Piracy in retrospect and prospect

The Economist (now behind a paywall) had a couple of features last week claiming that music piracy was “in decline”. The claim was based partly on a survey of British internet users in which the percentage reporting usage of file-sharing networks declined from 22% in December 2007 to 17% in July this year. What it didn’t mention is that you don’t need file-sharing software to pirate music anymore since it’s all over the web in plain Googlable sight.

It also cited a Swedish survey in which 60 per cent of former file-sharers claimed to have cut down or quit, with half of them moving to the legal ad-supported Spotify. If such a free (or near-free) service is available in a country, it’s not surprising a bunch of people would quit bothering with piracy. But it’s hardly the case that the pirates lost: rather they won, cutting a lot of the commercial value out of music recordings and massively increasing the quantity people get to listen to.

A couple of good essays on the social and musical impact of piracy over the decade: Eric Harvey’s at Pitchfork is more detailed. But Jace Clayton – who as DJ /rupture is without a doubt on my list of top ten musicians of the decade – is able to be unambiguously celebratory in a way an industry advertising funded site can’t really be, and without lip service to ‘alternative business models’ blah blah blah.

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Published in: on 23 November, 2009 at 8:01 pm  Comments (3)  

Software, value and competition

Another day, another half-baked over-long comment. In this case it’s a comment at Le Colonel Chabert about software and the implications for Marx’s theory of value. I’m posting this here because 1) commenting elsewhere at length uses up my blogging time for the day; and 2) it kind of relates to my post yesterday on value – I want to keep these together because otherwise they’re scattered all over the place. Keynes returns soon, I promise!

Competition is a crucial element in Marx’s theory of value and price of production. Where the forces of competition are suspended (or, rather, transformed since there is always some possibility of competition) there will be exceptions to the general law of value. Land rent is the classic case.

We need to be clear about ‘competition’, though, because Marx’s use is different from (and superior to) the neoclassical sense of competition (‘perfect’ or ‘imperfect’) many are more familiar with. For the neoclassicals it is solely competition between sellers in the commodity market. For Marx it crucially also includes the ability of capital to move between different branches of production. Also, for Marx there is no need for ‘perfect’ mobility of capital or a large number of competitors in the commodity market. The mere potential for new entrants into the industry is enough to discipline production processes. Even a monopolist in an industry is disciplined by the need to chase the average rate of return on capital or it will find it harder to obtain funds on the capital market. The law of value assumes a tendency towards the equalisation of profit rates. Firms with long-run higher-than-average profit rates are a good indicator that the normal disciplines of competition have been evaded to some extent – though in capitalist history higher-than-average profit rates have inevitably been eventually eroded.

The question to ask about software is, then, what are the unusual features of competition in this industry, and what is normal? First, in the commodity market: Intellectual property laws protect specific articles of software. But they do not protect them from close substitutes. There are use-value specific things about software that in combination with IP laws give more protection – the famous ‘lock-in’ and network effects, for example, that have made Windows so dominant in the operating system market. There is little doubt that Microsoft has benefited for a long time from these effects, accordingly winning very high rates of return on capital. But it has not been immune from competition – from Apple, from Linux.

The second thing about the software market is the extremely low marginal cost: that is, it costs next to nothing to produce additional items, though the initial outlay (design and programming) is expensive. This makes software firms extremely vulnerable from new entrants and piracy. The latter explains intellectual property law – without it capitalism is unable to allocate labour and capital properly to do the initial outlay. (Exceptions – state subsidy a la university research; cross subsidisation from advertising revenue a la the media; or cross-subsidisation from service/support/consulting work, which has been the strategy of many open-source oriented firms, including large ones like IBM.) Piracy is not the only threat here, though – there is also the risk of perfectly legal competition from a close substitute with an alternative lower-cost business model. Netscape vs IE is the classic case, also witness the tantrums Microsoft was throwing about open source not so long ago.

The third thing is that these firms are subject to competition on the capital markets just like any other capitalist firm. If the rate-of-return is high, capital will drift into the industry in some way and get in the incumbents’ faces (unless there is a true barrier to entry, in which case capital may flow to the incumbents). If it is low, capital will flow out: the incumbents will face higher costs to borrow and issue equity.

