If someone exchanges 3 hours of pay for a game how is it fair for them that the guy sitting at home doing nothing gets it for nothing and it goes down to he wouldn't have been able to afford it anyway.
The article didn't justify piracy in a moral sense by talking about people who wouldn't have bought it. He was trying to build an argument by saying most pirates wouldn't buy the games in any case, so that describing pirates as potential customers is erroneous, and therefore high piracy rates are not necessarily the cause of poor performance in the market.
The example of the iPhone was particularly good, I thought. From the numbers, it seems self-evident that app piracy isn't actually a big problem, even when most apps are pirated.
And for what it's worth, fairness has little to do with anything outside of childhood; there's no daddy you can go running to saying "it's not fair!", only economics, courts and politics, each with its own dynamics, but mostly coming down to power in bargaining.
Also,
> Isn't that how our economy works? You either have the money for something and you buy it or you don't have to money so you don't get it.
No, that's how a scarcity economy works; the people who don't pay don't get an X so there are Xs left over for the people who do want them. An information economy works completely differently: the best possible "solution" to distributing an information product is to have everyone in the world owning it at the maximum price they're willing to pay, on a value gradient all the way from $billions to $0.
Using this comparison, one piece of fine art is no different in value than the other because the value of the paint used to create each is the same.
"that's how a scarcity economy works; "
I keep hearing this argument and it's just wrong. Just like art, the scarcity isn't in the bits that you can copy. It's in the talent, time, and energy used to arrange those bits on a higher level.
When anyone can create (not copy) Photoshop CS5 in a few hours on their computer, you might have a point.
"An information economy works completely differently"
I like how software, music, and movies are called "information" only to make the argument that it should be free.
"the best possible "solution" to distributing an information product is to have everyone in the world owning it at the maximum price they're willing to pay, on a value gradient all the way from $billions to $0."
If you want to make a living, this doesn't work. If people are given the choice of paying $100 or $0, most will pay $0. This is why business doesn't work on the basis of donations.
The product itself _is_ the set of copyable bits, and this _is_ scarcity-free, due to having zero marginal cost of production.
In a non-scarce market, people pirating your game is economically equivalent to e.g. people reading books instead, or spending their time writing their own games. Pirates are just another category of people who aren't your customer.
The best possible solution to piracy is to _ignore_ it, and focus on identifying your actual paying customers and developing products for them.
But if you absolutely must think of piracy as lost sales, then use piracy volume as an input into your demand curve and adjust your pricing model accordingly.
But don't waste your talent, time, and energy trying to fight a Quixotic battle against a macro-level phenomenon that you have no actual control over.
It doesn't have a $0 cost of production. Did it cost Microsoft $0 to develop windows?
"The best possible solution to piracy is to _ignore_ it, and focus on identifying your actual paying customers and developing products for them."
I disagree. While it is good to focus on paying customers, if an industry ignores it, they will quickly put themselves out of a job.
"But don't waste your talent, time, and energy trying to fight a Quixotic battle against a macro-level phenomenon that you have no actual control over."
It's the people that want free stuff that are trying to tell me I have no control over it. I know for sure that adding copy protection for software increases sales.
The other issue is with search engines like Google. If the pirates get organic keywords that are higher than a legitimate source and offer the same thing for free, many users will go to the illegitimate source and never purchase.
It's okay though. With the Internet getting faster and cheaper, I see most software apps going to a service eventually.
You skipped over the word "marginal," which was the most important word in that sentence. http://en.wikipedia.org/wiki/Marginal_cost
Most pieces of software cost millions to develop, so I don't think it even applies.
Software does have zero marginal cost of production, so someone making an illegal copy of your software does not create any actual cost for you in the way that someone stealing your physical inventory would. So the impact of an individual using a pirated copy of your software is the same as that individual not buying your software for any other reason. The macro-level impact of piracy is the same as the impact of any other macro-level factor that discourages people from buying your product, e.g. a competitor offering an equivalent or better product at a lower price point.
I'm not saying that you shouldn't assert your copyright in the face of brazen piracy. But the best way to earn your ROI for developing the product is to maximize the value that it creates, and thereby maximize the number of people who will willingly pay for your product. Focusing on pirates, who are manifestly unwilling to pay you, is a dead-end. Spending money on DRM is a waste of capital that could be used to improve the product and attract more paying customers.
