Capitalism is an economic system built on greed; this is not a particularly bad thing, especially when some limited form of social conscious provides, to some degree, for those who are down on their luck or are otherwise in unfortunate situations. In addition, Americans also support their government with their hard-earned dollars – the extent to which has been debated heavily back and forth between friends, neighbors, and those participating in the political theatre since our country was incepted. At the core, every American is generating a certain amount of money that is subtracted from in numerous ways before completely belonging to them; it is our capitalistic nature to maximize this final value, whether it be by minimizing the subtractions or by maximizing the initial value so that a smaller percentage is lost. We do these while still participating in economic circles we can – we hope to live within our means and better (except for the few individuals who, for whatever their own reason, do not take this route).
In general, the quality of life in America has grown over the years, even for the poorest of us (in comparison to former generations) – that is, the poorest now are still better of than the poorest 50 years ago, and so on so forth. This has been aided for many reasons – strong public education, good infrastructure, and, most importantly, the (mostly) competitive market that drives industry forward and reduces the cost of material goods over time. This economic system favors new markets; new products tend to have the highest profit margins when successful, as few, if any, competitors exist – stereotypical examples include Microsoft’s success with the Windows operating system and Apple’s success with the iPod. Over time, however, the operating system has grown more conflicted as open source competitors have matured; iPods remain a luxury alternative to the vast selection of portable music players that can be bought for much less.
Few markets are free from this trend – commodity goods see daily rises and falls, while experience markets (such as paint balling, sporting events, concerts, etc.) have gotten increasingly expensive alongside inflation. Until recently, the music, television, and film industry also operated under these conditions; produced content, on televisions, tapes, CDs, and DVDs existed as a material good that one basically needed to purchase or rent in order to enjoy. These industries made a ton of money – think of lofty network executives, record producers, fabulously wealthy musical artists, and of course, exceptionally wealthy film stars. This is not to say everyone working or participating in these industries was making bank – there were definite casualties – but the people at the top were making, for lack of a better phrase, an obscene amount of money. This still happens in some industries; consider gas companies, whose top executives bring home millions, if not billions, of dollars in money while lowly gas attendants bring home squat (if they’re lucky) – money balloons as you go up the pay scale, simple fact.
These profit margins were, essentially, the extended version of the new market profits that exist for newly introduced products; even better for these companies was that prices fell with disinterest in a product, often accompanied with newfound interest in a new product. All they needed was a process to find, record, and publish new artists, films, or television series – excuses for excessive profit margins were padded with the expense of these different steps in production. At the end of the day, the end consumer wasn’t being charged a ridiculous some of money, but they were being charged – the industry was happy. At this point in time, there was no “acceptable” alternative to these goods.
So, the Internet came and revolutionized the world. Way back when, the Internet was slow – but still, file sharing became a pervasive, efficient, and cheap way to share music. End users found a way of acquiring something they placed little value in for free – they no longer needed to spend any money to access something they liked; and besides, they heard music for free all the time on the radio. I’m not defending piracy, but this is undeniably a fact – music, which I love, has little to no monetary value intrinsic to it. There is no commodity value. Until the Internet existed, people were forced to pay because it was the only way to get access – when the Internet came about, and Napster made it possible to get new music free-of-charge, the people of America set the value of music lower than it could possibly be imagined by record companies; zero.
The record companies, instead of adjusting to the new delivery platform they were being faced with, opted to sue infringers (which has been an overall losing battle). Instead of them creating an ecosystem for distributing music at a reduced, but acceptable price (say, $1 per song), they let Apple create iTunes and jack a ton of profits from what could have been theirs. Instead of adapting to new market conditions, an aging industry obsessed with “the old ways” clung to the prospect that they should still be making a ton of money – but in reality, there was and is no reason a top executive should make that kind of money other than, at its core, extortion of the end consumer. The record industry has been further battered by the decline in recording costs and the declining interest in music agents – the Internet provides an efficient and cheap means of distribution and studio sessions have dropped incredibly in price. The days of huge profits are gone for the record industry – it’s a shame that musicians aren’t making as much money as they used to, but it’s a result of their trade – they create a product that is instantaneously reproducible in perfect or near-perfect quality, unlike other art forms has an experience factor near zero – that is, the experience of listening (at least on a CD player) to music doesn’t justify heightened prices (this is in contrast to movies, where people still enjoy paying to go see a theatre in movies).
The television industry was hit next (faster internet speeds means larger files can be downloaded efficiently). The Internet has the potential to be cable television on steroids – watch anything on demand, whenever you want. Again, the television industry refused to grab onto the Internet as a useful tool and again let iTunes create an economic market for shows that the industry wasn’t in control of. Individual networks allow streaming of some shows, with limited episode counts and commercials, which is fine, as long as you keep on top it. The problem here, however, is not the commercials – its limited access. If I pick up a show in its second season and wonder what happened in the first, ABC doesn’t allow me to watch season one online – I have to go rent or buy the DVD. Or I can download it for free in a few minutes. Or I can provide limited profit through iTunes, since ABC didn’t create its own online market. See the problem? Instead of capturing any revenue, ABC managed to lose money by me not watching TV commercials, but they lost potential revenue from ads on their streaming website, and I ended up not buying it on iTunes anyway. (Note this is a thought experiment.) Complete failure – you would’ve thought they’d have learned from the record industry.
Now we are at a tipping point for the film industry – what will they do? They’ve already basically let Netflix set up shop where they could’ve been. Not to mention the awkward gap in time that precedes a movie’s release on DVD – if the movies available for download illegally and you want to watch something you can’t even buy, I wonder what you will do (astute readers will point out that any honorable American would wait…right). In their defense, the film industry is leveraging Netflix properly – they don’t allow a lot to get set up on Netflix’s streaming service – but they epically fail at providing their own market simply because they want to keep DVDs and BluRay thriving as long as possible. And a DVD purchase doesn’t really make sense in the end – going to the theatre costs about $13 to see the movie on a screen much bigger than the one in my living room, about $17 less than a DVD. Oh yeah, the movie is available online, for free, and near instantaneously.
Piracy is wrong – I don’t advocate it. There are diligent, hard-working people that are being “stolen” (or at least devalued*) from by pirates every day. The fact of the matter is, however, that piracy is a result of these mega-industries protecting their top dogs and failing to adapt to a changing market that is already reducing their profits – capitalism calls for a competitive market, and nothing is more competitive than free and instantaneous.
* As an aside, it should be noted that the damage a pirate does is undeterminable. Who exactly does he or she harm? One could say profits, but definitely not completely – some pirates download things they would simply otherwise not purchase. In the few cases that the RIAA has been successful with pursing, offenders have been charged an insane sum for downloading a handful of songs that are otherwise worth about $50 in record sales. Making an example is a pretty bad way to make a point. Reality.
