Monday, August 27, 2007

A Parable About Copyright's Future

When more players enter the market for expressive works, an author faces both new competitors and new customers. What affect does that have on copyright's power to stimulate authorship? Assume, both for the sake of simplicity and because it seems reasonable, that the ratio of authors/consumers holds steady. I posit that copyright will in that event offer greater rewards for authorship. Allow me to explain, here with a parable, and in a later post with some graphs.

The Parable of the Village Authors

There once existed an isolated village of 1,001 people. Of them, only Amarel had the gift of writing entertaining words. Many villagers valued her tales, so the counsel of elders instituted a copyright law to encourage her authorship. Thanks to that law, Amarel earned a decent living, selling one new story a week for a dollar apiece.

Only 500 of the villagers purchased Amarel's works, however. The rest, who preferred music to literature, found her work a bit too pricey for their tastes. And opinions about her work varied even among the 500 villagers who did purchase it. Two hundred and fifty of them, who preferred poems to prose, found it just barely worth the cost. The remaining 250 found her stories precisely to their liking—so much so that, had she only known, Amarel might have charged them nearly $1.50/work.

One day a group of 1001 refugees appeared. Their homes had been wiped out in a flood, so they sought permission to settle in and around the village. The counsel of elders, having pity on the refugees and judging them very much like their own people, agreed. The village thereby grew to include 2002 people.

The newcomers included Berek, who shared with Amarel a gift for writing. In his old home, he had played a role almost exactly like that played by Amarel in hers. He had enjoyed copyright protection, earned a living selling his works to half of his neighbors, found 250 of his customers complacent, 250 of them ardent, and so forth. Whereas Amarel wrote stories, however, Berek wrote poems.

What happened when Amarel and Berek began to compete for customers in the newly enlarged village? Amarel lost to Berek 250 of her customers—those who favored poetry to prose. She kept the 250 customers who had always regarded her stories as a bargain, however. Amarel found among the former refugees 250 new fans, moreover, who happily purchased from her the prose that Berek had denied them. Berek experienced the same turn of fate, trading 250 barely satisfied customers for 250 devoted ones.

The growth of the village thus left unchanged the number of customers served by Amarel and Berek. It allowed them, however, to better serve what customers they had. Amarel could focus on the villagers who favored prose, whereas Barek could focus on those who favored poetry. The authors thereby found that they could raise their prices and win greater profits. Their customers gained, too. Granted, they now had to pay more. But most of them were happy to finally get the art they loved best, and all of them paid less than they thought the art worth.

Who did lose? The villagers who, though unwilling or unable to pay $1.25 for the right, would have enjoyed reading Amarel or Berek's words. Though it would have cost next to nothing to make sufficient copies to satisfy those villagers, copyright stood in the way. Thus were many simple joys foregone.

Moral: As the market for expressive works grows, assuming that the ratio of authors to consumers does not increase, copyright owners tend to earn larger profits.

[Crossposted to The Technology Liberation Front.]


Gil said...


You implied (but didn't state explicitly) that they raised their prices to $1.25 per unit.

Anonymous said...

Okay... but technology has greatly eased the process by which artists can produce work. You can have print-on-demand books published, you can make a professional music CD with on a MacBook Pro.

Therefore the ratio is changing, wouldn't you say?

Tom W. Bell said...

Gil: I'm content to argue that they would raise their prices to between $1 and $1.25. How close they get to the upper bound depends on how well they can discern their customers' preferences.

Hamilton: I guess you could say that the ratio of *publishing* artists to consumers is changing, granted. But I wanted to keep that complicating factor out of the present analysis. Do note, though, that it does not necessarily force the conclusion that copyright should get stronger.