economics for the win
Ran across this on boingboing - a company apparently offering p2p insurance. Their site's in swedish or something so I can't really determine what's going on, but that's beside the point.

This is capitalism/applied economics at its finest. This company recognizes that the threat of an RIAA lawsuit is significant given the average settlement (somewhere in the $2k-3k range last I heard), but runs some numbers to determine the actual risk per user per year of getting sued, and prices their insurance based on that - $20 a year or so.

Personally I'd put the actual cost of risk per user per year at closer to $3, assuming - pessimistically - average settlement of $4000 plus $500 overhead for additional variables that may arise, and assuming - again, pessimistically - there's a 1/1500 chance of getting sued (see article linked above). That doesn't include operational overhead from actually running a company providing the insurance, and any adverse selection - that is, the insurance being more attractive to high volume p2p users who are more likely to be sued than the average user.

Anyway, that's kind of beside the point. What it comes down to here is the RIAA has been using these highly publicized lawsuits as a scare tactic for a couple years now - but the actual economic penalty is minimal, particularly when risk is distributed as insurance is designed to.

I could see a US version of this - priced appropriately of course - effectively destroying the RIAA's p2p lawsuit strategy. It's way too optimistic to speculate they'd start to recognize the additional value that can be created by users sharing/copying content, or that they'd embrace social/networked distribution models which encourage copying, but if nothing else it'd be a step in a better direction...
- posted by vcmc @  6/30/2006 12:21:00 PM