Jan 19, 2012

Dreams in Digital

A discussion about the premise of Copyright, IP and Artificial Scarcity #SecondLife


The premise of Artificial Scarcity is, at the core, flawed at best and woefully inadequate at worst in the context of the digital age. It is no secret that copyright and intellectual property is gravely threatened by the digital culture we live in today, and increasingly so at an alarming rate of advancement. Such is the nature of the Internet to effectively circumvent censorship and treat all attempts to censor as damage and route around it.






After all, the Internet is a digital system that was at its very core designed to withstand a nuclear war and come out relatively unscathed.


What is most disconcerting is not that the Internet itself is nearly impervious to the worst attempts of censorship, but that the paradigms that fostered the creation of this system are no longer relevant to the situation at hand. Worse, still, is that this understanding of distribution of materials and information in the digital age is entirely counterproductive to the existing paradigms which create these media forms.


I can give a quick lesson on the past ten years or so of innovation in this digital culture, but I’m fairly certain most of us already know the drill. Peer2Peer came about in systems like Napster, and the copyright and IP industry lost their nut trying to kill it. All that managed to do was throw fuel on the fire, leading to more advanced networks of distribution and even after those legal battles ensued – first against the networks (which by law should have been protected under safe harbor) but later against individuals as young as twelve years old and as old as your dear grandmother in what amounted to a legal paperstorm.


Astronomical fines and penalties, legal cases that no individual could possibly afford to protect themselves against, and what turned out to be further fuel on the fire of piracy in the form of the invention of Bittorrent.


Clearly the attempted enforcement of artificial scarcity within the confines of a system that does not acknowledge scarcity at all is likely to lose, or make the problem worse.


There are very interesting insights from people like Jaron Lanier who believe that artificial scarcity is a necessity in order to give digital experience value and meaning again, but I will have to disagree with his assertion (at least in part). When it comes to Jaron, I rarely disagree with his vision – but this is one of those topics where I have to respectfully shake my head.


It’s called artificial scarcity for a reason, and that reason is because it is an artificial construct in a system specifically designed without scarcity in the form of digital media in all forms. When music was simply on CDs, there was natural scarcity in the availability of the content in physical form, but in the digital world it doesn’t cost anything to copy data. There is no physical cost in duplication, and the very least of the costs is relegated to the production of the original media.


But that’s where the costs really end. Unlike pre-digital days, the costs no longer carry over past the production cycle, and such things as marketing and distribution are freely available, if not exponentially so and for free. Even the production cycle has a diminishing cost, as we can see with DJs, Mashups and Youtube.


Nobody has to pay a distribution center to get airplay on the radio any longer, or produce physical compact discs for the record store shelves. Terrestrial radio airplay isn’t as important as it used to be in the face of countless internet radio stations, satellite radio subscriptions and more.


This is the dilemma.


It’s a matter of old school thinking versus new age. In a world that became accustomed to the natural scarcity of products, and literally based their entire business model on that natural scarcity and the control of the distribution channels from start to finish, it must be terrifying to suddenly lose that control – and so we see a constant battle between copyright and IP holders (RIAA & MPAA) and the “Pirates”, culminating in toxic legislation such as SOPA and PIPA, as well as the attempt of leveraging $75 Trillion dollar fines (RIAA vs Limewire).


This isn’t a new problem, however. This goes back to the printing press itself, wherein the same arguments were leveraged and fought tooth and nail. It carried on further with the invention of BetaMax and VHS, the Cassette Tape, Blank CD Media, and the MP3 Player itself (Roxio), and even into the right to use the MP3 Format altogether (Thanks, Fraunhofer, for the legal battles).


The thing about this history is – no matter how much we cry and complain about the damages that a new technology will bring to an industry in the form of piracy, those fears never seem to materialize. Even more interesting is the seemingly opposite effect that piracy has had on the music and film industry, with the record profits of those industries plain as day despite their constant arguments that piracy is hurting the industry and costing them hundreds of billions of dollars a year. Uproxx provides an excellent insight to this by giving an overview to the situation (further reading)


Pirates are your friends (Yarr!)


Yes, I just opened up a massive can of worms with this statement, but it had to be said. Given the industry of intellectual property and copyright, it can be shown time and again that the greatest harm to the copyright and IP industry are themselves.


