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Piracy is a Negotiation, not a Fight

The sale of Bebo.com to AOL for $850 million last week sparked a fresh wave of opining about music piracy, with Billy Bragg and Michael Arrington both stepping into the ring. The problem is, they are both wrong.

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This piece was originally written for TorrentFreak

In the blue corner we have musician Billy Bragg, who sees people like Bebo founder Michael Birch as another type of pirate, or profiteer, earning millions by leveraging other people’s intellectual property, and sharing none of it. He writes in The New York Times:

“The musicians who posted their work on Bebo.com are no different from investors in a start-up enterprise. Their investment is the content provided for free while the site has no liquid assets. Now that the business has reaped huge benefits, surely they deserve a dividend.

“What’s at stake here is more than just the morality of the market. The huge social networking sites that seek to use music as free content are as much to blame for the malaise currently affecting the industry as the music lover who downloads songs for free. Both the corporations and the kids, it seems, want the use of our music without having to pay for it.”

Artists add value to Bebo, but Bragg is over-reaching claiming they deserve a share in Bebo’s sale price. Bebo also adds value to artists who voluntarily post their songs on the site. Does Bragg also think artists who post on Bebo.com should share their concert ticket profits and royalties with the social network?

In the red corner we have Michael Arrington from TechCrunch, making the opposite but no less extreme case that “recorded music is nothing but marketing material to drive awareness of an artist.” He also says “if an artist can’t make a living playing concerts live, then he/she may want to think of it more as a hobby than a way to make a living.”

Arrington reasons that because music can be reproduced at a zero marginal cost, it should be free. But marginal cost does not equal total cost. It still costs something to produce music. It still takes money, time and effort to produce good music, not to mention software, movies and other goods with zero marginal cost. People producing such things need to make money in the end. Zero marginal cost does not mean it should be free. It just means we need a new distribution system.

Bragg’s line of reasoning is skewed, but he makes one good point; creative works like songs and films are worth something, and we have to figure out a way to reward creative people fairly in the age of the Internet.

Arrington’s argument is also flawed, but he’s right to say that Bragg is off the mark, and he’s right to say we should neither “line up file traders and shoot them”, or “give a government subsidy to anyone who calls themselves a musician so that they can pursue their art.”

Fortunately for the rest of us, these are not the only two options. Bragg and Arrington represent the two polar opposites in this ongoing debate, and they’re both wrong.

All the people at the extreme ends of both sides of this debate are wrong. But the truce is coming. Soon enough, there will very likely be a $5-$10 a month voluntary license fee for downloading all the music you want, and most people will be happy to pay it. As long as the money makes its way back to artists, it will help the music business grow.

I can’t wait to see an Internet where incredible music resources like OiNK can exist and artists can prosper at the same time, and that day is coming, hopefully sooner rather than later. But when that happens, another community will suddenly find itself as redundant as the music industry’s lawyers; the pirates.

When peace breaks out in the music business, a lot of people are going to have to find something else to talk about (which is why I cunningly future-proofed The Pirate’s Dilemma by talking about piracy in all businesses…). Music pirates will no longer be the face of the revolution, they will be part of the old regime. Over 500 years ago, Niccolo Machiavelli wrote: “Innovation makes enemies of all those who prospered under the old regime, and only lukewarm support is forthcoming from those, who would prosper under the new.”

Pirates create periods of chaos, then society works out how to make this chaos work for everyone, at which point it is enshrined in law and becomes the new order. Piracy itself is not a long-term solution. The arguments for music piracy as a force for change will become old news when file-sharing is finally legitimized, but the good news is there is still plenty for pirates to rebel against.

The pirate’s job is to push the envelope, while the corporation must play catch up as fast as it can. Both of these communities need each other. But when the corporations do catch up, the pirates need to move on. File-sharing is not so much a movement that needs to survive for its own sake as it is a means to an end. This isn’t a war without end. It’s a negotiation.

10 Responses to “Piracy is a Negotiation, not a Fight”

  1. Dart_Adams Says:

    This was a great read, thanks a lot.

    One.

  2. mattmason Says:

    Always a pleasure Dart – hope all is well.

  3. Blaise Alleyne Says:

    Arrington reasons that because music can be reproduced at a zero marginal cost, it should be free. But marginal cost does not equal total cost. It still costs something to produce music. It still takes money, time and effort to produce good music, not to mention software, movies and other goods with zero marginal cost. People producing such things need to make money in the end. Zero marginal cost does not mean it should be free. It just means we need a new distribution system.

