Pirates As Underserved Customers: Borrowing Thoughts From Another Industry

News flash: the music industry has a problem with piracy. Shocking, right? The p-word has become the center of industry attention ever since the mass-acceptance of digital music about a decade or so ago, and a viable solution has yet to be found. Industry luminaries are still spending the bulk of their time trying to figure out a way to make customers pay using the existing channels of distribution, like jilted lovers who spend the final days of their relationships trying to get their own back. ISP Taxes, new implementations of DRM, and martyring  with the DMCA have either proposed, tried and/or failed. The consumer still steals music and now they hate the record companies more than ever.

After reading this article on an SMU panel featuring Jason Holtman, Valve Software’s president of business development, it is clear the music industry could stand to learn lessons from outside sources. Piracy, as you may have guessed, doesn’t just cause headaches within our chosen field, dear readers. The PC gaming market has been struggling with the issue for years, and has suffered through similar doomsday proclamations about industry demise and consumer outrage over “outlandish” copyright enforcement. Holtman however, seems to think the problem isn’t the people who are stealing, its the people who aren’t supplying.

Valve has managed to be highly profitable in a floundering market sector, mirroring in many ways the success of iTunes by building a digital distribution platform that is convenient and instantly accessible by a global market. In so doing Valve has cut out the heart of the reason why piracy takes place in the first place: supply that doesn’t meet demand fast enough. In the bad old days, different markets received their product at different times. Customers in Russia, for example, would have to wait as long as 6 months to get their hands on a release that their American counterparts already have. As a result, the piracy rate amongst Russian consumers was sky high. Before the implementation of officially sanctioned digital distribution, there was absolutely no way around this. Physical product takes simply too much time to move through physical space.

It is true that the greatest amount of piracy tends to occur in markets that feel they are under served. From a global perspective, this generally means people in non-Western countries, who are subject to different street dates than their counterparts in Europe and the USA. When combined with an inability to purchase the music legally when it is available anyway, then it is no wonder piracy is so rampant.

What Holtman is advocating is, to borrow a phrase from Guy Kawasaki, turning the window into a mirror. Times are pretty dark now anyway, so the only thing we are going to be able to see are our own reflections staring back at us. The business side of the music industry will continue to shrink as the result of poor business practices and the economy and it is given fact that physical product is dead. What is important now is a focus on providing access to everybody in a way that is egalitarian and of a better quality than the free alternative. Itunes seems to have pulled it off, and Amazon is playing a great second fiddle, but there is room for this approach to work for everybody. Continuing to blame consumers or, on the other hand, acquiescing to illegal behavior because doing things properly is too much work is simply inadequate and lazy.