Beg, buy or steal video content - the iTunes flawed rental model

ThinkSecret has another Apple scoop today, this time that iTunes is planning a rental model for video on iTunes.

Apple was able to corner - indeed, almost singlehandedly create - the market in legal music downloads because it brokered a deal with music rights owners so convenient for users that for many of them the incentive to steal evaporated. Where the alternatives are to buy or steal a good, the user is essentially being asked to make a rational economic calculations like any other - a cost/benefit analysis of whether the chance of being caught plus the severity of the criminal penalty is sufficient to deter them from the convenience and cost-effectiveness of the theft. Before iTunes, millions of Napster, Kazaa and Gnutella users made the calculation that the potential costs of stealing music online - of being caught and punished - were slim to nil and the benefits - of not having to pay, queue for CDs or tolerate onerous DRM - were considerable. Thus a black market emerged.

Apple's apparently imminent announcement of video rental over iTunes shows that either Apple, or the movie studios, or both, have failed to learn the lessons of the music industry. Currently it is easy and simple to steal films and other video content via BitTorrent so millions of people do so. Of course, there will be some consumers whose marginal decision will be to buy a DRM-heavy rented film from iTunes rather than steal it from BitTorrent with the attendant (seemingly trivial) legal risk. Some will make a moral calculation that they do not wish to steal - Forrester says (sub req'd) that around 22% of online youth has stopped downloading copyrighted music for fear of getting caught but roughly the same percentage has done so because they think it is wrong. The most substantial consumer group, therefore, is the one making a simple cost/benefit calculation that they are unlikely to be caught stealing media. The hope of the movie studios must either be that a more vigorous and high-profile policy of prosecutions will make for a different dynamic within their industry - or they are hoping for no reason at all that evidence to the contrary consumers will rent DRM-laden films from iTunes.