But what Microsoft fails to understand is that the problem lies with its pricing
policy - not with the pirates. When faced with a global marketplace, a company
can adopt one of two policies: either to adjust the price of its products to a
world average of purchasing power - or to use discretionary differential pricing
(as pharmaceutical companies were forced to do in Brazil and South Africa). A
Macedonian with an average monthly income of 160 USD clearly cannot afford to
buy the Encyclopaedia Encarta Deluxe. In America, 50 USD is the income generated
in 4 hours of an average job. In Macedonian terms, therefore, the Encarta is 20
times more expensive. Either the price should be lowered in the Macedonian
market - or an average world price should be fixed which will reflect an average
global purchasing power.
Something must be done about it not only from the economic point of view.
Intellectual products are very price sensitive and highly elastic. Lower prices
will be more than compensated for by a much higher sales volume. There is no
other way to explain the pirate industries : evidently, at the right price a lot
of people are willing to buy these products. High prices are an implicit
trade-off favouring small, elite, select, rich world clientele. This raises a
moral issue : are the children of Macedonia less worthy of education and access
to the latest in human knowledge and creation ?
Two developments threaten the future of intellectual property rights. One is the
Internet. Academics, fed up with the monopolistic practices of professional
publications - already publish on the web in big numbers. I published a few book
on the Internet and they can be freely downloaded by anyone who has a computer
or a modem. The full text of electronic magazines, trade journals, billboards,
professional publications, and thousands of books is available online. Hackers
even made sites available from which it is possible to download whole software
and multimedia products. It is very easy and cheap to publish on the Internet,
the barriers to entry are virtually nil. Web pages are hosted free of charge,
and authoring and publishing software tools are incorporated in most word
processors and browser applications. As the Internet acquires more impressive
sound and video capabilities it will proceed to threaten the monopoly of the
record companies, the movie studios and so on.
The second development is also technological. The oft-vindicated Moore's law
predicts the doubling of computer memory capacity every 18 months. But memory is
only one aspect of computing power. Another is the rapid simultaneous advance on
all technological fronts. Miniaturization and concurrent empowerment by software
tools have made it possible for individuals to emulate much larger scale
organizations successfully. A single person, sitting at home with 5000 USD worth
of equipment can fully compete with the best products of the best printing
houses anywhere. CD-ROMs can be written on, stamped and copied in house. A
complete music studio with the latest in digital technology has been condensed
to the dimensions of a single chip. This will lead to personal publishing,
personal music recording, and then to the digitization of plastic art. But this
is only one side of the story.
The relative advantage of the intellectual property corporation does not consist
exclusively in its technological prowess. Rather it lies in its vast pool of
capital, its marketing clout, market positioning, sales organization, and
distribution network.
Nowadays, anyone can print a visually impressive book, using the above-mentioned
cheap equipment. But in an age of information glut, it is the marketing, the
media campaign, the distribution, and the sales that determine the economic
outcome.This advantage, however, is also being eroded.
First, there is a psychological shift, a reaction to the commercialization of
intellect and spirit. Creative people are repelled by what they regard as an
oligarchic establishment of institutionalized, lowest common denominator art and
they are fighting back.
Secondly, the Internet is a huge (200 million people), truly cosmopolitan
market, with its own marketing channels freely available to all. Even by
default, with a minimum investment, the likelihood of being seen by surprisingly
large numbers of consumers is high.
I published one book the traditional way - and another on the Internet. In 50
months, I have received 6500 written responses regarding my electronic book.
Well over 500,000 people read it (my Link Exchange meter registered c. 2,000,000
impressions since November 1998). It is a textbook (in psychopathology) - and
500,000 readers is a lot for this kind of publication. I am so satisfied that I
am not sure that I will ever consider a traditional publisher again. Indeed, my
last book was published in the very same way.
The demise of intellectual property has lately become abundantly clear. The old
intellectual property industries are fighting tooth and nail to preserve their
monopolies (patents, trademarks, copyright) and their cost advantages in
manufacturing and marketing.
But they are faced with three inexorable processes which are likely to render
their efforts vain:
The Newspaper Packaging
Print newspapers offer package deals of cheap content subsidized by
advertising. In other words, the advertisers pay for content formation and
generation and the reader has no choice but be exposed to commercial messages as
he or she studies the content.
This model - adopted earlier by radio and television - rules the internet now
and will rule the wireless internet in the future. Content will be made
available free of all pecuniary charges. The consumer will pay by providing his
personal data (demographic data, consumption patterns and preferences and so on)
and by being exposed to advertising. Subscription based models are bound to
fail.
Thus, content creators will benefit only by sharing in the advertising cake.
They will find it increasingly difficult to implement the old models of
royalties paid for access or of ownership of intellectual property.
Disintermediation
A lot of ink has been spilt regarding this important trend. The removal of
layers of brokering and intermediation - mainly on the manufacturing and
marketing levels - is a historic development (though the continuation of a long
term trend).
Consider music for instance. Streaming audio on the internet or downloadable MP3
files will render the CD obsolete. The internet also provides a venue for the
marketing of niche products and reduces the barriers to entry previously imposed
by the need to engage in costly marketing ("branding") campaigns and
manufacturing activities.
This trend is also likely to restore the balance between artist and the
commercial exploiters of his product. The very definition of "artist"
will expand to include all creative people. One will seek to distinguish
oneself, to "brand" oneself and to auction off one's services, ideas,
products, designs, experience, etc. This is a return to pre-industrial times
when artisans ruled the economic scene. Work stability will vanish and work
mobility will increase in a landscape of shifting allegiances, head hunting,
remote collaboration and similar labour market trends.
Market Fragmentation
In a fragmented market with a myriad of mutually exclusive market niches,
consumer preferences and marketing and sales channels - economies of scale in
manufacturing and distribution are meaningless. Narrowcasting replaces
broadcasting, mass customization replaces mass production, a network of shifting
affiliations replaces the rigid owned-branch system. The decentralized,
intrapreneurship-based corporation is a late response to these trends. The
mega-corporation of the future is more likely to act as a collective of
start-ups than as a homogeneous, uniform (and, to conspiracy theorists,
sinister) juggernaut it once was.
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