Its a real place (part 4 of 5)Posted: March 6, 2012
So far in this series I have made 3 broad points.
Part 1 explored the thought that it is no longer OK to NOT know how the internet works.
Part 2 examined what we can learn from the containerisation of global trade; standardisation, innovation and legal protection for the essential carrier class.
Part 3 demonstrated how the current issues of copyright enforcement (SOPA, PIPA, ACTA etc) are forcing society into making a choice between the incumbent content industries priorities, and the healthy functioning of the modern information economy.
In this post I intend to look at some of the basic economic principles at play, with regard to modern content businesses, and why I feel the need for significant copyright reform is massively preferable to more stringent and effective copyright enforcement.
So, here’s the thing. The economics of the existing model are fundamentally and utterly broken.
They are broken because they are built on theories (and historic actualities) of scarcity, where today incredibly cheap copying provides abundance instead. And they are broken fundamentally and utterly, because there is no rational relationship between supply and demand when the traded product is in a state of abundance.
Moving from scarcity to abundance is economically seismic, and when worlds collide, things get broken. In this case it’s the content industries incumbent business model that has broken, and it isn’t going to get fixed unless we break computers or limit access to them. Neither of which should be acceptable to society.
Now, we don’t have the abundance much written about in science fiction, at least not yet. However, we are in a situation where the relationship has changed to such a degree that the tenets of selling a scarce product are no longer relevant.
The essential problem is this. In a world where increasing numbers of products are being sold as digital code, instead of physical artefacts, the ability for a general purpose computer to make an unending supply of copies tilts the relationship between supply and demand to favour the consumer and not the producer.
A world where the cost of copying is negligible trending towards zero, is a world with incredibly high supply trending towards infinite.
A world where supply is trending towards infinite is a world that will never see demand outstrip supply. The pressure on price, in a classic model, is ever downwards.
A world that is increasingly designing life vectors dependant on easily available computing, trending to ubiquitous, is a world that cannot afford to restrict access to computing, or to reduce the functionality of computation itself.
It’s not abundance as science fiction would have you believe, but it’s not scarcity either.
Here is the reason why getting this stuff right, is so important, and it’s nothing to do with getting ‘free’ stuff. This is about the on-going ability of humans to continue contributing developing and interacting with our cultural heritage and cultural artefacts.
If we don’t work out an economic model that efficiently distributes financial rewards in such a way as is judicial, and also which provides economic incentive to maintain infrastructure and encourage business innovation, then we will not have any content to consume beyond the inanity of our friends social output. And as essential as social discourse is it is only one part of the human experience, one furthermore that is commonly enriched by cultural creation. If we don’t get this right, there will be no TV to discuss, no music to enthuse about, no writing to make us think.
This is not a ‘no poem’ argument, the thought that people only make content if they will be remunerated. This is an infrastructure argument. Culture today has a new dimension, the GLOBAL masses. And access to the global masses is enabled by the global industrial infrastructure of the internet. Similarly, if we give everyone the ability to create and post, we will want ever more quality control in both creation and curation. Well, these things cost money, and that money has to come from, at least at some point, the end users of products.
Here’s the kicker, not necessarily from all end users, and not necessarily for all products.
Perhaps the most famous fictional account of a society built on abundance is the world of Star Trek. We are all familiar with the replicator that creates anything you need or want, it is, if you will the poster boy of abundance technology. However, there are other important conditions that would need to be met for a society to be deemed one of true abundance.
Alongside the need for replication, you would also need an unending power source and a level of automation (both mechanical and AI) that could efficiently cover all menial tasks. Then there are the issues of social change and status, governance and enforcement, rights and privilege. It’s a lovely idea, but it does bend the brain a little thinking about it. It is, if you like, the very definition of paradigm shift. One of the characteristics of paradigm shift is that it is very difficult nigh impossible, to foresee solutions for the next paradigm’s challenges from the confines of the present one. You can get awfully tied up trying to think your way through this stuff.
Now, fortunately, we clearly aren’t at such a stage. Our situation, how we are going to fund content production, isn’t nearly so difficult, although many would have you believe otherwise.
As an aside it is rather wonderful to point out that in a post abundance society one of the big things that would confer status would be artistic and cultural ability, talent. The talented, the truly talented would be cosseted and lauded, but cajoled for performance in return. The authentic will rule. It is slightly perverse that so much opposition to these required changes comes from some of the most artistically talented members of society.
Anyway that’s not us. We still need to find a way to take money from users and give it to creators. We aren’t going to transform into a post abundance society any time soon, so we are stuck with a simple challenge.
How can we refocus commercial transactions to areas that have natural scarcity?
I say refocus, because there is still substantial revenue being collected under existing schemes. There is no need to throw the baby out with the bathwater.
I’m also making an important distinction between artificial and natural scarcity. Simply making it hard to consume products, in order to restrict unlawful copying eventually degrades the original experience to the point that the law abiding will yearn for untrammelled unfettered access. We need to find points of difference that consumers will value.
- Essential quality – in a truly abundant society the greatest artists and talents will be among those that can garner actual status in the absence of economic reward. We should never lose sight of the fact that it has never been easy to make a living as an artist, or in today’s parlance a content creator. No-one deserves a free lunch just yet. The internet will just make it easier and easier to compare product. Quality will be valuable.
- Access – delivery, interface, technical quality, sociability, speed, ubiquity
- Unique – live performance, interaction, communion (be available), limited edition artefacts
- Computing infrastructure – none of this happens without computers, the internet and a wide array of internet access points or communities and tools. We pay for all of this right now, and happily. If these industries end up being the big winners of this power transition I truly see no reason why they can’t also be the providers of the required industrial infrastructure.
Every single one of these points provides ample space for there to exist differentials in service across the market, and hence for there to be a real element of competition amongst providers.
What should be discarded is limitation of access to the digitised product. It’s the only part of the picture that is currently being attacked by abundance. In short, you have to be comfortable with it being distributed for free, outside of your control. It doesn’t have any economic value in and of itself so let it go as far and wide as quickly and cheaply as possible. Get it into the experience of as many people as possible. Turning it into quasi-advertising may be the only way to recoup value from the digitised product. Much like radio airplay used to be essential for selling music; widespread consumption will become the gateway to generating subsequent and incremental revenues in our new content economy.
As I sit here typing, this all sounds alarmingly straightforward to me, where of course it simply isn’t. There are risks involved, these are new economic spaces and there will be trailblazers and spectacular failures. Humans are a loss averse creature, our essential nature would prefer to maintain the existing, the comfortable, the known, the understood. This transition will be bloody. It is highly unlikely that we will achieve consensus, one party will eventually feel aggrieved and it will take longer than it should. I have no idea how to avoid this.
Still the fact is that the economics of the incumbent content production and distribution models have been dealt a killer blow and they will not recover. That said, I see no reason why the incumbents can’t maintain some position in the new landscape; it is the business models that are gone, after all, not the brands themselves. There is still a role for them. They retain a huge and valuable knowledge base. They are where the talent currently resides. As I have said, talent is only going to be ever more valuable. There is much to be retained from the incumbents.
Call me an optimist, if you like, but I earnestly believe that wherever this all finishes up, and however long it takes we will eventually be in a better place. The seductive call of abundance is just starting to make itself heard in our economic reality, the inevitable disturbance of the necessary transformation aside, this is a wonderful thing isn’t it?