Piracy as market signaling mechanism: Why don’t they listen?

That The Oatmeal strip I mentioned a few days ago has stirred up some controversy. A post on TechDirt links to both a rebuttal from Andy Ihnatko decrying the culture of entitlement that leads to people thinking they have a right to download content just because they can’t buy it, and a post by Instapaper’s Marco Ament that takes a more pragmatic stance.

Ament uses the example of a public restroom where people kept throwing wadded up paper towels on the floor by the door because they wanted to use them to avoid touching the restroom door handle and there was no wastebasket nearby. The management kept putting up signs telling people to use the wastebasket, and people threw even more paper towels on the floor in response. They apparently never thought of putting another wastebasket in a convenient position near the door.

He compares this to the content industry’s constant scolding of pirates rather than doing the pragmatic thing and making their services more attractive to the sort of people likely to pirate.

We often try to fight problems by yelling at them instead of accepting the reality of what people do, from controversial national legislation to passive-aggressive office signs. Such efforts usually fail, often with a lot of collateral damage, much like Prohibition and the ongoing “war” on “drugs”….


Relying solely on yelling about what’s right isn’t a pragmatic approach for the media industry to take. And it’s not working. It’s unrealistic and naive to expect everyone to do the “right” thing when the alternative is so much easier, faster, cheaper, and better for so many of them.

On TechDirt, Mike Masnick adds:

Taking the point even further, there’s a simple fact of today’s world, which is that consumers have power. Ihnatko’s entire point seems to assume that this consumer power is "entitlement." I tend to think of it as consumers making their will known — and that tends to lead to better products that should make everyone better off. What Ihnatko ignores is that a market is not determined by just one side. It’s the interplay between buyers and sellers, and if the buyers aren’t happy, they express that to the sellers in certain ways — and infringement is one of those ways. It’s a market signalling method. I’d argue that it’s just as much an "entitlement" mentality by the "sellers" to pretend that only they get to decide what the consumer should be able to get, without listening to what the consumer wants.

I was discussing this with some friends online this morning, and they raised a number of interesting points. It is true that piracy has often been a driver in getting us better products. For example, if it hadn’t been for Napster, we wouldn’t have gotten iTunes—and by making music easier, faster, and more trustworthy to buy than to pirate, Steve Jobs demonstrated conclusively that it was possible to compete with free. In fact, some studies suggest that music piracy has declined considerably since Apple and Amazon got in the music game.

One of my friends pointed out that there are other ways of protesting corporate policies that we don’t like—not buying something or organizing a boycott are taking a moral stance, but just ripping off the stuff you want is giving up any claim to a moral stance. But the problem is, it’s all very well to protest in a moral way, but it usually doesn’t get you much attention.

Zillions of people have boycotted Amazon for one reason or another (including me, at one point), but it just keeps chugging along. The people who try to make May 15th “Buy No Gas Day” or try to turn Black Friday into “Buy Nothing Day” are considered kooks and laughing-stocks. People don’t notice or care about boycotts, and only in very rare situations involving tiny specialty markets (such as the Elsevier thing I mentioned yesterday) can boycotts be effective.

Almost any sort of broad consumer boycott tends to get lost in the noise of the people who don’t buy for other reasons and the zillions of people who do buy anyway. And it also ends up being the same sort of “slacktivism” as e-petition drives—ways people can feel like they’re “doing something” by not actually doing anything at all. And even if it did end up being effective, it might send the wrong message: if a non-e-book-available print book sells poorly, is it because people are waiting for the electronic version, or because they just don’t want the book at all? How do you tell the difference?

But people notice when you pirate. Aside from the music and iTunes example, rampant video game piracy got us things like Valve’s Steam. (Of course, it also got psychotic ultra-tight DRM from publishers like Ubisoft that you practically have to pirate to be able to play at all, so the pendulum swings both ways there.) They may not like that you’re doing it, but it’s certainly visible in a way that boycotts aren’t. And it shows there is demand for a particular product in a particular format.

And yes, it ends up getting the pirate free stuff. And many pirates might never have been willing to pay for the stuff if it had been available. But as The Oatmeal indicated, at least some would have. And that’s money the media producers—be it film studios who window their movies, or publishers who make their books available only in certain parts of the world—are leaving on the table.

It’s possible to take steps to meet pirate demand without implying pirates are right in what they do. I covered both and Valve doing something to that effect in Russia a while back. So why don’t content publishers do this more often? At least some of them are already treating piracy stats as market research. Perhaps they should pay more attention.

About Chris Meadows (4149 Articles)
TeleRead Editor Chris Meadows has been writing for us--except for a brief interruption--since 2006. Son of two librarians, he has worked on a third-party help line for Best Buy and holds degrees in computer science and communications. He clearly personifies TeleRead's motto: "For geeks who love books--and book-lovers who love gadgets." Chris lives in Indianapolis and is active in the gamer community.

