Re: [tlug] Re: MPEG stream analyser?

["Stephen J. Turnbull" <stephen@example.com>]

>>>>> "Josh" == Josh Glover <jmglov@example.com> writes:

    Josh> But they need to learn that DRM is hurting them, at least in
    Josh> some markets. I will not buy a licence to a song--I had
    Josh> better be able to have a copy of that song at home, at work,
    Josh> burned to a CD in my car, in my stereo, etc.

Unfortunately, the whole problem is that for an intellectual asset,
without DRM, there is only one market.  If they find a way to make an
exception for "Josh 'I Stand on My Principles' Glover", then the
number of "Josh Glovers" in the market will be approximately equal to
the number of customers.

    Josh> Maybe Dr. Turnbull has some good analysis that shows that
    Josh> most people do not care enough about DRM for it to be a
    Josh> deal-breaker. Steve?

Two points.  First, Patrick is wrong about the commodity industry,
thin margins cha-cha-cha.  As indistinguishable (not to mention
unlistenable, but that's a different issue) as I consider all Utada
Hikaru and Hamasaki Ayumi songs to be, it wouldn't satisfy the paying
customers to record their first song, dupe it until the medium is
full, then rerelease that album every 6-18 months for ten years, and
then change the cover and rerelease again as a different artist.  The
music (ditto movie, ditto games) industry is _not_ a commodity
industry, based on reasonably certain though very thin margins.
Rather it is a highly uncertain market with profits dependent on
constantly increasing variety, with huge overhead costs on every
release.

It doesn't physically _have_ to be that way, viz the Grateful Dead or
any of the great bar bands that Columbus OH supports (let along
Cleveland, Detriot, Greenwich Village, the Castro District, etc).  Or
(true) samizdat, for that matter.  However, for reasons I don't
understand the relevant market (14-year-olds with excessive
allowances?) likes the industry the way it is, with all the hoopla and
lack of content.  So be it.  It's the hoopla and mass-marketing that
needs to be funded on a huge scale, not the recording and distribution
end of the business.  And for whatever reason, the artists are
unwilling to Just Say No to the greedy media conglomerates: _they_
apparently want to play in the hoopla league, not in the bar band
league.

Second, insisting on the traditional "one-price-per-infinite-plays"
pricing model is only hurting consumers.  (And it's not all that
traditional, anyway.  Maybe you're too young to remember real
jukeboxes, but pay-per-play was once very popular even in the U.S.)
What you need to remember is that intellectual assets[1] are assets
(aka capital goods), and therefore are durable goods with many, many
markets (potentially) associated with them, running from instantaneous
rentals (compare the toll telephone call or electricity) to outright
purchase (like a car) to complex contracts that specify time and usage
limits (like a time-share condominium).

As an analogy, think what it would be like to get rid of car rentals,
too, and the airline industry (if you want to travel by air you have
to buy a plane)?  And when you buy a movie ticket, it should be a
lifetime pass to see that movie anytime, anywhere, whether you want to
see it again or not?  When you need a gold-plated system that is proof
against anything except a direct hit by an atomic bomb, do you insist
that the power company provide redundant lines to your site, or do you
buy a UPS?

The problem with all of those examples is that sometimes you don't
want to buy the cow, you just want to drink some milk.  The reason you
think differently about DRM is that you've never seen the kind of
markets that would be possible with effective DRM.  What you would see
(eventually; IMHO) is most like the automobile industry, with its huge
variety of short-term rental, long-term lease, and ownership
contracts.  And you would see a decrease in the cost of listening to
the music you want to listen to in the long run (monopoly or not, but
holding that constant---obviously changing from monopoly to
competition would have dramatic effects on both the variety of songs
produced and the price/quantity tradeoff in the market).

What about Patrick's correct observation that CDs reduced cost
compared to analog technologies such as tape and vinyl, yet prices
increased?  Well, simply note that quantities have increased
dramatically at the same time.  This can only happen, whether in
monopolized markets or in competitive ones, if the demand has
increased dramatically.  It's impossible (without resorting to
magic<coff />advanced statistical analysis) to determine how much of
the price increase is due to the monopolist increasing unit profits
and how much is simply due to the increased value being delivered to
consumers.  And yes, it is increased _value_; nobody is holding a gun
to their heads, but the consumers are willingly paying more.  Where
does the increased value come from if the goods are physically
basically the same?  Higher quality sound (except perhaps for extreme
audiophiles), new markets such as 3-year-olds and autos where you
would never use vinyl, and richer consumers.

