The future of digital piracy

Suppose you could put a spoon into a photocopier and get a perfect copy of it for a price of Rs.0.50. That is, suppose a `photocopier' could give you an identical spoon at near--zero cost. You'd be able to make a dozen copies of a nice spoon and give them to your friends. Would that profoundly change the spoon market?

When the cost of replication drops to near-zero levels, the cost of production is only incurred once. All future copies face essentially zero marginal cost, and copies can be made by anyone (not just the original producer). The market for such goods proves to be very different from the more normal markets, where marginal costs are substantial, and only the original producer can make copies.

Science was the first area where this phenomenon took place. The output of a scientist is new knowledge, embodied in research papers. These papers are freely distributed (since the cost of photocopying is nil). The scientist earns nothing when photocopies are made. However, the scientist does obtain payoffs in the form of jobs, consulting assignments, research funding, conference invitations, etc. as a consequence of writing good papers. More importantly, he earns the respect and recognition of peers.

The second market which experienced this phenomenon was software. Many years ago, Richard Stallman and others at MIT started the `Free Software Foundation'. This was based on the audacious premise that volunteers could create good software and give it away for free to the human race. They were spectacularly successful.

The Internet has generated a teeming community of brilliant programmers talking with each other, exchanging programs, improving on each others work, and generating a hectic pace of innovation. The free software community has harnessed this new technology of interaction. Today, in many software product categories, free software has become the dominant player. The rise of free software has arguably knocked off $100 billion from the market capitalisation of Microsoft.

The Free Software Foundation does not advocate piracy. It tries to obtain resources for building free software. Why do people write software and give it away? For some, there is an element of altruism, of creating public goods for all of mankind. For others, fees for consulting, support, training, etc. yield handsome and attractive returns. For most, the payoff that matters is recognition in the eyes of peers. The smartest programmers in the world are to be found in the free software world, and every young genius seeks to prove himself in their eyes by writing a cool program that is released as free software. This community hangs out at places like slashdot, and is working wonders for mankind.

The third battle has begun with music. Digital technology makes it possible to reproduce music with perfect accuracy. Music CDs can be copied, and music can be converted into files called MP3 files which are transferrable on telephone lines.

MP3 files are inferior to CDs, but they are startlingly good. I found that with MP3 files created at 256kbits/s, I cannot differentiate the MP3 file from the CD with my eyes closed. At this point, 2 megabytes of storage are required per minute of music. This means that a hard disk costing Rs.5,000 can hold 5,000 minutes of music.

This opens up a whole world of new possibilities for replication of music at near-zero marginal cost. Piracy of music has taken off, with individuals copying MP3 from each other. The famous `Napster' program keeps a global database of music that's available for piracy.

Large music companies have reacted to these developments with extreme fear. The music business today has a peculiar dynamic. The end-consumer pays Rs.500 for a CD, of which Rs.50 goes to the musician. The rest goes to all the intermediaries in the middle. Distribution through MP3 files gives us dis-intermediation, where end-users could pay Rs.50 to the musician and the intermediaries are eliminated. Further, most musicians are happy to give away music free since it improves their ability to obtain fees from concerts, advertising, etc. Hence, we are seeing a notion of `free music', much like free science or free software.

A great mass of existing music is owned by five big music companies. Individuals all over the world have embarked on large-scale piracy of this content. The music industry has responded using lobbying, legislation and lawyers. The music industry persuaded lawmakers in the US to enact stringent new laws. It is very likely that lawsuits in the US will shut down Napster.

However, there is much more to this situation than shutting down Napster. New systems called `gnutella' and `freenet' have come up, which provide similar functions and are impossible to shut down. Microsoft came up with an idea for their non-standard `windows media player', which restricted copying. It was an interesting test of the talent found at Microsoft. Within a matter of hours, the smart programmers of the world had released a program, tartly named `unfuck', which copied these files anyway.

The fourth battle is shaping up on movies. DVDs are the highest quality format for movies today. A program `deCSS' breaks the trivial encryption of DVDs, and the program `DivX' compresses the resulting data so that a movie can be written onto a CD. With DivX and deCSS freely available, DVDs can be copied, a prospect which horrifies the movie industry

Books are the fifth front. Many authors, including the bestselling novelist Stephen King and Nobel-prize winning economist William Sharpe, are using the Internet to publish books without the overheads of intermediation. An effort called Project Gutenberg is creating free electronic copies of books for which copyrights have expired.

Where is all this going? In the immediate future, I expect that the entertainment industry will buy government support for more and more intrusive enforcement against copying. Yet, my sense is that the copying can only be stopped in a police state. The only way to reconcile modern democracy with modern technology is to abandon existing notions of copyrights, and accept a world with unrestricted copying.

We should step back to see that copyrights and patents do not exist as an end in their own right; they were designed to help society move forward by encouraging the production of intellectual content. Today, society moves forward best through an unrestricted exchange of content, in the context of a free society.

From an Indian perspective, these developments have several implications. Free science has always been a boon for developing countries, since knowledge was available at the trivial price of obtaining books or scientific journals. Free software is a boon for India, since it shifts the revenues of the global IT industry away from products (where India is weak) to services (where India is strong).

A certain skepticism about the global copyright and patent regime is useful in India. From 1982 onwards, the US patent regime has been dominated by the interests of large corporations, and has steadily shrunk the universe of public domain knowledge. India should not accept these narrow notions; instead we should think from first principles about the appropriate patent and copyright regime that should be used in India.

Back up to Ajay Shah's media page