The problem is, people already have (had? I'm not following the wave of shuttings-down) a pretty much optimally convenient distribution system in the shape of the P2P networks. No branding, so you don't have to care which record company produced the song, no money to spend to get the file. No absolute guarantee that you'll get the right file, and mediocre labelling - "Mozart - Moonlight Sonata.MP3" was an amusing example I found yesterday.
I don't believe that people will pay $16 for convenience.

It would also be much more convenient for me if I could just randomly walk onto aeroplanes and trains, and pay my fare on board or at the other end. But instead, they spend lots of money on ticketing systems which have the effect of making travel less convenient for me.

This isn't a new "digital economy" question. Vast chunks of the economy are already devoted to "access control" of one kind or another. The Guardian once ran a thought experiment to try and work out how many people would be unemployed tomorrow if we all suddenly turned completely honest overnight ....

...trying to protect your intellectual property by making your products inconvenient to use is a losing long-run strategy.

Hmmm. Then I need to find some other rationale for my cryptic and impenetrable blogging style.

I don't believe that people will pay $16 for convenience.

I would. P2P networks like kazaa could be vastly improved. Better metadata, better access to files (9 out of 10 dl attempts don't work), greater variety of files, better search and sort capabilities, better client software, etc. I'd pay $10-20 a month for that.

DD, those expensive access control systems are for services whose cost of duplication is much greater than zero, the cost of duplication of an mp3. The cost to duplicate a movie is still tangibly greater than zero, but not for long.

In addition to convenience and cost, there is also a trust/security component to digital commerce.

Some sites seem to require IE for viewing, and I just skip them, being perhaps overly paranoid about that browser's well-known security holes/spyware issues. Not to mention pop-up intrusion.

On the trust front, I won't use the web to re-load a Starbucks card, because the process *requires* me to sign up for Microsoft Passport(tm), instead of just asking me for a credit card number like everyone else.

Competition [Amazon vs. B&N vs. Booksamillion, eg] seems to breed customer friendly digital commerce environments. It seems unlikely that over extended spans of time the sprawling and famously quarrelsome entertainment business will be able to avoid embracing usability to hold onto customers.

Mr. Womack:
Obviously the P2P service is not optimally convenient for you and there is room for a more accurate service , maybe even one you would pay for?

Mr D Squared:
Surely Ryanair is a good example of people trading the convenience of open tickets nd reserved seating for a more bus like approach? Part of the reason they can do this is because it is now easier to design flexible ticketing systems. Not an entirely new world but change nevertheless.

My question is how a system can generate the content in the first place?
There rarely seems to be much discussion of the price elasticity. Still less the fact that most artists do not make money out of their recordings. They get a relatively small part of the revenues and usually have to pay production and promotion costs.

Perhaps the answer is to concentate on live recordings instead. These could be made for far less than the studio recordings popular now. The musician could then distribute them and not worry about piracy at all. This model even has a precedent in the Grateful Dead. Specialist music venues could promoote their acts on web sites. Instead of restricting fan sites the artists could encourage them.

I don't think this is a new point in itself but most discussions of the subject do little more than praise or damn the status quo.

In a unique crackdown on illegal file-sharing, a Danish anti-piracy group mailed invoices to alleged pirates demanding compensation for downloading copyrighted materials off the Internet, an attorney for the group said on Tuesday.

The Danish Anti Piracy Group (APG) identified 150 alleged pirates asking them to pay a combined $133,600, said Morten Lindegaard, an attorney for the group. The biggest offenders face a bill of $13,360.

"We are demanding full payment for the use of these copyrighted materials," Lindegaard said. The APG has worked with the Danish branch of music trade body International Federation of the Phonographic Industry, to crack down on online piracy. The decision to seek compensation for downloads opens up a controversial new front in copyright holders' ongoing campaign to curb consumer piracy on the Internet, a phenomenon blamed for a decline in CD sales and upswing in the free trade of video games, computer software and video games.

http://www.reuters.com/newsArticle.jhtml;jsessionid=EDHAGHMKM1KBUCRBAELCFEY?type=internetNews&storyID=1809254

Previous to 9/11, I regularly visited the wonderful web site of Arnold Kling, www.arnoldkling.com. He may very well be our most astute observer regarding technology issues. Kling should be far more famous than he is currently.

