Open Source, Piracy, and Networks

Many people who believe current copyright laws are too strong have suggested that sharing benefits publishers. A number of artists agree, but publishers remain unconvinced. They continue to push for draconian legislation and digital rights management which interfere with our ability to use the content we pay for. Ken Camp argues that this will ultimately fail: content is not king, “content is a commodity . . . we are the value.” His argument is very similar to Steven Weber’s insight in The Success of Open Source1.

What Weber says is this. Most economic theory is based on excludability and scarcity. Most goods are both excludable (you can stop someone else from using them – your car, for example, when you lock it) and rival (there is a limit to them, so the more I have the less someone else can have). Software is different: it is both non-excludable and non-rival. If I have a piece software, I can give it to you without incurring any cost or disadvantage to myself. As a result, all sorts of economic mechanisms, such as supply and demand, break down.

One such mechanism is the problem of free-riders – people who take from a common pool without putting anything in. A good example is fishing: it is in the collective interest that we not overfish the oceans. But it is in the individual interests of fishermen to free-ride. If I take a few extra fish I’ll make more money. Of course, it’s in every other fisherman’s interests to do the same. And so we overfish, stocks collapse, and everybody loses.

For most goods, free-riders would be a serious problem. Open Source seems to suffer from more than it’s share. In fact, we are all free riders – you, me, just about anyone who uses a computer. I use Mozilla, Open Office, my mail is sent through an SMTP server. And yet, Open Source doesn’t even discourage free-riding (in other contexts called piracy). Why not?

The first part of the explanation is obvious: software is non-rival and non-excludable; you can’t “overfish” software. But Weber goes one step further. He says that while free-riding is a problem for most goods, for software it can actually be a benefit. Open Source developers allow free-riders to use their software because it is in their own interest.

The key is positive network externalities. Every additional copy – even if made by a free-rider – increases the value of all the other copies. This is the reason for Windows’ dominance. Windows runs on close to ninety percent of the world’s desktops. Why? Because most software is written for Windows. Why is most software written for Windows? Because Windows runs on most of the world’s desktops.

Ken explains how people using content – like music, films, and books – increase its value:

When we make it our own, we add value with our joke, our quotes, and even with our getting it wrong. We are the value. We’re the value that makes LOTR the blockbuster. We’re the value that makes that hit song #1. . . . The Internet isnt’ a delivery mechanism for content. The Internet is a collaboration mechansim for us in the value chain. We are not consumers. Consumers eat the steak from the market at dinner and the steak is no more. We’re not a market. We’re not a target audience. We’re the top of the value chain. We are the value-add.

Ken is talking about positive network externalities. He’s talking about how even free-riders can increase the value of content. I hope he’s right. I hope Weber’s right. Then everybody wins.

Notes

1 Harvard University Press, 2004.

2004-09-27

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