hyperpeople :: the world is my hard drive :: you can't download a tee shirt

At a post-Christmas barbecue, one of the kind Australians continuously throw during their high Summer season, I met a musician named Peter Neville.  “What do you play?” I asked. 

“I started with the violin,” he replied, “but now I play drums.  Percussion.”

 “Do you play with a band?”

“Yeah.  The Resindogs.  Out of Brisbane.”

“Wow.   Made records?”

“Yeah, a couple.”

“Cool!  You have a record contract?”

“Well…we did.”

“Huh?”

“Our first album did really well, sold about 25,000 copies.   But the second one, that sold only 12,000.   Funny thing is, our concerts were drawing bigger crowds all the time.  When the second album came out, we were more popular than ever before.  But we couldn’t sell the records - so our label dropped us.  They only have time for you if you’re going to be a huge hit.  If you’re a smaller act, they just drop you.  We only ever got play on JJJ (Australia’s “alternative” FM radio station), never on the big pop stations.  No airplay, no record sales.”

“I don’t get it; if you were more popular, why’d you sell less albums?”

“Why do you think?” he concluded, giving me a hard look.  He knew I was playing dumb.

We’ve now come to the hard place, where art and commerce meet, where desire and duty battle it out.  The Resindogs second album, which could have been a chartbuster, failed commercially because the band’s fans simply downloaded the music from the Internet.  These fans didn’t pay royalties to the copyright holder (in this case, Virgin/EMI music, one of the “big four” recording companies), so there was no money to pay Peter for his own work. 

There’s a widely-held opinion, born of willful ignorance, that file-sharing doesn’t hurt anybody except greedy record executives (who probably deserve it).  The RIAA works to “educate” the public about the economic evils of file-sharing: not only is it against the law, it deprives your favorite artists of money they’ve rightfully earned.  But, because this message is coming from an organization widely perceived as evil, corrupt, and greedy, the message dies with the messenger.  Screw the RIAA, the logic goes, they’re suing grandmothers.  With this shaky moral justification, the recording industry is rapidly being hollowed out.  Although 2004 will likely be the best year in history for the industry, in terms of sales, everyone knows that several billions of dollars in copyright theft have deprived the industry of even higher revenues.  These billions might be a drop in the bucket for big acts like U2 or Metallica, but it’s a make-or-break affair for 2^nd tier bands like the Resindogs.  And, as the lesser acts are dropped by the record companies, those companies are forced to focus upon fewer and fewer big releases.  That means the record companies have become progressively more vulnerable to file-sharing.  If you’re only putting out twenty or thirty “big” albums every year, and you’re banking on every one of them being a hit, file sharing becomes a very real threat.  You’ll throw a lot of marketing dollars behind each of these releases, spread the hype, and find, one day after the release, ten times as many of people downloaded the album illegally than purchased it in a record store.  That’s the way of the world today, and there’s no sign that it will change.  There’s no sign that it can change.

We’re confronted with quite a paradox: file-sharing satisfies our desire to have access to vast and varied collections of music, but file-sharing so pollutes the economic ecology of recorded music as to render it a toxic monoculture, populated only by the most popular (and, often, most puerile) content.  If we were satisfied with what has already been recorded - the last hundred and twenty five years, since Edison’s invention of the gramophone - we could let file-sharing spread far and wide, and simply recycle the history of recordings endlessly.  But I suspect that would soon grow dull.  Although we should treasure our musical heritage, it’s also important to be confronted with new artists and new music.  Without that constant breath of fresh air, our musical culture would quickly grow stagnant.  We have to find a way to live with file-sharing; it’s not going to go away, yet it threatens the very medium it celebrates.

I don’t have any easy answers for this paradox.  I suspect there aren’t any.  But, eternally hopeful, I asked musician Peter what he thought he could do to earn a living as a musician in the age of file-sharing.

“Well,” he replied, “you can’t download a tee shirt.”

With his hard-earned wisdom, Peter put his finger on the very heart of the matter, the difference between atoms and bits.  The ones and zeroes of the digital universe are infinitely reproducible at little or no cost; you don’t have that kind of liberty in the material world - you can’t just wave a magic wand and reproduce a thousand tee shirts emblazoned with your favorite band’s emblem.  Whether or not we consciously recognize the distinction between atoms and bits, as a culture we have already incorporated this difference into our assessment of the value of digital media.  It is said by some enthusiasts of file sharing that it isn’t really theft.  If I make a copy of your CD, you still have the original.  You’ve lost nothing, yet I’ve gained something.  If you haven’t lost anything, how can it possibly be a crime? 

