Three years ago I published a book of short stories in Israel. The publishing house belongs to Israel's leading (and exceedingly wealthy) newspaper. I signed a contract which stated that I am entitled to receive 8% of
income from sales of book after commissions payable to distributors, shops, etc. A few months later (1997), I won coveted Prize of Ministry of Education (for short prose). The prize money (a few thousand DMs) was snatched by publishing house on legal grounds that all money generated by book belongs to them because they own copyright.In mythology generated by capitalism to pacify masses, myth of intellectual property stands out. It goes like this: if rights to intellectual property were not defined and enforced, commercial entrepreneurs would not have taken on risks associated with publishing books, recording records, and preparing multimedia products. As a result, creative people will have suffered because they will have found no way to make their works accessible to public. Ultimately, it is public which pays price of piracy, goes refrain.
But this is factually untrue. In USA there is a very limited group of authors who actually live by their pen. Only select musicians eke out a living from their noisy vocation (most of them rock stars who own their labels - George Michael had to fight Sony to do just that) and very few actors come close to deriving subsistence level income from their profession. All these can no longer be thought of as mostly creative people. Forced to defend their intellectual property rights and interests of Big Money, Madonna, Michael Jackson, Schwarzenegger and Grisham are businessmen at least as much as they are artists.
Economically and rationally, we should expect that costlier a work of art is to produce and narrower its market - more emphasized its intellectual property rights.
Consider a publishing house.
A book which costs 50,000 DM to produce with a potential audience of 1000 purchasers (certain academic texts are like this) - would have to be priced at a a minimum of 100 DM to recoup only direct costs. If illegally copied (thereby shrinking potential market as some people will prefer to buy cheaper illegal copies) - its price would have to go up prohibitively to recoup costs, thus driving out potential buyers. The story is different if a book costs 10,000 DM to produce and is priced at 20 DM a copy with a potential readership of 1,000,000 readers. Piracy (illegal copying) should in this case be more readily tolerated as a marginal phenomenon.
This is theory. But facts are tellingly different. The less cost of production (brought down by digital technologies) - fiercer battle against piracy. The bigger market - more pressure is applied to clamp down on samizdat entrepreneurs.
Governments, from China to Macedonia, are introducing intellectual property laws (under pressure from rich world countries) and enforcing them belatedly. But where one factory is closed on shore (as has been case in mainland China) - two sprout off shore (as is case in Hong Kong and in Bulgaria).
But this defies logic: market today is global, costs of production are lower (with exception of music and film industries), marketing channels more numerous (half of income of movie studios emanates from video cassette sales), speedy recouping of investment virtually guaranteed. Moreover, piracy thrives in very poor markets in which population would anyhow not have paid legal price. The illegal product is inferior to legal copy (it comes with no literature, warranties or support). So why should big manufacturers, publishing houses, record companies, software companies and fashion houses worry?
The answer lurks in history. Intellectual property is a relatively new notion. In near past, no one considered knowledge or fruits of creativity (art, design) as "patentable", or as someone's "property". The artist was but a mere channel through which divine grace flowed. Texts, discoveries, inventions, works of art and music, designs - all belonged to community and could be replicated freely. True, chosen ones, conduits, were honoured but were rarely financially rewarded. They were commissioned to produce their works of art and were salaried, in most cases. Only with advent of Industrial Revolution were embryonic precursors of intellectual property introduced but they were still limited to industrial designs and processes, mainly as embedded in machinery. The patent was born. The more massive market, more sophisticated sales and marketing techniques, bigger financial stakes - larger loomed issue of intellectual property. It spread from machinery to designs, processes, books, newspapers, any printed matter, works of art and music, films (which, at their beginning were not considered art), software, software embedded in hardware, processes, business methods, and even unto genetic material.
Intellectual property rights - despite their noble title - are less about intellect and more about property. This is Big Money: markets in intellectual property outweigh total industrial production in world. The aim is to secure a monopoly on a specific work. This is an especially grave matter in academic publishing where small- circulation magazines do not allow their content to be quoted or published even for non-commercial purposes. The monopolists of knowledge and intellectual products cannot allow competition anywhere in world - because theirs is a world market. A pirate in Skopje is in direct competition with Bill Gates. When he sells a pirated Microsoft product - he is depriving Microsoft not only of its income, but of a client (=future income), of its monopolistic status (cheap copies can be smuggled into other markets), and of its competition-deterring image (a major monopoly preserving asset). This is a threat which Microsoft cannot tolerate. Hence its efforts to eradicate piracy - successful in China and an utter failure in legally-relaxed Russia.
But what Microsoft fails to understand is that problem lies with its pricing policy - not with pirates. When faced with a global marketplace, a company can adopt one of two policies: either to adjust price of its products to a world average of purchasing power - or to use discretionary differential pricing (as pharmaceutical companies were forced to do in Brazil and South Africa). A Macedonian with an average monthly income of 160 USD clearly cannot afford to buy Encyclopaedia Encarta Deluxe. In America, 50 USD is income generated in 4 hours of an average job. In Macedonian terms, therefore, Encarta is 20 times more expensive. Either price should be lowered in Macedonian market - or an average world price should be fixed which will reflect an average global purchasing power.
Something must be done about it not only from economic point of view. Intellectual products are very price sensitive and highly elastic. Lower prices will be more than compensated for by a much higher sales volume. There is no other way to explain pirate industries: evidently, at right price a lot of people are willing to buy these products. High prices are an implicit trade-off favouring small, elite, select, rich world clientele. This raises a moral issue: are children of Macedonia less worthy of education and access to latest in human knowledge and creation?
