Hacker News Reader

Comment by solutionyogi | Hacker News Reader

Pardon me, but this is total bullshit.

Piracy is not market correction. There is no reason a particular product has to be priced relative to the marginal cost of production. According to his logic, an audio cd should cost less than a dollar.

Producers can price their product however they want. Consumers have the choice to buy it if they can afford it. Trade happens only if both parties think that they are getting value out of it, econ 101.

Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior.

I am surprised that this post reached top of hacker news.

View on HN

"I am surprised that this post reached top of hacker news."

I sometimes upvote articles that I disagree with so that they'll live longer, because I want to see more discussion about them.

Does anyone else do this?

That's why I originally voted this up, and why I voted you up. I wanted to see an intelligent HN discussion on the finer points of why this is bullshit.

This is a big problem.

You come here for intelligent discussions, and would like to hear intelligent people's take on why a rant is bullshit. What will happen is that over time the intelligent people will leave. The reason there is such an intelligent discussion here is that the submissions are worth discussing - if they degenerate the people that make the intelligent conversation will leave, and you will have Reddit. I read through the article, expecting to find a subtle point, an intelligent analysis or a valid viewpoint. Something to make the article worth my time. When there was none I felt a bit cheated. If this happens enough I will leave.

Yes, but only articles that have a valid point. I enjoy coming to HN because the linked articles have intellectual value, even if I happen to disagree with them. This one doesn't.

Piracy is not a market correction. It is a superior product. What.cd and waffles.fm, with their depth of product and usability, make iTunes and Amazon music seem like a joke.

The music hydra does not just have every album, it has most versions of every album. When what.cd and waffles.fm are shut down, they will be replaced by four sites, possibly more.

For example, for The Beatles album Let It Be, the following editions are available, as high-quality MP3s and FLAC (currently just FLAC for the vinyl rips, which is fine):

24 bit lossless vinyl rip of the 1970 Apple record. 24 bit lossless rip of 1982 Japanese vinyl. 1987 Parlophone CD. 2004 Apple vinyl rip (16 bit lossless, alas). 2007 Purple Chick Remaster. 2007 Dr. Ebbetts Remaster. 2008 Dr. Ebbetts Remaster. 2009 Apple Remaster.

When the music industry can offer a product superior to piracy, they will stand a chance. When the marginal cost of production falls to zero, classical economics ceases to function and extra-market restrictions are needed to force the continued existence of the market.

In my mind, justifying piracy just because their products are superior is like justifying theft just because the commercial versions are crippled.

Besides, piracy is observed in other industries where there's no such difference (games, books), so I don't think that's the driving force.

Nobody's saying piracy is right. Just that it's a natural, predictable occurrence that will be part of any digital economy, and that any realistic theory of markets needs to account for it. Most Econ 101 treatments assume full compliance with laws, which in this case is an absolutely devastating assumption, because supply and demand don't tell us much at all when copying is as easy and anonymous as it is.

The problem: economically, in many (most?) cases piracy is the rational choice. If I want a product that is sold for $20, but it's available for free (illegally) as a torrent, then I have to weigh the $20 savings vs. the risk of being caught and the financial penalty if caught. Since the risk of being caught is extremely small, well under 1% (practically zero in some cases), even a several thousand dollar fine is not enough to tip the scales in favor of purchase.

...until we consider morals, which in a sense can be considered to have financial value. To some people, the desire to "do right" is worth a lot, enough to make piracy "cost" more than the purchase. But for many more, the moral value of paying for a game/CD/movie/etc legitimately does not balance out the gain they would receive by pirating. These decisions depend on the particulars, obviously - if you like the artist, you'll assign a higher moral value to paying them, and if you hate a company, you're not going to give a second thought to pirating their software.

Put another way: do you feel $9 worth of bad when you pirate a $10 CD? If not, then you are making the wrong decision when you pay for it.

The original claim is correct, but in a roundabout way: piracy is (at least in part) a result of the fact that prices are higher than the moral cost that people suffer when they pirate them, and it should be exerting a downward price pressure to normalize the two factors (actually, it should be applying a downward pressure only until an optimal point - there are many subtleties involved in figuring that point out, and I'm not actually sure that we're too far off from it, but I'll leave speculation about that for another rant...).

Groups like the RIAA have tried to respond by raising the cost of piracy instead of lowering the cost of purchase (these costs include things like inconvenience, payment hassles, etc). It seems unlikely that they will be able to push the average cost to a pirate high enough, though, unless they can massively increase the enforcement rate, which is rather unlikely. So we're stuck in a bit of a market stalemate.

The upside (depending on your POV) of which is that it's pretty much a no-brainer for a lot of people to pirate a lot of stuff, and they're getting loads of value for very little cost.

Edit: Yes, I am suggesting that instead of price approaching marginal cost ($0), it should be approaching the less tangible "I'm a bad person" moral cost that people incur when they don't pay for something, plus the inconvenience cost of pirating, both of which are usually (but not always) nonzero. Note the difference between this and donation systems: the crucial difference is that the "I'm a good person" value that people get by donating to an artist is not equal to the moral value they lose by pirating, which is typically higher. I suspect it is better to charge for something, even if you know and accept that some people will pirate it, than to give it away for free and solicit donations.

give this man your upvotes. repeat after me: economic statement are value free. nobody said piracy was good or bad. piracy is a natural outcome given human preferences.