This isn't true. When you steal physical goods..the original owner loses just the cost of the physical item. It doesn't change the value. Digital goods are different. As more and more people pirate it, the perceived value approaches $0, which has the potential to destroy a business. Even worse than this, if it's not stopped, more and more people will just start assuming that software is free (and will not want to pay for it). Piracy hasn't just destroyed a business, it's destroying many industries.
You may be fine with this. However, it will just result in more forms of DRM and an increase in services where you don't get to install it on your computer. I don't see the people bitching about DRM offering any kind of alternative. Most people, like you, won't even admit there is a problem with piracy.
You also can't say that the owner doesn't lose anything. I have been involved with too many businesses that have seen piracy directly effect their business. With my own business, my sales dropped 40% when there were cracks readily available. When I disabled the cracks, sales went back up to normal.
"Will customers buy my product, and if so, at what price?" is an enormously non-trivial question, and the entire discipline of marketing revolves around trying to answer it.
How much weight would you give to piracy against all of the other relevant variables in assessing the potential market value of a product?
Very true. However, if you have sites on the Internet that are more popular than yours giving the same thing out for free, eventually you won't have to even ask the question. It will be answered for you: $0. Most people take the path of least resistance. If they are given the choice of downloading something for free or buying it for $50, many will always find a reason to justify not paying for it.
If the pirates were actually coming out with something innovative and competing (an example would be creating independent labels to compete with recording industry) the industry would truly have to worry. Instead, content is just copied for free and spread around. The only real defense to is to add more protection. Since the demand is just as strong, the industry doesn't really know if a loss of sales is because they are putting out shit or because of freeloaders.
It actually may prevent good movies, music, and software from coming out and hurt consumers in the long-run. But, most people don't care. They just want free stuff and will go to great lengths to justify it.
The fact that many software products do well on the market despite rampant piracy illustrates that there are plenty of customers who are willing to pay, and see the value in buying the product even when pirated copies are available.
So if your product isn't performing as well enough to be viable, and you don't know whether to attribute it to (a) pirates copying it for free, or (b) the possibility that your product isn't very good, what response is more likely to generate positive value? You can (a) fight the pirates, incurring additional expense and/or diminishing the value proposition for your paying customers; or (b) improve the quality of your product in ways that actual customers will appreciate anyway.
If the answer is (a), and the target market for your product is composed mostly of freeloading jerks, you're probably focusing on the wrong market.
Or you find a way to get it cheaper. Countless innovations throughout history have their roots in someone wanting something, but not being able to afford it. Piracy is just an unfortunate side-effect of this driving urge.
I think the result will be drastically lower budgets to the point where someone can make a dollar selling the content for a dollar or putting ads around/before it online. It's just a matter of whether we can accept that, it may be a good thing? The budget models for movies right now does seem to be a bit out of whack.
More importantly, neither of them require online interaction - you can set Steam to an "Offline Mode" in case I want to go an airplane or my Internet connection isn't doing so well. On top of that, I regularly max out my downloading speed when moving games around on Steam. In Steam's case it's much more convenient than pirating (don't have to check for quality, no cracks to apply) and adds even more value (checks for updates automatically) to the game. On the flipside, it's exceptionally difficult to bundle up games shared from Steam - but the gifting codes are just as easy as buying the original game. Blizzard hasn't yet made it too difficult to bundle, share, and upload a downloaded game (other than multiplayer not working due to CD-Key issues), but I find a lot of my value in the multiplayer component.
That kind of direction, where DRM adds value to the game rather than adding layers of complexity, is the direction I wish DRM would go in.
It will become an issue once steam goes away.
As an example how copy protection can bite you years later: I have some old DOS games that verify the CD-ROM. Not if you try to run them in DOS-Box or something, you will have to find a DOS driver for your CD-ROM drive (at least I had the issue once, when I still had an SCSI drive. Not sure what it would be like now). Needless to say, I haven't played those games again. One of them was "Little Big Adventure" - it is a shame that such gems will eventually be lost forever.