Category Economics

Permissions, babies and bathwater

A few months ago I started seeing this when I went to Google sites…

 

Screen Shot 2015-12-26 at 15.42.23

 

Kind of funny, the privacy reminder. I’m guessing most people don’t see this because most people are logged in to Google most of the time and so have accepted their terms explicitly when they log in. But I’m not. As you can see I did a bit of investigating, and about a week later the message changed…

 

Screen Shot 2016-01-08 at 10.38.20

 

I’m actually banned from using Google unless I accept their terms. I still don’t fancy this so it has given me an incentive to try out other search providers and – guess what – I get along fine. Great.

But it’s a bit more annoying than that because sometimes other people use Google to host things (YouTube videos, maps, documents etc) and so I’m not really using Google when I want to look at those things, Google just happens to be hosting. The price for me to watch the video, view the document, see the map is to make an agreement with Google to collect information about me. A quick look at their privacy policy confirms this is quite a long list of things they want permission to collect.

So… I can work around that if I try – “incognito” browser window (I get the “privacy reminder” message, still, but I’m not blocked), different computer, etc. But it’s annoying.

But look at this:

 

Screen Shot 2015-12-26 at 15.42.46

 

And this

 

Screen Shot 2015-12-27 at 11.14.44

 

Really strange. My browser can’t connect to Google sites at all. Now perhaps this was some weird technical thing – but the internet was working fine for other sites (you can see that the second one is a YouTube video embedded in a Bing search result) and I didn’t get the same error in other browsers.

So I can’t help wondering if Google’s servers are now refusing to talk to me at all. Sent my computer to Coventry. Pretending not to be there.

Whether or not that’s what happened it makes me think about the whole issue of permission, Google’s insistence that users must explcitly agree to give them data as a condition of being able to use their service brings the whole issue of “free” into clear sight.

Google isn’t free. They require quite a lot in return for being able to use their services. A quick summary from their privacy policy:

  • Information you give them such as “name, email address, telephone number or credit card to store with your account… photo”
  • Information they just gather from your machine such as device information – “hardware model, operating system version, unique device identifiers, and mobile network information including phone number”
  • Usage information such as “details of how you used our service, such as your search queries; telephony log information like your phone number, calling-party number, forwarding numbers, time and date of calls, duration of calls, SMS routing information and types of calls; Internet protocol address; device event information such as crashes, system activity, hardware settings, browser type, browser language, the date and time of your request and referral URL; cookies that may uniquely identify your browser or your Google Account”
  • Location information

And so on. Lots of stuff you have to give them before they’ll let you use their service. And they use it for a pretty broad range of things, also explained (although not, in my view, very clearly) in their privacy policy.

None of this is a criticism of Google. I think this is rather great, actually. I like that the deal is being made clear – at least to people who aren’t logged into Google, and that they can make their own choice about whether to click the “accept” button.

But it does highlight the issue. Permission matters – and not just in copyright.

It highlights another issue too which I alluded to above. It’s all very well asking me to opt in as a condition of using Google’s services, and all very well for me to decide not to and live without them if I want.

But what about when I’m NOT using Google’s services? I’m using someone else’s and it just so happens that THEY have decided to use Google to help?

Look at this email I got today from a company called Brewbot who make a cool device I will probably never own which brews beer for lazy people like me.

 

Screen Shot 2016-01-08 at 11.21.51

 

I’m a sucker for a chance to win some swag, so I clicked the link to their survey and this is what I got…

 

Screen Shot 2016-01-08 at 11.23.10

 

It’s a Google doc and it doesn’t work for me. It does if I use another browser, or an incognito window, but in my normal browser I get this inability to connect to Google. Whether or not this is related to the privacy policy issue I don’t know but there does seem to be a pattern here.

So Brewbot, it turns out, seem to have been unwittingly recruited as a data gatherer for Google. Before I can offer my survey results to Brewbot I have to agree to silently give Google the long list of stuff I described above.

Or, to look at it another way, companies using Google to host their surveys, documents, videos, whatever, are actually only able to offer those things to opted-in Google users. Not to everyone. As long as Google remains ubiquitous perhaps the distinction isn’t obvious, but who is aware of it?