14 Comments on Piracy as market signaling mechanism: Why don’t they listen?

  1. I think there’s an added element in play with anti piracy efforts with regards to the dominant pre disruption players that isn’t necessarily about simply stopping people from getting free stuff. It’s difficult to argue that the traditional players in the music industry are better off now than they were pre-iTunes. The industry as a whole certainly is but the small handful of companies who once dominated have taken clear steps backwards. Piracy may well be signaling a need to shift business models due to consumer demands, but that shift is also harmful to the old forces that controlled the industry. Their fight against piracy is more a fight against changing business models, resisting the digital transition that consumers want but is bad for their bottom line. I still believe the SOPA/PIPA fight was far more about stifling digital distribution channels than it was about stopping piracy. Some pirates may be acting entitled, but they only have a small shadow of the entitlement old school media companies act under.

  2. “But people notice when you pirate.” People also notice when you throw a brick through a storefront window. So, is social progress to be won by those who throw bricks?

    The result of such behavior goes one way or the other: Vendors shore up security and defenses against the brick-throwers; or they close up business, leaving brick-throwers (and everyone else) with nothing to buy. Since neither outcome is attractive to the customer, I fail to see why encouraging social change through piracy sounds like a workable plan.

    It’s pointed out that boycotts don’t work. Boycotts don’t work when the number of boycotters is significantly smaller than the number of non-boycotters, that is, those who are happy with the service. If the number of those unhappy with a service is significantly outnumbered by those who are happy with the service… what does that tell you?

    At the end of the day, the root cause of piracy is still entitlement.

  3. Again those who obsess with finger wagging contribute nothing to moving the the topic forward. Those who want to find ways of selling more legitimate product, earning more income and profit need to focus on solutions, not moralising.

  4. Oddly enough, when people threw the brick of Napster, the music industry allowed Apple to open a store that sold bricks. Perhaps they were foam rubber bricks at first, because you couldn’t throw them through the window, just keep them and enjoy them for yourself…but a few years later, Apple allowed users to exchange them for completely solid bricks with their names engraved on them. Funny how that works.

  5. Howard, there’s a reason for that: The topic hasn’t moved forward specifically because of the lack of morally-guided principals and practices that both sides can agree upon. You can’t have solutions without a moral base… at the very least, an agreed-upon concept of fairness. We clearly do not have even that.

  6. Steve – I disagree fundamentally. There is no need to have any moral element in a solution whatsoever. What is need is a pragmatic marketing strategy that achieves it’s goal, and doesn’t waste time being distracted by whatever moral position people may hold. It has been demonstrated more than once that piracy can actually help sales in some circumstances and some markets. It has also been demonstrated on many occasions by independent research showing that the level of piracy is orders of magnitude lower than the Media/Publishing companies claim through it’s own biased ‘research’.
    In addition it has also been demonstrated that certain strategies increase and certain strategies reduce piracy of whatever magnitude is being claimed. DRM, Geo restrictions, windowing, against fair pricing, easy purchase, etc etc. Solutions do not need to enter the moral maze of human behaviour.

  7. Howard, if morals weren’t involved, ebooks and piracy would not have been so indelibly linked over the last decade. I don’t care how good your marketing strategy is… if consumers don’t think it’s fair, they won’t buy it. Period. And if vendors don’t think they’re being fairly treated by consumers, or earning a fair wage for their work, they won’t do it. Period. “Fairness” IS a moral issue. So HELLS YES, morals are involved.

    With business, two types of morals dominate: Everyone gets a fair shake; or The ends justify the means. The latter moral position works only when one side has absolute control over the other, and the other capitulates out of a desire to get what they can. For the record, those markets rarely produce anything worth having. The former works when both sides come to a mutually agreed-upon balance of fair goods and services at a fair price.

    I know which side I’d rather see.

    I don’t know why some people assume vendors and publishers “aren’t listening” to the ills of the marketplace; do people really think the publishers have no clue they have problems? Of course they know, and yes, they are trying to figure out a way past it. Unfortunately, all they’re getting from their questions and researching are the equivalent of a bunch of boys waving wooden swords and yelling, “AArrrrr!”, making for a moving target that Robin Hood would have trouble hitting with a hand grenade.

  8. Okay, I’ll grant the original premise of the article. Changes in piracy levels may serve as a signaling system for distribution deficiencies.

    However, that still doesn’t bring us that much closer to a solution. The last decade has grown a large market for free goods. Sure, we can talk about making the exchange of goods more convenient, consumer friendly, and so on. But the flip side of the Napster/iTunes argument is that iTunes hasn’t killed music filesharing. There is still a significant “baseline” level of piracy that has absolutely nothing to do with anything other than wanting something and not being willing to pay for it. If faced with the dilemma of only being able to afford an album or a taking a date out for ice cream, too many consumers will just download the album for free and listen to it on the way to the store. The concept of self-denial is becoming utterly alien to a rising generation of consumers.

