The Freeloading Digital Economy

>> I think digital media should be worth more

Yes, blueprints-enabled Linux should be worth at least $1 million per DVD pack, as was the case in times past for various quality proprietary software when source code (under NDA) was included. -- But Linux is $0.

One aspect is that many share the work of creating Linux.

Another is that other business models exist, eg, many people utilize the software in their business, are willing to contribute on their own time in return for all the software they are getting anyway, run a service where being an expert with the software increases sales significantly, etc.

Art is different in various ways, but notice I mentioned success Nina has had and many others, eg, who have been featured on techdirt.com (see case studies for a selection, and not how different some of the business models are). One reason I mention her is that she doesn't just tolerate "piracy" or use CC noncommercial licenses. She uses CC-by-sa, a copyleft open content license.

>> So the market value has no relation to the quality, depth, originality, or creativity of the content, or how much it cost to produce, or how much talent and hard work went into it.

Aren't there great commercials that take lots of money and time to develop? Yet the sponsor actually pays for the privilege of having others see that expensive commercial that already cost a bundle.

A key point is that such a commercial pays for itself if you have a good offering and really need to get the word out.

Another key point is that those who acted out, wrote, directed, etc, effectively were partners with someone who had a valuable scarce item to sell. They didn't sell T-shirts, but were able to make money off someone who did.

Seen differently, they traded their time, a scarce resource, for money up front from a risk-taker.

>> "Musicians should give away recordings to promote concerts." That's just plain stupid, and they either have no idea how difficult and expensive a concert tour is, with no guarantee of making any money

First, the markets are different and changing we agree. As mentioned with Linux, people will have to think creatively and adjust where they put their time and money. What worked in the past might not work, but that doesn't mean something new might not work even better.

A concert that people want to go to is likely to succeed. The key is how do you create that awareness and demand without spending a bundle. For high demand, the unavoidable costs can be covered. High demand can be created at much lower costs today.

Not every artist wants to tour, but those that enjoy that have that option among others.

Again, it makes a world of difference if fans like the material and the person v. if they don't. Concerts are one vehicle, not the only one.

No matter the vehicle, we have to look at the miracle that is the ability to reach many people today very cheaply so that even a very small fraction of that large number can result in success. However, we also want to grow the fraction that responds. To use perhaps an unappealing analogy: if one person in 10,000 replies to a special Nigerian deal, that might make it worthwhile for the solicitor; however, if 3 in 10,000 reply, that is better for the con artist.

Let's remember that just like digital content is easy to move around and pirate, this also means all sorts of marketing can be done as cheaply (especially since a bunch is done by others on your behalf). Lower revenues matched by lower costs can still lead to the same profit. Many people who rely on copyright don't make more than a few pennies per CD sale, depending on what deals they have in place. Higher revenues offset by higher costs.

As I mentioned in the other comment, people are having success both giving away digital content and charging for it. In some cases, the people aren't aware a free version is available, or it's not available in a particular format or at a particular time. However, paying when you can otherwise get it free is fine if you don't mind donating or if the price is low enough. Eg, 99 cents to a few dollars for a book or album in electronic form for a portable device might be more than worthwhile if you like the artist and/or don't want to bother doing the conversions.

And whatever you say about the benefits of digital information, a book has particular features no e-anything will ever have but which many (even if not Carla) who like the content will desire to have as well.

Now, let's look at earnings per item. What if this value is still lower for the digital versions? Let's assume.

99 cents vs $100? Well, if you have 100 sells, 99 cents is rotten, but if you have a popular work that reaches its intended audience, then you might find 1,000,000 potential buyers. At 1 cent, you can do nicely. And you may reach those people while spending much much less than was the case in the past.

We don't have the infrastructure in place yet to accommodate micro-payments for everyone, but many have found alternatives today.

Sometimes it's a matter of doing what you love and waiting. Eventually, your 15 minutes might result in a fair fraction of 1,000,000 people hooking up with your biz (eg, with your line-up of goodies). [See, eg, the Dan Bull case study at techdirt.]

