Off Topic: “Group Buying” Through The Eyes of Piracy.

I was reading an article called “Collaborative Intellectual Property Purchasing” by a blogger called Close to Anonymity. In his article, he clearly describes the concept of “group buying,” and suggests that it is one method to provide a solution to the piracy problem. The problem is that in many circumstances [as the copyright laws and DMCA statutes are in their present form] “group buying” is illegal.

NOTE: While he approaches the topic from an honest and upstanding discussion on how to provide a “fix” to the copyright statutes, this article is a dark, cynical, and corrupted view of the topic from a jaded view of the law. This article approaches the merits and faults of group buying, but it does so by viewing it through the eyes of a “pirate.” Up front, I ask for the forgiveness from the author.

Collaborative buying, or “group buys” is something that you will find on various bittorrent websites (not public websites like Pirate Bay or what was KAT, but more often on “private” file sharing websites which host “private” trackers). To get access to these websites, you usually need an invitation and need to know someone who knows someone, etc. The private tracker sites are often topic-specific, so if you are looking for art-related books, you’ll go to one bittorrent website which hosts this kind of content, and if you are looking for business-based torrents, you’ll go somewhere else.

The idea as I have seen it in practice is that someone posts a proposed “Group Buy” on a forum for a digital product. This can be a DVD course, a piece of software, or anything that can be copied and shared online. This digital product costs, say, $100, so to get the price down to $10 per person, the user proposing the group buy will ask for ten people to commit to spending $10 a piece. I am not aware of how the funding happens (e.g., through an intermediary website), but one person will purchase the product on behalf of the group, and they will share it with the other users who participated in the purchase. I suppose the group buy participants believe that they are not “pirating” the software or the media because they each contributed a few dollars to purchase it, and in a way, they are right.  However, the law disagrees.

As for the legality of group buys, copyright licenses for multimedia products and software often think in “one purchase, one license, one copy, [or, one purchase, one installation]” terms. You see this concept of “one purchase, one copy” on full display when trying to view a digital copy of a book purchased by your local library via the Overdrive app.  If a library has purchased one copy of an ebook or an audio book, they can only allow that one digital copy to be “taken out” by one user at a time, even though the technology is there to share the ebook or audio book with all of their patrons at the same time.  It’s a silly model for a library to prevent all of their patrons from accessing the copyrighted content at the same time, and my best guess is that if they were to negotiate unlimited licenses, then the cost of licensing the content to the library would be significantly higher, perhaps on the level of a scribd, or a Netflix.com.  Thus, they opt to buy the “one copy” and they strictly adhere to the “one copy owned, one copy available for use” copyright model.

In the context of piracy and group buys, when one end user purchases the product and shares that product with ten other individuals (each of whom paid a proportional share of the cost of the product, and each of whom install the software product on their machines and use the same serial code to activate the product), when the software “phones home” to authenticate the same serial number for the ten computers, the software developer sees the 9 users as “infringers” and the original purchaser as someone the one who is responsible for the piracy, and they’ll deactivate the software for everyone.

Similarly, when group buying something as simple as a movie or a DVD title, the individual who breaks the copy protection on the DVD and provides copies of the cracked DVD to a number of his friends who contributed to the purchase is seen as both violating the DMCA laws (breaking copy protection), and violating the copyright statutes because that user copied the DVD without authorization from the production company.

Thus, the copyright rules and the DMCA rules do need to be updated to stop piracy. I commend the author of the “Close to Anonymity” blog for proposing a viable solution to making products more affordable to end users while at the same time providing the content creators (the copyright holders) with extra money and sales through the group buy. The solution will not stop the “piracy problem,” but allowing for group buys on a large scale can at least mitigate (somewhat) the damage that copyright holders claim to suffer at the hands of piracy.

I am jaded somewhat, however, and I cannot stop the nagging feeling that group buying will never be legalized. The content producers will claim that group buying would hurt their sales, in that if the nine (9) users were unable to get together to purchase the $100 piece of software, if at least two (2) of them paid the full $100 for it, then the content producer would have made $200 in sales, whereas with group buying they would only be making a $100 sale. Thus, they would not go for such a concept.

Similarly, I cannot imagine the lawmakers [who are showered with benefits for voting in line with the MPAA / RIAA lobbyists] would ever try to make content more readily available to end users. If you look at the way lawmakers have voted over the years, copyright statutes only get worse and worse for the public, not better. Case in point (and I am going by memory here without checking this fact) — the statutory damages for copyright infringement were not always $150,000 in the US. This ever-increasing statutory damages limit is the doing of the lawmakers who I can only think had their pockets lined for voting in favor of harsher and harsher penalties for copyright infringement.  Between you and me, I am already of the opinion that the statutory damages for copying one video, music, or copyrighted work are already unconstitutionally high, but good luck getting a judge to rule this way.

