As a citizen of a Third-world country, I have been using pirated stuffs for years. Not until recently when I started working in a First-world country that I decided to pay for what I use. Even then, I still feel ripped off at times.

The guity feeling piracy caused me was that of theft, although not as much. It makes me wonder if I were really stealing.

Of course, I did not steal. What I did was to make unauthorized copies of something: a software, a music track, or a movie. By doing so, I was gaining something, without paying back to the copyright holder. After I make my copy, the copyright holder does not lose anything, or only a negligible amount of thing. What they lost was a potential sale, which accounts to zero dollar, because I would never be able to buy such stuff even if no pirated copies were available. Holywood movies, for example, are created with the US audiences in mind. Letting an isolated African watches such a movie does not make the company lose any money, nor any money to be stolen. The value was never there to begin with.

This confusion comes from these facts:
– It costs nearly zero to make copies of these Intellectual Properties.
– Supply: Infinity. Demand: elastic according to the pricing.

So, instead of making a “copy” of a rice bowl, and asking the African for the cost of “copying”, the US companies are making copies with zero cost, and ask the African for a ridiculous price over its movie.

It’s worth noting, however, that intellectual property exists from ancient times. Copyright and piracy only arise recently as the mere artifacts of the computer and the Internet that renders the traditional pricing model invalid. Piracy is the result of the current flawed pricing model.

The unavoidable question is, then, what is a better pricing model.

People don’t buy the movie. They buy the experience of watching it. For example, I don’t care about The Avengers itself. I do care that I want some laugh, have some surprise from the plot, and has something to discuss with friends that have watched it. Any movies other than The Avengers that can serve my need can also replace it.

There are such products in the current market: Spotify and Netflix to name a few. Even cinemas offer such products. You go to the cinema to have the experience of watching movies in widescreens with high quality sound effects, pop-corns, friends and other audiences. In the long run, I think copyright holders will obtain their income from two main sources: delivering the experience by themselves (liveshows or cinemas), and through a subscriber model (Spotify or Netflix). The latter will play a more and more important role, as they are in the better position to affect the users’ attention.

As for softwares, downloads will be reduced to minimize the risk of piracy. Enterprise softwares will be priced by customization & maintenance service, while popular softwares will gradually be replaced by online apps which are either free or very cheap. There may be niche markets where this prediction fails, because there are so few parties in those markets to bring the market to an equilibrium, graduate-level textbooks, for example.