So to sum up, software firms are subject to fairly intense competition. To some extent it has followed the pattern of many previous new industries before their maturity, and as with them we would expect some time to pass before competitive conditions (including labour processes) settle down. But the low marginal cost issue (i.e. the ease of duplicating the product) will always haunt it and I expect make competition quite chaotic and unpredictable. It is interesting in that the high initial costs are skilled labour costs rather than fixed capital costs as in airlines (which also have high initial costs and low marginal costs and are therefore prone to debilitating bouts of price warfare). But this underscores the point that it is labour at the bottom of it all, and what makes it seem so weird is the disjuncture between the labour-time necessary to do the initial creative work (lots) and the labour-time necessary to reproduce the product (very little).

Published in: on 31 October, 2007 at 11:25 am  Leave a Comment  

Album of the hour

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Sonic Youth was the band that turned me into a music collector. I first heard them when this guy Richard in my Classics class passed me his earphones and said I should listen to this song. It was a simple, driving, repetitive riff and a woman growling “now I wanna be your dog” over and over again. I asked who it was and he said “Sonic Youth” and I bought one of their albums right away to hear the song again.

That was Washing Machine, which had recently come out. That song wasn’t on it. As it happened, Richard’s family moved to England (I think) and I didn’t get a chance to ask him what album it was on. These were the days when you still had to buy albums, and my only income source was a $4/hour job I worked at after school two days a week. But one by one I bought every album they had ever released, working backwards. That song was on the last one I got – of course, it’s their Stooges cover on Confusion is Sex. (You couldn’t get their debut EP back then but eventually I found it on cassette, where the whole thing is repeated backwards on the B-side.)

Sonic Youth were a private obsession, my friends tended to be into hardcore, (we would drive into Wellington from the Hutt Valley for all-ages gigs at Thistle Hall) and my girlfriend was into other great 80s stuff like the Pixies. Neither of these were in any incompatible with Sonic Youth of course, but no-one else I knew listened to them. It set me off on a path where I generally got into music by myself, rather than socially, which the internet has only accentuated. At university I worked my way through bands that were in some way connected to Sonic Youth, tastes shifting with new discoveries until by 1999 I was listening mostly to electronic craziness like Aphex Twin, Autechre, Coil.

At that point the whole universe got dumped through the black whole of Napster and… at some point my tastes became ecumenical. I’ve developed a critic’s taste – I listen to everything, as long as it’s good, with a sense of how the scenes all fit together historically, and no deep attachment to any of them. How much this is personal and how much it’s of the epoch I’m not sure. I sure don’t regret getting access to all of recorded music history, but there are things I miss…

Tonight I played EVOL, from 1986, for the first time in several years I think. Despite having heard all too much music since I first got it, it still gets right into me. I see Pitchfork rates both Daydream Nation and Sister ahead of it in their “top 100 albums of the 1980s”. But EVOL is my favourite. It’s so damn dark, more melodic and slower than those other classics. (I’m afraid I haven’t developed a critic’s ability for actually writing about music.) But… it reminds me of a different kind of musical obsession, which is also a different time.

Published in: on 20 September, 2007 at 10:18 pm  Comments (2)  

Technological regress

A few months ago I got very excited when I discovered that you could use Google Books to read whole books. Google has permission from a lot of publishers to return from their books a ‘limited preview’ of a few pages around the text you searched for. By typing in a few words from the end of the ‘limited preview’, you could read the next few pages and read your way through until your eyes got sore.

Alas, sometime in the last couple of weeks the loophole seems to have been closed. Google Books now skips pages and won’t keep serving up consecutive pages for long. It was great while it lasted.

For people with access to university library accounts, the web is much bigger. Through a library you can generally search or read almost any periodical you want these days, including decades of back issues.

But now I’ve started to feel that even this charmed world has started to narrow. I’ve developed a sense of entitlement to text, and it has come to greatly annoy me if I can’t read something online – I was aggrieved to discover that the London Review of Books was not available through the Sydney Uni library. Fairfax recently decided to remove access to the Australian Financial Review from Factiva. Now you have to search via its own website and pay to read articles, or pay a prohibitive monthly subscription for online access. This is pretty dire for a major daily newspaper, but possibly a good business decision, since I imagine many businesses will cough up for continued access. It has certainly made me buy it more regularly than I otherwise would.

It’s funny how much effort now goes into disabling the distributive potential of the internet, in order to protect the commodity status of text, music, films, etc. Was there ever a clearer case of the productive forces straining relations of production?

Published in: on 10 July, 2007 at 9:17 pm  Comments (8)