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Payment is the real problem behind intellectual property piracy

By Matt Asay - posted Tuesday, 9 September 2003

The software and entertainment industries have a problem but it's not the problem they think it is. Both believe they have intellectual property problems. In the case of software, large software vendors are struggling to figure out how to keep their IP and associated revenues from being cannibalized by Open Source software. Record labels and movie studios, for their part, believe that peer-to-peer piracy is destroying their ability to charge for the art they produce. Both are wrong. Neither has an intellectual property problem. Instead, both have a payment problem.

In the face of open source and P2P, consumers (be they businesses or individuals) are less and less likely to want to pay for the goods that the software and entertainment industries deliver. Not because consumers are evil but because the models of access to software or media have outpaced the models for monetizing that access.

Companies like SCO, unable or unwilling to move into the 21st-century software business, cling to their IP and wage lawsuits against competitor and customer alike, trying to frighten the world into believing in their 20th-century business model. On the entertainment side, groups like the RIAA sue end users, write threatening letters to businesses and universities, and generally try to force the P2P genie back into the bottle.


This is folly. Pure folly.

Why? Because these tactics make criminals out of a massive pool of would-be buyers. Such tactics focus so much on the encroachment on their IP (and the ability to monetize it) that they fail to see the expanded world of opportunity now open to them.

Consumers want control

Software companies have charged a premium for their IP for years; who can blame consumers for grabbing a more malleable (and generally cheaper) alternative when it presents itself? Why pay hundreds of dollars to Microsoft for Office when I can download OpenOffice and get all the functionality I need, or nearly all, for free? Why lock myself into a single vendor of an operating system when I can rely on the fluid innovation of Linux?

Of course, Open Source technology is not truly free of cost, because I must make trade-offs to use an open source product. And no, access to source code is not a panacea to all problems. But given the margins proprietary software companies have been able to command, and given the strict control over their code they have maintained, no one should be surprised when consumers look elsewhere, even if the Open Source alternatives are not yet perfect substitutes for proprietary products.

On the entertainment side, the entertainment industry has been conditioning consumers to not pay for many, many years. Radio and TV have conditioned consumers to expect free entertainment. Under these models the only thing consumers pay is the slight annoyance of listening to or watching advertising. No money ever changes hands between the content creator and the consumer in these two media.

And, as with software, P2P networks deliver greater control over entertainment to the consumer, so who can blame consumers for flocking to these services? In MP3 music and DIVX movie downloads, the concepts of radio and TV have been perfected. Suddenly, consumers hear or watch what they want, when they want.


In both software and entertainment, the consumer's focus is not really about avoiding payment. Rather, the impetus for using these alternatives to IP is to maximize access and control. The matter of cost is of secondary concern.

Hence, my earlier statement that the software and entertainment industries have a payment problem, and not an IP problem. Both industries need to invest their resources in figuring out how to monetize this rabidly open market.

Solving the payment problem

The solution to a new technological reality is not to try to litigate that reality away. The music industry learned, or should have learned, this with radio in the 1920s. Radio crushed recorded music revenues and all sorts of dire warnings were issued as to the record labels' ability to survive. But the labels fought back, not by slapping lawsuits on radio but rather by resolving the payment problem through ASCAP, a licensing regime that permitted radio and the record labels to flourish.

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This article was first published in on 26 August 2003.

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About the Author

Matt Asay has spent most of his professional life trying to conceive novel ways to monetize open source software. Asay was GM of embedded Linux startup Lineo's Network & Communications business, and moved from Lineo to Novell, where he is responsible for charting Novell's Linux/OSS strategy. Asay holds a juris doctorate from Stanford, where he worked with Larry Lessig on analyzing the GPL and other open source licenses.

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