Tuesday, September 09, 2003

Capitalism and the Law: "Hackers not Lawyers"

Andy Kessler has an article at the Wall Street Journal that I don't agree with:

As of yesterday, record companies--via the Recording Industry Association of America--have sued more than 250 of their customers, sent subpoenas to Internet service providers demanding the names of flagrant file-sharers and even threatened to unleash worms and viruses on file-sharing Web sites.

But c'mon, no one outside the insurance industry really thinks it's a great long-term strategy to scare your customers. Alienate 16-year-olds, and all you'll ever sell are Rolling Stones albums to boomers.
Isn't it the RIAA's point that the pirates they are pursing in the courts are not their customers?

Fifteen years ago, the software industry had a huge piracy problem, one of the main reasons being that Microsoft Word or Excel cost hundreds of dollars. Borland cut the price of its Quattro Pro spreadsheet program to $79, and people bought it instead of copying it. Sales went up. Economists call this elasticity.

The same thing may happen in the music biz. The vast majority of music listeners are honest, property-loving citizens, and my guess is we would all gladly pay a fair price for music. Ten dollars per album may still be high--who knows? The industry still needs to figure out how to transition to an online-only model. Without shiny discs, and the markup brigade, they can charge 50 cents a song and $5 an album and still make as much as they do today via stores. It shouldn't be that hard--the cellphone industry does $1 billion a year in ring-tone sales. Surely the music industry can sell songs online in even bigger numbers.

Long term, the music industry needs technology, not lawyers, to fix its problems. Hire a few of those hackers you are now threatening with jail time. Don't sell dumb data, sell software. Each song or album could eventually come with its own code, its own little operating system, to play the song on the next generation of players.
Yes, price, packaging, and quality affects record sales. But failing to find the price, packaging, and quality one desires does not give one license to steal.

I agree that the way music is sold will change, shifting from the album CD to the Internet single song model. Yet with either model, piracy will still be a problem. I know people with 1,000 songs on their hard drive. If under the Internet model, songs sell for $0.50 a pop, that’s still $500 dollars. I question why a teenager would pay $500 for something he can pirate for free, if he thinks he can get away with it. And it’s precisely that point that makes me think that RIAA’s strategy is correct--they need (and have a right) to protect their property from theft. That means little pimply pirates need to feel some heat, so as to remind them that theft is wrong and that it will not be sanctioned.

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