You're missing the key fact in the piracy debate, which is that _the market value of a recorded film/music/whatever is ~zero._ It follows from the laws of supply and demand.
As a thought experiment, imagine this this: tomorrow, I invent a machine that can make unlimited free copies of soybeans, and distribute those beans instantly to almost any point on the globe, also for free. And also, for the sake of argument, imagine that nearly everyone on earth has access to my soybean copier.
In this case we could fairly say that the supply of soybeans is ~infinite, and you only need to read the first page of the Econ textbook to learn that the price must necessarily fall to zero, no matter what. It's a mathematical certainty for any finite demand.
You can pass whatever laws you want, but so long as they're practically unenforceable, you won't change the boots-on-the-ground spot prices in the market, which will hover very close to zero. (If you doubt me, ask the Argentine currency bureau if legislating prices works well.) Obviously the price will never be exactly zero, because my machine still needs electricity to run, and the market will perhaps price in a little law-enforcement risk. But in general these costs are probably going to be negligible.
And of course this has nothing to do with soybeans---the same thing will happen for corn and light sweet Saudi Crude #2 and intelligence reports about the location of Assad's WMD or any commodity you'd care to name. And digitally copyable goods are the very definition of a commodity, for while not all soybeans come off the vine created equal, a torrented .avi is a provably interchangeable item with the original. Thanks checksums. (If a film ain't on the Pirate Bay, then obviously supply != infinity, so my argument doesn't apply).
This sucks for the business models of the entertainment stakeholders, but capitalism doesn't care that you disagree with the market about the price of your product. Those stakeholders took profits for a long time, playing (approximately) by the rules of the game, and now they're pissed that those same rules have invalidated their business. Well, tough luck, MPAA. The market's invisible hand is slapping you and you'll have to adapt.
Those stakeholders took profits for a long time, playing (approximately) by the rules of the game, and now they're pissed that those same rules have invalidated their business.
Right, because the entertainment industry consists solely of monolithic studios that have been around since the beginning...not.
Do you not realize how absurd this argument is? Imagine that you had this idea for a film and you desperately wanted to make it. Well, nobody wanted to take the risk and so you learn to produce a film. It's a feature, so if you managed to get it completed and sold within 5 years of deciding you want to make movies you are doing extremely well. So you push your Little Film That Could out into the world, but since your first feature probably doesn't have any big stars or or amazing production value it gets a minimal theatrical release and you hope to recoup your costs on DVD, foreign, and streaming sales. Not really to make any money - simply breaking even on your first film and returning the investors' input is the benchmark for industry success.
Then someone comes along and tells you that the market value of your film is zero, and if you make any attempt to protect your IP you're a troglodyte who has failed to adapt, and you should feel bad about all those decades you spent fleecing the public.
That's like saying startups should give their product away for free because IBM, Microsoft, and other industry incombents have often exploited consumers in the past.
I think the key part to take away here is that the filmmaker is the one who desperately wanted to make it. The audience wasn't desperately waiting for him to make it. Just because he pours lots of effort in it, doesn't mean that the movie has intrinsic value.
But the audience does desperately want to be entertained. And while you could make a modest return on a modest investment some years ago, and iterate on larger budgets if you had a reasonable amount of skill and talent, that has become very much more difficult because the internet has disrupted things.
Good side, you can now make money on sites like Youtube, and the technical barriers to entry are low, so there is enormous upside potential. Bad side, that probably means short-form lowest-common-denominator stuff. Great if you are happy churning out episodes of Annoying Orange, a disaster if your goal is to make feature films. You end up with a 'superstar economy' where a small number of films make $$$$ and a much larger number make little or nothing. This was always the case to some extent but the internet has seriously exacerbated it.
Yes, the audience wants to be entertained. And they are being entertained, to the extend that the entertainment market is oversaturated and as such the value of entertainment goes down.
I feel like your second paragraph is just a reiteration of what it is like for someone who wants to produce something that is not valued by the majority of his apparent market. We do not really care too much about this in other markets and we should not do so in entertainment. If what he is doing is so incredibly great, he might try crowdfunding, patronship or another form of sponsorship - it has worked great for the artists of our history.
I think my point is, you can't demand to be paid for producing something you want to produce. It's a game of supply/demand.
Well, my underlying point is that you can't demand to be paid, (and never could), but that doesn't justify people infringing copyright and then using the fact of that infringement driving down the value to say that the product is worthless.
