How Many Bad Assumptions Can You Make In A Single Article About Content Creation And Copyright?

from the freeload-this dept

I really like The Atlantic and think they do pretty good work. I also tend to like Megan McArdle's work, which is usually pretty thought provoking. So I was profoundly disappointed with her recent article, The Freeloaders, which makes a bunch of really bad assumptions, tied together with debunked arguments, with claims that simply go against the facts and with a heaping of "oh noes, the pirates are killing content" fear mongering, to create an article that is sort of a parody of itself. After all, the article bemoans the fact that new and high quality works may be harder to come by in the future (based on no actual evidence), but all of the arguments in it are old and derivative themselves (many of which have been debunked), leading to a piece that comes off as downright amateurish.

Let's pick out some of the more egregious mistakes:

But even as I've heard over the past decade that things weren't that bad, that the music industry was moving to a new, better business model, each year's numbers have been worse. Maybe it's time to admit that we may never find a way to reconcile consumers who want free entertainment with creators who want to get paid.

That's simply not true. McArdle is making the same mistake that many politicians and reporters make, despite it being pointed out as an error time and time again: she's confusing the recording industry with the music industry. The music industry is actually doing quite well when you look at the numbers. Switching back and forth between the two, as McArdle does throughout the piece, and pretending they're the same thing at some points, and different at others is really weak reporting. Yes, the numbers for the recording industry are worse, just as the numbers for the horse buggy industry got worse and worse each year as the automobile industry ramped up. Now, later in the piece, McArdle tries to switch back to including the wider music industry, but we'll get to the problems with her statements there later.

Reflecting on this problem, the computational neuroscientist Anders Sandberg recently noted that although we have strong instinctive feelings about ownership, intellectual property doesn't always fit into that framework. The harm done by individual acts of piracy is too small and too abstract. "The nature of intellectual property," he wrote, "makes it hard to maintain the social and empathic constraints that keep us from taking each other's things."

In other words, we kept to our rules about IP as long as it was attached to a physical object: a book, a CD, a videotape. Now that it consists of endlessly replicable electrons, we are ethically unmoored.

Now, I know McArdle understands economics, so I'm a bit surprised that she didn't actually look into the economic arguments here, and immediately jumps to the ridiculous claim that people who intuitively recognize that abundant goods are under pressure to be priced at zero are "ethically unmoored," rather than realizing this is just the good old supply and demand curve at work. Supply goes up, price goes down. Supply goes to infinite, price gets pressured to zero. This is why many people intuitively and instinctively do not see an ethical quandary in copying a digital work: because they recognize they're not taking away anything from anyone else, they're actually adding to the overall supply.

The argument that people don't think about it because "the harm is too small" is also questionable. People don't think of it that way because they don't see it as harm. Making a copy of something is effectively obtaining the work from a competing supplier offering a better price. If there's no ethical issue in saying I'll buy lunch at this sandwich shop instead of the grocery store across the street because the sandwich shop is cheaper, then there's no ethical issue in getting content from a different supplier as well. It's a matter of competition.

They are Generation Free, and they just might kill the goose that lays the golden egg.

A pithy statement based on nothing. In fact, the evidence suggests exactly the opposite. Once again, the evidence:

While album sales have generally fallen since 2000, the number of albums being created has exploded. In 2000, 35,516 albums were released. Seven years later, 79,695 albums (including 25,159 digital albums) were published (Nielsen SoundScan, 2008).... Similar trends can be seen in other creative industries. For example, the worldwide number of feature films produced each year has increased from 3,807 in 2003 to 4,989 in 2007 (Screen Digest, 2004 and 2008). Countries where film piracy is rampant have typically increased production. This is true in South Korea (80 to 124), India (877 to 1164), and China (140 to 402). During this period, U.S. feature film production has increased from 459 feature films in 2003 to 590 in 2007 (MPAA, 2007).

The golden goose doesn't look like it's dying. It looks like it's going in the other direction. And even those numbers appear to undercount reality. Soundscan is notorious for undercounting many new music releases, and if you go beyond the MPAA's feature film numbers, you find that the the number of movies being made has increased a lot more than the rate of growth in just feature films.

