There’s a great debate about movie piracy going on over at WaPo’s “The Switch,” kicked off by the launch of a new web site – PiracyData.org – by our friends at the Mercatus Center. The Mercatus site is headlined by the following question: “Do people turn to piracy when the movies they want to watch are not available legally?”
The implication is that piracy of movies that aren’t being offered legally is OK, or at least less bad, than piracy of movies that are currently available.
This is a complex issue – too complex to cover all the angles in a brief blog post. But I want to focus on one question: If you believe copyright holders have an obligation to make all content available to everyone all the time (as PiracyData.org seems to suggest), at what price would you require them to offer it? Should it be based on cost, or will you permit price discrimination – i.e., pricing based on intensity of demand? Either way, who will set these prices, and what economic models will be used to ensure they are welfare maximizing?
The reality of the movie business is that content is released and re-released, taken off the market and put back on — “windowed” as they call it – in order to efficiently price discriminate, i.e., to make content available at something close to marginal cost to some customers, some of the time, while charging others – those with higher willingness to pay – prices high enough to defray part of the sunk cost investment. It’s simply another form of the efficient, competitive price discrimination engaged in by ISPs. And, if it’s OK for Comcast – as I suspect most of the folks at Mercatus agree – it ought to be OK for the movie labels too.