Thursday, January 26, 2006

Please copy me!

Digital Rights Management (DRM) applications have a horrible but deserved reputation as being designed to STOP you from doing things...usually preventing you from copying digital content and giving it away. It tempts only the finest hackers, (and sometimes just the mediocre ones) to break the copy protection for fun and fame. The average user could care less.

Rights management applications that treat ease-of-replication as an asset rather than a liability, now there's an idea. This philosophy enables Superdistribution, which actively encourages free distribution of information-age goods via any distribution mechanism imaginable.

The definition of Superdistribution: superdistribution n. An online retailing scheme that encourages the free and widespread distribution of digital files (e.g., music files) that can only be opened under a restricted set of circumstances. These restrictions include opening the file only on a single computer; opening the file a limited number of times; or allowing the file to be opened only after a payment has been processed.

Nova Spivack writes in his "Minding the Planet" blog: "Superdistribution harnesses basic human drives to save money and make money. It's more powerful than copy protection, more powerful than ethical arguments, and more powerful even than fear of legal prosecution.

"Piracy comes about because people like to get things as cheaply as possible. When calculating the "cost" of getting something, we need to consider not just the pricetag but also the rest of the transaction-cost -- for example the cost in time to locate something, download it, potentially pirate and crack it, etc. To combat piracy, we need to bring the total cost (including all transaction costs) of paying for digital products down to roughly equal or less than than the total cost of pirating those same items. One way to accomplish this is too keep lowering prices of goods. But there are price-points below which sellers lose their margins and thus cannot pass. The problem arises when the total transaction cost of piracy is still less than the lowest commercially-viable total transaction cost to purchase a digital product legitimately. In such a situation piracy flourishes because sellers simply cannot compete by lowering prices any further. So what is a seller to do in that case?"

"Fortunately there is a solution: Sellers can effectively lower the total transaction cost of purchasing versus pirating by using superdistribution. Superdistribution enables "peer-to-peer" marketing and selling. The concept is simple. I buy a product from Seller X and pay price Y for it. But I can then promote it to my friends and if one of them buys it, I get a commission that reduces my price Y for my copy. If they then further distribute the product to their friends and so on down the line to some number of levels, I get further comissions (fractional by social distance of each purchaser from me). This is sometimes called "network marketing" and is fully legal in the USA so long as no up-front fees are charged to parties before they can become resellers and start earning commissions (at least this was the law last time I checked -- but do your own research to be safe if you are planning to go into business doing this!). In other words, you don't have to buy a product before you can resell it to others and earn commissions -- you can resell it and earn commissions even if you yourself don't own it."

Spivack continues: "In any case, legal subtleties aside, the concept is what matters here. Superdistribution reduces the buyer's total transaction cost, and even enables them to potentially get their product for free or even make a profit if enough downline sales result from their referrals. The catch is that it only works in cases where the product is easily superdistributable, and the customer has good enough connections to easily find downline buyers. Finally, it only makes sense in cases where the market is not already saturated -- where there are still lots of potential buyers who haven't bought the product yet."

"Superdistribution, if done properly, will virtually eliminate piracy. The reason is simple. If you buy a product wouldn't you rather get a lower price or get it free or even make money, if you could? Because superdistributing a product has this potential, but giving it away for free does not, parties who buy products are more likely to then superdistribute them than they are to simply give them away for free to their friends. Now what about the case where a party does not buy a product? Superdistribution wins there too because even non-buyers can act as resellers -- in other words, they can make even greater profits than buyers because they didn't even spend anything. So in short, if a suitable superdistribution mechanism is provided, people will use it to resell digital products they download and/or buy rather than giving them away to others for free. This is really the solution to the music industry's woes -- it is far more effective than any form of digital rights management or legal action. By enabling non-pirates to benefit financially compared to pirates, non-piracy can naturally be brought about for the majority of cases."

Is Spivack's vision too broad and grandiose? We don't think so....

I'll show you how to put his vision into action in future installments.


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