<p><strong>Background</strong></p>

<p>Since the marginal cost of distribution for a creative work such as a song is now essentially zero, the efficient thing to do would be to provide all songs to listeners at a price of zero (i.e. to allow piracy). However, this neglects the fact that producing creative works involves a fixed up-front cost (e.g. studio recording time, or simply the artist's time composing the work) that cannot be covered if the price is zero. Moreover, it is efficient for producers of 'good' songs (i.e. those that create value in excess of the production cost) to incur the fixed cost, and for producers of bad songs not to do so.</p>

<p>The way that society mostly addresses this issue is through the grant of intellectual property (specifically, copyright) protection. The trade-off made is that artists are allowed to act as monopolist suppliers (with all of the attendant inefficiencies) because the resulting profits will give them an incentive to produce in the first place. The fact that a seller's rewards are tied to their monopoly profits means that the most popular artists should, in principle, have the biggest incentive to create.</p>

<p><strong>Efficiency effect of piracy</strong></p>

<p>If one buys the idea that we need IP protection to induce the production of creative work then tolerating widespread piracy is a bad idea because it takes away the profit that is supposed to provide artists with the incentive to create. Whilst each individual instance of piracy might be efficient, the overall effect of reducing the number of works produced might not. It is then necessary to ensure that enough people do not pirate enough of the time to keep the rewards from production at a sufficient level.</p>

<p>People should be expected to pirate if the benefits from doing do (free consumption of creative works) exceed the costs (determined by likelihood of being prosecuted and the penalty when prosecuted). An obvious way to stop people from pirating is to increase this cost by prosecuting more people—even if you don't really care that much about winning. Indeed, the main objective is not to win the case and get what, to the RIAA is pocket change; rather, the objective is to scare people enough that they start buying rather than pirating music. [n.b. The RIAA would have to win at least some of the cases, otherwise the threat would be completely empty. As Densep notes in a comment, this raises the issue of whether we can really call these cases SLAPPs or not].</p>

<p>If the result is that artists earn more money and respond by producing more creative works then this can indeed be efficient.</p>

<p><strong>Some tangential remarks</strong></p>

<p>The last qualifier (if the result is that artists earn more money and respond by producing more creative works then this can indeed be efficient) is non-trivial. There is some debate about how elastic the supply of creative works really is to the rate of piracy and whether this effect is big enough to offset the efficiency gains that come from consuming creative goods at marginal cost (i.e. zero).</p>

<p>My sense is also that there is a consensus among economists that the existing degree of copyright protection (typically something like the entire life of the author plus an additional seventy years) is far more generous than the level necessary to induce efficient levels of creative goods production.</p>

<p>Lastly, there are other ways of providing an incentive to create. For example, instead of granting an intellectual monopoly, the state can insist that all creative works are freely available and instead reward artists with a lump-sum prize. This avoids the monopoly distortion, but has a couple of drawbacks: (i) the prize would have to be funded somehow (e.g. from taxation, which is itself distortionary); (ii) it would be necessary to find a way to ensure that prizes are only given to reward the right kinds of music. The advantage of the intellectual property approach is that the market automatically rewards popular songs more.</p>

