After my IP class last week, a classmate and I continued our debate. He said something that stuck with me: “Companies won’t leave money on the table.” But in many cases, companies do leave money on the table. Sometimes the risk isn’t worth the reward, but sometimes it’s sheer stubbornness.
I mentioned Farhad Manjoo’s article about why there is no iTunes for a movies a few weeks ago. The reason, according to Manjoo, is there are too many contracts to renegotiate and too many people to get permission from to make an all-you-can-download movie service cost effective. This is not because it’s actually expensive to make (all those BitTorrent sites seem to manage). It’s because the variety of rights holders demand too much money. Rights holders over value their copyright (or patent other cases). They demand more money than someone can make selling another product (like a download service). Instead of getting paid, nothing gets done or sold, meaning everyone leaves money on the table.
Want a nice, clean consumer example? iTunes introduced variable pricing for music at the demand of the record companies. Record companies could choose a lower 69 cent price, the regular 99 cent price, and a $1.29. Few chose the lower price, pushing popular and new songs to the higher $1.29. Early results show the labels are losing money from the decrease in sales – unit sales have dropped to the point where actual revenue is lower than when prices were 99 cents. Don’t say they weren’t warned.
The examples are numerous, from newspapers threatening Google even though its sends them tons of free traffic to monetize to Warner Music demanding more money from YouTube and music games like Guitar Hero, ignoring the huge promotional benefit they get from both. TV shows like the Wonder Years can’t appear on DVD or TV because of the over-priced music. Other shows have changed the music, from Dawson’s Creek to WKRP in Cincinnati.
In the patent world, having too many patents in one area is called a patent thicket and can make it hard for research because it requires so many different licenses (and too many companies over valuing their intellectual property) that it becomes cost-prohibitive to research either from licensing or lawsuits. Some companies collect their patents to allow products to be made, but these patent pools often do more harm than good. This is even hampering drug research:
Peter Ringrose, chief scientific officer at Bristol-Myers, has said there are more than 50 proteins possibly involved in cancer that the company was not working on because the patent holders either would not allow it or were demanding unreasonable royalties.
Yes, I went there. You might die because greedy companies refuse to take money.
In all seriousness, intellectual property not only gives monopoly rights to a single entity, but it also comes a sense of entitlement that seems to hurt the rights holder and everyone down the supply chain, including consumers. This is because rights holders significant over-value their own intellectual property. Much of the value from content comes from how it reaches the consumer, whether on DVD, TV, or some innovative package. Pricing yourself out of these products does not make your content more valuable – it devalues it because consumers don’t experience it. Companies are leaving money on the table, not just from the initial royalties, but from the future revenue made by future sales of products based on new fans or new innovations.
