Copy protection revisited

I mentioned content protection in my last post, and this Salon article "Profits from Piracy Evidence is mounting that cracking down on software copyright infringement may not be good for business. Case study: Microsoft in China" discusses how software vendors have begun to realize that it's neither possible nor practical to actually protect their softward from illegal copying. The new twist though, is the suggestion that it might actually be profitable.

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.

But hey, I'm not an expert here so I'm not going to go around telling everybody we ought to drop all copy-protection and have all open-source code. The point I really wanted to make was one they also speak of in this article: the futility of creating products that are inconvenient to use and which will be pirated anyway. Here's another quote from the article:

""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.

Now obviously, the software industry's products are significantly different from the entertainment industry's. That doesn't necessarily mean the principle doesn't apply, but Hollywood (damn those liberals!) doesn't want to let go of their very strict copy protection schemes.

Microsoft's friendlier stance in China parallels an overall softening of anti-piracy rhetoric in recent months, at least on the part of tech industry. Give most of the credit for that to Hollywood, which, in its hard-line efforts to clamp down on copyright infringement in the U.S., has succeeded in alienating many high-tech companies. Witness this spring's flare-up between Disney and Apple over the iPod, a portable MP3 player, and Apple's "Rip.Mix.Burn" ad campaign, which was labeled a tacit endorsement of unauthorized copying by Disney chairman Michael Eisner.
The Hollywood/high-tech tiff seemed to reignite in mid-September during a panel discussion at the International Broadcasting Convention in Amsterdam. Speaking on behalf of Microsoft, Brad Brunell, marketing and business development director of the Windows New Media Platforms division, wondered aloud why Hollywood execs insisted on setting the piracy threshold down to the level of individual users. Instead of fighting consumer enthusiasm, "why not just embrace it?" Brunell said. "Why not just flood the peer-to-peer services with legitimate content?"

I have never believed the RIAA's claims about file-sharing networks and piracy causing decreases in profits. To me it seems pretty simple: if a person purchased a copy of a cd or single from an illegal vendor, then they cost the legal publisher money. However, free downloading is not and has never been a replacement for purchasing cds. The logic of that seems obvious enough to me: you can't assume everyone who wants to listen to a song or album would have bought it. And as a matter of fact, while I don't know all of my friend's buying habits, most of them don't put a lot of money into music, whether they have ever downloaded music or not. It doesn't change their individual buying habits. I know one person who has a lot of burned cds, some of which music he got from other individuals, but then he still didn't replace his cd buying habit with that, since he didn't have one before! The only reason he has all that now is that it is free! Anyway, if free downloads don't change the buying habits of the vast majority of people who buy (or don't buy) music, which I truly believe, then piracy cannot be such a major problem!

Here then, is someone else who's willing to believe such a thing, but unlike me, he's an expert in the area. Stan Leibowitz is an economist at UTD who's been studying copyright law since the 70's. So if anyone will know what he's talking about, he will. I mean, he's not saying exactly what I said, but he does talk a lot about why the fear of downloading is more hysteria than rational fear. He also says that there doesn't appear to be any numbers to support the idea that downloaded music has hurt cd sales in any way.

One of the other more intersting things he has to say is that basically, cheap downloading is the way of the future. An interesting point that he makes is that he thinks downloaded songs should be much cheaper than they are. I would really recommend that you guys read the entire article. It's quite interesting.

In this article, really brief, a group at the University of Ottowa calls down the Canadian music industry.

CIPPIC also stated that file-sharing alone for recent declines in record sales has not been proved.
"There are many other likely reasons for revenue decline, including fewer albums released, increased competition from other forms of entertainment ... and general economic conditions," he said.
He said that recent studies show file-sharing can actually lead to increased sales, as fans test tracks on-line before purchasing CDs.
"It is telling that CRIA did not release figures on this particular issue," he said.

Now one last point I want to make is that it is almost impossible to find any numbers backed up by anything on this issue. If you hear record execs talking about millions of downloads, billions of dollars, percentages...well, it's basically numbers being pulled out of a hat. I mean, I've looked for the numbers. There doesn't seem to be a single original source of statistics to be had. Look through all the old news articles you want, look at RIAA documentation, there's no sources for the numbers. This is another example of journalists not doing their homework, because even people you would think should know bettter have accepted the claims of the RIAA that it's losing them billions of dollars. What's really there are two numbers: 30% decrease in sales of cds since 2000, and doubling or tripling of people who use p2p networks. But there's nothing that actually connects the two numbers. We shouldn't have laws and lawsuits based on assumptions.

Ok people, this has taken me an hour and a half to write. You better have something to say!