New Study: Piracy Increases The Quality Of Content

from the well-that's-not-going-to-play-well... dept

Eric Goldman points us to a very, very interesting new research paper by Atanu Lahiri and Debabrata Day, showing all sorts of real examples about how "piracy" appears to increase the quality of the related goods that are being infringed upon. Of course, this counters the "common sense" argument that such infringement inevitably lowers the quality of content, since the creators and distributors of said content can no longer invest as much in the content.

The key explanatory factor here: the best way to compete with piracy is to offer a better product yourself. And one way to do that is to increase the quality. For example:

A case in point is the European unit of the cable TV channel HBO, which is fighting against unauthorized distribution of its content by illegal torrent websites by raising the quality of its offerings. The piracy rate faced by HBO is estimated to be between 30% to 50%. HBO has responded to this high piracy rate by churning out new high quality contents in different European languages (Briel 2010). New contents are available through both HBO’s cable TV channels as well as its new IPTV channels. HBO’s innovative offerings have reduced piracy and brought in new subscribers. Valve, a video game manufacturer, has also adopted a similar strategy. Since releasing its game Team Fortress 2 in 2007, it has made frequent quality enhancements, including addition of new weapons and avatars. This strategy has encouraged enthusiastic gamers, who have a strong preference for the latest version, to switch to legal downloads.

The study doesn't just look at such anecdotal cases. It digs in on some evidence as well, showing how investments in R&D from software companies continues to increase, almost directly in line with claims that "piracy" rates for those companies has increased. The conclusion: less enforcement of copyright laws will likely lead to greater quality in output in many cases, and conversely that greater enforcement likely leads to less social benefit as the quality decreases, in markets facing the same conditions. In fact, they find that content creators (or distributors) are likely to increase profits by focusing on product quality, rather than enforcement.

Most of the paper focuses on creating and testing an economic model that explains this behavior, and highlights when such factors apply and when they don't, for the purpose of trying to optimize policy as well as an individual copyright holder's response to piracy. That is, they do find some conditions under which the traditional "common sense" view holds, but it seems relatively rare. In fact, one part of the study models whether or not there are "ethical" consumers who don't infringe for ethical reasons -- and finds that in such a world, there tends to be even fewer reasons for increasing enforcement.

Of course, when you think about much of this, it makes sense. We've argued from the beginning that there are tons of ways to "compete" with unauthorized access, and providing quality is definitely one such way. It's nice to see this bit of research adding deeply to this debate, both with real world examples of this happening today and a detailed economic model that explains the behavior.

And yet... our policy makers continue to think that the best answer is simply to keep on ratcheting up enforcement.

Filed Under: competition, content, copyright, infringement, piracy, policy, quality

Google Ditches Newspaper Archival Effort... To Help Publishers Charge For Online Content

from the i-thought-google-was-all-about-the-taking dept

It seems like it was just a few days ago that we were listening to a Disney exec (one Anthony Accardo) droning on and on about how the tech community (Google, in particular) should be doing more (and more, and more) to prop up Big Content and protect its interests. No sooner had our eyes glazed over when along came the news that Google is abandoning its newspaper archival efforts (which would have benefitted all Google's users) in favor of assisting various publishers in monetizing new online content. 

Of course, Google's archival efforts had already coaxed various bitchy noises from various Big Content noiseholes, namely Rupert Murdoch (whose son, James Murdoch, was given free rein to lambast the British Library for attempting to do the same thing).  So, thanks to incessant complaining and uphill battle after uphill battle to do a "good thing," Google has apparently decided it might be simpler to just do "a thing" and give publishers a hand with their money problems via OnePass, its new online payment platform.

Obviously, projects like a comprehensive archive of 200 years of newspapers are just another example of Google's selfish efforts to improve the flow of information. This kind of computing power and technical know-how is better utilized constructing virtual tollbooths on the information superhighway.

Honestly, Anthony, your industry can't fail fast enough.

Filed Under: archiving, content, journalism
Companies: google

Groupon... And The Difference Between Idea & Execution

from the all-about-the-execution dept

About a month ago, the folks at Planet Money did a nice podcast on the economics of Groupon. There's no doubt that there's a bit of a "coupon" bubble going on these days, with tons of companies crowding into the space, and (as the Podcast notes) a bunch of ex-Wall St. types jumping into the space with talk of creating derivatives on coupons/deals. At the same time, plenty of people have mocked Groupon and insisted that its model isn't sustainable and others can easily come in and kill Groupon. In fact, some of the Wall St. guys who stayed on Wall St. are saying that Groupon's value shouldn't be that high because anyone with a phone can copy them.

