The seemingly straightforward act of purchasing a good or service is fraught with mystery. Economists have made their names defining minute subcategories of purchase motivations – consider, for example, the "positional good", that one buys because it is scarce and expensive, and so visibly owning it is a marker of your social status. Examples include fancy cars, designer clothes, and useless lumps of highly compressed carbon traditionally given as pledges of betrothal.
The complexity is multiplied by purchases in the digital world. In the physical realm, there's real danger in taking a good without paying for it (you might be arrested and sent to jail); in the digital realm, that danger is much lower. So much lower, in fact, that the majority of media that changes hands online does so for free and without authorisation.
This fact has occasioned much hand wringing, hair pulling, and legal manoeuvring, and a great deal of rhetoric about why the public "should" buy stuff they can readily get for free.
This rhetoric is often muddy and confused, and at odds with the strategies deployed by the companies and individuals who employ it. For example, the ads shown before film exhibitions and DVDs warn that pirate DVDs are of poor quality and may not play back reliably. At the same time, the manufacturers of DVDs have been going to ever-greater lengths to degrade the quality of legitimate video purchases – lengthy, unskippable adverts; arbitrary geographic playback limitations; even the mandatory installation of "anti-copying" software that hijacks your PC to stop you making an unrestricted copy of the movie.
If your strategy is to convince the public that the "real item" is reliable and the unauthorised ones are dodgy, then you must do everything in your power to increase the reliability of the real item, otherwise word will get around and the campaign will fail.
In this article, I take a first cut at a taxonomy of "value propositions for the purchase of digital goods" – that is, reasons you should spend money on digital files that you can get for free – and of the market strategies that enhance or undermine each strategy. Different companies and products need different value propositions, but whatever your strategy is, your stated case for buying your products should be supported by those products. And if your sales strategy actively militates against your value proposition, you're doing it wrong.
This list isn't comprehensive; it's a starting point. If you've got more value propositions, please add a comment …
Buy this or you'll get in trouble
This is one of the canonical cases for going the legit route. Its credibility depends primarily on two factors: price (will the cost of getting caught be higher than the total savings from all the times you get away with it?) and perceived risk (are millions getting away with it and dozens getting into trouble for it?)
Young people are poor candidates for this proposition: they don't have much money, so most prices are apt to be too high for them. They are also still developing the ability to perceive and measure risk accurately and are bombarded by urgent messages about the riskiness of practically everything they want to do, from having sex to taking drugs, so chucking in the risk of getting into trouble for unauthorised copying is unlikely to have much effect.
What's more, young people are apt to believe they possess the technical skills to evade detection – they may be swapping files by synchronising hard drives with friends, pasting links into private social networking spaces, or taking other measures that keep them out of the authorities' watchful eyes.
Buy this because it's the right thing to do
When a record executive says: "stealing is wrong, end of story", this is the proposition being put to you. It's a simple, easy-to-absorb argument, and many find it compelling. Seizing the moral high ground is easy, holding it is harder. It's true that "you wouldn't steal a car" – but what if that car itself was stolen from a hardworking artist by a greedy entertainment exec and you could steal it back without getting caught?
When I talk to file sharers about the ethics of downloading, they often raise the litany of high profile stories about how shabbily artists are treated by labels and studios, with specific reference to how little of the money from a sale goes to an artist. For example, labels infamously class paid-for downloads as "licences" to their customers (you haven't bought the music, you've just licensed it). However, the standard label deal with artists demands that they pay a 50% royalty on licences, as opposed to a mere 7% royalty on "sales". So when the labels account for these "licences" to their artists, they are conveniently reclassified as "sales" and six-sevenths of the money is trousered by the labels.