This seems dysfunctional to me, and unfair. It seems a high price to pay, for users and for companies who are using Google’s services (and may well be paying for them) for reasons that are nothing to do with Google’s core consumer services.

At its heart it highlights the conundrum which is central to so many of the issues which copyright people – as well as the internet at large – need to sort out. This silent, unknowing, pervasive process which takes the place of permission and transparency is not, in the end, serving the broad interests of the users of the internet.

I’m unusual in not having accepted Google’s terms, which means I am also unusual in seeing these messages which make what’s going on slightly more explicit to me.

But isn’t this an interesting perspective from which to consider the question of price and value on the internet. While money often doesn’t change hands, rendering lots of internet services nominally “free”, lots of other valuable stuff is still given in return – and if it’s not, the service is withdrawn.

At the heart of it all, value is being exchanged for permission. The same thing that happens in the copyright world. It needs to be done better.

Fearlessly speaking common sense

I have often made the observation that for the business of media to work well commercially, there has to be a link between popular success and commercial reward.

One of the great frustrations of the internet has been that this is, largely, no longer true: even staggeringly popular sites like MailOnline (117m monthly unique users) earn pitiful revenues (£20m for the half year to March 2013).

This is partly to do with the internet, the changed rules of the game which produce perverse outcomes all too often, and about which I have written much.

But it’s also to do with the tactics many of the media players have adopted in the game.

Despite years of failure, despite other winners clearly emerging, despite years of data and obvious simple logic which show it can’t ever work, the strategy of many media brands has been to treat popularity as an proxy for commercial success, whatever it costs. Earning money, if it puts consumption figures at risk, is deemed too risky to try.

Even in the old world, though, there were trade-offs. It was still possible to undermine your business by being too cheap, screwing up the balance between reach and commercial return. Popularity was important, but not at any price. The bottom line mattered more.

So, for example, while free media products existed and still exist, many of the most successful sacrificed some of the reach they would have obtained from being free for the greater commercial strength of being paid by their users.

In other words, even in the past popularity was a central goal but not the only one. Common sense, intelligence, flair and a hard nose were always needed to get it right.

All of which have been notably lacking in many erstwhile rational players’ approach to the internet.

So it’s refreshing and to see one of the masters of the media game saying some controversially common-sensical things in public.

Mike Darcey, new CEO of my former employers News UK (née News International) made a speech last night and said some things which, despite their seeming… well, almost banality, are so counter-cultural that they are still capable of being controversial in some quarters.

For example, Mike says:

there are real problems with giving your product away for free over the Internet

A little later he tackles one of the reasons some people find this comment so controversial:

Some people have argued that the problem with a pay-wall strategy is that you lose reach, while others who maintain a free web presence continue to enjoy large numbers of Unique Users and Page Views.

To which I say: to what purpose? – this reach doesn’t generate any meaningful revenue, and the pursuit of it undermines the piece of the business that does make money.

So if your purpose contemplates still being here in 5-10 years time, then the choice seems clear: it is better to sacrifice reach and preserve sustainable profitability.

Moreover, when we sacrifice this so-called reach, what have we really lost?  A long tail of passing trade, many from overseas, many popping in for only one article, referred by Google or a social media link, not even aware they are on a Times or a Sun website, wholly anonymous.

That passing trade was good for the ego, if Unique User stats do that for you, but they don’t really add to our purpose at all.

It’s only a short speech, but it contains within it a large amount of good sense, which other media executives would do well to think hard about, resisting their natural instinct to dismiss their rivals.

Hopefully the whole thing will end up online soon, in the meantime here are some links to coverage which includes other quotes.

UPDATED: News UK have now put a video of the speech on their website here

Media Week

Dominic Ponsford in News Statesman

The Guardian

No to Google News: common sense or suicide? – An update

Well that didn’t take long.

Apparently the Brazilian boycott of Google News has cost them just 5% of their traffic. They think that’s “a price worth paying”. I’d say so too. I don’t know how their revenues stack up but I would be surprised if the financial cost was much greater than zero.