And the same thing is true on the money front. Depending on which research you look at, the overall consumer dollars spent on music have increased between 5% and 66% in the decade from 1997 to 2007. And the movie industry, of course, keeps setting records at the box office. The golden goose is alive and well and laying bigger and bigger golden eggs.

Isn't that worth mentioning in a story about what's happening in the market?

Can the market evolve fast enough to keep up with the expectations, and predations, of Generation Free? Even if the music industry manages, what about all the other businesses that depend on intellectual property--including (gulp) my own?

Considering that it already has and continues to do so, this seems like an odd question.

Yet even if die-hard music buffs spend more on albums than the guy who buys one box set a year, they're still buying less than they used to. Moreover, spending less on recorded music doesn't necessarily mean you spend more on shows; the savings could just as easily go toward beer. And even avid music lovers in urban areas can see only a few shows a week. To raise revenue, you have to get new customers in the door or raise ticket prices.

Yes, but we have numbers on this, and the money isn't actually going to beer. It's still going to music or music related goods, which is why consumer spending in the market has increased. And, yes, getting new customers in the door is key. And here it would be worth pointing out (though, McArdle doesn't) that research has shown that (at least in the UK, though I would imagine the results are similar in the US), 60% of the population didn't buy music anyway. So getting any money out of them via alternative offerings is better than nothing.

Concert-promotion mogul Michael Rapino has said that just 2 percent of Americans attend more than a couple of concerts a year, which leaves plenty of room to increase attendance, but also suggests that most people don't particularly care for live music. It's far from clear that free MP3s increase the number of concertgoers, instead of just changing the mix of shows they attend.

But that's a totally different argument. I never really understand this line of thinking. You have people saying "well, no money is being made." Then you point out that money is being made, so they say "well, fewer works of art will be created." So you point out that more works of art are being created. And then they say "well, very few people attend shows." So what? If more works are being created and more money is being made... then what are you complaining about?

Also, while live shows are an important and growing part of the music industry, it is still just one part of the music industry. Here it seems that while McArdle has moved away from pretending the recording industry is the music industry, she now thinks that the live industry is the only other part of it. It's not. There is a large (and growing) B2B side of the business that McArdle doesn't even acknowledge, and there is a growing direct-to-consumer part of the business as well.

This fragmentation has been good news for performers like Jonathan Coulton, who makes a decent living selling quirky songs and related merchandise on his Web site. But the broader music industry, like other entertainment fields, has always worked on a tournament model: a lot of starving artists hoping to be among the few who make it big. What happens to the supply of willing musicians when the prize is an endless slog through medium-size concerts at $25 a head?

Again, we have the answer to that: it grows. Why? Because the folks like Coulton who can make a living doing medium-sized concerts at $25 a head wouldn't even be in music five or ten years ago. The Coultons and Corey Smiths and Matthew Ebels of the world who we've talked about, are all folks who likely would be working day jobs instead of making a living in music. That's because under the old system, the only way to make a living making music was to get a golden ticket: get signed by a major record label and then be one of the 5 to 10% of major label acts that the label decides to really push each year. Otherwise, you're back to your day job. But today, with the ability to take control over your own career, you can actually make a living in music (if you're good) without a record label. So the barriers have lowered, and that's why there are more people making music today than ever before, and more people making a decent living from music than ever before. Just look at some of TuneCore's numbers. These are the sorts of facts that an article like this should be highlighting. These are the sorts of numbers of what's really going on -- not just what the major labels are complaining about.

Moreover, whatever the sins of the big labels, they invest heavily in finding, promoting, and recording new music... People tend to underestimate the extent to which the old industry supports things like... concert attendance.

No doubt. The big labels have always invested heavily in finding, promoting and recording new music. But no one said that's the way it always needs to be. The money is there, it's just in different places, and as long as the money is there, there are clear incentives for others to provide those services as well. In fact, they'll probably do it a lot more efficiently and economically, without having to waste millions on the sorts of things that record label execs are famous for wasting money on.

A smaller, more amateur music business is possible, if not optimal.

How can anyone say this when the numbers show that the amateur music business has exploded? I mean, it's just flat out wrong.

