Monday, February 1, 2010 - The Progress & Freedom Foundation Blog

Complementary Goods and Debates about E-Book/Music/Video Pricing

During a recent blog post on William Patry's self-parodying, dishonest, and hate-filled book Moral Panics and the Copyright Wars, ("Copyright Wars"), I argued that disputes between creative industries and technologists who create new means to access creative works tend to be notoriously complex because creators of new content and creators of new content-access technologies are producers of complementary goods.

Producers of complementary goods do not want to destroy each other, but they would love to commoditize each other. In other words, a producer of a complementary good should want to drive the price of any complements produced by others as close as possible to marginal cost in order to maximize the share of mutually-created value that it could potentially capture.

For a concrete example of what I was talking about, review Clash of the Titans, an interesting, opinionated, and perceptive account of the recent clash between and Macmillan over ebook pricing. It represents a thoughtful analysis of the complexities lurking behind these debates. Moreover, the issues outlined are relevant to debates about online pricing of all types of expressive works--music, video, news, periodicals, etc.

Thanks to Marginal Revolution for highlighting this post.

PS: Speaking of Patry's vile book Copyright Wars, I just belatedly perceived another of its many glaring ironies. Around a year ago, the unhinged Patry was putting the finishing touches upon its false and hate-filled claims, (e.g., "I cannot think of a single significant innovation in either the creation or distribution of works of authorship that owes its origins to the copyright industries."), in order to depict an ugly alternate reality in which copyrights had so failed to support the production of innovative works that they should be wholly repealed: "In other areas where a government monopoly, created to serve the public interest, is blatantly abused over a long period of time, it is taken away" (p.199).

Meanwhile, back on Earth, funding provided by copyright industries was empowering Director James Cameron to put the finishing touches on the years of work and the millions of dollars in R&D required to create the beautiful alternate reality depicted in his wildly popular film Avatar. A finer testament to the vacuity of Patry's rabid, unreasoned hate is scarcely conceivable....

posted by Thomas Sydnor @ 11:58 AM | Antitrust & Competition Policy , Books & Book Reviews , Copyright , E-commerce , IP , Innovation , Internet , Mass Media , What We're Reading