Piracy is not a pricing signal

Lost sales from illegal downloads are lost because of convenience, not price.

The comments to yesterday’s Four Short Links threw up a predictable response from “Frankster”:

So why don’t you put your money where your mouth is. Why don’t you put torrent links next to all of your books here at oreilly.com. Put a big “free” button next to the button that let’s you pay. Show us how it’s done. Show us how cool you can be. Show us that it works. Don’t just give us a “great takedown”. Lead by doing!

This is such a well-worn canard that I am reposting my response.

@Frankster: actually, you’ll find all O’Reilly books in shop.oreilly.com have links to ebooks that are cheaper than the print version. The purchasing system is simple (not one-click, alas, but pretty close) and–most importantly–you can have the ebook in whatever format you want, without DRM. Oh, and there’s Safari, our subscription service for ebooks. We try to make it as convenient as possible for you: all our books, all the formats, no DRM inconvenience. What kind of an idiot builds roadblocks to a sale?

Also, as an author of a technical book, I’m well aware that it is readily pirated from around the Internet. Go knock yourself out if price is that much of a barrier to you. I’d rather see you educated than bankrupt for the price of a lousy technical book.

You seem to have me painted as some kind of creator-hating anarchist. You don’t understand that I want to pay for movies and TV. There’s a huge pool of middle-class downloaders who would gladly buy if it were available: iTunes and Amazon’s MP3 sales show this for music, and Hulu and Netflix are the signs of this for movies and TV. (I want downloads, not streams, because of the pricing structure of broadband in my part of the world)

Whatever lost sales there are from illegal downloads are lost because of convenience, not price. The inconvenience of current downloads and streams are not a technology problem, they’re a business problem. And rights holders (aka existing distribution companies) perpetuate the piracy “problem” by not giving consumers the convenience that piracy does.

The experience of piracy is actually pretty good compared to that of existing TV and movies online. And, once you get outside the USA, it’s pretty much the ONLY way to get digital media–iTunes and Amazon and Google don’t carry much digital media for us; they offer a dismal few items to international customers versus the munificent excess of their domestic catalogue.

Downloading isn’t a sign of the rise of technoanarchist capitalist-hating communist punks. It’s not even a pricing signal. It’s a market signal to the distributors that convenience matters. While they ignore that signal, piracy will win. It’s that simple.

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  • http://apoemeachday.com Arjan Tupan

    Yes, yes, and YES! The current business model of the entertainment industry in particular is sick. I would gladly pay. But I live in a country of which the language I do not master enough, and that is relatively small. I don’t watch local tv channels, and would LOVE to be able to buy movies and tv-shows if I only could. However, content is not available to me as I want it, at the time that I want it, due to where I live. If I don’t even have the option to pay for content, what are my options?

  • Nathan

    I find the parallels between digital piracy and digital security fascinating. (Really, I think they’re the same thing.) In each case you have content that “the bad guys” consider to be more valuable than than the cost (which factors in the convenience) of obtaining it via legitimate channels. Increasing security amounts to dissuading attackers by reducing the value proposition.

    Traditional media companies still seem to perceive controlling digital content as security problem, rather than as a distribution problem. Yet, their business model relies on pumping the value of that content. It’s backwards.

  • Shawn

    There is no such thing as “lost sales”. Have you ever heard the saying, “Don’t count your chickens before they hatch?” Well, lost sales are unhatched chickens; they don’t exist. They’re just a myth created by the greedy to con others into supporting their greed.

  • anon

    I agree with much of the general attitude of O’Reilly regarding piracy, but sometimes you guys cross the line into ridiculousness. I’d love to hear if Tim agrees 100% with what Nat has written in his last two posts.

    In my experience, many people spend hours trying to find the right torrent or file sharing link rather than getting a job during those hours to pay for the content (mostly young people fit this description). I think many people consider it a ‘game’ (or even a political statement) and posts like this only encourage the attitude that content creators aren’t worth paying if you can find another way to get the content.