As Techcrunch says, the source (the Brazilian newspaper association) isn’t exactly unbiased but if this number is correct then “Google could be in trouble”.

That’s not the answer; now, what’s the question?

David Leigh came up with an idea to “save newspapers”. Every broadband customer would be forced to pay £2 per month to fund newspapers. Lots was subsequently written about it, most of it contemptuous.

The problems with this idea are so obvious and numerous that I didn’t bother writing anything about it to add to the cacophony of derisive comments (the only person I noticed having something nice to say about it was Leigh’s Guardian colleague Roy Greenslade). He is by no means the first to have thought of it, just the first to have not immediately realised that it could never and should never work.

The obvious unfairness inherent in picking out a particular sub-sector of the media to benefit. The lazy complacency which would inevitably result from guaranteed, unearned income rolling in every year. The perverse incentives which a traffic-based method for dividing up the money would create, not to mention the barriers to entry. The admission of defeat inherent in the whole proposal. The obvious challenge of forcing users to pay a new tax whether or not they like it. The conflict between a press beholden to government subsidy and a free press which holds politics to account.

The more you think about it, the longer the list of objections gets.

But lurking within it are two questions which are actually more relevant and interesting.

How can a newspaper like the Guardian (or any creative endeavour for that matter) which succeeds online be rewarded for its success? Answering this conundrum answers all of the challenges the internet currently poses for professional creativity.

Obviously, not adopting a model which abandons not just revenue but any prospect of achieving revenue would be a start. Nothing can stand in the way of a company hell-bent on oblivion, and spending a fortune to make a product which you give away to everyone is pretty much the definition of a business which will fail.

But the second question is the one David Leigh and others should really be posing for legislators.

Why is it actually impossible right now for a business model which rewards popular success to be found?

If you’re going to ask politicians to help solve your problems, this is a better one for them to get their teeth into rather than simply asking them to write you a cheque.

Copyright lies at the heart of answering this conundrum. Where copyright is weak we see hyper-inflation of copying (so its easy to feel successful due to the illusion of popularity) but a complete collapse in value. This is what is happening online and it prevents viable business models even being imagined. Where copyright is strong, as we have seen from the last few hundred years of analogue media, we create wealth, choice and diversity.

It doesn’t have to be this way, and a more sustainable solution can be found by looking at the generic issue rather than making special pleadings for businesses and products which might just be dying of natural causes.

Once it’s possible to have a good newspaper business online, it will be up to the skills and ingenuity of The Guardian and others to actually run one. If they succeed they will be rewarded with a viable product generating lots of revenue and which has no need for taxpayer support. If they fail it will be their own fault, but someone will take their place.

The first thing the politicians need to do is get a grip on copyright.

The first thing the Guardian needs to do is just get a grip.

Copyright and money: spot the difference

By me in City AM
I’ll post it here later but in the meantime head over there

The Guardian: a dating site which runs a newspaper on the side

Digital first, redundancies second, profits last

Just over a year ago The Guardian announced its new strategy to go “digital first” and move its efforts away from print towards the internet. My post about it at the time was titled, perhaps a little cynically, “throwing in the towel”.

Their plan was to increase digital revenues to £91m in five years, and manage the decline in print revenues along the way.

So, how’s it going?

They announced some figures the other day and they are bleak. Operating losses have increased to £44.2m – a massive 42% increase since they announced their digital first strategy. Newspaper sales are in freefall (down 10% in a single year).

They are responding by reducing editorial budgets and laying off journalists.

Digital advertising revenue is a little ray of light; it has grown by 26% since last year. That sounds impressive until you notice that the new total is just £14.7m. Annually. From a weekly audience of 5.8m people. The surprise isn’t how much they are making but how little – last year it would have been just over £11.5m.

The total digital revenue is a much less awful £45m (up 16.3% but still a long way off their goal of more than double that). The extra money comes from sites like their weirdly successful Soulmates dating service, as well as other unspecified revenues.

Not much of those “other” revenues appear to be from people actually paying for their content – they have only managed to find 17,000 people willing to pay £9.99 a month for their iPad app. Hardly surprising when the same stuff is available for free on your iPad using the built-in web browser.

