I find it equally annoying and reassuring when I read an article by a respected industry insider that reads like one of my own sermons on the topic. Annoying because, well, I’m a grad student trying to make my bones when I obviously know my stuff. (I will never forget the compliment Jacie Yang gave me on a break one night in Fall 2011: “What are you even doing here?!”) Reassuring because, well, I can completely forgive my ego if the right message and right philosophies are being taught.
The Internet, the Cloud, and all the current trends in tech are all old pipe dreams of mine. I am perpetually indebted to the engineers, businessmen, and/or academics who made these things happen. But on the same hand, the failure of the dominant paradigm to abandon its top-down model of control to pursue the future has been a constant source of dismay and depression.
For his ambivalence about “sex sells,” as we covered earlier this minimester with Dr. Royal, Wired’s Chris Anderson has the right idea about scarcity, abundance, and the externalities governing both. There are a few points from his articles (that later became books) “The Long Tail” and “Free” that I would like to explore:
Scarcity of physical space on the shelf:
“Unlimited selection is revealing truths about what consumers want and how they want to get it in service after service… And the more they find, the more they like. As they wander further from the beaten path, they discover their taste is not as mainstream as they thought (or as they had been led to believe by marketing, a lack of alternatives, and a hit-driven culture)… If the 20th- century entertainment industry was about hits, the 21st will be equally about misses. For too long we’ve been suffering the tyranny of lowest-common-denominator fare, subjected to brain-dead summer blockbusters and manufactured pop. Why? Economics. Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching – a market response to inefficient distribution…. We equate mass market with quality and demand, when in fact it often just represents familiarity, savvy advertising, and broad if somewhat shallow appeal. What do we really want? We’re only just discovering, but it clearly starts with more.” (“The Long Tail”)
“Hit-driven economics is a creation of an age without enough room to carry everything for everybody. Not enough shelf space for all the CDs, DVDs, and games produced. Not enough screens to show all the available movies. Not enough channels to broadcast all the TV programs, not enough radio waves to play all the music created, and not enough hours in the day to squeeze everything out through either of those sets of slots. This is the world of scarcity. Now, with online distribution and retail, we are entering a world of abundance. And the differences are profound.” (“The Long Tail”)
Channel conflict, whether it’s about the physical space required for old-media commerce or between new vs. old media:
“[Physical media put] two dramatic limitations on our entertainment:
The first is the need to find local audiences. [Retailers] can pull only from a limited local population… It’s not enough for a great documentary to have a potential national audience of half a million; what matters is how many it has in the northern part of Rockville, Maryland, and among the mall shoppers of Walnut Creek, California… In the tyranny of physical space, an audience too thinly spread is the same as no audience at all.
The other constraint of the physical world is physics itself. The radio spectrum can carry only so many stations, and a coaxial cable so many TV channels. And, of course, there are only 24 hours a day of programming. The curse of broadcast technologies is that they are profligate users of limited resources. The result is yet another instance of having to aggregate large audiences in one geographic area – another high bar, above which only a fraction of potential content rises.” (“The Long Tail”)
“Surprisingly enough, there’s been little good economic analysis on what the right price for online music should be. The main reason for this is that pricing isn’t set by the market today but by the record label demi-cartel. Record companies charge a wholesale price of around 65 cents per track, leaving little room for price experimentation by the retailers. That wholesale price is set to roughly match the price of CDs, to avoid dreaded “channel conflict.” The labels fear that if they price online music lower, their CD retailers (still the vast majority of the business) will revolt or, more likely, go out of business even more quickly than they already are… But what if the record labels stopped playing defense? A brave new look at the economics of music would calculate what it really costs to simply put a song on an iTunes server and adjust pricing accordingly. The results are surprising… it should cost just 79 cents a track, reflecting the savings of digital delivery. Putting channel conflict aside for the moment, if the incremental cost of making content that was originally produced for physical distribution available online is low, the price should be, too. Price according to digital costs, not physical ones.” (The Long Tail)
“In the monetary economy it all looks free — indeed, in the monetary economy it looks like unfair competition — but that says more about our shortsighted ways of measuring value than it does about the worth of what’s created.” (Free)
On the fundamental shift from scarcity to abundance created by the Long Tail model:
“The rise of ‘freeconomics’ is being driven by the underlying technologies that power the Web. Just as Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero. But tell that to the poor CIO who just shelled out six figures to buy another rack of servers. Technology sure doesn’t feel free when you’re buying it by the gross. Yet… [i]t’s not about the cost of the equipment in the racks at the data center; it’s about what that equipment can do. And every year, like some sort of magic clockwork, it does more and more for less and less, bringing the marginal costs of technology in the units that we individuals consume closer to zero.” (Free)
“What’s interesting is that transistors (or storage, or bandwidth) don’t have to be completely free to invoke this effect. At a certain point, they’re cheap enough to be safely disregarded… In Zeno’s dichotomy paradox, you run toward a wall. As you run, you halve the distance to the wall, then halve it again, and so on. But if you continue to subdivide space forever, how can you ever actually reach the wall? (The answer is that you can’t: Once you’re within a few nanometers, atomic repulsion forces become too strong for you to get any closer.)…[So when do costs] come close enough to zero to say that you’ve arrived and can safely round down to nothing? The answer: almost always sooner than you think…
“From the consumer’s perspective, though, there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you’re in an entirely different business, one of clawing and scratching for every customer. The psychology of “free” is powerful indeed, as any marketer will tell you. This difference between cheap and free is what venture capitalist Josh Kopelman calls the “penny gap.” People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that’s the difference between a great market and none at all. The huge psychological gap between “almost zero” and “zero” is why micropayments failed. It’s why Google doesn’t show up on your credit card. It’s why modern Web companies don’t charge their users anything. And it’s why Yahoo gives away disk drive space. The question of infinite storage was not if but when. The winners made their stuff free first.” (Free)
My own opinion: The Problem
Ever-growing copyright terms are chopping out the middle part of the Long Tail. The creep on the public domain is destroying any legitimate form of participatory culture with some of our most cherished stories and characters. If comic books continue the Greek epic tradition, then they are, in effect, our new Aesop. People will work for free if you let them, and put out some really great stuff. (Look at Wikipedia!) The safe play of these necessarily conservative top-down media empires is why every movie has a number at the end (or a subtitle, if they’re worried that the number is high enough to inspire widespread cynicism). Why not let a Star Wars fan direct a Star Trek movie? It worked great for JJ Abrams. Why not let a DJ cut together a pastiche of old beats and licks to create something else entirely, and how is that a cause for alarm if they do it with a keyboard and mouse instead of a guitar and microphone?
If you love it, set it free. Just sayin’.
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