"It's the right thing to do" cuts both ways. Customers who have bought (or "licensed") music and films laden with digital and contractual restrictions may feel like their ethical obligation only extends to treating the vendor as well as the vendor treats them. If you've paid for a movie "rental" that expires 10 minutes before you finished watching it because you had to tend to the baby, you might feel you have the ethical right (if not the legal one) to torrent that movie and finish it off. Or if you've bought a movie once on DVD and you want to watch it while you're on the road, you might feel justified in downloading it. Licence payers who find themselves abroad and locked out of the BBC's iPlayer might feel like they've paid for the right to download the shows they've paid for from an unauthorised source.
It's hard to argue that customers should be "fair" to sellers when the sellers are playing 'gotcha' games with the fine print and digital restrictions. What's more, "it's the right thing to do" isn't the same as "it's what the letter of the law demands". There's a widespread perception that the law has been cooked by the entertainment giants, and that they themselves only obey it selectively.
Likewise, it's a little jarring and unconvincing to hear the entertainment companies who consistently argue that it's OK to show sex, violence, and alcohol and drug abuse to kids suddenly pitch themselves as guardians of public morality.
Buy this because you're supporting something worthwhile
This is the proposition made by indie artists and it's one reason so many major entertainment companies hive off "indie" labels, imprints and brands. Supporting the arts feels genuinely good – knowing that your money is going to someone who made some work that moved you and entertained you. This may be the most powerful motivator of all, but it's also the trickiest.
For this to be really effective, the customer needs to have a sense of the person or people behind the work. That means this proposition favours artists with highly visible, personal public profiles, and not every artist has it in them to hang out there in the world with their audience. Some people are just shy. Some are worse than shy – some artists have negative charisma, and every time they appear in public (physically or virtually), they reduce the business case for buying their works.
The paradox of this proposition is that most high-profile artists got their profile through the good offices and extensive expenditures of a publisher, label, studio or other intermediary. But artists who are backed by these intermediaries are seen as less "worthwhile" than their independent counterparts – after all, the proposition is "support an artist," not "support a giant company that takes most of the money and gives some of it to an artist" (no matter how much the artist may value that arrangement and believe it to be a fair one).
This proposition also loses its lustre when it is pitched by artists with glamorous, highly public lifestyles – "support this movie because the star only made $20m" lacks a certain persuasiveness. That's one reason that the anti-piracy ads shown in American cinemas often feature movie carpenters, electricians and make-up artists – working people who aren't best known as multi-millionaires. Unfortunately, these people aren't perceived as artists in the same way that actors and directors are perceived to be, and this undermines the proposition.
Buy this because paying money will deliver high quality
Some bootlegs are unreliable or of poor quality. I once had a well meaning friend give me a pirate Rolling Stones cassette for my ninth birthday; the bootlegger saved money, squeezing the 45-minute album onto a 30-minute tape by fading out each song two-thirds of the way through. In some instances, this matters – you want what you acquire to be a faithful copy of the work you're after. But inferior packaging and labels are unlikely to bother most purchasers, who are likely to stick the media on a shelf and forget it, possibly ripping it first if it's especially good.
But this pitch only works to the extent that the paid-for item is indeed of high quality. When anti-copying restrictions are added to media, it actually lowers their quality relative to the illegitimate item. I often hear from parents who download unauthorised cartoons for their kids because the DVDs come with long, unskippable (or difficult-to-skip) adverts, the worst of which deploy "pester power" tactics intended to get kids to nag their parents to buy something. As far as these parents are concerned, spending money gets them a product that much worse than the free version.
Experienced gamers know that the commercial versions of games often come with licence checking routines that require you to have a constant, high-availability network connection in order to play the games you buy, even if they are single-player games. Recently, Dragon Age: Origin was unavailable for a period of days to players – even though the game was installed on their computers, the company's licence server was down, and the games refused to launch.
The worst cases of video game lockdown involve mandatory (and often sneaky) installation of software that interferes with CD or graphics card drivers, turning computers into bricks. Some popular games include "anti-cheating" spyware that has the power to examine, delete or send copies of every file on your hard drive to the company that made the game.
But unauthorised, cracked versions of games sidestep all the problems with playability, privacy invasion, and disabling of PCs. And unlike the authorised games, these cracked versions are free – a bad way to convince gamers to spend their money instead of going the free route.