Lots of people are discussing Felix Salmon's excellent analysis of the economics of Groupon, which is really more about the fact that Groupon has dominated the space because it executes well. That is, it's not about the idea, it's about the execution. The fact that it has remained dominant despite so many copycats shows that just copying isn't enough. This doesn't mean that Groupon will always be the best at executing (in fact, I doubt it will be). But it's not so simple as just coming in and copying.

This is an issue that comes up all the time when we talk about business and intellectual property. People who haven't built up businesses like this assume that all you need is the idea -- and if an idea can be copied, then the company can't succeed. But that ignores just how important the execution element is. Salmon talks about how hard Groupon works to make sure its advertisers are happy with the results, to a level beyond most of its competitors. However, I think there's another element of Groupon's execution that hasn't received nearly enough attention: how enjoyable it makes the whole thing for consumers.

Groupon employs a bunch of writers who work hard to make sure all of the deals are compelling, enjoyable and fun. It always amazes me how much people underestimate the value of the quality of the writing in Groupon's offers. However, where it really struck me was a few months back, when I was researching some newer competitors to Groupon -- in particular, newspapers that were offering deals directly to compete with Groupon. In theory, newspapers should be able to absolutely destroy Groupon. If you're just standing on the mountain looking down, and seeing who has the advantages here, it's clearly the newspapers. Newspapers already rely on local advertising and deals, and have established long-term relationships in the market. On top of that, newspapers employ a ton of (mostly) high quality writers as well, so they should be able to create similarly compelling content.

And yet, when I was looking at various newspaper Groupon clones, what struck me was how boring and dull their offers were. Even if the deals themselves were comparable (and they often weren't), they just weren't that interesting or compelling to read. And that's because the newspapers -- like the Wall St. analyst above -- are engaging in cargo cult copying, where they think that all that matters is copying the superficial idea -- while missing the secret sauce that goes into the less obvious execution.

As a final aside, the quality of Groupon's content highlights another key point that we've raised many times before: how "infinite goods" like content make scarce goods more valuable. In this case, the "content" created by Groupon's writers (and, yes, this is also an example of how advertising is content) is valuable. But no one's selling the "content." What Groupon is doing is using that good content to make the scarcity of the deals more valuable, making more people willing to buy them.

In the end, I will admit that I have my doubts about the overall sustainability of Groupon itself, but it's not because "the idea" is easily copyable. I'm just not convinced that Groupon can continue to execute as well, and some aspects of what it's offering have some elements of a fad written all over them. But claiming that the company is overvalued because the "idea" is too easy makes little sense.

Filed Under: content, coupons, creation, deals, economics, execution, idea, innovation
Companies: groupon

If You Can't Understand The Difference Between Money And Content, You Have No Business Commenting On Business Models

from the please-shut-up dept

I've been noticing a really silly trend lately, of copyright maximalists trying to "debunk" people who actually understand the economics of content, by trying to sarcastically equate money to content and then saying, "if it's okay to copy content then isn't it okay to copy money?" It's an argument stemming from pure ignorance, mixed with an unhealthy dose of smugness, and we should try to pop this bubble before it goes much further. In order to do so, let's take a look at a picture perfect specimen of this sort of argument from (of course), an IP lawyer (who else?) named James Gannon, who wrote "How I Learned to Stop Worrying and Love the Copy," all about copying money. It's getting passed around by various copyright maximalists with comments about how "brilliant" it is.

It's brilliant only if you don't understand all of the following: money, economics, copyright, business and value. If you understand any of those things, you might recognize that the analogy makes no sense. Misunderstand all of them... well, then I can see how this argument might make sense. It's also not a very original argument, because we see it all the time and it's been debunked before. But now that it's rising in popularity, let's dig in a little and see if we can explain how utterly ridiculous the comparison is.

Gutenberg did not invent the printing press so that it would be controlled in the hands a few rich and powerful central bankers who desperately cling to outdated business models. With the advent of digital technologies, everyone can and should be free to copy their own money.

I see what you did there. Of course, here's the key thing: money and content are two totally separate things. We write about content frequently, but we also write about money quite a bit, and in fact, have spent an awful lot of time discussing what money is, how it might change and where it's heading. Traditionally and classically, money is defined as three things: a store of value, a medium of exchange and a unit of account. Content is none of those things. You can't compare the two, because they're nothing alike.

