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Comment by DennisP | Hacker News Reader

The article talks about how the music industry is shrinking, but says nothing about musicians. Musicians who embrace the new reality are doing fine. What the Internet is really doing away with is a giant industry that used to be useful, but now is merely parasitic.

The same is happening to the book publishing industry. We don't really need them anymore. Instead of giving $15 to a publisher who then gives $1.50 to the author, we can just give $1.50 to the author directly and be done with it.

In the process, we'll see lots of articles like this bemoaning the 90% shrinkage of the publishing industry, while actual authors make more money than ever.

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      What the Internet is really doing away with is a giant industry 
      that used to be useful, but now is merely parasitic.

That can go both ways: the Internet is also breeding a generation of customers that used to value and support music & books, but now is merely parasitic.

      we can just give $1.50 to the author directly

I'm all for eliminating middle-men, but free is still a whole lot better than $1.50; and when downloading hundreds of songs from PirateBay, that's several hundreds of dollars versus free.

     Musicians who embrace the new reality are doing fine.

Citation needed.

I would also love a functional gift economy, instead of one of scarcity ... but on the Internet a gift economy doesn't really work, because most users are not giving back. How many users of open-source software are giving back contributions and donations?

Even when your software is used by lots of corporations; you either have to beg, or your software has to be broken (in need of a fix).

And I quote from http://www.undeadly.org/cgi?action=article&sid=200603210... ...

     OpenSSH is in use by millions around the world 
     however the revenue stream just simply isn't there.

Music, books, software: all of them require effort and lots of it. Being able to work on such things full-time is wonderful; and if broken technologies/legislation like DRM are the only solution for it, then that will be the future.

"and when downloading hundreds of songs from PirateBay, that's several hundreds of dollars versus free."

No, it isn't several hundreds of dollars, since many people who are downloading from PirateBay would not buy the songs even if the free option wouldn't be available.

That's his point. The choice for a consumer (who knows about BitTorrent) is between paying hundreds of dollars, or paying nothing. Given that, most people will choose to pay nothing.

But I wanted to say something else. Many people how don't know about BitTorrent would still not pay.

"Many people how don't know about BitTorrent would still not pay."

And some would. So where does that leave the overall argument?

It leaves that "it isn't several hundreds of dollars, since many people who are downloading from PirateBay would not buy the songs even if the free option wouldn't be available." The average person who casually downloads a huge torrent with hundreds of songs would not realistically download all of those songs if they paid $1 each for them. That's not a matter of personality but basic economics -- there's far more demand for a song when the "price" is $0 than when it's $1. For $0, many people will download a given song even if they have no real intention of listening to it, simply because the interface to delete lots of files from your computer is easier than the one to exclude lots of individual items from a torrent download. And hey, you can listen to one or two of them for 15 seconds each, maybe you'll find a new song that you like. The first benefit goes away when you're sticking individual songs in your cart, and the second is not worth very much money at all. Take the option of torrenting away and those people would download only a few of those songs for a much more reasonable amount of money.

You're denying basic free market economics with an emotional argument. In a competitive market, the cost of a good tends towards its marginal cost of production. We get all excited as the cost of solar cells tends lower and lower, as the marginal cost of their production gets smaller. Do we "value" solar cells less because of this?

"the Internet is also breeding a generation of customers that used to value and support music & books, but now is merely parasitic."

To borrow a phrase, "Citation needed".

What about the upfront cost of production? It's all well and good to say each additional copy has tended towards zero but that still doesn't cover the production costs.

Simple. Pay it up front, release the files for free afterwards. The files turn into advertisements for the next piece.

Eh? Who pays up front? I think it's anything but "simple". There's a big incentive to free ride and let someone else pay.

"Anyone who wants to" is one model, perhaps with some goodies thrown in for those who do. A bunch of musicians have been using that in various forms for the past decade or so (e.g. http://www.neubauten.org/?q=supporters-english), and Kickstarter now sort of formalizes it.

I'm not convinced that that sort of model can support as much production, and thus we might see a lower level of production of information goods, but I suppose only the future will tell. Musicians always have the fallback of concerts, as I mentioned in another comment.