Music companies have all but abandoned this route, but they did lasting damage to the reputation of their products through an escalating series of anti-copying measures that culminated with Sony-BMG intentionally shipping a "rootkit" on over six million CDs. The software would compromise your computer, leaving it vulnerable to other malicious software, and it violated many of the world's anti-hacking laws.
Buy this because it is convenient
As Apple and Amazon have discovered, one-click purchasing is a marvellous proposition to put before a potential customer. Making it easier to go legit is a strategy that is applicable in every case I can think of.
That means reasonable prices, slick payment processing, minimal additional measures (for example, requiring the use of "download managers" or anti-copying frameworks that are not required by the free unauthorised versions), and the same global, 24-7 availability that the free items enjoy.
Unfortunately, this flies in the face of the traditional business practice of selling territorial licences for entertainment products.
Every net user has experienced the frustration of trying to load a video or song, only to be confronted by a message saying that the authorised, legitimate version isn't available in your territory. Of course, the unauthorised, free version is available, and frustration at this situation is an often cited reason for abandoning authorised markets and services.
One potential mitigation strategy for territorial rights would be better coordination among sublicensors. Today, if you try to watch a TV clip from a UK computer, you'll get a note telling you that Channel 4 has the rights in the UK, with a link to C4's website – but not to the clip that you're trying to watch, which is usually impossible to locate. Re-engineering things so that visitors are seamlessly redirected to the correct local site for their media is a major challenge, but by not doing so, rights holders create a situation where the legit item is less convenient than the infringing one.
This is also at odds with the voguish idea of selling off limited sets of rights at different prices: "buy the right to watch this once for X, upgrade to add a rewind button for Y, add Z and get the right to pause it while you pee!" While there has been limited acceptance for the idea of digital "rentals" that expire after a short period, the rest of these offers have been a bust in the market, and I don't expect they will ever catch on.
Buy this because your devices won't play the unauthorised version
While most propositions have carrots, this one is all stick. It's primarily used by games console vendors, but also in Apple's iOS and a few other devices. These devices are sold with a lock built into them that can only be opened with a cryptographic key only given to companies that pay large sums for the right to sell their products to people who've bought the locked down devices.
Though usually pitched as an anti-piracy technology, this is primarily an anti-competitive system, one that ensures that third parties stump up a fee to the device vendor. It's hard to articulate any value to the customer for these systems ("buy our gizmos and we'll make sure that all the stuff that runs on them is more expensive because we're taking a cut!") and governments around the world are taking a hard look at the laws that prohibit unlocking your own technology to run third party software.
This works best in a marketplace with little or no competition: you can't really buy a games console that doesn't feature this sort of lock (though games companies get black eyes when they sue programmers who figure out how to unlock their devices, as Sony discovered with its lawsuit over a break to the Playstation 3). On the other hand, once competition comes to the market, customers and developers often perceive the value of switching to platforms that aren't optimised for rent seeking.
What's more, a customer who owns multiple devices (a phone, a laptop and a games console) can often opt to download unauthorised media and play it on the less restrictive device.
Buy this and you'll get more features than you would with the unauthorised version
This is the inverse of the proposition above, and it's hard to pull off. In video games, it's access to a game server where you can meet other players – World of Warcraft, for example, isn't much fun on your own.
With DVDs, this usually takes the form of the "additional material" disc, though the novelty of these wore off sometime in the first decade of this century. With music, it might be access to password-protected streams of a concert tour; with ebooks, it might be access to an online chat with the author.
The thing these all have in common is that they add access to an ongoing (or time-bounded) service as a bonus for buying the fixed, finished product. Subscriptions are a lot harder to get for free than recorded media, since they can't be "copied" in the same way (though user names and passwords might be shared).
Whenever we talk about how to sell digital stuff, we freely and unsystematically mix up value propositions and product designs. By matching strategies with propositions, we might be able to avoid stepping on our own toes.