Category Archives: Misc

Examining justice in the context of professional athletes

Both the NFL and NBA are looking like they’ll be locked out next year. Collective Bargaining Agreements expire for both leagues (and already have in the case of the NFL). The NFL, though, probably won’t miss any time. Everybody is rolling in money in the NFL, it’s at the height of it’s popularity, and profit sharing keeps most of the owners happy. They’ll figure it out when the prospect of everybody losing money looms closer.

But the NBA is a mess. Contracts have gotten out of control, players get way too much guaranteed money, and most owners don’t make any money. In fact, the majority of franchises lose a good amount, and one team is owned by the league. Unlike the owners of NFL teams, the threat of no NBA won’t be scaring the majority of the owners, because they would have been losing money anyway. So something is going to have to change.

The owners have recently been leaking that they want to force players to spend two years in the college game before coming to the NBA, which makes sense to me, and reflects the trends of the other major sports. But it’s debatable: some have argued that the NBA is getting free training out of the NCAA, and denying the right of a 19 or 20 year old who is ready to play in the pros his chance to do so. Again, it seems fair to me, but that’s not the point. The point is, we don’t know what’s “fair”/”just” here. I’ve been reading about justice as a concept lately, specifically on deconstruction as a tool to examine what we think is just as a society. Still reading? Great. That line of thinking basically holds that justice is an undefinable, unachievable urge that manifests itself in how we organize society, a reflection of ourselves, and that we can figure out more about that sense by looking at how we treat different groups. /end summary.

(Above: Kobe Bryant, who entered the league straight from high school, and John Wall, who had to play a season for Kentucky before enjoying the same privilege.)

What’s interesting to me is that arguments for or against forcing future pros staying in college tend to compare sports leagues, which obviously makes some sense, but it ignores the larger economic analysis by pigeonholing all athletes into one category. Our sense of justice is satisfied so long as all athletes are treated the same way, but doesn’t necessarily require that athletes be treated the same way as other professions. People compare the NBA owners’ proposal to the existing systems in the NFL and the MLB, both of which (sort of) require college players to stay for 2-3 years before turning pro (the MLB will draft you out of high school into a farm league, if you want, but if you go to college you have to stay for 3 years). So, because other athletes are forced to go to college for a few years, we are okay with potentially forcing the same on basketball players.

But why don’t we compare this profession to OTHER professions that people enter? Would it be fair to require amateur work of qualified individuals before they can “turn pro” on an essentially arbitrary basis? For the sort of athlete who is seriously able and fully capable of entering the NBA after high school, we would presume they gain nothing from college in terms of education: they don’t need what they learn in college if they could already be drafted, though it might improve their draft stock by allowing them to mature, a calculated economic decision that they, one could argue, should be allowed to make for themselves. Conversely, the teams should calculate the risk of signing an immature player themselves, and factor that into their decision regarding who to draft: indeed, they do this already with players from college. High school players are essentially skilled laborers, being told that they must enter a training facility and work without pay (though likely on a full scholarship), creating value for the training facility (untaxed revenue for the college) but seeing no fruit of their labor personally for two years. Is there another economic market where we are okay with forcing laborers into this situation?

(Above: Cam Newton, who played for free [maybe] and helped make Auburn more than $60 million last year.)

This point is, as I’ve mentioned, fairly debatable in the context of athletes: Do basketball players benefit from going to college instead of straight to the NBA? (plenty of examples pointing in both directions) Does “basketball” as a nebulous concept benefit by having better NCAA players for longer? These are the questions people ask in the debate. What they don’t ask is: Do the majority of NBA owners, who are white, and the heads of college programs, who are white, benefit from forcing black athletes to work for free for two years before being allowed to profit from the value they achieve for their employers?

That last rhetorical question obviously betrays the conclusion I’d like to draw: We treat athletes differently than other professionals when we consider what is “just” in their treatment. The debate over whether we should force black 19 year olds into creating value for predominantly white owners and provosts of colleges is not one of race, but of economics. It seems “just” that athletes merely be treated like other athletes. There is a tension here, but I don’t know what else to say about it. The way the public debate on this topic has played out thus far (granted, its been only a few days), it seems clear that our society has a different sense of justice when it comes to athletes. Athletes who are predominantly black.

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Fair Use in Altering Photographs for Art – Why is this so difficult?

Big story in the copyright world is how a lower court judge recently tried to rewrite fair use, claiming that an artist who took pictures from another artist and altered them dramatically was violating copyright. Tons of blogs that touch on copyright have mentioned it, and Techdirt, overanalyzer of all things, is having a field day.

The basic details are that a prominent artist, Richard Prince, was sued for taking images from a book of photos of Rastafarians and altering them, under the guise of copyright infringement. Here’s a side-by-side, see if you can tell the two apart…:

Did you guess which one was Prince and which was the original? I’m guessing you did, and that’s kind of the problem with the original photographer’s argument to me: No consumer would ever confuse these two pictures, and the market for them is different (one of the prongs of Fair Use, and to me, determinative here). If I’m looking for a great photo of a Rastafarian to use in whatever sorts of things people in the market for Rastafarian photos do, I’m going with the left photo! I specifically do not want the photo on the right. If I’m an art connoisseur, I don’t want the picture on the left: I want the tremendous value added by Prince’s attention and critique.

