You have this product which has high fixed costs to produce but zero marginal costs to produce an extra one. If everyone chose to pay zero then the product would not be made and everyone would be worse off. By choosing to pay zero you are free-riding on other people who choose to pay non-zero. It is possible that piracy could bring about:

a) higher prices to other consumers who have to pay a larger share of the fixed costs because other people are choosing to pay zero. this is not really a cost more a fairness problem.

b) some products not being produced because not enough people are willing to pay the higher price to pay off the fixed costs. even though there might be a price point X that is lower than what it is worth to some of the zero payers which would result in the fixed costs being paid. this is a real economic cost

I see it as a cart-before-the-horse problem. Before the printing press things were more horse-before-cart (no copyright). After the press and the statute of Anne, to today, we have been very cart-first. We paid for physical CDs without knowing if we would like most of what they had on them (we may have heard one song on the radio for free, as advertisement - ie, the pirate bay is a modern radio business - but the rest were a mystery, and distributors exploited our eagerness by adding on a dozen unknowns). We still felt like we were buying something tangible (the medium was tangible), so it was relatively easy to accept trading money in advance for something we couldn't see into first.

I think following that approach further requires an untenable "enforcement" culture on private and social thinking and collaborative efforts. I'd rather put the cart back behind the horse (fund the work itself, to create the first copy, rather than pay mandatory royalties for all future copies - and endure the social unrest of preventing what boil down to thought-crimes, IMHO).

In the past artists (and scientists) had patrons but today we have kickstarter. It is possible to fund the creation of large projects (movies, TV shows, games, hardware, research, etc) without as much risk to the people carrying it out.

It is damage in the sense that you are consuming a product without "voting" for it in the marketplace.

This can lead to products that are in fact popular being less economically feasible to produce under certain business models if the piracy rate is too high.

At the same time, popular copies - paid or otherwise - become more well known and potentially much more profitable. One may not be voting with money, but one is voting with time (and "time is money") by accepting it, using it, and sharing/promoting it to others. Microsoft used this strategy in China (Gates said something like: if they're going to steal it, we want them to steal ours...). They have done less well recently.

If you are a game developer, the fact that several hundred thousand hours have been spent playing your game isn't helpful to eating or financing your next game if you have no way to monetize those hours.

There are of course business models that are aided by copying (such as those based on open source software).

The difficulty is how the video games industry can adapt to this. The route they seem to be increasingly taking is to sell games as a service rather than a product but then this is decried as "always on DRM".

A college degree is also not guaranteed to lead to a job immediately either, particularly if there are alternative sources of the expertise. (There is no equivalent to copyright, in that sense, guaranteeing a student the right to be the sole provider of their expertise because they paid to receive it...)

Every sale is still a negotiation. I've said in the past that I think the economics of copies boils down to begging, but that seems a much harder sell when I say it first, so I like to argue a bit first... :)

FWIW, I think people are also decrying the service-model appearing in games (similar to the Kindle model, where Amazon can delete your books) - recall the recent Microsoftie who was fired after some bad PR - so it looks to me like people are moving towards the same limiting equilibrium, with or without copyright: easy copying, and paying only when they feel an obligation. IMHO, we can get there the hard way (increasingly jack-booted copyright) or the easy way (accepting human nature and negotiating differently in light of it).

(Note: I have edited the first paragraph a few times trying to be clearer, for lack of a perfect analogy.)

Getting a college degree will likely get you a job if there is demand in the area in which you did your degree.

Imagine the situation where you get your CS degree but find that few people are willing to pay for programmers or software and the people who are willing to pay will still not pay very much yet the demand for software is still very high. Such a situation doesn't make sense in a rational market.

Problem with piracy is that it isn't a "negotiation", a negotiation would imply that there are 2 sides attempting to reach a compromise. With piracy you can simply hit up TPB and download whatever you like without the consent of the author.

"Such a situation doesn't make sense in a rational market." Tell that to philosophy majors. :)

I can also turn on the radio and receive music for free, with ads. TPB has plenty of those (but isn't distributing anything themselves, so arguably isn't infringing... Perhaps they are facilitating, but if so they are largely facilitating non-commercial infringement; I can't imagine anyone downloading a movie and selling it would be common). Radio stations usually pay royalties, otherwise they would be commercially infringing copyright. I mention elsewhere that I can sympathize with commercial copyright enforcement.