The infringement isn't driving down the value. Market saturation and lack of scarcity are driving down the value. Copyright is an artificial construction, an attempt to create scarcity where there is none.
Copyright infringement is, in most cases, the result of asking too much money for a product that has very little intrinsic value and the addition of customer-unfriendly measures to legal alternatives (read: DRM and all its woes).
(Regardless of its merits,) I don't think the argument is that the product should be free because the incumbents have exploited the public. The logic is that it should be free because supply is infinite; the exploitation is a side note.
I have to disagree that supply is infinite. The marginal cost of supply is near zero, but the fixed costs are considerable. It's almost impossible to make a saleable film for under $100k. There are little breakout movies like Primer that are famous for being cheap ($7000 in Primer's case), but that's sort of marketing BS - the low number is what it cost to make a playable copy that could be submitted to film festivals but nobody talks about all the extra work involved to get it consumer ready.
The point is that costs are fixed, but revenues are not. They don't make a product and sell it once with a win. Of course you could argue that they have a business risk and all that, but at the end of the day, you'll have to work for every extra dollar you make and they don't.
I love it when I'm being paid by the day because actual money ends up in my pocket. I have ownership interests in a number of films and the only reason I hold onto the contracts is sentimental value - none of them will ever make any money.
Only about 20% of films break even, and only a very small number of those make long-term royalty income - and that was true before the internet upended distribution models - which is why the careers of studio executives are so precarious. For indie producers, creatives, and technicians it's almost all business risk. Most projects don't pay very well (if they pay at all) and never recoup their production costs. At the indie end your goal is to win some prizes and get a film into distribution, and maybe make some of your money back if you put money into it. The win condition is that having distribution shows you can make work to commercial standard and maybe someone will like what you've done and give you a larger budget to work with.
To break even typically requires a film to spend about the same money on marketing as production costs, and of course films compete mainly against other films that are released around the same time. Unless you are exceptionally lucky and talented, there is little chance that you will make money with a production budget under $1 million. The typical 'low budget indie movie' that most people think of - quirky romance or gritty crime story - costs $5-10m.
Those are pretty high barriers to entry. It used to be that you could bootstrap yourself by doing some straight-to-video films that were not necessarily very good but were sufficiently adequate to find a small audience in between good big-budget movies, eg James Cameron's first directing job was on the Piranha 2 which was every bit as bad as the title suggests. But now that you can stream many movies you'd want to watch or download a high-quality movie if you're not happy with the streaming offerings, the fims with very small budgets are competing head-to-head with larger-budget offerings and of course the large-budget offerings win for all but the most devoted cinephiles and genre fans, of whom there are not that many.
Most people in the film industry never see any residual income worth talking about. And when they do, residuals are basically compensation for the fact that there are few regular paychecks to be had. You know the best way to make money in film? Run a food catering business. Regardless of the budget, it's an iron rule that production pays for the food and everyone gets at least one square meal a day. For short films and micro-budget projects, food is often the single biggest expense.
It's incredibly challenging to make a profit on a genuinely independent feature these days - close to impossible, in fact.
And whilst YouTube apparently offers a new hope for video, the fact is it's its own creature, and really doesn't support drama - or anything that takes more than five times as long to make as to watch - terribly well.
Oh, lastly - sound recordist also works pretty well as a paid gig in film, apparently. It's hard to get a guy to hold a boom mic for 12 hours for free. But other than that, making cash in film is... tricky.
I'm really good at it and I don't work for free, but I am always being asked to, which is how I come to have an ownership interest in some films, I'll take a percentage depending on who's involved. The sad reality (and this is true for camera and lighting people as well) is that very often you're being offered/paid rental for your equipment and nothing for your work.
GP here. You're right about the relative unimportance of the side point.
However, the main point is not a prescriptive argument that the product _should_ be free, but rather a descriptive argument that the product _is_ free. I claim the market doesn't care about the cost of production, but rather only about supply and demand, when setting prices.
Well, from a purely market point of view, why would a market actor choose possibility A (get the movie for free) over possibility B (pay for the movie)? Or why would they choose B (pay for the movie) rather than C (not care about the movie at all)?
The successful answers to these questions have always been those where people choosing B actually get something (be it a warm fuzzy feeling of supporting good movies, a nice box, or just the convenience of an interface that allows you to simply find and watch a movie).
If you want to rely purely on IP protection for that movie, good luck - people can watch other people's movies, the next YouTuber's shoestring budget entertainment, or a football game? Why wouldn't they read a book, or spend an evening knitting nice red socks.