But that argument leads to a pretty obvious problem: What if the guy making the picture on the right is the ONLY person in the market for the sorts of photos on the left? That’s essentially the larger argument that supports telling Prince to F off and pay a licensing fee, and it isn’t from this case, it’s from the AP vs Shepard Fairey, the case dealing with the Obama Hope picture. If you aren’t familiar with that case then I’ve probably lost you, but basically the guy who made the Obama Hope poster/shirt/bumper sticker/lunchbox based his image on a photo taken by an AP photographer, and the AP wants money as a licensing fee for using it. Their argument is: We pay photographers for their photos, and if 1 in a million is useful, we need to get paid for that useful one to make the system work. If the court analyzed business plans, they’d probably give that one a de no-no review (worst pun I’ll ever go for), but some people think the argument holds water.

My opinion is that, copyright at it’s core is intended to encourage the creation of artistic works without fear that they will be stolen and sold without permission, out of fear that such behavior would ruin the basic incentive to create works in the first place. It isn’t about getting into the market for a good you never envisioned creating yourself because somebody else used your work as source material and altered it completely (this is a view courts have typically supported, such as in the famous Roy Orbison/2 Live Crew case). It also isn’t about supporting crappy business models, such as the AP’s claimed structure of paying for thousands of photos on the prayer that one gets famous and they get a windfall licensing fee. The photographers in both the Prince case and the AP case had no intent to create the base for a work of art, and if you told them that none of their photos would ever yield a licensing fee for a famous work of art, they would take the photos anyway. They aren’t, after all, artists in that manner. The AP presumably made money from the photo as it makes it from all photos: they pay a very small fee to the photographer, and use the photo to add value to their story. The Prince Plaintiff made money as well: He’s selling a book of rastafarian photos like he intended when he took the photo.

I’m trying to think of a profession where you are encouraged to just run around, randomly produce things, with no specific monetization plan whatsoever, simply hoping that somebody else “steals” the thing and makes use of it (besides patent trolls… let’s please not make copyright into patent law!). I can’t think of a good reason to promote that sort of market, and I don’t think it’s a proper use of Copyright to defend works that fall into that unique scenario. Luckily, Prince is appealing, and I can’t imagine he will lose.

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Luxury goods, virtual goods, and the massive disparity of wealth in the world

Virtual goods are becoming a huge industry, and there’s no reason to think it’s just a fad given the penetration of technology and the internet in our lives. This year, the virtual goods market is projected to reach $2 billion dollars, more than $800 million of it coming from social games [edit: those are U.S. numbers, btw. The entire global market is much larger]. Those are pretty massive numbers, and virtual goods could very well be a $5-10 billion dollar industry by 2020.

There’s a bunch of interesting things about the virtual goods industry:

It’s got crazy high margins. CRAZY high. Zynga, the most prevalent and dominant company making facebook games, was recently discussed as being the most profitable company ever, with a profit margin of 47% (for context, Apple and Google are around 30%, Amazon is around 5%, and the previous record might have been Chanel at 45%). [http://read.bi/fsBlIJ]. Helps when you sell things that don’t actually exist.

That’s all we REALLY know about the industry so far. May sound a bit dismissive, but really, it’s a very young industry and the economics of it are still being examined as the market changes, as new competitors arrive, and as the industry grows to new non-facebook non-second life sectors. Part of the reason for this lack of wisdom is:

– It’s unregulated. At multiple levels, this rather large industry is controlled entirely by private funding, but many of the companies are getting big enough to sit in an awkward space of having a near-public secondary market for trading stocks. This is bound to go badly, and most people seem to think it will pretty soon: as you can see in the article linked above, the huge valuations and margins these companies are drawing is leading to a lot of investment in the companies AS IF they were public, but without the oversight or reporting requirements of public companies. Board members are the venture capitalists who invest in all manner of companies to get an edge on the industry, and the information disparity between those professionals and the everyday man who ends up invested through the secondary trading market is massive. One of these companies is bound to tank, leaving regular investors with shares of a worthless, revenue-less internet company after all the sophisticated VCs jumped ship. And that will be quickly followed by regulation.

It’s a luxury goods market that caters primarily to the middle class. Most of the users of the most successful virtual goods application to date, Farmville, were middle age women. I don’t know the income distributions of virtual goods purchasers across the whole ecosystem, but I don’t imagine they are any more well-off than the average middle-class American. Virtual goods, as I think most would agree, are a luxury good. Maybe a strict economist would point out that we don’t have enough data to know about the elasticity of the demand in the market, but something tells me the first thing most people would cut out of their budgets in a time of crisis would be their virtual tractor oil or new shirt for their avatar. The goods don’t even EXIST, it’s perhaps the most ‘luxury’ good ever. So this is an industry that makes pure luxury goods, selling to the middle class, during probably the worst recession in the history of the United States. And it’s working. Investors will pay anything to get a piece of it.

I originally titled this post as if I was going to make a critique of this pattern in human society, noting the strange disparity in wealth in the world when one society is spending billions of dollars on nonexistent goods while others die of starvation and disease and war… but I’m actually not so sure spending money on nonexistent goods is any more ridiculous than spending money on any other luxury. Is paying $400 for a handbag really much better than paying $2 for a different set of pixels? I’m not advocating either form of discretionary spending really (both seem like a borderline moral wrongs for a society with massive unemployment and legions of medically uninsured), but perhaps the virtual goods are actually better: at least they never go in the dump, and most of the virtual goods are made in America! Maybe that will reduce those unemployed and uninsured numbers by 2020.

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