Non-commercial copyright infringement is harder to value IMHO. In the case of commercial copyright infringement, there is positive income, and the profit can be fought over. Now that we have dropped boxed distribution media and gone digital only for most types of content (and, importantly, I pay for my ISP), the "profit" to the infringer, and the cost to the originator, from any given copy is at best very ambiguous. The profit to argue over could be positive, non-existent, or negative (heck, they might be wasting their life, watching Game of Thrones, when they could be creating value). There is nothing obvious to fight over in the case of non-commercial copyright infringement, except the copy itself (whether the copier had the right to copy). But preventing copies needs a system similar to a cable TV network, not an amoebae-like Internet.

I like the Internet and the ability to speak freely, and to mix what I find, too much to enforce copyright (even my own) anymore. It's taken a long time for me to get here, and I used to want to be a professional artist.

TPB do make money from advertising and I'm pretty sure they aren't cutting cheques from that to the artists/developers.

The issue isn't so much the copies themselves, I could download every torrent on TPB and archive them on a stack of HDDs somewhere and it wouldn't hurt anybody.

The issue is that there is no longer a requirement to pay to consume something where the business model requires that the consumer pay.

Perhaps this is no longer a viable model, but the question is how to replace it?

Does popular content simply move to locked down platforms? Do we deliver games under a SaaS model (WoW etc)?

Both of these models have disadvantages to consumers, arguably it would be better if people simply refused to consume pirated goods and always paid the asking price but this seems unrealistic.

Please don't think I'm not taking your question seriously, but I do think the future model is a donate button (I also say above, I think it boils down to begging). I do also consider this model sustainable since, even ignoring all the other ways fame can be monetized, the potential audience is 7 billion people and a gift of even $1 from even 0.001% is $100,000 - enough to justify most indie projects. But if that's too risky, I am encouraging people to put the horse back in front of the cart and to hit up people through kickstarter... (It still amounts to begging/patronage, but it's more predictable by being up-front.) The main difference between that and the old publisher-oriented model, is that creators have all the control over the terms.

I would also love to see people release commercial stuff more under CC-SA and similar (even if they still charge for distribution), or the FOSS licenses - assuming they need one. There's no reason they can't generate income, even while being shown through a subscription. The license doesn't change the distribution model. (Ubuntu is asking for donations. I would love to see some stats.) I think people just need to get used to flying without a net (copyright).

Take Netflix for example: they are producing their own shows. Like iTunes, all the content on Netflix can be torrented, but Netflix is easier for non-technical people. I don't even think copyright is necessary for either of Netflix's or iTunes' success. Netflix is a subscription, but I think they could make a similar amount if their shows were CC-SA licensed. People pay for both Netflix and iTunes because downloading is simply harder and more likely to give their computer an STD, even if the quality can be better ( https://news.ycombinator.com/item?id=5621119 ). Copyright still affects the food chain today, but Netflix has convinced me that they don't need copyright to keep the game going.

What's more likely however, I think, is that we will see something like the 6.4/93.6 ratio continue into the future, painfully and in spite of copyright, and with much resentment, until that hostility turns to acceptance (though, by then we'll probably have other generational gaps to deal with) - assuming we can get through the next 10-20 years without a censorship/copyright-centric police state. 6.4% of 7 billion, for something priced as low as $1, is still revenue of 448 million, even without budging that ratio, so I have no doubt creators will do well.

Edit: I don't feel like waiting 40 minutes for the reply button to appear on your comment, but I suppose only time will tell. In the mean time, the pro-copyright-ons and anti-copyright-ons will likely have to learn to live with each other, if for no other reason then so they don't collide and annihilate, sending us all back to the stone age (or industrial age).

I'm not quite so optimistic, or at least my optimism is more measured at least in terms of the games market.

Most kickstarter projects I see (games at least) are not proposing "If this gets funded the game will be free" they are proposing "If this gets funded the game will be $20, but you can get it for $15 if you fund us". So they are still relying on copyright to some extent.

Of course there are some games that appear to be sustainable as donationware (dwarf fortress for example) but I would be amazed if we saw a COD/Skyrim scale game on a "pay what you want model" simply because the up front development costs are so high that it would be too large a risk.

I suspect in the AAA areas you will see a move towards support for closed platforms where piracy is more easily controlled and IAP type models.

So probably two divergent markets , with starving artist auteurs in one corner and AAA publicly traded behemoths in another.

Music is the absolute easiest thing to pirate, yet iTunes is huge. People are willing to pay for the simplicity of iTunes. It's still slightly easier than searching for a decent torrent.