What if you don't produce something popular? One approach is to keep working it. Keep working to appeal to more people. "Connect with fans" is a term used by techdirt and others. A person might not ever learn Linux, but they might buy the book to make a gift for their geek friend/family. The person may still value what Carla does with her Linux skills (eg, blog with dexterity and wise words), and may come to see her physical books as rather valuable in the right hands.

Just like many people who work on FOSS might moonlight or many aspiring actors might until they get a break, people shouldn't think that is abnormal in these cases. If people have to take side jobs while they wait, how would this be any different than how things were 20 years ago?

>> A music CD is the ultimate value for both musicians and fans: for a few bucks you get a portable, high-fidelity rugged medium that will last decades without degrading like a tape or vinyl LP.

Yes, and people do bite at this. If someone wants a backup, they will have to do it themselves pay someone else. A CD is not a digital download. You can have both, one for free and one for a few bucks. They fulfill different roles.

The challenge is not whether people will pay for CDs or some other medium, but how the primary author(s) gets their CDs to be bought amid competition from those copying the digital content. For those who use open content licenses, "endorsements" take on particular value... but this brings me to partnerships which I'll mention below.

>> Writers and moviemakers can't give away their creations to promote concert tours.

Sure, likely not concert tours they perform themselves. The talents, personality, wishes, etc, of each such person will lead to different approaches, and some of these approaches might involve concert tours.

Do private firms not need technical writers? How about producers or actors? They sure pay for these things today. Here the key is that you are performing a service like happens with most people on the planet.. you get paid for your time.

We need to separate the idea of doing what you love v. making a living. To get paid, unless you are among the fortunate, you have to do something you may not love 100%, but enough times you can mix everything in together to offer an exclusive edge while also enjoying what you like.

So we know that most people earn a living through a service. Well, most people could not do so except by partnering with an employer. What this means is that it's reasonable to believe we can get paid for doing something today (v. what we did yesterday), yet at the same time us not being able to figure out how to do it without help.

>> if I wanted to sell T-shirts I'd already be in the T-shirt business.

Nina Paley, I think, has partnered with many people. For example, someone else comes up with a business selling some service or scarce good related to your creation. That person then has an edge in the market if they get your endorsement. In exchange they pay you. You do almost nothing, yet by partnering with someone who is an expert in say selling T-shirts, she can leverage that. That person can sell official T-shirts or simply carry a logo that in fact they support the artist.

How many people know audacity well and make money creating with it or teaching others to use it? Maybe there aren't that many in the US, but some surely do and make OK money. Now imagine if all of those people knew of your great book and that you had an affiliate program? Imagine if you had an interesting website and many more people actually knew you as a neat talented person. Does being associated with you (maybe even on personal terms) not help the business of those who do their audacity work? Likely it would.

>> the core problem: the actual customers, the readers, listeners, and movie-watchers are the ones who should be paying.

I don't think you believe that.

I think that if a, b, and c benefited from your work but A, B, and C paid you, you would not care.

Did I ever pay you for your work at Linux Today? Never. Not a dime. Yet I benefited, and you got paid. Call me a freeloader. Call our relationship non-ideal or even obscene.

How about a person who also benefited and showed you off to someone who was looking to pay someone for X? That person in the middle provided a service in exchange for enjoying your work. They did it out of gratitude or maybe even out of greed (to look well with their other friend, boss, or perspective client).

>> I'm sure that a lot of the people reading this have been motivated to buy something after first being exposed to an "illegal" version

So that is not really the point. Point is that money somehow finds its way to you, and this is facilitated the more flexible you are and the more willing you are to seek income from your time or from some other scarce good. And you might still make money directly from ebooks and other digital content!

>> It's always been difficult to make a living in the creative arts.

This is why "connecting with fans" is so important. Do people want to pay second hand, or do they know the primary artist so as to possibly deal on more direct terms? Is the primary artist approachable?

I can even see a case of someone doing free parties or break even "concerts" as part of building their brand. Then have people buy merchandise or even make donations at a sustainable level based off this goodwill.

