Get Ready For DRM On Physical Goods

from the would-a-hammer-and-nails-represent-circumvention dept

Simon Phipps recently posted a short film showing the nature of DRM when applied to a chair, effectively demonstrating how ridiculous it is to build a product that is designed to prevent usage, creating artificial scarcity where none need exist: As he notes, DRM is really a form of "digital vandalism." While the video itself may seem a bit silly, some are certainly thinking about DRM for physical goods. At Mobile World Congress last week, a company named Fabulonia debuted, hyping up its "copyright solution for 3D printing." What's that? Honestly, it's not at all clear. It looks like it'll be a marketplace for 3D printing instruction makers who are overly paranoid and who don't want to participate on any of the much more open platforms for 3D printing instructions. In this case, the "DRM" isn't so much on the product, but on the printing instructions, which might be the same thing in the long run. Part of the way it works is that the designs get uploaded and downloaded, but apparently are somehow kept encrypted such that the "buyer" never actually gets to see the plans themselves.

Of course, most people would recognize that this automatically decreases the value to the buyer. They can't see the actual plan? They can't have it on their computer? Then why would they buy it in the first place? You don't convince people to pay by taking away a key part of the value. And yet that seems to be the entire goal of Fabulonia.

As with music, software, movies and more, these all are cases of imposing artificial scarcity where it makes no sense to do so. It's not just "digital vandalism," it's out and out economic vandalism, because you are purposely destroying a resource that can be used for economic growth. It's really tragic that people still think this is a concept that makes any sense at all.

Filed Under: 3d printing, artificial scarcity, chairs, copyright, drm, physical goods

Artificial Scarcity Is Subject To Massive Deflation

from the bingo dept

In discussing the basic economics of scarce and infinite goods around here, sometimes certain points get lost or confused. One of the key points that we've tried to make (but that sometimes gets lost), when we say that an old model is obsolete or going away, is that you can try to hang onto that business model, but the economic trends are clear: it's not going to last. So, you can try to keep charging for information in a highly competitive market, and maybe you can pull it off for a little while. But betting your future business on it alone? Good luck.

The Citizen Media Law Group points us to an even better explanation of this very point, by Eric Reasons, noting that artificial scarcity is facing massive deflation. It's such a great concise way of making the point, I wish I'd thought of it:

Every business model relying on intellectual property law (patent and copyright) is heading for massive deflation in our lifetimes. We've seen it with the music industry and newspapers already. The software industry is starting to feel it with the maturity of open source software, and the migration of applications to the cloud. Television, movies, and books are next. I've come to question the ability of copyright and patent law to foster innovation, but leaving that aside, the willingness of people to collaborate and share, and the tools provided for it on the internet, may render these laws obsolete.

He then explains why he believes deflation is the right term:

Why is deflation a better descriptor? Because as businesses whose product is reliant on intellectual property shrink due to Internet-based efficiencies, consumers are reaping the rewards of these efficiencies.

Exactly. The reason old business models are at risk is because the free distribution of content is simply more efficient due to modern technology, and it's about as close to impossible to hold back economic efficiency, once enabled. Artificial scarcity is based on pretending you can hold back that efficiency.

So this is a great way to think about the threat side of things. Unfortunately, I don't think Eric takes it all the way to the next side (the opportunity side), which we tried to highlight in that first link up top, here. Eric claims that this "deflation" makes the sector shrink, but I don't believe that's right. It makes companies who rely on business models of artificial scarcity to shrink, but it doesn't make the overall sector shrink if you define the market properly. Economic efficiency may make certain segments of the market shrink (or disappear), but it expands the overall market.

Why? Because efficiency gives you more output for the same input (bigger market!). The tricky part is that it may move around where that output occurs. And, when you're dealing with what I've been calling "infinite goods" you can have a multiplicative impact on the market. That's because a large part of the "output" is now infinitely reproduceable at no cost. For those who stop thinking of these as "goods that are being copied against our will" and start realizing that they're "inputs into a wider market where we don't have to pay for any of the distribution or promotion!" there are much greater opportunities. It's just that they don't come from artificial scarcity any more. They come from abundance.

Filed Under: artificial scarcity, deflation, economic efficiency, economics