CC BY-SA 3.0
2016-02-01T02:41:22.487Z
So people really [ARE scared](https://www.reddit.com/r/theydidthemath/comments/2n9ske/request_what_are_the_actual_odds_of_being_caught/)? I mean, people will always find ways. They borrow from a friend, use a proxy, download using a public WiFi, etc. Please explain to me how a world that tolerates piracy is different from the world in which we live now. PS Artists can be paid through ads. That's kind of the point of my other post.
BCLC
CC BY-SA 3.0
2016-02-01T02:43:27.613Z
Why taxation rather than ads? Afaik, anyone can set up a blogspot (or whatever is used these days) account and then make a google adsense account. Whenever they get views, they get money from google or whatever.
BCLC
CC BY-SA 3.0
2016-02-01T10:09:19.927Z
@BCLC The relevant question is not whether the average individual is deterred from piracy by the treat of legal action / the reinforcement of the moral sentiment that that people should pay for music (because the average individual's behaviour will not be sensitive to small changes in risk or attitude). Rather, it is *marginal* people who are close to indifferent about pirating a given recording will be much more sensitive to the incentives. Given that the record industry generates $15bn/year in revenue, the are clearly some people who are deterred from pirating.
Ubiquitous
CC BY-SA 3.0
2016-02-01T10:10:34.663Z
@BCLC Unless you believe that people enjoy having their listening interrupted by advertisements, an ad is like a price that you pay with your time instead of your money. Having ads is (statically) inefficient for the same reason a positive price on a zero MC good is inefficient.
Ubiquitous
CC BY-SA 3.0
2015-07-22T09:33:16.107Z
2015-07-22T12:48:32.027Z
2015-07-22T12:48:32.027Z
Ubiquitous
<p>Spin-off from <a href="https://economics.stackexchange.com/questions/6329">Piracy/File sharing - Why aren&#39;t songs, movies or ebooks given for free (+ads) like TV?</a></p>
<p><strong>What are the economic benefits of <a href="https://en.wikipedia.org/wiki/Strategic_lawsuit_against_public_participation" rel="nofollow noreferrer">SLAPP</a> in or out of file sharing/piracy?</strong></p>
<p>There's a comment in above link that says 'The relevance is that the recording industry is not obviously losing the piracy battle. The basis of the OP's question is that they are' (I'm OP, btw ^-^).</p>
<p>If that's the case, <strong>why did the RIAA heavily prosecute people</strong> for what some (yay, weasel words!) people may consider outrageous fines for outrageous expenses (not to mention <a href="https://i.sstatic.net/XqfYQ.jpg" rel="nofollow noreferrer">opportunity cost</a>)? Examples are Joel Tenenbaum (4.5m USD at one point) and Jammie Thomas-Rasset (1.92m USD at one point).</p>
<hr />
<p>From Wiki (emphasis mine):</p>
<blockquote>
<p>A strategic lawsuit against public participation (SLAPP) is a lawsuit
that is intended to <strong>censor, intimidate, and silence critics</strong> by
burdening them with the cost of a legal defense until they abandon
their criticism or opposition.</p>
<p>The typical SLAPP plaintiff <strong>does not normally expect to win</strong> the
lawsuit. The plaintiff's goals are accomplished if the defendant
succumbs to fear, intimidation, mounting legal costs or simple
exhaustion and abandons the criticism. In some cases, repeated
frivolous litigation against a defendant may raise the cost of
directors and officers liability insurance for that party, interfering
with an organization's ability to operate.</p>
</blockquote>
<hr />
<p>I'm assuming that there are some economic benefits to the government, society, the RIAA/the plaintiffs, someone or something by having pursued those individuals so persistently. But then again if it was so beneficial, then I expect we'd hear about a lot more than just these 2 SLAPP cases. (Or, what, everyone else really decided to settle? Idk. I kinda think it's more like RIAA/MPAA decreased its litigious tendencies.)</p>
<p>Perhaps in cases besides file sharing, this might have some benefits, but when it comes to current copyright law, file sharing, piracy, a digital world, etc, I'm drawing blanks particularly due to the '<a href="http://stanfordartsreview.com/citizenfour-cinema-verite-and-using-humanity-as-a-call-to-action/" rel="nofollow noreferrer">Internet principle of the Hydra: You know, you can stomp one person, but there’s going to be seven more of us</a>.'</p>
<p>Chairman and CEO of the Motion Picture Association of America (MPAA) Glickman 'concedes that piracy will never be stopped, but states that they will try to make it as difficult and tedious as possible.'</p>
<p>So, <strong>what exactly is the MPAA/RIAA getting out of SLAPP's</strong>? If there is no direct answer to be given, <strong>an alternative could be: What are the benefits of SLAPP's in general (then reader e.g. me infers analogous benefits)?</strong></p>

CC BY-SA 4.0
2020-12-21T02:03:02.377Z
@Giskard pyrrhic victory? i think i would change 'The typical SLAPP plaintiff does not normally expect to win the lawsuit' to 'The typical SLAPP plaintiff does not normally expect to achieve non-pyrrhic win for the lawsuit.'
BCLC
CC BY-SA 3.0
2015-07-18T21:04:56.810Z
1. Non-piracy:
Did you not already include some benefits of SLAPP in your question?
2. Is RIAA prosecution really SLAPP? My understanding is that they usually win the cases. I would consider it deterrence.
Giskard
<consumer-theory><preferences><consumption><free-riding><intellectual-property>
What are the economic benefits of SLAPP in file sharing/piracy?
BCLC
# What are the economic benefits of SLAPP in file sharing/piracy?

