Piracy is Progressive Taxation, and Other Thoughts on the Evolution of Online Distribution
Subject:   not really
Date:   2003-02-16 16:24:13
From:   anonymous2
Piracy is obviously not progressive taxation , nor does its market impact resemble a system of progressive taxation. Firstly theft isn't a tax , it's theft. Secondly a system of progressive taxation imposes progressively graduated costs based on income or value. The 'piracy tax' on artists is actually parabolic , imposing the highest net relative costs on those artists in the middle ( ie. lost sales will represent a greater proportion of income relative to the total ). Once again the middle class gets screwed.

* I think that Tim knows that his argument is specious. You don't see O'Reilly putting new titles on Kazaa in anticipation of benefiting from promotion through piracy do you ??

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Showing messages 1 through 10 of 10.

  • not really
    2008-04-19 09:31:54  swing_developer [View]

    Progressive taxation is taxation graduated to a person's ability to pay. If you have a lot of money, then you pay more. That's the point, I think. People who have more time than money are exactly those people who can't pay US $500.00 for Photoshop or $500.00 for 35 CDs. These are the people who pirate. As you get older and make more money, you can afford to buy it and you like the convenience and a good conscience, so you buy it.

    People thought nothing of making mix tapes in the 80s. Those same people bought a fair share of tapes by the same artists who were on those prirated mix tapes- to the limit of their financial ability. Now those same people just buy CDs or download tunes from Apple.

    What is the point of cracking down on the poor? Spending all that time on lawyers and courts and jail and the enforcement of fines and witnesses and forensic experts and in the end creating millions (as the RIAA would have it) of people whose fines are so high, they're economic basket cases for life- no longer able to contribute to society and the larger economy?

    Why should society spend those resources just because an industry can't figure out a viable economic model for their goods and services?

    If you don't want people to pirate, then you just need to calm down on your pricing scheme.

    The majority or people are genetically engineered to want to get along in society and follow norms- that's why there IS a society, not because there's laws.

    Look, think clearly: the reason, say, your neighbor doesn't sneak into your house at night, kill you and take your things isn't because there are laws against doing that.

    It's because your neighbor doesn't WANT to do that. The impulse just isn't in your neighbor's heart.

    If it were in your neighbor's heart, if that sort of impulse was something that the average person had to fight off by intensely reflecting on the consequences of their actions, then society wouldn't be able to stop it and we'd have all chaos, all the time. In fact, we wouldn't even have survived as a species. Some small percentage of people run afoul of the laws. Small percentage.

    On the otherhand, if you charge too much for food, you'll turn everyone into a criminal. Now you're essentailly criminalizing the need to eat.

    The record industry needs to take a hard look at how much money people really have. Not as much as they did in the 50s and 60s aor even 70s and 80s.

    They outsourced their CD production, their marketing, their manufacturing and so did every other industry. Guess what. If you want customers you need employees. If you want to dump Americans as employees, then plan on selling into those countries whose people you are willing to employ, and at prices they can afford.

    Industry has been playing a game for quite a few years called "fire your customers". The first companies to do it made a bundle. They sold to people employed by other, sucker, companies.

    As more and more companies jumped ship, the standard of living of the average American and concomitant disposable income has gone down.

    As disposable income goes down, the amount of discretionary income devoted to buying CDs for 17.98 goes down. Way down.

    Industry in general needs to face what it's done to its own customers, and quit hankering after days gone past. If you don't employ people, you turn them into poor people. Poor people- e.g. students- steal because they have to have those things to participate in society and they can't afford them. Think developing photoshop skills.

    As for music, the impulse to participate and posses is even stronger, although it's not future-job-skill based. It's driven by the need to reproduce.

    Participating in what's cool, what's going on with your peers, demonstrating you can decode, complex social signals and creatively and meaningfully send those signals back, is to signal your fitness as an aware, creative, discerning and fully functioning potential mate all of whose working parts are in fine form.

    It's called "youth culture", and if you're inclined to sneer at its importance, it's only because you're not young anymore.

    So stealing the "now" music if you can't afford it is an absolute imperative if you're a part of a subculture that values and is united by that music, and in fact you find that students who wouldn't steal anything don't think twice about stealing THAT.

    If you want to stop people from stealing, you need to price things appropriately to their income and the imperatives and pressures on them to gain access to the thing you're selling.

    $17.99 is the price you can charge for a CD when you don't have Communist China acting as your jack-booted enforcer of 100 hour weeks for 12 year old girls working in your sweat-shop factories churning out your CDs and slipping the art work into sleaves.

    Now that you have that, and you unemployed all your Americans, it's time to rethink your pricing scheme.

