A Parable About Copyright’s Future

by on August 27, 2007 · 14 comments

When more players enter the market for expressive works, an author faces both new competitors and new customers. What affect does that have on copyright’s power to stimulate authorship? Assume, both for the sake of simplicity and because it seems reasonable, that the ratio of authors/consumers holds steady. I posit that copyright will in that event offer greater rewards for authorship. Allow me to explain, here with a parable, and in a later post with some graphs.


The Parable of the Village Authors

There once existed an isolated village of 1,001 people. Of them, only Amarel had the gift of writing entertaining words. Many villagers valued her tales, so the counsel of elders instituted a copyright law to encourage her authorship. Thanks to that law, Amarel earned a decent living, selling one new story a week for a dollar apiece.

Only 500 of the villagers purchased Amarel’s works, however. The rest, who preferred music to literature, found her work a bit too pricey for their tastes. And opinions about her work varied even among the 500 villagers who did purchase it. Two hundred and fifty of them, who preferred poems to prose, found it just barely worth the cost. The remaining 250 found her stories precisely to their liking—so much so that, had she only known, Amarel might have charged them nearly $1.50/work.

One day a group of 1001 refugees appeared. Their homes had been wiped out in a flood, so they sought permission to settle in and around the village. The counsel of elders, having pity on the refugees and judging them very much like their own people, agreed. The village thereby grew to include 2002 people.

The newcomers included Berek, who shared with Amarel a gift for writing. In his old home, he had played a role almost exactly like that played by Amarel in hers. He had enjoyed copyright protection, earned a living selling his works to half of his neighbors, found 250 of his customers complacent, 250 of them ardent, and so forth. Whereas Amarel wrote stories, however, Berek wrote poems.

What happened when Amarel and Berek began to compete for customers in the newly enlarged village? Amarel lost to Berek 250 of her customers—those who favored poetry to prose. She kept the 250 customers who had always regarded her stories as a bargain, however. Amarel found among the former refugees 250 new fans, moreover, who happily purchased from her the prose that Berek had denied them. Berek experienced the same turn of fate, trading 250 barely satisfied customers for 250 devoted ones.

The growth of the village thus left unchanged the number of customers served by Amarel and Berek. It allowed them, however, to better serve what customers they had. Amarel could focus on the villagers who favored prose, whereas Barek could focus on those who favored poetry. The authors thereby found that they could raise their prices and win greater profits. Their customers gained, too. Granted, they now had to pay more. But most of them were happy to finally get the art they loved best, and all of them paid less than they thought the art worth.

Who did lose? The villagers who, though unwilling or unable to pay $1.25 for the right, would have enjoyed reading Amarel or Berek’s words. Though it would have cost next to nothing to make sufficient copies to satisfy those villagers, copyright stood in the way. Thus were many simple joys foregone.

Moral: As the market for expressive works grows, assuming that the ratio of authors to consumers does not increase, copyright owners tend to earn larger profits.

[Crossposted to Agoraphilia.]

  • http://www.techliberation.com/ Tim Lee

    Doesn’t this assume that different copyrighted products are not substitute goods? In your example, that’s certainly true—half the villagers like prose and half like poetry, and so the authors specialize to produce non-substitute goods. But at some point, might we reach the point where there is more than one author filling each tiny niche, and competition then forces them to cut prices in order to gain an audience?

    It seems to me that this is more or less what’s happening in news and punditry. I can’t think of any blogs that charge for access, and there are only a handful of general news sites that do so. For those markets, competition has driven the market price down to zero. I suspect the same thing is likely to happen to music, and perhaps to some kinds of video.

  • http://www.techliberation.com/ Tim Lee

    Doesn’t this assume that different copyrighted products are not substitute goods? In your example, that’s certainly true—half the villagers like prose and half like poetry, and so the authors specialize to produce non-substitute goods. But at some point, might we reach the point where there is more than one author filling each tiny niche, and competition then forces them to cut prices in order to gain an audience?

    It seems to me that this is more or less what’s happening in news and punditry. I can’t think of any blogs that charge for access, and there are only a handful of general news sites that do so. For those markets, competition has driven the market price down to zero. I suspect the same thing is likely to happen to music, and perhaps to some kinds of video.

  • http://www.tomwbell.com Tom W. Bell

    I think I see your point, Tim, but we are surely very far from the point where so many authors exist that they end up filling every niche with functionally equivalent works. I don’t think, at any rate, that such an effect explains what’s going on in the blogosphere. It isn’t that bloggers duplicate what print media do. Rather, it’s that they offer something different, that they do it for love rather than money (see one of my prior posts for a discussion of that effect), and that when bloggers do duplicate the print media, they do so with regard to facts, which fall outside of copyright protection.

