Tomorrow sees the start of the London leg of the Search Engine Strategies conference series and, as befits probably the largest event in the search marketing industry, they’ve organised a highly respected and fascinating keynote speaker. Last year they had Nick Carr, author of The Big Switch and this year they have another author with a fascinating thesis: Matt Mason, author The Pirate Dilemma.

It was the first book to make the number one spot on Amazon’s economics and rap best-seller lists at the same time and examines how pirates and those for whom copyright is no more than at best, an annoyance and, at worst, a cultural irrelevance, are both strengthening & threatening modern businesses. In the week that file-sharing freedom fighters* The Pirate Bay are finally taken to stand trial in their native Sweden whilst Spotify came out of beta, but shorn of thousands of tracks due to licensing wrangles, The Pirate’s Dilemma has never been more relevant.

Matt was kind enough to answer a few of my questions from his base in New York before flying in to his home-town of London toopen SES London tomorrow (February 17th):

Altogether Digital: Your book talks about how different industries & companies have reacted to piracy. Which sectors or brands would you say have handled ‘pirates’ best?

Matt Mason: I think Hollywood has reacted slightly better than the music industry – because they saw what happend to the music industry. A lot of the studios seem a lot more interested in working out new legit distribution systems like Hulu.com. But across every industry there are examples of individual companies benefiting by copying pirates rather than fighting them – in fashion, pharmaceuticals, video games – there are examples everywhere you look.

AD: Spotify has stated that its aim is to kill off file-sharing – doesn’t the fact that people preferred to download In Rainbows from P2P sites than the official one, even though it was free, show that some people just prefer nicking stuff?

MM: I don’t think an entire industry let alone a single company has the power to kill off file-sharing. P2P is a subculture at this point, a movement that hundreds of thousands are passionate about and will defend. It’s not just about nicking stuff for a lot of people involved, it’s a philosophy they will fight for and that’s the point everyone seems to miss – this isn’t a tecnology problem, it’s a cultural shift of sorts. But things like spotify are a step in the right direction – legitimizing the phenomenon seems to be more effective than fighting it.

Some people do just prefer nicking stuff – but the easier it is to use legal, well-priced alternatives, the less likely people are to nick stuff. It’s about social norms – people form habits. Because no legal alternative to file sharing was in place for so long, the first place a lot of people go for new music is their favourite torrent – it’s habitual at this point. I think that’s another reason In Rainbows was downloaded elsewhere too – people went where they go to get music, which didn’t happen to be Radiohead’s website.

AD:  If you were launching a record label right now, what would your business model be?

MM: My business model would be a virtuous circle. Any pirate-proof business model in any sector has to have multiple revenue streams that add value to each other. The story of the product or the brand has to work across several areas at once – and all of these points have to entice users to other points. Successful artists are often great business people as well, but artists are having to deal with new levels of complexity today. But they are dealing with it. I’m optimistic. The big problem in music is the lack of a collective licensing system that works online, and it’s going to take the entire industry working together to get that done, and the majors aren’t very good at working together. It’s probably still years away.

Interestingly, in an interview with The Observer, the music consultant with e4’s Skins talks of creating just such a virtuous circle: the show promoting uinsigned bands, with their records then released on the show’s label, and the bands appearing at the show’s events. Out-dated TV regulations seem to be the only thing stopping this from happening.

AD: Could you explain why you don’t think movie companies should worry about DVD pirates? 

MM: Um – I do think they should worry about DVD pirates. People file sharing is one thing, but organised illegal DVD stamping operations fund drugs, terroism, all kinds of stuff. Hollywood isn’t lying about that.

DVDs represent a large chunk of Hollywood’s money – Blu Ray was just a way to put off the inevitable shift to downloadable movies which everyone is scared of. The way to fight DVD pirates (and filesharing of movies)  is similtaneous release – films on all formats at once, but that’s a huge risk. There are many reasons this won’t happen anytime soon – the power of retailers like Wal-Mart, the simple fact that no one in Hollywood is really behind the idea – it’s a very, very risk-averse town. But similtaneous release will happen someday, they’ll put it off as long as they can though.

I based this question on an interview I read with Matt where he says “Hollywood’s model depends on exclusive release of films to theaters, followed months later by a DVD release. Yet despite the activity of the pirates, the summer of 2007 was Hollywood’s biggest ever, with movies taking in $4 billion at the box office.” It seems I may have mis-interpreted his quotes.

AD: How many free copies of your book have been downoloaded, and how easy was it to get your publishing company to agree to this strategy?

MM: Thousands and thousands – it’s hard to know because so many of them don’t come from my website. It was difficult to get my publishers behind the idea at first – it was only when the book got pirated anyway that they decided to give it a go. But almost a quarter of the people who get it from the website pay for it, which is amazing. Radiohead got way less than that, I’m very happy with how it’s turned out. My publishers know this was a better strategy for me than it was for them – because selling books isn’t my main revenus stream – all the things I do because of the book that my publishers don’t get a cut of make more money – speaking, consulting etc. The business model for publishing is changing a lot though – both my publishers (Penguin in the UK and Simon & Schuster in the US) have opened speaking bureaus since the book came out.

AD:  Are there any instances where you don’t think piracy (other than of the real, Somalian variety obviously) is good, either for the product or the consumer?

MM: Yes – many. This is why I called the book The Pirate’s Dilemma. Pirates are only worth copying if they are genuinely adding value to your business model, value you aren’t getting a share of. If they are just producing inferior knock offs of something you do, then fighting them is the best way to go – the problem is recognizing value, it’s not always obvious.

For example, if you make toothpaste and someone starts making fake copies in lead tubes that poisons people, there is no value for you in competing with that product. Your customers are not trying to get poisoned. That seems like a no-brainer. But there may be value even there – who is distributing this poison toothpaste? Who is buying it? There could be a new emerging market and new distribution channel there just waiting for you. Of course you need to get the poison toothpaste off the market as quickly as you can and send the people manufacturing it to prison, but the people buying it and distributing it could be absorbed into your legit business model.

AD: I understand you used to be a DJ on pirate radio – I used to be a pirate radio fan in my teens – which ones were you on? And what did you play?

MM: I used to play on Powerjam in Bristol in the late 90s, and MAC 92.7 FM in North London, ICE 88.4 FM in South from 1999 – 2004. I played house and garage. I still listen to the London pirates more than any other stations – I never miss DJ Perempay’s show on Rinse FM.

AD: I think you now live in New York: do you feel that London or NY has a more thriving ‘piracy’ culture?

MM: In my experience, it’s much easier to be an entrepreneur in the NY, there is less of a stigma attatched to going bankrupt and people are much more supportive of you if you’re trying to start something new. I wish I could defend the UK on this, but I still have friends over there who keep asking me when I’m going to get a “real job.” But London has pirate radio, and the clubs are much better.

AD:  What would be your tip/thought/breaking idea for 2009?

MM: Take a risk. start something. It’s a great time to innovate – people are looking for new ideas and ways out of this mess, and it can be done with less moany than ever before. And if you mess up, you can blame it on the economy.

And there, due to the constraints of time, georgraphy and a million other things, the interview had to end. It’s certainly thought-provoking stuff and I can’t recommend checking out his book highly enough. And just to show that some of us luddites are still around, why not pay for your copy and then pay for a ticket to see him speak at SES London?

*In keeping with the theme of this interveiw, I hereby licence the phrase I invented, “file-sharing freedom fighters”, under the creative commons system, to be used & abused by tabloids around the world.

Pirates image by Oakley Originals on flickr

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