  • Re: not really - proof?
    2003-03-27 12:05:31  soopahman [View]

    Obviously the term "tax" was metaphorical - to scoff at this much was trivial. Call it "Progressive Reduction in Revenue." My understanding is that the scale in "progressive" is the popularity of the author (and thus their average income... as in a progressive tax).

    What proof do you have that this is a bell curve, in which those authors in the middle lose the most money, rather than those at the top? I find your observation highly illogical as it only makes sense the most popular authors would sell content that is mostly dearly pursued (and so, most likely to be pursued until it is obtained for free).
  • Tim O'Reilly photo not really
    2003-03-01 11:44:24  Tim O'Reilly | O'Reilly AuthorO'Reilly Blogger [View]

    Actually, I think the analogy is pretty good. Did you read Janis Ian's essay on the impact of Napster/Kazaa on her sales? See Note also the experience of Baen Books, as described at They don't have Robert Heinlein or Michael Crichton for free download, but they have a lot of people who are trying to make a name for themselves (and succeeding, with the help of free downloads to spread the word.)

    And in fact O'Reilly has made quite a few books available for public download as a way of boosting their visibility. As noted in the article, we believe that the positive impact is greatest for little-known works. For works with high visibility, such as most O'Reilly books, there is a "progressive tax" which we would prefer to avoid. But my point is that these should be individual decisions by creators, not wholesale decisions by a publisher cartel who profits disproportionately from a very small number of high profile acts, and is keeping down the greater number of people who could benefit (consumers and lesser known artists) from a new medium.

    • not really
      2003-04-28 04:35:38  jwenting [View]

      Where you go wrong though is drawing the parallel between authors making their failed works available online freely to gain exposure (which might lead to future sales being better) and people making the work of others which is still available commercially available without prior consent (and sometimes benefitting financially from doing so).

      You're comparing giving freely of your own things with selling (or giving away) stolen goods and concluding they're pretty much the same thing, when they're clearly not.

      I don't argue about the POTENTIAL for higher sales due to filesharing technology, but the current practice is that it caused a sharp drop in sales of music CDs and movies over the past few years while at the same time the sales of blank CDs has risen sharply.
      Software piracy has now risen to such excessive amounts that companies are sometimes spending more money on preventing it and prosecuting the guilty parties than on the development of the software itself. If they don't, they're forced out of business and if they do product development suffers.
      This is not as much an issue in the US as it is in Europe and especially Asia where (at least in the games market) in some countries over 90% is pirated.
      The situation in the music industry isn't (yet) as bleak, with piracy accounting for maybe 30% of the market (and some people indeed buying more because they hear a few tracks of low quality reproductions and wanting the real thing, but many people now rip entire albums at near the original quality which are made available and CDs burned from it all over the world).
      In stores, the sad result is racks of CDs for sale the boxes and booklets of which have been stolen by people who have burned the CD after downloading it via filesharing. That never happened on such a large scale in software, but might start happening now that software too is being ever more distributed in smaller boxes.

      You say the artists should decide whether to make (some of) their work available over the internet and I agree.
      But it's the artists who should make that decision, NOT the end users!
      • Tim O'Reilly photo not really
        2003-04-28 07:17:15  Tim O'Reilly | O'Reilly AuthorO'Reilly Blogger [View]

        I agree very much that the artists should make the decision, not the end users. But in the current legal climate and sea of misinformation put out by the music cartel, it's very hard for artists to make that choice, even if they want to.

        I believe you make a serious mistake equating file sharing with software piracy. Software piracy is organized duplication of software for sale -- and that's music (or DVD) piracy as well. It flourishes only in countries without much in the way of copyright protection. It doesn't require additional draconian laws.

        Meanwhile, you missed the real point of my article, which is that after a period of possible disruption, some form of publishing infrastructure will inevitably arise again, leading to opportunities for profit. If the music companies and artists fight that evolution, they will be left out. If they embrace it, they can be the ones to leverage the new medium.
        • not really
          2003-04-29 04:39:17  jwenting [View]

          I hope you are right about the industry being able to survive in the long run in an economic system where filesharing as it is today is an accepted phenomenon by that industry, but I have serious doubts.

          There have been several initiatives to sell MP3 or other music files over the internet by record companies, AFAIK none have been successful.
          Here in the Netherlands a chain of music stores last year (or maybe 2001) started a largescale pilot together with record companies where people could assemble their own CDs with a selection of music (current and older) and have it burned for them in the store (or order online and have it delivered to their door), which goes a long way towards destroying the claim of "I do it only to see if I like the artist before going out and buying an album", yet the piracy of music (both largescale by people leeching music off the web and selling it and smallscale by people leeching a few CDs for their own use) has risen sharply (keeping track with both the drop in sale of CDs and the rise of the number of highspeed internet connections).