Ok, so now repeat after me: murder is not good or bad. Murder simply is; a natural outcome given human preferences.

I'm obviously being flippant: being a 'natural outcome given human preferences' does not render piracy immune from judgement as good or bad. As I'm sure you'll agree, murder is one perfectly natural activity (as evidenced by its prominence in regions of the world where the rule of law is weak) which is undeniably bad.

And I think piracy is bad. To those that think it is ok, I meekly and politely suggest that you make an effort to empathize with an indie game programmer whose work is pirated many times in excess of sales, leaving said programmer without the requisite resources for follow-ups or improvements -- to say nothing of personal compensation. The pirate (or filesharer) derives enjoyment out of the programmer's work, and yet the programmer has not been compensated, nor has he consented to the pirate's use. This is unjust. To claim that e.g. filesharing, where the activity is 'non-commercial', is not theft (and therefore not unjust) simply because the file is duplicated rather than moved is just as specious as to claim that an employee at Google should be allowed to take Google's proprietary source code and algorithms, leave the company, and to publish them on github or elsewhere, because 'sharing is caring', and because, hey, the original is still on Google's servers, right? -- without fear that they will be punished by the law.

Or put yourself in the shoes of a musician, like me (shameless plug: www.myspace.com/martindifeo), who after spending considerable time and energy and financial resources into his music, is faced with people telling him, with no apparent irony, on the one hand that they love music and respect musicians, and on the other that he (and other digital content creators) must simply accept that his music will be pirated. (The OP may not explicitly say it, but this statement is actually somewhat timid. For those who hold the view that music piracy is unavoidable, and therefore simply to be incorporated into the 'business model' or 'economic model', typically couple this view with a vehement opposition to the introduction of any legal or technological instrument to actually enforce digital rights, be it DRM, deep-packet inspection, graduated response, etc., thereby encouraging and, in effect, lobbying for the very conditions he claims are unavoidable.)

The OP proposes instead that the musician engage, in effect, in a PR campaign to win over the 'hearts and minds' of fans, in order to induce them to pay some 'token gesture' fee for the music even though, let's be honest, it's totally unnecessary as the OP himself states. I, for one, would like to think that my (ok...I'm being optimistic here) fans aren't idiots, and I certainly wouldn't relish the prospect of having to guilt-trip or otherwise trick them into pitying me enough to send me a few coppers. I'm not destitute, I wasn't e.g. born in the slums of Rio de Janeiro... I can't play the pity card very well. I don't want to take on causes, no matter how noble, simply to curry favour.

Call me crazy, but I think that the normal and correct way for transactions to occur in a modern, civilized, capitalist economy calls for the producer of the good to set the price -- without fear that his product can be appropriated unlawfully. If that price is too high, then consumers are free not to purchase, or, more pertinently, to purchase from a lower-priced competitor. And, no, by competitor, I don't mean to say TPB or the like, I mean another musicians who offers his music for free or at lower cost.

I challenge anyone to name a single instance in history in which widespread and systematic violation of property rights -- real or intellectual -- have led to anything other than net impoverishment. To believe that, simply because it is coupled to the technological marvel that is the internet, piracy and filesharing are ok and to be tolerated, is akin to saying that fusion bombs are 'ok' because, after all, they employ such exquisite quantum physics. Technological advances can be used to encourage good, civil behaviour, and for bad, disrespectful behaviour, like filesharing and piracy, where one minority constituency (the musicians and associated lines of work) are violated and left impoverished for the benefit of the majority (the consumers). AK47s can be purchased for a mere few hundred dollars in many regions, such is the wonder of modern manufacturing. Should we therefore all expect, to use a topical phrase, a bullet in the (mother*$%^ing) head? ;)

Just the thoughts of a concerned musician and onetime hacker...

uh....I didn't claim that piracy was immune. you do know that it is possible to talk about the effects of things without condoning them right? we can talk about how the murder rate of cities affects property values for example.

Call me crazy, but I think that the normal and correct way for transactions to occur in a modern, civilized, capitalist economy calls for the producer of the good to set the price -- without fear that his product can be appropriated unlawfully.

My main problem with this ideal (and I suspect one of the key things that needs to be addressed for the digital economy overall to flourish) is "the price". It's all well and good to set a single price for physical goods, where marginal costs are nonzero, but the fact is, it costs nothing to distribute one more copy of a digital good, so any time a consumer is willing to pay even a single penny for a song/album/movie/etc. but can't do so because the producer's price is too high, the producer loses.

I don't have anything useful to say on the morality of any of this, because piracy is not going away no matter what anyone does - it's clearly "wrong", but the important question is what we should do about it, and I have yet to see any practical solutions other than accepting it as a cost of business and trying to maximize revenues anyways. DRM schemes are fine in theory, and I'd have no problem if a good one came around, but in practice they have all really sucked because they punish legit consumers with all sorts of annoyances, and they still end up getting cracked, so pirates continue to pirate. DRM is by definition an impossible technical problem to solve, so we can't expect it to be a silver bullet.

