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Kindle and DRM and Netflix too
After reading this post, I realize I don't understand my status quo DRM rights with Kindle. That's not a good sign. I did notice this sentence, which I didn't feel the need to parse any further:
Here is the major problem with this scenario.
As a reader, I find it good policy to keep the number of books on my Kindle to below twenty. That forces me to read the ones I order and it also protects me from "stranded" consumer durables. Uncertainty and confusion about my rights only strengthens my desire to keep that policy.
As a writer, I expect the Kindle is temporarily in my financial self-interest, as it gets more "influentials" reading my work and perhaps talking it up. In the longer run I suspect it means a lower equilibrium price for books. One question is whether publishers use "sticky" or inconvenient DRM practices as an implicit collusive method for limiting the spread of Kindle.
Today I was struck by this passage about the origins of Netflix:
Netflix's selection of more than 100,000 DVD rental titles is made possible by the "first-sale doctrine" of U.S. copyright law, which permits buyers of DVDs to lend them out without studios' consent.
In Netflix's early days, its buying team would sometimes purchase DVDs at local Wal-Marts or Best Buys if it couldn't get copies through studios, says Ted Sarandos, Netflix's chief content officer.
In contrast, to deliver movies and television shows over the Internet, Netflix has to license them from studios. So far, it has gotten only about 12,000 titles, a hodgepodge of older films such as "Diehard," episodes of popular TV shows including "30 Rock" and a smattering of new releases.
That's right, we had more innovation because some of the usual copyright strictures about negotiating rights did not apply. I am pro-copyright, but once again the default settings make it too hard for successful negotiations to occur.
Posted by Tyler Cowen on June 23, 2009 at 02:14 PM in Books, Web/Tech | Permalink
Comments
I think if publishers could do it over again, libraries would not exist.
Posted by: DavidS at Jun 23, 2009 2:25:01 PM
If we all read as much as Tyler we'd all have to write books because couldn't afford not to.
The problem with books and all these things is they either are not worth what you pay for them, or worth considerably more.
Posted by: Andrew at Jun 23, 2009 2:39:01 PM
But do you believe the Netflix story about internet delivery? When having lousy internet delivery is the only thing that makes their price discrimination between X-dvd-out-at-a-time and Y-dvd-out-at-a-time plans possible?
Posted by: Paul Gowder at Jun 23, 2009 2:41:47 PM
Tyler, have you read Against Intellectual Monopoly by Boldrin and Levine? What do you think about it?
Posted by: Mark at Jun 23, 2009 2:53:33 PM
Re: Paul - Personally, I believe the Netflix internet delivery story. The laptop/TV divide is still a big enough value driver that for most content, I would prefer to get the physical DVD. I know that I can somehow or other hook my laptop up to the TV, but it's too complicated for me to want to deal with. I believe the vast majority of consumers are in the same boat, and the remainder are likely not Netflix subscribers anyway (more early-adopter-friendly services, pirated content, etc.).
Regarding copyright, the licensing system seems like a huge barrier to innovation. Seems difficult to strike a middle ground between the current system and outright piracy. No good way to determine a default license fee without allowing crazy gaming of the system and unintended consequences.
Posted by: Greg at Jun 23, 2009 3:00:16 PM
The government should be motivated to expand movie sales since we have to sit through their damn FBI advertisement with every viewing.
Posted by: Andrew at Jun 23, 2009 3:09:13 PM
WHY ISNT MARGINAL REVOLUTION ON THE KINDLE YET!?
Posted by: sean at Jun 23, 2009 3:09:47 PM
Tyler, does your "strictures" crack imply sort of the same thing as being anti-copyright-in-its-current-form?
I strongly support copyright in theory, because creators deserve tangible benefit (in other words, profit) from what they create. But the length and the existing strictures inhibit innovation.
How do you think copyright be restructured so that something like say happy birthday or I dunno stairway to heaven would be automatically slid into the public domain at some point where the creator had received ample benefit and the tune had implanted itself into the general public consciousness?
I don't have any good differential method. But as a last resort, I think copyright terms could be substantially shortened to the creative benefit of everyone except the copyright holders of creations that had already generated a ton of money.
Posted by: kranky kritter at Jun 23, 2009 3:18:30 PM
"I am pro-copyright, but once again the default settings make it too hard for successful negotiations to occur."