    I think it’s very fair to discuss the reality that is piracy without legitimizing it with posts like this. Pirates should not be publicly emboldened. They are not ‘heroes.’ Frankly, they should be shamed for their entitlement just like the RIAA/MPAA crazies should be shamed for their ridiculousness. There’s a middle ground and I think that’s where the conversation should focus.

    For those who love this post, take a look at Franksters reply in the original post for a nice and substantive rebuttal. I recommend that Nat post it in this post so that it doesn’t get lost in the conversation.

  • Frankster

    This was a great argument 15 years ago before the Kindle, Safari, iTunes and dozens of other perfectly nice programs. These are, for the most part, easier to use than the pirate sites yet as we’ve seen from the Megaupload arrests, piracy is incredibly lucrative.

    If this argument really held water, we would have seen the USENET sites and the file swapping sites disappear. We haven’t. The free networks like Napster are being replaced by sites like Megaupload where people consciously pay to get big discounts on content Why? Because they’re dramatically cheaper than paying $7-10 for a movie from iTunes.

    Piracy is very much a pricing decision these days.

  • AnonymousE

    People like Frankster inhabit a fantasy world. Piracy will always exist. When I was in college, we all had brought our CD collections from home and would trade them around. A night or two ripping CDs and you had a lot more music. There are two points to be made here: (1) Piracy can be good. In this case, I ripped a bunch of punk rock CDs and it introduced me to something totally new that I wasn’t hearing on the radio in my part of the world. I went to concerts, bought more CDs, t-shirts, etc. It actually INCREASED the amount I later spent. (2) Good luck eradicating piracy completely. As in the above case, or private networks, or thumb drives, or even most of the current system, you’d have to craft a world government so repressive that any gains to the industry/artists would be far outweighed from a moral perspective, by the horrors of such a society.

    So, piracy will always be a problem. It’s like a friction coefficient in your system. What can you do to minimize it? Don’t treat your customers like criminals is a start. Most of all, make things convenient (as this article is about), and charge a reasonable price.

  • Lanny Heidbreder

    Frankster, the number of clicks between viewing a product and downloading a file is not the only measure of convenience.

    If I buy a movie on my PS3, I can play it only on my PS3. If I buy a TV episode from iTunes, I can play it on my Mac and iPad, but not my PS3 or Xbox. If I buy a Kindle book, I can only read it on a Kindle device or in a Kindle app, regardless of whether it’s the best book-reading experience on my devices. If I buy a Blu-Ray, I have to sit through ten minutes of unskippable FBI warnings and previews and commercials before I can watch the movie. If I buy a single-player game from Ubisoft, I can be kicked out of the game at any moment if my internet connection hiccups.

    Yet anything I can buy DRM-encumbered has been cracked and can be downloaded without any of these ridiculous restrictions.

    DRM protects nothing and engenders spite for the media companies that insist upon using it. It shows absolute disrespect for the customers who buy products using it. This is why lots of people download copyrighted material illegally.

    There will always be people who pay for nothing and pirate everything, and it is impossible to stop them. The only thing you can do is maximize your sales by making your product as convenient as possible to use, so the people who want to pay for it can do so without feeling dirty and dreading the hassle that follows.

  • bob

    A fantasy world? Did I say anything about getting rid of piracy completely? In fact I advanced the same friction argument that one of the anoymous folks did, but did it in a way that suggested that somehow piracy wasn’t entirely noble.

    Do I think that piracy will be eradicated? No. But I also don’t think that murder, rape and plain old fashioned robbery will be eradicated either. So I’m not tossing up my hands and saying we should give up enforcing those laws. A mixture of law suits and technical restrictions can keep it in check.

    To me, enforcing the rules on piracy are about fairness. Just as locks keep honest people honest, good restrictions on piracy force us all to contribute equally to the artist. The freeriders can’t live off of the narrow range of the population that are willing to pay the creator.

    It’s worth noting that the vision of techno-utopia endorsed by the anti-copyright crowd is one that’s largely enjoyed by those with the programming skills to download. The poor end up subsidizing the blockbusters because they have to pay to see them in the movie theater. The rich, college educated with unlimited bandwidth get the content for free, but the poor get the bill.

