For those of you unfamiliar with The Copyright Alliance, they are a “a non-profit, non-partisan educational organization dedicated to the value of copyright as an agent for creativity, jobs and growth.” They’re also the recent recipient of the Arnold Broido Award for Copyright Advocacy.

All-in-all, they’re a fantastic organization (in my opinion), and one that any creator or individual who cares about copyright or artists’ rights should be aware of and follow. You can learn more about them here.

Seeing as how both links for Starving the Artist here go to Amazon, and Amazon.com is down, I should point out you can also buy it at Barnes and Noble (plus it’s on sale there!).

I wonder how much money Amazon’s losing.  I’m guessing it’s a lot.

BTW, If you’re ever looking for a good way to see if a site is down for just you or for everyone, use http://downforeveryoneorjustme.com

I do plan on sharing my thoughts here on the site soon for those of you who were unable to attend, but in the meantime, Internet Retailer Magazine has done a good job summarizing my main points.  If you’d like the quick recap version, I recommend you read their article.  My own recap will be posted later this week soon.

Also, here’s a photo I found from one of the attendees of the presentation.

To help spur this trading/sharing, he’s offering a zip file containing multiple formats of the e-book on his site. He’s also encouraging those who download the file to upload it to all the file sharing sites they use and distribute it in any way possible (or, if they prefer, not distribute it at all).  Basically he’s giving permission for people to steal his book so he can see if it really hurts sales.

The problem with this experiment however, is that it’s really nothing more than a marketing tactic. By giving permission for people to share this book he’s not, in any way. embracing piracy, but rather he’s embracing alternative distribution channels.  Copyright law grants the copyright holder or administrator the right to determine the price and distribution allowed for any work owned/administered, so obviously if he’s telling people to trade the file and download it without payment, that’s his right to do as the copyright holder. All he’s done is lowered the price of this book to zero for the duration of his experiment.  (If this non-price will continue to be enforced once the thirty days are up, and if so, whether he decides to do anything about it are unknown.)

This is the point I’ve been trying to make (and my core argument in Starving the Artist): a creator absolutely should have the right to determine the price and distribution of his or her creation.  If someone wants to give away their work, that’s up to them.  In this instance, however, Konrath is not telling people to download all of his books in eternity for free – nor is he encouraging the more explicit pirates to actually print up copies of his book in printed format and sell them on their own (with no portion of sales going to Konrath).

What this “experiment” is is really nothing more than a version of the “free sample.”

Think of it this way: Let’s say you’re at the grocery store and they are giving out samples of a potato salad they’re trying to sell.  They have little paper cups filled with the potato salad, complete with little plastic spoons for you to eat it.  The goal is to get people to try it out and, provided the potato salad is any good, a percentage of those people sampling it decide to buy a pound for their barbecue.  For extra bonus points some of them even come back next week and buy it again (and the week after that, and the week after that).

Konrath’s experiment is really nothing different.  The blog post promoting this endeavor states, “JA Konrath, known for the Jacqueline “Jack” Daniels thrillers set in Chicago, offers this collection of short stories and novellas from the Jack Daniels universe.”  So what Konrath is doing here is offering one part of a larger whole of product.  In this case, his product is the Jack Daniels thriller brand. In fact, for this experiment it’s actually a sampler of samples, since the book being promoted is a series of short stories.  The point is, if someone downloads this collection and likes it, Konrath wants people to want to read more (and this time, pay for them).

Again, this is just simple marketing: offer part of a whole for free so people can decide if they like it or not, then encourage them to buy either the whole thing or your other, related products. Konrath’s positioning this as “testing if piracy is harmful” is really just semantics – it’s not piracy if he’s allowing it.  What’s more, by engaging in this promotion and all the press it has received (like the article you’re reading, or the one on Techdirt), is this anything more than a stunt to get those who don’t know about him to find out?  Or maybe even to encourage pirates to buy from him to strengthen their argument that piracy doesn’t hurt sales?

So, Joe, this is where my questions come in.  I’ll be interested to see the answers once they’re available.

