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The New Auteur

Independent Film in Times of the Internet

Tag Archives: Kevin Kelly

I presented a paper at ETICA 2010. The conference was on ethical considerations of emerging ICTs. Since the Internet is an information and communication technology – and kind of emerging too – I took the chance and submitted a paper. Next thing I knew is that they accepted it and I went off to Barcelona. That was in April. As I got quite some comments (especially from Kai Kimppa from the University of Turku, thanks for that) I revised the paper – until yesterday.

The paper explores ethical considerations surrounding file-sharing of digital films. I argue that, though one can come to the conclusion that illegal file-sharing is ethically questionable, it is rather the actions, or better non-actions, of the entertainment industry that are morally wrong. For the interested reader:

  • Film once was a private good; excludable and rivalrous (I had to buy a DVD/cinema ticket to watch a film. If someone else watched the DVD, I couldn’t watch it at the same time. If all cinema seats were taken, I had to wait). The Internet turned films into public goods; they are non-excludable and non-rivalrous.
  • Every public good brings with it what economists call a ‘free-rider problem’. We call it polemically ‘piracy’.
  • There are endless studies on the impact of piracy. They, of course, also contradict each other. One side argues that there is a substitution effect (every pirated copy equals a certain number of missed sales) – e.g. Siwek 2006, Oxford Economics 2009 or Rob and Waldfogel 2006. Others argue that piracy leads to a sampling effect (sharing media leads to discovery; if we like what we discovered, we are more likely to buy products of the author) – e.g. Oberholzer and Strumpf 2004, Andersen and Frenz 2007 or Blackburn 2004.
  • People seem to think that mainstream titles suffer a substitution effect while non-mainstream products experience a sampling effect.
  • Looking at Kant (Of the Injustice of Counterfeiting Books & Fundamental Principles of the Metaphysics of Morals), we can come to the conclusion that:
    1. Authors who seek recognition or impact (i.e. a maximum audience) benefit from piracy. So do authors who have commercial interests and experience a sampling effect.
    2. Authors who seek financial profits but suffer a substitution effect are harmed by piracy.
    3. Audience members clearly benefit from piracy since they have access to an abundance of films.
    4. With piracy being a universal law (i.e. everybody doing it) – which is one of Kant’s tests for morally right behavior – audiences would profit as they have access to all films. However, those films that seek maximum profits but suffer a substitution effect will, most likely, vanish. Since those are the films we are, judged by cinema attendance, most interested in, audience will also suffer.
    5. Ergo: Piracy has good sides (access, benefiting authors who seek recognition or impact or experience a sampling effect), but one bad side (substitution effect).
    6. It would thus be morally right to find models that try to prevent the negative effects of piracy without eliminating the positive effects.
  • One economic solution to the free-rider problem is to turn public goods into club goods. Coase argued that if people who benefit from a product would easily find each other, they would regulate the market output. Doctorow, Cuban, Kelly (among others) hence suggest a one-stop shop. This is a place were all films are available. Such a one-stop shop combines the advantages of traditional sales (reliable, legal, metadata, fast, easy to use) with those of file-sharing (variety of content).
  • Chris Anderson and Kevin Kelly suggest to give things away for free and earn with immediacy, personalization, interpretation, authenticity, accessibility, embodiment, patronage, findability, freemium, advertising, cross-subsidies (all things that cannot be copied)
  • I believe that both strategies, Free and a One-Stop Shop, mimic the advantages of file-sharing – i.e. they would allow for a bigger audience (mainly due to simple availability of titles and ease to find them) and thus for more recognition and impact as well as for a better chance to experience a sampling effect. At the same time, they offer a legal alternative to file-sharing and, with it, a way to earn money, hence helping to overcome the substitution effect.
  • Those solutions are also in line with other ethical principles like personal benefit, social benefit, benevolence, paternalism, harm, honesty, autonomy and lawfulness.
  • But, and here lies the problem, Free and/or a One-Stop Shop can only be implemented on a universal scale if the film industry sets it up. Only they have the market power to do so. But they don’t seem to want it and, instead, rather protect old revenue streams and earn money with law suits against pirates.
  • As long as the film industry does not implement alternative distribution strategies (some that are more in line with 21st century media and consumer behavior), they will be ethically responsible for illegal file-sharing. Their inaction causes what they claim destroys them.

So there we go. It is quite hard to summarize a complicated topic like this within a few bullet points. That’s why I attached the whole revised paper here; just in case.

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A week ago, I was trying to write a chapter on culture as a commodity and all the things concerning payment for creative products. What always struck me as a bit weird was that nearly everyone takes it for granted to be paid for their creations. This is something I don’t understand. I would like to teach much more, but the university doesn’t seem to have any vacancies. So should I just teach without getting paid? Maybe. As a filmmaker, I want to make a film. So I will. But why do I expect the world to be waiting for my film and people line up to pay for it?

A lot of the criticism of Chris Anderson’s (not so new anymore) book Free (of which there is a lot: Shooting People members, Malcom Gladwell, John Taplin and in the comments of this Techdirt post) is this weird sense of expecting to be paid for something that nobody asked for, paired with sticking to old, and possibly outdated, business models of the analogue world.

I do think that Chris Anderson made some valid observations and that there are business models around giving products away for free. And his argument is backed up by simple economics:

  • Competition in a free market always drives the price of a product to its marginal costs.
  • Infinite goods will have marginal costs of almost zero and will thus be available for free.
  • Scarce goods, on the other hand, can be sold for a price above their marginal costs.
  • When giving things away for free, those things stop generating income. They can no longer be considered a product. But they become a free resource for other products, which then create a new market.

All of this is nicely laid out in Michael Mesnik’s post on Techdirt – and discussed ad nauseam in the comments.

I think, most of the criticism is motivated by protectionism of old businesses. But the internet puts artists into a new environment. Digital products are no longer scarce – they are abundant. Whereas before the internet, access to films was restricted through cinema admission, TV license or DVD rental/purchase and owning a copy/seat meant that someone else couldn’t own this copy/seat, today those limitations do not apply anymore. What once was a private good (excludable and rivalrous) is now a public good (non-excludable and non-rivalrous). Films will never ever again be private goods – if copyright protections will start to work (or if people decide to follow legal offerings like iTunes), films might become club goods; at best. But the times of a film being a private good are over.

This now doesn’t mean that people will not pay for films anymore. They will; just as people pay for other public goods (train fares, NHS in the UK). But there will also be free-riders – pirates.

A friend of mine is a booker and publisher for independent music. He clearly profits from advertising shows and bands online – for free. Those bands are able to play live and even earn some money from their shows (though not enough to make a living). But still he complains about the internet and piracy. Nobody buys CDs anymore. Well that might be true. But on the other hand, marketing is free. It is much easier for smaller bands to attract fans and to get known.

That all goes together with people complaining about Anderson’s Free. What is it that we want? Do we want an internet that allows us to communicate freely and widely or do we want a pre-internet world where access is scarce and expensive? I would rather like people to see the internet as a chance and embrace the new opportunities than complaining about some free-riders. And if those pirates are such a big problem, then maybe we should follow the suggestions of Chris Anderson, Brian Newman or Kevin Kelly, who seems to have spoken about this first.

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