Blixa and Neubauten have a large and loyal fanbase from the decades they spent making music the 'old' way. Thus they (like NiN and Radiohead) can skip the hard "build a captive audience" step necessary for something like that to work. A new band no one has heard of is going to have a much harder time making something like that work, so as such it's not really comparable.

I agree it's not easy to pull off with no starting fan base, but isn't that true of breaking into the industry the old way too? An unknown band with no fan base is not going to have an easy time convincing an RIAA label to sign them and put out their album. I'm not sure their current problem (put out demos, find fans) is actually harder or lower-probability than the older problem was (put out demos, impress A/R person).

The problem is that there are two "costs" of production:

* The cost of reproduction - which in terms of software, music, and now books, is essentially zero.

* The cost of producing those goods in the first place, which is very high in many cases. These are called 'sunk costs'.

Prices are tending towards the cost of reproducing stuff, and people are struggling to come up with ways to cover actual production costs, which haven't really changed much.

Now, certainly, in the past, there were no guarantees that if you wrote a book over the course of a year, that you'd be able to make up for a lost year's worth of wages, but at least you had a shot at it - and also a shot at earning several times that if you had a hit.

If, instead, you spent a year writing a book, and it were easy, legal and acceptable (we're not quite there with all three) to just copy it all over the internet once it was released... where would you get your money from?

This is all described pretty well here:

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

> struggling to come up with ways to cover actual production costs, which haven't really changed much

The cost of buying food hasn't changed much, but the actual costs of doing the recording/release/distribution have decreased a lot, which lowers barriers to entry and increases supply.

To produce a recording whose production values are seen by the average casual music fan as "good enough", and then sell an mp3, requires much less capital investment than putting out a decent-sounding record in 1975 would have, or even a decent-sounding CD in 1990.

Sure, home recording on a Macbook isn't going to get you the quality a professional studio would get you, but the quality gap is much less than it used to be, especially for someone who spent some time reading (free) documentation on the subject. Rather than home recording producing unreleasable cassette demos, they're now often good enough to upload to YouTube or sell directly to fans. As a result, the people who've paid for professional studio time now have to compete directly with all those home recordings, whereas previously they could more or less ignore them. That drives down prices.

Related, many artists actually put a negative value on their time: there are quite a few people who love what they do so much that they're actually willing to subsidize their own art-production by working other jobs (e.g. waiting tables).

Each type of 'information good' is a bit different:

Musicians can at least do concerts, which are excludable and rivalrous, and so make for a pretty good 'traditional' product that they'll get paid for.

Writing a book is likely a bit faster than 50 years ago due to computers, but not that much, as most of it's in your head. Isn't it Neal Stephenson who says he writes everything freehand?

One possibility some self-publishing writers are using is to also sell traditional products of some sort, e.g. limited-edition letterpress or handmade editions of their books.

It does lead to different economics, since it rewards a writer by how many ardent fans they have (preferably well-off ardent fans who're collector types), rather than total readership.

Not sure how many total writers it'll be able to support; I suppose we'll see. But then, I'm not sure how many total writers traditional publishing would be able to support either, even absent piracy; the industry seems to be converging on a model that picks and heavily advertises relatively few large blockbusters per year, which only serves to support a fairly small number of writers, though it admittedly supports each of the lucky few quite handsomely.

>there are quite a few people who love what they do so much that they're actually willing to subsidize their own art-production by working other jobs (e.g. waiting tables).

Do you really see this as a good thing? When the only way to make money is to do something that can't be given away and anything digital must be given away?

I don't think it has to do with digital or non-digital. It has to do with the fact that people like forming bands, making music, writing poetry, etc. They like it so much that many of them---even people who are good at it---would be willing to do it even if they didn't make any money at it. Hence, it's hard to charge a high price for labor that people are willingly oversupplying.

Contrast with waiting tables, where people do not enjoy doing it enough to do it for free. If there were a lot of people who loved it so much that they were willing to wait tables for free in their spare time, wages would probably go down there too...