So it would seem that on the digital side, they make more than twice as much from other services than they do from their editorial websites. Which makes the newspaper website seem like a rather expensive loss-leader for a profitable dating site.

No wonder they’re responding by cutting editorial jobs – how many dating subscribers does a war correspondent persuade to sign up?

Sadly, all this is obvious and predictable, except, it seems, to the Guardian. If they want to be a newspaper, a journalism business, a crusading power and influential voice, then making journalism profitable is key.

The fact is that if you keep making huge losses and have no source of income to pay for them, you’re doomed.

Even if you have the special status of the Guardian, and so can ignore normal commercial realities and make irrational investments in your least profitable products, at some point simple maths will catch up with you. Other newspapers making similarly irrational decisions at least have people with deep pockets backing them.

So the Guardian’s plan seems, still, to be to hang on and hope that at some point their huge online audience turns into a decent business.

Perhaps they’re hoping the hundreds of millions of pounds of content they give for free to millions of commercially worthless readers will result in an exponential rise in lonely hearts reaching out across cyberspace using their peculiarly out of place dating service (certainly a new twist on the idea of “freemium”).

History and common sense suggest that neither thing is very likely. Anyone building a turnaround plan on simple blind hope has, by definition, to be prepared to suspend their rational faculties before they can pursue their plan with gusto.

That’s what they did when they announced their new strategy last year. As the results become clear, though, they need to perhaps try to relocate a few rational thinkers and start making sensible decisions.

They don’t have long. Their figures state that they will shortly have £300m in the bank, having disposed of some assets such as radio at a considerable discount to their book value.

Even if things stay the same for the next few years, unlikely given the unbroken and decades-long failure of the free content model for newspapers, it means they have a little under seven years before they run out of money.

If they keep increasing losses at the current rate, it will much much sooner. And if they think that online advertising is going to cover the £44m gap to get them back to at least breaking even then I’m afraid the fantasists are still running the company strategy.

If things do start to turn around it’s still going to be a race against a dwindling cash pile before anyone can say the problem is fixed, all the more so if they continue to rule out the seemingly innocuous idea of asking people to pay for their most expensive and valuable asset – their content and product.

In the meantime, redundancies all round. Which, with 650 journalists, might not be a bad idea anyway.

But one simple bellwether of success for newspaper companies is their ability to invest in journalism. It is their raison d’être, a simple expression of their success and mission.

When they start to cut this investment merely to try to flatter the bottom line it’s a sure sign that the end is nigh.

Lets hope a bunch of lonely people turn up soon to save the day!

Giving copyright the $5m finger

Check this out.

bo.lt is a startup in what seems to have become the classic west coast model.

Silly domain name? Check!

Bullshit mission statement? Check!

SF address and previous startup credentials Check!

Big money funding? Check!

Business model entirely dependent on other peoples content? Check!

It’s really extraordinary. Let me quote from the website:

Grab the pages that interest you. Cut out what is distracting, corporate, and irrelevant. Drop in images and text that can make the page come alive again. And share what you have done. Content wants to move in the social world. Give it a boost.

We have created software that helps *you* make the web more interesting to the people you care about. With BO.LT we have taken the shackles off. It’s your turn.

So let me put that another way.

Copy content. Amend it however you like. Change the meaning if you want. Remove the branding, links, context, design (or don’t, even if you have changed the meaning and message of the content). Add some stuff of your own. Re-publish it somewhere else.

Kind of an encyclopaedia of what copyright is meant to prevent. This is a product of the crazy internet utopia that so many west coast startup people seem to live in, believing it to be real. Act as if the world is the way we want it to and maybe it will come true!

There’s a reason why this stuff is illegal. In the case of bo.lt lots of them. I find it hard to fathom that it has to be spelled out. All you have to do is put yourself in the position of whoever created a page or site or piece of content in the first place.

Are they necessarily happy for anyone else to use it however they want? Do they mind if someone alters the content but makes it look like they didn’t? Do they mind if it’s commercially exploited by someone else? Do they care if someone’s marketing department wants to tweak their article to make it a bit more favourable? Do they mind if their brand is mis-used whimsically by anyone who happens to swing by bo.lt?

