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Lesson 1: Obscurity is a far greater threat to authors and creative artists than piracy.
Let me start with book publishing. More than 100,000 books are published each year, with several million books in print, yet fewer than 10,000 of those new books have any significant sales, and only a hundred thousand or so of all the books in print are carried in even the largest stores. Most books have a few months on the shelves of the major chains, and then wait in the darkness of warehouses from which they will move only to the recycling bin. Authors think that getting a publisher will be the realization of their dreams, but for so many, it's just the start of a long disappointment.
Sites like Amazon that create a virtual storefront for all the books in print cast a ray of light into the gloom of those warehouses, and so books that would otherwise have no outlet at all can be discovered and bought. Authors who are fortunate enough to get the rights to their book back from the publisher often put them up freely online, in hopes of finding readers. The web has been a boon for readers, since it makes it easier to spread book recommendations and to purchase the books once you hear about them. But even then, few books survive their first year or two in print. Empty the warehouses and you couldn't give many of them away.
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Lesson 2: Piracy is progressive taxation
For all of these creative artists, most laboring in obscurity, being well-enough known to be pirated would be a crowning achievement. Piracy is a kind of progressive taxation, which may shave a few percentage points off the sales of well-known artists (and I say "may" because even that point is not proven), in exchange for massive benefits to the far greater number for whom exposure may lead to increased revenues.
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Lesson 3: Customers want to do the right thing, if they can.
Piracy is a loaded word, which we used to reserve for wholesale copying and resale of illegitimate product. The music and film industry usage, applying it to peer-to-peer file sharing, is a disservice to honest discussion.
Online file sharing is the work of enthusiasts who are trading their music because there is no legitimate alternative. Piracy is an illegal commercial activity that is typically a substantial problem only in countries without strong enforcement of existing copyright law.
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The simplest way to get customers to stop trading illicit digital copies of music and movies is to give those customers a legitimate alternative, at a fair price.
Lesson 4: Shoplifting is a bigger threat than piracy.
While few of the people putting books on public web servers seek to profit from the activity, those who are putting up CDs for sale on eBay containing PDF or HTML copies of dozens of books are in fact practicing piracy--organized copying of content for resale.
But even so, we see no need for stronger copyright laws, or strong Digital Rights Management software, because existing law allows us to prosecute the few deliberate pirates.
We don't have a substantial piracy problem in the US and Europe. The fact that its software products have been available for years on warez sites (and now on file trading networks) has not kept Microsoft from becoming one of the world's largest and most successful companies. Estimates of "lost" revenue assume that illicit copies would have been paid for; meanwhile, there is no credit on the other side of the ledger for copies that are sold because of "upgrades" from familiarity bred by illicit copies.
What we have is a problem that is analogous, at best, to shoplifting, an annoying cost of doing business.
And overall, as a book publisher who also makes many of our books available in electronic form, we rate the piracy problem as somewhere below shoplifting as a tax on our revenues. Consistent with my observation that obscurity is a greater danger than piracy, shoplifting of a single copy can lead to lost sales of many more. If a bookstore has only one copy of your book, or a music store one copy of your CD, a shoplifted copy essentially makes it disappear from the next potential buyer's field of possibility. Because the store's inventory control system says the product hasn't been sold, it may not be reordered for weeks or months, perhaps not at all.
Lesson 5: File sharing networks don't threaten book, music, or film publishing. They threaten existing publishers.
The music and film industries like to suggest that file sharing networks will destroy their industries.Those who make this argument completely fail to understand the nature of publishing. Publishing is not a role that will be undone by any new technology, since its existence is mandated by mathematics. Millions of buyers and millions of sellers cannot find one another without one or more middlemen who, like a kind of step-down transformer, segment the market into more manageable pieces. In fact, there is usually a rich ecology of middlemen. Publishers aggregate authors for retailers. Retailers aggregate customers for publishers. Wholesalers aggregate small publishers for retailers and small retailers for publishers. Specialty distributors find ways into non-standard channels.
Lesson 6: "Free" is eventually replaced by a higher-quality paid service
A question for my readers: How many of you still get your email via peer-to-peer UUCP dialups or the old "free" Internet, and how many of you pay $19.95 a month or more to an ISP? How many of you watch "free" television over the airwaves, and how many of you pay $20-$60 a month for cable or satellite television? (Not to mention continue to rent movies on videotape and DVD, and purchasing physical copies of your favorites.)
