If you think that they can’t, then you also would agree that the price is too high. They can’t even compete with neckbeards in their mom’s basement. Can you give an example of another business where this is true? Machining? Car manufacturing? White cheddar popcorn production? Generic drugs?
Yes, I tried to explain. It was sloppy of me.
I don’t know why this is odd at all. Price should be a function of the market, the result of constant haggling between producers and consumers. Individual producers are free to charge whatever they like. If that price is too high, they will have to lower it or stop doing business. If they could have lowered it, but didn’t, and then went out of business anyway, then I think it is fair to say the price was incorrect.
Now that we have established that the pedant’s sword of striking +1 you wield only goes one way, we can move on. Yes, you see the problem I am pointing out. It seems that the marginal cost of producing the next unit is extremely low, but the price of a new game is around $50. This is quite a large disconnect, even if we fudge a few numbers and leave a little wiggle room for the vagaries of business that would fill a ledger and not fit in a post on a message board.
Whatever my numbers would be, they’re higher than the 0 you’ve offered.
This not a new one. I said that piracy is itself evidence for the counterfactual I’ve plainly said is difficult to support directly.
It’s not relevant to the marginal cost of production. This is why I said, at the outset, “To me, the issue is the marginal cost of production.” You want to talk about something else, that’s fine, but it’s not part of my position, such as it is, which is admittedly a bit torn.
Then there should be less games. We should not subsidize an industry that would otherwise fail in a fair and free market (not free as in radical libertarian free before you start that shit up) with monopoly rents. I do not think that is a sound practice. Thankfully, a large portion of the world agrees with me about monopolies (until we have to apply them to copyright and patents, when suddenly everyone forgets their arguments).
The costs you described would not be variable costs.
“I sometimes feel that prices are correct. I sometimes feel that prices are too expensive. They are free to price their product however they wish. I believe that without monopoly power, prices would drop considerably. If they wouldn’t, piracy wouldn’t be a problem, because “pirates” couldn’t distribute games any more cheaply (how would they beat the margin?).”
I responded with this:
"…pirates distribute games for free. How on earth is a game company going to beat that margin? “”
You claimed that if game companies lowered game prices then piracy wouldn’t be a problem. I pointed out that pirates distribute games for free and there is no way that game companies can beat that margin. You can’t take what I said out of context of responding to what you said.
Car companies compete with thieves all the time. Do you watch the news? I’m sure that if they existed White cheddar popcorn would get stolen as well, and that prices would have to go up to compensate for this. Piracy will not cease to exist if game companies bring down their prices and it would be a silly reason to bring the price down. In context: game companies cannot compete on price with free, so they should not attempt to do so. I’m a photographer: and there are many different avenues where people can get free, legal photography. I don’t try and compete on price with the free photographer, and game companies shouldn’t try and compete on price with the pirates.
Of course. But you argue that marginal costs and marginal revenue are such important factors in the price of a product, yet these are unimportant factors in the incorrect price of a product. They are either important or they are not: and by your own definition they are not that important.
If you wave your magic wand and decide to completely ignore the factors that contribute to the price being $50.00 then you might be right. But in the real world, where game companies actually have to consider how many hours it takes to produce a game, your assertions are nonsense.
Ten years ago it cost me $1.60 to catch a bus into town. Yesterday it cost me $4.50. Ten years ago it cost me $160 to buy a computer game. I can now buy games for $89.00. Prices have come down significantly against the flow of inflation. It is cheaper now to buy games than probably any time in history, and games are getting cheaper. Why do you think that they are too expensive?
Then if you can’t support your assertion: then you should withdraw it.
But you seriously can’t argue that the price of a game should only be related to the medium of distribution! You can’t ignore the other costs, you simply can’t. Your position makes no sense. You refuse to even offer a suggestion for a better pricing model that would be profitable because you know that you can’t.
ROFL! What a ridiculous argument. Its a free market, and if you choose not to buy a game you can choose not to. People are “subsidizing” the gaming industry the same way they are subsidizing the cocacola industry, by giving them money in exchange for something they want. Game companies fail all the time. Prices are set in a way to help try and stop game companies falling over. What is this monopoly that you speak of?
Thankfully most governments agree the the current state of IP laws are the best they can be for both the producer and the consumer. And while you might think that a large portion of the world agree with you about monopolies, you have to firstly prove that such a monopoly exists in the first place before your argument becomes meaningful.
So what? They contribute to the cost of the product, do they not? How do you expect games to get made if they cost little more than the price of a DVD to the end consumer? Who is going to pay the programmers? The artists? Where is the money going to come from?