Perhaps they would like to have a say. Perhaps they would like people to ask first. Perhaps they want to be able to say no if they don’t like it. All these rights are given to them by the law, yet here someone has set up a business as if the law simply didn’t exist.

I know that these things go on. I have spent years stopping the most egregious mis-uses of content and brands which I have been managing. But I haven’t often seen quite such a blatant attempt to commercialise what to me is quite clearly illegal activity (bo.lt is a “freemium” service – prices for corporate users start at $2000 per month).

So, if this seems so clearly illegal, how are they getting away with it? Why on earth did someone put $5m into it?

Well, it seems that is all part of the game. Whether something is legal or moral doesn’t really seem much of a consideration. And in the case of bo.lt they reckon the law has given them a killer get-out-of-jail card. They are protected, they say, by the “safe harbour” provisions of the Digital Millennium Copyright Act. Nothing their users do is their problem until someone tells them about it. Never mind their role in facilitating and hosting the infringement – as long as someone else actually did the deed of initiating it, they’re OK.

You can tell how much they care about copyright by looking at their terms and conditions.

If you’re a user you have to agree – by accepting the terms of service – that you will not:

violate or infringe the copyrights, rights of privacy or publicity, or any other rights of any person;

which you will, of course, almost always be doing unless you’re using it to adapt your own owned or licenced content or webpage which would seem a little odd. There may certainly be non-infringing uses of the service but they seem unlikely to be the majority. They have to put that little thing in their terms, to at least try to stay on the right side of the DMCA, but note the informality of it. Nothing done to enforce or check compliance, just a sentence buried in the small print nobody ever reads.

Compare and contrast to what you have to do if your copyright has been infringed:

It is Boltnet’s policy to respond promptly to claims of copyright infringement and to remove or block access to any infringing material as described below. If you believe that any content or pages served by the BO.LT network contains infringing material or property, then please notify us as soon as possible.

If you believe that your work is the subject of copyright infringement and appears on our Site, Services or any pages on the BO.LT network, please provide Boltnet’s designated agent the following information:

  • A physical or electronic signature of a person authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.
  • Identification of the copyrighted work claimed to have been infringed, or, if multiple works at a single online site are covered by a single notification, a full list of such works at that site.
  • Identification of the material that is claimed to be infringing or to be the subject of infringing activity and that is to be removed or access to which is to be disabled at the Site, and information reasonably sufficient to permit Boltnet to locate the material.
  • Information sufficient to permit Boltnet to contact you as the complaining party, such as an address, telephone number, and, if available, an electronic mail address at which you may be contacted.
  • A statement that you have a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.
  • A statement that the information in the notification is accurate, and under penalty of perjury, that you are authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

Boltnet’s agent for notice of claims of copyright infringement on this Site can be reached as follows:

By Mail: Boltnet.Inc,

Attn: Ben Smith

3 Pier, Suite 105

San Francisco, CA 94111

By Phone: 415.742.8418

By E-mail: copyrightclaims@boltnet.com

While they’re prepared to take their users implicit word for it that they’re not infringing anyone’s copyright – no need even for a statement “under penalty of perjury” to confirm – despite that being almost vanishingly unlikely in a huge proportion of cases, they are a little less inclined to take a copyright owner’s word for it when their work has been infringed.

So while anyone can effect an infringement by simply pasting a URL into the bo.lt website, the work of a second or two, anyone wanting to protect their work has to not only actively track it down but also provide a slew of paperwork and scary legal documentation to get it removed.

Even after that, it would seem the best you can hope for is that they’ll take down or block access to the content. Nothing there about damages, identifying the user they’re hiding behind to get their DMCA protection, helping right any wrongs. Just the minimum the law demands of them.

It’s a sort of distillation of the contempt with which parts of the online world regard other peoples property. They see it as a free resource, a route to a swift $5m in “series A funding”. The idea that the person who owns something might have something to say about it, or that what they’re doing is simply legally and morally wrong, seems not to come into it.

For sure, it confirms what is already obvious: the DMCA is bad law and gives rise to bad outcomes. Somehow, though, it is worse than that. It seems so cynical, showing a metaphorical finger to copyright and laughing all the way to the bank. I honestly thought it was a spoof. I hope it is. But sadly it seems real.

