Comment by nextparadigms | Hacker News Reader

Comment by nextparadigms | Hacker News Reader

> "Piracy is not a real problem"

I wish more people would have the courage and conviction to say this out loud. I notice many people speaking out against SOPA on the web or on TV, that always start with "While I do believe piracy is a serious problem,..." - even though they don't really mean it, and they are just saying it because they are afraid of being seen as "pro-piracy".

And I agree with Tim O'Reilly that the vast majority of "copies" being pirated online, would not be bought if they had no other alternative. That's just part of RIAA's and MPAA's bogus claims that every pirated copy is a lost sale. It couldn't be further from the truth.

If you want to test this just compare a Netflix' user consumption of movies or shows, or a Spotify user's consumption of songs every month, to an iTunes user's consumption who spends around $10 per month, and you'll notice that the consumption of the Netflix or Spotify user is a lot higher than that of the iTunes user.

Why is this happening? Because as more content is available to them, they will consume more content, but they are not willing to spend more money on content. Limiting availability to more content, or in this case "curbing piracy", will not result in more sales and more money, because the user will not be willing to spend more than they were already spending.

>> I wish more people would have the courage and conviction to say this out loud.

There's an interesting story here in HN that debated this conviction: http://news.ycombinator.com/item?id=2490457

I see the problem as an issue of trust with people identifying themselves as a potential customer or non-customer (some-one who would never pay for your content).

Because there is no immediately lost revenue when a non-customer views premium digital content without paying (due to the free duplication) the only reason I can see for denying non-customers your content for free is because there are indirect consequences to their revenue. Such indirect consequences might be the devaluation of content due to its perceived lack of prestige and exclusivity. But the main focuses of piracy, music and films do not gain value due to exclusivity or prestige (I struggle to think of anything digital that would benefit from this). In fact one could argue that the spread of these goods creates advertisement by word of mouth and increases the potential set of customers (and non-customers).

Determining who is a valid non-customer is however nigh impossible. The only scenario I can envisage of a provable non-customer is when some-one clearly does not have the finances needed to be a customer. However this scenario falls apart because you cannot prove they would never acquire the finances and become a customer in the future. You can however obviously prove yourself a potential customer by paying for the product.

Ultimately I like to think most people would be honest enough to say whether they're a potential customer or not (and O'Reilly clearly agrees) and in an ideal world I think every-one should have access to anything (spend all your money and you're then a non-customer for other products). However it's the prerogative of any company to only sell their content to proven customers and not give it away to possible non-customers.

It wouldn't matter if piracy was a serious problem. Even if it was destroying half of the revenue of the entertainment industry per year, for example.

There is no excuse to destroy due process and freedom of speech on the internet. None. Not piracy. Not child porn. Not terrorism. None.

No surprise: if people want something, and you lower the price, they will usually consume more of it.

That might lead to greater profits if the growth in sales volume exceeds the reduction in profit margin. Or it might not. That relationship is called the price elasticity curve; every product has a different shape and optimization point. Learning the shape, and picking the optimization point, is a huge part of selling something.

But the key point is that it is the right of seller to place themselves on that curve. LogMeIn Ignition is $30 in the iOS App Store. Obviously they would sell more copies if it was 99 cents, but they've chosen their pricing strategy. Does the mere existence of greater demand make it ok for people to pirate that software instead? I don't think it does.

It's obviously true that there is not a 1:1 relationship between piracy and lost sales. But it's also not a 0:1...some pirated copies are in fact lost sales. And, what's lost in talking about this equivalence (or lack thereof) is the damage to the pricing strategy of the seller--even the copies they do sell will necessarily be lower on the price elasticity curve because piracy increases the volume.

In fact, sometimes it may be the reverse - the net result, that is. Being able to pirate products (say, music) may lead to more consumption of services (say, concerts). I do not have a citation available, but IIRC, studies have shown that people who pirate CDs generally use more money for going to concerts, buying merchandice, etc.

> It's obviously true that there is not a 1:1 relationship between piracy and lost sales. But it's also not a 0:1...some pirated copies are in fact lost sales

Another thing to consider is that pirated copies can be lost sales to someone OTHER than the owner of the pirated material.

Suppose I would like a game to relax with. I'm willing to spend up to $20. I see a game that I'd like but it is $50--so I pirate it. Let's assume that if I could not have pirated it, I would not have bought. $50 is simply off the table for me.

We can't reasonably count my pirated copy as a lost sale to the maker of that $50 game.

However, if I could not have pirated it I would still want to have a game. I would have probably found an older game that I could get for $20, or perhaps picked up an indie title or two.

Steam is a great example. For years the big publishers had been whining that piracy was destroying PC gaming. Then Steam came out[1] with reasonable priced games, awesome sales and no hassle updates and it is a huge success. There are countless of people who formerly pirated games that now buy a lot of games through Steam.

[1] Ok, I didn't go quite like that.

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