There is no inherent law of nature that says that we need more film producers or film directors, or that they should make more money than the singer-songwriter in the bar down the street, or that guy who makes his living composing music for films and adverts once in a while. Or more than the guy who spent 5-10 years of his life trying to sell pet food over the internet and noticing that the business model is not competitive.
It's the investors betting on (a) people finding your film more attractive than knitting red socks, and (b) you being able to monetize that fact properly.
"Monetization" can come in all sorts of shapes: selling individual copies of the movie, selling licenses to distribution companies (including Netflix), putting adverts on the movie, or streaming.
Given that we have Google Play and Netflix, you should think that there is some value in allowing an app store model of people buying any film they like. That this doesn't happen is partly due to the rightsholders of these films (usually larger companies) not seeing the point of that when people could also watch new movies (= more revenue for them).
You could also make an argument about culture. It would open your eyes to the many ways that the entertainment industry - or the majority of it in terms of capitalization and revenue - is not concerned about culture at all, and to the many ways that what we have now - in terms of grassroots/pastime content creation, publically funded culture (e.g. orchestras and theaters in many places), and large projects (such as films or video games) - of creating, revising and sustaining cultural artifacts.
> You're missing the key fact in the piracy debate, which is that _the market value of a recorded film/music/whatever is ~zero._ It follows from the laws of supply and demand.
(side comment: emphasis; you are doing it wrong!)
The market value is the price point at which the supply function (mapping price to quantity producers are willing to supply) and demand function (mapping price to quantity consumers are willing to purchase intersect.)
That should be the price at where the utility to those willing to purchase at that price equals the total production costs divided by the units delivered including a financial profit equal to the opportunity cost of not putting the production costs into some other venture (this is zero economic profit).
As the fixed costs of movie production are not even close to zero (even if you assume the marginal costs were zero, which they aren't, quite), this is not even close to zero.
Now, there is an economic observation that, with perfectly interchangeable commodities with perfect competititon between suppliers, in the long term the unit cost should be driven down to the marginal cost, because the longer the term (really, the more total units, but, ceteris paribus, longer term = more total units) the fixed costs is amortized over, the closer to zero the per unit share of the amortized fixed costs is, so then the marginal costs dominate.
But that doesn't mean the fixed costs are irrelevant in supply, and thus market clearing price.
Next time, read more than one page of the Econ text.
> As a thought experiment, imagine this this: tomorrow, I invent a machine that can make unlimited free copies of soybeans
That's not really analogous to the situation with movies (even assuming that movie copying is really completely zero cost), as the soybean you are copying exists in nature without human activity, no one needs to be induced to create it before it can be copied; there is no fixed cost if the reproduction is free; well, except the fixed cost of developing the reproduction device, so maybe it is analogous, but then it doesn't support your argument, either.
And if it takes you 100M to design the soy-bean-printing-machine, you will get the necessary investment exactly how?
I don't like MPAA either, I think they go over the top. But you are no better than MPAA by failing to take a more nuanced point of view. If there is no copyright whatsoever, I can guarantee you that no one will make 100M hollywood movies. And yes, they do take 100M to make - they hire armies of artists and programmers for that.
You don't need 100M to make a good movie. You need 100M to make a movie that is trying to hide its own inadequacies by spending an insane amount of money on special effects and well-known actors.
That is not to say that there aren't movies that are worth spending 100M to make - but the market-driven talentless big budget movies that are coming out of Hollywood? We could well do without them.
That being said, most movies that have a 100M budget earn back their money in theatres, so I'm not convinced that with a downsized copyright system (no copyright whatsoever sounds silly, considering the term covers quite a few different bases, many of which are not impeded on by person-to-person sharing) they would run into big problems.
Even if you invented a machine to produce infinite amounts of soybeans, the supply would not be infinite, it would be whatever amount you want to produce! Property rights are just as important in Economics as costs, and illegally obtaining cheaper-than-book-value goods is older than any of these entertainment companies that you call dinosaurs.
> Well, tough luck, MPAA. The market's invisible hand is slapping you and you'll have to adapt.
How in the world did a comment like this not get downvoted into oblivion? Pirating content has nothing to do with the market's invisible hand.
Copyright works restricts property rights. I own a machine that can copy digital works, and it's my property right to use this machine for its purpose, and yet copyright restricts my property rights, banning me from using my property.
This is a very common analysis of piracy but it is wrong, and here is why.