I think your 'oversupply' might be in the number of people willing to do X (acting in films, music, writing...), which doesn't necessarily correspond to the set of people who are actually good at X. The ideal solution would let people who are good at X do more of it, as this benefits both them and everyone else. In other words, we're "better off" with Humphrey Bogart acting full time, and J Random Dude moving on from waiting tables and dreaming about movies to something he's actually better at (making sets or something).

Were films something people could freely and legally copy, we might see a shift to handycam amateur efforts funded by table waiting, and fewer things like Avatar, which would require approximately 281328282 man-years of table waiting to produce. I think that we would lose something in that transition (although other things would be gained).

>Hence, it's hard to charge a high price for labor that people are willingly oversupplying.

Not strictly true. Thanks to digital camera availability there are a near infinite amount of people willing to do your family portrait but I suspect you'll have no issue with paying to have it done.

>Contrast with waiting tables, where people do not enjoy doing it enough to do it for free. If there were a lot of people who loved it so much that they were willing to wait tables for free in their spare time, wages would probably go down there too...

That sounds like an incredibly awful world to live in where people can only get paid for things that no one likes doing and everything fun has to be given away. I mean, I don't mind doing what I love to do for free so long as I don't have to pay for food, rent, etc.

Oh great, so the future of authors and their revenue lies now in the jobs that haven't been automated yet?

There used to be a time when taking an ID photo would require you to go to a specialized photo studio, you know.

Waiting tables might still have a future though, since those robots from Japan are kind of creepy (for now at least).

What are you talking about? I'm not saying to keep jobs around that make no sense to be done (e.g. having a guy stand at each of a construction site holding a sign to direct traffic). I'm saying that things that still have to be done shouldn't all become free if they are tasks that people like to do.

Don't people always say to find something you love to do and then find a way to get paid to do it? I don't want a world where there is no way to get paid to do it unless nothing costs anything.

The same wikipedia article also lists a variety of methods to overcome the problem.

Yes, all of which have various strong and weak points.

For instance, light houses are generally constructed by governments.

Do you want the government to be in charge of who gets paid to write or make music? I'm not a libertarian, but I don't really like that idea.

Intellectual property is another listed solution that, despite recent problems, has worked pretty well. As of late, enforcement costs may be exceeding benefits, although it's hard to say, really.

Assurance contracts are the one I'm mainly interested in.

Yes, there are indeed two costs of production, and free market economics has terms to cover both:

"Sunk costs" and "marginal costs". Free market economics says that the price of a good in a competitive market falls to the marginal cost of production, not to the sunk cost of production.

Read up a bit, I think you can find any number of good college freshman texts on "microeconomics". Then come back and argue.

You did not respond to the substance of my posting, which is echoed in the wikipedia article:

> Public goods provide a very important example of market failure, in which market-like behavior of individual gain-seeking does not produce efficient results. The production of public goods results in positive externalities which are not remunerated. If private organizations don't reap all the benefits of a public good which they have produced, their incentives to produce it voluntarily might be insufficient. Consumers can take advantage of public goods without contributing sufficiently to their creation. This is called the free rider problem, or occasionally, the "easy rider problem" (because consumer's contributions will be small but non-zero).

This theory is, first of all just a theory and second of all from a time before there were products with 0 marginal costs. Sunk costs have to be covered somewhere because if you can never make any money off of the product then why would you invest in creating it?

This doesn't completely answer your question about certain music artists doing just fine, but might also be an interesting read.

http://blog.tunecore.com/2010/10/music-purchases-and-net-rev...

For cost books have been competing with at cost books for a long time. The reality is reading 50$ worth of books takes far longer than listening to 50$ worth of music. So while I could download 500,000 books tonight I can read them fast enough for that to be a meaningful activity.

PS: At the sub 3$ a book range there is little reason to pirate. I tip waiters more than that let alone entertain me for a few hours.

For authors with established audiences (at breadpig we stick to webcomics) the Internet has been a fabulous publishing boon. We're approaching 35,000 copies sold of xkcd: volume 0 (now available in meatspace!) and Randall is getting a majority of the profits.

Breadpig isn't the first publisher to do that, but it's going to be really hard convincing popular webcomic artists to take a typical book publishing deal.

And for now, there are still plenty of us who enjoy reading deadtree versions of our favorite webcomics - delicious irony!

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