Besides this is not competition were talking about. This is Steve Jobs' war on piracy. Billions of $ are lost to pirate films. Apple's direction is to boost their media dominance by reshaping the media field to their advantage. They did it with music and had wild success. Perhaps they will repeat the reversal on piracy with new movie rental and purchasing options.
"Online Movie Pirates"
There's been a reversal on piracy? I'm not aware of it if there has been, but maybe a source would convince me.
Let's have a hypothetical situation. A massive number of people believe that the price asked for a product through legitimate avenues is unreasonable. The product is available elsewhere for free, with a statistically negligible chance of having to pay a fine amounting to a couple grand to settle the case (ie, the cost of about 150-200 movies or CDs). A large number of people, therefore, decide to go with the lowest cost method of acquiring the product, despite its warts.
Let's add a hypothetical modification. A company provides another way of getting that product. However, it doesn't offer many cost advantages over the legitimate avenues mentioned above, and actually has some noticeable quality issues. The product can still be found in roughly equivalent quality (and often in better quality) for free.
What countereconomics says is that the pirates will (statistically) continue to pirate. People who stuck to legitimate means of acquisition will be most of the adopters of the new technology, in this case iTunes.
In order to provide sufficient value to lure pirates away from piracy, iTunes must continue doing what it has been doing -- adding value, by removing DRM, increasing bitrate, and so forth, until it is functionally equivalent to the primary legitimate avenue
but lower its price sufficiently that it seems fair. At that point, pirates will cease to pirate. Not many people enjoy pirating, I should mention -- the files are of unknown quality and sometimes don't work right because of any of a dozen different conflicts, they are usually tagged poorly and of uncertain lineage, and the ability to acquire a given product in suitable quality is often iffy.
The problem is that most pirates do not perceive the stated prices as fair. The companies, however, are unwilling to lose revenue by lowering prices or allowing operations like iTunes to lower prices. Thus it will continue -- companies losing billions, and people having crappy media libraries -- because the prices are perceived as being unsuitable.
You can argue piracy is unethical, and I won't really argue that. I will, however, state that it's a fact of life and a fact of modern business. Statistically: Few pirates will pay $10 for a sub-DVD quality download if he wouldn't pay $5-10 for the real thing used on Amazon. Few pirates will pay $1 for a DRM'ed 128K song when they can download the whole album in FLAC for free. And I seriously doubt any pirates will pay $4 to rent a film for 24 hours. To own it, legitimately, and in high quality, maybe. But not to rent it. Except, of course, out of curiosity.
iTunes is caught between a rock and a hard place. The rock being the studios' iron-hard price demands, and the hard place being their relatively tech-savvy users -- the people who are most likely to rent or buy music or movies online, and, statistically, the people most likely to pirate. As more people mature and become tech-savvy, iTunes' marketshare will grow, as it has now for a few years. But a large number of people are pirating and will continue to pirate unless an immense compromise in price and quality is made.
If anyone has a solution, I'm sure
sjobs@apple.com would love to hear it.
/Jesus, that went off-topic
