Quick note on the RIAA's new tactic: notifying people before they sue. Because I've read a lot of confused opinions saying that this is looking like an 'effective strategy'.

First of all, let's categorize it: it's a deterrence tactic. The problem is, you don't want to deter consumers from buying your products - only from appropriating all the value you create.

From a strategic point of view, this strategy can only be considered 'successful' even in the strictest sense if, in the aggregate, it stops people from downloading music they otherwise would have bought. If it's only succesful in stopping people from downloading music they never would have bought, it's an inferior strategy. That's because every strategy costs something - and in the latter case, you're trading something for nothing.

In fact, we can even extend this argument: it's an inferior strategy if it causes anyone to not buy music who otherwise would have bought music at any price above the marginal cost of producing the music - because recorded music is non-rival in consumption: any number of people can consume the good. It doesn't become scarce by 'running out'.

I think this strategy is a case of the latter - an inferior strategy. Because, fundamentally, while this strategy can change the expected payoff from downloading, it doesn't change the expected payoff from not downloading.

What's more, there are definitely people who would have paid something for music, but aren't willing to pay what the industry is asking.

I won't get into deeper strategic issues, but all the usual suspects are also there: erosion of brands, user bases, and other strategic assets, erosion of competences, lack of incentives for innovation, etc.

So while this strategy may have a chilling effect on 'file-sharing', the effect on sales is going to be another story. And that effect has to do with something I'm writing a longer piece on which I'll post soon.