I've yet to see any mass exodus from any of the artistic fields that are affected by piracy, so can't believe that it's is killing anything, or that it will in the future. If I had to guess, more than anything else it's increasing the number of people that obtain a product, most of whom would never have bothered to buy it in the first place. At worst it's a few percentage point hit to the industries, but IMO those percentage points could be more than reclaimed by adopting a more creative pricing structure (I realize this is not something an individual artist could do, as it would require a lot of data to predict what someone would be willing to pay).

Beyond any of this, I don't think the small guys are hurting at all due to piracy, as they never had any sales to speak of to begin with. Taking music as an example (I've both been a musician and worked at a record company), before the Internet, things looked almost exactly as they did now: big musicians made a lot of money off of albums and selling their fame in other ways, whereas small musicians had trouble making rent and made most of their money from gigs and lessons. The only difference these days is that small musicians can actually sell a little bit of their music on the net to people that aren't physically at their shows - back when I was playing, a band without a major record deal was lucky if it sold any CDs at all, and worse, they had to pay for large numbers of them to get pressed up front. I knew very few, if any, unsigned artists that were able to recoup even the physical production costs of their CDs pre-2000, so I'd say things are slightly better for the small guy now, if anything.

Actually, in many places (specially what we call '1st world countries'), removing the 'morals' makes almost all theft rational economic choices. This doesn't make people steal the small store where they are not looking at you. That would make them thieves.

Pirates, though, don't feel like they are thieves, and that's the point, not the economics. They think 'if I copy this' that other person won't lose his copy' and 'I wouldn't have bought that if it wasn't available for free'. These are the rationalizations people do, not 'its cheaper stealing this and risking getting caught than buying it'. Most don't think 'stealing' and 'pirating' belong together. Therefore, it doesn't really inflict the same 'moral' cost you suggest.

Involuntary, inhumane incarceration threatens actual thieves. Those that collate stealing and piracy are wrong; it's just a cheap rhetorical point they use because it takes too many words to dispute.

Moral values should come into play only at a meta-level, because we can only ever talk about economic models rather than the reality that economics doesn't actually describe.

Morals do function as a modifying factor in the model of the overall willingness of people to donate to artists for recorded music.

BitTorrent pirates are never ordered to jail, except maybe the Pirate bay guys, but I don't think anyone expects them to actually serve any time.

You bring up a very important point.

Some people do associate zero moral cost with piracy. They simply don't believe that music (games, software, etc.) should be paid for, and they're never going to, but they think it has value and want it anyways.

These people make up a loud piracy background noise that companies selling bytes need to learn to ignore, rather than focus on as if it's money taken out of their pockets. They are not lost sales, there's nothing that can be done to convert them to sales, and unless/until they change on their own, they won't stop pirating your stuff.

It's the rest of us, the ones that have a bit of money and feel bad when we take for free something that for whatever reason we feel deserves to be paid for, that need to be focused on.

Fixed price points do a spectacularly bad job at serving the sections of the market that agree that something should be paid, but don't happen to think the charged prices are reasonable. It's these people who are relevant to the argument I posted above, and there's a lot of money there that's being lost.

I have to say that I'd need more time in order to properly think through your argument right now, and I don't have such time at the moment.

But the first thing that comes to mind is that no, these people shouldn't be ignored. This feels like saying "the very big thieves are always gonna be thieves, lets not worry about that. Instead, lets focus on the occasional thieves".

You might argue that since the items are not being lost, that doesn't have an impact, but I digress. There is no way to tell what would really be the pirate's action were him totally prohibited from pirating. What would he do.. pay for the stuff he likes, turn to a new hobby? Sit still thinking about all the things he is not doing? We can't know.

> When the music industry can offer a product superior to piracy

Problem there is that the vast majority of people - be they pirates or normal consumers- cant tell the difference between the quality.

(also, TBH it's complete bull because a large amount of ripped music is of pretty poor quality in my experience)

I was referring specifically to the music hydra and its 175,000 users as the example of the superior product. All of the rips on the hydra are of the highest quality and in multiple formats, as I said in my post.

Methinks that the relatively small community (and market) is what helps keep the quality up. Larger communities would probably see a decline in overall quality because generally people aren't too worried.

Or rather, the people pirating music because of a desire for higher quality is, I suspect, only a small portion of the group - most want a free lunch.

I disagree, the music already exists in the hydra. It costs nothing to duplicate. More and more users can be added without having to diminish the qualities of the existing rips, as only one rip of each type is allowed. Adding more downloaders would actually benefit the ratio economy more than hurt it.

What happens when the hydra hits a million users? The cost of duplicating digital music is nothing and it doesn't take all that much bandwidth to run a bittorrent tracker. 2 million users? 10 million users?

For reference, it took about a month for what and waffles to get to the stage where the user experience was comparable to oink. I expect the hydra to grow even faster in the next round.

I give 50/50 odds that the RIAA will disintegrate before the hydra.

When the marginal cost of production falls to zero, classical economics ceases to function and extra-market restrictions are needed to force the continued existence of the market.

