Core Value & The Packages It Comes In
If I purchase a Playstation Portable, I own it. It is my property. So what motivates me to buy a PSP? Well, to answer that question, we have to consider the core value that is inherent in a PSP. Yes it’s really just a physical object but its core value is it’s a great little entertainment system.
One could argue that there are other values to be derived from possessing this physical object, e.g. it’s a status symbol that boosts my popularity with my friends, but few would dispute that it’s inherent value lies in its capabilities as a video game machine, portable movie player and handheld web browser. It’s impossible for me to replicate or share that core value with anyone else unless I give up possession of the physical container that houses that core value.
This is all just a long-winded way of saying that the core value of the PSP cannot be decoupled from the physical container that carries it. While this all may seem like metaphysical babble, this inextricable pairing of perceived value and physical representation is what creates business opportunity. Without that lock-in of value, Sony can’t slap a price on a PSP and generate money.
Sixty-Eight Glorious Minutes Of Wonderful Core Value
When I purchase a compact disc, I own it. It is my property. I can lend my CD to a friend. When I do so, I no longer enjoy its use. Let’s assume for a second that its 1982, and I really can’t easily or affordably replicate the music on the CD. So applying the same test as the PSP, why is the CD valuable to me? Is it because it has great cover art? Is it because it’s shiny and round? Obviously not. Nearly all of its core value comes from the music encoded on it. Take away the music, and it’s pretty much worthless. And so, the physical CD is really just a container. It’s no more valuable than the PSP that is never turned on.
Here Come The CD-R’s!
Fast forward 20 years, and hand us 50X CD burners, MP3 encoding and 100 blank CD-R’s for $12, and the proverbial plot thickens. Today, anyone can easily decouple the music (the core value) from the container (the CD). CD’s used to cost $18 or $20 because the ability to extract that core value wasn’t there. This barrier to decoupling created an incredible business opportunity. In other words, a large portion of that $18 wasn’t derived from packaging or paying artists, it was derived from the tight entanglement that once existed between the music and the physical container that housed the music. It’s sort of like a tax that’s been artificially slapped on after the fact.
Now that we’ve untangled things, the opportunity for record labels to tax us is disappearing. So what is that core value really worth? $3? $5? $10? Who knows. We need a reappraisal because the world doesn’t need the containers anymore. Or stated differently, that physical artifact which gave record labels a place to slap on a price tag is disintegrating.
What we’re witnessing now is the flailing and screaming of an entire industry drowning.
The laws that everyone points to: copyright, "fair use", DMCA and such are hardly worth entertaining because they really amount to feeble attempts to reconcile laws that protect creative works that are indelibly tied to some physical representation (like a painting or sculpture). Nobody’s bothered to speak of how to deal with creative works that simply don’t need physical objects. Our economy is primarily grounded on the ability to buy and sell goods and services. To date, we lumped in creative works with "goods." Well, we don’t need the goods anymore. Now what?
When In Doubt, Load The Shotgun
I’m a premium MP3Tunes customer. MP3Tunes allows me to store my music online so I can access it from anywhere via a web browser, Winamp or iTunes plugin. A few days ago, I received an email from them stating that they were being sued by EMI records for what I guess is copyright infringement. EMI is freaking out because their core value is now flowing over wires. They’re trying to somehow apply the container tax when we don’t need their containers anymore.
"Say hello to my…(eh, you know the rest)"
It really isn’t surprising that record labels are putting up a fight here. It’s a very large and slowly dying industry that is going to go down swinging. There’s a lot to lose here. Still, the carpet bombing approach is just plain ugly. It reminds me of the closing scene of Scarface, where Al Pacino, surrounded on all sides, decides to go out in a blaze of gunfire. College students, grandmas, storage services, software companies. The whole thing borders on silly. It’s sort of like to nut who goes into the mall and just randomly starts shooting.
It would serve the record labels well to replace litigation with dialogue and a broader view of intellectual property. Lawsuits suck. They require time and money. They create stress. They rarely result in a positive outcome. EMI and other labels should put their guns away and start to embrace this inevitable shift.