1. What percentage of people downloading your book for free read it?
2. What percentage of increased sales are due simply to the extra press you’re receiving from this promotion?
3. What percentage of people who downloaded your free book paid for another one?
4. What percentage of people who downloaded your free book decided that, since you set your price at zero, the rest of your books were worth zero as well?
5. By pricing your book at zero, have you decided that your work is really worth nothing – and everything above that price point is gratuitous?

Here are my final thoughts:

It’s great to use free wisely; it’s an extraordinarily powerful tool. But by doing so, do we diminish the perceived value of other creative works?

When you give someone permission to take your work, you’re not encouraging piracy. Instead you’re giving away your work. The motives for doing so are yours alone.

What do you think? Should the music industry forgive and forget, instead taking this opportunity to try to monetize the immense userbase of Limewire users?  Is it even possible to convert them to paying customers?  Or are Limewire users just going to move on to another service?  Seeing as how it takes years for the music industry to stop a service like Limewire, maybe another can hop in for a bit (maybe dupe a few users) and make a couple million $. Or, perhaps due to the precedence set by this case the next one will fall all that much faster.

It will definitely be interesting from here on out.

The other portion of the cost that both of these types of items have is the cost of actual manpower to create.  There’s someone designing the underpants, just like there’s someone writing and performing the music. This even includes if a waffle was made by some sort of automatic waffle maker – that automatic waffle maker was created by manpower (or the robots that created it were created by people who programmed the robots). Or, if the music is completely computer-generated, someone created the computer program that allowed the music to be created. If a person’s time or talent has value, then creation has a cost.

The point I’m trying to make here is that everything has some sort of cost involved in creating it. Nothing is free to create.

With this cost come questions for creators. Do I pass any of that cost on to the consumer? What is my purpose for creating?  What is the price of my creation?

If any of the reason for the creator is monetary, then there must be some price to be paid by someone for some aspect (no matter how vaguely connected) to your creation.  If it’s not monetary, then what did you create it for?  Was it simply to better the human race?  Perhaps it was to strengthen the acceptance of a cause you feel strongly about. In both of those cases you’re at least charging the cost of a person’s time to consume your creation. There are plenty of creations out there that fall into all of these camps, and a lot more.  As such, there’s a lot of competition out there.

The easiest way to compete in business is by offering a lower price. If you are okay with assuming your time, knowledge, talent and effort are worth nothing monetarily, then it’s easy to offer your content for free.  With millions of people creating content today, a percentage of them are willing to offer their creations for free, and that percentage of a lot of people turns out to still be a lot of people. So what we have is a lot of content for free, competing with some content with a price. How does one compete with free?

Again, the easiest way to compete is by offering a lower price – and there’s no lower price than free – so instead, many individuals compete with free by offering free, plus something else for free (in an example of an e-book, think of an e-book but with a free bonus podcast).  So what ends up happening is that free competes with free in an effort to increase consumption. To what end that consumption is encouraged is up to the creator or distributor, but the battle right now lies ultimately in consumption.

If we back up to the cost of a creative work, however, the vast majority of that cost really is in time, effort, talent, skill and knowledge. Costs exist, but in our previous world where bits and bytes were not free (or nearly free), they cost raw materials to reproduce.  People actually paid for a physical object.  The fact is, however, that what they paid for was much more than the cost of the raw materials – it was the cost of the raw materials, plus all those skills, efforts, hours and smarts (put into an equation of expected sales volume, marketing costs, etc) that made up the price the consumer paid.  The consumer, however, placed their value on the physical product that they paid for, rather than the information or aesthetics that were portrayed via those physical media. When someone paid $15 for a CD, they said they paid $15 for a CD … not $15 for the music that Nirvana recorded and distributed to individual listeners for a cost that was below the actual cost of recording the music but was hopefully made up for (with little left over to pay for food) via volume.