What it comes down to, and I’ve asked you this question before, if you think that games are too expensive, how do you think that game companies should price their products?
You seem to have invented a position I did not advocate out of whole cloth, then ask me questions based on this mythical position, then get upset when my answer doesn’t seem to make sense.
What position have I argued for? What did I say the alternative was to copyright? I will save you the trouble: I didn’t propose anything. I did say that the issue of marginal cost of production is most troubling. By indicating that pirates can reproduce a game for free—a point I didn’t make and would not claim—you have already agreed with my one point, that games are very expensive, given the marginal cost of production.
It’s the reason everyone’s prices go down. It’s called competition. Yes, piracy is illegal. It’s “piracy” and not “competition” because we’ve given a monopoly to the companies in question. Here’s another position I put forth: subsidizing industries through monopolies is unsound.
I am fully aware that their model is based on monopoly rents and like any monopoly they will jack up the price. It’s totally unsurprising.
They are incidental factors. Again, my use of “correct” was really sloppy there. I will not say it a third time, having already conceded the point on that term twice. Get over it.
No, it is not “nonsense.” Your understanding of business is nonsense. Here’s an example. A game company makes a game. It took them five years and ten million dollars, plus another ten million to advertise it. Now they can set the price. What determines the price? Don’t worry, this is a rhetorical question. What determines the price is whatever they can sell it for to maximize their profits. If they sell zero units, they spent 20 million dollars. If they sell ten million units, they still spent those same 20 million dollars. So what’s the difference? The price.
Development costs (and a host of other costs like you’ve brought up) are sunk costs. They’ve been spent and they are gone. They are never coming back. Now you’ve got a product in your hand and you want to maximize your profit. You want to maximize your profit today and in the future. The past is gone. Done. Never going back. You can’t “make up” what you’ve already paid. You can’t “recoup” anything. If this was going to be a good investment, you needed to question that before you dumped 20 million into the project because now, today, that money is gone and all you have in hand is your game, which you can burn to disc and distribute for some cost. So that’s where your profits will come from. The point at which profit is maximized in a competitive market is where the marginal cost is equal to the marginal revenue. If the marginal cost were less, you could profit by making more. If it were more, you’d be losing money and make less. This is because in a competitive market, you don’t get to set the price. The price is already determined by the market. You can either compete at that price, or you can’t.
Guess who doesn’t have a competitive market? That’s right! Copyright holders! Monopolies get to determine their price because they don’t operate in the face of competition. They don’t care at all what price the market wants. They, too, will produce until their marginal cost is equal to their marginal revenue but since they can set their price this point is different for monopolists. This difference is usually called economic rent. Other people can have rents, too, driven by scarcity. In the monopolists case, they create their own scarcity, because they’re monopolists. Nice gig, if you can get it.
Markets don’t have perfect competition and most monopolies aren’t perfect because there are substitutes, though not perfect substitutes. In the case of copyright, though, piracy is a concern because through the magic of reproduction you actually can have perfect substitutes. This is extremely scary to anyone in love with their monopoly because it means price really would be driven down extremely low.
I have answered this several times.
I can support it. I can’t support it the way you like. I can’t show you what the marginal cost of the next game burnt to disc is. This is why I am sometimes torn and think that the pricing could actually be something pretty close to ideal in a competitive market without monopolies. But the prices of DVDs and CDs suggest otherwise, as the production quality and technology are basically identical. Since DVDs and CDs are so much cheaper, and since piracy is apparently so cheap, it is hard for me to hold the position that in fact game pricing is already competitive even with copyright monopolies. But since I’ve never heard a proposal for what would replace copyright laws, and I’ve never made one myself, it is very difficult to get into details about this counterfactual situation.
You call this reasoning twisted, and playing rhetorical games. Frankly, you’re wrong. It’s a simple argument you’ve only attempted to ignore by frothing at the mouth about theft, which really is tangential as I’ve not once promoted piracy of games.
The price of any product is a function of the market. We’ve distorted the market by granting monopoly power called “copyright.”
I did. You should, too. Sunk cost is a psychological ploy used to great effect by monopolists. You might recognize them as the people who hold copyrights. Oh, and drug companies, who hold patents.
The extremely small number of positions I’ve been willing to take differ from the position you think I’ve taken. It does seem that the position you think I have makes no sense.
I don’t see why I would propose a pricing model. I know extremely little about a lot of the industries involved in copyright. Even if I were an expert on gaming, it wouldn’t apply to books, movies, scripts, song lyrics, sheet music… It is only the very stupid copyright law which lumps all these together, and your fantasies about my position which suggests I could possibly propose a pricing model.
