Wednesday, January 2, 2008

Economic copy protection

Suppose I've created something really cool, say a screensaver that's so entrancing that when you see it on my screen, you've got to have it. I agree to give you, and only you, the binary for it, for a hefty sum. Bear with me -- it's a thought experiment.

You've got the binary. I've made no effort to copy protect it. You can copy it as much as you want and give it away to all your friends if you want. Will you?

My guess is no. If you've paid a bunch to have my screensaver on your screen and your screen only, why would you give it away? Will I copy it and give it to someone else? Not if I want to do business with you again.

In effect, the work is copy-protected, but by economic, not technical means.

Now suppose you grow tired of my creation. You could just give it away then, but why not try to get something out of it? Say, sell it to your six friends that have been drooling over it, with each paying 20% of the original price you paid me. They get the cool screensaver at a heavily discounted price (to make up for their not having had it hot off the press), and you get a cool 20% profit. Plus the use of the cool screensaver in the meantime.

But If I'd known you were going to do that, I would have been better off just selling to you six friends to begin with, and maybe to you as well if you could tolerate not being the only one with the new work.

With more customers I can charge less per customer, but by charging less I will also pick up more customers who don't see any need to refrain from copying the work and giving it away. If you pay, say, $4 for something and get as much enjoyment out of it as you would from a fancy cup of coffee, your investment at that point is zero. So why not give it away (absent any technical or legal barrier)?

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