Due to this idea of paying for the physical product rather than the creation within, it was easy for us to start viewing the actual media itself as the item with a price.  Therefore, when the media was no longer required and the new distribution options had little cost (I’m already paying for Internet access, why should I pay to access things via my Internet access) it was also easy for us to feel that the creations really weren’t something we should start having to pay for.  We didn’t pay for books before; we paid for the paper they were printed on and the shipping and the store shelf space.

The price was nothing. In the world of music, the new digital price actually started as nothing. The music industry wasn’t first to start offering their music online, but instead it was people – people who had been trained to think that the music itself really wasn’t what one paid for. After all, one doesn’t pay for the radio. So what happened was that by distributing music for free from the beginning, an anchor point was set for music to be worth nothing.  The fact that the music industry was very slow to respond with any sort of model on their own only reemphasized this idea.  The price at which music was available online was zero. There was no alternative – or if there was, people didn’t know about it.

A really simple explanation of the way pricing works is as follows: Costs are determined and volume is estimated. A profit goal is set. The minimum price should be equal to your total cost + your total profit goal, divided by volume (or units). Or, as a mathematical equation:

(Total Cost + Total Profit Goal) / Units = Price Per Unit

In today’s world of a digital economy, however, one can easily be led to believe that volume is potentially unlimited. Since the costs are only up-front for a creation that is distributed digitally (that is, the only costs are those costs to create the work in the first place – replication has no cost), and volume is unlimited, price can be set almost to zero and the profit goal can still be met, even as the profit goal reaches infinity. But if the profit goal is zero, and a lot of people have no profit goal (or if they do, they are assuming they can make a profit through another channel, perhaps through speaking engagements, branded automatic waffle makers, etc.), they can easily set their price to zero.

So when the monetary costs of raw materials are virtually zero, and one is willing to value their own time and work monetarily at zero, we end up with creations that are priced at zero. With a small percentage of a lot of people doing this, we end up with a lot of people pricing their content at zero.  There are also a lot of people pricing their content at prices much higher than zero. But regular people (consumers) are seeing a lot of stuff priced at zero. They then ask, “what’s with these people asking for monetary compensation?”

What happens is a product or service is set at a price, and if enough items are priced at that level for a long enough time, people accept that price as the price of the item. For example, if a pair of pants typically costs $70 at Banana Republic, one then assumes that a pair of pants at Banana Republic is worth $70. When the pants are on clearance for just $40, it’s a great deal – even though a pair of pants at JC Penny might only cost $40 normally.  By JC Penny setting their price at $40 normally they’ve set the value of their pants at $40 – so for their pants to be a great deal, even if they’re exactly the same as the ones at Banana Republic (in this example let’s just pretend they’re the same), they need to drop the price considerably.  The same was the case with CDs – when they cost $18 at Sam Goody and Best Buy started offering them for $12, Best Buy had the better deal. Suddenly $12 was a great deal – but over time, $12 started to become normal (the anchor point) and $18 seemed overpriced.

When music was offered for free online, an anchor was set. Other media, such as books or movies, was also susceptible, but didn’t catch on at the speed music did.  By the time the music industry was ready to compete they had to deal with this anchor, as well as the anchors they had set via the physical model.  A digital download of a song had some value, they argued, but that value was also less than the cost of a CD divided by the number of songs on it, since a CD also had physical raw material costs involved. As such, $.99 sounded like a fair price.

Still, more and more music is being offered for free – but this time it’s being offered for free by the bands, labels, etc. This is because, as I stated earlier, the easiest way to compete is by setting your price to free. By doing so you have set no barrier to entry other than the time it takes the user to download, the time it takes the user to listen (if they even do is another question) and the tiny bit of space it might take up on their hard drive if they save the song (which nowadays they don’t, since streaming is ubiquitous).

Of course, this phenomenon is not unique to music, but has expanded into all realms of content that can be recreated and distributed digitally. What’s happening though is that with more and more creations being set to a price of zero, the anchors are moving as well. Over time, the expected price for most creations will be zero.  This is the issue that the newspaper industry is battling now – and it’s the reason that Rupert Murdoch is setting up a pay wall for the Wall Street Journal. He has decided that his content has value – the work his journalists do has a cost – and their knowledge and expertise is actually worth something. This is why he’s charging – he’s attempting to reset the placement of the anchor.