    I’ve heard the old piracy sells concert tickets many times before and while I don’t disagree, I think it only works for an increasingly narrow range of content. The creators of newspapers, books, and movies can’t surrender assuming they’re sure they’ll make it all back in live readings of the nightly news.

    So who is living in the fantasy world?
    Am I the one that thinks that people will invest $100 million in a nice period drama if it’s going to be wildly pirated? Have the bloggers risen up to fill the void of the Rocky Mountain News or any of the other papers that are now gone?

    If Mr. Torkington is so in love with making torrent links easy to find for movies, if he really thinks the movie companies are “nags”, he should bet his salary by asking Tim O’Reilly to put the torrent links next to the O’Reilly books. Offering fair prices isn’t enough. If you’re going to be helping people find torrent links for movies, you should be willing to put your own business on the line.

    To me, it’s all about fairness. If you’re enjoying a work, you should be contributing to its creation. All of the customers should be treated equally.

  • Jayne

    Wow, why all the arguing? I’m pretty sure we can all agree that piracy isn’t just going to stop over night and that a huge part of the reason IS price. Is piracy akin to other crimes? No. It’s supply and demand, just like everything else. If you want the real deal, with a cover to make it look nice, you’re going to have to pay, if you’re ok with a download, you can get it for free. To me, that’s as fair as you can get. It’s available to anyone and they can choose to pay or not, it’s nobody’s job to make it easier to provide links for downloads or to put anything “on the line” to promote downloading. We are all responsible for ourselves and, seriously, if you don’t have the wherewithal to find your own download You probably shouldn’t be touching a computer at all, for your own safety. Just Saying.

  • https://plus.google.com/117352818909576007115/posts Lucas

    Yeah! In Brazil the only easy option to get legal music is buying a CD, but why the hell would I want a CD? How am I supposed to listen to my favorite songs on my phone? Should I listen to music only in places where I have a CD player? I can’t even rip the songs I just bought to mp3 for my personal and exclusive use, because many discs are copy protected and legally I may be “infringing copyrights”.
    Smartphone paid apps are good examples that people usually prefer spending some money to get legal apps instead of searching and downloading pirate stuff from untrusted sources. But smartphone apps usually have something that music don’t: a fair price. God, they are not producing the song again when I buy it, it’s nothing but a copy! Of course that production costs, authors’ rights and profit have to be diluted on the copies, but prices are many times abusive. The costs for copying digital content is almost zero, so if you divide production costs and author’s rights for the millions (billions?) of copies that will be made, you will realize that most part of a song price is profit. Is it fair?
    Almost all of us want to pay for what we get, and we surely want to help our favorite artists, actors, directors, book authors, producers etc. to get money for their work. But entertainment industry did not follow the technology evolution and still wants to make money in the same way they did decades ago. Piracy must not be faced with repression, but with innovation.

  • http://biohazard.seattle.wa.us twodogs

    O’Reilly makes their titles available at a WIDE variety of prices which should appeal to everybody. You just have to look around before you pay.

    Take Asterisk: The Definitive Guide 3e for example:

    Print: $54.99
    Ebook: $43.99
    Google books: $31.72
    Android App with DRM free export of epub file: $4.99!

    A lot of the titles are available at that price point in app form.

  • dan

    the content creators should release the torrent files themselves, embedded with advertisements for products relevant to the pirating community.

  • Aaron

    Even if you believe convenience is the main issue, you can still see piracy as a pricing signal. It’s simply that inconvenience can lower the acceptable price to below zero.

  • Chris

    Hi Nat,

    Thanks for the thoughtful article.

    Unfortunately, I’m not sure I can agree with your conclusion. It sounds to me like you made your company’s content as convenient as you can, and people are still going elsewhere for it. If your books were still hindered by DRM, or the checkout process was cumbersome, you might have more of a point, but as it stands, your argument doesn’t really explain the thousands of people who have a convenient way to pay your price, and still choose to get it for free.