(Asked by: username_0 on 2015-07-16)

Spin-off from [Piracy/File sharing - Why aren't songs, movies or ebooks given for free (+ads) like TV?](https://economics.stackexchange.com/questions/6329)

**What are the economic benefits of [SLAPP](https://en.wikipedia.org/wiki/Strategic_lawsuit_against_public_participation) in or out of file sharing/piracy?**

There's a comment in above link that says 'The relevance is that the recording industry is not obviously losing the piracy battle. The basis of the OP's question is that they are' (I'm OP, btw ^-^).

If that's the case, **why did the RIAA heavily prosecute people** for what some (yay, weasel words!) people may consider outrageous fines for outrageous expenses (not to mention [opportunity cost](https://i.sstatic.net/XqfYQ.jpg))? Examples are Joel Tenenbaum (4.5m USD at one point) and Jammie Thomas-Rasset (1.92m USD at one point).

---

From Wiki (emphasis mine):

> A strategic lawsuit against public participation (SLAPP) is a lawsuit
> that is intended to **censor, intimidate, and silence critics** by
> burdening them with the cost of a legal defense until they abandon
> their criticism or opposition.
>
> The typical SLAPP plaintiff **does not normally expect to win** the
> lawsuit. The plaintiff's goals are accomplished if the defendant
> succumbs to fear, intimidation, mounting legal costs or simple
> exhaustion and abandons the criticism. In some cases, repeated
> frivolous litigation against a defendant may raise the cost of
> directors and officers liability insurance for that party, interfering
> with an organization's ability to operate.

---

I'm assuming that there are some economic benefits to the government, society, the RIAA/the plaintiffs, someone or something by having pursued those individuals so persistently. But then again if it was so beneficial, then I expect we'd hear about a lot more than just these 2 SLAPP cases. (Or, what, everyone else really decided to settle? Idk. I kinda think it's more like RIAA/MPAA decreased its litigious tendencies.)

Perhaps in cases besides file sharing, this might have some benefits, but when it comes to current copyright law, file sharing, piracy, a digital world, etc, I'm drawing blanks particularly due to the '[Internet principle of the Hydra: You know, you can stomp one person, but there’s going to be seven more of us](http://stanfordartsreview.com/citizenfour-cinema-verite-and-using-humanity-as-a-call-to-action/).'

Chairman and CEO of the Motion Picture Association of America (MPAA) Glickman 'concedes that piracy will never be stopped, but states that they will try to make it as difficult and tedious as possible.'

So, **what exactly is the MPAA/RIAA getting out of SLAPP's**? If there is no direct answer to be given, **an alternative could be: What are the benefits of SLAPP's in general (then reader e.g. me infers analogous benefits)?**

**Tags:** consumer-theory, preferences, consumption, free-riding, intellectual-property
> **Comments:**
> **username_1**: 1. Non-piracy: Did you not already include some benefits of SLAPP in your question? 2. Is RIAA prosecution really SLAPP? My understanding is that they usually win the cases. I would consider it deterrence.  
> **username_0**: @Giskard pyrrhic victory? i think i would change 'The typical SLAPP plaintiff does not normally expect to win the lawsuit' to 'The typical SLAPP plaintiff does not normally expect to achieve non-pyrrhic win for the lawsuit.'  

