I often get into arguments about why I don’t think piracy is wrong, but actually helpful to businesses.  The crux of many arguments, from newspapers to music to software, revolves around how people should be paid for their work rather than will people pay for that work.  This is a serious disconnect that explains much of the frustration many feel regarding new business models and free content.

Content creators argue they should be paid for their work. If they aren’t paid for their work, no one will make music, movies, investigative journalism, or video games. We’ll live in a silent, non-fun, corrupt world of animals on skateboards.

But this is not the economic reality.  In capitalism, people can try to make money, but there is no right to it.  600,000 small businesses are started each year and more than 50 percent will fail within the first five years.  No one should have to support these businesses. It’s up to each business to find a market need and fill that need.  While making money is obviously the goal, it is a side effect of effectively meeting a market need.

The content industry (I’m including newspapers and software) certainly filled important market needs – entertainment, productivity products, information and education, etc.  But they got used to a business model based on little competition and monopolies on distribution. The market has changed, but the market need is still there.  People will always want all these products.  But without the monopoly on distribution, consumers have more choice to market products.  More competition drives prices down, and this means for the content industry, the price of content is zero.  The value is still high, but there’s so much of it, you can’t price it higher.  It doesn’t matter if you should be paid for your content.  No one will pay you because another company will fill the market need at the lower price.  This is why you have to treat piracy like a competitor, not a threat, because it’s the market demanding change.

When a company says people should pay, it’s claiming a right and entitlement to compensation.  Obviously, if someone works hard, it’s good to be rewarded, but often hard work comes with the risk you won’t be properly compensated. That is business. It’s competition. It’s healthy for the economy overall.  If companies are guaranteed money, they don’t have to try as hard to earn consumer’s money by creating valuable products that feed market needs.

This is why Google chairman and CEO Eric Schmidt was so right when he told newspaper executives they shouldn’t piss off consumers.  Consumers decide how they want to consume news, not news executives.  If consumers won’t pay for newspapers, then newspapers will go out of business.  Nothing can change that.  You might think they should or even have to pay, but the economic reality is, they won’t.  Even if piracy is stealing, it’s the economic reality. It’s what the market wants. Nothing can change that.  The successful businesses of the future will learn how to capitalize on this market demand and find new, innovative ways to make money.  Everyone else will get left behind.