You don't even need marginal costs to be zero - external utility factors are required for even the most basic of markets to function, laws being the primary example, but there are others.

For one, most people feel bad when they steal. They feel embarrassed when they are caught, even before they are punished. The likelihood of being caught stealing a physical product is rather high, and once you layer on the punishments, which are rather large, it's enough to make most people refrain from shoplifting.

Unfortunately for digital media, stealing and getting caught are both extremely impersonal acts, so there's very little embarrassment or guilt involved. And getting caught is so rare that the financial penalties are all but meaningless.

In my opinion all of these industries need to stop worrying about what is "due" them for their hard work, and start worrying about what the optimal price points, payment systems, and purchase/discovery paths are to get paying customers. These may be very different from the current levels, and may require radical steps: I don't think it's out of the question to offer vastly different prices, going as low as you can imagine, to different people based on how likely you think it is they will purchase the item. If it costs nothing to sell a digital copy of Britney's new CD, then it's crazy not to let someone buy it for $.25 if you're pretty sure they'd otherwise either pirate or ignore it.

These changes may end up meaning that margins and/or revenues are significantly cut from the pre-Internet era, but that's life. And if things do get so bad that certain types of information can no longer be produced, so be it, the market has spoken.

Like you say, even the most basic markets require external factors like laws to function. The real estate market for example would, I believe, break down if it weren't for laws prohibiting people from trespassing, squatting, etc. The retail market would also break down if it wasn't for the enforcement and existence of shoplifting laws.

It seems software is in a position where the existing laws (or the enforcement of such laws, depending on how you look at it) are not adequate to sustain the market.

> Unfortunately for digital media, stealing and getting caught are both extremely impersonal acts, so there's very little embarrassment or guilt involved. And getting caught is so rare that the financial penalties are all but meaningless.

I think your assessment is absolutely spot on and I couldn't have said it better myself. Right now other than my own personal guilt, there is absolutely no reason for me not to pirate software. The chances of getting caught are extremely slim. I know many people who use pirated software extensively in a business environment and even there they stand almost no chance of being caught - and even if they were there would be very minor consequences. I feel that it's getting to the point where to be competitive in the market you have to use pirated software. How can you stay competitive when those you're competing against aren't competing on a level playing field.

I see only two possible solutions to the problem: 1) Some sort of miracle fix from the software industry - for example everything going to the web (in reality I doubt this will happen though) or 2) Actual enforcement and or the addition of new piracy laws so that piracy has some real consequences.

Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior.

What do you mean "in the digital age"? Ever heard the term "black market"?

Of course it's a market correction, it just happens to be an extralegal one. The laws of economics don't stop applying, and the market doesn't go away, just because a producer has been granted a government-enforced monopoly; no matter how appealing the notion is, making something illegal doesn't make it magically disappear.

I have little doubt that producers could find ways to successfully sell their products anyway, but that would require sucking it up and admitting that they have to compete on actual value, instead of relying on massive government market intervention.

Show me one example of a black market where consumer can get the EXACT same product as available in open market for FREE and if it is as easy as clicking a button on a screen.

Forget free, you will be hard pressed to find an example where black market offers a product which costs less. Black markets happen when consumer want something but they can't buy it legally (e.g. drugs, organs etc.)

The currency market in India for exchange rates in the black market till sometime ago gave better rates than legal conversion.

It still happens in Cuba: dollar to cuban convertible pesos, it is cheaper on the streets.

I would argue that the open source software movement fits into the "black market" for purposes of argument. In many cases open source software is superior to commercial software. There are other ways commercial software competes, and they've tried to outlaw it in a roundabout way thru patent litigation, but in reality, they've just had to face the music.

It is bullshit.

It's confusing between the economic outcome in a perfectly competitive market, "price drops to marginal costs" with a normative statement "price should drop to marginal costs."

Every business article you need. Every way of gaining "competitive advantage" is a strategy for avoiding this outcome. If the moral imperative,price should drop to marginal costs, existed and was enforced, doing business would practically be illegal.

Bingo. You have put it way better than I did!

I think the implied moral imperative is generally taken to be "markets should be freely competitive"; everything else is details. Prices not dropping is just an indicator that a market isn't competitive due to, e.g., barriers to entry or government interference.

Of course, not everyone thinks free markets are morally preferable, so it's not really an imperative that applies universally.

I see what you're saying, but I don't buy it. I think if you look at the contexts where the normative statement appears , you'll find that it is a genuine mix up, not an indirect criticism of restricted markets. I wouldn't be surprised if criticism of restricted markets is part of where this comes from but it is not a rational path.

Even a perfectively free market is not perfectly competitive. Perfectly competitive is a theoretical position used by economics, but it is theoretical. Perfectly competitive means profits are consistently zero, for example. If I have a nicer smile then the girl at the next shop and you prefer to shop at my shop, that's an "obstruction" preventing perfectly competitive markets.

The only markets that approach perfect competition in reality are commodity markets where, by definition, all products are perfectly equivalent.

