Tuesday, February 2, 2010

The Age of Epic Battles Raging Over Location

We are now beginning to see the signs of the raging battles over location picking up all over the place. By location, we don't mean physical land, water, or any other physical resource. Instead, we're talking about the physical location of an individual who is a potential consumer of resources.

Up until very recently (and I mean that literally, in the sense of saying 'up until a few years ago'), it was fairly easy to control the physical location where many of the coveted resources (i.e. products and services of the current economy, or cultural artifacts of the current civilization) were to be consumed. For example, just as devout religious practitioners are expected to congregate in a physical church or other places of worship, so were consumers of cultural goods, who expect to enjoy works of art or plays or concerts, expected to congregate in a physical location (such as a concert hall, or a theater, a museum or an art gallery, etc.)

Similarly, movie goers are expected to consume the motion pictures at a very specific physical location, such as a movie theater. Same goes for people who enjoy going to the circus, or to the country fair, etc.

The ability of the businesses (who produce and publish products to be consumed by the market) to fully control the exact physical location where the act of consuming is to take place, is the vital part of the profit making model that such businesses pursue. Thanks to the virtue of the fact that such physical locations are enclosed in wired fences and walls, with only a single point of entry where the business can charge the admission fee, the businesses can ensure that only consumers who pay the fair price get the privilege to enjoy the offered products and services.

What we're talking about here is the good old world of 'haves' and 'have nots', which is the time honored way that human civilization works. The elites (the 'haves') find themselves in a very fortunate situation where they are in the possession of an upper hand, meaning they have sufficient means at their disposal to go ahead and produce things and services that the underprivileged, the 'have nots', cannot produce. This arrangement then creates sharp and extremely lopsided inequality, where the underprivileged (who by far outnumber the privileged elite) are starving and craving for the products and services that the elite can offer. And the elite is indeed offering these thing for a fee, often by charging what we call the 'admission fee'.

For example, if I wish to enjoy the much ballyhooed movie "Avatar", I have to make a trip to the local movie theater, where I'll be expected to pay the admission fee before I'd be allowed to get in and watch the spectacle.

If I then, upon finishing watching that movie, leave very impressed and the next day decide I'd like to see that movie again, I must do the same thing all over again: make a trip to the movie theater (a physical location where that movie is playing), and pay the same admission fee yet again. The business that's running this operation (i.e. the movie theater) doesn't care whether I'm their regular patron or that's my first visit ever -- the admission fee is the same for everyone. No discrimination there.

That same model applies to many other businesses, such as museums, art galleries, circus tents, Disney Lands and Disney Worlds, theaters, concert halls, stadium, and so on. All those business ventures operate on the 'admission fee' model, which, of course, implies the necessity to make a trip to the actual physical location where the event is taking place. And once there, it would be extremely difficult to cheat and beat the system by gaining the entry without paying the admission fee. There are physical barriers that are legitimately erected for the exact purpose of preventing anyone from cheating and getting in for free.

If you were to pay closer attention to how does the above system actually work, you will no doubt notice that it is all based on the assumption that end user, the actual consumer, has no other ways or channels whereby he or she could consume the content. The consumer is forced to make that trip, to visit the designated physical location, otherwise he or she won't be able to experience the event.

Where this model breaks down is in the cases where the consumer gets to be sufficiently educated and self-reliant. For example, let's talk about a consumer who is literate. Armed with solid education and a healthy does of self-esteem, such consumer now gains extra freedom and can get a book and can then consume that book in ANY location. All of a sudden, we see that certain resources, such as books, magazines, newspapers etc. do not require people to visit an exact physical location before they can consume these products.

As the technology keeps maturing, we see more and more of such liberating instances being offered to the general public (to the typical 'have nots', the unwashed masses). The invention of radio, for example, with the supporting wireless technology, was one of the mold-breaking advancements that allowed the unprivileged masses to consume a play or a concert or a sporting event without having to make an actual trip to the physical location. Of course, the invention of television brought that liberation to an even higher level, where it was now possible to enjoy movies and cartoons and all other kinds of motion picture products, without being expected to make a trip to the exact physical location.

The trend was slowly becoming apparent: the more an individual is educated and the more the technology had matured, the less was that individual forced to make a trip to the specific location in order to consume an event. Conversely, those who lack education and access to the mature technology, had no choice but to make the trip and pay the admission fee, if they were to participate in the scheduled event.

For example, with the advent of the recording technology, people who have access to the playback equipment could obtain the desired recording and enjoy the performance in the comfort of their own homes. Or, in the comfort of their own vehicle.

The ones who were left behind were basically uneducated on how to set up and use the playback equipment. But as soon as they've upgraded their education, they too could then afford the luxury of enjoying the performance in their own homes.

The music recording industry didn't follow the model of the movie making industry. Instead of setting up music listening halls, where consumers could gain admission by paying the admission fee and then listening to the recorded albums, the music industry opted for manufacturing a product (a vinyl record) which is then being sold to the general public. This was a significant shift in the battle for location, as the control of the location has now shifted from a particular physical building or stadium, controlled by the business, to the individual homes. Just as long as an individual had legitimately purchased the product (the vinyl record), that individual was free to listen to it in his or her home. But the significant game changer here also was the fact that the consumer could consume the product more than once.

This game changer had, of course, opened a can of worms. Not surprisingly, the movie industry followed suit by issuing products that contained recordings of the movies and TV shows, suitable for playback in the comfort of the consumers' homes. No longer were the consumers expected to make a trip to the movie theater in order to watch the movie. And even more significantly, once they obtained the recording of the movie, they were free to watch it over and over, and thus enjoy limitless playbacks at no extra charge.

