The software and entertainment industries have a
problem but it's not the problem they think it is. Both
believe they have intellectual property problems. In
the case of software, large software vendors are struggling
to figure out how to keep their IP and associated revenues
from being cannibalized by Open Source software. Record
labels and movie studios, for their part, believe that
peer-to-peer piracy is destroying their ability to charge
for the art they produce. Both are wrong. Neither has
an intellectual property problem. Instead, both have
a payment problem.
In the face of open source and P2P, consumers (be
they businesses or individuals) are less and less likely
to want to pay for the goods that the software and entertainment
industries deliver. Not because consumers are evil but
because the models of access to software or media have
outpaced the models for monetizing that access.
Companies like SCO,
unable or unwilling to move into the 21st-century software
business, cling to their IP and wage lawsuits against
competitor and customer alike, trying to frighten the
world into believing in their 20th-century business
model. On the entertainment side, groups like the RIAA
sue end users, write threatening letters to businesses
and universities, and generally try to force the P2P
genie back into the bottle.
This is folly. Pure folly.
Why? Because these tactics make criminals out of
a massive pool of would-be buyers. Such tactics focus
so much on the encroachment on their IP (and the ability
to monetize it) that they fail to see the expanded world
of opportunity now open to them.
Consumers want control
Software companies have charged a premium for their
IP for years; who can blame consumers for grabbing a
more malleable (and generally cheaper) alternative when
it presents itself? Why pay hundreds of dollars to Microsoft
for Office when I can download OpenOffice and get all
the functionality I need, or nearly all, for free? Why
lock myself into a single vendor of an operating system
when I can rely on the fluid innovation of Linux?
Of course, Open Source technology is not truly free
of cost, because I must make trade-offs to use an open
source product. And no, access to source code is not
a panacea to all problems. But given the margins proprietary
software companies have been able to command, and given
the strict control over their code they have maintained,
no one should be surprised when consumers look elsewhere,
even if the Open Source alternatives are not yet perfect
substitutes for proprietary products.
On the entertainment side, the entertainment industry
has been conditioning consumers to not pay for many,
many years. Radio and TV have conditioned consumers
to expect free entertainment. Under these models the
only thing consumers pay is the slight annoyance of
listening to or watching advertising. No money ever
changes hands between the content creator and the consumer
in these two media.
And, as with software, P2P networks deliver greater
control over entertainment to the consumer, so who can
blame consumers for flocking to these services? In MP3
music and DIVX movie downloads, the concepts of radio
and TV have been perfected. Suddenly, consumers hear
or watch what they want, when they want.
In both software and entertainment, the consumer's
focus is not really about avoiding payment. Rather,
the impetus for using these alternatives to IP is to
maximize access and control. The matter of cost is of
Hence, my earlier statement that the software and
entertainment industries have a payment problem, and
not an IP problem. Both industries need to invest their
resources in figuring out how to monetize this rabidly
Solving the payment problem
The solution to a new technological reality is not
to try to litigate that reality away. The music industry
learned, or should have learned, this with radio in
the 1920s. Radio crushed recorded music revenues and
all sorts of dire warnings were issued as to the record
labels' ability to survive. But the labels fought back,
not by slapping lawsuits on radio but rather by resolving
the payment problem through ASCAP,
a licensing regime that permitted radio and the record
labels to flourish.