Let’s break this down logically…


Modern piracy is simply the enactment of a highly efficient and targeted distribution system without any centralized control or overhead of cost. We can’t necessarily claim that piracy is stealing, because theft is the removal of the original instead of making a copy. Piracy is copying, plain and simple. The only difference today versus prior to the Internet is that there was a physical component which acted as the barrier to entry – Cassette tapes, blank CDs, VHS tapes, etc. and those media forms came with an additional blank media tax to compensate for perceived losses to the industry. The only reason that piracy is equated to theft is because of the false assertion that every file downloaded is automatically a lost sale.


If we were paying attention, we’ve seen this claim for as long as these industries existed – case in point:






Clearly this turned out not to be true, as the recording industry continued to make record profits and even today they continue to post profit gains and not losses. The only losses they are claiming are entirely imaginary losses based on fabrication.


We could make a convoluted claim that even the unauthorized copying is costing the owners of the copyright and IP the premise of future revenue which is entirely estimated, and based on fuck all, as seen with the RIAA statement that they believed Limewire owed in damages an amount that exceeded all the money in the world. The RIAA and MPAA can spew out all the make believe numbers they want, but it’s not based on anything substantial. It’s a lot like me saying that because people read this blog I estimate the damages from lost revenue to be 400 trillion dollars a year. I’m just pulling a number out of my ass, and totally out of context to the total situation at hand, much like the RIAA and MPAA does regularly.


Zen and the Art of Piracy


So how do we effectively stop piracy? I’m the first to proclaim that protection of intellectual property and copyright is something that needs to happen – despite my advocacy of piracy in the same breath. It’s really about looking at the bigger picture and actually taking the time to see the widespread implications past narrow interests of the old paradigm.





For instance, think about all the money spent in the promotion and distribution of media by the RIAA and MPAA. More specifically, let’s look at the process for the RIAA wherein they spend an astronomical amount of money to A&R representatives in order to essentially buy a spot on the radio to play a new single for promoting an artist. This is a regular occurrence, and it baffles me.


When I was younger, my highschool actually had its own radio station and radio communications was one of the classes offered. Of course, I was enrolled in that class and managed straight A’s (45 days away from having my radio communications license to work as an on-air personality). Even then, the process baffled me due to the no solicitation rules. The station manager would have us regularly listening to new music coming in, and checking to see if it violated any of the rules, but that list of music always came from some A&R representing a label, whereas local bands trying to get heard would be routinely turned down. As DJs, our hands were pretty tied, as the station manager would be approving the playlist and helping to compile them.


Even if we were approving music on the list or disapproving it, most of the time that didn’t even matter. Those songs would be inexplicably stricken from the list when we approved them, or oddly added to the playlist when we as DJs decided the music was utter crap by consensus.


It more or less came down to who was willing to pay more money to get a band heard and played, and not necessarily based on merit. 


The apparent point of this process is to get an artist’s material heard by a large population of listeners, and they treat this process as a marketing expense, yet if we turn the tables and look at piracy – this is exactly the sort of distribution and outcome that Bittorrent has without the overhead. Interestingly enough, piracy is based entirely on merit and not who has the most money or connections for marketing and distribution – a stark contrast to how it used to work. Today, that local band (Garageland) wouldn’t have to be bending over backwards to get their music heard, and instead they’d simply make an official website for the band and distribute their own music via Bittorrent as a marketing loss. Those local bands would simply exist on their own merit and ability – which I always felt was how things were supposed to be.


So let’s call this what it is – it’s the inability of the industry to differentiate between personal piracy and commercial piracy. Commercial piracy is the problem and by all means should be fought or at least intelligently channeled, whereas Personal Piracy should actually be encouraged to no end.


The moment we stop trying to lump together personal piracy and commercial piracy, the faster we realize the benefits that personal piracy gives us. This idea that personal piracy costs the media industry hundreds of billions a year is absurd (as absurd as the assertion that it cost the RIAA $75 Trillion dollars in damages from Limewire) – because if anything it is actually increasing the revenues through widespread proliferation of new media at a cost that is exactly zero to the distribution channel (and subsequently to the media holders). What scares them the most is that media is now based on the idea of a meritocracy and not who has the most money or connections.


Personal piracy is good as long as we’re willing to call it what it is in proper context. The best course of action for the media industry going forward is to literally, and without hesitation, pirate their own media and make it available at a high quality to the masses.






Why on earth would I suggest this? I mean, I just offered the equivalent to the digital media apocalypse as the solution to the digital media apocalypse.


Natural Scarcity


This brings us back the idea of artificial scarcity versus natural scarcity. Natural scarcity was the model that the media industry was originally built on and it worked absolute wonders. It wasn’t until the introduction of mass reproduced media that they began to panic and invent methods of artificial scarcity to sustain a model that is based on natural scarcity. Natural scarcity was the sold out concert you couldn’t get tickets to, artificial scarcity is deliberately limiting the amount of CD’s pressed to inflate worth arbitrarily or (in the digital age) creating convoluted DRM schemes to restrict the usage rights of agnostic digital media.