Such is the liberating power of the constantly maturing technology. What once was scarce is now abundant. However, not everything in this arrangement is positive and optimistic. There are flies in the ointment, and we'll examine them next.

The first proverbial fly in the ointment stems from the newly won privilege to enjoy the performance unlimited number of times, all for the same price. Under the old regime (the one that were forcing people to pay the admission fee each time they wanted to enjoy the performance), businesses were guaranteed repeat income from their consumers. Under the new regime (the one where people can enjoy the performance unlimited number of times for a single admission fee), this repeat income has been lost. Furthermore, thanks to the technological advancement, the consumers can now not only enjoy the performance unlimited number of times, they can also lend the product to others, who then get to enjoy it for free.

To curb that undesirable consequence of the maturing technology, the businesses came up with the hair-brained concept of residual income. What that concept states is that, even though someone can obtain the rights to enjoy the performance by purchasing the container (a record or a VHS tape or a disc) containing the performance, that arrangement still does not entitle the purchaser to further freely distribute the container in question. In case the original purchaser wishes to further distribute the artifact, that purchaser is obliged to pay the royalty fee to the maker of the product.

This royalty fee is a very problematic concept, as it is incapable of enduring any protracted logical scrutiny. In a nutshell, royalty fee is based on the concept of intellectual property. Unlike objective, tangible property, such as real estate, or vehicles, furniture, clothing etc., intellectual property is a very nebulous concept that gets applied in a wishy-washy fashion, and is thus entirely indefensible.

For example, if I have an idea for a song, and I then work on writing that song and recording it, once I publish that song, it is protected under the auspices of the laws governing the intellectual property. Anyone who wishes to use my song, either in its entirety or a portion of it, is requested by the law to first contact me and obtain the permission to do so, after which each subsequent use of my intellectual property is followed by the user paying the royalty fee to the owner.

In a way, the above arrangement is all fine and dandy, but the problem lies in the fact that it is governed by the double standards. And any time we have a situation where the law does not apply equally across the board, we know we have a serious problem on our hands.

To illustrate the inequality of the laws pertaining to the concept of intellectual property, suppose I'm an artisan cabinet maker. I get an idea on how to make a completely original chest of drawers, for example. I do it, and then I sell that chest of drawers. Where's the problem, you ask? Well, in case of a chest of drawers, my original idea, my intellectual property, is not protected by the law. In other words, the law claims that an artisan cabinet maker who expects to receive any residual income after the initial sale of his product is simply dreaming.

But why? Why am I, as a creative individual who happens to make armoires and shelves and chairs and tables and chests etc. not entitled to the legal protection of my intellectual property, while a book writer or a composer etc. are entitled to it?

The answer to the above question is very simple: the technology hasn't been invented yet that would enable people to create an exact replica of my chest of drawers with a simple push of a button. Hence, I have no right to ask for the legal protection, because I am already protected simply thanks to the immature state of technology. Once we reach the stage where it will be cheap and easy to create an exact replica of the cabinet maker's products, the law of intellectual property will surely come into full effect.

So it's easy now to see that the law of intellectual property is a very arbitrary concept, as it hinges entirely on the ability of people to make cheap and easy copies of the products that embody the intellectual property. Those products that cannot be copied with a minimal cost are exempt from the legal protection.

This inconsistency is the Achilles' heel of the law of the intellectual property. Because of that, the entire setup is invalid and illegal.

On to the second proverbial fly in the ointment. All the existing legal constraints that have been formulated around the concept of intellectual property are built on the presumption that the product in question is going to be consumed at the predetermined location.  In other words, either the consumer will be expected to make a trip to the theater, a concert hall etc. before she can enjoy the performance, or she will be privileged to enjoy the performance in her own home. This arrangement is bound by the sheer physicality of the location delivering the actual performance. Either the location is a physical public building (such as theater, or a stadium, etc.), or it is a physical residential building. The only third category of physically defined location where the performance could be enjoyed is a private vehicle, a car.

Furthermore, the carrier of the performance is assumed to be a physical object, such as a book, a magazine, newspaper, vinyl record, magnetic tape, or a digital disc.

But what if the content can be delivered without requiring a container? For example, I can today stream digital music wirelessly to any location of my choice, and furthermore, I can stream several identical recorded performances to several location of my choice at the same time. Suddenly, the concept of the location starts to lose it's meaning.

The battles over the location of the performances to be enjoyed by the paying customers have traditionally been fought by erecting barb wires, walls, and placing the bouncers around the physical locations. With the maturation of the technology, stringent laws have been put in place to protect the unauthorized playback of the copy-protected recorded performance. These copy-protection laws all hinge upon two things:
  1. There is a physical object, a container that carries the recorded performance
  2. There is a pre-set physical location where this recorded performance will be enjoyed
The above presumptions have now been invalidated thanks to the unstoppable march of technology. The first presumption (that there always must be a physical container carrying the recorded performance) has been rendered meaningless by the wireless streaming of the content to any chosen location. I can store my content on the Amazon S3 service, that exists somewhere in the cloud, and I can then easily stream that content wirelessly to any location on the planet. That content is not bound by any physical container, as its actual location is indeterminate, and its delivery is wireless, intangible.

The second assumption (that there is invariably a pre-set physical location where the recorded performance will be enjoyed) has also been invalidated by the maturation of the technology. I can travel to Sao Paulo, Brazil, visit any Internet cafe in the city, and right there stream my content and play it back while I sip my latte. No constraints of the physical container carrying the recorded content, no constraints on where can that content be consumed.

In conclusion, the epic battles over the location have now been rendered meaningless. It remains to be seen how will the intellectual property bullies attempt to deal with this new reality of containerless content and locationless location.