And here's the key point that the "har har copy money durrr" crowd doesn't seem to comprehend. Money is a scarcity. They used to go on and on about how content was the same as a car ("you wouldn't steal a car") but the switch to using "money" as the example is because enough people have so debunked that argument by explaining the differences between scarce goods and abundant goods that they (mostly) don't even try any more. But by switching to money, they show that they don't understand what they were being taught. They thought people were only focusing on tangible goods, not scarce goods in explaining the differences. Tangible goods are scarce, but not all scarcities are tangible goods. Money is a perfect example of that.

Money is scarce. It's not scarce because there are a limited number of bills. In fact, most money isn't in bill form at all, so that's clearly not it. Money is scarce because of that first characteristic listed above: it's a store of value, and money, by itself, doesn't create any additional value. The overall value is a scarcity and the money is a representation of that value. You can print more money, but that creates inflation, because the overall value remains the same. That's not the case with content. Contrary to what some claim, getting more content on the market does not take away value. In a culture where shared culture and shared cultural experiences are highly valued, the fact that you can copy content makes it even more valuable. It makes it easier to share that cultural experience.

In other words, content can create new value. Money does not. Money is a store of value. Content is not. Pretending these two things are the same is wrong and will make you look foolish.

Don't get me wrong. I love the bank notes that are created by the Bank of Canada (BoC). In fact, I consider myself to be one of their biggest fans. Even though the BoC will try to stop me if I try to make my own copies of their bills, they should really be flattered.

Imitation is the sincerest form of flattery and I only want to share their work with my friends and family. By allowing me to make copies of their works, my friends might become fans of their currency too. Everyone knows the value of a currency is based on its demand so why not try to get as many fans as possible?

Right, except all of that is simply wrong and shows ignorance of the basic factors of both content and money as described above. When you copy money, you are actually decreasing the value of money. That's not true of content. When you share content with people, you increase the market opportunity for the content providers. That's not true with money. Pretending otherwise is either ignorance or propaganda.

Gannon's piece goes on from there, continuing to pretend that he's sarcastically making a point. It's a really pointless argument, and doesn't make him look particularly intelligent. If he wants to debate actual economics or business models, plenty of us would be happy to do so. Instead, making arguments like this is just silly and doesn't make his point. It just makes him look like he has no real argument, and has to resort to pure sophistry.

Filed Under: business models, content, copying, economics, money, scarcities

Sometimes It's Better To Just Let People Copy Your Content Than Deal With Licensing

from the just-take-it dept

For the last few months, we've been going back and forth with a well-known major mainstream news organization about syndicating some Techdirt content. There's no monetary exchange here. They just want to republish some of our content. I'm totally cool with it, as we're perfectly happy to get more people reading what we have to say, and as we've said repeatedly, we've declared everything we do here to be in the public domain so people can do what they want with it. Yet, because of the way things work these days, this company still requires a licensing agreement, and that's meant months and months of back and forth delays as lawyers have to look over stuff. Admittedly, some of this is my fault for being slow to review things, but that's part of the hassle. I'd be perfectly happy if this publication just decided to start reposting posts here with a nice linkback without even having to go through the legal discussion. In fact, the more we've gone back and forth over the agreement, the more I realize that this license agreement only serves to make things worse for me -- because the lawyers want me to "indemnify" and promise that anything I write won't get them in legal hot water. In other words, all this license really does is create increased liability for me.

I'm almost wondering if a better strategy isn't to just follow the strategy of the site Universe Today, which was sent in (months ago, actually) by clemahieu, who put up a post telling major media properties to "please 'steal' our content":

I’m not sure if you've noticed, but Universe Today articles are showing up on other websites, including our good friends over at Discovery News, Physorg, and even the Christian Science Monitor. I've had a few people emailing me, warning me that people are stealing our content.

They're not stealing, I'm encouraging them to steal. Here's the deal, and I've actually said this for years and years: feel free to use Universe Today articles for anything you like. You don't need to ask permission. If you find an article that you like, and you'd like to put it on your website, be our guest. Free. You can put it into a website, record it as a podcast, include it your Astronomy Club's newsletter, etc.

All we ask is that you attribute Universe Today as the original source of the article, and that you give credit to the original writer. If it's on the web, please provide a link back to the original article on Universe Today. I think that's fair. Free content for your website in exchange for a link back.

We've had a few other big news organizations approach us about similar deals to the one I mentioned above, and I'm pretty tempted to just point them to this post going forward, and tell them to use whatever they want (which they could already just do) rather than have to go through the whole "license agreement" process again.

