| Three years ago I published a book of short | | | | price sensitive and highly elastic. Lower |
| stories in Israel. The publishing house | | | | prices will be more than compensated for by a |
| belongs to Israel's leading (and exceedingly | | | | much higher sales volume. There is no other |
| wealthy) newspaper. I signed a contract which | | | | way to explain the pirate industries : |
| stated that I am entitled to receive 8% of | | | | evidently, at the right price a lot of people |
| the income from the sales of the book after | | | | are willing to buy these products. High |
| commissions payable to distributors, shops, | | | | prices are an implicit trade-off favouring |
| etc. A few months later (1997), I won the | | | | small, elite, select, rich world clientele. |
| coveted Prize of the Ministry of Education | | | | This raises a moral issue : are the children |
| (for short prose). The prize money (a few | | | | of Macedonia less worthy of education and |
| thousand DMs) was snatched by the publishing | | | | access to the latest in human knowledge and |
| house on the legal grounds that all the money | | | | creation ?Two developments threaten the |
| generated by the book belongs to them because | | | | future of intellectual property rights. One |
| they own the copyright.In the mythology | | | | is the Internet. Academics, fed up with the |
| generated by capitalism to pacify the masses, | | | | monopolistic practices of professional |
| the myth of intellectual property stands out. | | | | publications - already publish on the web in |
| It goes like this : if the rights to | | | | big numbers. I published a few book on the |
| intellectual property were not defined and | | | | Internet and they can be freely downloaded by |
| enforced, commercial entrepreneurs would not | | | | anyone who has a computer or a modem. The |
| have taken on the risks associated with | | | | full text of electronic magazines, trade |
| publishing books, recording records, and | | | | journals, billboards, professional |
| preparing multimedia products. As a result, | | | | publications, and thousands of books is |
| creative people will have suffered because | | | | available online. Hackers even made sites |
| they will have found no way to make their | | | | available from which it is possible to |
| works accessible to the public. Ultimately, | | | | download whole software and multimedia |
| it is the public which pays the price of | | | | products. It is very easy and cheap to |
| piracy, goes the refrain.But this is | | | | publish on the Internet, the barriers to |
| factually untrue. In the USA there is a very | | | | entry are virtually nil. Web pages are hosted |
| limited group of authors who actually live by | | | | free of charge, and authoring and publishing |
| their pen. Only select musicians eke out a | | | | software tools are incorporated in most word |
| living from their noisy vocation (most of | | | | processors and browser applications. As the |
| them rock stars who own their labels - George | | | | Internet acquires more impressive sound and |
| Michael had to fight Sony to do just that) | | | | video capabilities it will proceed to |
| and very few actors come close to deriving | | | | threaten the monopoly of the record |
| subsistence level income from their | | | | companies, the movie studios and so on.The |
| profession. All these can no longer be | | | | second development is also technological. The |
| thought of as mostly creative people. Forced | | | | oft-vindicated Moore's law predicts the |
| to defend their intellectual property rights | | | | doubling of computer memory capacity every 18 |
| and the interests of Big Money, Madonna, | | | | months. But memory is only one aspect of |
| Michael Jackson, Schwarzenegger and Grisham | | | | computing power. Another is the rapid |
| are businessmen at least as much as they are | | | | simultaneous advance on all technological |
| artists.Economically and rationally, we | | | | fronts. Miniaturization and concurrent |
| should expect that the costlier a work of art | | | | empowerment by software tools have made it |
| is to produce and the narrower its market - | | | | possible for individuals to emulate much |
| the more emphasized its intellectual property | | | | larger scale organizations successfully. A |
| rights.Consider a publishing house.A book | | | | single person, sitting at home with 5000 USD |
| which costs 50,000 DM to produce with a | | | | worth of equipment can fully compete with the |
| potential audience of 1000 purchasers | | | | best products of the best printing houses |
| (certain academic texts are like this) - | | | | anywhere. CD-ROMs can be written on, stamped |
| would have to be priced at a a minimum of 100 | | | | and copied in house. A complete music studio |
| DM to recoup only the direct costs. If | | | | with the latest in digital technology has |
| illegally copied (thereby shrinking the | | | | been condensed to the dimensions of a single |
| potential market as some people will prefer | | | | chip. This will lead to personal publishing, |
| to buy the cheaper illegal copies) - its | | | | personal music recording, and the to the |
| price would have to go up prohibitively to | | | | digitization of plastic art. But this is only |
| recoup costs, thus driving out potential | | | | one side of the story.The relative advantage |
| buyers. The story is different if a book | | | | of the intellectual property corporation does |
| costs 10,000 DM to produce and is priced at | | | | not consist exclusively in its technological |
| 20 DM a copy with a potential readership of | | | | prowess. Rather it lies in its vast pool of |
| 1,000,000 readers. Piracy (illegal copying) | | | | capital, its marketing clout, market |
| should in this case be more readily tolerated | | | | positioning, sales organization, and |
| as a marginal phenomenon.This is the theory. | | | | distribution network.Nowadays, anyone can |
| But the facts are tellingly different. The | | | | print a visually impressive book, using the |
| less the cost of production (brought down by | | | | above-mentioned cheap equipment. But in an |
| digital technologies) - the fiercer the | | | | age of information glut, it is the marketing, |
| battle against piracy. The bigger the market | | | | the media campaign, the distribution, and the |
| - the more pressure is applied to clamp down | | | | sales that determine the economic |
| on samizdat entrepreneurs.Governments, from | | | | outcome.This advantage, however, is also |
| China to Macedonia, are introducing | | | | being eroded.First, there is a psychological |
| intellectual property laws (under pressure | | | | shift, a reaction to the commercialization of |
| from rich world countries) and enforcing them | | | | intellect and spirit. Creative people are |
| belatedly. But where one factory is closed on | | | | repelled by what they regard as an oligarchic |
| shore (as has been the case in mainland | | | | establishment of institutionalized, lowest |
| China) - two sprout off shore (as is the case | | | | common denominator art and they are fighting |
| in Hong Kong and in Bulgaria).But this defies | | | | back.Secondly, the Internet is a huge (200 |
| logic : the market today is global, the costs | | | | million people), truly cosmopolitan market, |
| of production are lower (with the exception | | | | with its own marketing channels freely |
| of the music and film industries), the | | | | available to all. Even by default, with a |
| marketing channels more numerous (half of the | | | | minimum investment, the likelihood of being |
| income of movie studios emanates from video | | | | seen by surprisingly large numbers of |
| cassette sales), the speedy recouping of the | | | | consumers is high.I published one book the |
| investment virtually guaranteed. Moreover, | | | | traditional way - and another on the |
| piracy thrives in very poor markets in which | | | | Internet. In 50 months, I have received 6500 |
| the population would anyhow not have paid the | | | | written responses regarding my electronic |
| legal price. The illegal product is inferior | | | | book. Well over 500,000 people read it (my |
| to the legal copy (it comes with no | | | | Link Exchange meter registered c. 2,000,000 |
| literature, warranties or support). So why | | | | impressions since November 1998). It is a |
| should the big manufacturers, publishing | | | | textbook (in psychopathology) - and 500,000 |
| houses, record companies, software companies | | | | readers is a lot for this kind of |
| and fashion houses worry?The answer lurks in | | | | publication. I am so satisfied that I am not |
| history. Intellectual property is a | | | | sure that I will ever consider a traditional |
| relatively new notion. In the near past, no | | | | publisher again. Indeed, my last book was |
| one considered knowledge or the fruits of | | | | published in the very same way.The demise of |
| creativity (art, design) as 'patentable', or | | | | intellectual property has lately become |
| as someone's 'property'. The artist was but a | | | | abundantly clear. The old intellectual |
| mere channel through which divine grace | | | | property industries are fighting tooth and |
| flowed. Texts, discoveries, inventions, works | | | | nail to preserve their monopolies (patents, |
| of art and music, designs - all belonged to | | | | trademarks, copyright) and their cost |
| the community and could be replicated freely. | | | | advantages in manufacturing and marketing.But |
| True, the chosen ones, the conduits, were | | | | they are faced with three inexorable |
| honoured but were rarely financially | | | | processes which are likely to render their |
| rewarded. They were commissioned to produce | | | | efforts vain:The Newspaper PackagingPrint |
| their works of art and were salaried, in most | | | | newspapers offer package deals of cheap |
| cases. Only with the advent of the Industrial | | | | content subsidized by advertising. In other |
| Revolution were the embryonic precursors of | | | | words, the advertisers pay for content |
| intellectual property introduced but they | | | | formation and generation and the reader has |
| were still limited to industrial designs and | | | | no choice but be exposed to commercial |
| processes, mainly as embedded in machinery. | | | | messages as he or she studies the |
| The patent was born. The more massive the | | | | content.This model - adopted earlier by radio |
| market, the more sophisticated the sales and | | | | and television - rules the internet now and |
| marketing techniques, the bigger the | | | | will rule the wireless internet in the |
| financial stakes - the larger loomed the | | | | future. Content will be made available free |
| issue of intellectual property. It spread | | | | of all pecuniary charges. The consumer will |
| from machinery to designs, processes, books, | | | | pay by providing his personal data |
| newspapers, any printed matter, works of art | | | | (demographic data, consumption patterns and |
| and music, films (which, at their beginning | | | | preferences and so on) and by being exposed |
| were not considered art), software, software | | | | to advertising. Subscription based models are |
| embedded in hardware, processes, business | | | | bound to fail.Thus, content creators will |
| methods, and even unto genetic | | | | benefit only by sharing in the advertising |
| material.Intellectual property rights - | | | | cake. They will find it increasingly |
| despite their noble title - are less about | | | | difficult to implement the old models of |
| the intellect and more about property. This | | | | royalties paid for access or of ownership of |
| is Big Money : the markets in intellectual | | | | intellectual property.DisintermediationA lot |
| property outweigh the total industrial | | | | of ink has been spilt regarding this |
| production in the world. The aim is to secure | | | | important trend. The removal of layers of |
| a monopoly on a specific work. This is an | | | | brokering and intermediation - mainly on the |
| especially grave matter in academic | | | | manufacturing and marketing levels - is a |
| publishing where small- circulation magazines | | | | historic development (though the continuation |
| do not allow their content to be quoted or | | | | of a long term trend).Consider music for |
| published even for non-commercial purposes. | | | | instance. Streaming audio on the internet or |
| The monopolists of knowledge and intellectual | | | | downloadable MP3 files will render the CD |
| products cannot allow competition anywhere in | | | | obsolete. The internet also provides a venue |
| the world - because theirs is a world market. | | | | for the marketing of niche products and |
| A pirate in Skopje is in direct competition | | | | reduces the barriers to entry previously |
| with Bill Gates. When he sells a pirated | | | | imposed by the need to engage in costly |
| Microsoft product - he is depriving Microsoft | | | | marketing ("branding") campaigns and |
| not only of its income, but of a client | | | | manufacturing activities.This trend is also |
| (=future income), of its monopolistic status | | | | likely to restore the balance between artist |
| (cheap copies can be smuggled into other | | | | and the commercial exploiters of his product. |
| markets), and of its competition-deterring | | | | The very definition of "artist" will expand |
| image (a major monopoly preserving asset). | | | | to include all creative people. One will seek |
| This is a threat which Microsoft cannot | | | | to distinguish oneself, to "brand" oneself |
| tolerate. Hence its efforts to eradicate | | | | and to auction off one's services, ideas, |
| piracy - successful in China and an utter | | | | products, designs, experience, etc. This is a |
| failure in legally-relaxed Russia.But what | | | | return to pre-industrial times when artisans |
| Microsoft fails to understand is that the | | | | ruled the economic scene. Work stability will |
| problem lies with its pricing policy - not | | | | vanish and work mobility will increase in a |
| with the pirates. When faced with a global | | | | landscape of shifting allegiances, head |
| marketplace, a company can adopt one of two | | | | hunting, remote collaboration and similar |
| policies: either to adjust the price of its | | | | labour market trends.Market FragmentationIn a |
| products to a world average of purchasing | | | | fragmented market with a myriad of mutually |
| power - or to use discretionary differential | | | | exclusive market niches, consumer preferences |
| pricing (as pharmaceutical companies were | | | | and marketing and sales channels - economies |
| forced to do in Brazil and South Africa). A | | | | of scale in manufacturing and distribution |
| Macedonian with an average monthly income of | | | | are meaningless. Narrowcasting replaces |
| 160 USD clearly cannot afford to buy the | | | | broadcasting, mass customization replaces |
| Encyclopaedia Encarta Deluxe. In America, 50 | | | | mass production, a network of shifting |
| USD is the income generated in 4 hours of an | | | | affiliations replaces the rigid owned-branch |
| average job. In Macedonian terms, therefore, | | | | system. The decentralized, |
| the Encarta is 20 times more expensive. | | | | intrapreneurship-based corporation is a late |
| Either the price should be lowered in the | | | | response to these trends. The |
| Macedonian market - or an average world price | | | | mega-corporation of the future is more likely |
| should be fixed which will reflect an average | | | | to act as a collective of start-ups than as a |
| global purchasing power.Something must be | | | | homogeneous, uniform (and, to conspiracy |
| done about it not only from the economic | | | | theorists, sinister) juggernaut it once was. |
| point of view. Intellectual products are very | | | | |