This is not what I mean. Ideally, a free market has perfect competition. Obviously this is a pipe dream but plenty of products come very close to the ideal and they behave very much according to theory.
No, they aren’t. If that were true, game companies wouldn’t have to appeal to copyright and piracy would no longer actually be piracy because copyright wouldn’t exist.
If you do not understand what copyright is you are completely unprepared for this conversation.
No, they do not.
Assuming DVD prices aren’t too high, which is also very questionable given the evidence of piracy, that is their job to figure out, not mine.
Every business asks themselves this. Most of them don’t have copyrights on their product.
I have no position on the matter. I think this is an unreasonable request.
Unlike the proposal for patents, which I mentioned and sourced above, I’m not aware of proposals for fixing the problem with copyrights. I don’t have all the answers. I haven’t claimed to. I think copyright is a real problem, but it is trying to solve a real problem. It may be the best we can do, but I doubt it.
The past is the past? Not recouping development costs? What bullshit and nonsense.
Do you think a company develops a game out of the goodness of its heart?
No, they risk development money to create the game; the copyright protects them for a time so that they can set their price that they hope will a) recoup the development costs and b) then generate profit. People get employed along the way.
Companies don’t have bottomless pockets. Set the price wrong or develop something that no one wants and they’re screwed.
Pirates charge little or none because they’re not on the hook for development costs.
This is why piracy is illegal.
The fact you think the price is too high sometimes is just tough shit.
Actually, a huge number of American enterprises rely directly or indirectly on some kind of intellectual property for a major part of their income, be it copyrights, patents, trademarks, trade secrets or other.
The monopoly granted by patent law is basically in exchange for an inventor to disclose his innovation. Otherwise, inventors would instead keep their inventions as trade secrets, thus slowing down discovery and innovation.
And the economy as a whole and individuals benefit massively from all forms of intellectual property protection – America is essentially a producer of IP to the world. It’s a major part of our economy, and it also provides a huge percentage of the desirable occupations in our economy.
The public is also getting something huge in exchange for the monopoly granted to copyright owners, namely, a massive market for professional, high-quality works at relatively low prices. Without copyright protection, that range of works simply would not exist.
But, regardless of anything else, if you think the price is too high, then you have one acceptable, moral, ethical, legal choice – don’t use the works. Don’t buy it, don’t copy it, don’t view it, don’t read it, don’t listen to it. That’s how the market works.
Indeed, we benefit much. It’s a shame that we don’t benefit more. It’s a shame that we don’t research more. Instead…
The “life of a patent is too short” complaint has not gone away since 1981. It’s made an appearance in two different trade magazines I read. Resources wasted even by legitimate businesses to dodge patents (even while patenting their dodge) is really ridiculous.
Far from being a huge boon to society as such, patents mean we engage in too little of the wrong research too slowly. We should not accept this situation. We should find a better way of rewarding innovation.
Mind if I disagree loudly with the system in the meantime, or am I just supposed to eat shit and grin?
I wouldn’t be more pleased. But that’s not the point. I’m telling you your disagreement is mistaken and would be severely damaging to our economy. We are a country of creators and creators ought to be respected by the system. Especially in the field of entertainment. There’s no need for anyone to have to have access to a particular work of entertainment. If the price is too high, you can find some other work to enjoy, or, hell, go entertain yourself. But if you want to make use of someone else’s work, then, hell, yeah, you should respect their terms. That’s basic.
I think that given the ease and relative inexpense involved with its reproduction, treating IP more in the vein of drug patents might be worth looking at. I think if a corporation only could hold exclusive rights to distribute a movie, game or whatnot for a certain timeframe, say 1 to 5 years, it would be a much fairer system and they’d likely generate a bit more goodwill when cracking down on piracy.
You think you understand business? Not hardly.
Any decision to invest in something new - from a game to a microprocessor - involves a careful comparison of development and then distribution costs and expected revenue. Development costs might be sunk after they are spent, but pretending that an expectation of losing revenue through piracy would not prevent development in the first place is just absurd.
Games and music and movies are not the only place where marginal production costs are small when compared to development costs. The cost of making one more microprocessor is very small when compared to the cost of designing that processor. When that cost is recovered, the prices drops. Same as with games. It is easy to buy an older games whose development cost has been recovered (or won’t ever be) for not much more than the incremental production cost. If you want it cheap, wait.
Copyrights only protect the work and derivative works. If you develop a first person shooter, you can only stop someone from copying your exact FPS, you can’t prevent someone else from developing another first person shooter. If you could patent the idea of a first person shooter, then you can prevent this.