The future of media is authentic experience. Natural scarcity is something you cannot reproduce in a digital form, and thus holds intrinsic value over time. You can film a concert, and maybe sell the t-shirts online, but you can’t pirate the actual unique experience of actually having been there. You can create DRM and other artificial scarcity methods to continue propping up your old business models, or attempt to force the old business methodologies on new media, but the sad truth is – artificial scarcity in an environment built without scarcity is a costly and failed endeavor.


In the movie industry, I’ll just cite all the DRM and Ultra-Violet Digital lockers having no effect on Bittorrent distribution except to make it more popular. However, I’d also state that all the unskippable garbage and advertisements on those DVDs are also a major factor, just like advertisements in between and during shows on television send people off to pirate the more authentic experience of the DVD version off of Bittorrent.


Physical goods and actual experiences that are unique are the new media paradigm to embrace, while the old media paradigm (currently being propped up desperately by artificial scarcity tactics) should be relegated to marketing channels in order to promote the natural scarcity of unique experiences and sales. Sure there are people out in the parking lots selling knock-off t-shirts for $5 out of their trunks, but the only reason they manage to make a killing is because you’re charging $10 for a cup of beer, $5 for a hotdog and $40 for a t-shirt inside. The problem isn’t the counterfeiters, it’s your inflated sense of worth and douchbaggery to the honest customers and fanbase.


Instead of writing piracy off as a revenue loss, we should be saying it is a marketing and proliferation surplus without additional cost. We’re actually saving money through personal piracy, if we’d actually figure out how to embrace it and wean ourselves off the artificial scarcity paradigm, we’d see that it’s actually helping far more than it hurts. As far as counterfeiters – actually curtailing them has less to do with trying to stop them and more to do with stopping yourself.


Telling a Story


Remember when VH1 had the Storytellers concerts? Only a certain amount of people could attend those intimate concerts, and there was far more natural scarcity for the experience than listening to it in MP3 or watching the recorded show on VH1. There’s a level of abstraction there, and anyone who watched those VH1 Storyteller episodes has at least once thought to themselves how amazing it must have been to actually have been there.



Authentic experience is the new reality of media | Greenday at Storytellers – Extraordinary Girl



Hopefully you’re starting to get the bigger picture now. VH1 Storytellers was (and is) a unique experience, an authentic experience, and not easily reproduced. It had intrinsic value – far more than the DVD version or the MP3 Soundtrack. In this manner, we foster the piracy of the VH1 Storytellers albums online, and even offer the videos online without restrictions (but maybe advertising is alright). The end result is you are utilizing the piracy aspect of a lesser experience in order to strengthen the value of the natural scarcity of a greater experience. You can always offer a pay what you want model as well, but you should never be under the delusion that it won’t be pirated for free after a short period of time.


If you want to offset that personal piracy as marketing loss, sit down and figure out how to charge for live streaming access to that experience, as well as the much more valuable experience of the tickets to attend that experience in person (since it’s a limited audience). These limited experiences should be more available as the revenue source, creating a value based on natural scarcity and access instead of artificial scarcity. The more authentic the experience, the more it is actually worth.


It’s always much better to attend a Broadway show than to watch it online, but if you were streaming it online for free, you’d drastically raise awareness (the point of marketing) and increase the demand for the personal experience of actually attending that play in person as an authentic experience.


The other benefit to pirating your own media is that you are immediately sabotaging the bigger threat of commercial pirates who are trying to sell the media illegally. Why would anyone buy what they can get for free? More importantly, what is left to pirate commercially is something that cannot be pirated at all – the authentic experience. Authentic experience creates loyal customers – which is another lesson for Social Media.


I actually applaud Deadmau5 in this context for the way one of his recent concerts was handled – it was streamed live on Youtube for the first hour (maybe half hour) as a preview and then turned into a pay-per-view sort of experience. However, this doesn’t entirely grasp the full potential of unique experience or utilize it to the fullest advantage. It’s a good start, but could definitely have been done better.


Sure, the ideal here for the limited access to a live streaming concert is still considered artificial scarcity, but it is based on natural scarcity at the root and not just arbitrarily applied as we normally see. For instance, in the context of the Deadmau5 concert, it would have been better to stream the entire concert for free in SD quality and make the HD stream a pay per view stream. The first half hour would have been an HD preview of the live concert, switching to the SD quality free stream afterward unless you had already paid for the stream access in advance.