I think it's both a reasonable ethical principle and an economic
principle that those who get more benefit from a good should
contribute more toward its production.  Those are both arguments for
DRM and intellectual property in general, and for "pay-per-play"
distribution methods for software (here including music and video) in
particular.

Note that DRM and pay-per-play have no obvious structural
relationship.  Effective DRM (pretty much by definition) enables all
of the possible contracts to be written, while the absence of DRM
could (in theory) lead to the primary markets (ie, the media companies
who actually pay the artists) using _only_ pay-per-play technology.
(It's true that "enables" doesn't mean that format will actually
emerge in the market, but note that even Microsoft will sell site
licenses for some of its products.)

So why do most sane economists think there's a problem with the
introduction of effective DRM?  Because _effective_ DRM doesn't exist,
and it's hard to see how it _can_ exist.  So to make it effective, you
have to "enhance" it with police state methods of enforcement.  Yeech.

Does that mean intellectual property can't be effective in delivering
more music to listeners at lower expense?  Not at all, though it will
be of limited effectiveness compared to (say) the automobile market.

So where should you stand on all of this?  It's hard to say.  Yes, I
think that the "right solution" to the problem of production and
diffusion of software of all kinds will involve (restricted) IP,
something like copyright with a 5-10 year term.  I currently don't
believe in software patents in practice, but that's a corner solution
to a a cost/benefit analysis that could very well end up with a
similar conclusion (some degree of patent protection for certain kinds
of software is appropriate) if circumstances change.  That's just a
"full disclosure" declaration of my position, not advocating that you
should adopt it.

What I think you should consider in thinking about your own position
is the following.

(1) In this context, calling me "Dr." is inappropriate and you should
    wash your mouth out with soap.  I don't have special authority
    here.  Any half-trained grad student (and even many free software
    fanatics) can recite the economic analysis part chapter and verse
    (although the FSFer's will immediately and incorrectly tell you
    it's false ;-).  It's the received wisdom, and for good reason.
    On the other hand, the policy implications are complex and depend
    on values in complex ways---and nobody is as good a judge of your
    values as you are.  Certainly not any of the half-trained grad
    students I know.

(2) Politics: can you trust the legislative process not to act as an
    accessory to theft by extending and reinstating IP protection for
    _existing_ intellectual assets?  (Of course, really fixing this in
    the U.S. would require a Constitutional amendment.)

(3) Psychology: are people sufficiently bovine[2] as to pay for what they
    could easily get for free (ie, in the absence of even half-baked DRM)?
    You'll never see the harm caused if they're not---it will be
    measured in products that _could_ have existed but were not worth
    developing.

(4) Ethics: is it really right to have a system where those who get
    small benefits must pay the same amount as those who get large
    benefits, if it's possible to share development and production
    costs more proportionately to benefit received?

(5) Value of variety: note that while it's certain that some of the
    revenues to intellectual property will go to unproductive
    rightsholders (aka greedy media conglomerates), it's equally
    certain that none of the value received by those who get copies
    outside of the primary market is ever recycled into production of
    new varieties of the good.  (This is unlike programs, where free
    software is a tool that incites, encourages, and often directly
    supports or is a component of new varieties.)  The loss of variety
    is "invisible" but important.

(6) Note well that marketing is something that both programmers and
    most rock bands suck at, and so they must somehow get
    professionals to do the marketing.  However, when they get
    started, they typically have no financial resources to hire the
    professionals with, so to do so they must trade on the equity in
    their product.  This isn't an ethical reason why IP or DRM is a
    good thing, but it is a fact that any policy intended to avoid use
    of IP or DRM has to deal with.  rms is right that lots of people
    will continue to write programs and songs whether they're paid
    well or not; but few people would be willing to do marketing work
    unless they are very well paid.

Footnotes: 
[1]  Note, not "property", which is a legal construct.

[2]  Cf. Lessig's _Code Is Law_.

-- 
School of Systems and Information Engineering http://turnbull.sk.tsukuba.ac.jp
University of Tsukuba                    Tennodai 1-1-1 Tsukuba 305-8573 JAPAN
               Ask not how you can "do" free software business;
              ask what your business can "do for" free software.