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Matt Mason

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IT's Not about the Technology

We live in an age of piracy. Intellectual property can no longer be locked up in the corporate castle. Instead, it flows as freely as trade winds--and can be plundered in the form of illegal downloads or cheap knockoffs produced offshore. Businesses face a new dilemma: are pirates a threat to be battled or innovators to be emulated? Should you compete with pirates at their own game? In the book The Pirate's Dilemma, Matt Mason shows how piracy has become a new business model and argues that youth culture is pushing the world towards a more democratic model of capitalism. Mason, who is 29, tells us what we can learn from pirate radio, video game hackers, and why being pirated is a whole lot better than being ignored.

Why is piracy becoming such an economic force?

The human being is a copying machine. It's how we learn to talk and learn social norms. We organize ourselves as a society by imitating what the rest of society does. Piracy has been with us throughout history. The problem now is we have the ultimate copying machine--the Internet. Things can be copied so fast that no one can even determine the original anymore.

Is piracy ever healthy in spawning innovation or creating a market?

Absolutely. Sometimes it creates a more efficient market -- digital distribution is a much more efficient way to deliver music than CDs and that's why people switched to it without the music industry wanting them to. A lot of people think my argument is that all piracy is great, which isn't really the argument. The argument in the book is piracy can actually be a market signal. It really highlights market failures in many ways.

Microsoft, for example, is alarmed that Vista isn't being pirated very much.

This is an interesting thing with piracy -- it's become a new kind of rating system. It concerns people within Microsoft that people weren't pirating Vista; they're continuing to pirate XP. These are important metrics because it tells you something about your customers.

To rip off Stephen Covey, what are the habits of highly effective pirates?

An entrepreneur looks for a gap in the market; pirates look for a gap outside the market. They go to the taboo area, and that's where they set up shop. The second thing they do is create a vehicle or platform, and that medium is also a message. A $5 DVD highlights that gap outside the market and says to the consumer, "This is a good idea. Why can't you get this legally?" The third and most important thing pirates do is harness the power of their audience. If the audience decides that what they're offering is of value to society and is more efficient than the legal, established way of doing it, fighting in the courts no longer works. You won't be able to stop it. You'll be as likely to win that as the war on drugs or prohibition.

What do you when somebody starts ripping you off?

The pirate's dilemma is a dilemma because there's more than one answer to this question, and there are a lot of questions you have to ask. If you're Colgate-Palmolive and somebody starts copying your toothpaste at a factory in China and it's toxic, well, that's a no-brainer. You've got to fight that with everything you've got. It's an example of people producing inferior, illegal products that don't offer any value to anybody and that's when you fight piracy. The time when you need to look at piracy again is when it's adding value in some way. When Edison started recoding musicians on plastic disks, live musicians did not like this. They saw it as the death of their business. Obviously, that wasn't the case. Edison and the live musicians came to an agreement and the record industry was born.

What's an example of a company that responded effectively to piracy?

In the book, I talk about Nike and this very famous shoe, the Air Force One. It was launched in 1982, and it's been kept alive by the hip-hop generations' love for its simple iconic design. Well, this didn't stop a 22-year-old hip-hop DJ from Tokyo called Nigo from making his own version of the Air Force One. He had a fashion brand called Bathing Ape and took the Air Force One, ripped off the swoosh, and added a shooting star logo and released them in limited quantities for around $300 and these became really popular. Bathing Ape is now a multimillion dollar brand all over the world. Although there was a definite case for infringement, Nike didn't sue him. They competed with him in the marketplace. They saw the way he was using garish textures and colors they hadn't experimented with, and they decided to do the same. There's no point in trying to sue somebody if they help you sell more of the original. Bathing Ape is doing really well and Nike actually bought shares in Bathing Ape. They invested in them.