Why does it matter if it's "fair?" Our economy is based on value propositions—that's why we can charge 100x the price for a box labelled "enterprise edition" that contains a stream of bits no different than the one labelled "home edition." The enterprise values the software 100x as much, so we make one exchange of value with them, and then make another value exchange with (presumably a larger number of) home users for a smaller price. For some people, the value proposition you exchange with them simply is "zero dollars per license."
Also,
> Isn't that how our economy works? You either have the money for something and you buy it or you don't have to money so you don't get it.
No, that's how a scarcity economy works; the people who don't pay don't get an X so there are Xs left over for the people who do want them. An information economy works completely differently: the best possible "solution" to distributing an information product is to have everyone in the world owning it at the maximum price they're willing to pay, on a value gradient all the way from $billions to $0.
"Why does it matter if it's "fair?" Our economy is based on value propositions—that's why we can charge 100x the price for a box labelled "enterprise edition" that contains a stream of bits no different than the one labelled "home edition."
Using this comparison, one piece of fine art is no different in value than the other because the value of the paint used to create each is the same.
"that's how a scarcity economy works; "
I keep hearing this argument and it's just wrong. Just like art, the scarcity isn't in the bits that you can copy. It's in the talent, time, and energy used to arrange those bits on a higher level.
When anyone can create (not copy) Photoshop CS5 in a few hours on their computer, you might have a point.
"An information economy works completely differently"
I like how software, music, and movies are called "information" only to make the argument that it should be free.
"the best possible "solution" to distributing an information product is to have everyone in the world owning it at the maximum price they're willing to pay, on a value gradient all the way from $billions to $0."
If you want to make a living, this doesn't work. If people are given the choice of paying $100 or $0, most will pay $0. This is why business doesn't work on the basis of donations.
But talent, time, and energy aren't the products being sold. Those are capital expenditures, and are already sunk costs by the time there is any product to sell.
The product itself _is_ the set of copyable bits, and this _is_ scarcity-free, due to having zero marginal cost of production.
In a non-scarce market, people pirating your game is economically equivalent to e.g. people reading books instead, or spending their time writing their own games. Pirates are just another category of people who aren't your customer.
The best possible solution to piracy is to _ignore_ it, and focus on identifying your actual paying customers and developing products for them.
But if you absolutely must think of piracy as lost sales, then use piracy volume as an input into your demand curve and adjust your pricing model accordingly.
But don't waste your talent, time, and energy trying to fight a Quixotic battle against a macro-level phenomenon that you have no actual control over.
"The product itself _is_ the set of copyable bits, and this _is_ scarcity-free, due to having zero marginal cost of production."
It doesn't have a $0 cost of production. Did it cost Microsoft $0 to develop windows?
"The best possible solution to piracy is to _ignore_ it, and focus on identifying your actual paying customers and developing products for them."
I disagree. While it is good to focus on paying customers, if an industry ignores it, they will quickly put themselves out of a job.
"But don't waste your talent, time, and energy trying to fight a Quixotic battle against a macro-level phenomenon that you have no actual control over."
It's the people that want free stuff that are trying to tell me I have no control over it. I know for sure that adding copy protection for software increases sales.
The other issue is with search engines like Google. If the pirates get organic keywords that are higher than a legitimate source and offer the same thing for free, many users will go to the illegitimate source and never purchase.
It's okay though. With the Internet getting faster and cheaper, I see most software apps going to a service eventually.
The cost of development is a capital investment, not a production cost. You may or may not recover that investment, depending upon a whole host of variables, most of which you will have no direct control over, presuming you even recognize their existence.
Software does have zero marginal cost of production, so someone making an illegal copy of your software does not create any actual cost for you in the way that someone stealing your physical inventory would. So the impact of an individual using a pirated copy of your software is the same as that individual not buying your software for any other reason. The macro-level impact of piracy is the same as the impact of any other macro-level factor that discourages people from buying your product, e.g. a competitor offering an equivalent or better product at a lower price point.
I'm not saying that you shouldn't assert your copyright in the face of brazen piracy. But the best way to earn your ROI for developing the product is to maximize the value that it creates, and thereby maximize the number of people who will willingly pay for your product. Focusing on pirates, who are manifestly unwilling to pay you, is a dead-end. Spending money on DRM is a waste of capital that could be used to improve the product and attract more paying customers.
Also,
> Isn't that how our economy works? You either have the money for something and you buy it or you don't have to money so you don't get it.
No, that's how a scarcity economy works; the people who don't pay don't get an X so there are Xs left over for the people who do want them. An information economy works completely differently: the best possible "solution" to distributing an information product is to have everyone in the world owning it at the maximum price they're willing to pay, on a value gradient all the way from $billions to $0.