Three hundred years of copyright law say otherwise.  First enshrined in the British legal canon in the early 1700s, copyright law provided a mechanism whereby the authors of books could profit from their efforts.  In earlier times, popular books were simply duplicated and sold by competing publishers, without any recompense to the creator of the work.  Authors of hugely popular books died in poverty.  Copyright guaranteed that an author could assert complete economic control of his work, holding it closely or releasing it for sale as appropriate.  It’s a noble idea, one which was later enshrined in the US Constitution.  (The US Patent and Trademark Office, which also handles copyrights, was established in 1790, immediately after the ratification of the Constitution.)  Because of copyright, the publishing industry could build a sustainable economic model.  As a result, today we have millions of texts available to us, the product of those three centuries of copyright law.  Copyright in itself is not an evil; it lets us have ownership over our own ideas.  But the copyright practices of all of the media industries - music, film, television and print publishing - have lost touch with economic reality.

One of the continuous obsessions of economists is the idea of “value” - of what something is worth.  This is a tricky subject, because it is so subjective.  Some things which have enormous value to you (a photograph, or a yellowed letter from a long-dead relative) might have no value at all to me.  Other things, such as gold or diamonds, have value because of their “inherent” qualities.  Gold and diamonds are valuable because of their scarcity (gold is truly rare, while diamonds are kept in a permanent state of artificial scarcity because of the DeBeers cartel), and because of their material characteristics: gold is the best conductor of electricity, diamond the hardest substance known.  Every material object has both some absolute material value and some subjective worth; the human body is composed of a few dollars of carbon, water, and minerals, but we consider human life beyond any economic calculation.  Karl Marx defined the economic theory of “Surplus Value” - in his model, the Earth’s raw materials have only minimal value until human labor has transformed them into usable commodities.  (Think about how much it costs to pump a gallon of crude oil from the ground - a few tenths of a penny - when measured against the price of a gallon of refined gasoline.   That’s surplus value.)  The value of cotton in the fields is far less than the value of the same cotton, spun into a tee shirt.  Human activities upon the material world add surplus value to it.

What is the value of a song?  What about a film?  Neither a song on a CD, or a film on a DVD, is really a material thing.  Yes, the physical material of the disc costs about ten cents for a CD, and about 20 cents for a DVD, and it may cost another penny or two of labor to “burn” the digital information to the disc.  But CDs rarely sell for less than ten dollars, and DVDs rarely retail for less than twenty - particularly if they’re popular titles.  The costs, we are told, are production costs: it costs upwards of seventy million dollars to produce the average Hollywood film; it costs many hundreds of thousands of dollars in studio time to create an album.  In addition, it costs money to promote the film or album, to raise public awareness of the existence of the work - in other words, it costs money to generate demand for the work, demand which increases the value of the work by making it more desirable.  The price you pay for a CD or DVD is essentially the price of desire; if that price is greater than your desire, you won’t buy it.  On the other hand, if it’s something so alluring that you simply must have it, you’ll pay almost any price for it.  Marketers think very carefully about where to set the “price point” for these sorts of intangible goods, looking for a balance between perceived value (desire) and sale price.  The price must cover production costs, but everything beyond that is the price you’ll pay to satisfy your own desire.

File-sharing has eliminated the cost of satisfying our desires.  The personal acquisition of media, once strictly rationed because of the value assigned to it by copyright holders, has become unshackled from the economics of scarcity.  A copyright holder no longer has the capacity to act as a “gatekeeper” to the digital properties they control.  These properties can now be copied perfectly, endlessly, and at no cost.  The more popular a property is, the more likely it is that there will be digital copies being traded through file-sharing networks.  Material objects like vinyl record albums and films exhibited in theatres (shown on celluloid, though this too is transitioning to digital) are difficult to copy as material objects, though they can be digitized.  Everything that can be easily translated into a digital form - music, movies, television programs and books - is slipping beyond the control of copyright holders.

If ubiquity through superdistribution on file-sharing networks is the natural state of digital media - I believe that I have adequately demonstrated this point - then it is up to the holders of copyright to adapt to the new economic realities of digital distribution.  The world will not change to suit the economic needs of the recording industry or movie studios; no amount of legal haggling, political influence buying, or threats of artistic apocalypse will slow the trend toward the ever-greater distribution of digital media.  These works will be copied and recopied because people desire the experiences which they articulate, and because the essential nature of the digital medium makes it so easy to satisfy that desire.  How, then, can artists adapt to this new world, where economic models, developed over the entire Industrial Era, have ceased to function?