Filed Under: content, liability, license

Is The Internet Enabling Bad Content... Or Killing Bad Content?

from the can't-hide-behind-marketing-any-more dept

One of the common refrains we hear from the modern Luddite is that one of the awful things about today's internet culture is that it's flooded with too much "crap." One of our regular critics in the comments insists that key point and our failure to realize what this means for the world is why he spends so much time attacking everything I post. He's worried about what all that crappy content means for the world. Of course, that always makes me wonder why he bothers spending time paying attention to crappy content. After all, one of the nice things about the internet is that you only have to pay attention to what you like. It's truly an elitist position to complain about the crap that's out there. The thing is, it's really not a problem.

First, what may be crap to you may be wonderful to someone else. The idea that there's some objective measure of what's great and what's crap when it comes to content for everyone is just silly. As someone who likes a few niche areas of music, the ability for me to find out about more artists from around the globe has been amazing. And, yes, even if I discover some of them aren't very good, it's easy to move on and find the next band that's really fantastic.

But the bigger issue is that even if there's a ton of crappy content out there, this is really a filter problem. And, some are realizing that the reality is that the internet actually helps stop crappy content (found via obhi and the infdist panel). The point raised in the link is that, historically, professional content creators were able to deliver bad content all the time -- and just hide it behind a massive marketing campaign. People would go see awful movies because they didn't realize how awful they were.

But today, that's no longer true. Word of mouth travels fast, and is attached to all sorts of content. Haven't heard of the movies playing at the theater? Just look them up quickly online and you'll get an immediate sense of whether or not people liked it. The fact is that the internet acts as a filter to help you avoid crappy content. It still gets created, but it's even less likely to get in the way than it did before. Back before the internet, when I used to go searching for new obscure bands in a particular genre, half the time I'd be making a total guess about the quality of an album (sometimes based on the album artwork). But, today, I no longer have to do that. I can see what others think, I can sample the music via their own websites, etc.

There may be more "crap" online, because now everyone can get their own content out there, but it's easier than ever to avoid that crap and easier than ever to find the good stuff -- and that's true both at the amateur and the professional level. The internet doesn't cause anyone to be overloaded by crap... unless you're bad at using the internet.

Filed Under: bad content, content, filters, good content, internet

Stop Thinking That Tech & Content Are Fighting Each Other

from the forward-thinking dept

The following is a guest post from Martin Thornkvist, who both runs a Swedish indie record label, and works for Media Evolution -- an organization designed to help its various members learn about and embrace new media innovation opportunities. This is cross-posted from his blog at Media Evolution, and raises a really good point. Too often people talk about technology and content as if the two are at war with each other, rather than recognizing how it's a complementary relationship.

The first quarter 2011 Apple made a profit of $26.74 billion $6 billion. An impressive 17% of that is from their latest product, the iPad. Having followed Apple's reports for some years it struck me just how unimportant content distribution is for them. In economic terms at least. 

The iTunes store counts for only 5% of Apple's overall profit. In light of that fact, I have a hard time understanding why they are upsetting content providers by increasing the areas where they take a cut of the revenue.

It's obvious that Apple, and other tech companies, are using content to sell hardware. And damn, they are good at making us buy new products each and every year.

Hook and bait

It's obvious that the main objective of dealing with content for Apple, and tech companies in general, is to boost hardware sales. These days you can't hear a mobile executive talk without mentioning the importance of building an ecosystem for content to sell handsets.

The fisherman needs both a hook and bait to catch a fish. The fish is too smart to go for a hook without bait, like customers with tech products. And the bait without a hook is a fiesta for the fish rather than the fisherman, kind of like being a fish in a bay of pirates.

When looking at the media landscape we can see that everybody wants to be the hook. The hooks are owning the customer and the ecosystem in which they interact. That means they can control price, pace of releases and the right to set the rules of the game. 

The media industries were used to being the hooks. That changed many years ago. Now, it's just about creating those alternative hooks of income streams yourself.

To many the question of being a hook or a bait is emotional. Everybody sees their work as the center of the media landscape and wants the rest to obey to their wills.

Stop making life hard for each other

Even though content distribution represents a small percentage of Apple's overall profit, they are making life hard for content producers by changing the rules of the game. Most recently they announced that for publishing companies to sell their subscriptions inside applications, they will take a 30% cut. It's still uncertain whether that counts for music apps like Spotify as well.

The content side is making it equally hard for tech companies that want to develop new media platforms. Music labels, film studios and book publishers can arguably be said to make it a nightmare to license their products. This is instead of acknowledging developers and engineers to be their best buddies to create new ways of providing content to customers, and eventually help them make money they badly need.