"Supply" in the "supply and demand" equation, is what the supplier is willing to supply. Not the total supply that is technologically possible.
Put another way, economic analysis does not get to throw away the legal environment in which the market operates. You cannot disprove the utility of a legal structure like IP law by assuming it does not exist--that is called "begging the question" and is a logical fallacy.
This notion of supply works if the producer has an enforceable monopoly on production and distribution of the content. While the big studios do have a monopoly on the content they produce (i.e. movies and music are not commodities) the inherent ease of distribution and reproduction of that content means that attempts to monopolize its distribution will inevitably be circumvented.
For all practical purposes, once a work is pirated it is effectively supplied by a large number of individual actors within the market, and not the original distributor.
> For all practical purposes, once a work is pirated it is effectively supplied by a large number of individual actors within the market, and not the original distributor.
Yes but the question is not whether something is possible, but whether it should be legal, and what enforcement options should be made available to the government.
All property rights are legally granted monopolies. There is nothing inherent in the physical properties of, say, a bottle of water that creates or protects the supplier's rights. Instead, society has created a set of legal rules that govern the relationships between the supplier and its distributors and customers. Likewise, society has created rules that create the concept of copyright to govern those relationships.
In discussions of piracy, the degree and manner in which the law enforces IP rights is the very topic of discussion; assuming that such enforcement is impossible is simply a neat trick to try to win the argument before actually having it.
It is incredibly easy to pick up a bottle of water and walk out of a store without paying. The ease with which a law can be violated is not disproof that the law is needed.
In fact, it was the very ease of distribution that led to the creation of copyright in the first place. Prior to the printing press there was little need or concept of copyright; the physical difficulty of copying a book was sufficient protection. After the printing press, when authors started having their books quickly copied and sold by others--that was when the foundations of copyright were laid.
So: arguing today that because it's easy to copy, it should be legal to copy, flies in the face of history and logic. The easier it is to violate property rights, the more important (not less) legal protections become.
The cost/benefit of protection vs. innovation is a great topic for discussion! My point is just that it's not insightful or helpful to try to misuse basic economics to disprove the laws that govern economic relationships in the first place.
> For all practical purposes, once a work is pirated it is effectively supplied by a large number of individual actors within the market, and not the original distributor.
Which just means that content producers are forced to raise unit price on the first few units to amortize the fixed costs over a shorter window (and focussing appeal to that narrow audience willing to pay those higher costs over that shorter window.)
Or, why whenever there is a widely-supported in-theater feature that widely available consumer devices don't support (or at least, don't support well for pirated content) -- whether its 3D or higher frame rates or something else -- movies will tend to make heavy use of it.
I'd argue that entertainment media do provide value to consumers and that there is an observable willingness to pay for these kinds of goods.
On the cost side, even if your marginal costs are zero, you still have to recover your first copy costs -- for a blockbuster movie and your replicator.
As a thought experiment, imagine this this: tomorrow, I invent a machine that can make unlimited free copies of soybeans, and distribute those beans instantly to almost any point on the globe, also for free. And also, for the sake of argument, imagine that nearly everyone on earth has access to my soybean copier.
In this case we could fairly say that the supply of soybeans is ~infinite, and you only need to read the first page of the Econ textbook to learn that the price must necessarily fall to zero, no matter what. It's a mathematical certainty for any finite demand.
You can pass whatever laws you want, but so long as they're practically unenforceable, you won't change the boots-on-the-ground spot prices in the market, which will hover very close to zero. (If you doubt me, ask the Argentine currency bureau if legislating prices works well.) Obviously the price will never be exactly zero, because my machine still needs electricity to run, and the market will perhaps price in a little law-enforcement risk. But in general these costs are probably going to be negligible.
And of course this has nothing to do with soybeans---the same thing will happen for corn and light sweet Saudi Crude #2 and intelligence reports about the location of Assad's WMD or any commodity you'd care to name. And digitally copyable goods are the very definition of a commodity, for while not all soybeans come off the vine created equal, a torrented .avi is a provably interchangeable item with the original. Thanks checksums. (If a film ain't on the Pirate Bay, then obviously supply != infinity, so my argument doesn't apply).
This sucks for the business models of the entertainment stakeholders, but capitalism doesn't care that you disagree with the market about the price of your product. Those stakeholders took profits for a long time, playing (approximately) by the rules of the game, and now they're pissed that those same rules have invalidated their business. Well, tough luck, MPAA. The market's invisible hand is slapping you and you'll have to adapt.