The solution is simple: embrace piracy.

This sounds like a ridiculous statement: how can you embrace piracy and earn a living?  After all, if you just give your work away, it won’t have any value.  People won’t pay money for something they can get for free.  That, at least, is the common-sense reasoning.  It is also wrong.

Movies and music are not the only forms of digital media.  Computer software is inherently a digital medium, and software companies have been plagued with digital piracy since the earliest days of personal computing.  Most commercial software released today comes with a “key,” a string of numbers and letters which must be typed into the software during its installation.  But, just as fast as a key gets generated, someone shares it - after all, it’s only a bit of text - and then any number of people can install the same piece of software.  Commercial organizations very carefully ensure that their software is all properly licensed and paid for, but home users rarely observe such niceties.  Software piracy is rampant, and always has been.  Yet the software industry is larger than it ever was, and growing furiously.

Rock musicians use a lot of software to compose and mix music, and Peter has some on his Macintosh.  “I downloaded a cracked version of this composing software,” he said, meaning that the protections on the software to prevent unauthorized use had been removed, “but I discovered that as I learned the software, I really wanted to have a legal copy of it, so I could get updates and support and all the newest features.  I used the free copy, only to learn that I wanted a real copy.”  Peter paid the thousand dollars for a licensed version of the software, and doesn’t regret it.  The accessibility of digital media leaves us free to experiment, to learn what we like and don’t like, and to invest ourselves in the things which really capture our interest - even to the point of spending a lot of money on them.

For my own part, my ability to download music that I’ve heard through friends or on the radio has introduced me to artists I would have missed otherwise: bands like Wilco and Gomez, musicians like the late Elliott Smith - all of these performers I first heard through tracks I found on file-sharing networks.  Only later did I become an avid fan of their works, buying many of their albums.  It’s isn’t as though a CD has no value at all.  A CD has enormous value to a fan of a band; it’s a physical representation of attachment, a statement of loyalty, something that separates a connoisseur from a poseur.  We each have our passions, and we invest our time and money and attention in them.  In order to demonstrate these passions we collect material things, badges signifying membership in a community of fans.

The recording industry isn’t blind to this sort of behavior; back in they heyday of vinyl they offered “digitally remastered” recordings of classic albums, complete with special covers, photos, bumper stickers, and so forth.  Recently, both record companies and film studios have been releasing “special edition” versions of their media properties.  A special edition CD might have a few extra songs, or a DVD of a live concert by the band, while a film DVD might have hours of extra footage, director commentaries, a behind-the-scenes documentary, and so forth.  These special editions sell for as much as three times the “standard” version of the media products, because they’ve been designed to be intensely desirable to a loyal fan base.  A loyal fan will collect every version of a property - look at the number of versions of The Lord of the Rings DVDs that have been sold: standard edition, widescreen edition, extended edition - all of them eagerly snapped up by a hungry horde of fans.  There is always room in the market to sell something to someone - even when it is given away freely.

Here’s where file-sharing demonstrates its positive capability in the marketplace.  In a world where all digital media is freely available, the more something is shared, the more valuable it becomes.  This seems counter-intuitive when viewed through the obsolesced economic model of copyright, but fits in perfectly with the new era of digital distribution.  The best example of this phenomenon comes, once again, from the world of software.  LINUX is a computer operating system which draws its design fundamentals from an operating system known as UNIX, created at Bell Labs back in the early 1970s.  Bell Labs made UNIX freely available to universities around the world, so an entire generation of computer scientists and engineers grew up familiar with it.  As a result, UNIX gained enormous popularity with the geek set from its very early years.  In 1991 a Finnish engineering student, Linus Torvalds, decided to create his own version of the UNIX operating system for his own PC.  Rather than trying to sell his program - which he named LINUX, a play on his first name - he decided to share his work freely over the Internet, asking other programmers to contribute to the effort to improve his admittedly meager efforts. Over a decade, LINUX grew from a one-man project to a participatory effort by thousands of engineers working around the world.  Their collective efforts led to the development of a stable, robust and very powerful operating system - an operating system so popular that most web sites on the Internet use some version of LINUX to run their web servers, and so successful that Microsoft sees LINUX as the greatest threat to their continued dominance in computer operating systems.