    It is only common sense that content publishers react to consumer demand. However, we’re in a losing proposition if we can’t ALSO move the needle past “Filesharing is probably wrong, unless it’s something I really, really want.”

  9. Preston – I just don’t buy into your idealised and simplistic model of the world. I agree there is a small baseline of piracy (illegal downloading) but firstly I believe it is a much smaller number than any of the Media companies claim, and secondly the reality is that this baseline is here to stay and that is how it is.

    Lamenting this as some kind of moral decline is, imho, a mistake. Irrespective of what some say I believe there is a fundamental moral difference between consuming something for nothing that deprives someone else of something, and consuming something where there is nothing ‘lost’. It doesn’t make one moral and the other immoral. Morality is far more subtle.

    A guy my age who has been doing odd jobs for me for years lives on an extremely low income in welfare housing. But he absolutely loves classical music. He downloads concerts and performances from many of the great artists and listens to them, on an old iPod I gave him a few years back, as he works and at home. He doesn’t pay, except for one or two CDs now and again. He is doing something illegal and morally ‘wrong’. But it is not the same as stealing a CD. His downloading and listening is not depriving anyone of anything because he could not afford to buy it anyway. On the other hand he gets to enjoy our culture’s great artists and I firmly believe that NO great artist would begrudge him that.

    So morally this whole downloading thing is a far more complex situation that cannot be just dismissed in terms of ‘self denial’.

    Too many of the publishers have demonstrated terminal incompetence and most of them still refuse to face up to what is happening and the direction the market and technology is going. That is self evident from recent goings on in the Publishing industry. They are still trying to defend and entrench the old models. Too many of them are trying to play the piracy myth for political and tax favours in a cynical and objectionable manner.

    A business that wants to succeed needs to look at ‘what works’, That is all it needs to do. Any business that thinks it can change cultural morals and the changing face of the interface between new technology and individual’s sense of proportionate morality is a loser, pure and simple.

  10. For what it’s worth, Techdirt has posted another article arguing the moral side of the question at length. It’s not really suited for another post so soon after this one, but worth reading as an adjunct.

  11. And, par for the course at Techdirt, a pretty poor argument at that. The usual “piracy can’t be stopped, so better find a way to placate the pirates!” In fact, their argument is as amoral as they come, suggesting that companies who just “roll over” and do what the pirates demand will ultimately be happier and more successful. Moreover, ignoring the role that law and security play in leveling the playing field is just being dense. Saying “it can’t work” a million times doesn’t make it so.

    So, as everyone is so keen to point out, we’re still at square one and arguing about which step to take next.

  12. Piracy is what happens when a huge marketing campaign generates consumer interest initially but not at the level to justify the price point the publishing company has arbitrarily set for it.

    Compare to Books for a Buck, which sets the price initially at a low level and then increases to a “normal” price of 3.99.

    I suspect that for ebooks under 2 or 3 dollars there is little piracy — or if there is, it’s not really significant. That’s what I’ve described as the “chump change” threshhold.

    As for moral arguments, I think it boils down to motivating people to WANT to compensate the creator. But some publishing companies and media companies take such a huge chunk out of royalties that it just doesn’t feel like buying something is a way of showing support for the artist. Also, many companies have gotten used to starting out with such a ridiculously high price for something that piracy seems to be a sensible alternative.

    That said, the last 5 years have seen remarkable improvements in the % of royalties going to the content creator. Now if only they would stop trying such a high initial price, nobody would have to worry about piracy.

  13. Robert, cost is only one criteria that creates piracy. DRM, windowing, quality, format unavailability, hardware/software problems, privacy-threatening purchase registrations, vendor distrust, even public popularity of an author, all have been linked to piracy. Thus, even a $0.99 ebook can be pirated for any number of reasons.

    All of these things need to be addressed, and both sides need to agree that everyone is working within reasonable effort to fix these issues, and the bad reactions they cause (like piracy). Otherwise, the sides will continue to accuse the other of sabotaging the works, and piracy will not abate.

  14. You can’t use “morality” or “legality” as an argument against piracy for the following reasons:

    1. Your morals might be someone else’s sin. Morality is subjective.
    2. Laws are often wrong. Remember the laws about African Americans on the busses and segregation? Most of us today’s think how stupid and wrong they were. But back then, many thought they were morally right and lawfull. Maybe in the years to come most of society will think the copyright and piracy laws are wrong and stupid.
    3. By demeaning and demonizing the potential consumer using terms like “piracy” and “entitlement” you do more harm than help. Sure, it makes you feel more righteous and might give you a warm and fuzzy feeling about how moral and right you are, but it will never help fix the underlying problem – that you can’t provide a service that the consumer wants and if you don’t, you are going to loose out on cold, hard cash.

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