This makes it even harder to get from "prices equal marginal costs if markets are perfectly competitive" to "prices prices should equal (or sometimes 'reflect') marginal costs." The implication is not just "remove government enforced barriers to competition" it is also "remove differences between you and competitors" and absurdities like "hire the same person as your competitors." Perfect competition requires perfect substitutes (competitors).

Imagine a "product" that uses necessarily non-uniform inputs: a seminar. One has Jimmy Carter speaking. The other has Mohammad Khatami. For this market to be perfectly competitive, the speakers (and the location and the coffee, etc) would have to be exactly equivalent.

>Even a perfectively free market is not perfectly competitive. Perfectly competitive is a theoretical position used by economics, but it is theoretical.

Exactly. I wish more free market advocates understood this.

According to his logic, an audio cd should cost less than a dollar.

Yes, this is exactly what pro-piracy people are saying. They are saying that content has always been free and the medium is whats being charged for, hence you sell papers instead of news stories, CDs instead of music tracks etc etc.

The problem is that its often easier (certainly easier on the wallet) to pirate than to buy. Since its so easy, people are going to do it - regardless of what you do - so you need to adapt. Sure, you can rely on laws, but when a majority of the population does something, how can you make it illegal? Eg, even Lily Allen, who is completely anti-piracy, herself "pirated" to get her music out there. She claimed she did it because she didn't realise it was wrong. Well, most people don't! If most people don't realise that piracy is wrong (cause its just sharing, right? and most people are taught from a young age that sharing is the right thing to do), then how can we really make it illegal?

Its a tough one. If we did say that piracy is Ok, then business gets very difficult because where do you draw the line? If its fine to pirate music, then its also Ok to pirate movies and games and business software and.. just about anything thats convenient or easy to copy!

The general consensus on #startups seems to be that SaaS is the way to beat this, but really, SaaS is just a (currently hard to bypass) form of DRM, when you think about it.

I don't know the answer and I'm not trying to guess. Personally, I'm trying a mixture between the conventional business model and adapting to the fact that if my software is popular, it will be pirated - I need to ensure that between legit sales and alternative revenue streams, I make enough to be able to ignore the piracy..

> They are saying that content has always been free and the medium is whats being charged for, hence you sell papers instead of news stories, CDs instead of music tracks etc etc.

That's only entirely true in a market where, using your example, the quality and content of news articles are identical.

People usually choose to purchase a paper based on the type of content inside; they might be paying more than the content is worth because of the media - but that is a slightly different point.

Well, the content is used to drive the sales of the medium. so, if you have better quality content, then people buy that medium instead. If this really makes sense or not I can't say.

I believe PG has an article on the matter, though he seems to argue that this is, indeed, the case.

> Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior.

That may be. But if the consumer consumes the product without paying because they couldn't afford it in the first place, can you really say that you lost money on that? If they didn't have the money to buy it in the first place, how could they have given you money for it if piracy wasn't an option?

The real cause of piracy (other than availability) is the over-saturation of media markets that we have. Example: If I want to buy a new video game for $60, that's maybe 4 or 5 CDs that I can't buy, so I download those CDs instead.

I know that some people will call it naive, but we live in a society where we are bombarded by marketing in which everyone tries to shout the loudest or find the best way to subtly convince you that you need their product (i.e. you won't be cool unless you have X). But we are now in a marketplace where the consumer can choose to pay for X and pirate Y instead of just deciding to (exclusively) buy X or Y. So it comes down to this: If everyone is able to convince me that their product is a necessity, then I'll end up acquiring all of those products, but only some of them will be paid for.

Note: I'm using a hypothetical 'me/I' in this explantion.

There's also the "try before you buy" argument, where those who pirate typically don't keep what they nab. If you pirate something that you end up disliking, and would never have bought it without knowing if it's worth it (so, wouldn't have), there's definitely no loss to the publisher.

Besides. As many companies who have dropped DRM have found, many pirates are simply waiting for an unencumbered form of what they want. If the only legitimate porsche seller is selling half-crushed cars, and there's a perfect-quality one sitting next door with the keys in the ignition and a sign that says "free to a good home", is it even ethical to buy the crap one? (that said, all "would you steal a porsche" arguments are straw man arguments anyway)

There's still plenty of options to "try before you buy" in the legal market. If its a game, you can rent it, or borrow it from some friend. In many platforms games will have a demo for you to download before you play. Most magazines and websites will have reviews, maybe even video ones, about that game. Most movies have a trailer you can watch before watching the movie, ebooks have sample chapters, etc.

Just a .02$ story about renting from about two years ago. I never really rented before this but was making enough money finally to say 'eh what the hell.'

I rented three games in a row from the local hollywood video for my 360 that were unplayable in some way. One was 'ringed' by another user, another was scratched just enough to lock up after the entry video and the third didn't boot at all. After the third trip back down the block to tell them 'hey this doesn't play either' I just downloaded the game and played it on my PC.

Needless to say, I haven't tried renting a game again.

If its a game, you can rent it, or borrow it from some friend.

Ah, not if it's a DRM'd PC game. Many allow it, but try doing that with a Steam game. You're stuck with the often-inaccurate demo version of the game. And if you're talking about a console game, where do you go and who do you know to find all games you may be interested in? I generally have less than 10% success rate when visiting rental places, and that's not including foreign language titles that aren't available anywhere here.

