In a nutshell, the copyright right industry does not actually sell products, it collects government mandated monopoly rents. When faced with actual competition, instead of competing, it sues based upon those monopoly rights.
Well, this newest edition of why the copyright industry cannot compete comes to us from book publishers. According to a column published by the New York Times, the problem with ebooks and the loss of power of publishers, is that prices will be set according to market fluctuations. Seriously. According to David Streiteld, the mechanism that sets prices on everything else in our lives should not be applied to books. Because, well, because… that’s why. Here’s a quote.
One consequence of this shift is that soon no one will know what a book’s “real” price is. Price will be determined by demand and perhaps by whim.
Another quote complains that the demand for books being influenced by fluctuating prices is somehow beneath the sale of book,
“That’s how you sell widgets, not books.”
And there’s this tasty tidbit:
“Discounting, and especially inconsistent or shifting discounting, really messes with a publisher’s ability to price a book fairly and accurately to its cost.”
An anonymous moron at Slashdot summed up the article thusly,
“Economists, publishers, and readers no longer have confidence that a book will cost the same amount this week as it did the last.”
There is so much wrongness to deal with, but I’ll just jump in.
First, there is no “real” or “accurate” price for anything. There is only what people are willing to pay. Some people will argue that the price should be the manufacturing costs plus a profit. But that’s simply not true. I could build a factory that changes my shit and urine into very ugly figurines, at a very high cost. I could start selling those very ugly and smelly figurines at 20% over my costs. But, here’s the important part, if no one is willing to buy them at that price, the price is not real.
Second, who cares if customers are not willing to pay the production and manufacturing costs? That’s not a problem consumers should ever be concerned with. If people are not willing to pay such costs, you should find new ways to reduce the costs, find new sources of income to subsidize your product (e.g., touring to subsidize the release of new music) or you go out of business. If people are not willing to pay to have your product produced, it should not be produced.
Third, the fact that prices will fluctuate means nothing. We live in a capitalist society and deal with fluctuating costs of goods every fucking day.
For the longest time, books and other copyrighted goods were priced not on free market demand, but from government fiat. If you wanted to read a particular book or listen to a particular song, you had to pay whatever price was dictated or face a penalty of law. That’s why book and CD prices were so ridiculously high back in the 90s. The idea of paying nearly 20 bucks for a CD of music seems ludicrous now. And we have the internet to thank for that.
Before the internet, the copyright industry could create artificial scarcity. A music label didn’t produce an infinite number of CDs nor did a publisher release an infinite number of books. Releases were limited which created an artificial scarcity, which artificially increased demand.
But the internet pulled back the curtain on such artificiality. We now know that every person on this planet can get a copy of a new song, movie, or book. Because data is not scarce. And now that the curtain is pulled back, the idea of buying movies, music, and books at the old artificial monopoly price, is simply asinine. We won’t do it. And no amount of complaining will help.
We’re entering a new era. Much in the same way buggy whip manufacturers had to adapt, so will publishers. Maybe we won’t even need publishers in the future. Maybe authors will simply self publish. Maybe we’ll look back and wonder why we gave publishers all that money for nothing. But we won’t look back and wish the publishers were still around. We won’t look back fondly for paying more than what a truly free and open market would bear.
Most people think that a great idea will make them rich. But that’s not really true. An idea can never make you rich. You first have to execute on the idea. And without the execution, the idea is worthless.
For example, think about the great idea of fast food restaurants. Instead of going in and waiting to be seated, and waiting to order, and waiting for your food, and then waiting to pay (there’s a reason we call them waiters), you merely order, pay, and then eat. It’s a great idea. Which is why McDonalds is worth so much money.
But McDonalds was not the first fast food restaurant. There were numerous others that failed miserably. They had the idea, they simply could not execute as well as McDonalds.
I’m bringing this up because of a website that alleges that huge corporate Goliath Lego Group at one time considered suing Mojang, the little David behind the game Minecraft.
The Lego Group released a crappy Lego based game called the Lego Universe way back on October 8, 2010. It bombed and the servers were pulled, killing the game on January 30, 2012.