Interdependent relationship

We need to understand that technology is nothing without content and content would be nothing without technology. Technology and content for sure has an interdependent relationship.

For a long time the content producers had the upper hand. Right now the technology providers act like they have it. But in the long run they both need to cooperate to keep prospering.

Filed Under: complements, content, strategy, tech
Companies: apple

Once Again, If You Don't Offer Authorized Versions Of Released Content, Don't Be Surprised If People Get Unauthorized Copies

from the broken-records dept

We just had a post about a guy in the UK who could not buy the version of RosettaStone's language training software that he wanted because the company would not sell it to him. In response, he felt compelled to pirate it, rather than pay lots of money for a lesser version with no promised upgrade. And here's another, similar case, involving venture capitalist Fred Wilson, who could not find a legitimate way to buy The Streets' new album after hearing that it was being released. After searching all over for it, the best he could do was order a CD. Instead, he ended up getting an unauthorized copy.

Then I searched the Internet for the record. It was not even listed in iTunes or emusic. It was listed on Amazon US as an import that would be available on Feb 15th, but only in CD form. I'm not buying plastic just to rip the files and throw it out. Seeing as it was an import, I searched Amazon UK. And there I found the record in mp3 form for 4 pounds. It was going to be released on Feb 4th. I made a mental note to come back and get it when it was released.

I got around to doing that today. I clicked on "buy with one click" and was greeted with this nonsense (click on the image if you want to read it). So then I went to find a VPN or proxy service that would let me grab a UK IP address so I could buy the record. That was an exercise in frustration. All I could find was monthly or daily services that were 2-3x the cost of the record. I could not find a free service that would let me change my IP address for a few minutes so I could download the file. As much as I wanted to pay the 4 pounds and pay for the record, I wasn't going to lay out $10 or more to do that.

So reluctantly, I went to a bit torrent search. I found plenty of torrents for the record and quickly had the record in mp3 form. That took less than a minute compared to the 20+ minutes I wasted trying pretty hard to buy the record legally.

Fred points out that he spends a ton of money on music every year and wanted to spend money on this music. But he was prevented from doing so for no clear reason. As he says at the end of his post:

I don't know whose idea this is of the way to market a record but I'm hoping they read this and never do this to a fan again. Fans love music. They want to support the musicians and they want to pay for music. But if you put enough hurdles in front of them, they will become pirates. As I did this morning.

Filed Under: authorized, content, fred wilson

Apple Trying To Run All Content Sales Through Its Own Sales System

from the that-might-not-go-over-so-well dept

Apple continues to make the iPhone/iPad app platform as obsessively controlled as possible. The latest are reports that Apple is starting to block other apps that sell content within their apps -- i.e., no more Kindle purchases on your iPad. The story is that Apple now wants all such purchases to go through Apple's cash register, so it gets a cut. Of course, that just seems like another opportunity for folks to seek out alternative solutions, such as via web apps, which Apple can't block. This seems like the sort of move that could backfire on Apple. It's no secret that the company likes to control such things, and to force everything through its own gateway and payment systems (where it gets to take a cut), but if it keeps doing things like that it's going to piss off an awful lot of potentially useful partners.

Filed Under: apps, content, ipad, iphone, itunes, point of sales
Companies: apple

Will Hollywood Kill The Golden Goose By Squeezing Netflix Dry?

from the watch-those-numbers... dept

Back in December, we did a little back-of-the-envelope calculating to show how much more expensive it is for Netflix to license movies for streaming, as compared to just buying DVDs and shipping them out. The differences are staggering. And apparently it's only getting more expensive. The Hollywood Reporter has an in-depth article highlighting the love-hate affair that Hollywood has with Netflix, including details on the sorts of prices that the various players are demanding (and often getting) from Netflix. What's not surprising is that they keep asking for more and more (and some are still complaining that Netflix doesn't pay enough). But the numbers being thrown about are simply staggering. And at the rate they're going up, it will make it increasingly difficult for Netflix to actually afford all of those deals. Once again, it seems like a situation where the content providers are overvaluing their content, and undervaluing the services that make that content more valuable. That is, they look at how Netflix is succeeding (especially as they're failing to adapt themselves online), and they start to get jealous, and assume that Netflix really should be paying them more money. Basically, they don't think Netflix deserves to profit at all, since it's really all "their content." What they ignore, of course, is that (despite multiple weak attempts) they were the ones who failed to provide a compelling streaming service themselves. Either way, if Hollywood keeps pushing those numbers up, they may discover that they end up killing the golden goose.

Filed Under: content, licensing, movies, streaming, value
Companies: netflix