Re: More Courtney, extrapolations...

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From: Jeff Bone (
Date: Wed Jun 14 2000 - 21:18:06 PDT

"Adam L. Beberg" wrote:

> Napster and the rest are building up a culture of people that object to
> any form of copyright and refuse to pay for anything, EVER. I fear that
> the genie is out of the bottle and exited stage right, unfortunately it
> was the "motivation to create" genie, and damnit we needed that one!

What a ludicrous leap. First, it's not clear that its about objection to
copyright; it's just as likely objection to buying 17 crappy songs at a
ridiculously inflated priceto get the 1 good tune. (Bundling! Price fixing!
Collusion! Limitation of choice!) Second, there's no evidence that Napster
users won't pay for anything, ever... it's just making it painfully obvious
that folks only want to pay for real value --- and pointing out where that
doesn't happen.

There's no evidence whatsoever that Napster is impacting record sales...
nobody's going to stop buying CDs just because they've got some gi-normous
pile of MP3s. If that were the case, well, it's no moreso than was true of
any previous recordable media, i.e. audio tapes. The average teenage budget
relative to cost of living hasn't probably increased significantly in the
last several decades. Kids will still spend the same fraction of their
budget on "the real deal" and the things that are napster-only --- or
tape-only, or whatever --- are things they wouldn't buy in any case. It
expands reach but does not decrease revenue. You *were* a teenager once,
right Adam? ;-)

It's just wrong-headed to assume that every pirated copy is a lost sale.
That pirated copy would probably *never* have actually been a sale, would
never have replaced the actual artifact. You can say "sell so and so DL'd
Sanitarium from Napster, therefore I lost $16.99 in revenue..." but that's
bullshit of the most egregious kind.

Furthermore, the economics of the follow-on sale (the T-shirt, the poster,
the concert program, the concert ticket, etc.) almost certainly indicate
that some free distribution of the works themselves, albeit in inferior
form, will actually *benefit* the record companies. I read somewhere that
for every $1 they make on record sales per se, they make $3 on
merchanidising / licensing / etc. That's what's so maddening! Here's a
no-cost way to expand audience by a factor of, say, 10, and thereby increase
ancillary revenues by a factor of 30, at a max reduction of sales by a
factor of 1! Jesus, these guys are totally herbie!

If you're going to be in the intermediary business, you've got to add
value. If you don't add value, you have no business. Travel agents get
pinched out because of the Internet, but the ones who turn up the service
prosper. Real estate agents with their proprietary MLS systems are
threatened at first by the Web, but the ones who cotton to it thrive.
Record companies get pinched by Napster, well, dammit, figure out *why*
people are doing it and then fit your business model around the new facts!

The genie that just exited stage right isn't the "motivation to create"
genie, but rather the "I can build a sustainable competitive advantage by
being an intermediary that simply controls distribution channels and
contributes no real value to the producer or the consumer." Works okay with
atoms, makes no sense with bits.


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