Arnold Kling has written only one book, Under the Radar. It is written expressly for those entrepreneurs contemplating to start an internet based business. I suspect that there is no better book written on the subject.

Russell wrote:

>>DD, those expensive access control systems are for services whose cost of duplication is much greater than zero<<

Not sure this is true. If a train is running with an empty seat, what's the marginal cost of putting my bum into it?

Jack: Good point re: Ryanair. One might also bring up the example of the retail industry, which also did well from moving from the "access control" counter service model to the self-service superstore (massively increasing theft losses and shrinkage, but making it up on volume and costs). But I still think that the general question of convenience versus protection is much more complicated and nuanced than Brad and Arnold Kling seem to think.

David Thompson wrote:

>> Arnold Kling has written only one book, Under the Radar. It is written expressly for those entrepreneurs contemplating to start an internet based business. I suspect that there is no better book written on the subject.<<

I'll get it to read as soon as possible. You also might try Stan Liebowitz's new one: "Re-Thinking the Network Economy", which, had it come out five or so years earlier, might have saved some investors billions of dollars.

Hal Varian has taken exception to some things Liebowitz wrote in it about he and Carl Shapiro's (1999) "Information Rules". Currently there is a lively debate at Usenet's sci.econ over this, including Varian and David Friedman.

If you don't want to sort through the threads via Usenet, you could read it at Google:

http://groups.google.com/groups?hl=en&group=sci.econ

Look for the thread titles "In his own words [re: Liebowitz Unchained]", and, of course, "Liebowitz Unchained".

I see that Stan Liebowitz has put up some of his, "Re-Thinking the Network Economy", on his website:

http://wwwpub.utdallas.edu/~liebowit/book/chapter1.html#_Toc536554

Of particular interest to this thread is his chapter 7, "Copyright and the Internet". He describes what is in it (from the url above):

>> Chapter Seven contains a lengthy discussion of the sale of music and other copyrighted material on the Internet. ....I take the reader on an extended review of the impacts of copying, on a history of previous instances when the owners of copyright have ‘cried wolf’ about their demise, only to be proven wrong by events as they unfolded. .... I also explain how record companies might have made an important tactical mistake in shutting Napster down since new technologies based on such Gnutella protocols are likely to be a more fearsome threat to copyright owners.

>> This chapter also discusses new technologies known as digital rights management. These technologies are viewed with great suspicion by many analysts who view them as providing far too much power to the sellers and possibly engendering a diminution of free speech. My analysis, however, suggests that these fears are unwarranted.<<

" >>DD, those expensive access control systems are for services whose cost of duplication is much greater than zero<<

" Not sure this is true. If a train is running with an empty seat, what's the marginal cost of putting my bum into it?"

That's not his point. The cost of duplicating another seat on the train is not remotely close to zero. More importantly, your use of that seat means no one else can use it. The issue of copyright is for products that are not "used up" when someone consumes them.

>>That's not his point. The cost of duplicating another seat on the train is not remotely close to zero. More importantly, your use of that seat means no one else can use it. The issue of copyright is for products that are not "used up" when someone consumes them.<<

I understand this perfectly. However, I am right.

Remember, train companies do not sell seats; they sell journeys. The question of duplicating the seat does not arise if the train has (as almost all trains do) empty seats.

Similarly, the fact that my occupancy of the seat precludes someone else from occupying it is irrelevant if nobody else *wants* to use it.

Just as with a digital recording, the marginal cost of providing another journey on the 1400 from London to Penzance is zero, or very close, and my consumption of that seat does not alter the marginal cost of providing another seat. If you're going to claim that non-marginal factors are important, go ahead, but be aware that you are questioning the very foundations of neoclassical economics!