Reviews are extremely poor substitutes for a good demo, in the same way that arm-chair theorizing is a poor substitute for field experience. And don't feed me bullshit about movie trailers being in any way a good measurement of what the movie will be like. Does reading a book really get you to understand what army life is like? To make matters worse, good demos are hard to come by, as most are relatively crippled compared to what you'd be buying (games and regular apps). If the demo doesn't demonstrate why I'd want it, or implies things that aren't true, I claim false advertising. And this is assuming there even is a demo version.

But of course. I understand all of those complaints, and I think they all make sense.

Though, look at how spoiled we've become by piracy. Now, we say we'd only buy something if we the exact same experience as we'll have with the final product. A demo is sometimes far from the game experience? yep. Movie trailers are bullshit? Sometimes, yes they are! Movie synopsis then? Even more!

Now, think about all the other things you buy. You can't really go to a car shop and say: "Hi. I'm looking for a car to cross the us. So, in order for it to be really like my final experience, I'll need to borrow it for at least a week.". Or like, "Hi, I want to try a Mac. Of course the factory Mac doesnt' help me much, so I'll borrow it for a day to install emacs/vi, some terminal scripts, quicksilver and see if it suits me well". The list goes on.

Specially with all the other non-pirated items, we have to make a decision about the buying the final product before we've had access to the final product. It's really up to the producer which means he'll provide you, as a sales mechanism, to try his product before you make your buying decision.

Not being able to have the full experience before you buy, specially with some kinds of products (some books, some games, most movies) is critical to selling it. It's not the consumer's right to take by force the final experience from the producer to make a buying decision.

No you didn't lose any money on them, but it does go a way to validate that persons activity as a social norm. If I can afford a game but my housemate can't and pirates it. I may then decide that I may as well do it to and save my money for something else.

I don't think this argument really holds.

Saying that you couldn't afford an item and therefore wouldn't have spent any money on that doesn't really mean you'd never spend any money on that given a free pirated option wasn't available.

The point being we do have the money, and we do can afford it. It's just that, when you can pirate it, you end up spending your money on other things instead. But its not like you'll never have enough money that you'll ever be able to buy one game.

It's interesting to observe the Playstation 3's market, because they've so far done what was unthinkable since way back the times of the PS1: a console you can't pirate.

So I have a loooot of friends that live on Brazil, and that pirated all their PS2 games. And that pirate music and movies too. Some even have an Xbox360 and pirate games on it too. But all of them buy PS3 games. They don't just leave their console there hanging, playing demos, as you'd expect.

No, it just means that the money that they do spend they redirect towards PS3 games. There are obviously people who always go for the 'low-cost' option which is usually pirating the music/game/video/etc. But you can't make that an absolute. You can't say that everyone operates in the fashion, just the way that I didn't say that my explanation applied to everyone.

People have a limited amount of income, but an insatiable desire to consume. How people deal with this varies from person to person. Though we can generalize it a bit, there is no catch-all generalization that applies to everyone.

In the future though, don't use anecdotes to try and prove a point. 'everyone does X because my friends in Brazil do X' is not a valid argument.

> Saying that you couldn't afford an item and therefore wouldn't have spent any money on that doesn't really mean you'd never spend any money on that given a free pirated option wasn't available.

If I download $3,000 worth of media per month, but I only make $3,500 per month after taxes, how can you posit that I would have bought all $3,000 worth of media where pirating it not an option? If I use the 'pirate market' as a way to consume outside of my income level (i.e. outside of my ability to consume without the 'pirate market') then how could I have purchased all of those things?

To your Brazil example, what were your friends spending that money on when they were pirating PS2 games or did their income level suddenly jump when the PS3 came out?

hey, I absolutely agree about my anedocte not applying to everyone else. What I wanted to illustrate was cases where, piracy not being an option, people just actually buy the games, rather than not buying as some people believe.

As for the income/worth of consumed media for month, I surely don't believe the amount of lost sales or whatever companies claim is exactly the amount of consumed media. That's false as you clearly illustrate. It means people would consume less media, within their means.

All those friends of mine, would the xbox 360 not have pirated games, would also have bought original games. They wouldn't just let it there, sitting. Would they buy every each of their pirated games? of course not.

So my thought process is not like "if there weren't pirated media, people'd pay for all they consumed as pirated items", but rather "weren't there pirated media, people would either consume original media, or do something else, and we can't tell that for sure". And therefore asserting that people who pirate stuff "would have never bought that anyway" is wrong.

> So it comes down to this: If everyone is able to convince me that their product is a necessity, then I'll end up acquiring all of those products, but only some of them will be paid for.

Wait, you're saying 'only some of them will be paid for', even though you've been convinced all the products are 'a necessity'. A more succinct way of putting this, that I believe loses none of the intended meaning, is 'I want I want I want.' Of course, this behaviour is not to be blamed on you, poor consumer, for you live in an awful society which has bombarded -- yes, bombarded -- you with vile and shrill marketing in order to trick you into thinking you need it. The horror, the horror!