Footnote: while they seem quite laissez faire about other peoples copyrights, bo.lt are a bit more protective of their own, bringing the full force of the law to bear on anyone who does to their content the thing that they will happily do to anyone else’s

From their terms of service again (emphasis added by me):

Unless otherwise specified in these Terms of Service, all information and screens appearing on this Site, including documents, services, site design, text, graphics, logos, images and icons, as well as the arrangement thereof, are the sole property of Boltnet, Copyright 2010 Boltnet, Inc.. All rights not expressly granted herein are reserved. Except as otherwise required or limited by applicable law, any reproduction, distribution, modification, retransmission, or publication of any copyrighted material is strictly prohibited without the express written consent of the copyright owner or licensor. You agree not to copy, reverse engineer, or otherwise infringe on our complete right, title, and interest to the business processes, technology, interfaces, designs, or other proprietary property contained in the Boltnet Site or Service.

Ha! Stick their own URL into their service and wait for the knock on the door. Perhaps I’ll try it!

Perfect economies

Is free really a radical price or just radically irrational?

Some say content will become free as a matter of economic necessity. That as the cost of copies of content approaches zero, so will its price. That we are in the grip of an all-powerful economic principle which will sweep whole industries before it, and the fact that so much content is given away online proves their point.

I say that the cost of content, in pure economic terms, has always been zero. That the “pure” economics of physical goods, applied to intangible products like content, led to terrible outcomes the last time it was tried, leading to a change in the law to prevent it happening again. And that this law, now being widely ignored, is the answer both to the “content wants to be free” pseudo-academics and also the problem the content industry now faces.

Cost=value?

I am not an economist. I am not an academic. I didn’t study much of anything. So forgive me if I tempt fate by taking a mighty leap to address a – seemingly academic – point which has become trendy among certain prophets of the digital age who, presumably, hope their wisdom will become self-fulfilling.

The academic point in question concerns the price for which content is sold online. More specifically, the point made by many that the rules of the internet radically change the economics of publishing, such that the aspiration to charge users for content is hopelessly unrealistic. Only dinosaurs think that way, we’re told: people who understand the internet also understand that giving things away is the key to reaching a lot of people, and reaching a lot of people is the key to making money.

So free, to quote the cover of Chris Anderson’s counter-intuitive but attention grabbing book “Free”, is “a radical price” which will define the future.

(An aside: I tried to get a copy of Free for, er free. It was available as a digital download for nothing at the time it was published. However now it’s not available free. The “hardcover” edition is available as a Kindle download for £12.15. The “paperback” edition – with a new, less embarrassing, strapline – is available for £5.45 in print but not at all on Kindle. So much for the radical economics of the internet).

Anyway, the argument goes something like this: making copies of digital things doesn’t cost anything. Economists tell us that in a perfect economy the price of something will tend towards its cost of production. For something which costs nothing to produce, like a digital copy, the price will tend towards zero. The fact that so much content is available for free is proof that the market is working well and the internet is fulfilling its potential. (Expand this argument to 400 pages and sell it and you too can be an internet guru as well as a rich author).

The sub-argument is that having so many consumers of your stuff gives you the chance to sell them other things, like concert tickets instead of CDs, or slightly better things, like CDs instead of downloads for your hardcore fans (or, like Chris Anderson, hardcover books, speaking engagements, consultancy and a day job editing an old media magazine as well as temporarily free downloads). So you can make money that way, in a way the content is a loss-leader for whatever else it is you have to sell. This is known as “Freemium” – you reward the people who care little for your stuff by giving them what they want for nothing, and punish those who really love it by charging them for consuming a lot of it.

Circular thinking

I think these arguments are a perfect illustration of what is wrong with internet thinking. So much of it is a post-rationalisation. It starts with a utopian picture of the internet the way the thinker would like it to be, idealised so that everything they care about is plentiful and – with the exception of whatever it is which makes them money – free. It progresses into the real world, via people and businesses simply behaving as if their utopian ideal were a reality (this is called, proudly, “a disruptive business model”), unencumbered by any old-world rules. It finishes with a seductive, intellectually feeble, post-rationalisation of the outcome whose main purpose is to justify itself and perpetuate the insular interests of those who profit most from the changes. An honest consideration of the broader picture almost never features and the interests of users and society as a whole, almost always claimed as the ultimate justification for whatever is being argued, are virtually never really considered.

