.
- barrkel 17y agoI believe the institutional costs to ensure the practical security of digital IP always and everywhere would be all but indistinguishable from a police state. One would have to outlaw user-customized hardware, non-corporate software development and build user spying capabilities into every device.
- ryanwaggoner 17y agoYeah...so basically the trends that are currently taking place?
- mschy 17y agoI specifically said 'large-scale piracy' because I agree that a sufficiently dedicated individual will always be able to steal intellectual property. That said, an IP market doesn't need perfect government protection to survive. It just needs to be good enough that those who wish to steal additional copies incur substantive risk and/or cost. I'm not arguing it's the best or only way to proceed, simply that it is a possible and seemingly viable way to do so, and as such, people would do well to recognize that the future is not guaranteed to be copyright and patent-free.
- actf 17y agoYou're building a straw man here. Large-scale piracy is very different than ensuring "the practical security of digital IP always and everywhere". Putting a _practical_ stop to services such as the Pirate Bay would be incredibly simple if it were enacted by national governments. If it turns out that in practice it's not enough there's numerous other easy, cost effective measures that could taken. A solution doesn't have to stop 100% of piracy to be effective.
- muffins 17y agoThat article is so ignorant. I pirate because I would never be afford all the things I want or use. I'm not saying I wouldn't pay someday when I have money, but the $ to content ratio is too high. It is not stealing a product, but a service. I'm stealing an experience created by a company (video games) or a sound created by musicians and not paying the entrance fee. There is another side to the issue that he completely ignores.
- derwiki 17y agoWhy do you feel you deserve all the things you want that you can't afford?
- emmett 17y agoPresumably because it's societally optimal for everyone to be able to consume as much media as they like (since it has a marginal cost of zero). He gains, no one else loses. Of course, there's a massive externality to deal with: how do the people who create media get money for it? But in an optimal system (which we might not be able to create) everyone would still be able to consume as much as they want.
- anamax 17y ago> Of course, there's a massive externality to deal with: how do the people who create media get money for it? But in an optimal system (which we might not be able to create) everyone would still be able to consume as much as they want. How is it "optimal" if it doesn't address the obvious cost? We don't consider compensating producers as an externality where physical goods are concerned, so why is it an externality for intangible goods?
- chromatic 17y ago> We don't consider compensating producers as an externality where physical goods are concerned, so why is it an externality for intangible goods? That's a good question. One important difference is that, at the point of which duplication is possible, the intangible good already exists. Compensating the creator for creating the good may or may not encourage future creations. It's a sunk cost. It's also the only cost.
- jacoblyles 17y agoThat's an awful lot of paragraphs to get to the point that the marginal cost of copying software is near zero, combined with a rant about what the author personally considers to be a "fair" price.
- thasmin 17y agoThere's also the fixed costs (development) to consider. The point he's making is that people are willing to may for software, but there's an inherent price. If the vendor's price is higher than the inherent price, people will pirate.
- jacoblyles 17y agoPiracy is not the function of "inherent" price. The author postulates some price like (MC + (FC/units)) * 1.15 (where MC is marginal cost, FC is Fixed cost, and units is units sold) below which is "fair" and people will not pirate and above which is "unfair" and people will pirate. If this is the case, then people should be less willing to pirate a game that costs $millions to make than a game that costs $thousands because it is more "fair" to pirate a game that was made on a budget than a game with high fixed costs. I don't think that is the case. Rather, I think piracy is a function of how much a pirate values his time and effort and how much he likes the software product.
- rabidsnail 17y agoI think the author is postulating that number of units scales with fixed cost.
- jacoblyles 17y agoIt doesn't matter which parameter assumptions you use to calculate a hypothetical number that has no connection to reality.
- alttab 17y agoAnd if you really think about what it takes to actually write the crack - they are amongst us. On a commentary note, what would drive a hacker to write a crack for a game? Most of the time it's not even for money. Others just download it after a search.
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- solutionyogi 17y agoPardon me, but this is total bullshit. Piracy is not market correction. There is no reason a particular product has to be priced relative to the marginal cost of production. According to his logic, an audio cd should cost less than a dollar. Producers can price their product however they want. Consumers have the choice to buy it if they can afford it. Trade happens only if both parties think that they are getting value out of it, econ 101. Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior. I am surprised that this post reached top of hacker news.
- randallsquared 17y agoAccording to his logic, an audio cd should cost less than a dollar. While I don't agree with the original post, this is not an argument against it. Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior. I agree, except I would say "fortunately". Monopolists should not have a legal right to their market, even if the market (for Metallica songs, for example) didn't exist before they began selling in it.