---

## 1 answers

### Answer by username_2 on 2015-07-22. Score: 3

**Background**

Since the marginal cost of distribution for a creative work such as a song is now essentially zero, the efficient thing to do would be to provide all songs to listeners at a price of zero (i.e. to allow piracy). However, this neglects the fact that producing creative works involves a fixed up-front cost (e.g. studio recording time, or simply the artist's time composing the work) that cannot be covered if the price is zero. Moreover, it is efficient for producers of 'good' songs (i.e. those that create value in excess of the production cost) to incur the fixed cost, and for producers of bad songs not to do so.

The way that society mostly addresses this issue is through the grant of intellectual property (specifically, copyright) protection. The trade-off made is that artists are allowed to act as monopolist suppliers (with all of the attendant inefficiencies) because the resulting profits will give them an incentive to produce in the first place. The fact that a seller's rewards are tied to their monopoly profits means that the most popular artists should, in principle, have the biggest incentive to create.

**Efficiency effect of piracy**

If one buys the idea that we need IP protection to induce the production of creative work then tolerating widespread piracy is a bad idea because it takes away the profit that is supposed to provide artists with the incentive to create. Whilst each individual instance of piracy might be efficient, the overall effect of reducing the number of works produced might not. It is then necessary to ensure that enough people do not pirate enough of the time to keep the rewards from production at a sufficient level.

People should be expected to pirate if the benefits from doing do (free consumption of creative works) exceed the costs (determined by likelihood of being prosecuted and the penalty when prosecuted). An obvious way to stop people from pirating is to increase this cost by prosecuting more people—even if you don't really care that much about winning. Indeed, the main objective is not to win the case and get what, to the RIAA is pocket change; rather, the objective is to scare people enough that they start buying rather than pirating music. [n.b. The RIAA would have to win at least some of the cases, otherwise the threat would be completely empty. As Densep notes in a comment, this raises the issue of whether we can really call these cases SLAPPs or not].

If the result is that artists earn more money and respond by producing more creative works then this can indeed be efficient.

**Some tangential remarks**

The last qualifier (if the result is that artists earn more money and respond by producing more creative works then this can indeed be efficient) is non-trivial. There is some debate about how elastic the supply of creative works really is to the rate of piracy and whether this effect is big enough to offset the efficiency gains that come from consuming creative goods at marginal cost (i.e. zero).

My sense is also that there is a consensus among economists that the existing degree of copyright protection (typically something like the entire life of the author plus an additional seventy years) is far more generous than the level necessary to induce efficient levels of creative goods production.

Lastly, there are other ways of providing an incentive to create. For example, instead of granting an intellectual monopoly, the state can insist that all creative works are freely available and instead reward artists with a lump-sum prize. This avoids the monopoly distortion, but has a couple of drawbacks: (i) the prize would have to be funded somehow (e.g. from taxation, which is itself distortionary); (ii) it would be necessary to find a way to ensure that prizes are only given to reward the right kinds of music. The advantage of the intellectual property approach is that the market automatically rewards popular songs more.

> **Comments:**
> **username_0**: So people really [ARE scared](https://www.reddit.com/r/theydidthemath/comments/2n9ske/request_what_are_the_actual_odds_of_being_caught/)? I mean, people will always find ways. They borrow from a friend, use a proxy, download using a public WiFi, etc. Please explain to me how a world that tolerates piracy is different from the world in which we live now. PS Artists can be paid through ads. That's kind of the point of my other post.  
> **username_0**: Why taxation rather than ads? Afaik, anyone can set up a blogspot (or whatever is used these days) account and then make a google adsense account. Whenever they get views, they get money from google or whatever.  
> **username_2**: @BCLC The relevant question is not whether the average individual is deterred from piracy by the treat of legal action / the reinforcement of the moral sentiment that that people should pay for music (because the average individual's behaviour will not be sensitive to small changes in risk or attitude). Rather, it is *marginal* people who are close to indifferent about pirating a given recording will be much more sensitive to the incentives. Given that the record industry generates $15bn/year in revenue, the are clearly some people who are deterred from pirating.  
> **username_2**: @BCLC Unless you believe that people enjoy having their listening interrupted by advertisements, an ad is like a price that you pay with your time instead of your money. Having ads is (statically) inefficient for the same reason a positive price on a zero MC good is inefficient.  

---

