TCS Daily

Moral and Economic Clarity

By James V. DeLong - May 23, 2003 12:00 AM

The big news a month ago - cover of Fortune, great hoopla in the business mags, the whole bit - was Apple's iTunes, an on-line music service that satisfies the fantasies of the user community. It allows downloads, CD burning, transfers among different kinds of listening devices, sharing over internal networks, 200,000 songs (for starters), and ease of use, all for 99¢ a song. The music is protected with DRM software to keep it from being shared over P2P Internet networks, but that is about the only inhibition on its use.

Consumer response was ecstatic, and a million songs were downloaded in the first week, despite Apple's small share of the computer market.

The big hubbub a fortnight ago was that a gap had already been found in Apple's protection system, and users were beginning to swap iTunes downloads over the Internet, avoiding even the 99¢. Apple has patched the hole, but of course this kind of thing tends to be an arms race, and it is only a matter of time until new gaps are found and iTunes songs reappear on the Internet.

This episode casts a strong light of moral and economic clarity onto the dispute over downloading. During the past couple of years, many excuses for the legitimacy of P2P music swapping have emerged. The record companies have been accused of dragging their feet, of protecting their business model of physical distribution of albums, of charging $16 for CDs with only one good track, of failing to develop convenient on-line services, and so on.

While the record industry would disagree, these rationales are not devoid of merit. They ignore the legal and practical difficulties that must be overcome to establish a fully-licensed downloading service; but, nonetheless, a music lover could, without undue moral strain, take the position that once good online services became available he would be happy to meet his obligation to support the creators, but that it was the industry's responsibility to provide such services and, until they came into existence, he would feel free to take advantage of the fantastic cost savings attainable from distributing bits of information over the Internet instead of by truck.

Now, this justification is out. The industry is doing its part. Apple has made the biggest splash, and will soon expand to Windows, but other services are coming online as well. So it is time for the downloaders to respond and end the free lunch. Most iTunes users agree, and have recoiled in dismay at the crackers. (It helps that the target is Apple, beloved by techies, not just the demonized record industry, of course.)

This leaves two groups of resisters. The first consists of the morally obtuse, who, while they will undoubtedly think of some new rationale to justify piracy, are responding either to the simple principle, "if it's there, steal it," or to the vandalistic itch to destroy for the sheer hell of it.

The second group of resisters is more complex, more ideological, and more important, especially because it is not clear that Steve Jobs of Apple knows that it exists. Many members of the academic and tech communities are opposed to the idea of property rights in the creations of the intellect. They assert not only a right but a duty to make all systems for enforcing intellectual property rights untenable, and regard breaking protections as a public service.

When pushed to explain how the producers of intellectual creations are to make a living or to finance production of their work, they slide off into vague talk of "new business models," compulsory license fees, government subsidies, or university and foundation support. They live in an abstract intellectual world of communitarian cooperation rather than the real world, which depends on harnessing ego and greed for the common good, and in which property rights are our best tools for doing so.

Were these abstractionists running the show, the impact on the creative community would be similar to the description of the Soviet Union in the 1920s provided by novelist Alan Furst in Dark Star, as "[A] kind of dream world, a mythical country where idealistic intellectual[s] . . . actually ran things, quite literally a country of the mind. Theories failed, peasants died, the land itself dried up in despair. Still they worked twenty hours a day and swore they had the answer."

Apple and the other music services, and, ultimately, providers of Internet distribution of movies, books, and other information, must cope with both these oppositions. It will not be easy because they tend to merge, with vandalistic impulses often hiding behind ideology.

Obviously, the response must be multitiered. For one thing, the content industries - especially for music - should be emboldened in their enforcement efforts by the fact that music lovers now have reasonable alternatives to the free peer to peer networks.

In addition, the entire creative community must pay more attention to defending the basic morality and utility of intellectual property. There is too much whining about what consumers think they are entitled to, which seems to be to free ride on producers. Why not focus on the opposite proposition - that producers are entitled to reap the fruits of their labor and creativity, and that consumers should be grateful to them?

In fact, consumers should want to pay for creative work. It is through prices and markets that they can send signals that something is valued and that more of it should be produced. And all non-market forms of financing - taxes, subsidies, pooled funds - depend on committees of bureaucrats for their allocation, the antithesis of consumer sovereignty. It is markets that make consumer preferences effective by providing financing for what consumers want. Those who insist on making content free are simply spoiling the system for everyone, and the "information should be free" crowd is actually the enemy, not the friend, of consumers. The content producers should reiterate this incessantly.

So let's drink a toast to Apple, using hard cider of course, and urge it stay the course and defend itself. There is a lot at stake, for all of us.

The writer is Senior Fellow and Director of the Center for the Study of Digital Property, The Progress & Freedom Foundation.

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