Where anchors are set is purely subjective. Anchors are a battle of what creators want to be compensated versus what other creators are willing to sacrifice for their work. They’re a battle of what goals the creators are attempting to accomplish – is it to make money or to make a difference? Where they end up being set is ultimately a choice left to those who create, and what their goals are.

Whether consumers are willing to pay the prices asked is really a question of whether or not they have a cheaper alternative with a perceived value higher than the cost they paid.

But remember: the easiest way to compete is by offering a lower price. It doesn’t mean you’ll win the competition.

For further reading on the topic, check out this article by Monica Valentinelli.

What I want to discuss here, however, is from one single paragraph of the book.  It’s found at the bottom of page 102 (of the hardcover) and is part of Chapter Two, “What Will Money Be?” in a section labeled, “Pick Your Poison.”  In it, Lanier says the following:

“It is a common assertion that if you copy a digital music file, you haven’t destroyed the original, so nothing was stolen.  The same thing could be said if you hacked into a bank and just added money to your online account. … The problem in each case is not that you stole from a specific person, but that you undermined the artificial scarcities that allow the economy to function.  In the same way, creative expression on the internet will benefit from a social contract that imposes a modest degree of artificial scarcity of information.”

The reason I’ve deemed this specific quote worthy of its own write-up is this: it’s one of the most eloquent and comprehensible explanations of why everything on the Internet should not be free.

When something is free ad infinitum, whether or not it is free by the decision of the owner or simply by those people who don’t care and take it for free by their own volition, it immediately reduces the item or idea’s value by no longer being scarce.  One of the basic tenets of economic theory, and why things have value, is that scarcity, combined with demand, can cause the value and price of an item to rise.  Therefore, by creating something that individuals want, but by enforcing scarcity (even artificially), one can create something that has value.

In Lanier’s example above, money that is simply added to a bank account through hacking the system does not actually take money from anyone.  Instead, it has added additional money to the pool of already existing money, thereby reducing the value of money in general. If people did this enough, it would cause inflation, causing society as a whole to suffer, and could even lead to economic collapse. Even when the money is transferred digitally between accounts and individuals, it is money that has appeared out of thin air, and no one actually loses this money. It never existed in the first place, and will continue to never exist so long as it continues to exist in an intangible, digital form. What happens instead is money, in general, loses value due to lower scarcity, causing everyone to lose some by making the money they already had worth less than it was worth before.

By trading music or other creative works online, even though a physical copy of the work is not actually taken, from anyone, the value of that work is reduced through every duplication.  Of course, one could choose to allow people to copy and share their works, should the creator have another goal in mind other than monetary gain – such as to spread knowledge or joy, to promote their work with the plans to later charge for it or a related product, or simply to build ego by knowing others are accessing their work (whether or not people actually read or listen to all the free stuff they download online, or if those downloads are just a padding of numbers through potential audience, is another topic altogether). But, in those instances, the creator is still in control of his or her own work and will hopefully be aware of how reduced scarcity will affect the perceived value of their work.

It’s in Lanier’s last sentence above that he speaks the most truth when he says, “creative expression on the internet will benefit from a social contract that imposes a modest degree of artificial scarcity on information.”  This, however, will only happen when people begin to agree once again that creative works and information have value in the first place. It will only happen when people grow to respect that value and the work creators and intellectuals put into making their works and thoughts worthwhile.

You can read more about this at Torrentfreak. However, for more information I recommend checking out this article over at The Register in the UK, where representatives from the web host say they know nothing of this injunction, and even go so far as to refer to The Pirate Bay as “fully legit.”

The sad part is, that if the Pirate Bay gets disconnected, it’s almost certain we’ll see it pop right back up in some other country on another web service. I hate to say it, but perhaps it’s time we consider actually putting together laws that require ISPs to block access to sites that are known to be operating illegally. Otherwise, it’s just going to continue to be a game of whack-a-mole.