Again, we’re going on the concept of pirating your own media for your own benefit, and writing it off as marketing expenses instead of lost revenue through piracy. It’s a balance between marketing and natural scarcity, creating additional value in a digital product or unique experience.


Who got this brilliantly right?




This is how you pirate your own music for marketing benefit. Take note, media industry.



Even better would have been if those concerts were streamed using not just high definition audio, but a Binaural audio stream for spatial audio fidelity. One step further would have been to offer that binaural stream in conjunction with 360 degree video so the viewers could pan around in real time with full spatial audio.


This is a massive step up from the lower definition of a simple SD stream for free, and something that constitutes a unique experience worth more money to the fans. The more authentic the experience, the more value it has in a culture where the lowest common denominator is mass distributed media.


And that’s the point, really.


It’s not piracy we should be afraid of, but the clear indication that non-authentic experience is nearly worthless in the digital age. It is this understanding that should be shaping our decisions going forward concerning digital media, copyright and intellectual property. Authentic experience has value, and that value can be used as marketing to sell more authentic experiences with increasing tangible value. The very fact that this point is being ignored on the whole is far more troubling than the specter of piracy.


Virtual Environments


Which brings us to the idea of virtual environments and the idea of prosumer culture. In a virtual environment where the users can create anything they want, it is no surprise that they more often choose to create what is familiar – as in brands that exist to them in real life. Companies have done an excellent job in marketing their brands into ubiquity and pop culture, but seem to be utterly confused when the ultimate result of that comes to pass.


Of course people want Coca-Cola in a virtual world and any number of other familiar brands, and they aren’t in a position to have to wait until such time as those brand owners decide to give it to them. This creates a conflict of interest, because we’re trying to apply the artificial scarcity rule to a virtual environment that (much like the Internet) has no such constraint of scarcity.


The current accepted practice is to file DMCA notices and have the offending content removed, which is a direct violation of the Streisand Effect, having the exact opposite of the intended outcome. Agnostically, we look at media overall – whether it is an asset or an MP3, and we should already know that it’s not in our best interest to call it piracy, but instead call it marketing.


In the end, what is more important to the end-user is authentic experience. As long as you control the authentic experiences, the non-authentic experiences of lesser digital value should serve as marketing in order to support the authentic experiences.


Case in point – let’s go back to Coca-Cola.


The proliferation of unlicensed digital representations of branded merchandise in a virtual environment like Second Life constitute the lower quality and less authentic experience, and as such act as the user generated marketing and advertising for the authentic experiences which they will gladly pay for in real life. Accordingly, the Coca-Cola merchandise in a virtual environment, generated by the users themselves is the best viral marketing the company could ever hope for, because it creates further brand loyalty (and is in fact a display of that loyalty) which in turn leads to the authentic experience of actually drinking Coca-Cola.


Even if those virtual representations are being bought and sold, it is in the best interest not to place that into the category of commercial piracy in that the users themselves are showing a willingness to pay to be advertised to on a wider basis than you could ever hope to achieve had you spent a few millions dollars on a 30 second Superbowl ad.


Does this necessarily mean that you should be relinquishing your right to the brand? By no means! It’s more about how you choose to handle that brand in context to the environment of experience. Much like Youtube offers a ContentID matching system for videos, virtual environments should offer something similar – wherein a ContentID match wouldn’t necessarily mean the content is removed, but instead simply labeled as being owned by a certain content or brand owner.


This follows the general rule of sanctioned personal piracy as marketing. If a content creator exceeds a certain amount of money in a virtual world from the sales of a branded item, then it should trigger an automatic percentage paid to the brand owner as compensation (a virtual item license fee).


In this manner, the brand owners actually make some money on what normally is seen as purely a piracy loss, instead treating it as pure marketing and licensing gain across the board. It also costs a lot less in legal fees, DMCA and litigation because you aren’t in a mindset to try and stop the actions but instead finding ways to foster it to the extreme for your own (and the prosumers) total benefit.


The end goal should always be promoting authentic experiences and fostering additional value in things which cannot be pirated, through encouraging personal piracy and brand loyalty to the extreme.


This doesn’t mean, however, that DMCA takedown requests aren’t needed. In context, it should be treated as the absolute last resort instead of the first. Explore all of our options first before we invoke censorship as a solution, because the potential for backlash with censorship is far more damaging than trying to work within the system of digital experience and organic community.


1 comment:

  1. Perma-linked at Netpolitik, rt. sidebar, "Outside posts of interest"