Services like Kazaa flourish in the absence of competitive alternatives. I confidently predict that once the music industry provides a service that provides access to all the same songs, freedom from onerous copy-restriction, more accurate metadata and other added value, there will be hundreds of millions of paying subscribers. That is, unless they wait too long, in which case, Kazaa itself will start to offer (and charge for) these advantages. (Or would, in the absence of legal challenges.) Much as AOL, MSN, Yahoo!, Cnet, and many others have collectively built a multi-billion dollar media business on the "free" web, "publishers" will evolve on file sharing networks.
Why would you pay for a song that you could get for free? For the same reason that you will buy a book that you could borrow from the public library or buy a DVD of a movie that you could watch on television or rent for the weekend. Convenience, ease-of-use, selection, ability to find what you want, and for enthusiasts, the sheer pleasure of owning something you treasure.
The current experience of online file sharing services is mediocre at best. Students and others with time on their hands may find them adequate. But they leave much to be desired, with redundant copies of uneven quality, intermittent availability of some works, incorrect identification of artist or song, and many other quality problems.
Opponents may argue that the Web demonstrates precisely what they are afraid of, that content on the Web is "free", that advertising is an insufficient revenue model for content providers, and that subscription models have not been successful. However, I will argue that the story is still unfinished.
Subscription sites are on the rise. Computer industry professionals can be seen as the "early adopters" in this market. For example, O'Reilly's Safari Books Online is growing at 30 percent a month, and now represents a multi-million dollar revenue stream for us and other participating publishers.
Most observers also seem to miss the point that the internet is already sold as a subscription service. All we're working on is the development of added-value premium services. What's more, there are already a few vertically-integrated ISPs (notably AOL Time Warner) that provide "basic" connectivity but own vast libraries of premium content.
In looking at online content subscription services, analogies with television are instructive. Free, advertiser-supported television has largely been supplanted--or should I say supplemented (because the advertising remains)--by paid subscriptions to cable TV. What's more, revenue from "basic cable" has been supplemented by various aggregated premium channels. HBO, one of those channels, is now television's most profitable network. Meanwhile, over on the internet, people pay their ISP $19.95/month for the equivalent of "basic cable", and an ideal opportunity for a premium channel, a music download service, has gone begging for lack of vision on the part of existing music publishers.
Another lesson from television is that people prefer subscriptions to pay-per-view, except for very special events. What's more, they prefer subscriptions to larger collections of content, rather than single channels. So, people subscribe to "the movie package," "the sports package" and so on. The recording industry's "per song" trial balloons may work, but I predict that in the long term, an "all-you-can-eat" monthly subscription service (perhaps segmented by musical genre) will prevail in the marketplace.
Lesson 7: There's more than one way to do it.
A study of other media marketplaces shows, though, that there is no single silver-bullet solution. A smart company maximizes revenue through all its channels, realizing that its real opportunity comes when it serves the customer who ultimately pays its bills.
At O'Reilly, we've been experimenting with online distribution of our books for years. We know that we must offer a compelling online alternative before someone else does. As the Hawaiian proverb says, "No one promised us tomorrow." Competition with free alternatives forces us to explore new distribution media and new forms of publishing.
In addition to the Safari subscription service mentioned above, we publish an extensive network of advertising-supported "free" information sites as the O'Reilly Network (www.oreillynet.com). We have published a number of books under "open publication licenses" where free redistribution is explicitly allowed (oreilly.com/openbook). We do this for several reasons: to build awareness of products that might otherwise be ignored, to build brand loyalty among online communities, or, sometimes, because a product can no longer be economically sold in traditional channels, and we'd rather make it available for free than have it completely disappear from the market.
We have also published many of our books on CD ROM, in a format referred to as the CD Bookshelf, typically a collection of a half dozen or so related books.
And of course, we continue to publish print books. The availability of free online copies is sometimes used to promote a topic or author (as books such as The Cathedral and the Bazaar or The Cluetrain Manifesto became bestsellers in print as a result of the wide exposure it received online). We make available substantial portions of all of our books online, as a way for potential readers to sample what they contain. We've even found ways to integrate our books into the online help system for software products, including Dreamweaver and Microsoft's Visual Studio.