Mojang released their game Minecraft May 17, 2009, with a full release on November 18, 2011. It has become a worldwide phenomenon.
Both games use the same idea. You build stuff in a virtual world. But Mojang succeeded where the Lego Group failed. Former vice president of Lego Group, Jesper Vilstrup, had this to say about Lego Universe’s failure:
You see, this is where we all went wrong. It wasn’t a failure on my part or the Lego Group’s part. It was that Minecraft overshadowed everything! Back in 2008, Lego Universe was a completely unique concept that no one had ever done before. Come 2009 and this Minecraft craze takes the internet by storm. The company behind Minecraft completely stole Lego Universe from us and put it online before we had a chance to be finished.
Our building system had the fun of Legos. Legos have been around for over 100 years! Our brand is strong, just like the god damn Lego pieces we build. We had a fully fleshed out combat system on top of all of this! So why do you think we failed? It’s because that no-good thieving company Mojang stole our ideas and used virtual Lego pieces that they don’t call Legos in order to one-up us! Well, jokes on them because we filed many patents in the process of creating Lego Universe. I’m sure they are infringing on one of these and I plan to sue the company and its founder into oblivion. Mega Bloks may have avoided our wrath because those old patents expired, but this company won’t be so lucky.
Think about what Vilstrup is saying. He honestly believes that a tiny company that no one had heard of was able to beat a huge international corporation with over 100 years of experience based on an idea alone. Does Vilstrup really believe that the “Lego” trademark is completely worthless? And it’s shocking that he somehow thinks that Mojang competing in an open market, and winning, was somehow unfair.
Interestingly, Vilstrup asked employee why they like Minecraft more than Lego Universe, and rather than listen to their answers and execute on them… he cuts them off and refuses to let them finish. To Vilstrup, the idea is all he needs. Actually listening to users and modifying the idea to better suit the market is completely foreign to him. Once again, an idea in and of itself is meaningless. Listening to customers and tweaking the idea is an integral part of execution.
This perfectly illustrates how little companies can defeat the status quo. In the Lego Group’s market of connectable bricks, it dominates. It does not really have to compete. Decade after decade it releases the same product but combines it with more monopolies when faced with competition. E.g., the Lego Group signed up exclusive deals to release Star Wars and Harry Potter franchise sets, which marketed themselves. It could not let Mega Bloks release its own Star Wars set, because then the Lego Group would have to compete against it. Which, apparently, the Lego Group is unable to do.
Back to the game, the Lego Group was given a chance to sell a virtual world where users could build. Little company Mojang beat the Lego Group out of the gate. By the time the Lego Group left the gate, they were already way way behind. Plus they were selling the game for full price ($40) and you had to pay $10 per month. While Mojang was letting people play for free, getting them addicted, making them pay later. Even if the two games were identical, Mojang executed with better marketing. While the Lego Group executed as if it were a monopoly, setting a ridiculously high price and demanding users pay without giving any good reason.
However, taking into consideration the fact that all things were not equal, that the Lego Universe was an inferior product, it’s not surprising at all why Lego Universe failed.
Lego Universe’s failure had nothing to do with anyone stealing an idea. It had nothing to do with patents. It had everything to do with Mojang beating the much larger Lego Group in the fucking ass by building a better product and marketing that product in a better way. If that’s illegal… if that’s worthy of a lawsuit… then we’re no longer in a capitalist society. Fortunately, we are.
My firm has a bizarre lawsuit waiting in the wings. Three students were given a grade of zero as punishment for cheating in a class.
But they didn’t take the answers with them to the test. Nor did they cheat off each other. They “cheated” by learning the material “too well.”
The nutjob professor feels that all of her materials are “owned” by her. She refuses to let anyone record her lectures or take pictures of her overheads or even the board.
The situation at hand deals with one document she presented to the class during a lecture on an overhead projector. When tested on the material the professor felt the three women did “too well.” She assumes that one of the women must have taken a picture of the overhead, shared it with the other two students, and then dared to study that material for the test.
In a meeting with the professor and the administration, my boss countered, “Well, maybe they took really good notes.”