Lastly, in the author’s article, he mentions the idea of a group buy for a $1.29 hypothetical song called “Hey Moe.” If the copyright holders knew that multiple individuals could purchase their same song in a group buy settling (e.g., increasing the price to $1.34 by having one purchaser pay $1.24 [a discount] and the other purchaser pay $0.10), while the solution proposed by the author would provide the copyright holder with a $1.34 sale, the “greedy” copyright holder would sulk at the $1.24 in lost profits by claiming that if such a group buy were not available, both purchasers would have paid $1.29 each for the song.

[How would they see lost profits? $1.29 x 2 sales = $2.58 in sales – $1.34 for the group buy sale = $1.24 in lost profits.]

Thus, the realistic result [if a “group buy” framework were legalized and made possible when purchasing copyrighted media] is that the “greedy” copyright holders would steeply increase the price of the media so that the “net” amount they make is the original $1.29 per copy that they would have made were there no group buy in the first place.

In sum, group buying is a great idea and it should be considered when revising the copyright statutes. But practically, because copyright holders in my experience are profit-driven to a fault (greed), and lawmakers are corrupt to a fault, I do not think we will ever see group buying being made legal in the near future.

However, for the pirates out there on private trackers, “group buying” will remain a viable method of obtaining new content to be shared first with the participants of the group buy, and then later with the members of the website. I am by no means encouraging or endorsing the practice, but with things as they are, group buying seems to be the most “ethical” (and still yet illegal) way to obtain content without paying full price for it, and bittorrent websites seem to provide the perfect forum for allowing such a practice to happen. In my opinion, if the bittorrent website only shared content with members who “bought in” to the group buy without sharing it with anyone else, that would be the closest to an ‘ethical’ solution (and yet it would still be illegal). A less ethical solution is to allow each user to buy in after the fact, making the product progressively cheaper-and-cheaper with every downloader “buying in” to the group buy, and thus crediting every previous purchaser’s account every time a new downloader “buys in” to the group buy after the fact.

But then again, through this example, I just made the point of the copyright holder. Eventually with group buys [after-the-fact], the product price would become infinitesimally small, and the copyright holder would only have made one sale of the product, which would then be shared with potentially hundreds or thousands of downloaders. This is copyright infringement in the classic sense — the unlawful copying or duplication of a copyrighted work, and one sale through a group buy would not adequately compensate the copyright holder for the purchase of his work.

In sum, the copyright system is broken, there is piracy, and until the content producers work with end users to make their content more readily available, or they price their products correctly to the point where they could capture the sale of a majority of those who would purchase their product, there will remain end users who might have purchased the product if it were more available or priced lower, but who instead turn to piracy to obtain that media because of the unavailability of that content for a price that the “market” can bear.


CONTACT FORM: If you have a question or comment about what I have written, and you want to keep it *for my eyes only*, please feel free to use the form below. The information you post will be e-mailed to me, and I will be happy to respond.

NOTE: No attorney client relationship is established by sending this form, and while the attorney-client privilege (which keeps everything that you share confidential and private) attaches immediately when you contact me, I do not become your attorney until we sign a contract together.  That being said, please do not state anything “incriminating” about your case when using this form, or more practically, in any e-mail.

2 thoughts on “Off Topic: “Group Buying” Through The Eyes of Piracy.”

  1. Group buying seems to highlight a huge problem.
    The price of much content is vastly inflated out of reach of many consumers.

    Copyright law is partially to blame, as it makes the middlemen feel that something is being done to protect their business model. Some recording contracts still have deductions to cover vinyl breakage… perhaps they need to let go of the past?

    Imagine what would happen if the damages for copyright were limited to x2 retail. Would there be copyright trolls chasing people for a possible pittance, or would pricing end up restructured?

    There are/were contracts for libraries offering ebook check outs, that imposed a limit to the number of times the book could be checked out on par with paper books. The bits don’t wear out, but any change in income is feared… to the point that they ignore the reality that ebooks cost much less to produce. We’ve always made X from selling books to libraries, we must always make X.

    The RIAA liked to run out the chestnut that if music cost less people would value it less. Funny it seems that even with rising prices, people are valuing it less. Their campagin to punish downloaders soured more people on the situation. Bankrupting people, generously allowing a family a few days to grieve before resuming the lawsuit against a dead person, and being completely tone deaf to the idea that the market changed. (Remember kids the ‘totally worthless” catalog of EMI sold for 2 billion, and the shareholders didn’t fire the whole board for wasting money.)

    They spend more time trying to grip the handful of sand, ignoring its slipping between their fingers. While lowering prices might sting at first, as it becomes cheaper & easier to acquire it is more likely they would see more sales than before. They are actively hurting their industry by staying this course they’ve been on. Samples have to be paid for, songs can’t sound similar or have the same “feel” without being paid for, so what if your platform & tech are making us money it has to be more, they are inventing “new” streams of income that drive prices higher & can’t figure out they are harming themselves in this relentless money grubbing.

Leave a Reply

Your email address will not be published. Required fields are marked *