3d printing and piracy: what lessons can be learned from the piracy of digital content?

3D PRINTING & PIRACYWhat lessons can we learn from the piracy of digital content?

Prof. Thierry RaynaESG Management School

trayna@esg.fr

PROF. THIERRY RAYNA

Professor of Economics

Department of Economics & Finance

Chair of Digital Business

ESG Management School, Paris

Email: trayna@esg.fr

THE STORY SO FAR…

• Massive consumer piracy has appeared in all industries that have become digital

• Firms have had tremendous difficulties adapting their business models

• As object go digital, will the piracy phenomenon spread to the physical world?

3D PIRACY:WILL IT HAPPEN?

NO, BUT IF I COULD DOWNLOAD A COPY, I WOULD

IT IS ALREADY HAPPENING

• “Physible” section on the Pirate Bay opened in January 2012

• Cease & Desist letters sent to online design hosting platforms

WARHAMMER 40,000

ON A SMALL SCALE?

• So far, very limited extent

• But, adoption of 3D printers by consumers is still low

• Technology is yet immature

• Early days of MP3, VCDs, etc. were similar

• Brace yourself for a far larger phenomenon!

3D Sc

anne

r 3D Printer

Piracy as easy as 1-2-3

‘HISTORICAL’ EVOLUTION OF PIRACY

t1985 1990 1995 2000 2005 2010 2015

CD-R

Internet

Napster

CD-ROM

Broadband

KaZaA

eMule

BitTorrentFloppy disks

DRM

Cyberlocker war

TabletsBlu-ray

LESSON #1:WHEN SOMETHING GOES DIGITAL,

IP INFRINGEMENT ALWAYS HAPPENS

3D PIRACYCAN IT BE PREVENTED?

THERE ARE LAWS TO PREVENT PIRACY

• Multiple means to protect IP

• Vast majority of legal systems are protective of IP

• Trend towards stronger protection of IP

• Does it work?

How different?

WHY IPR LAWS DON’T WORK AGAINST PIRACY?

Counterfeiting Consumer PiracyInfringersActivitySphere

IdentificationProfit (infringers)

Net Benefit (holders)Net Social Outcome

(of litigation)

Few (relatively) ManyProduction/sale Consumption

Public Mostly privateEasy (relatively) Difficult

High LowPositive Negative

Positive Negative

IF LAW DOESN’T WORK, WHY NOT USE TECHNOLOGY?

• Anti-piracy technologies have been used since dawn of digital age

• Digital Rights Management (DRM) have been rather ineffective

• Non-protected versions always available

• Obnoxious for legitimate users, may turn them to piracy or slow down adoption

• Costly to develop and manage

IF TECHNOLOGY AND LAW DON’T WORK WHY NOT CHANGE THE LAW?

• Graduated response “3-strike laws” adopted in France, New Zealand, U.K.

• Legal monitoring of private communications

• Reversal of burden of proof

• After 3 strikes, internet is cut and/or fine

WHY WOULD GRADUATED RESPONSE WORK AGAINST PIRACY?

Consumer PiracyMany

ConsumptionMostly private

DifficultLow

Negative

Negative

InfringersActivitySphere

IdentificationProfit (infringers)

Net Benefit (holders)Net Social Outcome

(of litigation)

Graduated responseTechnological use

Presumption of guilt/Less privacy

Moderate punishmentNo litigation cost/Market effect

Lower public expenditure

DOES THIS WORK?

• Ambiguous effect on consumers:

• improbable very high (and uncertain) cost vs more probable set and relatively low cost

• strategic behaviour with regard to warnings

• In fact, very costly

• Who bears the cost?

HOW EFFECTIVE?

• HADOPI:

• 2+ million emails in 2 years

• Including 186,000 as “second warning”

• 3 people found guilty: 1 got internet access cut for 15 days and 600€ fine, second 150€ fine, last one no fine

• No serious evidence of effect

• Dropped by new government

LESSON #2:NEITHER THE LAW NOR

TECHNOLOGY (ALONE) CAN PREVENT PIRACY

3D PIRACY:CAN IT BE AVOIDED?

YES, PIRACY CAN BE AVOIDED

• Successful examples of piracy avoidance strategies

• Lower prices (e.g. apps on iOS)

• Open Source

• Revenues linked to complementary products and services

• “O.E.M.” type contracts

• Requires radical changes in business models

LESSON #3:PIRACY CANNOT BE PREVENTED

BUT CAN BE AVOIDED

Think Different

≠

Digital Technology

Replicability

Non-rivalness

Non-excludability

Public Good

Sharing

Durability

Free-riding/Piracy

Imperfect information

SamplingBehaviour

Durable Good

Legend

Technology

Economic

characteristic

Behaviour

Type of

good

Experience Good

Delaying purchase

THE DIGITAL ECONOMY:A LAND OF OPPORTUNITIES

THE DIGITAL ECONOMY:WHAT MOST COMPANIES ARE TRYING TO DO

THE MUSIC INDUSTRYC. 2012

THE DIGITAL ECONOMY:WHAT GOOGLE IS DOING

THE DIGITAL ECONOMY:WHAT WE ARE DOING

DIGITAL ECONOMICS AIKIDO

• Stop fighting against nature

• Channel the strength of digital economy to your advantage...

• ... without harming your customers

+

+

+

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“IT’S COMPETITION, STUPID!”

• Piracy is a sign of the problem, not the root

• Even if it were possible to totally prevent piracy, the problem would still be there

• 3D printing and digital technology empower people with creation, production and distribution tools

• Far greater supply, far more competition

ON THE BRIGHT SIDE…

• Many objects too complex to be printed at home

• Probably will remain so for the next few years

• Growth of connected objects

• Piracy applies less for objects that are connected

Better a small slice in a big cake than a big slice of nothing