Interestingly, some of our most successful print/online hybrids have come about where we present the same material in different ways for the print and online contexts. For example, much of the content of our bestselling book Programming Perl (more than 600,000 copies in print) is available online as part of the standard Perl documentation. But the entire package--not to mention the convenience of a paper copy, and the aesthetic pleasure of the strongly branded packaging--is only available in print. Multiple ways to present the same information and the same product increase the overall size and richness of the market.
And that's the ultimate lesson. "Give the wookie what he wants!" as Han Solo said so memorably in the first Star Wars movie. Give it to him in as many ways as you can find, at a fair price, and let him choose which works best for him.
Slashdot/Linux' Prospects In Jordan
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In another faraway country... by KamenK (635658) <kirilov@[ ].bg ['abv' in gap]> on Wednesday December 25, @06:25PM (#4958295) |
| 30% poverty rate is nothing. Here in Bulgaria we got a lot more, not
sure of the exact figure; still, the state administration uses proprietary
software only. This year the government made a deal with Microsoft for
$13,650,000 - mostly WinXP licenses, without even considering any
alternatives. The press was screaming against the deal for months, as did
anyone who knew about free software and Linux. The official responsible
for the MS deal presented the reasons for choosing our favourite company,
revealing he was completely ignorant about computers. This guy can't tell
the difference between a mail client and an operating system!**#@#@@? Not
to mention that the deal itself was totally opaque and didn't help improve
the reputation of MS (and the government) at all. As a result of all this we now have a stronger than ever Linux society. The first projects aiming to provide Linux solutions for the government and NGO sector have started and this is Good(tm). I hope the guys in Jordan will act quicker. Yeah, I know this is offtopic. I just wanted to share my $0.02 with the geek world. |
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Similar situation in Syria by Anonymous Coward on Wednesday December 25, @12:44PM (#4957269) |
| Here in Syria [cia.gov] we have a very primitive infrastructure. Using free software is one way to cut costs. I'm promoting free software everywhere I go. Some problems we have is that most programs aren't full unicode aware, but we're working on patches that we then submit to the authors. |
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Bad approach (Score:1) by Osty (16825) on Wednesday December 25, @01:04PM (#4957334) (http://www.daishar.com/) |
And open source zealots wonder why nobody in the business world takes them seriously. Come on. Linux, just like every other operating system, is nothing more than a tool. There is no possible way that it is going to be right for every single situation, every single time. That would explain my you haven't had success on every situation (and not even on "a lot" of situations, but only "more than one" occassion). Next time, try assessing the problem properly and tailoring a solution for the problem itself. Knee-jerking and screaming "Linux!" is not the proper reaction. |
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Re:Similar situation in Syria by mumblestheclown (569987) on Wednesday December 25, @01:38PM (#4957430) |
| This is bullshit.
Syria is a key strategic country that the US cannot afford to piss off over trifles. Furthermore, Syria is a net importer of intellectual property and has no significant software industry whatsoever to speak of. Ergo, the low-cost-best-results alternative for Syria is to turn a blind eye towards software piracy, knowing full well that rightsholders' recourses are few. This will result in equally low cost, but better productivity and compatibility with the more developed world, because, zealot wet dreams notwithstanding, as of this moment Windows beats Linux for everyday user tasks, even more so when we take network effects into account. You should stop promoting free software and start promoting piracy. |
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Re:Similar situation in Syria by Anonymous Coward on Wednesday December 25, @05:11PM (#4958089) |
| > Who benefits from software piracy? I mean in
the long run? One country that benefited greatly from SW piracy was the USA. Check the early history of the US and how the so called intellectual property of Britain and the other major IP powerhouses of the early 19th century were treated. It wasn't until the late 1800's when large US corporations started controlling their own patents and other IP that the US started getting concerned about protecting artificial IP rights. The IP advocates in the US are some of the worlds biggest hypocrites. |
[Sept 27, 2002] Salon.com Technology Profits from piracy
"The software industry learned its lesson in the 1980s," says Kraus. "They copy-protected a ton of software only to find that the only people inconvenienced were the legitimate customers who wanted to make backup copies. The real pirates always found a way around the copy protection. [Software publishers] learned the hard way that law enforcement and groups like the Business Software Alliance were better ways to handle the piracy issue."
Indeed, many software companies have learned to avoid the issue altogether. Whether through free downloads, copyrights that allow for unrestricted copying or a simple unwillingness to equate computer users with thieves and cutthroats, the term "pirate" has lost a bit of its sting in recent years. Legal embarrassments such as a 2001 French court decision against Microsoft, fining the company 3 million francs for illegally incorporating another company's code into the Softimage 3D animation package, have further dulled the term's once-sharp edge.