No, it is scary because the sales assumptions under which development of something is given the go-ahead are violated. When Disney produced “The Little Mermaid” being fully aware that as soon as they released the DVD someone else would produce a knockoff Little Mermaid DVD with a cheaply produced cartoon based on the original story. Totally legal, totally moral, and no problem because anyone clueless enough to buy the knockoff would, on discovering the lack of the songs, be more careful the next time. Disney didn’t have a monopoly on The Little Mermaid - only on the version with the particular artwork, the particular voice talents, and the particular songs. That movie - which I like at least - would not exist under your model.
What seems to be beyond you is that no content provider will do so without some reward. Now some people will do it as a hobby for egoboo. When I had a C64 I bought some disks of games contributed by users and they were worth every penny (i.e., not much). If I wanted a high quality game I shelled out the money for a cartridge.
It is not only money. Sun bought Star Office not to make money but as a strategic attack on Microsoft. Thus they distributed copies of it for free on download or for incremental production costs if you wanted a CD. Notice it did not violate Microsoft’s copyright on Office.
Sunk cost is not a ploy. Sunk costs are real. I got paid by them. Yes there are risks. My sunk costs when I was working on a particular microprocessor design, a bust, never got recovered. But saying that there are risks skydiving does not mean they are identical to jumping out of a plane without a chute - and you are more or less recommending that content providers do this by giving up their greatest source of revenue which is margin.
Really? Like which ones where copyright applies? Even open source software is copyrighted, though distributed under a license which makes copying legal in many cases - but not all.
The model for art was very different back then. Shakespeare made his money off of public productions of his plays, and patronage. Then productions could not be copied. His plays were of course not published until after his death, though I believe some of his poems were published before. But that is not where he made his money.
I don’t quite know what you mean by Leonardo working for profit. I believe he very much worked on commission. He did not have a line of Mona Lisa magnets, for example. Dante wrote the Divine Comedy not to be published but under the patronage of nobility. Vivaldi wrote the Four Seasons for someone outside of Venice, and then promptly had it performed in Venice. Being supported by music sales as opposed to nobility and performances only started coming in from the time of Mozart to the time of Beethoven. Obviously copyright was considered as important then, since it is in the Constitution. But before this time (say during the time of Bach) music was not written to sell in the modern understanding of sales.
Yes, in the long run all costs are marginal. This is the aspect where I flip back to “the price could be quite reasonable even with the monopoly protection.”
Which model is that?
What?
I acknowledge there are imperfect substitutes in existence.
No kidding they’re real. I don’t think I said they were imaginary. Appealing to them as a justification for price is rubbish.
You quoted me a lot, could you find the passage where I said this?
What? The accusation was that things cost money and people gotsta get paid, and the question was where is that money going to come from? Every business asks this question. Supermarkets, machine shops, and Disney.
…erislover, sorry I don’t have time to point by point reply, but real life has intervened, (But fortunately others have stepped in to point out where you have gone wrong.)
I’ve been busy using my psychological ploy (the seven thousand dollars I invested in equipment) to further my monopoly and have been getting subsidized by my customers. But you don’t have to worry, because I’m only charging the marginal production cost of $5.00 to cover my way, and according to you I’m already in profit!
Just thought I’d remind you that the debate is about alternatives to IP: and from your posts you sure look like you are opposed to the current form of IP law (but I can’t quite tell, because you seem to change your position with every post!). So I’m wondering why, in a thread specifically set up for those opposed to the current IP framework, you don’t want to tell us how it should be replaced. You want the bubble popped, how do you propose to pop it? And why should content creators like myself support your ideas, or even a change to the system?
So are you just in this thread to rant against copyright? You don’t want to propose anything?
The psychological ploy is using sunk cos… you know what, I am not going to contribute to this bullshit any longer.
I have specified the idea behind replacing patents. I sourced it. I mentioned I have no position on copyright, and say I have this one problem with it. You invent a position on my behalf, you misconstrue facts about copyright, you ask me questions to clarify my position… and then, when I do so, you complain that I don’t have a position.
Enjoy the rest of the thread. I won’t entertain this nonsense any longer.
The issue may be that those costs are fixed and one time. Once you’ve recouped them the tools don’t stop working. Your margin drastically increases since you are only billing for your time. Now while as a content creator you are free to price whatever you like, pricing must compete with both the market and customer perceived value. If you keep double dipping and raising prices, eventually you price yourself out of your market; or someone comes along and offers the same content for less. You see this problem in non creative businesses all the time. Suppose I buy a 30k piece of multi use heavy equipment. I charge my clients a “machine fee” for bringing it out on jobs. Fine and well. Eventually I recoup my 30K and now each “double dip” on the fee is pure profit. Now suppose that someone else comes along and offers the same service for far less. I have to adjust to the market or lose out. That’s only fair though. Monopolies cheat because they set the prices.
