Piracy is a ‘Black Market’ Symptom of Mispricing Content.

[NOTE: I might be accused at a later time of stating that piracy is a black market SOLUTION to the copyright problem using the URL title of this article as “proof” that my initial thought was that it was a solution, not a symptom.  Rather, this was a mistyping error (I was looking at a “Group Buying is one SOLUTION to fix the broken copyright system,” note and correspondingly used that word in the title.  Because I did not want to interrupt the publication of this blog (in which the old URL was posted to Twitter, Facebook, etc.), I left it as it is.]

This blog post is a response to the “Close to Anonymity” author who is proposing a “group buy” solution to the copyright problem. It is also a follow-up article to my “Group Buying” Through The Eyes of Piracy article written on August 24th, 2016.

[To the author:  Once again, I want to reiterate to the author that I wholeheartedly support the concept of group buying as he proposes it. It is clear to me that he has put a tremendous amount of time and effort thinking this through, specifically on how to implement it. I support him 100% and there needs to be more individuals like him to speak out to fix the broken copyright system.]

The running theme of this blog has been that the copyright advocates (MPAA / RIAA) and copyright holders are over-exerting power given to them by the copyright statutes. Further, the copyright holders are focusing their efforts not on the creation of new and useful content, but on the extreme monetization of old and recycled content, often using unethical means (unconstitutionally high [$150,000] statutory damages for copyright infringement) to achieve their financial goals. I would suggest that while piracy is a legitimate problem, it is a symptom of greed, dishonesty, and an unwillingness to make content reasonably available to the consumer at a price the consumer is willing to pay for that content.

Instead of fixing the problem, those in power have called our side names, e.g., the “copyleft,” or the “pirate party,” whereas most of us who fight copyright holders believe staunchly in copyright, but disagree in the way their enforcement has been applied, often lobbying politicians and lawmakers and asking them to increase penalties and punishments to those caught infringing their copyrighted content, while at the same time clamping down on providing avenues for those same consumers to purchase or view the content lawfully at a reasonable price.

The reality is that a media company selling a piece of software for $100 would in fact claim that [of the 9 individuals who came together to purchase that piece of software at $10 a piece,] if the “group buy” were not available, *IF at least two* would have purchased the software product at full price, they would have lost profits under the group buy model.

*THIS IS THE FALLACY WITH THE COPYRIGHT HOLDERS — THEY FALSELY BELIEVE THERE WOULD BE A MARKET FOR THEIR PRODUCT IF PIRACY (OR IN YOUR CASE, A GROUP BUY) WERE MADE IMPOSSIBLE, AND IF YOU PIRATE SOFTWARE OR IF YOU MAKE GROUP BUYING OF COPYRIGHTED MEDIA POSSIBLE, IT WOULD BE YOUR FAULT THEY HAVE LOST THE PROFITS THEY WOULD HAVE BEEN ENTITLED TO.*

Assume for a moment that you are correct in that there would not be two purchases, possibly NOT EVEN ONE at full retail price. The copyright holder would rather make ZERO sales ($0 profit) rather than risk that multiple (here, 9) individuals would group together to make ONE purchase because they would see that as a disaster for their bottom line and they would count each group buy as a loss (here, of 9 potential sales).

Realistically, the answer is that the market should determine the price of a product, and not a copyright monopoly, threats under the Digital Millennium Copyright Act (DMCA) or statutory damages for copyright infringement. The existence of a “black market” for their copyrighted products (here, through piracy) is a strong indication to the copyright owners that they are either 1) mispricing their products, or 2) that they are failing to make them adequately available to the paying public.


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.

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One thought on “Piracy is a ‘Black Market’ Symptom of Mispricing Content.”

  1. I appreciate that we are coming at this problem with vastly different backgrounds (and “angles” so-to-speak). However, I do (perhaps naively misunderstanding your argument) disagree with a couple of related points that you made, at least in terms of how I intended to represent my version of the “group buy”:

    1. “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.”

    2. ” 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.”

    In both cases you assume that there are additional individuals who would be willing to purchase the underlying product at the full price. If this is the case, then I agree that the IP owner would not go along with the sale at some lesser amount. In the example in my writing, however, I assume that there is:

    a. One individual willing to purchase “Hey Moe” at $1.29.
    b. One individual willing to purchase “Hey Moe” at $0.50 (a price at which the IP owner cannot offer the song without forfeiting profits).

    In short: There is simply no way the IP owner is going to get $2.58. In fact, without the “group buy” there is simply no way that the IP owner is going to get anything more than $1.29.

    In more detail: Taking individuals (a) and (b) together, at best, the IP owner could recover a total of $1.79 (we know this since we have all of the information). However, while there may be some way for the IP owner to estimate the existence of customer (a), the IP owner cannot know precisely how much customer (b) values the song at. Because of this, if (a) and (b) team up, then they can offer the IP owner the example $1.34. The IP owner knows that this is greater than they would earn off of the one known purchase (by customer a), but cannot know exactly how much they may be missing out from person (b). With this information structure, this transaction is profitable to to patent holder (and everyone else, in terms of economic value) and thus should be accepted.

    I grant that I’m playing fast and loose with the information available to the different participants in the transaction, but covering that would require a much longer post.

    P.S.: Thanks for your interest in my article.

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