- cellis 17y ago"Should" and "should not" are normative statements, and have no place in economic discussion.
- DrewHintz 17y agoChris Anderson describes a similar idea in his book Free[1]. Anderson says the price of an item converges towards its marginal cost, and the marginal cost of duplicating information is essentially zero. http://books.google.com/books?id=lLZbXN2odVYC&printsec=frontcover http://books.google.com/books?id=lLZbXN2odVYC&printsec=f...
- ct4ul4u 17y agoChris Anderson is not actually an expert on anything, you know. He's just somebody who has made a bunch of anecdotal observations and written a few books about them.
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- decode 17y agoYou just described the field of journalism.
- blasdel 17y agoNah, that's a media personality / talking head. Journalism is the process of paraphrasing press releases into content to place ads around, while self-aggrandizing about how democracy depends on your work. Even Woodward & Bernstein were straight stenographers, just to the acting head of the FBI instead of some PR flack.
- Batsu 17y agoThe authors best comments are in the last three paragraphs. The larger portion of the text may not speak volumes to the how or why people pirate what they do, but that last part really points out unfair comparisons that are drawn in regards to software piracy and other (tangible goods) markets.
- albertsun 17y agoPeople pirate because they can and because when factoring in the punishment and the chance of getting caught they come out ahead by pirating. Let's say that a piece of software has price p and that you get value v from it. If v > p, then you will choose to buy it, getting v - p in consumer surplus. If v < p, then you choose not to buy it. Now let's say that you can pirate the software as well, with chance of getting caught c and punishment if caught d. Pirating the software costs 0. If p > c * d then it's economically rational to pirate it, getting overall value v - c * d.
- decode 17y agoYou're basically asserting that people are rational agents doing subconscious (or perhaps conscious) algebra in their heads. I thought we learned long ago that people are not rational agents. Sometimes it is useful to model people as rational agents, and sometimes not. But to say that people are actually motivated, in a real factual sense, by some cost equation, just doesn't correspond to reality.
- jacoblyles 17y agoPeople respond to incentives. Sometimes in strange ways, at the edges. But mostly they do.
- richardw 17y agoSo why do so many people not pirate software? If you think it's just because they don't know how, then you're wrong. I suggest because of their own sense of fairness. Most would not get caught but they still feel it's right to pay a software author for what they have created. Some cultures (currently) have more of this sense than others - e.g. the U.S. more than China.
- joeyo 17y agoI'd posit because the the product in the case of pirated or black-market software is almost always clearly inferior to the original software-- it has been cracked and changed in various undefined and poorly understood ways (certainly to the average person). There is some chance the pirated software will give you a virus, or be fake, etc. There is uncertainty about the product and people are naturally uneasy about it. I suspect a similar reason for why most people don't buy black market goods: pirated handbags or knock-off electronics brands, for example. The quality is perceived as worse, or at least unknown. Digital media (movies, music) on the other hand are more widely understood to be "exact" copies of the original and so there is less concern about the quality of the illegitimate good, to the point that it isn't considered illegitimate.
- alttab 17y agoHow many people steal Quickbooks? How many people steal ERP or CRM software? Now how many people steal Photoshop, Microsoft Office, and computer games? Its overpriced for the market, based on the added marginal value. The supply is greater than demand (especially for digital products - versus services - supplies are virtually unlimited), and people are correcting it by downloading it off the internet for free. These people probably wouldn't have bought it anyway - so its not stealing. And its not wasted resources by the these firms so they can't count it on the books as a loss. This is economics 101. A supply curve goes up with cost, a positive relationship with price. As price goes up, demand goes down, and the market price is where they meet in the middle. Because it cost virtually nothing to copy bits, the supply goes up. As the supply curve shifts up vertically, the demand doesn't necessarily change (demand curve shifting to the right) to compensate to keep it at the same price. Since demand is still at a constant rate (a certain number of people want to play these games), but supply is practically unlimited, ethically people can talk themselves into stealing it for free (correcting market price). As software developers I think HN is a perfect forum for audience polarization, but the fact of the matter is both arguments have their merits and can coexist without mutual exclusion. After reading the article then looking at the comments I was actually very surprised. But I'm merely adding my portion to the discussion.
- cellis 17y agoHow many people steal natural gas, electricity (yes you can equate stealing electricity to stealing digital media: it's transient, marginally inexpensive to transmit, etc)? The difference is simply a matter of enforceability.
