The authors argue that the fashion sector has more innovation because of its near-absence of copyright protection. Here is some brief background on the issue.
Fashion is a status good. You wear a new design if some other people do (it must be focal as an object of status), but not if too many other people do. You want some degree of exclusivity to your wardrobe. So let's say a new design comes out. There will be some early adopters, but then a rapid series of rip-offs from other companies. Once the rip-offs come, companies invest in making further designs. Fashion is ephemeral and the rip-offs spur the next round of innovation.
I think it's important to make a distinction here between design and innovation. Innovation, in my book, implies additional functionality, a permanent leap forward, even if slight. Not all design is innovative. Fashion design is mostly non-innovative design. Nor are clothes quite classifiable as art objects, the way poems or paintings are--garments need to be worn to exist, which makes them more like theatre than anything else.
In terms of an economic model, I'm not sure piracy in the fashion industry is comparable to piracy in the music industry. A pirated copy of Lawrence of Arabia offers the same user experience as the paid version. But a pirated Prada bag is not a Prada bag, nor, for the most part, do the real thing and the copy share the same customer base. As I mentioned, fashion is fundamentally an interactive, "live performance"--and to that extent, it cannot be pirated quite the way entertainment can.
There still may be lessons for entertainment here: I think one of the reasons fashion tolerates piracy so well is that fashion houses are far more focused on brand-building than on product. And piracy actually helps build a brand.
Maybe entertainment companies focus more on brand than product. Why do musicians release an album a year? Why shouldn't they release a song a week, and distribute them to subscribers via podcast? Since iTunes started selling TV shows, I've spent around $100 on Battlestar Gallactica and Lost episodes--and it would be double that if I could get 24. And I'm guessing a lot of customers like me are too lazy or busy to mess with tracking down bootleg bit-torrent files. So the lesson from the fashion industry isn't so much about innovation in product design--it's about old-school innovation in marketing. Increase revenues by increasing the stream of product--make the freshness of the product a selling point.
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