That the producer doesn't have a way to stop the piracy is the crux of the issue. Because the black market exists, consumers have the power to place their own value on a product. This value is the price that they would pay for the product if it were legally available at that price.

The product's price is relative to the marginal cost of production because that's the cost on the black market. The producer is competing with the black market.

I don't think you can compare black market with piracy. In black market, you do not get product for free. In fact, most of the time, you may through your nose for the product e.g. drugs/organs.

Show me an example where black market sells product at price which equals to marginal cost of production.

Software pirates selling their stuff on the street?

One can get a copy of the Windows 7 Ultimate (or whatever it's called) for about US$5 a 10 minute walk from my house.

It's still a black market, despite it being active during working hours, 6 days a week.

According to his logic, an audio cd should cost less than a dollar.

While I don't agree with the original post, this is not an argument against it.

Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior.

I agree, except I would say "fortunately". Monopolists should not have a legal right to their market, even if the market (for Metallica songs, for example) didn't exist before they began selling in it.

"Should" and "should not" are normative statements, and have no place in economic discussion.

Copyright is not a real right, it was created to encourage innovation and production. Hence, whenever dealing with copyright should and should not have a place.

Insofar as a country says "copyright" is a law, it is a real right. But that isn't what i'm saying. I'm saying that making statements based on moral judgement based on economics is wrong.

Sure - but - copyright was created (for the same reasons as patents) to drive innovation. To motivate people to put time and effort into creating something. When it fails to do this, then it should not be a real thing anymore.

Now, I'm not saying that copyright doesn't do what its meant to (patents are another story however...) and I'm not arguing that copyright should be eliminated.

When I say "should" in this context, I'm expressing my preference about laws, not making any kind of statement about an objective morality.

Why should Metallica not have the legal right to monopolize the market for Metallica songs?

http://en.wikipedia.org/wiki/Normative_statement

There is no way to prove this right or wrong. It is just a bad statement to make in the context of economics.

On the contrary, there are several different ways to interpret "should" and much of economic literature is focused on making those interpretations. For example, is a given policy economically efficient? social welfare maximizing? from a firm's perspective, profit maximizing? or more generally, does it lead to a society that you would want to live in?

I am not sure why the audio cd analogy doesn't hold. Quoting the original post:

"Software ISN'T a t-shirt. A t-shirt needs cotton. That cotton must be dyed, woven, sewn, printed, packaged, shipped. Software ISN'T a meal. A meal has ingredients, and the more you spend on them, the better, and that goes double for your chef's salary. People understand where their money is going. People are just fine with paying through the nose when they get their money's worth. But no one likes to feel like they have been taken to the cleaners."

Looking up on Google, I can get 500 audio cds for around 185$ (http://www.google.com/search?hl=en&source=hp&q=audio...), per CD cost is 37 cents. Do you think that I should be able to buy the latest album of Backstreet Boys for 37 cents? Where do you account for thousands of dollars spent on recording the album? What about paying the artists? ....you know the 'fixed costs'. We still happily pay 9$ for an audio cd because it gives us pleasure which is worth more than 9$. As he says, 'getting money's worth'.

Tell me again, how is software any different? You buy the software ONLY IF you think software gives you more value than it costs you to acquire it.

I didn't say the analogy didn't hold, but that if it held, it didn't mean the argument was wrong.

Separately, I do think the argument is wrong, because it's based on the labor theory of value, which has been shown wrong.

What about long dead artists? what about recordings done many years ago, where the covering of recording prices has long been achieved

Software, like most intellectual property is a Non-rivalrous good. Nothing in software design prevents simultaneous consumption, indeed, we would not have any website if that was the case. A T-shirt or a Meal is a Rivalrous good, my consumption of the meal prevents your ability to eat it.

The law affords protection to non rival goods be enacting author rights, exclusivity for a period of time, copyright etc... historically the limits ware set to release non rival good to the public for its general use.

Software companies, entertainment companies etc.. seek to milk those rights to no end, it will be an interesting case to see what an early mandatory release to public domain will have on piracy as a whole

I'm not sure why people come out with these moral axioms whenever piracy comes up.

"Monopolists should not have a legal right to their market"

Such a big statement with no real way of supporting it any further (the converse is also true). None of the rules around copyright or property ever came about because of any kind of "Natural Law" or moral reasoning. John Locke, be damned. Property rules were created based on existing conventions, or in some cases, created to correspond to defensible borders. You can hum a song or talk about it or play it on your guitar when you get home.

You can't sell copies of it? Why? Because printing, pressing & such are (were) possible to regulate with laws. Humming is not.

I'm not sure why people come out with these moral axioms whenever piracy comes up.

It's not a moral axiom; it's an expression of preference. More seriously, any argument for or against it relies on so much shared understanding that it's not clear that there's much use arguing about it at a length of two or three sentences. One sentence is enough to express the conclusion, but a rigorous argument that covered all the major approaches would require a fairly hefty book.

Because printing, pressing & such are (were) possible to regulate with laws. Humming is not.

That's one approach, but how will you defend your right to hum whatever you want when all of your actions are recorded all the time? Our current technological progress appears to be headed that way, making automatic enforcement of any arbitrary rules possible. In that situation, the question of what the rules should be is more than a question of what sort of rules can be enforced.

