It’s not about piracy, it’s about a failure to adapt

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“>Refracted Moments