The Demise Of Intellectual Property

Three years ago I revealed a book of short stories in Israel. The publishing house belongs to Israel's leading (and exceedingly wealthy) newspaper. I signed a contract that stated that I am entitled to receive eight% of the income from the sales of the book when commissions payable to distributors, shops, etc. A few months later (1997), I won the coveted Prize of the Ministry of Education (for brief prose). The prize money (a few thousand DMs) was snatched by the publishing house on the legal grounds that every one the cash generated right belongs to them as a result of they own the copyright.

In the mythology generated by capitalism to pacify the plenty, the myth of intellectual property stands out. It goes like this: if the rights to intellectual property were not defined and enforced, business entrepreneurs would not have taken on the risks related to publishing books, recording records, and preparing multimedia products. Thence, creative individuals can have suffered as a result of they can have found no manner to form their works accessible to the public. Ultimately, it is the general public that pays the price of piracy, goes the refrain.

But this can be factually untrue. Within the USA there's a terribly limited group of authors who truly live by their pen. Solely choose musicians eke out a living from their noisy vocation (most of them rock stars who own their labels - George Michael had to fight Sony to try to to just that) and terribly few actors come shut to deriving subsistence level income from their profession. All these will not be thought of as largely creative people. Forced to defend their intellectual property rights and the interests of Huge Money, Madonna, Michael Jackson, Schwarzenegger and Grisham are businessmen at least as abundant as they're artists.

Economically and rationally, we tend to should expect that the more expensive a work of art is to produce and therefore the narrower its market - the a lot of stressed its intellectual property rights.

Contemplate a publishing house.

A book that prices fifty,000 DM to produce with a potential audience of a thousand purchasers (certain educational texts are like this) - would have to be priced at a a minimum of 100 DM to recoup solely the direct costs. If illegally copied (thereby shrinking the potential market as some individuals will like to buy the cheaper illegal copies) - its value would have to go up prohibitively to recoup costs, so driving out potential buyers. The story is totally different if a book costs ten,000 DM to produce and is priced at 20 DM a duplicate with a possible readership of 1,000,000 readers. Piracy (illegal copying) should during this case be a lot of readily tolerated as a marginal phenomenon.

This is the theory. However the facts are tellingly different. The less the price of production (brought down by digital technologies) - the fiercer the battle against piracy. The bigger the market - the more pressure is applied to clamp down on samizdat entrepreneurs.

Governments, from China to Macedonia, are introducing intellectual property laws (beneath pressure from made world countries) and enforcing them belatedly. But where one factory is closed on shore (as has been the case in mainland China) - two sprout off shore (as is that the case in Hong Kong and in Bulgaria).

But this defies logic: the market today is global, the prices of production are lower (apart from the music and film industries), the promoting channels more numerous (0.5 of the income of movie studios emanates from video cassette sales), the speedy recouping of the investment nearly guaranteed. Moreover, piracy thrives in very poor markets in which the population would anyhow not have paid the legal price. The illegal product is inferior to the legal copy (it comes with no literature, warranties or support). Therefore why should the big makers, publishing houses, record companies, software companies and fashion homes worry?

The solution lurks in history. Intellectual property may be a relatively new notion. Within the near past, no one thought of information or the fruits of creativity (art, design) as "patentable", or as someone's "property". The artist was but a mere channel through that divine grace flowed. Texts, discoveries, inventions, artistic endeavors and music, styles - all belonged to the community and may be replicated freely. True, the chosen ones, the conduits, were honoured however were rarely financially rewarded. They were commissioned to supply their artistic endeavors and were salaried, in most cases. Only with the arrival of the Industrial Revolution were the embryonic precursors of intellectual property introduced however they were still restricted to industrial designs and processes, mainly as embedded in machinery. The patent was born. The more large the market, the more refined the sales and marketing techniques, the larger the monetary stakes - the larger loomed the problem of intellectual property. It unfold from machinery to styles, processes, books, newspapers, any printed matter, artworks and music, films (which, at their starting were not thought-about art), software, software embedded in hardware, processes, business strategies, and even unto genetic material.

Intellectual property rights - despite their noble title - are less concerning the intellect and a lot of regarding property. This can be Big Cash: the markets in intellectual property outweigh the entire industrial production within the world. The aim is to secure a monopoly on a selected work. This can be an especially grave matter in tutorial publishing where tiny- circulation magazines don't permit their content to be quoted or revealed even for non-industrial purposes. The monopolists of information and intellectual products cannot enable competition anywhere in the world - because theirs is a world market. A pirate in Skopje is in direct competition with Bill Gates. When he sells a pirated Microsoft product - he's depriving Microsoft not only of its income, however of a consumer (=future income), of its monopolistic status (low-cost copies will be smuggled into alternative markets), and of its competition-deterring image (a major monopoly preserving asset). This is a threat that Microsoft cannot tolerate. Hence its efforts to eradicate piracy - successful in China and an utter failure in legally-relaxed Russia.

However what Microsoft fails to understand is that the matter lies with its pricing policy - not with the pirates. When faced with a international marketplace, a corporation will adopt one among two policies: either to regulate the value of its product to a world average of getting power - or to use discretionary differential pricing (as pharmaceutical firms were forced to do in Brazil and South Africa). A Macedonian with a median monthly income of a hundred and sixty USD clearly cannot afford to buy the Encyclopaedia Encarta Deluxe. In America, fifty USD is that the income generated in 4 hours of a median job. In Macedonian terms, so, the Encarta is twenty times additional expensive. Either the value should be lowered in the Macedonian market - or a mean world value ought to be fixed that will reflect an average world purchasing power.