    I don’t read much Arrington, but I think you misunderstand the argument. It’s not that it costs nothing to produce music, but that it costs nothing to reproduce music. It’s simple economics. Price is the intersection of supply and demand, and if your supply is infinite (i.e. you can reproduce the product ad infinitum), then that’s certainly going to affect price.

    There is an inverse relationship between supply and price. Supply increases, price decreases. So, naturally, as supply approaches infinity, price approaches zero. That’s not agreed on by people, it’s what happens in the market.

    You mistake Arrington’s comments for an argument of what price “should” be. The argument is about what price will be.

    As a musician and music lover, I agree that there ought to be a way to make money in the end. Pretending that there’s such a thing as what the price “should” be is not going to help. (Price isn’t something we arbitrarily set, it’s determined by the market, explained by the economic laws above.) I think the answer is in recognizing and monetising those goods which aren’t in infinite supply, and leveraging the infinite goods to promote them. Not in sitting back and waiting for some new levy system to pay musicians for work they’ve done in the past.

  4. n.sputnik » Do you want to be like Billy or like Trent? Says:

    [...] in. Well, it was great in that Joe, Techdirt’s Mike Masnick, Blaise Alleyne, Thomas Hawk, Matt Mason, and some others had the opportunity to debate the issue of the moral obligation Bebo did or did [...]

  5. mattmason Says:

    Blaise, as a fellow student of the dismal science, I think it’s worth pointing out that economics isn’t that helpful at perfectly describing reality a lot of the time, and this is certainly one of those times. The situation you are describing works fine as a theoretical construct, but often what really happens in real markets is different, which annoys economists because they all agreed something else was supposed to happen.

    Artists are not going to stop charging money for music in droves anytime soon. iTunes is not going to stop making money despite the fact pirates are offering the same products for free. To break this down to a very basic definition of supply and demand is way too reductionist an approach. People are irrational, economic man is not. People use iTunes because it’s convenient and they understand it even though pirates offer the same music for free. People pay for music because they want to support artists even though they don’t have to. Vinyl sales are going up because free music online means other forms of music are worth more. The only reason more people don’t pay for music online is because the majors have made it difficult for people to consume music legitimately online. But as long as human beings value music, I don’t think the price has to be zero, even though, as you rightly point out, economics would have us believe otherwise.

  6. Billy Bragg heeft een punt | Marco Raaphorst Says:

    [...] Billy Bragg heeft een punt. Net zoals ik al eerder aankaartte. (+dit) [...]

  7. Blaise Alleyne Says:

    I’ll confess to not being a student of economics at all, lol. I actually know very little about it.

    I agree that the laws might not perfectly describe reality, but I don’t think the examples you listed counter my point (nor are they outside of it).

    Notice I said the price “approaches” zero. It doesn’t have to be zero. iTunes and iPods are examples of this. The latest iPod Touch has a reported capacity of 40,000 songs. iTunes currently sells songs for a dollar. Who is going to spend $40,000 on a (DRM-laden) music library? What about the rumours that Apple is looking into a subscription system?

    The point is not that no one will ever pay for music (sorry if I made it seem that was my argument), but that people will be willing to pay less and less for digital music. The supply is infinite. Why should you pay twice for two copies when you can copy it yourself? My siblings and I don’t need to buy the same albums, for example. We can share our libraries with each other.

    I agree, people will still pay for music, but they won’t pay as much, and you need to give them more of a reason to pay. Patronage is one reason (e.g. because they want to support artists). Embodiment and high-quality audio is another (e.g vinyl). Bundling music with scarce goods (e.g. Nine Inch Nails limited edition deluxe package for Ghosts) is another.

    Price is separate from value though. Value drives demand — but price is set by the intersection of demand and supply. People can still value music, but that doesn’t mean they’ll be willing to pay $40,000 to fill an iPod. Or even $5,000 to fill it 1/8 of the way.

    I don’t think that artists should stop charging money for music. But I also don’t think they can maintain the same expectations as in the pre-digital era on what they can reasonably expect people to pay. Trent Reznor and Radiohead are good, recent, high-profile examples of charging for music while recognizing the economics of digital music.

  8. Paradox Says:

    I am curious what the Free Press and Penguin’s response would be it if they discovered people with stolen copies of the book floating around on their laptops, PDA’s and Kindles. Would THEY too choose to fight?

  9. mattmason Says:

    No they are choosing to compete.

    The book will be available as a free download through both publishers from May.

  10. The Songnumbers Team Says:

    Great info, we DO expect (though) that the ad-supported model WILL work. //keeping our noses down and pushing ahead…
    Sincerely,
    The Songnumbers Team
    PS, we just pushed out BETA 2 of our site!

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