Advocates of the abomination that is copyright should not be surprised at this. Maybe it is cause to re-think one's support of artificial, special-interest legislation created out of nothing by a department of a criminal state. As I noted here, referring to a $1.92 million verdict against Jammie Thomas for "illegally" sharing 24 songs, "The pro-IP libertarians ought to hang their heads in shame. If they support this result, it’s unthinkably evil. If they oppose it–well, they really can’t, can they, since this is the result of having a state-run IP system–of having a state at all. Every IP advocate is a minarchist; you cannot have IP without state legislation. But once you have a state and empower it to “make” law artificially, you can’t complain about the law it does make–especially if it is IP law and you support IP. As Mises said, “No socialist author ever gave a thought to the possibility that the abstract entity which he wants to vest with unlimited power—whether it is called humanity, society, nation, state, or government—could act in a way of which he himself disapproves.”
Posted by: Stephan Kinsella at Jun 23, 2009 4:10:38 PM
The music industry's profit losses have nothing to do with piracy. It's because the switch from stores to online distribution has resulted in fewer album sales and more single sales. Under the old model, record labels would PAY radio stations to play their single, and then that would translate into album sales. Now that consumers can just buy the single, they have to advertise a lot more songs from the album in order to sell it.
Posted by: David C at Jun 23, 2009 4:34:48 PM
@David C:
I don't know where you're getting your info, but that simply isn't true. While I think the DMCA is too strict and possibly unconstitutional, there is absolutely no question that piracy has killed the labels. Allow me to relate to you a telling anecdote:
I play in a moderately popular local DC band. Our Myspace page averages 50 hits a day from all over the country, we have >15,000 page views. We self-released an EP last year. We've sold a few dozen physical copies and another 20 or so digital copies. When we pirated our own record and put it up on Mininova, it got 150+ downloads, and anecdotally, blogs who have posted our songs have also gotten many more downloads than copies we've sold.
Now, you could make the argument that the people we gave it away to wouldn't have heard it otherwise, but I don't buy it. I think they are mostly people who heard the Myspace, liked it, and decided to look for a free copy rather than paying for it. Now, imagine that 3 people are stealing the music for every one downloading it when your sales model involves hundreds of thousands or even millions of records, and you can understand why the industry is suffering.
Posted by: Nate at Jun 23, 2009 6:02:43 PM
Neil, thanks for sharing those numbers. I hope that isn't the story for all artisits trying the self publishing route. I like buying from artists directly.
As a counter anecdote, I buy at least one album a month, and for the past two years, every album ( with the exception of a collection album by and old favorite) that I've bought was bought because a free mp3 from music blog or SXSW download made it onto my mp3 player, and convinced me to buy more from the artist.
The studies of this are pretty divided. From what I've seen, I'd guess that piracy probably has a mildly depressive effect on the industry, but largely due to the sluggishness that the industry has shown in offering a product that fills the "I want it now" and "I want it work with my x" impulses of the digital consumer.
Posted by: Clark at Jun 23, 2009 6:40:48 PM
Tyler: You might think this through a bit more. For one thing, it is not at all apparent why strong property rights should impede contracting rather than facilitate it. The issue in copyright, and something that is not, as far as I know, a problem at all for movies, is orphan works--works protected by rights but without people attached to those rights to negotiate over them. This is a problem, but it is not at all clear that the limited term of copyright does not deal with it well enough (along with other doctrines). We can quibble over the exact term (and its retroactive extension), but you'd be hard-pressed to demonstrate that the current system is so clearly worse than a range of proposed alternatives (although I would support decriminalization--there's no reason the state needs to be involved in prosecuting these rights and contracts). But the fact that movie studios may not be willing to license their movies at the price being offered is, to say the least, not in itself evidence that property rights are too strong. Pointing to the innovation that the first sale doctrine may have facilitated and concluding that weaker property rights leads to more innovation is counting only piece of one side of a complex calculation. I don't know the how it would all wash out, but, among other things, you also need to take account of the incentive effect on creation of larger payments from stronger rights, and you also need to take account of the prospect that other, better, stronger innovation may have occured without the weakness created by the first sale doctrine. Personally, I think it's probably a good thing, given the high transaction costs of both preventing subsequent uses and transacting to license them. But that's the right way to look at issues in copyright (transaction costs)--it helps the debate very little to look at innovation ex post and declare that the presence of weak rights that is correlated with that innovation means weaker rights lead to more innovation, without offsetting cost.