And the nutjob professor actually responded thusly, “There is no way they could have copied the material that well, I don’t keep the material on the screen long enough for them to copy it.”
Here’s a professor who admits that her alleged proprietary interest in her course materials is more important than her students learning the material. She intentionally keeps the material from the student, because if they somehow learned it “too well,” her intellectual property would be violated.
When my boss called them on this ridiculous situation, that the college has in its employ a professor who does not want her student to learn, they just sort of looked at each other and shrugged, and then decided to adjourn the meeting to another date.
Hopefully they’ll come to their senses and give the students the grades they deserve. But if not, the jury is going to love hearing that this particular college is adverse to teaching students.
You can read the whole background here. A web comic author complained that when he went to buy or pay to watch the TV series Game of Thrones, he was unable to do so. The producers of that show simply do not allow anyone to pay to watch it except on HBO.
To summarize, he was willing to pay to watch the show, but the producer refuses to take his money.
A columnist by the name of Andy Ihnatko wrote that this shows the erroneous sense of entitlement internet users have. “Entitlement” being a derogatory comment, of course. He argues that HBO has no duty to offer its shows in a format to please its audience. And that internet users should simply buy what HBO offers or sit down and shut up.
He’s right. But he’s still wrong. He won the battle but lost the war. Let me explain.
Imagine if a meat-space retailer operated the same way HBO is acting. Imagine if Wal-Mart was only open a few utterly inconvenient hours per week, they had all of these “windows” (aka, timelines) for selling fresh fruit and meat, and sometimes they would simply refuse to even sell fresh fruit or meat. “Sorry, we have the steaks in the Wal-Mart vault.” Analogous to the famous “Disney vault.”
And to make the analogy complete, Wal-Mart would only barely lock their doors. Anyone could walk in anytime they wanted and take whatever they wanted.
Who would the police blame each and every time Wal-Mart called for another robbery? Wal-Mart, of course. And after a while, I’d guess the police would even stop coming.
But in the wonderful world of intellectual property, it’s never the copyright industry’s fault. It’s always the consumer’s fault.
So, Ihnatko is correct. HBO does not have to offer its shows in a format its customers want. However, once HBO refuses to take money from its customers, it no longer can complain about piracy taking away lost sales.
HBO has a solution to piracy: offer a product people are willing to pay for. The sole reason HBO is losing sales is because it’s refusing to sell.
Every so often a Copyright Maximalist gets caught violating copyright. For example, France’s President, Nicolas Sarkozy, was accused of violating copyright. SOPA sponsor Lamar Smith has been accused of infringing a photographer’s copyright.
People are outraged by this. They consider it hypocritical. How can someone demand stronger copyright laws, but then ignore the laws currently on the books?! It doesn’t seem to make any sense.
However, it does make sense. Copyright Maximalists don’t give a frick about protecting copyrights. A better term to describe them would be Middlemen Protectionists.
These people don’t give a frick about the rights of some photographer. But they are highly concerned if Viacom or Disney feels their profits are insufficient.
When a powerful status quo corporation, which derives all of its profits collecting government granted monopoly rents, wants government protection, the Middlemen Protectionist are the first to jump up to help. They’ll demand new draconian laws. They’ll gladly dump the first amendment and due process to give their middlemen buddies higher profits.
But if a photographer wants a bowl of gruel to compensate him for his work, the Middlemen Protectionist just lights up another cigar and laughs.
It would certainly appear that I’m using a circumvention device to access protected copyrighted materials.
I’ve written before that the copyright industry simply cannot and will not compete in a free market. Whenever competition arises, they’ll sue. If they can’t sue. They’ll have laws enacted to allow them to sue. If they can’t get laws passed, they’ll have treaties passed, which will force new laws to be enacted.
As another example in the pseudo IP realm, D’Addario, which makes guitar strings, also wants government protection from China. He wants the government to act as his own private police force to protect his trademarks.
But one person in the copyright industry has learned that competition is a good thing. She’s the CEO of a company which makes and sells software. When an employee left the company and started selling her own nearly identical version of the software, the CEO’s first instinct was to go legal. She sued. That’s what the copyright industry always does when faced with competition.
