Future Tense: A Pirate’s Life For Whom?
First disclaimer: Nothing that follows is intended to be read as an endorsement of piracy, only some thoughts about it as a social phenomenon, and what it might tell us about product demand.
Second disclaimer: I have published over fifty books and a few hundred short stories, columns, and articles, most of which I own the copyrights on. I’ve also contributed scripts to a dozen different TV series, and although I do not own any of those copyrights, I am entitled to residual participation on those television copyrights. And I have a financial interest in one movie, Martian Child, which is (loosely) based on the story of my son’s adoption. So I am not unbiased on the issue of copyrights and ownership.
Third disclaimer: I don’t like piracy, I don’t advocate it, I don’t endorse it, I don’t condone it—but despite my disapproval, people still keep downloading illegal copies of music, TV shows, books, comics and graphic novels, magazines, software, keygens, cracks, and hacks.
So, let’s look at all that downloading.
Start with the obvious. People download music and software and movies and TV shows because they want it. They want to listen to the music, watch the movie, play the game, use the software tool, read the book, look at the fanedit, hear or see the mashup, whatever.
The owners of the copyright don’t object to people wanting the product. In fact, they want you to want it. But they also want you pay for it. It’s how they stay in business—but sometimes it leads to shortsighted decisions, especially if you don’t know what business you’re in.
Harvard Business School used to teach a great example of this. After World War II, the government shifted many of its mail contracts from the railroad industry to the burgeoning airline industry. This was millions of dollars of revenue lost to the railroads. Because air travel was faster than trains, more and more people began to travel by air. As more people bought cars, and as the Interstate Highway System expanded, the railroads lost even more customers. The railroads still carry freight, but with the exception of a few high-density corridors, passenger rail travel in this country remains an intolerable mess.
This is because the railroad industry thought it was in the railroad business—they’re not. They’re in the transportation business. But they thought they were in competition and forgot about the possibility of partnership.
If the railroad industry had thought about providing genuine service to the customers, they would have partnered with the airlines. A train station can exist in a city center, an airport can’t. They could have established transportation hubs, with trains delivering passengers from city centers directly to nearby airports. By making it more convenient to use trains to connect to planes, both leaving and arriving, they would have simplified travel. Instead…we have competing facilities, overcrowded freeways, jammed parking lots, and an enormous waste of resources. (Meanwhile, in England, if you land at Heathrow, you can take the tube directly to anywhere in London, convenient walking distance to your hotel.)
Here’s a more contemporary example—what if the oil companies realized that they’re not in the business of selling oil? They’re in the business of providing energy. What if they invested one week’s profits into research and development of solar, wind, geothermal, biofuel, and tidal power? When the oil runs out, as it will, they’ll still have ways to sell energy to the consumer. But right now, too many people in the oil industry regard all those other energy-production methods as competition, not partners.
They don’t know what business they’re in.
This is the same mistake that the RIAA and the SMPTP are making today. They think they’re in the business of selling discs. They’re not. They’re in the business of delivering entertainment. And they’ve forgotten that. At least, their lawyers seem to have forgotten it.
This isn’t the first time the entertainment industry has made this mistake. Almost forty years ago, Sony started selling Betamax videotape recorders for home use. Universal and Disney promptly sued, claiming that home video recording would create the opportunity for copyright infringement and they would lose billions of dollars. The Supreme Court ruled against them. Under the fair use provisions of the copyright law, it’s legal to record media at home for personal use. Even if some people might use videotape machines for illegal purposes, that was not sufficient justification for denying fair use to everyone else.
After losing that lawsuit, Disney and Universal (and all the other studios as well) began selling their movies on Betamax and VHS tapes, and later on DVD. Videotape sales became an enormous market for the studios and eventually DVD sales accounted for at least half, often more, of a film’s total gross income. In fact, the DVD became so profitable that many films were made directly for the DVD market. Starship Troopers II and III, for example.
Or if you want to go further back, almost ninety years ago, when broadcast radio began as a commercial enterprise, the record companies were adamantly against the idea of having their music played on the air. They were certain that if people could hear the music for free, they wouldn’t want to buy the records. But what happened instead was that the radio became the primary channel for showing off new music.
Radio play energized record sales into a multi-million dollar industry. By the fifties, record companies were even paying DJ’s to have them play records they wanted to promote into hits. It was called ‘payola’ and when it was revealed, it was a major scandal for the record companies.
Knowing what business you’re in starts with knowing who your customers are and what they want, then finding the best way to serve that desire. Customers want music and movies.
Downloading what you haven’t paid for is electric shoplifting—no question—but the simple fact that downloading continues on such a scale is evidence of just how much the audience wants easy access to the music.
Amazon and Zune and iTunes all demonstrate that the audience is willing to pay for the convenience of downloading—especially if the prices are reasonable and the bit-rate is high enough. (I’ll take lossless, please.)
Disc manufacturing and distribution is cheap per unit, but expensive in volume. Getting the discs to the customers costs more money, the distributor takes a cut, the retailer takes a cut, and the inventory sits in the racks whether it sells or not, adding to the overhead of the retailer. In that model, the profit margin is sliced thin among all the participants, distributors and sales outlets.
But direct-downloading takes at least three steps out of the distribution channel. Record companies can charge less for albums and still show a higher profit per sale—and artists could enjoy a higher royalty rate too.
But a shift to a different business model is only possible if and when the record companies stop thinking that they’re in the business of selling records and remember that they’re in the business of selling music.
Right now, they’re still in the business of suing downloaders. The only people who can benefit from that are the lawyers.
Pfeh.
David Gerrold is a Hugo and Nebula award-winning author. He has written more than 50 books, including "The Man Who Folded Himself" and "When HARLIE Was One," as well as hundreds of short stories and articles. His autobiographical story "The Martian Child" was the basis of the 2007 movie starring John Cusack and Amanda Peet. He has also written for television, including episodes of Star Trek, Babylon 5, Twilight Zone, and Land Of The Lost. He is best known for creating tribbles, sleestaks, and Chtorrans. In his spare time, he redesigns his website, www.gerrold.com