One thing must be done regarding it not solely from the economic point of view. Intellectual products are very price sensitive and highly elastic. Lower costs can be a lot of than compensated for by a much higher sales volume. There's no alternative method to clarify the pirate industries: evidently, at the proper value a ton of folks are willing to buy these products. High costs are an implicit trade-off favouring little, elite, select, wealthy world clientele. This raises a moral issue: are the kids of Macedonia less worthy of education and access to the newest in human data and creation?

2 developments threaten the long run of intellectual property rights. One is that the Internet. Academics, bored to death with the monopolistic practices of professional publications - already publish on the web in massive numbers. I printed some book on the Internet and they can be freely downloaded by anyone who has a computer or a modem. The full text of electronic magazines, trade journals, billboards, professional publications, and thousands of books is obtainable online. Hackers even made sites accessible from which it's doable to download whole software and multimedia products. It's very easy and low-cost to publish on the Web, the barriers to entry are just about nil. Web pages are hosted freed from charge, and authoring and publishing software tools are incorporated in most word processors and browser applications. Because the Web acquires more impressive sound and video capabilities it will proceed to threaten the monopoly of the record companies, the movie studios and thus on.

The second development is also technological. The oft-vindicated Moore's law predicts the doubling of pc memory capability each 18 months. But memory is solely one side of computing power. Another is the fast simultaneous advance on all technological fronts. Miniaturization and concurrent empowerment by software tools have created it doable for people to emulate abundant larger scale organizations successfully. One person, sitting at home with 5000 USD worth of apparatus can absolutely compete with the simplest products of the best printing homes anywhere. CD-ROMs will be written on, stamped and copied in house. A complete music studio with the latest in digital technology has been condensed to the dimensions of a single chip. This will lead to private publishing, personal music recording, and the to the digitization of plastic art. However this is often only one aspect of the story.

The relative advantage of the intellectual property corporation will not consist exclusively in its technological prowess. Rather it lies in its vast pool of capital, its selling clout, market positioning, sales organization, and distribution network.

Today, anyone will print a visually impressive book, using the above-mentioned low-cost equipment. However in an age of knowledge glut, it is the selling, the media campaign, the distribution, and therefore the sales that confirm the economic outcome.

This advantage, however, is additionally being eroded.

Initial, there is a psychological shift, a reaction to the commercialization of intellect and spirit. Inventive individuals are repelled by what they regard as an oligarchic institution of institutionalized, lowest common denominator art and they are fighting back.

Secondly, the Web may be a huge (two hundred million people), really cosmopolitan market, with its own selling channels freely available to all. Even by default, with a minimum investment, the chance of being seen by surprisingly massive numbers of customers is high.

I revealed one book the traditional means - and another on the Internet. In fifty months, I've got received 6500 written responses relating to my electronic book. Well over five hundred,000 individuals read it (my Link Exchange meter registered c. a pair of,000,000 impressions since November 1998). It is a textbook (in psychopathology) - and five hundred,000 readers may be a lot for this sort of publication. I'm therefore happy that I'm not certain that I can ever contemplate a traditional publisher again. Indeed, my last book was published in the very same way.

The demise of intellectual property has lately become abundantly clear. The old intellectual property industries are fighting tooth and nail to preserve their monopolies (patents, trademarks, copyright) and their cost advantages in manufacturing and marketing.

But they're faced with 3 inexorable processes which are probably to render their efforts vain:

The Newspaper Packaging

Print newspapers provide package deals of low cost content backed by advertising. In other words, the advertisers get content formation and generation and therefore the reader has no alternative but be exposed to commercial messages as he or she studies the content.

This model - adopted earlier by radio and tv - rules the internet now and can rule the wireless net within the future. Content will be created accessible free of all pecuniary charges. The patron will pay by providing his personal data (demographic information, consumption patterns and preferences and thus on) and by being exposed to advertising. Subscription based models are sure to fail.

Thus, content creators can profit solely by sharing in the advertising cake. They will find it increasingly tough to implement the recent models of royalties purchased access or of ownership of intellectual property.

Disintermediation

A lot of ink has been spilt regarding this important trend. The removal of layers of brokering and intermediation - mainly on the producing and promoting levels - may be a historic development (though the continuation of a future trend).

Take into account music for instance. Streaming audio on the net or downloadable MP3 files can render the CD obsolete. The net conjointly provides a venue for the marketing of niche merchandise and reduces the barriers to entry previously imposed by the requirement to interact in pricey marketing ("branding") campaigns and manufacturing activities.

This trend is additionally doubtless to restore the balance between artist and therefore the industrial exploiters of his product. The very definition of "artist" can expand to incorporate all creative people. One will request to distinguish oneself, to "complete" oneself and to auction off one's services, ideas, products, designs, experience, etc. This can be a return to pre-industrial times when artisans dominated the economic scene. Work stability can vanish and work mobility will increase in an exceedingly landscape of shifting allegiances, head searching, remote collaboration and similar labour market trends.

Market Fragmentation

In a very fragmented market with a myriad of mutually exclusive market niches, shopper preferences and marketing and sales channels - economies of scale in manufacturing and distribution are meaningless. Narrowcasting replaces broadcasting, mass customization replaces mass production, a network of shifting affiliations replaces the rigid owned-branch system. The decentralized, intrapreneurship-based mostly corporation is a late response to these trends. The mega-corporation of the longer term is more seemingly to act as a collective of start-ups than as a homogeneous, uniform (and, to conspiracy theorists, sinister) juggernaut it once was.

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