[dangerlibrary]

Excellent point!

However, there is an incredible amount of content out there available via free and legal means. That is to say - technology has made the barrier to entry very, very low and so content creation is a really competitive market. The relevant question is not whether, strictly speaking, the pirate can afford the product - I can afford an Hermes bag if I save up for a while - but whether their willingness to pay exceeds the price. I'm priced out of the market based on my willingness to pay, not my ability to pay.

[ptmx]

That's a good clarification, and I agree that willingness to pay is the relevant metric to use when talking about being priced out of the market. The same point applies, though; it's hard to honestly assess your willingness to pay when it takes you 5 clicks and a few minutes of waiting to get exactly what you want for $0.

If we were to take a typical pirate and transport them to a hypothetical world where piracy was physically impossible, I think you'd generally find that they're not actually priced out of the market for many of the goods that they currently pirate. They'd likely cut down their consumption in a major way, but I strongly suspect that they'd still be willing to pay for a significant portion of the goods they currently pirate.

[tripzilch]

> If we were to take a typical pirate and transport them to a hypothetical world where piracy was physically impossible, I think you'd generally find that they're not actually priced out of the market for many of the goods that they currently pirate. They'd likely cut down their consumption in a major way, but I strongly suspect that they'd still be willing to pay for a significant portion of the goods they currently pirate.

I really doubt that.

First your last sentence. Which one is it? Either you cut down on consumption in a major way, or you still pay for a significant portion of your current consumption.

Then, questions about this hypothetical world. Does free music (net.labels, ektoplazm.com etc) still exist in this world? If not then I'd expect music culture to become a rather elitist hobby, if it even still exists in any meaningful form at all.

If free music still exists then I expect it to flourish much more than it does in the real world. I'd probably mostly listen to that, because that's where the innovation will happen. I'd probably buy a tiny number of some classic genre-definers that happened to end up on the "paid" side of the fence.

The latter situation is where we're moving with piracy as well.

[dangerlibrary]

It's really easy to "honestly" assess willingness to pay, actually.

If you paid for it, you were willing to pay at least the asked amount. In a "pay what you want" scheme, your willingness to pay is something between infinity and what you wind up paying. If you don't buy a thing, your willingness to pay is something below the price being asked.

There's no magic. It's an immediately available revealed-preference system - you either pay or you don't. I won't disagree that the availability of a free, well-functioning, DRM-free, easily available alternative reduces people's willingness to pay for locked-in, degraded, or even available-but-overpriced alternatives. That said, we live in a world where the piracy alternative exists, whether people like it or not.

Adjust your business model accordingly. Valve is making a killing selling software via Steam.

[ptmx]

Sure, easy piracy is a part of reality and businesses should, as a pragmatic matter, adjust their business models -- that's neither here nor there.

When I talk about being able to honestly assess willingness to pay, I'm talking about the pirate who claims that they wouldn't buy a good anyway so they might as well pirate it. It might be true, but all we can really say from the outside is that they value the good at least $0 worth, so their willingness to pay is somewhere between 0 and infinity. You can't put an upper bound on their willingness to pay just because they didn't buy the good when they got the good for free.

I don't particularly care if people pirate, but I find that pirates tend to do a fair bit of mental gymnastics trying to justify why piracy is ethical; I think the "I wouldn't pay for it anyway" argument falls under that umbrella.