Digital Five Finger Discount


Given any eBook discussion, and people will talk about pirates. You’ve probably heard it all before – the good and bad of piracy, the good and bad of DRM. Heck, I’ve said a good portion of it before.

Here’s something different: Digital book piracy makes suppliers have to think like retailers.

Every retailer estimates a certain percentage of “inventory loss”. You know, for shoplifters. The “five-finger discount”. Theft. Stores try to minimize those losses (sometimes to a ridiculous extent), but by and large it’s known as a price of doing business. Some degree of shoplifting will occur, regardless of what you do about it.

The same thing applies to piracy. Piracy is the same kind of theft as shoplifting. It should be minimized, but companies must realize that digital piracy will never, ever go away. In the information and content business, piracy is going to occur regardless of what you do about it.

There’s two big differences, both in the reactions of companies.

1. For a while there, retail stores tried to keep shoplifting in check by examining everyone’s bag and trying to detain those who refused. This did not go over so well, and I’ve seen the practice decline in real life. DRM – in many ways the equivalent, especially when it has to “call home” to a central server – is still around despite a similar public backlash.

2. Retail stores don’t bemoan the loss of purchases from shoplifters. This is a key difference. Retail stores understand that the shoplifters were never going to buy the item they stole. Digital publishers don’t seem to understand this. They count every pirated copy as a loss of revenue – but it’s not the same.

In Search Of Lost TimeRetailers do complain about inventory loss, and rightly so. A retailer cannot sell a shoplifted sweater – it’s gone from inventory. A retailer can sell a MP3, even if it’s been pirated – there is no loss from inventory. It’s apples and chairs, people.

The availability of a pirated product may reduce the price someone would pay for the same product, but that’s a totally different paradigm. Pay $10 for Half-Life? I sure did – even though it’s available on torrent sites. Would I pay $50 for a game released in 1999? Um… that would be a different story.

Piracy is not a good thing. Yet simply working within the same good/bad paradigm doesn’t make sense. We have to make sure the ways we talk and think about piracy actually reflect the reality of the economic situation. The internet, once again, Has Changed Everything.