The news of this has been all over the web (WSJ has one of the best pieces of coverage), but I think Patrick Ross of the Copyright Alliance has one of the best responses to it on their blog.

I left my thoughts on the Copyright Alliance’s site, but thought it was worth sharing here as well. So, consider this my official response to the news.

“This is one of the best pieces of news I’ve seen reported in a long time. It’s about time this happened. I remember a few years ago, I was talking to some people I knew and found out that they don’t ever buy music – instead they only download from Limewire (or did at the time). The thing is, when I told them that what they were doing was illegal, they had no idea. Their response was “but I bought some pro version and a plan.” It was only after explaining to them that it still was unlicensed and nothing went to any of the artists or creators that they saw just how misled they had been.

Limewire’s entire business plan was built around the theft of copyrighted materials, and as you said, they were just fine with that. It’s good to see that the Judicial System has stepped up and given them the smack they so deserve.”

It’s about time.

On a web site we have the distinct advantage of being able to see pretty much everything that happens within its borders. By using analytics software like Google Analytics, Coremetrics or (my favorite) Omniture SiteCatalyst it’s extraordinarily easy for web designers, programmers and marketers to watch what users are doing with your site. The problem, however, is that most of these packages have a tremendous amount of data that you can look through. So, what your focus needs to be is to determine what information you’re looking for and focus on that.

For the purposes of this discussion, we’re going to focus on giving the visitor a remarkable experience. What is a remarkable experience? It’s one in which the user doesn’t want to leave you site until the goal is achieved. In my opinion, it’s not about flashiness or spectacle, nor about guiding the user through the loopholes you might want them to go through for add-on sales, extra page views, etc. Instead it’s about determining why is this person on my site and how do I get them to leave fulfilled?

That is your goal. If they are fulfilled they will return, and they will tell others to come as well.  If your business model is sound, good will come of this approach.

As for the analytics, however, the question remains how do I fulfill my visitors goals? What is my purpose?

Well, for starters, you need to figure out what that goal is.  If you’re selling shoes on your site, the customer’s goal is to find a pair of shoes he or she likes, and to order them – or maybe just to add them to the wishlist to ponder over – so your goal is to help them find the right pair of shoes.  If your site is there to give home improvement advice, your visitors goals may be to visit the site to find out how to accomplish a simple goal around the house (like wire a light fixture) – so your purpose is to get them to the right set of instructions (so they can print out the wiring diagram).

Once you’ve determined what that goal is, you need to find out what the barriers are to your customers’ success in achieving the goals. One of the best ways to do this is to watch for what are called “exit points” or “exit links” on your site. Where are people leaving?  If they’re leaving before their goal has been achieved, you need to determine if there’s a specific place where this happens.  If so, then that’s where you are failing them.  That’s the place you need to fix.  If it turns out that there are multiple places where people are leaving, then you will need to dig deeper.

In either instance what you’re going to need to start to do from here is determine what one problem is.  What is a single barrier to success that you can destroy?  It may be obvious, such as a broken link in an actionable area of your failing page, or it may be subtle, such as a variety of distractions on your pages leading up to completion of a goal, which combine to deliver a confusing experience with no clear path to goal fulfillment.

The point is, you need to find just a single issue and start there. Your analytics software will hopefully be able to help you with this. Before you look at the data, first look at the page you are trying to focus on and determine what the goal of the page is.  Figure out what a customer should do on that page to achieve the goal, and then look to see if they are acting on it or not.  The page, of course, may have several goals, but if each path is not clearly laid out, and one of the paths leads to a failed goal, then one of your paths is not clear.  It is imperative that you follow each of your paths and determine if any are failing – but first focus on the main path you want people to follow. If you can determine that a set group of users should be doing a set action and they are not doing it, then you have problems with your presentation.  You have something you need to fix.

This is what you need to watch for.  Where are the barriers to your visitors joy?  What are the things you have created that are stopping them from achieving the goals they came to you to fulfill? You need to find them and destroy them. It’s only through finding them, identifying them, and destroying them that you can create a fulfilling experience.

What did you do wrong today?