Mercatus’s Unhelpful Business Advice to the Creative Industries

Washington, D.C. is full of smart people with great ideas about how other people should run their lives and businesses. The more innocent of first hand knowledge and practice they are, the more generous and enthusiastic they seem to be with their advice.

While free market advocates are particularly fond of criticizing progressives for this sort of “helpfulness,” it is, in truth, a bi-partisan, pan-philosophical affliction.

For example, I have a friend who runs a business managing parking garages for various organizations and corporations in D.C. In one of those only-in-Washington moments, an executive at one of his accounts, a free market policy analyst, summoned him to a meeting to explain to him how to better run the parking garage.

The scholar proceeded to cite and explain various economic models that counseled changes in my friend’s business practices. As I listened to my friend’s story sympathetically, I thought of how I would respond. In truth, I’m cut from the same cloth as this scholar, so I probably would have cited Mises and Hayek back at him, and talked about the importance of distributed, first hand knowledge. We could have had a fine Washington think tank conversation – perhaps we could have perfected it by citing “data” supplied by rival trade associations.

My friend’s answer was simpler. After listening patiently, he asked the scholar a few questions: “Do you know how many cars came into this garage between 7 and 10am yesterday? Do you know how many spaces are in this garage? Do you know how many spaces are in the neighborhood?” “No,” replied the scholar. Of course, my friend knew the answers, and knowledge like that, combined with 20 years of successful experience explained why he ran his business the way he did.

The conversation pretty much ended there, with the free market advocate and the actual market actor staring at each other across the gulf between theory and experience.

I was reminded of this story when I heard about the error-plagued launch of the Mercatus Center’s new piracydata.org project. The free-market organization launched a website that proposes to answer the question: “Do people turn to piracy when the movies they want to watch are not available legally?”

To answer this question, the website takes a weekly top ten list of most-pirated movies from the TorrentFreak website, and then compares it to a list from CanIStream.It, which purports to provide information as to whether movies are available for rental or purchase via stream.

Initially, Mercatus claimed that only 1 of those top ten most-pirated movies was available for rental and 4 were available for purchase. It later issued a correction (buried at the bottom of this Washington Post piece), noting that, actually, 4 were available for rental and 6 for purchase. (In truth, Mercauts only concedes that 3 were available for rental, since the authors offer a qualification with respect to one of the movies).

What to make of all this? Well, putting aside the embarrassing errors (but the authors don’t seem all that embarrassed), first there’s the way Mercatus framed the research question: Do people “turn” to piracy because the movies they want are unavailable legally? Ah, yes, that familiar “turn” of phrase, as in being forced to “turn to a life of crime” by circumstances beyond one’s control.

It sounds to me like Mercatus is blaming the wrong victim here, which is what Jeffery Eisenach said in TechPolicyDaily. We skeptics weren’t the only ones who saw things that way. Many who praised the website saw it the same way. For example, TorrentFreak’s coverage said “Is Hollywood partly to blame for the high piracy rates of some movies? A newly launched website suggests that this may be the case, as it shows that the most pirated movies are not available to stream, buy or rent legally.” The CCIA’s blog similarly headlined its coverage: “Piracydata.Org Confirms Yet Again That Hollywood Should Evolve Business Models To Deter Piracy.”

Look, we all get it, skeptics and fans alike: There are certain questions you ask because you want to make a particular point by answering them. Is it really a surprise that the newest movies are the subject of the most piracy, and, may not be available quite yet, as their owners continue to exploit other markets? It would be more of a surprise to find “The Maltese Falcon,” “Casablanca,” or even “The Little Mermaid” among the most pirated movies. And yet, Mercatus chose to ask the question and gather the data. It seems disingenuous to claim that the authors were just curious and had no point to make about piracy.

Jerry Brito of the Mercatus Center explains that this point of view is wrong. Piracy is bad. Brito says he is not blaming the victim.

In both my post announcing the site and the Washington Post article Eisenach links to, as well as other articles about the site, I make it clear that there is no excuse for piracy. Piracy is illegal and wrong and copyright holders should be able to exercise their exclusive rights as they see fit during the term of copyright. I don’t know how much more explicit I can be.

Okay, sorry. So Jerry Brito is not blaming the victim. Except, of course, when he is blaming the victim on Twitter:

Brito

Brito also links piracy to Hollywood’s release windows – the implication seems to be that Hollywood should change its business model. Just as with my friend’s parking garage, the free market analyst wants to tell the market actor how to run his business.

But once again, I allegedly am doing the Mercatus project an injustice. I’m not the first to contend that Brito and his colleagues are, well, Washington know-it-alls, and Brito wants to make clear that he is not a meddler:

In my post announcing the site I wrote that “their business model is their prerogative, and it’s none of my business to tell them how to operate,” and that’s something I repeated in other articles where I was quoted. So to be clear, I don’t think movie studios have any obligation to do anything. And I certainly don’t think that shortening their release windows would “eliminate piracy,” as [one commentator] said.

So, Brito is not telling Hollywood how to run its business. I got a different impression from his friend and frequent collaborator Tim Lee, who quoted Brito in the Washington Post as follows:

Hollywood, [Brito] says, could “change its business model to take their own voluntary measures to deal with piracy,” by making movies more readily available through legal online channels. If it chooses not to do that, he believes, they have no business complaining that tech companies aren’t doing enough to combat the problem.

Putting snark aside, perhaps the authors should simply dispense with the pretext. All too often, we see arguments such as this that say ‘I think copyright is important and abhor piracy, BUT . . . ‘ And, after the “but” comes outrage at most any attempt by creators to enforce their rights and protect their investment. Or, as in this case, advice that excuses piracy and counsels surrender to piracy as the only practical way forward. Perhaps it would be less hypocritical for such commentators to admit that they are members of the Copyleft. While I think that it’s a terribly misguided and unfortunate position, it is all too respectable in libertarian circles these days. See the debate in which I participated earlier this year in Cato Unbound.

In any event, however, how about a little more modesty and a little more respect for copyright owners? In truth, the “content” industry leaders I’ve met are, as I’ve told them, way smarter than the Internet says they are. They are certainly smarter about their business than any policy analysts or other Washingtonians I’ve met.

The movie industry knows these numbers very well and knows about the challenges imposed by its release windows. They know their business better than their critics. All sorts of internal, business, and practical constraints may keep them from fixing their problems overnight, but it’s not a lack of will or insight that’s doing it. If you love the free market, then perhaps it’s time to respect the people with the best information about their property and the greatest motivation to engage in mutually beneficial voluntary exchanges.

Or you can just contribute to the mountain of lame excuses for piracy that have piled up over the last decade.

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