But I doubt that YouTube can substitute for Hollywood in a world where "cheap" indie films can cost millions.

Ah, the YouTube fallacy. Apparently there's nothing in-between a major motion picture and YouTube. Those are the world's only two choices. And, yes, a cheap indie film can cost millions, but we're seeing all sorts of innovations that make the cost of making movies cheaper and cheaper, and we keep hearing about indie movie makers experimenting with interesting business models. Why assume that they won't work?

Children's films might be made at a loss to sell action figures--but how do you finance The Godfather? With a co-branded line of frozen cannoli?

At this point, we point out, yet again, that box office attendance has hit record highs, despite widespread unauthorized file sharing, and that the top movie downloads also seem to be the top at the box office. So, it certainly looks like you finance The Godfather the same way The Godfather was financed when it was made: by selling tickets to the theater.

We have yet to figure out how to make IP work in the new era.

No, you have yet to understand new business models in the new era. That has nothing to do with "IP." If anything, "IP" is holding back many of these new business models by giving folks a crutch to rely on, rather than experimenting with smarter business models.

Even if we don't, people will still make pictures, sing songs, and write stories--just not as frequently, or as lavishly

Except, again, all of the evidence says that they're doing so more frequently because everything about making pictures, singing songs and writing stories has become cheaper. It's cheaper to create. It's cheaper to promote. It's cheaper to distribute. And, as your basic economics will tell you, if you make all of those things cheaper, you tend to get greater output. Why McArdle would just assume lower output... well that's not explained.

But even if we do, file-sharing will probably alter the form of the works we do create. The popular arts may come to look more like the rest of the Internet...

Is that a bad thing? So, rather than having mass produced pablum forced down our throats by a few gatekeepers, there will be a wider variety of content, created by people who really love to create? Doesn't that seem like a good thing?

As a postscript to all of this, Boing Boing points us to an amusing musical rebuttal. It turns out that the image used to illustrate McArdle's article used non-public domain music, which some musicians noted highlights how wrong McArdle's article is, in that she seems to draw "a clear line between right and wrong where there is, in fact, significant ambiguity." So, the musicians recorded an album based on the notes. Is this ethically unmoored? Is this the result of "freeloaders" creating less works? It doesn't seem that way.

Filed Under: copyright, culture, freeloading, megan mcardle

Dismissing The Freeloading Myth

from the please,-let-this-go-away dept

A bunch of folks have sent in this column by freelance writer Anne Wollenberg claiming that there is no defense for file sharing and that free riders and freeloaders are simply bad, stop, end sentence. Oddly, looking over Ms. Wollenberg's own website, we find links to many of her works, including PDF files and jpg image files of writeups done for publications that don't have those writeups on the web. Some of those appear to be written up in magazines that require a subscription or a newsstand fee to view normally. Now perhaps she has permission to post these (or perhaps not), but even if she does, it certainly seems that she sees the value in having her works shared freely for the promotional value of her ability to write (not particularly well, mind you, but that's a separate issue). Yet, oddly, her writeup seems to ignore the concept of promotional value of works shared freely online. Update: In the comments, Ms. Wollenberg was kind enough to let us know that she has permission for all of those works on her website. That's great, even though we made it clear in the post that even if she does (in fact, we assumed she did), it does not change the fact that it negates much of the point she tried to make with her column.

Instead, she tries to lump all who file share into a single camp of people who are pure freeloaders. Of course, she even gets the basics of freeloading wrong, focusing on the sociological issues, but ignoring the economic research on freeloading and the value of commons and sharing. That's doubly odd considering that our recent Nobel Prize winning economist won that prize for her groundbreaking work showing that the simplistic thinking on "sharing" and "commons" simply isn't accurate, and that communities will quite frequently create models where sharing is seen as beneficial and other structures make sure that fair compensation occurs.

Now, I'm not one who believes that people should be sharing the files of those who don't allow it (and I don't participate in any unauthorized file sharing myself), but to write off the entire community as "freeloaders" without understanding what's actually happening and without actually understanding the economic research on freeloading seems like a pretty weak argument.

Filed Under: anne wollenberg, copyright, freeloaders, freeloading