Brand is very valuable.

And today large firms like Disney hog up the brand gains while hiding the primary artists. One reason they get away with it is because it has been difficult to bypass the big investor, but that is no longer the case with the Internet. You can advertize. You can reach out and address people more intimately at a fraction of the cost. You can get a penny from 100,000 people this year (or this will be possible with micro-payments.. maybe flattr or something else). You can collaborate on open content (FOSS, for example) to build works Hollywood can't even match (or this will be the case eventually).

>> But this breaks down if the expectation is that an artist should invest money, time, and talent in giving away their creative works in the hopes of shaking some income loose indirectly.

I'm not sure I know what you mean? How does this differ if there were no piracy? You still have to take risks (maybe moonlight or seek service jobs) and in the end you are guaranteed no sales.. unless you hook up with someone that is willing to take on the risks for payment.. ie, seek employment giving up your scarce time for sure money in order to avoid taking on investments with possibly no returns. You may not like the assignments when you depend much on an employer. That is how things work today. Piracy has nothing to do with this.

>> Who Pays?

No need to repeat what is above.

>> Look at all the people who say they come to LXer to get away from the obnoxious ads on Linux Today

I lived fine with LT for years, but everyone is not like that. If everyone were like me....

>> But paying the bills takes cash money, and I think it's a rather undeserved sense of entitlement that expects Bob, Dave, and Scott to keep it going just for our benefit.

You can't have everything. People will always complain.

If you want to try something different, go for it. Ask for ideas. [LWN developed their own plan and don't have ads.. I'm sure many more things are possible.]

As concerns ads, we also have the issue that advertizers willing to pay aren't necessarily those whom the readers want to patron.

>> the real gold is in lead generation, and harvesting and trading user data. This is the terrible bargain of free content: in exchange for content we don't have to pay for, everyone pays in crappy content, ads masquerading as news and reviews, and wholesale invasion and exploitation of our privacy and personal business.

This would appear to be a problem of expectations, negotiation, or unfortunate leverage.

If you don't want to sell out, try a wide array of things. I'm not saying it is easy, but why only consider extremes?

Has LXer considered letting readers sign up for ads? And then tayloring ads based on keywords of their choosing? Sell this to advertizers as LXer being able to provide access to many interested individuals. This has value, a preselected and eager audience. This setup would help those who want or don't mind ads. Meanwhile, those who don't won't get any.

If LXer gets a little money from this rather than a lot, that is a little better than nothing and will mean a little less crap until some other idea comes up.

If you want help designing the software or finding the right software or idea, ask. Make it a community thing. Make the content that gets created open. Everyone chips in because they can leverage the results for their own business in the future.

I recommend people skim over at least some of the techdirt case studies if they haven't. This will help generate ideas and help quell fears a bit.

I want to clear up that I think "everything" you said, Carla, is reasonable and arguably accurate. I have a tendency to jump into reply mode if I there is an alternative pov that comes to mind.

Part of the problem is that it is generally difficult to earn a living doing certain things without sufficient leverage, which means you need the business savviness, connection, existing wealth/influence, or to make a perhaps significant compromise.

As concerns writing, art, etc, and society, people gravitate towards a common culture, a common language. This is one reason why over-cooked monopolies are wrong despite the attempt of copyright law (in theory) to give leverage to creators. A common culture, language, standard, shared experience can only be so diverse, and if you allow a limited number of people (or corps), even if these were among the most talented (or wealthy), to lock up access to these popular themes, then you make it very difficult for most everyone else. Essentially you say, OK, we have a winner, folks, now let's all move out of the way, at least until the next franchise.

Sure, we might have many big winners -- hundreds or even thousands -- but in a society with hundreds of millions, that is not nearly enough.

So taking culture into account, we need to relax the monopolies. And, after all, a monopoly is not natural. It is a law passed by the People (in theory) which is supposed to be a net positive (promote the progress, the general welfare, etc). It is a law that is a restriction on people and in ways that aren't to protect tangible property or prevent harm (which is why the requirement "to promote the progress" exists).