LINUX is still free - it always has been, and very likely always will be.  But that hasn’t stopped anyone from making billions of dollars with it.  IBM, that colossus of computing, began investing in LINUX in the mid-1990s, and today sells software packages for LINUX which cost hundreds of thousands of dollars.  Some of this software is proprietary - the copyright is owned by IBM - but much of it is freely available through other sources.  Companies pay IBM money so that IBM will support the software.  IBM will answer the phone when something goes wrong, and that’s worth real money, even if the software itself is free.  IBM isn’t the only company profiting from free software: RedHat, Novell, MySQL, and scores of other firms and individuals make substantial earnings providing support for software freely available for download from their web sites.  None of this would have come to pass if Linus Torvalds had held onto his intellectual property.  Sharing his work has made him a geek celebrity with worldwide fame, a good job, and a comfortable life doing what he likes best - furthering the development of LINUX.   Torvalds may be the most famous member of this club, but he’s hardly the only one.  Many others have found that sharing their work is the best path to success.  I am one of them.

In 1994 I completed work on a project to wed the then-new World Wide Web with my own work in real-time 3D computer graphics.  When I’d finished my programming, I was faced with a choice: I could try to hold it under copyright, and struggle to find customers and investors, or I could release it freely, lose control over my work, and do my best to interest others in it.  Although I have profited little directly from my work (known as Virtual Reality Modeling Language, or VRML), as my work grew more popular I was offered a book contract.  Over the next four years I wrote three books about VRML.  One of these books did well enough that I didn’t have to work for a whole year - giving me the freedom to continue to promote VRML.  Writing led to an invitation to teach at San Francisco State University, which led to my appointment at the University of Southern California, and, finally, to my current position as Lecturer at the Australian Film Television and Radio School, Australia’s national film school.  I am where I am today - doing what I love - because of the reputation I earned by giving my own work away.  

Is it any easier to compose great music than to write a great piece of software?  Music is an art and a craft; it takes years of practice to master it.  Yet it is probably not necessary to participate in the existing economic system of recorded music to have a successful career as a musician.  Peter earns money from live performances with the Resindogs, and even if these earnings will never equal the returns of a chartbusting album, they’re enough for him to live comfortably upon.  The Resindogs website has a list of band paraphernalia - including tee shirts - which fans can purchase, and that money also flows back to the band.  If the Resindogs take the final step, and freely release their music into the file-sharing networks, there’s some chance that they’ll find audiences outside of Australia - in America or the UK, or perhaps even Japan.  They might find that the global reach of superdistribution gives them a popularity they never had when they worked under contract for Virgin/EMI.  A global base of music fans could promote them far beyond the limited resources any record company would care to devote.  It could happen.  This story could have a happy ending.  But it will take a change of mind before the Resindogs can even begin to consider the possibilities.  For now, most professional musicians pin their hopes on cutting a huge record deal and getting millions in royalties.  But such instances have always been rare - and now, in the age of file-sharing, they’re growing rarer still.

So we come to this book.  You might be reading this book in the traditional way - as a hardcover or paperback purchased at a local bookstore, or borrowed from a friend.  Or, you might be reading this book online.  Before I started writing hyperpeople I made a decision to release the text freely through the hyperpeople.org website.  I’m putting my money where my mouth is.  Literally.  I do understand that popularity is the best thing that could happen to my work, and that the best path to popularity is to share this work freely.  If people like it, they’ll tell their friends, who will tell their friends, and so on.  Some might like it enough that they’ll want to own a physical copy - because a book in hand is nearly always better than a book on screen.  (That’s one advantage that publishing has over the recording or film industries - for the moment.)

It remains to seen whether any book publisher understands this logic.  A publisher may feel that a book freely available in electronic form has no value in print.  They couldn’t be more wrong, but until publishers are confronted with a commanding economic argument - arguments I have attempted to provide here - they’ll go about their business in the same old-fashioned way, missing out on an opportunity which, if properly leveraged, could make them even more money.  If you’re reading a book made of atoms, not bits, it means that somebody, somewhere, understands. My publisher will have learned how to put superdistribution to work.  Here’s hoping.

 

© Copyright 2005, Mark D. Pesce
This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/2.0/ or send a letter to Creative Commons, 559 Nathan Abbott Way, Stanford, California 94305, USA.