Books, culture, fishing, and other games

February 04, 2004

Dinosaurs and other ineconomies of scale

Work sure can interfere with other things. Writing for work interferes with blogging more than most activities, at least for me. I use up all my "must write" energy on reports that no one reads. Working on a crash plan for a certification and accreditation of a system that is overdue for such by more than three months. And that's secondary to the actual job I was brought in for, though it sits squarely on the critical path for that job too. And the template documents for the process are still in progress, three years after the initial C&A, so I get to make up things somewhat on the fly. Somewhat, I say, because there are laws governing (a dozen or so, mostly vague), OMB and OIG directives and guidance, and various somewhat completed drafts of proposed processes.

"That's what life is like on the bleeding edge, Dan," someone might say. I'd have to fire back, "Um, this is government, it's not the bleeding edge. More like a bleeding rut."

But what I meant to write about is not that. My sister has found this blog, and left a comment, which set me off on an email... not quite a rant, nor a flame, but a mildly warm commentary, which had me in the frame of mind to slap around the situation here a bit before I could settle down. There, I'm okay now. I think.

A follow up to my last post: today's SANS had another note on the ongoing battles between the film & recording industry and the various publishers of peer-to-peer software. The c/net News article reports on the upcoming hearing in a Federal appeals court that may determine the fate of peer-to-peer file-sharing software.

But the implications are much wider. The principle to be ruled on is whether a manufacturer of a new technology (or an existing one) is responsible for the illegal actions of users. If the product has nothing but illegal uses, I can understand (possibly) holding the manufacturer liable. But this case, and others, deal with things that have legal and proper uses.

This case seems to me to have a lot in common with the gun suits of the not distant past (guns were used in crimes, so let's hold the gun manufacturers responsible!) and the newer junk-food suits. Aside from the attitude that those who commit the misdeeds are victims of some commercial conspiracy that compells them to act irresponsibly, improperly and possibly illegally, there's also a very Edwardian (as in the current, as of this moment, Presidential candidate) pragmatism present that says "sue the people that have the money, that's what pays." You can't get much in damages from the 12-year-old who uses file-sharing software to burn her own CD of the latest Brittney squeal. You can get more from a software company that has a real business model, as one commentor notes, and is probably pulling in some real revenues, or at least that has significant capital invested by trusting shareholders.

Another thing the gun suits and the record & film suits have in common: both are attempts to pull a win out of a loss. The gun-control crowd is losing the war (they have no guns, of course they're losing the war!). The evidence is rolling in that societies that have guns have less crime. Some of the past "evidence" of the gun-control lobby that proved the contrary has been shown not only to be false, but to be, as the saying puts it, "damned lies." So the gun-control faction got creative and decided to sue and see if they could convince a limited, and captive, jury pool to enforce their wishes against what is clearly majority wishes.

You do the exercise. Wait, that's my job. The film and record industry have a badly broken business model. They refuse to face up to that. They have been living as middlemen between the artists and consumers, very well too, for decades, nearly a century. Now technology has appeared (in fact, they fought tape recorders and Beta/VHS and other technologies too) that makes their relevance much less. There just isn't as much need for their service as there was in the past, or as they managed to convince us there was. Now, the current generation of consumers is savvy enough to know it IS easier to just grab the product they want, a pure information product that translates nicely into the digital space surrounding the internet, and transfer that onto any other medium they like using off-the-shelf technology they have anyway.

The problem with that, of course, is that it's illegal. But it's too easy and too cost-effective, from the consumer standpoint, and too hard to enforce as a practical matter, so goverment is not anxious to tackle the challenge. It's the drug problem multiplied one hundred times over, except the "harms" to society are very localized. Artists don't get their royalties. Oh, and the fat middlemen, who have always skimped as much as they could manage on those royalties are cut out of the process and their livelihood and existence is put in jeopardy.

So, rather than face reality and changing technology (on which they initially built their businesses and their business models) the film & recording industries are fighting to stop progress by preventing access to certain technologies which can be (and, admittedly, are being) used to accomplish these illegal ends.

Not that our 12-year-old pirate can't buy a DVD, crack the copy protection, burn a dozen copies and give them all to her friends.

The root cause to this issue is that the market has determined there is a need that is not being met. Evolving technology enables individuals to meet their own needs better, so they bypass the existing system. It is obsolete. It must either adapt, or be replaced by a new system.

Netflix took up the challenge. Others are too. They are looking for ways to profit from using the new technologies in such a way that meets a demand.

But the behemoths, the dinosaurs, the "big" companies are fighting to prevent their own evolution. They want things to remain the way they were. They want to monopolize artists, profit on all parts of the artistic and marketing process, charge a price that allows extravagances and permits them control, and deliver in a way and at a time that pleases them and serves their bottom line, not the best interests of their consumers (as the current market situation shows).

We will soon see their bones in museums beside old Rex. They have big teeth, true, but with that brain that wags their tail being in control, they are doomed.

It's not a matter of if, it's simply when.

Posted by dan at February 4, 2004 02:24 PM | TrackBack

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