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Piracy is Progressive Taxation, and Other Thoughts on the Evolution of Online Distribution

by
12/11/2002

The continuing controversy over online file sharing sparks me to offer a few thoughts as an author and publisher. To be sure, I write and publish neither movies nor music, but books. But I think that some of the lessons of my experience still apply.

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Lesson 1: Obscurity is a far greater threat to authors and creative artists than piracy.

Let me start with book publishing. More than 100,000 books are published each year, with several million books in print, yet fewer than 10,000 of those new books have any significant sales, and only a hundred thousand or so of all the books in print are carried in even the largest stores. Most books have a few months on the shelves of the major chains, and then wait in the darkness of warehouses from which they will move only to the recycling bin. Authors think that getting a publisher will be the realization of their dreams, but for so many, it's just the start of a long disappointment.

Sites like Amazon that create a virtual storefront for all the books in print cast a ray of light into the gloom of those warehouses, and so books that would otherwise have no outlet at all can be discovered and bought. Authors who are fortunate enough to get the rights to their book back from the publisher often put them up freely online, in hopes of finding readers. The web has been a boon for readers, since it makes it easier to spread book recommendations and to purchase the books once you hear about them. But even then, few books survive their first year or two in print. Empty the warehouses and you couldn't give many of them away.

Many works linger in deserved obscurity, but so many more suffer simply from the vast differential between supply and demand.

I don't know the exact size of the entire CD catalog, but I imagine that it is similar in scope. Tens of thousands of musicians self-publish their own CDs; a happy few get a recording contract. Of those, fewer still have their records sell in appreciable numbers. The deep backlist of music publishers is lost to consumers because the music just isn't available in stores.

There are fewer films, to be sure, because of the cost of film making, but even there, obscurity is a constant enemy. Thousands of independent film makers are desperate for distribution. A few independent films, like Denmark's Dogme films, get visibility. But for most, visibility is limited to occasional showings at local film festivals. The rise of digital video also promises that film making will soon be as much a garage opportunity as starting a rock band, and as much of a garret opportunity as the great American novel.

Lesson 2: Piracy is progressive taxation

For all of these creative artists, most laboring in obscurity, being well-enough known to be pirated would be a crowning achievement. Piracy is a kind of progressive taxation, which may shave a few percentage points off the sales of well-known artists (and I say "may" because even that point is not proven), in exchange for massive benefits to the far greater number for whom exposure may lead to increased revenues.

Our current distribution systems for books, music, and movies are skewed heavily in favor of the "haves" against the "have nots." A few high-profile products receive the bulk of the promotional budget and are distributed in large quantities; the majority depend, in the words of Tennessee Williams' character Blanche DuBois, "on the kindness of strangers."

Lowering the barriers to entry in distribution, and the continuous availability of the entire catalog rather than just the most popular works, is good for artists, since it gives them a chance to build their own reputation and visibility, working with entrepreneurs of the new medium who will be the publishers and distributors of tomorrow.

I have watched my 19 year-old daughter and her friends sample countless bands on Napster and Kazaa and, enthusiastic for their music, go out to purchase CDs. My daughter now owns more CDs than I have collected in a lifetime of less exploratory listening. What's more, she has introduced me to her favorite music, and I too have bought CDs as a result. And no, she isn't downloading Britney Spears, but forgotten bands from the 60s, 70s, 80s, and 90s, as well as their musical forebears in other genres. This is music that is difficult to find -- except online -- but, once found, leads to a focused search for CDs, records, and other artifacts. eBay is doing a nice business with much of this material, even if the RIAA fails to see the opportunity.

Lesson 3: Customers want to do the right thing, if they can.

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Piracy is a loaded word, which we used to reserve for wholesale copying and resale of illegitimate product. The music and film industry usage, applying it to peer-to-peer file sharing, is a disservice to honest discussion.

Online file sharing is the work of enthusiasts who are trading their music because there is no legitimate alternative. Piracy is an illegal commercial activity that is typically a substantial problem only in countries without strong enforcement of existing copyright law.

At O'Reilly, we publish many of our books in online form. There are people who take advantage of that fact to redistribute unpaid copies. (The biggest problem, incidentally, is not on file sharing networks, but from copies of our CD Bookshelf product line being put up on public Web servers, or copied wholesale and offered for sale on eBay.) While these pirated copies are annoying, they hardly destroy our business. We've found little or no abatement of sales of printed books that are also available for sale online.

What's more, many of those who do infringe respond to little more than a polite letter asking them to take the materials down. Those servers that ignore our requests are typically in countries where the books are not available for sale or are far too expensive for local consumers to buy.

What's even more interesting, though, is that our enforcement activities are customer-driven. We receive thousands of emails from customers letting us know about infringing copies and sites. Why? They value our company and our authors, and they want to see our work continue. They know that there is a legitimate way to pay for online access--our Safari Books Online subscription service (safari.oreilly.com) can be had for as little as $9.95 a month--and accordingly recognize free copies as illegitimate.

A similar data point comes from Jon Schull, the former CTO of Softlock, the company that worked with Stephen King on his eBook experiment, "Riding the Bullet". Softlock, which used a strong DRM scheme, was relying on "superdistribution" to reduce the costs of hosting the content--the idea that customers would redistribute their copies to friends, who would then simply need to download a key to unlock said copy. But most of the copies were downloaded anyway and very few were passed along. Softlock ran a customer survey to find out why there was so little "pass-along" activity. The answer, surprisingly, was that customers didn't understand that redistribution was desired. They didn't do it because they "thought it was wrong."

The simplest way to get customers to stop trading illicit digital copies of music and movies is to give those customers a legitimate alternative, at a fair price.

Lesson 4: Shoplifting is a bigger threat than piracy.

While few of the people putting books on public web servers seek to profit from the activity, those who are putting up CDs for sale on eBay containing PDF or HTML copies of dozens of books are in fact practicing piracy--organized copying of content for resale.

But even so, we see no need for stronger copyright laws, or strong Digital Rights Management software, because existing law allows us to prosecute the few deliberate pirates.

We don't have a substantial piracy problem in the US and Europe. The fact that its software products have been available for years on warez sites (and now on file trading networks) has not kept Microsoft from becoming one of the world's largest and most successful companies. Estimates of "lost" revenue assume that illicit copies would have been paid for; meanwhile, there is no credit on the other side of the ledger for copies that are sold because of "upgrades" from familiarity bred by illicit copies.

What we have is a problem that is analogous, at best, to shoplifting, an annoying cost of doing business.

And overall, as a book publisher who also makes many of our books available in electronic form, we rate the piracy problem as somewhere below shoplifting as a tax on our revenues. Consistent with my observation that obscurity is a greater danger than piracy, shoplifting of a single copy can lead to lost sales of many more. If a bookstore has only one copy of your book, or a music store one copy of your CD, a shoplifted copy essentially makes it disappear from the next potential buyer's field of possibility. Because the store's inventory control system says the product hasn't been sold, it may not be reordered for weeks or months, perhaps not at all.

I have many times asked a bookstore why they didn't have copies of one of my books, only to be told, after a quick look at the inventory control system: "But we do. It says we still have one copy in stock, and it hasn't sold in months, so we see no need to reorder." It takes some prodding to force the point that perhaps it hasn't sold because it is no longer on the shelf.

Because an online copy is never out of stock, we at least have a chance at a sale, rather than being subject to the enormous inefficiencies and arbitrary choke points in the distribution system.

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