But after spending a ton of money with no solution in sight, she decided to drop the legal action and compete. She listened to her customers and made a better product. Her sales are higher as are her profits.
Let’s hope the music and movie industries learn the value of competition before they go out of business.
A long long time ago, before income taxes were imposed upon the citizenry of the United States, the Federal government made its money from tariffs. If you wanted to import your goods into the US, you had to pay the government. Tariffs gave the government its loot and protected our corporations from competition.
But as the US became a huge economic juggernaut, US corporations wanted to export our goods to the rest of the world. Those corporations fought against tariffs and demanded “free” trade. They wanted to sell our goods to foreign lands without additional costs and impediments.
This system worked for a while. Because we were the world’s largest exporter, we we able to sell tons of our stuff to the rest of the world. However, it finally came back to bite us. Starting in the 60s Japan got really good at building quality products and used our lack of tariffs to import them at dirt cheap prices. Now we don’t make any electronics in the US.
But, for corporations, it was still a great system. US corporations simply moved production to third world countries such as Mexico and to former second world countries such as China. So now we don’t build much of anything in the US.
What I find so deliciously ironic is that a corporation is actually complaining about this system.
Jim D’Addario, the CEO of guitar string manufacturer D’Addario, is complaining about China. He’s complaining that the Chinese are able to produce cheaper strings and sell them for less and he’s losing money on it. He defends using the United States government his own private police force as follows:
How is possible for the public to ask the legitimate manufacturers to bear the role of the government and police every instance of (trademark infringement) with a law suit?
First, if you cannot compete in this “free” market, you should go out of business. Second, if the only way you can compete is by spending my tax dollars, you should go out of business.
Corporations rammed down our collective throats that a “free” market system works best. Now it’s killing you because you’re utterly inefficient. You want my tax dollars used to protect your trademarks?! What the frick do I get out of it? Do I get a share of your profits. Frick no. I get nothing while you get richer.
Jim, I have a solution for you which would benefit all of us. If you want government protection, demand tariffs on imported goods. You benefit because the cheap labor China relies upon and environmental laws it ignores are balanced by the collection of tariffs. I benefit because the federal government would no longer need to tax me as much. So I’d have more money to spend on your strings.
Jim, if you want protection. Ask for tariffs. Not a hand out. Thanks!
I’ve been meaning to write up a post about how the copyright industry lacks the ability to compete in a free and open market. What finally got me off my butt and write this post is the most amazing real-world example I could ever imagine.
U2′s manager Paul McGuinness asked Apple boss Steve Jobs to create a business model for the music industry:
Steve is the guy who has always magically known what the consumer wants before the consumer even knows it. I wish he would put that great mind and that great corporation of his to work devising a model that finally allows artists and creators to get properly rewarded for their work. Maybe he’s working on it right now. I hope so.
Paul McGuinness has been in the music industry nearly his entire life. But he cannot figure out a way to make money from it? Heck, it’s even worse than that. According to McGuinness, no one in the music industry knows how to make money running a business. Does that make any sense at all?
Unfortunately, it makes perfect sense.
Most people think that copyright is a property right. It is not.
Copyright is a government granted monopoly. The government grants monopolies over music, movies, photographs, etc., and then middlemen make money off of them. That’s how Paul McGuinness makes his money. Acting as a middleman between U2 and its fans.
Every time the copyright industry is faced with competition, they sue. If they cannot sue, they have laws passed so they can sue. If they cannot have federal laws passed to suit their needs, they have state laws passed instead. If they can’t get a government to pass the laws they want, they have treaties enacted which force all governments to pass the laws they want.
What I described above has happened countless times in the history of copyright. For a great example we have to travel back into time to when the player piano was first introduced. Back then the monopoly granted by copyright did not cover performances, only published sheet music.
So anyone could play any song he or she wanted without paying a dime. The music industry made money selling sheet music to musicians.
The player piano eliminated both paying for published sheet music and eliminated the musician who would have bought the sheet music.
So, as I said, the music industry of the 1800s sued. They lost because, as I said, copyright did not cover performances.
