Business models

Interesting reading this morning.

On the one hand, a Vancouver Sun article with some fascinating quotes from Graham Henderson (president of the CRIA), and on the other, a Locus Online article by Cory Doctorow about the economics of giving stuff away for free.

The first article has various quotes about how Canada needs to "update" its copyright law, apparently so that the CRIA's members can try out their (pre-internet) business model because "we don't yet know that it won't work", and says that Graham Henderson has "a tone sounding a bit like panic". The second provides bountiful evidence (all somewhat circumstantial, because you can't release the same book both allowing and disallowing free downloads) that giving books away for free online helps sell more physical copies. So here's a business model that seems to benefit from the internet and that doesn't require any changes to the law.

One detail jumped out at me. In the Doctorow article, he cites a 2004 paper by Harvard PhD candidate David Blackburn that calculated that for music, "piracy" helps the sales of the 75th percentile and lower, hurts the 97th percentile and above, and does nothing in between. The CRIA's members, the huge multinational music companies, have built their business model on the star system - they drop anything below the 75th percentile like a hot potato and market that best-selling 3% for all it's worth. The Canadian music industry tends to be not-so-big names, so many of them probably benefit from p2p marketing, and very few are harmed by it.

So the split of all the actual Canadian record companies from the CRIA to form the CMCC, and the CRIA's continued insistence that file-sharing must be made illegal, both make perfect sense.

If you look at what's best for Canada, and what trends are likely in the future, Graham Henderson's panicky tone makes perfect sense, too. I bet King Canute sounded much the same.