Free —> monopoly by mattsteinglass
May 30, 2008, 11:16 am
Filed under: Media | Tags:

Tim Lee writes again to defend “free” business models and claim they’re not harming the totality of the market for intellectual content. He draws from an analogy (presented by commenter Lance Linden) of a retiree who decides to produce excellent burgers at cost, thus driving down prices at for-profit burger joints to the point of nonprofitability. But the result is everyone’s getting more better burgers for cheap:

To the extent that producing high-quality content is unprofitable, it’s precisely because there’s so much high-quality content being produced that it’s pushing profits down.

But this is not in fact what “free” business models represent. The most common example of free distribution isn’t someone who sets up an at-cost burger stand (which never actually happens). It is the cheap knicknacks handed out by major corporations for advertising purposes. Just as important, the online revolution has only had a small effect on the cost of content generation. It has had huge effects on the cost of content distribution. It’s more like someone walking into your burger joint, taking the burgers off the stove and handing them out for free, while you’re still trying to sell them.

What’s actually happening in the news business is that there has been no net increase in the generation of news stories — in news gathering and reporting. That remains expensive and labor-intensive work. In fact there has probably been a large net decrease in total reporting over the past 10 years. But there has been a huge increase in the amount of commentary produced on zillions of blogs, for free, on that same small amount of reporting, which is increasingly being done by a smaller and smaller number of national or global corporations: the wire services and a couple of major national newspapers. And not even the surviving top wire services are reaping big rewards; they’re freezing hiring too.

In part this is because in fact the entire news business always already depended on a loss-leading business model: the news gathers eyeballs, while advertising generates the money. But “free” distribution models for commentary on the news, or for the news itself, have crushed those advertising revenues. What’s actually happening is that the plurality of different reporting operations is being reduced down to at most a couple of reporting monopolies. There isn’t so much “high-quality content being produced”. There’s just so little margin available between already-existing content and new high-quality content that everyone is repackaging existing content rather than make new stuff.


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One of the themes……

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