Also, I didn't intend to imply that writing a book does not mean you haven't put in lots of time already. You should be able to work hard for a while and then relax afterward; however, reality is reality, meaning that an author may have to go beyond the book to create an "ecosystem"/brand. This is really what major firms do (think Disney) in their own way. You have to "nurture the baby", keep it living and growing.

Also, keeping in tune with a non-monopoly (or limited monopoly) approach, the author might have to compromise a bit here or there like most people who don't get monopolies have to do. And let's not confuse copyright exclusive rights with things like facts, that enable creators to build unique branding and have the power of endorsement. Society gives extra value to authenticity, all else being the same.

jdixon, some of your points I can agree with, but that veers into the political so I'll stop there.

Those are cr@p wages for people who are often required to have master's degrees, who put in hundreds of hours of unpaid overtime, who are the first to be pink-slipped at every manufactured budget crisis, the first to be blamed and scapegoated, who are expected to not only teach but be psychologists, emergency medical personnel, babysitters, guardians of morals, janitors, their own assistants, and fund their own classroom supplies. I have decades of personal experience with the real world of schools and teachers, and my executive summary is "You can't kick a dog into loving you."

Tutoring is not getting paid twice for the same work anymore than getting paid for any extra work is getting paid twice.

In fact they're cr@p wages for nearly anyone-- try raising a family on $38k. ~$50k is the average American family income; that's with multiple wage earners. Wages for working people have been stagnant for a century, even with amazing gains in productivity and value of output per worker. We don't share in those gains. You've probably seen charts like this: http://survivalandprosperity.com/2011/02/17/will-growing-inc...

So the correct yardstick is not that teachers get paid a little more (on paper only, in the real world they're bled white) than some other working people, it's that most American workers are underpaid.

Scott, it has a little bit of relevance to the topic-- those who demean the value of creative works (even as they enjoy them), and have the weird idea that creative artists should happily give their work away. Just like we want the best and the brightest for teaching our kids, but don't want to pay them anything or give them any respect.

So I have thought about the issue, added very political rants - which luckily got lost by middleclick-tab accident - but it seems lots of people are talking about the entitlement of _other_ people.

To break this trend, let my tell about my own sense of entitlement.

Of course, I think I'm entitled to live in a save environment, but when there's an argument in front of my house because someone thought they were entitled to priority or entitled to sniff white powder, I don't intervene - because I'm a coward.

And when I need Windows, I download it without paying. After all, people like me are generating wealth for people like Steve Ballmer and Bill Gates - who are only consuming wealth. So why should I help transfer more wealth from the people who create it to those only consuming wealth? Why would I work for them sitting on their bottoms - and only rising from their chair to make bad commercials?

Also, I think I'm entitled to a cheap payment system. Where I can pay with money I already earned, without being screwed by US credit card companies - which pretty much look like a cartel if you ask me. I think I'm entitled to a worldwide payment system like iDeal, the best e-payment system in the world, far cheaper than creditcards, much safer - because it relies on challenge / response cryptography and not a dumb 'cleartext' number. And if 'they' won't arrange cheap payment systems for me (though I'm perfectly fine with PayPal, I think rules here for PayPal Sàrl in Europe are different than in US), then screw them, I simply won't pay. And if the content creator has the bad luck their content is available for free - and especially if I think it's too expensive (like most CD's), lots of times I'll leech it. Especially if the people owning the company are pure "wealth consumers" and don't add anything positive to the world.

There, I said it. Even while I know it's morally wrong to rob the content creators, I do it anyway. So those "other people" feeling entitled to stuff: Here, I belong to that group!

But, how to fix this? Well, I think there are several steps:

-Provide the content 'cheaper', meaning cutting out Apple / Google, MPAA / RIAA and publishers; I don't want to add to their wealth. Like said, distributing content can be done today for almost zero cost. Of course, I'm OK with paying more for paper books. But e-books should be cheaper than paper ones.

