Not Only Can You 'Compete With Free' You Have To If You Don't Want Your Business Overrun By Piracy

from the basic-economics dept

Rob Reid, who recently got a ton of well deserved attention for his hilarious TED talk on copyright math, has a WSJ op-ed piece, in which he tries to explain why there's so little ebook infringement, compared to music infringement. The crux of his argument? Even though the big publishers aren't really great about this stuff, rather than fight the technology, they were actually quick to embrace the technology and make authorized works available for purchase. Contrast that to the music industry, which sued every advancement in technology, including the first MP3 player, and didn't actually license an MP3 download store until many, many years after MP3 players were widely available.

Compare this to the situation in books. Although it had some small-time forerunners, the Kindle, like the Rio MP3 player, brought portability to a mass market. But the Kindle launched with licenses rather than lawsuits from the key rights-holders in its domain, and offered more than 90% of the day's best sellers when it shipped.

This meant that consumers discovered digital books through a licensed experience that delighted them. Exciting hardware, a critical mass of titles and Amazon's retail sensibilities were all integrated into a single elegant package that piracy has never matched.

Of course, piracy emerged anyway. Countless unlicensed e-books can be found online, and millions of people use them. But sales figures suggest that relatively few of these downloads represent foregone purchases. Most Kindle, iPad and Nook owners seem to view piracy as a low-rent and time-consuming experience compared with the sanctioned alternatives. They probably wouldn't if the publishers had kicked things off with a five-year content boycott.

This highlights a key point that many of us have been trying to make for a long, long time. The "answer" to the "piracy question" is not greater enforcement or more draconian laws, as the entertainment industry keeps telling us, but rather more legitimate services that can provide good value to consumers. The music industry failed at that for so long, that it really helped drive the culture of infringing music.

For years, we've pointed out that of course you can compete with free. But what Rob's article is highlighting is even more fundamental. Not only can you compete with free, you must compete with free or you're going to lose out. If you don't offer a legitimate alternative, people will flock to the illegitimate ones. Yes, some people will always infringe, but over and over again we see how legitimate services pull people away from file sharing and towards paying -- if they provide enough value at a reasonable price.

Now, I know that some will quibble with one other major difference between books and music that Rob sort of leaps over in his piece: it was much easier to create digital music than ebooks. You could just take CDs and drop it into your computer and there you go. There really wasn't a simple equivalent for books. Sure, lots of people have scanners, but that's a laborious process. Still, I'm not convinced that was really as big a deal as I'm sure some will make of it. That's because once a single copy of a book is digitized, it's very quickly available all over the place. And there were plenty of people working to digitize books long before the Kindle came along. It might have been a limiting factor, but certainly not a complete hindrance to ebook infringement.

Either way, the key takeaway can hardly be challenged: the way to deal with piracy is to offer good legitimate services, and preferably more than just one, so they can compete on adding value. Unfortunately, many in the industry like to just dip their toes in the water with a few services -- and as soon as they become successful, seek to raise prices. That's no way to encourage a long term market success.

Filed Under: compete with free, copyright math, kindle, mp3, piracy, rob reid