The simple thing why copyright industry pushes ACTA, SOPA and similar laws is obvious: they have problems with their business. And the problem is simple: they can’t earn enough. They blame piracy for their problems, but actually, piracy isn’t a problem for them. Piracy is only a symptom. The real problem is dramatically decreased costs of reproduction.
It is a big paradox: when your costs decrease dramatically, you can’t do your business in the same way you did before. When you need to change your business process, that will cost you money. But you can’t get money because of decreased costs. At first look this seems illogical, because decreased costs seem to increase your profit, but that’s not the case. The paradox is that when your costs decrease, your profits decrease too. So, get a look at the roots of this problem.
Let’s say that costs of production and distribution is 10 bucks per CD. You then add 20% margin (2 bucks) and sell CD for 12 bucks. So your profit is 2 bucks per CD. You can’t change that margin freely: for example, when you try to increase your profit for 10 times, you get lots of competitors and they bring you down. And authors will flee away to those competitors who pay more. When you try to get less profit, you suffer from shortage of funds. Your profit isn’t directly related to your needs, but obviously related to prime costs.
Let’s say now, that you have produced 10,000 CDs and sold them. Your costs were 100,000 bucks, but you had covered them and got 20,000 bucks profit. This seems well to me. But now, try to calculate similar business in the internets. Let say, you sell 10,000 online albums. Your costs will be around 100 bucks for the distribution of the same amount of albums. And what happens when you try to increase your margin? Yes, there are lots of competitors who bring you down. So, your profit will be 20 bucks instead of 20 thousand.
And remember that not only distribution and production costs reduced drastically. With computers, recording costs dropped too: everybody can have his very own studio at home. Entry barriers for new authors are crashing down, that means increased competition too. Despite that, copyright industry try to increase their margins while reducing costs, but that is temporary process. For example, profits of Apple Music store skyrocketed several years ago, but competitors are already on the way.
That’s the point why all those lobbyists of antipiracy laws are flooding governments with their shit. That’s the reason why they put so much of their efforts. That’s the reason why they want censorship. And that’s the reason why they want to close the internet. You get 1000 times less profit when you do business in the internet. This is because the production and distribution costs are lower up to 1000 times.
The problem of copyright industry isn’t piracy. The problem is decreased production costs, competition and industry’s inability to change. They’re simply losers who fail. They’re losing market because of changing World.
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I’d like to thank Mister Galva Žmogų Puošia from Lithuanian blog Commonsense.lt for correcting my terrible mistakes I made here. By the way, he is lobbyist of Lithuanian bloggers and him and Skirmantas Tumelis are pushing law against ACTA. I hope they will win.
February 12th, 2012 on 22:29
Yeah baby! Bloggers are doing policy! Entry barriers for smart not corrupted politics are also melting down and these are melted down with clarity, which provides us new technologies and new phenomena (like wikileaks).
February 12th, 2012 on 22:34
Congratulations for Lithuanian blogging guru hamster Rokshkis Rabinovich with first own written English article published on the internet. I hope that with your sharp insights and talent to write you will conquer hearts and brains of all active internet community. That’s our Rokishkis hate it or love it !
February 12th, 2012 on 22:37
Actually, my brain is small and my cranium is empty (there is food to be placed), but anyway thank you for your wishes 🙂
February 14th, 2012 on 00:43
interesting approach – oligopoly vs perfect competition. I think this view, could be one of the a strongest cards against publishers with “old world view”.
February 14th, 2012 on 19:30
Rokiškis, you made the absolutely childish assumption that there are possible alternative choices in the recording industry. If a capitalist such as me owns the rights to the latest Whitney Houston album, someone else can’t just offer to sell that album for less (actually, he can’t even sell that album at all!). Ergo, all your other blabbering about decreased margins is a big load of mumbo-jumbo. I can add a margin of however much I want, and the decreased costs of distribution is a godsend, rather than a curse.
February 15th, 2012 on 00:16
No, you made few mistakes (and you’re not capitalist, don’t be childish with your tries to parody – I have banhammer and don’t understand jokes).
The first mistake is thinking that Whitney Houston hadn’t competitors and their album means monopoly by itself. The second is that some copyright monopoly should be permitted keeping her rights. The third mistake is thinking that after dropping of costs there would be no competitor who can make better offer to Whitney, directly by decreasing his margins.
Because you pretend to parody capitalism, you should know some economic principles. Relation between costs and profits is one of basic things when you talk anything about free market rules.
February 14th, 2012 on 21:44
Bloody great info, seriously looks like I knew this in fragments and now I know whole thing, cool man, thank you…I’m still catholic, and steeling is the sin…isn’t it?
February 15th, 2012 on 00:19
Dear Algirdas, as a catholic, you should know the story about Jesus. Jesus had copied and multiplied bread long before any talks about piracy 🙂
Is multiplying stealing? Are you christian, and catholic? Really? 🙂