Monday, May 13, 2002

Hollywood and copyright Three nice articles on Hollywood's jihad against technology, and Ernest Holling's (Dem. SC) willingness to sell them injunctive relief against the future. Here's the economics.

Hal Plotkin asks why Hollywood just doesn't sell its own distribution network that controls content perfectly and leaves computers alone. It's simple: such dreck won't sell and the content cartel knows it. Each manufacturer would have incentive to cheat and sell cheaper, uncrippled hardware people actually want to buy and thus bust the cartel. Only a collusive contract can bind cartels, and since these are illegal, Valenti has paid Congress to write it for him. "Industry standards" bodies have long supported this sort of collusive activity, but John Gilmore gets his economics wrong when choosing who will lose from Intel's "standards" suggestions -- if manufacturers have a choice they'll support open uncrippled hardware that people will buy.

Lawmeme has a good article on why digital copies are as lousy as analog copies, but at one point concludes that since bootleg movies only work when legitimate movies aren't available, Hollywood can easily fix this by releasing everything at once. Hollywood delays international movie distribution because of the option value in dropping duds that probably won't do well abroad, and delays DVD releases to price discriminate between consumers with different tastes. If the internet reduces their ability to price discriminate, they get less profits, and that for them is a very real problem.

Finally, USA Today mentions how Microsoft's draconian school licenses are driving people to free alternatives. Perfect price discrimination in one market makes the demand curve for close substitutes perfectly elastic (i.e. cross market price elasticity becomes infinite) which greatly increases their ability to steal share from the incumbent. The more content owners perfectly prices their wares, the faster free alternatives will arise if they have open distribution channels. This is why even perfect DRM won't save the content cartel so long as people can still offer free content.


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