So, back the economic argument for content being free (or, in some cases, for copyright no longer being relevant). The central point is that the cost of a digital copy is zero.

Cost has always been zero

My counterpoint is that the cost of copies of content has always been zero. When books first started being mass produced, the cost of the content, as opposed to the paper, ink, binding, distribution and so on, was always nothing. You used the same amount of ink however you arranged it on the paper. The words themselves made no difference to the cost. A CD costs the same (about 9p) to manufacture whether it contains a Lily Allen album or Microsoft Office but might be sold for anything from a few pounds to a few thousand pounds depending on what it contains.

It’s the content which creates the value. The bits, not the atoms, are the product whatever it looks like on the shelf of a shop.

So in my view, it’s pointless to consider the economics of content in terms of the manufacturing cost of copies because doing so not only defies everything we know about the content economy but also leads to perverse outcomes.

Weve been here before…

There was a time when the “natural” economics were the only kind around. The world was about supply and demand, the materials which went into something more or less defined the whole. You could add up all the costs of something, add on whatever margin you thought you could get away with, and sell your product.

The thing which changed it was books. The advent of the printing press revolutionised the way in which knowledge could be shared and spread. For the first time mass production could make books affordable to the masses. Great things would happen.

However, the economic realities lagged behind the industrial surge forward. Although printing was indeed cheaper and easier than ever before, the main value of a book was the words on its pages rather than the pages themselves.

Bits and atoms 300 years ago

Unfortunately the laws of supply and demand didn’t recognise this. They only dealt in atoms, not bits. So the people who wrote the books, who created most of the value, tended to get a bit of a raw deal – however successful their book might be they rarely made much money. So not many books got written. The authors usually had better and more lucrative things to be doing.

So a law was written, the now infamous Statute of Anne, the first modern copyright law. Its aim was to ensure authors were properly rewarded for their work, to end the “ruination” of them and their families which too often had happened in the past. And it did this in a simple way – by giving them control over copies of their work. By recognising that the bits had a value beyond the atoms of the paper and ink, and putting in place a solution which would allow the value to be determined by the market.

And so, a book or CD which costs a few pence to produce is sold for a few pounds. JK Rowling is a billionaire. Hundreds of thousands of books are published every year, hundreds of TV channels flourish and thrive, countless movies are made every year and the creative economy supports 8% of the overall UK economy and over 2 million jobs. Even the printers, publishers and distributors of books, who would have seem to have got the raw end of the Statute of Anne, are still doing fine. Taking a smaller, fairer, slice of a much bigger pie, and thriving nonetheless.

All be recognising that the words, or the bits, have value separate from the paper they’re printed on, or the atoms.

Forward to the past

Fast-forward to the internet. Here we find ourselves in a situation a bit like the pre-copyright era. For a number of reasons, most of which are for another day, mass market publishing is only possible online for no charge. The only direct revenues available to publishers are from advertising, but they are competing for a smaller slice of an ever-diminishing advertising pie (I’ll come back to this point in another post as well). Success is about scale, quantity trumps quality.

So the people making money are those who pay the least for their content. The most money is made by the people who pay nothing (Google, overwhelmingly). The people who pay nothing, who benefit the most from content being free, are also the strongest advocates of content being free as a force of nature or of economic reality. They ignore, because it doesn’t matter to them, the actual reality that if the returns on the investment of time, money and creativity diminish so will the investment.

Free isnt worth the paper it isnt written on

To me the “free” idea is as worthless as it suggests. To my mind it’s simply wrong, and it destroys value for almost everyone except the person sitting at the tip of the pyramid.

Anyone who wants to be able to make a living from their creativity should be able to choose to do so, and choose their way of doing so, without the odds being so heavily stacked against them. I hope this is about to become a bit easier.

%d bloggers like this: