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