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<div class="featured_meta"><div class="meta_article">22 Oct 2001 | <a href="/article/6604?print_version=1">Print <span class="shift_up"><img src="/images/printer_icon.gif" alt="Printer-Friendly Version of This Article" border="0" width="9" height="10"></span></a></div></div>
<H2>Steal This Essay 1: Content Is a Pure Public Good</H2>
<div id="article_box_5220"><P>Steal this essay, or, why these sorts of essays represent the future of all publishing. Hint: I'm not getting paid for them.</P><BLOCKQUOTE> "Freedom of the press belongs to those who own one." - A.J. Liebling</BLOCKQUOTE><P>If you or anyone you know has ever or will ever produce content (writing, music, video, etc.) and hopes to get paid for it, you should be afraid.</P><P>To see why, start by downloading (for free, of course) one of the numerous peer-to-peer file sharing systems such as Aimster, LimeWire, and eDonkey2000 that have emerged hydra-like to take the place of Napster, whose head was cut off this spring by the Recording Industry Association of America (RIAA). You will find that much the same selection of MP3 music that was on Napster is still available for free, as well as being accompanied by more and more movies ("ripped" directly from DVDs), and nearly all other forms of content, from Shakespeare's works to hard core adult materials.</P><P><<A HREF="http://www.aimster.com/">http://www.aimster.com/</A>><BR><<A HREF="http://www.limewire.com/">http://www.limewire.com/</A>><BR><<A HREF="http://www.edonkey2000.com/">http://www.edonkey2000.com/</A>><BR><<A HREF="http://www.napster.com/">http://www.napster.com/</A>><BR><<A HREF="http://db.tidbits.com/series/1206">http://db.tidbits.com/series/1206</A>></P><P>What you will not find - even if you are the RIAA - is anyone to sue. Because unlike Napster, there are no companies underlying the software infrastructure, no servers to confiscate, no officers on whom to serve papers. The next generation of peer-to-peer clients relies on no central infrastructure whatsoever, and is being developed by a loose knit group of developers spread around the world, all donating their significant efforts without any real hope of getting paid for their work. All of the developers are men - or teenage boys - and though not following the typical societal track toward prestige, they are just as competitive as any rival athletes or entrepreneurs. Many are distributing their software as open source, so anyone else can fix bugs and make improvements. What this means is not just that the RIAA is applying makeup to the corpse of the music industry as we've known it. In fact, it heralds an even larger change about how all content is created and distributed, and raises serious questions as to whether content creators (such as the author of this essay) will ever be compensated for our work.</P><P>Read a few dozen articles by top technology analysts, and it is often difficult to find one that doesn't breathlessly declare how this or that new technology represents a sea change, an inflection point, or the end of history. In fact, while the Internet's growth rates have been quite high, other technologies such as radio and gas cooking have actually been adopted faster. It may be, though, that all of the hype surrounding the digital duplication and peer-to-peer distribution of content actually underestimates the impact on the authors and publishers of music, movies, and written works.</P><P>Put simply, in a world where there are essentially no costs to replicate content and it is effectively impossible to stop anyone from doing so at will, the current economic model underpinning content creation will be dead. Despite the protestations of lawyers, (certain) rock bands, and legislatures (all on the same losing side, oddly enough), we are entering that brave new world.</P><P>If, as this hard technology determinist viewpoint suggests, content is destined to be free - i.e., the content creators and publishers will not be directly compensated the way they are today when you make a purchase from your local CD store - then the real question is what system could replace the content compensation system that has worked quite well for the last 300 years. However, implementing revenue models for infinitely redistributable goods is not an entirely novel question, and there are several economic models that can support the creation of content. What there may not be is <EM>enough</EM> revenue to support the publishers of that content in addition to the authors, which helps explain why the RIAA is so eager to thwart digital distribution. When an ecosystem undergoes severe environmental changes, certain organisms that were previously essential - like the cyanobacteria that originally converted carbon dioxide to oxygen, or the record companies' A&R men - may recede to minor ecological niches.</P><P>Economists have a term for what digital goods have become. Items are "nonrival" when we can all make use of them without anyone having to give them up. If I copy your CD, you're none the worse for it (nonrival), but if I steal your car, you will probably be upset (rival). Goods are "nonexcludable" when it becomes impractical to stop everyone from making use of the item, once one person can. It is infeasible, for instance, to stop additional viewers of broadcast television (nonexcludable), while it is very feasible to stop additional moviegoers from entering a theater (excludable). Economists call nonrival, nonexcludable items "pure public goods," although the name does not imply that public goods can be provided only by the government.</P><P>Lighthouses are a classic pure public good. They are nonrival because each additional ship does not reduce the light available to the others. They are nonexcludable because any ship sailing by can see them. There are cases in New England two centuries ago of shipping guilds building privately managed lighthouses, even though the services couldn't be withheld from non-members. Most medical research and nearly all basic scientific research today is a pure public good, although for exactly this reason it is often financed (at least indirectly) by the government. Other textbook public goods are national defense, mosquito control, and public radio. In each case, the cost of providing the item to one consumer is the same as providing it to any number of consumers (nonrival), and it is impractical to stop anyone from making use of the good (nonexcludable). The table below provides some examples.</P><PRE> | EXCLUDABLE | NONEXCLUDABLE -----------+--------------------+-------------------------------- RIVAL | car, Walkman | unmanaged fishing rights -----------+--------------------+-------------------------------- NONRIVAL | movie in a movie | lighthouses, national defense, | theater, concert | mosquito control | in a large hall |</PRE><P>If content is becoming a pure public good, it will necessitate a radical rethinking of the recording industry's claim that copying content is stealing. We as a society react very differently toward the unpaid use of rival versus nonrival goods. Think of the punishment inflicted, for example, on those who steal cars versus those who listen to public radio without contributing to the fund drives. Of course, whether a good is rival or not is beside the point if you can successfully exclude people who don't pay. (Ask Microsoft, whose cost for selling one copy of Office is approximately the same as selling 100 million copies (nonrival), but which has used informant tactics and large legal penalties to make their software very excludable, at least for businesses.)</P><P>The lawyers representing the recording and movie industry are well aware of the threat to their business models of digital content, and they believe they have already developed the answer: encryption. Encryption represents the music industry's last, best hope of maintaining their product as excludable. Why they are wrong, and content protection is doomed to failure, will have to wait for the next essay.</P><P>[Dan Kohn is a General Partner with Skymoon Ventures. His writings are announced through <<A HREF="mailto:dankohn-subscribe@yahoogroups.com">dankohn-subscribe@yahoogroups.com</A>> and can be discussed through <<A HREF="mailto:dankohn-discuss-subscribe@yahoogroups.com">dankohn-discuss-subscribe@yahoogroups.com</A>>.]</P><P><<A HREF="http://www.dankohn.com/">http://www.dankohn.com/</A>><BR><<A HREF="http://www.skymoonventures.com/">http://www.skymoonventures.com/</A>></P><!-- Steal This Essay 1: Content Is a Pure Public Good Dan Kohn --></div>
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