So the music industry went to Congress and had copyright laws changed to cover performances. So when the music industry sued again, they won. Of course they won. They always win.
I have to stress, the player piano was perfectly legal. The music industry could have competed with it just like restaurants compete with each other all the time. They could have advertised the fact that music played by real musicians constitutes a better product. That full bands are better than a mere piano. Etc.
However, at no point does the copyright industry ever simply roll up its sleeves to compete in a free market. Their “solution” to legal competition was and is to make the competition illegal. That’s why the music and movie industries have no problem suing their customers. The copyright industry doesn’t really have customers. They have tolls which we, by law, are required to pay under certain circumstances. When competition is created via new technology, they have new tolls added to the new technology. That’s a completely different mindset from someone running a business such as a restaurant.
So when I hear about someone who lived off the teet of copyright for his entire life, but who’s unable to come up with a business model that works in a free market, I’m not surprised at all. People like Paul McGuinness are not businessmen. They’re middlemen who live off what the government grants them. They never create. They never innovate. They merely take their cut. When their cut gets too small, they blame everyone but themselves. They even go as far as to sue their own customers or demand to have them kicked off the internet. As if that would magically make them start paying the old tolls again. People like McGuinness think this way because they don’t understand how businesses or markets work. And because they know of no other way.
As I’ve written about previously, the RIAA is attempting to get radio stations to pay
the labels musicians for the music radio plays. Not through any free-market business approach, but through an act of Congress. It’s called the Performance Rights Act.
As nearly everyone knows, throughout the history of radio, the payments have gone the other way. Artists and labels have paid DJs and programmers to have their music played on the radio. It’s called payola.
Even though it’s illegal, and even though labels are demanding to be paid from radio stations, the labels are still paying payola. Why? Because getting your song regularly played on the radio almost guarantees it’ll be a hit.
Of course radio broadcasters have fought against the Performance Rights Act. But they’re changing their tune as of late. They’re willing to support the passage of the act if the feds mandate FM radios in every portable electronic device, e.g., iPods, cell phones, etc.
As everyone knows, among young people radio is in decline. Young people don’t listen to radio like they did back in the old days. Back in the old days radio was the only way to hear hip and cool new music. And it was basically the only way to get music in your car or on the beach. Sure, 8-tracks and cassettes came along, but you had to have the time and equipment to make your mix tapes.
But when the MP3 player came out, suddenly you had your entire music collection in your pocket. Now that’s also true of cell phones, which nearly everyone carries.
So why would anyone listen the radio, filled with commercials and obnoxious DJs, when you already carry your entire music collection in your pocket?
Radio broadcasters are hoping that if they force FM receivers in consumer products, that people will magically start listening to the radio again, just like the good old days. It won’t happen. Anymore than the government forcing automobile manufacturers to include buggy-whip holders will force car drivers to buy and use buggy-whips. The time has passed.
That’s not to say that radio is dead. Far from it. Heck, you can still buy buggy-whips on Amazon.
It’s just that radio will no longer have the same impact it had back in the old days. Serials are gone. News is better found online. You can get real-time traffic reports on your phone. And the days of kids fervently listening to their favorite DJs for the favorite music are gone.
Radio is still the best way to get a hit single, but it’ll never be the center of attention it once was. And merely mandating an FM radio in everyone’s pocket will not change that fact.
Of course it’s partially radio’s fault for their decline. AM used to be cool and the DJs were as famous as the rock & roll stars they were promoting. White kids wanted to listen to black music, and they could only hear it on the radio.
But AM stations stopped caring about finding the next cool artist, and started playing just the hits, the hits, and only the hits. It became mundane.
Then FM radios came out. FM used to be cool. It used to be cutting edge. AM was where hits were made. But FM is where DJs were free to experiment and music fans tuned in to hear the next big thing.
But as the old saying goes, all good things must pass, and so did the coolness of FM radio. The album rock format took over from experimental DJs and programmers. Then the hit music format took over from that. Suddenly FM’s formats were just as narrow and bland as AM used to be.
It’s really hard to get teens excited about the safe, bland, and mundane. And the current consolidation of radio has eliminated anything worth being fervent about.