-Provide for an easy and cheap way to pay. Most of people in Europe are reluctant to use creditcards and don't own one. Moreover, it's better to pay with money you have than to pay with money you "might earn" tomorrow, and being screwed if tomorrow you don't.

-For content creators: Trying to connect to the content consumers! I bought Carla's Network Cookbook, because even though we never met, I have a feeling I "know Carla a little". Social media could help here. Also, when at some concert of some band I turned out to like, I personally bought the CD directly from them, giving me a pretty good feeling.

-Maybe, consider making content available to people after they Flattr'ed you. I think for those who write 'shorter' articles (like Carla, and myself sometimes), earning 5000 times 3 cents from people who Flattr'ed may still make us feel recognized and awarded. If there's a song for 3 cents and enough people buy it, it still could be profitable.

Because the most important thing I think I'm entitled to, is paying such an amount that the content creator can eat and pay the bills, _without_ making the content creator a billionaire.

hkwint, I won't condone copyright infringement (though I believe fair use and Constitutional standards to promote the progress do leave a fair opening which may or may not apply in your case), but thanks for the perspective about the views I think many citizens hold of wanting rational laws that allow many to make money without making it too easy for some to dominate so much.

Without copyright law, consumers and other who might co-produce will frequently have a sense of reasonableness (even if it's biased towards themselves, "me"), and authors can use persuasion, bring up facts, and appeal to this good sense. They can invoke future and present intentions (see kickstarter as example of people contributing ahead of time if they have confidence).

The consumers know that information is intangible and a part of everyone's head. It is "me" sharing something I know or have "written down" with someone else. It helps spread valuable goods, and every such sharing adds goodwill to the originator of the information and grows their popularity. A book is costly to replicate, but information is not, especially if the negligible costs are born by those sharing.

Remember that a copyright is a monopoly restriction applied to everyone. The author always has the choice not to write or to write and keep things private or among friends or business acquaintances without having the government step in to keep people from sharing information they otherwise come upon. The author can sell books and numerous other tangibles, partner with many people (endorsements) so that they get a cut of what they earn related to the author's work, and can certainly seek to provide custom expert services where the author's past works may certainly be leveraged to command a premium (whether via brand value or quality of service realities).

If authors had expectations to 10 year copyright, they would live with that. If they had expectations that writing the work was merely the first very important step of several steps, they would also accept. When copyright runs out, they don't lose the primary advantage in any related business for being the primary creators and experts.

And don't tell Nike or any of many groups that brand has no meaning. Even Coke losing taste tests still wins when people buy with the sticker in tact. Building and feeding the brand is an ongoing process just as is writing. It has been made all the cheaper to build with the Internet and social networks and such. And the best thing is that, once written, that fact exists forever. You can't undo or neutralize that an author created something. If it takes 30 years for one particular work to gain awareness, even then the author gains "full credit". You have to build the brand, and you can even partner with experts at brand building.

As open source has shown, a work can go much further when many contribute, and there is room for many to benefit. I mean, imagine if 10,000 worker ants went out with incentives to "sell" Audacity to their friends. And these people knew the primary players around audacity. Would those central figures not be better off this way? I can understand why a J K Rolling, Stephen King, or Michael Crichton might not want to share today (and they do not need any more copyright protections.. though the law is giving it to them regardless), but most every other author stands to gain (and these three have made plenty so I wouldn't feel sad for them) by having motivated people spreading the author's "ecosystem".

Again, these are my opinions. I can't say a world without free open source software would be a better world. Don't expect me to sell Microsoft or most other proprietary software to anyone. I almost only sing the praises of FOSS because there is something in it for me and because I'm grateful as would be any other human (to some extent anyway).

I can't wait for micro-payments to be commonplace (meaning every single page on the Internet pretty much offers a way to donate to one or more people). You will oftentimes see many many thousands of people give cents (while some give more others participate in tangible goods or services buying). Flattr's mechanism is not something I really like. I would prefer for the person to have full control over how much they give on each occasion.