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