IP is difficult to price because the fixed costs are often very low or difficult to properly ascertain. I"m currently working on a Steampunk-type prop just for the hell of it. I don’t have much in it in materials because most of that was already laying around my shop. I’ve got time, but if I bill that piece at normal client rate for propwork it would price out of the general market. So how do I determine value? The only rational bet is to eat a “Projected loss” on my time, or I don’t sell the piece. If I put it up for sale online it’s a sure bet that someone will copy it if they can figure it out. However if I make my pieces reasonable within the market people will pay me rather than wasting all of their time trying to copy me. Content is a high-demand, low perceived value product. It is unique from physical products in that regard, and we should treat it differently in out business models.
Additionally, we have to consider the problem of personal use vs commercial use. Copyright should protect a holder from unauthorized commercial reproduction. Those people are actively harming the holder in a material way. They are profiting from their cheating. Someone who copies something once for their personal use only though isn’t doing that. Talking about projected losses isn’t really fair, because you don’t know if someone WOULD have purchased if you hadn’t been so exorbitant. That brings us back to the first point, that pricing has to be set by the public or in a distribution model that benefits them, or they WILL simply steal the work. There isn’t any way to stop it. So at this point, those in favor of a massive overhaul of IP rights are really just arguing that if you want to have anything left in the future, you’d better move forward. It isn’t about wanting free stuff or justifying theft, (though sometimes it is), it is about wanting a vast, free, and creative market available to everyone; not just those who can afford it.
No, in the long run fixed costs are still fixed costs. That is like saying that the cost of living in a house is only the marginal costs of utilities, property taxes, and the like, and that we could stay with a much reduced income by telling the bank that the mortgage is a sunk cost and can be ignored. For a business the cost of development is either paid directly, forgoing investment income, or perhaps borrowed. Same thing as buying a house.
Pepsi is an imperfect substitute for Coke. A Camry is an imperfect substitute for a BMW. When there is a monopoly situation most consumers don’t have the choice of close but not exact substitutes. Look at Windows vs Linux. For most consumers Linux is not a viable choice.
This is the heart of it. Pooh-poohing them as “sunk costs” is pretty much calling them imaginary for purposes of pricing - or, more accurately, for the purpose of making a decision about pricing. Why don’t companies devote entire labs to improving paper clips? Because the price obtained, set by the market, won’t let them recover the investment. If you drive the price of games to the paper clip level you won’t get anyone developing good ones either. Do you deny this?
Here
[QUOTE=You]
Every business has risk. Every business has employees. Every business has expenses. Every business has investments.
[/QUOTE]
Yes, every business has risks, but not all risks are created equal. The risk of product development in a copyright situation where the business can expect to recover its fixed costs are far different from those in a non-copyright situation where a business could only recover its marginal production costs.
And the answer, under a copyright system which allows piracy, is nowhere. The guys who crank out the DVDs can get paid, but not the ones who code them.
BTW, what you seem to be using as a definition for monopoly is way off. Monopolies involve markets, not individual products. You seem to be using it as a scare word, calling anyone who wishes to protect their IP a monopolist even if they are in a very competitive market.
The issue is that sunk costs cannot rationally affect decisions about the present and future. They’re sunk. The context specifically was regards to price.
They’re marginal because in the long run you keep making investments. A series of sunk costs made over time in the long run are variable costs. It’s the cost of doing business. For instance, with gaming. You cannot recover your investment, it is spent. But you can collect your normal profits and include in your normal profits the money needed to finance the next game. Such a perspective is actually totally independent of copyright, because all companies have such expenses.
Why would I deny this? What, specifically, have I said which suggests I would deny that decreasing the benefits of producing something would lead to less of that being made?
Please find me an economic paper which argues that patents and copyrights aren’t monopolies.
Fantasy position: erislover is arguing that we should eliminate incentives to innovate.
Real position: erislover is arguing that monopolies are not the right way to create incentives for innovation. erislover has supported this with a reference to a paper arguing that monopolies, with respect to patents, fail to provide enough incentives for the right kind of research fast enough.
Fantasy position: erislover says sunk costs don’t exist or don’t count.
Real position: erislover says that in the discussion of marginal costs under common timeframes sunk costs are not rationally related to present and future decisions about price.
Fantasy position: erislover only cares about marginal cost.
Real position: erislover’s problem with copyright monopolies are related to marginal cost of production. erislover is concerned with many more things. The fact that erislover mentioned this one concern does not constitute proof that no other issues are relevant.