It's roundabout, but it still applies. The main argument is that in a market economy, prices stabilize close to costs because competition exists. In this particular market, this cannot happen because each product is unique and gives monopoly to its owner.

But this is not written in stone.

Imagine an alternate model where artists still own full IP rights, including on non-commercial use, but use an open process to distribute their music. A free for all in distribution.

Or a model in which artists only make money in commercial distribution. Pirate Bay would have to pay, but downloaders not.

Or any model in which the artists can be compensated in two different ways. For example the classic way, and a way for listeners to subscribe to "unlimited mp3" plans. Of course, if both distribution channels go trough the same media companies, like I think they do now with online music purchases, there is no real competition to drive the prices down.

The crux of the matter is that the bottleneck is not at the artists, but one step down. Remove that, and lots of alternate models involving real competition can appear.

You are correct in what you say about producers pricing a product and consumers having a choice. I believe that the real issue here is that consumers now have a moral choice and for many the morality of pirating a cd from a torrent site or even burning it from a friend is not a difficult decision.

You will have a hard time finding someone my age or younger (early twenties) who thinks that pirating a cd is equivalent to steeling anything; and building upon that idea many even think torrenting/pirating software and video games is an acceptable thing.

I don't know what will happen with music and its distribution but one thing I can say is it probably won't stay the way it is indefinitely.

You're right that producers have the right to price.

However, it's not just about price, it's also about being able to get a product in the form and through the channel that a consumer wants. This relates to the current argument about the availability of legal downloads vs pirated downloads. And wait, wait, yes, you're correct, producers have the right to determine product form and channel. :)

The way that piracy can work for market correction is that it's information. A product's sales may not be performing as well as a producer would like. Is it because it's too expensive? Or do people just not want it? It could be one, or the other, or both, or other. Piracy, while illegal, is still an indication that yes, people do want the product, and it's desirable enough to break the law to get it. So what can we, the producer, change to convert those pirates and other non-consumers into paying customers?

A producer could (doesn't have to) use that extra information to help him think about his product's format, or channel, or price.

> it's also about being able to get a product in the form and through the channel that a consumer wants

Why do consumers have the right to their choice of form, channel and price?

If the seller is unwilling to provide as the consumer prefers, where does the consumer get the right to force the producer's hand?

What's wrong with "if the buyer and seller don't agree on terms, the deal doesn't happen"?

"Why do consumers have the right to their choice of form, channel and price?"

I'm not saying they have that right, not beyond deciding to buy or not. I'm pointing out that some consumers do try to appropriate that right, and that's one indication of demand.

It is also an indication of the demand for car stereos when someone cinderblocks my window and rips the stereo out of the dash.

Welcome to the current overly-developed sense of self-entitlement that a lot of people have these days.

Everyone is owed everything with nothing in return.

Not necessarily. There are a lot of people that are just compulsive hoarders, but their hoarding is directed at digital 'items.'

http://en.wikipedia.org/wiki/Compulsive_hoarding

Comparatively, there are compulsive hoarders of physical items that have their house filled to the brim with items that they have purchased, or run up huge amounts of debt acquiring.

Why do consumers have the right to their choice of form, channel and price?

They don't have any particular "right" to these choices.

But that doesn't mean the choices disappear. And it also doesn't mean that real value is not created by offering them, even if it's done illegally: the Pirate Bay has probably created more real value in this world than most startups could ever dream of. It doesn't matter that it's ethics are questionable.

What's wrong with "if the buyer and seller don't agree on terms, the deal doesn't happen"?

Nothing at all, that's exactly what happens a lot of the time.

With most digital media it just so happens that there are plenty of illegal "sellers" that are willing to step in with terms that are more suitable to the buyer.

It may not be legal or "right", but it's pretty damn efficient.

I am sorry, but I disagree.

Producer has the complete right over their product. They can price however they want, they can decide the form and the channel by which you will be able to acquire the product. Piracy doesn't provide information. A free market with healthy competition lets producers know what consumers are looking for. And trust me, they do a fine job at it.

Imagine for a second that there was a 100% fool proof way to protect digital content. Do you think recording companies will be fighting with Apple about letting them sell the music on iTunes? If I were to guess, there would be an online music store from Amazon, from Microsoft, from Google, from Pandora and what not. All competing with each other trying to sell music. A song would probably cost less than a dollar because suddenly you can tap in to much larger consumer base. Unfortunately, there is no way to protect digital content and we are back to our imperfect world.

"Producer has the complete right over their product."

I completely agree with you.

"Piracy doesn't provide information."

Everything is information. Some is more relevant than others, and relevance can be because you decide to treat it as relevant.

Not true... Everything is data, not everything is information. Information is processed data that has been able to produce useful conclusions.

Cooks make food. Musicians make music.

Just because you can't record food on a CD doesn't mean musicians are special and should make millions without working for it.

The only ones I'm the slightest bit worried about are writers.

How much should writers make?

"you can't record food on a CD"

At least not yet ;-)

Reply on news.ycombinator.com