Paul Graham has a great new essay out looking at the decline of the content industries:
A copy of Time costs $5 for 58 pages, or 8.6 cents a page. The Economist costs $7 for 86 pages, or 8.1 cents a page. Better journalism is actually slightly cheaper.
Almost every form of publishing has been organized as if the medium was what they were selling, and the content was irrelevant. Book publishers, for example, set prices based on the cost of producing and distributing books. They treat the words printed in the book the same way a textile manufacturer treats the patterns printed on its fabrics.
Economically, the print media are in the business of marking up paper. We can all imagine an old-style editor getting a scoop and saying “this will sell a lot of papers!” Cross out that final S and you’re describing their business model. The reason they make less money now is that people don’t need as much paper.
Newspapers like to think of themselves as being in the same business as (if vastly superior to) the Huffington Post or Slate. But I think it’s more accurate to describe them as being in the same business as Verizon and Comcast. Or, more precisely, as the predecessor to walled-garden information networks such as the classic AOL. Newspapers have always been information “networks” that efficiently delivered information—news but also display ads, classified ads, public service announcements, legal notices, coupons, and so forth—to large numbers of people. The technological limitations of this “network” required it to be vertically integrated, and so newspapers are in “the content business” by necessity. But “content” has never been a free-standing business, and it is suffering from the same basic problem that killed AOL: any one organization can’t compete with the combined efforts of thousands of different firms on the open network. Once people get access to an information network that was not vertically integrated, there was no particular reason for them to continue consuming content provided by their previous, vertically-integrated, network providers.
I also think Graham is right later in the essay to note that iTunes isn’t selling content so much as levying a kind of convenience tax. The iTunes store is the most convenient way to get content onto the iPod, and Apple has kept the cost low enough that most people aren’t motivated to look for an alternative. Likewise, the Kindle is profitable only because people want Kindles and Amazon makes it hard to get content for the Kindle any way other than through them. Here again, the business model is to bundle content with delivery. I think this is a temporary artifact of closed platforms and industries that still have one foot in the 20th century. The market for copies of articles or songs is unlikely to ever be as large as it was in the much less competitive world of 20th century media. And basic economics tells us that in the long run, most information will fall to its marginal cost, which is zero.
“The market for copies of articles or songs is unlikely to ever be as large as it was in the much less competitive world of 20th century media. And basic economics tells us that in the long run, most information will fall to its marginal cost, which is zero.”
I’m glad every time I read statements like the one above. I think the wisdom is starting to seep into the culture. I posted this some time ago questioning the very nature of a “Knowledge Economy”:
http://blog.ericreasons.com/2009/07/innovative-deflation.html
“[Many 20th century markets] relied on the traditional inefficiencies of their business models–inefficiencies that have been *eliminated*, not just shifted to new markets. The closer the markets are to intellectual property, the faster they fall.”
I see this in my summer job, too. Games are priced by what their components cost, not by how good the game is. I’ve dealt with many frustrated customers who are surprised that a game they can (and have) played at home with scraps of paper costs $31.99 at the store.
This post dovetails nicely with your earlier posts on patents. Novel content is what people want, yet they are forced to pay for the delivery system of that content. But they conflate what they are paying for with what they want. Similarly, patents assume that ideas are the harder part of the system, and encourage something that doesn’t need encouragement, while discouraging something that does (development and manufacturing).
My response to those customers in my store is to shrug my shoulders and say “If only you’d thought of publishing it first!”.