This last weekend the young pirate party of Sweden (“Ung Pirat”) went to a festival to talk politics with interested people. When talking politics you often need something to attract people to your tent for a talk. The youth pirates decided to hand out waffles for free and managed to reach their goals of attracting a lot of people with the help of this. The event the youth pirates were participating at, was a free festival where one would think it would be ok to hand out free food but the festival tried to shut them down from handing out free waffles. Note: other free food was also handed out during the festival but apparently not as successful in diverging the customers from the paid options.
The problem was that a nearby tent was trying to sell waffles which for obvious reasons didn’t go as good as they expected. They then complained to the responsible people for the area who in turn tried shutting down the “unfair competition”. The youth pirates continued to hand out free waffles after they were banned from it since they disagreed on the decision and the responsible person didn’t have time to discuss with them about this issue. Because of this the security guards were called and they were about to be thrown out from the festival before they called the police. The situation got resolved by moving the “free waffle stand” further away from the people selling the waffles.
In this story we can see clear links to the filesharing debate and what is currently happening there. If you can’t compete with a service you try to shut them down. From basic economics we know it’s pretty hard to beat the elasticity curve and compete with free. Following this I see three options for someone trying to beat free:
1) Radically change your product to add enough additional value to beat the free option
2) Change your business idea, either giving up product completely or using a different monetizing model e.g. freemium method
3) Get rid of the competition, using legal methods or externalities to disadvantage the competition.
In the case of #wafflegate, as described above, the third option was used. The first thing they attempted was trying to stop them from making waffles, thereafter they tried to throw them off the area and the last compromise to disadvantage the competition was to add the externality of extra distance to the competitors product. Option number three is, most of the times, a short-time solution since others will try to find a way around this added externality imposed upon the market.
Most copyright owners seem to prefer option number three (some are using the other two options though). The third option entails trying to shut down the competition of filesharing to maintain the old outdated models of business. Since the old models have such a high opportunity cost (time, money, effort, middle-men etc) there will continously be attempts to circumvent the externality costs imposed upon filesharing which shows that it’s not a sustainable solution.
Using option number three is supposed to be a short time solution in order to create time for you to change your product or business model. The problem with copyright owners is that they are trying to use it as a long term solution. Instead of changing their product to add additional value or their business model they are short-sighted and see only the quickest and easiest approach.