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Summary:

Y Combinator founder Paul Graham is right when he says that the continued push for legislation like SOPA and PIPA is a result of a failure to adapt to the changing environment the internet has created when it comes to intellectual property and the content industries.

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The threat of rampant piracy — the downloading and re-distribution of what the content industries claim are billions of dollars worth of intellectual property — is continually raised to justify ever-more-draconian laws such as the recently proposed SOPA and PIPA bills. While they have been shelved (at least for now), the pressure on legislators to come up with new variations continues, as does the pressure to launch federal cases against service providers like Megaupload or Hotfile. Y Combinator founder Paul Graham argues that this phenomenon isn’t the natural order of things, but stems from the failure of those content industries to adapt to the new realities of the internet. He is right — as long as they continue to resist, the battle will go on.

Graham compares what the movie studios and record labels and other entertainment and media conglomerates are trying to do with someone trying to charge money for the air — a reference to an old folk tale about a student who was sued by a restaurant owner for stealing the smell of his food (according to the story, the judge ordered the student to repay the man with the sound of some jingling coins). Their control over the packaging and distribution platforms that we used to take for granted gave them the ability to do that, Graham says, but that is no longer the case:

The record labels and movie studios used to distribute what they made like air shipped through tubes on a moon base. But with the arrival of networks, it’s as if we’ve moved to a planet with a breathable atmosphere. Data moves like smells now. And through a combination of wishful thinking and short-term greed, the labels and studios have put themselves in the position of the food shop owner…

This metaphor may not be exact, but Graham’s point is well taken: The environment in which content-owning companies of all kinds are operating now has irrevocably changed, and so the business models and processes must change as well — and the points at which we see friction are when these industries try to apply the old model to the new reality. So geo-blocking of sporting events and time -windowing and other tools that used to define markets for video run headlong into the desire of someone like Union Square Ventures partner Fred Wilson to watch a Knicks basketball game, and “piracy” is the result. But piracy is just a symptom of a broader problem.

The game has changed, and playing the old game is not working

So should these industries just give their content away for free? Of course not. But Graham argues that there needs to be a realization that the game has changed, and therefore different rules are required, instead of just repeated attempts to get the courts and governments to reinforce the old rules. As he puts it:

Should people not be able to charge for content? There’s not a single yes or no answer to that question. People should be able to charge for content when it works to charge for content. But by “works” I mean something more subtle than “when they can get away with it.” I mean when people can charge for content without warping society in order to do it.

As a number of observers have pointed out, including author Matt Mason in his book The Pirate’s Dilemma, piracy in virtually any industry is a sign that there is something wrong with the fundamentals of that market — in effect, it means that potential customers are finding it more worth their while to pirate something than to pay for it. And if examples like comedian Louis CK’s recent download experiment have shown anything, it’s that people will pay for something if they value it highly enough, and if you make it as easy as possible — even if the option exists to get the same content for nothing.

Musician Jonathan Coulton has shown that it is possible to make a good living from music even if you give it all away under a Creative Commons license, as Techdirt has noted a number of times (fellow musician Neil Young recently said that “piracy is the new radio”). And Coulton had some fascinating comments to make in a recent interview about the value of the internet vs. the value of the content industries:

[I]f as a consequence of letting [the internet] do what it wants, we destroy a number of industries, including the record business, and maybe even including the rock star business, I think that humanity will be better off. I, for one, think that the internet is one of the greatest human achievements, ever. It’s an amazing tool and we have only just begun to explore the possibilities. To me, it feels like it’s a part of our evolution as a species. I value it as much as I value the Bill of Rights.

That’s probably not a common viewpoint, but it is a far more optimistic one than the doom-and-gloom message from the content industries, or the repetition of absurd claims about how much value is theoretically being destroyed by piracy (for more on that, see Rhapsody founder Rob Reid’s recent TED talk about the “$8-billion iPod”). In the end, as Brad Burnham of Union Square argued during the SOPA and PIPA battle, the internet isn’t just a tool, it’s actually a belief system — and the central principle is that the kind of behavior the internet empowers is fundamentally good for society.

The ironic thing is that content companies would probably create even more lasting value if they tried to adapt to those principles instead of fighting them.