    Technical books tend to go stale very quickly, and have a lot competition from blogs and Q&A sites. Therefore, in my estimation:
    a) The value proposition for the content is short lived, which lowers the price people are willing to pay.
    b) People can get similar content for free from other sources even if though it is less convenient.

    Piracy offers people a way to get “premium” content for free, but it’s the free content that has lowered the value proposition for the premium content. People aren’t willing to pay very much for something when they can get something similar for free.

    Your content is already more convenient for most people who want to consume it than combing through lots of websites for bits and pieces of the same information. You’ve made it as convenient as you can. You said so yourself.

    I still buy O’Reilly books, and I read them as part of a Safari Books subscription through my work.

    The problem is that anything more than a dollar or too is just too expensive for a lot of people. Unfortunately, some people choose to take your content without paying, which I don’t condone. But I’m afraid they’re going to keep doing it until you catch on that you’re competing with free, even if your books are still much better than most of the alternatives.

  • Matt

    I agree with the title, and the article. Scarcity exists on the internet. But it is not information or content. It is scarcity of easy buying and content management infrastructure. Amazon and Apple have the best infrastructure for content + billing. I don’t ever hesitate to buy from these two sources. I buy a lot from them. I have never once added up how much I have spent, because the things I buy are important to me. I am not rich either. If they don’t have it, that’s when I’ll look elsewhere, and it is massively frustrating. I am prepared to pay Amazon and Apple for the convenience of management of this function. The content I can get anywhere.

    It’s why universities might be around for a long time. People don’t need content any more. They need ways to limit content, they need boundaries to make content easy to digest, reviewable, and they need deadlines. People need to have the capacity to say, of all the information in the world, this is what I know, and give it a title (degree). I imagine its the same with Amazon and Apple. Of all the music in the world, this is what I know, this is what I like.

  • Able Lawrence

    @Frankster
    We outside the US, such as in India do not have access to good movies and other content through legitimate means.
    Only B grade and blockbuster movies are released (and they are a big success considering the size of the market). I make it a point to find time to watch all reasonably good movies that are released. DVDs are a hit and miss (Only 50% open since they sell 3 different region coded CDs in India namely, East Asia, Middle east and Russia) and I end up having to rip and convert your own legitimate DVDs so you can watch them. Now I always rip them and watch them since it is more convenient than disc.
    For many classics, the only option is download. I have searched DVD stores in 3 continents to get a copy of blade runner. Finally when I managed to buy a copy online (from an Indian site), it was corrupted and did not play. So back to downloading what you already bought. The same story repeated for 2001 a space odyssey.
    We are all waiting for the day when contect can be downloaded online for a fee. a la carte. Netflix is a waste since no one has to time to watch movies worth 15$ in a month.

  • Able Lawrence

    @Frankster
    We outside the US, such as in India do not have access to good movies and other content through legitimate means.
    Only B grade and blockbuster movies are released (and they are a big success considering the size of the market). I make it a point to find time to watch all reasonably good movies that are released. DVDs are a hit and miss (Only 50% open since they sell 3 different region coded CDs in India namely, East Asia, Middle east and Russia) and I end up having to rip and convert your own legitimate DVDs so you can watch them. Now I always rip them and watch them since it is more convenient than disc.
    For many classics, the only option is download. I have searched DVD stores in 3 continents to get a copy of blade runner. Finally when I managed to buy a copy online (from an Indian site), it was corrupted and did not play. So back to downloading what you already bought. The same story repeated for 2001 a space odyssey.
    We are all waiting for the day when contect can be downloaded online for a fee. a la carte. Netflix is a waste since no one has to time to watch movies worth 15$ in a month.

  • PeterD

    I am more inclined to believe that piracy is a signal for both pricing AND convenience. Isn’t this the reason why iTunes and Amazon’s MP3 sales are so popular? Why isn’t there such a service for ebooks? Isn’t it obvious that it’s the next BIG thing on the web?

    Also if you are interested, consider reading: Free illegal knowledge and how (not) to deal with it

  • http://www.cherada.net Tomas Canjura

    The only way you can buy music legally in my country is going to a CD store, Internet make things easier by downloading the music you really want to have.