    I might add that because blogging has encourage an influx of new authors, it contradicts my assumption that the ratio of authors/consumers holds steady. In this case, we see not growth in the overall market for expressive works, but rather a disproportionate growth in authors. Or, rather, a disproportionate growth (thanks to new technologies) in the number of authors able to reach extant readers. Long story short: Blogging resembles not the sort of parable I told, but rather one where a magic spell suddenly empowers everyday folk to put their dreams into words. Though the author’s guild suffers, the the rest of us end up rich in entertainment.

  • http://linuxworld.com/community/ Don Marti

    This looks consistent with numbers on the increasing price of a movie ticket relative to minimum wage at monster.com. Multiplex theaters, more movie choices, higher prices.

    Tim, the New York Times, The Economist, and the Wall Street Journal charge for access. There’s probably room for a few high-quality paid competitors even in a market that’s swamped with others.

    (Hey, I typed “cite” tags and the publication titles didn’t show up in italics. Can you let “cite” through please?)

  • http://www.tomwbell.com Tom W. Bell

    I think I see your point, Tim, but we are surely very far from the point where so many authors exist that they end up filling every niche with functionally equivalent works. I don’t think, at any rate, that such an effect explains what’s going on in the blogosphere. It isn’t that bloggers duplicate what print media do. Rather, it’s that they offer something different, that they do it for love rather than money (see one of my prior posts for a discussion of that effect), and that when bloggers do duplicate the print media, they do so with regard to facts, which fall outside of copyright protection.

    I might add that because blogging has encourage an influx of new authors, it contradicts my assumption that the ratio of authors/consumers holds steady. In this case, we see not growth in the overall market for expressive works, but rather a disproportionate growth in authors. Or, rather, a disproportionate growth (thanks to new technologies) in the number of authors able to reach extant readers. Long story short: Blogging resembles not the sort of parable I told, but rather one where a magic spell suddenly empowers everyday folk to put their dreams into words. Though the author’s guild suffers, the the rest of us end up rich in entertainment.

  • http://linuxworld.com/community/ Don Marti

    This looks consistent with numbers on the increasing price of a movie ticket relative to minimum wage at monster.com. Multiplex theaters, more movie choices, higher prices.

    Tim, the New York Times, The Economist, and the Wall Street Journal charge for access. There’s probably room for a few high-quality paid competitors even in a market that’s swamped with others.

    (Hey, I typed “cite” tags and the publication titles didn’t show up in italics. Can you let “cite” through please?)

  • Barnaby

    Cute story.. but how complex was the copyright law of this village? Did it allow for the resale of used copies of the works? Perhaps those villagers who were unwilling or unable to pay $1.25 might be willing or able to pay less for a used copy sometime later. Those villagers who held the works in the highest regard would pay for an unused copy immediately, so the authors would lose nothing from them. The less interested would still get to enjoy the works sometime later. Would anyone lose under this scenario?

  • Barnaby

    Cute story.. but how complex was the copyright law of this village? Did it allow for the resale of used copies of the works? Perhaps those villagers who were unwilling or unable to pay $1.25 might be willing or able to pay less for a used copy sometime later. Those villagers who held the works in the highest regard would pay for an unused copy immediately, so the authors would lose nothing from them. The less interested would still get to enjoy the works sometime later. Would anyone lose under this scenario?

  • http://www.tomwbell.com Tom W. Bell

    Don: I switched “Accept Trackbacks” to “on”; I hope that accomplishes what you asked.

    Barnaby: Even in a simple economy, the price set at the first sale of any copy would presumably include the future income from resale, so the authors would not lose in your scenario. And, granted, the price discrimination you describe would help some of those secondary users (finally) get access at a bearable price. But I don’t think that would prove so perfect as to completely get rid of the deadweight social costs of restricting access to what can be, as a matter of physics if not law, made available a virtually no cost.

  • http://www.tomwbell.com Tom W. Bell

    Don: I switched “Accept Trackbacks” to “on”; I hope that accomplishes what you asked.

    Barnaby: Even in a simple economy, the price set at the first sale of any copy would presumably include the future income from resale, so the authors would not lose in your scenario. And, granted, the price discrimination you describe would help some of those secondary users (finally) get access at a bearable price. But I don’t think that would prove so perfect as to completely get rid of the deadweight social costs of restricting access to what can be, as a matter of physics if not law, made available a virtually no cost.

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