- alttab 17y agoNatural gas is a resource that can not be digitally copied, and you may think electricity comes from vapor but I can assure you it costs money to produce it unless you have your own solar panels and are off the grid. And its not necessarily a matter of enforcability as it is availability. If natural gas and electricity were as easy to steal as computer games or WiFi then people would do it. Natural gas and electricity, while commodities, are still limited by our technology and can not be given to everyone with a computer as easily as computer games.
- dlytle 17y ago7 people at a LAN party I attended last month were in the process of trying to buy the latest Borderlands DLC when someone pointed out it had Securom. I had it in my Steam cart when I found it out, and promptly removed it. Everyone who played the DLC that night played the pirated version instead. There are certainly cases where piracy is a market correction of sorts, but you certainly can't just narrow it down to a single cost-to-produce argument like the linked article. It's a large variety of different problems and incentives tied to a single, very polarizing, issue. Trying to come up with a magic bullet solution/answer is just shooting at the wind.
- jsz0 17y agoThis article is full of naive statements which means everyone will discount it but I feel like the core point is somewhat valid. Obviously content has to be developed, art has to be produced, someone has to manage the whole thing, you need to market it so people know it exists. Oh, and they all need health care and a reasonable salary. That being said I feel like the content industry is failing to adapt to people's habits for consuming their content. As a result maybe piracy is a correction of sorts. People are creating a set budget of how much they are willing to pay for entertainment. This includes cable/satellite, access to broadband, and old fashion offline entertainment. When you tally it up that's a pretty good chunk of money before you even buy a single movie, record or game. I don't want to listen to one or two CDs a month. I want a dozen. Maybe I won't even like most of it but I like exploring what's out there. Maybe I want to watch 3 or 4 movies a month. Not that unreasonable but the stuff they play on cable/satellite is awful to me. I don't want to watch those particular movies yet I'm actually paying for them anyway via the cable subscription. I have a seriously short attention span for games. Maybe I only want to play 5 levels of your game but I have to buy all 50 on the DVD for $60. I only wanted 5% of your product but you were only willing to sell me 100% of it. So when I look at $0 versus $60 the $0 just seems more fair to me so I go with it. I would pay $3 for it bundled into a subscription plan or micro-payment system.
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- stse 17y agoThis thread is a good example, for one of the reasons, why I try not to read HN comments anymore. (Failed this time though, as I'm very interested in serious discussions on this topic) There's a lot of information out there for anyone who wants to actually try and understand the issues, instead of dismissing people who have though about them and claiming everything is bullshit, econ101 and stealing. How can you even have a discussion with someone that can't even differentiate between physical property and intellectual property? Either we try and work around the issues and find solutions, or give up civil liberties in the name of stagnating business models. Incomprehension and ignorance must be the lobbyists best friends.
- scotty79 17y agoThere are two services. One is producing unique content and second is delivering content to people who are interested. Traditionally first service was paid by establishing monopoly for second service and channeling disproportionate gains from providers of second service to the providers of first service. Since second service became ubiquitous (anyone can provide it at almost no cost and without involving anyone else except himself and his customer) it became virtually impossible to uphold this model of financing creative work. Of course no one gives away old ways without putting up any fight, especially if old ways brought him mountains of cash, but all antipiracy campaigns are just futile attempts to play against the market that due recent developments in communication technology made coupling used in the past infeasible. There are new ideas (new for the industry) how one can pay for creative work. Some are advertisement based. Some involve entangling content to services provided by server that is under complete control of party who has deal with content producer. Some (dumber ones) involve closing up content delivery process by limiting capability of device. Some things turn out to be more profitable some less. Market adapts to advancement of technology. Some people are not seeing money that past experience led them to believe they deserve but that's just the way life goes. Technology giveth, technology taketh away.
- colinplamondon 17y agoYes, if only greedy developers would drop their App Store prices from 99 cents to 25 cents, all the Crackulous pirates would immediately start purchasing apps. They just don't have the extra 75 cents to spare!