Posted by: geoff at Jun 23, 2009 7:13:27 PM
kranky kritter writes:
I strongly support copyright in theory, because creators deserve tangible benefit (in other words, profit) from what they create. But the length and the existing strictures inhibit innovation.
kranky,
Authors, musicians and other creators could profit from their works even without ocpyright. You say that creators deserve tangible benefit from what they create, but what if they create duds that few people want to buy? Should they still earn profits?
Cretive works are no different from any other product, say pizza made in a pizza parlor. Pizza shops presumably earn competitive profits if they produce good products. It's very easy for a competitor to copy a successful pizza shop's recipe and compete for its business.
Similarly, authors or musicians would earn competitive profits in a free market (i.e., one without copyright). This would be true even if copiers reproduced and sold their books and music.
And the actual creators have other ways to make money that pizza entrepreneurs don't, namely live book tours and concerts, to name a couple avenues.
If anything, the pizza business is probably more competitive than the publishing and music industries (even without copyrights), yet we don't see pizza entrepreneurs pining for monopolies.
Posted by: AADL at Jun 23, 2009 8:19:35 PM
To put it simply, copyright lengths are far too long. With Disney lobbying to constantly up the copyright lengths, we now have copyrights that are expected to last forever. Is there any reason why copyrights should last more than 7 years, maybe 14 with an active renewal? That gives plenty of time for the author to exploit the material for money, but we'd end up having a lot of music, books and media available in the public domain. I doubt it'd do much to prevent new material from coming out.
Posted by: JordanT at Jun 23, 2009 8:21:02 PM
I agree with many of the other posters: copyright terms are too long. Patent terms are only 20 years. Yet the 20 year term is long enough to induce many companies to invest millions of dollars into research and development. 20 years should be more than sufficient to induce artists to create.
Currently, a copyright term is either life of author plus 70 years or 100 years for a corporate author. So if you write a book at 30 and live to 100, your book will not fall into the public domain until 140 years after you wrote it. Pretty ridiculous. And because the copyright term was recently extended from life + 50 to life + 70, nothing published after 1922 will fall into the public domain until 2019.
Unfortunately, our treaty obligations prevent us from shortening the term. As do the special interest groups. And the whole "no backsliding" principle prevents the law from changing as to currently authored works. So that song you heard on the radio the other day will be copyrighted until 1/1/2080 (assuming the performer and songwriter die this year). Grotesque.
Posted by: TomB at Jun 23, 2009 8:47:07 PM
AADL: A work of art is not an economic substitute for another work of art. And pizzas are consumed, not copied.
All we need are shorter copyright terms (15-20 years). Period. All the rest of these arguments are nonsense.
Posted by: LDAA at Jun 23, 2009 11:46:11 PM
the current system has perverted the original intent of the founders. the first copyright act had a 14 year term extendable for another 14 year term if the author was alive and chose to. copyrights also had to be registered to receive protection.
now, we have automatic copyright protection for the life of the author plus 70 years and have even criminalized some cases of infringement which requires the government to police private property.
Posted by: luke at Jun 23, 2009 11:52:00 PM
LDAA: that's a neat idea. Too bad it was already done in 1790, then doubled in 1909, then more than doubled in 1976. Let history repeat itself then we'll see who speaks of nonsense.
The problem I have in defining any term for copyright or patent is that any time period you assign is wholly arbitrary. 14 years, 20 years, 28 years, author + 75, 150 years, whatever. They're all arbitrarily chosen, which means they can [and have] be arbitrarily extended. The constitution says "limited Times" and while "author + 75 years" is definitely limited (so saysith the Supreme Court) it means that even if an author died on your birth day then not even you will see the public domain fruits it bears. Your grandchildren won't see public domain fruits of the Harry Potter series (assuming Rowling lives a long life).
I think the only way this would work is if you specify terms in a constitutional amendment, but you just better be sure they're "good". 28 years for a solid book may be right but 28 years for software is absurd. 28 years would put Microsoft Windows 1.0 to expire in 2013. Does Windows 1.0 still deserve copyright protection? Hah!
The term relevancy is dependent upon the industry and the current/future technology. It's an ugly, ugly can of worms.
