Thanks to everyone who listened and gave some feedback on the previous podcast, I learned that some people still didn't agree with my point of view about piracy and DRM. So I'm taking advantage of this blog to attempt a longer form explanation of my idea.
Because of the nature of digital goods, there is the incentive and ability for independent actors to distribute the digital good closer to the actual marginal cost. These independent actors are called pirates. They spend a smaller fixed cost uploading the digital good, and charge only skeevy ads in the sidebar of your favorite torrent site, plus a bit of goodwill.
The obvious reaction to this argument about piracy is that possible doesn't make it right. And I'll admit, that's actually a tough reaction for me to work through. But here's the rub - it's not just possible, its inevitable. There is an incentive to pirate, and there is nothing that can ever completely stop a pirate from doing so. If it's video, I can always point a camcorder at my screen, and upload that video, completely separate from the original file.
So the best way to handle piracy is to acknowledge it is a competitor. The music industry has done so, and is now more profitable now than it was before Napster, and music is still pirated, and distributed for free on youtube and similar sites. The cost to buy music has gone down significantly, but its decreased to somewhere very close to the marginal cost through marketplaces like iTunes, Pandora, and Amazon. Which brings me to another notion, the notion of multiple aspects of a price.
