“Sue em all” Awesome

Techies frequently rag on the RIAA “sue em all” campaign, saying that it hasn’t worked and never will. They’re wrong.

As an example of someone saying Sue Em All is not working, this sober analysis by professional economists describes the situation this way:

A catch-all phrase covering letter writing,
bandwidth throttling and legal action against those who upload and
download files. Whilst understandable as a choice given the current
coordination problems, there is little evidence suggesting the costly
process of pushing down on the black market will indeed raise up the
demand for the licensed market for music. Furthermore, there exists the
real risk of a ‘Whack-A-Mole’ game – persistent reappearance of
unlicensed sources for music upon the closure of any source.

“Shadow
pricing P2P’s economic impact” (Will Paige, David Touve, Keith
McMahon; MCPS-PRS Alliance)

It’s true that individuals in private life are just as free to do filesharing as ever, and that the amount of filesharing isn’t going down. However, it’s not true that businesses can incorporate filesharing.

A business that builds on filesharing creates unacceptable risk for its investors. The investors are about return on investment, and they aren’t ok with giant settlements or big ongoing legal bills. Businesses who need music are usually forced by their investors to cut licensing deals, despite the brutal expense.

Google’s settlement of the lawsuit over the book-scanning program is a good example. They had a pretty damn good legal case if they wanted to fight it out, but they stood to gain more by making up. Fighting meant uncertainty over whether the final judgement would vaporize the entire publisher project in the end. Settling now meant putting bounds on the costs.

Standing on principle is not what businesses do. They exist to make money. Making money means controlling risk. Controlling risk means preventing ruinous legal judgements.


And users gravitate towards experiences supported by business, because business support allows for better usability.

Case in point, the Apple silo. Apple makes it very easy to get music onto the iPod by buying at the iTunes music store. If you’re an iPod user, you’re an iTunes user, and if you’re using that software then it’s often easier to buy licensed music from the iTunes store than to download from a filesharing network and import to iTunes.

Not that users *can’t* do filesharing — that would be a ridiculous claim — but that the usability of licensed commercial suppliers is greater.

And usability is a huge factor. People have a hard time operating computers. They have an easier time when businesses devote resources to helping them. When they have an easier time of one thing than another, they do more of the easy thing.


Again, it’s not that lawsuits against private filesharers have caused private filesharing to go away. For an individual engaging in filesharing the calculation is clearly on the side of doing it. Individuals who are rational actors *will do filesharing*.

It’s that the same calculation doesn’t produce the same result when it comes to support businesses.

I hear you say: what about My Favorite Software, which is still around? What about X-Factor-Gee-Whiz-2000? What you don’t know is that the proprietors of those companies almost certainly are having meetings with the labels. They are making the pilgrimage to Santa Monica to kiss the ring and seek absolution. If they’re still doing what they’ve always been doing, the reason is probably that they can’t get a favorable deal.

Open source software is an exception; without investors, it doesn’t need to control risk. Generic software which can be used for filesharing is the other exception. Nobody thinks it might lose a big court case.

As a result of all this, the record labels are busily cutting licensing deals. It’s simply not true that they have scared the customers away. Now, maybe the companies taking out those licenses are going to go out of business, leaving the labels dead in the water in the long run. But the jury is out on that. We won’t know for a few years whether licensees can survive and under what conditions.

What we do know is that the labels have created a customer base by suing it into existence.