          Industry initiatives to sell music in electronic format are met with "why should I buy it if I can get it for free", not with "that's a good initiative, now I don't have to resort to pirated music anymore", despite reasonable prices (1 or so per track, a bit more for physical distribution).

          The problem is indeed in part the lack of industry understanding of the current technical and social-economic climate, I don't deny that.
          But in large part the problem is more about the lack of respect among the averate end-user for the intellectual rights of others (coming at the same time as a marked drop in the respect for physical ownership of items).
          The industry embracing new technologies won't cure that, and unless means can be found to both combat the illegal use of those technologies and protect the legal use the embracing of those techs will likely backfire.
          • Tim O'Reilly photo not really
            2003-04-29 12:02:26  Tim O'Reilly | O'Reilly AuthorO'Reilly Blogger [View]

            I don't think that 1 per track is a reasonable price Evidence from markets like cable television show that subscription packages are more attractive than pay per view. What I've always wanted to see in a music service is a basic service with lots of current content (equivalent to radio, just as basic cable is equivalent to broadcast television) with "all you can eat by genre" premium packages.

            According to George Riemann's analysis of RIAA figures, at the peak in the year 2000, the music industry sold something like 900 million CDs at an average list price of $14. But remember all the intermediaries in the channel and the discounts given to those intermediaries. If discounts are anything like they are in the book business, this would suggest that the RIAA members themselves took in something like $6 billion (900 million times $14 times a 50% discount). That is somewhat less than the revenue that you'd get from about 1/3 of Kazaa's 230 million users paying $9.95 a month for unlimited legal downloading of high quality copies. And while it may seem unlikely now, I sincerely believe that a legitimate high quality product at the right price (which we haven't yet seen) will drive out the user file sharing services.
            • not really
              2003-07-28 15:14:37  anonymous2 [View]

              I was thinking that perhaps there are some differences between music and television and the way people interact with them that you didn't consider.
              1) People sit down and watch TV. Because Music is only an auditory experience, many people listen to music while doing other things (such as working etc). Most people do not interact with TV in the same way. This may be completely irrelevant, but I think most people feel an individual song might not be worth as much as an entire movie, and this effects how much they'd be willing to pay for a subscription service.

              2) There is a difference between on-demand and broadcast. TV Cable and Radio are both broadcast.. the schedule is not controlled by the user.. People are less willing to pay-per-view when they cannot control when their enjoyment takes place. Contrast this with Video store rentals and purchased (to own) content which are enjoyed at the users whim. People are happy to pay-per-view when they can control the time of enjoyment.

              Also - don't forget that there's no expiration period on file-sharing. You download it and you've got it till you delete it. It's not like radio, which we have internet versions of already.
              • not really
                2003-09-10 12:24:40  anonymous2 [View]

                I think that you're missing the big picture here. The music industry does not necessarily face a threat to the sales of its music across the board - only a threat to the sales of its music promoted under the current marketing scheme. It is way too expensive - utilizing today's marketing model - for the industry to equally promote all of the bands that it signs, especially if those bands REALLY DO represent a wide range of original and eclectic musical tastes. Personally, I'm a little sick of their marketing scheme. This is what they do (and all of the time): they sign a big name that they think that they can sell (Brittany Spears) and promote this name till the cows come home. I mean, they just throw so much money at this name that it's a surprise that their big name artist doesn't drown in it. And then, rather than doing this for every artist, they sign a bunch of other similar and smaller name artists that can ride on the bigger name's coattails. This practice is becoming more and more prevalent. Do you really wonder why music sales have declined? I mean, have you actually listened to some of the music that is featured in the bigger music stores? It all really sucks. It is all bland, unoriginal, and lacking in meaning. I am a very avid file-trader, but I also buy plenty of music. The only reason I download songs is because I like new stuff. I have discovered many bands by listening to my local (and only one left) public radio station and hearing something I like. I then listen closer for the name of the artist of the song. When I get home I plug these factors into Kazaa and download a few of their songs. When I find that I like most of it, I (usually because I can't find them in a local store) log onto Amazon or something similar and buy the disc. That is how it is done. If the music industry could sign some better artists they may not have this problem.
            • not really
              2003-06-11 00:43:26  anonymous2 [View]


              It's great to see you participating in these threads. Your defense of article is as eloquent as the article itself. I'm excited to see someone with your reputation and inside knowledge of the publishing industry commenting on these issues!