Post and thumbnail images courtesy of Flickr users Paul Sapiano and http://www.flickr.com/photos/yanrf/1408711192/“>Refracted Moments

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  1. Equating media with air is ridiculous. Media requires requires resources and effort to create.

  2. c’mon brainwashed Friday, March 30, 2012

    Copied endlessly at zero cost means it is worthless.
    Sorry Basil , but that’s a fact.

    Making laws to alter reality and limit copying is downright regressive and draconian.
    Throwing people in jail for worthless copying is immoral.

    Spending $ 1 million creating something that can be copied endlessly at no cost WITHOUT a realistic way to monetize your creation is a STUPID BUSINESS MODEL.

    The internet is a filesharing network and it also has income generation models that work.

    HOW MUCH did you pay to read this article ?
    Is the writer not getting paid ?

  3. I strongly disagree with the idea that “there is something wrong with the fundamentals of that market — in effect, it means that potential customers are finding it more worth their while to pirate something than to pay for it.” There is nothing wrong with the market and traditional mode of doing business. Rather, people have just found a way to circumvent the market and consume content on their own terms. There is also a legitimate market for content on the internet but many people still chose to consume pirated material. There does need to be increased inventiveness in the way we distribute content in this day and age but there also need to be boundaries and people need to contribute some value to the content they choose to consume.

  4. Geoff Middleberg Friday, March 30, 2012

    At the end of the day, solving online piracy is the goal. Let’s not lose sight of that target. Whether you want to do this by coercion or legislation, is irrelevant. Let’s get everyone in a room together and solve this problem so that we can protect independent artists.

  5. The goal isn’t to ‘solve online privacy’ Geoff. The goal is to implement business models that work. There’s no ‘getting everyone in a room together’ buddy, there’s just companies who innovate and thrive and those that wither and sometimes die. The record labels choose the later route. The film industry seems pretty determined to do the same, though they’re a different animal entirely so, we’ll see. A contraction doesn’t seem unlikely.

  6. The best analogy I read is that the concept of online downloading is “competing service.” The big media companies are simply not competing, trying to strong-arm mafia-style the competition when in fact, it’s not getting them far. They’re wasting money, losing money, the whole 9. Movie industries and music industries should take it from iTunes and whatnot: charge $1 for your song or $5 for your movie and let it download fast. I just read last night that the movie industry wants to charge more for Theatre tickets because 3-D isn’t doing well. Very poor business tactics, indeed.

  7. The music and movie industry are business dinosaurs and, hopefully, sooner than later shall be extinct (not going to happen) or drastically cut down in size and influence (should have happen already, but then again some dolts also believe that we have free and competitive markets in this country or the world).

  8. Agreed, the old models are obsolete. And what is the new model? I read many proclamations about the new environment, yada, yada, yada… and everyone should get everything for free or very little. They sound anachronistic by now. The arguments that content is like a smell or by having no cost (it actually does, it’s just small) are unconvincing. Apple, Amazon, and similar are held up as examples. But they are the gatekeepers from hell. Talk about draconian. I hope the new model is not give everything to an oligopoly of powerful distributors who can refuse market access to whomever they please and claim whatever premium for distribution that they please (“take your business elsewhere – ha!”). Eric Schmidt and Jeff Bezos might be great people with ethics to admire – but they will pass and someone else will come along who might be more like a big oil or too-big-to-fail bank executive than a cuddly internet founder / early stage executive. Are we putting our faith in mission statements? Exxon and BofA have really nice ones. While there may be a commercialization model that does “give content away” does that mean everyone has to use it? Isn’t that draconian in its own way? The ad hominum nature of replies to inquiries about details of the new model betray the fact that there may not be a model. Perhaps the free content advocates simply don’t understand the perspective of content creators? The fact that they refer to “Hollywood” and “record companies” shows that they conflate creators and marketers. In fact Apple and Amazon are also marketers. Is this about what marketing entity we want to give control of content to or is it about freedom and justice for creators? If so, what’s the model that serves them?

    1. Thinking about it, Bernie Madoff just stole people’s investments, just numbers, nothing tangible. Piracy is the white collar crime accessible to all.

  9. This article nearly made me vomit. We made a film last year that was initially doing ok then it got pirated on the pirate bay…. Sales literally stopped that hour, no money to pay the bills, no money to reinvest this year. Stealing is criminal theft, it’s really simple.

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