Finally, there are those who simply view the term as too one-sided, especially in an industry where companies quite often benefit from illegal copying.
The argument for allowing piracy boils down to two words: network effects. Without a critical mass of users, most software products tend to wither and die. Conversely, the more users a software product acquires, particularly a consumer-oriented software product, the more valuable it becomes. This is especially true for operating systems, which require significant third-party support from application developers to stave off obsolescence. In fact, it was Microsoft's overwhelming dominance of the P.C. software marketplace in the mid-1990s that forced many economists to reexamine the issue of software pricing.
Starting with a 1994 paper by Amherst researcher Lisa N. Takeyama, economists and policy researchers began advancing the argument that having a large illegal user base might actually boost vendor profitability. In a 1999 paper titled "A Strategic Approach to Software Protection" economists Oz Shy and Jacques Thisse examined instances in which companies faced with certain duopolistic market settings dropped software protection as a marketing strategy and benefited from the decision.
Osorio's working paper, which has yet to be published, advances the argument into a new realm. Instead of looking at competition between proprietary software vendors, Osorio looks specifically at competition between proprietary and open-source software vendors unhindered by piracy concerns. Not surprisingly, his research takes him to the Chinese marketplace, where recent government investment in software research has resulted in a number of open-source spinoffs, most notably the Beijing-based operating systems vendor Red Flag Linux.
Factoring in the presence of open-source competition, Osorio's offers a "threshold" rate -- 81 percent according to statistical models laid out in the paper -- above which fighting pirates becomes a less optimal strategy than allowing piracy to occur. In other words, in developing markets, companies stand to make more money if they view each new illegal user as one more mouthpiece for the software and one less customer for the competition.
In its headline description of the Microsoft-China MOU, the Register, a UK Web site known for its cheeky coverage of the IT industry, summed up the Osorio argument even more succinctly: "Ballmer to China: 'Steal all the software you want, so long as it's ours.'"
Not everybody buys the "network effects" theory. An August, 2000 paper put out by Singapore researchers Chua Li Tze and Sougata Poddar dismisses most pro-piracy arguments as mere "artifacts" of statistical models that bear little resemblance to actual markets. The paper goes on to argue that even if network effects are given the fullest weight possible, "protection" of copyright "is always optimal."
Despite such counterarguments, the evidence coming in from the marketplace suggests that some companies are erring on the side of larger markets. For example, Apple, which declined a request for comment on Osorio's paper, distanced itself from market rival Microsoft by releasing the latest version of its MacOS, code named Jaguar, without any copy activation mechanisms. Microsoft XP, in contrast, includes a "product activation" feature designed to limit copying and suffered a minor PR embarrassment this spring when versions leaked out onto the Internet anyway.
Osorio, who doubles as a visiting research scientist at the MIT Media Lab, prefers to call his paper a "preliminary result" for the moment. He is currently exposing it to the harsh criticism of the peer-review process to make sure he hasn't missed anything. Still, he says, the feedback has been largely positive.
"I've had talks with people at proprietary software companies," he says. "They say, 'Yeah, you're right on this, but we cannot say that publicly.'"
One person who does speak out publicly in favor of the paper is Carl Howe, a senior analyst who follows the software industry for Forrester Research. Howe describes Microsoft's recent anti-piracy efforts in China as a prolonged exercise of "shooting itself in the foot" and wishes the company would spend less time obsessing over lost revenues and more time obsessing over new customers.
"I think they're actually acting against game theory," says Howe. "They're doing what's not in their interest by cracking down on piracy."
Then again, as the recent MOU indicates, Microsoft executives aren't exactly ignorant when it comes to game theory. As a company, Microsoft has shown an impressive willingness to modify corporate ideology in the face of market momentum. It is also a company willing to give away its products for free -- Internet Explorer anyone? -- for a share of future profits. Added together, it isn't hard to envision a kinder, gentler Microsoft, at least where China is concerned.
Although Microsoft representatives declined to comment on the Osorio paper, a company spokesperson was more than happy to reiterate the company's policy on copyright infringement. Like the Ballmer response in June, the statement included no mention of the word "piracy" -- a term once reserved specifically for just such occasions:
"Microsoft believes it is essential that intellectual property rights be protected and respected in the digital age so that worldwide economic growth and Internet commerce can continue to flourish," said the spokesperson.
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