BUSINESS COLUMN | Brimer: Pirates do fuzzy math

When you download an album for free, what is the music actually worth, economically speaking? Perhaps I should rephrase: What is the price of a CD divided by zero?

The transformation of intellectual property into public goods appears to be a systemic problem of yet-unrealized magnitude, one that will only continue to grow and spread as we digitize more and more of our world. Music, once purchased in physical form, is now widely available free of charge to anyone who wants it. Album sales have been falling rapidly since 2004, and Nielsen data shows that the record industry witnessed a 14-percent decline in CD sales in 2008 alone. Though digital music sales have been climbing, 95 percent of all music downloaded from the Internet is illegal.

It’s all a question of duplication and dissemination — both of which are continually becoming easier and cheaper (often to the point of free) via the Internet. Costless duplication and dissemination of any good will typically cause such a item to become both non-rival and non-excludable, rendering it a public good. As we build new ways to connect with one other and share information online, not only will the opportunity for content production increase, but even more so will the opportunity for content consumption. It is almost laughable how easy it is to obtain digital content for free. Not only is this content widely available and easily accessible, but the price has in many places dropped to zero. Information has become, by and large, a public good.

But of course, we started down this path long before the Internet. The development of the VCR and the audiocassette were both major advancements on the consumer level in the ability to freely duplicate content. No longer were movie studios, TV stations and record companies the sole arbiters of media. The VCR and tape deck allowed any home user to easily record and copy any content available to them. This was the first step, but it was still limited in the sense that it turned intellectual property non-rival but not necessarily non-excludable. Cable television viewers could record content for themselves and their friends, but there was no way to publicly share this content to anyone who was interested.

We are continuing along a technological trajectory toward making all intellectual property into public goods. As it becomes easier to duplicate and disseminate digital content, the economic value of such content (as it pushes further into the realm of pure public goods) will only continue to decline.

But what about DRM and copyright? Let’s consider a real-life counterexample to their supposed effectiveness. In about five clicks, I can download freeware audio editing software that allows me to remix and re-record virtually any unprotected audio file into an entirely new creation. Even if said file were “protected,” I could strip the DRM restrictions from it simply by burning a CD of the file and then importing it back into my computer — all in under five minutes.

And when government policymaking can’t keep up with the pace of technological innovation (and consumer adoption of it), paradigms of power start to shift.

Legal restrictions are only as worthwhile as their enforcement — to function at all, action must be taken to protect and restrict digital content. Technological restrictions, on the other hand, are only as good as the lack of patches, hacks and workarounds available. Action must be taken in order to bypass protections and restrictions, and there is no real limit to the number of people who can learn how to write — or just use — the requisite code.

This structural dichotomy of legality and technology is a potent mix, and it spells almost certain doom for DRM and outmoded forms of copyright. In fact, we’re starting to see these effects already — tight-fisted record companies once obsessed with the strict protection of their music are stripping DRM from much of their content (while also on the hunt for better business models), and Apple is doing away with DRM altogether on the iTunes Music Store. Many bands are even starting to voluntarily offer more of their music free of charge, looking to branded merchandise and concerts as their primary income streams.

As we transmute more of our private goods into public ones, we’re collectively eliminating the discrete economic value of virtual media. And if we continue to push the price of all information to zero, we may be in store for some truly massive economic consequences. Power will remain, but in whose hands?

Matthew O. Brimer is a senior in Jonathan Edwards College.

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