Posted by: Colin at Jun 24, 2009 8:32:05 AM
Tyler: "I am pro-copyright, but once again the default settings make it too hard for successful negotiations to occur."
It's important to remember that the original justification for a *limited* copyright in the Constitution was to encourage the arts and sciences. A limited term allows the creator to profit, but then puts the work into the public domain, for all to freely use *and extend*. IIRC,
Disney's original works were pretty much remixes of existing works (I wonder when Disney actually first came up with a truly original work? Post-WWII? 1960's? Later?). Disney took public domain work, and added to their profits and our entertainment. Then, of course, they played the rich squatter's card, and gained an extremely restrictive, permanent title to their remixes.
Posted by: Barry at Jun 24, 2009 9:10:51 AM
Colin: You're being dramatic. Copyright royalties will fade to perpetuity in any industry, so that's your term.
Posted by: LDAA at Jun 24, 2009 11:19:53 AM
Now, you could make the argument that the people we gave it away to wouldn't have heard it otherwise, but I don't buy it. I think they are mostly people who heard the Myspace, liked it, and decided to look for a free copy rather than paying for it. Now, imagine that 3 people are stealing the music for every one downloading it when your sales model involves hundreds of thousands or even millions of records, and you can understand why the industry is suffering.
The problem is downloadable music is way too expensive. During the golden years of CD sales, CD prices where kept high by price fixing by the major labels and distributors (they where eventually found guilty of price fixing in the U.S., and had to pay a substantial settlement). Now, people are selling music online for those same high prices that where established by 1990s cartel price-fixing, except that cartel no longer exists.
Recording equipment is dirt cheap (a standalone 32 track all-in-one HD recorder costs about $1000... but you can record even cheaper if you use your PC), distribution is dirt cheap (a penny or two of bandwidth per album), there is no minimum costs required for manufacturing (you don't have to print up mp3s in batches of 1000, like you did with CDs), and there is no shelf space opportunity cost. Charging $12+ for digital downloads of music is outrageous.
A reasonable price for digital downloads would be about $1 per album. If you charged $1 per album, it becomes cheaper time and effort wise to purchase music legally... the only people who wouldn't buy it are kids who don't have any money and are using their parent's bandwidth and whose time is very cheap.
Posted by: Vehical Driver at Jun 24, 2009 11:31:55 AM
Now, imagine that 3 people are stealing the music for every one downloading it when your sales model involves hundreds of thousands or even millions of records, and you can understand why the industry is suffering.
Right, but the objective of public policy is not to protect the profits of either musicians or (especially) record labels. It is to spur innovation and creativity. And I think that it's very hard to argue that the amount of new creative music being generated is lower today than 20 years ago. It's probably much higher thanks to lower costs of entry. No one has ever started a garage band to make money. Just now you don't need money to start a garage band and publish.
Posted by: Andrew Edwards at Jun 24, 2009 1:19:32 PM
We also have to remember that, back when the original IP laws were written, it was a lot harder to market a book or an invention. How much time and effort would go into printing a book worldwide? How long did it take for an invention to be produced and distributed across the country?
Today, we have simple worldwide publishing. Selling a patent protected videogame console to millions of people can be done in a month or two. And yet, patent durations haven't shortened, and copyright has lengthened. This means that the value of copyright is not just 10 times larger than it used to be, but hundreds of times.
At the very least, most IP rights should be scaled down. When dealing with software, even 10 years already seems like an eternity.
If the companies want more sales, they should consider more aggressive pricing. Is $20 really the sweet spot for a CD? $60 for a videogame? Seeing the profits of iPhone software selling for a dollar or two, is hard to see the current pricing in other stores making sense.
Posted by: hibikir at Jun 24, 2009 1:40:53 PM
"That's right, we had more innovation because some of the usual copyright strictures about negotiating rights did not apply. I am pro-copyright, but once again the default settings make it too hard for successful negotiations to occur."
There will never be successful negotiations because content owners want to control the distribution medium. Youtube vs Hulu is a perfect example. Essentially Google has pissed off content producers and is paying for it dearly. After Hulu the model for content producers is obvious - allows techies to come up with innovative ideas, squash the techies and then control the distribution medium the techies created.
Posted by: assman at Jun 24, 2009 2:29:22 PM