- Super_Jambo 17y agoMy position on this is to come from the other end, i.e. start at the moral side then journey into the economic. Economic laws have been developed over time for the good of society. We started to settle and farm so we needed property rights. This was so your hunt didn't kill my dairy cow - disrupting both our milk and cheese nommage. Intellectual property rights exist then to ensure that society has a good supply of IP. Their success should be judged not on the moral value of you 'stealing' my 'work' but on how the copywrite and patent systems changes supply and demand curves from the baseline that would exist without the extra rules (and costs associated with those rules). Remember it was not illigal for you to hunt my dairy cow because of how unfair that feels. If I'd been keeping a friendly rabbit alive society wouldn't have bothered with property rights. Society wants more Meat and Cheese, not warm fuzzies. So where does that get us? Well, does anyone truly believe they'd be music starved if they could only listen to the current back catalouge + what would be made for the kudos / enjoyment / profit from merch & performing? No chance. Music should be free, we have a VAST oversupply and there are ample incentives to keep people supplying it without authorized monopolies. Books? Movies? Games? With these the cost of production is alot higher, the argument that people would do it for free still exists but it's less obvious how they could leverage resultant fame into some kind of money spinning live performance. I think here society needs to have the debate, but for it to be useful it MUST be framed in terms of supply, demand and what behaviour the system incentivieses. Not self-rightious moral 'right' of what you 'deserve' either from the pirates or the artists.
- alextgordon 17y agoThere are many different motives for piracy. Some are morally justifiable (at least to me), some are not. For example: * Lack of available funds. This is a mostly harmless (and sometimes beneficial) form of piracy. If a person has $75 and a product costs $200, then their two options are non-purchase and piracy. In this case, piracy cannot financially hurt the owner, as the person could not have bought the product in the first place. Adobe have used this kind of piracy to their considerable advantage. High school and college kids pirate Photoshop and become proficient. They go on to become professionals, already locked into Photoshop. * Unwillingness (but not inability) to purchase. This is a harmful type of piracy. A person has the available funds, but pirates something through pure unwillingness to pay for it. This is seen mostly in music and app store piracy. This is a difficult kind of piracy to deal with. How do you compete with something that is free? One notable success is Spotify, which has displaced a proportion of piracy by merely being more convenient. * Non-availability. This is particularly prevalent in the piracy of TV shows. Frequently a program is shown exclusively in the US, and is not available in other countries for months or years, sometimes never at all. This is potentially financially harmful to rights owner, but as those pirating the shows only have the options of non-purchase and piracy, it is justifiable. * Superiority of the pirated product. For example, music at a higher bitrate than can be easily purchased, a pirated TV show that can be watched at any time in full 1080p, a pirated game that does not include restrictive DRM. This type of piracy is financially harmful. Morally this is a bit of a gray area. Perhaps the moral solution is to purchase the inferior product and pirate the superior one. This is however still illegal. The general solution is for the rights owners to "compete" with pirates, to provide equal products.
- gabrielroth 17y agoObviously this is totally wrong, for reasons others have pointed out on HN. But it contains an interesting germ of truth: Consumer psychology around pricing gets complicated. A couple years ago, my local bagel store raised its prices. When they did, they put a notice next to the counter saying, “To our valued customers: Recent increases in the price of wheat have forced us to raise prices. We hate to do this, but it’s the only way we can continue to pay our rent. This will be our first price increase in almost eight years. We hope you understand our situation.” According to Econ 101, this sign was a waste of time. Customers will look at the new prices and decide whether or not to buy bagels at those prices. In fact, according to Econ 101, the bagel store might just as well have put up a notice saying, “Dear customers: We are raising our prices because we’d like to increase our profits, and we suspect that many of you are not very price-sensitive.” Of course, no one conducted an experiment to see what effect the sign had on business, but I’m prepared to bet it helped minimize the drop in business from the price hike. Econ 101 has no concept of “fair share,” but consumers do, and they’re willing to take losses to prevent someone else getting more than what they perceive to be his fair share. (http://en.wikipedia.org/wiki/Ultimatum_game http://en.wikipedia.org/wiki/Ultimatum_game) This isn’t right or wrong—it just is. If you’re selling physical goods, you should sell them at whatever price enables you to maximize your profits, just as Econ 101 suggests. But you should also suggest, in the way you talk about your product, that the cost is determined largely by the cost of your inputs. If you’re selling intellectual property, well, it’s a bit more complicated because everyone knows the inputs don’t bear on the marginal cost of each item. But it might be helpful to let everyone know that you’re not getting rich. Let your customers know you’re trying to support a family as an independent software developer, or that you still work a day job to allow you to make music. Don’t let people think you’re ripping them off. Of course, when your product is easily available for free on the black market, as is the case with piracy, none of this makes much difference. Consumers prefer to pay the lowest possible price. Econ 101.
- calcnerd256 17y agotheft is market correction ... if we take the market as orthogonal to morality