This is a good link:
http://projectrho.com/rocket/rocket3al.html#consequences
It's talking about the unintended consequences that can result from certain common sci-fi physics violations, but it illustrates very nicely in terms of a hypothetical situation in the physical world what computers have done with information.
What if the utility of the software is such that it isn't worth the cost of developing it to a single person, but it would be worth it to aggregate the demand from lots of potential users?
In other words, it will cost millions of dollars to develop a piece of software that is worth only a few hundred dollars to any one individual. The only way to support the expense of developing the software is to be able to sell it to lots of users. But if the software can be freely copied, then the person who pays for its development can't recoup her costs, much less make a profit.
This seems like such a simple and obvious question that I know I must be missing something, since those who oppose the existence of IP are so passionate. There must be something i'm missing at a very basic level.
The problem is the way that the supply and demand curves for information are skewed because of the existence of the computer and the internet. The cost of production for the software developer is pretty much invariant with quantity sold because copying software is so danged easy. The supply curve is a vertical line at the development cost. The intrinsic value of a copy of software is practically nil. Practically all of the cost is labor. The more copies are sold, the less each copy is worth. So as the number of copies sold goes to infinity, the value of each copy goes to zero. And as soon as the developer sells one copy of the software, he has introduced a competitor into the market, one who only paid the box price for the software, and who can copy it for the same cost that the developer can, and who thus can make a profit on it by selling it for alot less. In fact, often just the goodwill he earns from the public by giving it out for free is worth more than the cash he could get by selling it, or the badwill he earns from the business community or government (small compared to the general public). Thus, anybody with a copy of the software can make out like a bandit (if "only" goodwill-wise) while massively undercutting the developer's price. And goodwill is actually quite a valuable commodity. Just being someone's friend can inspire them to help you in myriad ways. In fact, I'd go so far as to say that goodwill is far more valuable than money. So the pirate's supply curve is basically a vertical line on a supply/demand graph right at zero (monetary) cost. If goodwill gains are taken into account, it becomes a vertical line, (or even a line with cost decreasing as quantity increases), that lies very solidly in the negative-cost region of the graph. The demand curve, meanwhile takes a huge drop as soon as the cost goes above zero, and the only reason that demand doesn't drop all the way to zero is that a few customers are scrupulous enough to actually pay.
So the supply/demand curve gets shot to heck, and meanwhile the corporations sustain a massive goodwill loss in the eyes of the public, which tilts their own supply curve to falling cost with increasing quantity. The net result is a widening rift between the public and the corporations.
How is "removing the limits" different from delivering the key to the buyer of an automobile? I'm sure I must seem like a complete idiot for not getting this, since so many smart people treat this as such a simple problem.
Because the buyer of an automobile has an interest in keeping that key to himself so that nobody drives off with his car. He has an interest in limiting other people's use of it so that he gets to use it himself. But if only one car and key ever needs to be produced on the assembly line, and after that a new car and key can be made from any existing one simply by waving the key and saying "abracadabra," then the owner will not really feel any compulsion to keep the key to himself. If some total stranger asks for his car, he can just wave the key and say "abracadabra," and he will have gained the goodwill of the stranger at no cost to himself (except the negligible effort required to cast the duplication spell). It gets even worse if the car can be teleported to a new user at practically any distance with "alakazam." The car manufacturer will then have a vested interest in trying to figure out a way to copy keys, and in trying to maintain as much control of the keys that do exist as he can. He will also probably wish to restrict the public use of the words "abracadabra" and "alakazam" as much as he possibly can.
You grew up in the era when the cost in time and capital to duplicate any significant amount of intellectual property was fairly high. To copy a book, you had to buy a fair amount of emulsified tree, and then spend a great amount of time at a typewriter copying each copy of the book. Now, you just type it up on a computer, save it, upload it, and post a link to it. Now, to make a new copy, all anyone has to do is click on the link, and on any decent connection it will have been copied, with practically no effort on the part of the user, in a few minutes.
So here's an analogy for your generation: I own the rules to tic-tac-toe (The IP rights are an heirloom in my family. My 80-fold great grandfather spent a good hour thinking up the rules at age five). If you want to play tic-tac-toe, you have to buy a copy of the rules from me, for the low, low, bargain-basement price of 50 cents. That doesn't cost you much, does it? My anscestor spent an hour on it, so 50 cents doesn't even cover his labor costs at minimum wage, and I'm barely squeaking by on materials costs since I only make 48 cents profit per copy (paper and printer ink costs a bundle, doesn't it?). If somebody that has bought the rules wants to play tic-tac-toe with you, are you going to buy your own copy, or are you just going to use theirs, copy the rules into your brain, and then use that teach anybody else you want to play with that doesn't know the rules? A computer program, to a computer, is not really any different from a game of tic-tac-toe, just more complex. (Even to a human brain it isn't. We'd just have trouble remembering the whole ruleset and would take centuries to execute it with our brains).
EDIT: And I forgot about the effect that DRM has on demand. A hacked, DRM free piece of software is likely to be percieved as more valuable than a DRMed piece of software just because of reduced hassle and such, even by people who would never dream of copying software or otherwise obtaining it without paying for it. There are some who might actually go out and buy a CD for a piece of software and then go and download a hacked copy of it without DRM without ever putting the CD in their machine. That's why I tend to go with freeware: Low cost, hassle free, publicity is generally earned and not bought, so the stuff you manage to hear about is good, and no ethical dilemmas.
