Do You Really Want To Be A Product?

Do You Really Want To Be A Product?

DeLong Op-Ed in Intellectual Capital
August 03, 2000

The current controversy over Napster is part of a broader debate over intellectual property in the Information Age. A significant segment of opinion is possessed of the view that the idea of intellectual property (IP) is passé and that music, films, news and literature should circulate freely.

Their mantra is "information wants to be free." References abound to "greedy" record companies, artists, publishers and so on. Much of the discussion contains contempt for the marketplace -- an assumption that charging money for intellectual products is to be sneered at and a longing for a purer world of shareware and community.

When proponents of this view are asked how production of intellectual property will be financed in the future, they point to the sponsorship model of radio and television. People who want to reach an audience will buy ads, they say. (And artists can hawk posters and t-shirts.) And they point to much of the Web, where content is delivered free and the site operators make money, or plan to, through advertising.

Paving the way for another 'vast wasteland'?

The desire for a world of communication so financed and organized brings to mind Saint Teresa of Avila, who said: "More tears are shed over answered prayers than unanswered ones." This approach to intellectual property would not produce a world to the liking of its proponents. We know they would not like the result because such a world already exists, in the form of broadcast television and radio, and it does not please the educated elites who back the free intellectual-property concept.

These people agree with the view expressed in 1961 by the chairman of the Federal Communications Commission when he characterized TV as a "vast wasteland." Not much has changed since then except that the desertification has spread to 100 channels. Indeed, one of the justifications cited by the pro-downloaders of free content in their Web postings is the sterility of conventional broadcasting.

One would think that after 40 years it would occur to people that the problem with commercial broadcasting is not that media executives are venal or stupid. The problem lies in the fundamental economic relationship. In the broadcast model, as in any sponsorship model, the product being sold is not the program, and the customers are not the audience. Instead, the audience is a product that is sold to advertisers, who are the real customers.

This may seem too axiomatic to be worth saying, but think about all the implications, bearing in mind the ancient business maxim that the customer is king. The most obvious is that the programmers measure their success by the number of eyeballs watching, hence the push for the lowest common denominator in programming.

The sponsorship model also means that the only relevant decision is the binary watch/don't watch decision. From a broadcaster's perspective, any money spent on added enticements for a viewer who already has decided to watch, or any sacrifice of other possible viewers to add to the happiness of an existing one, is wasted. The mirror image is also true: Once a viewer has decided not to watch, no additional degradation of quality carries any cost.

From the viewer's perspective, the binary nature of the decision makes it impossible to register intensity. If he likes the program a little, he watches. If he thinks it represents a stunning triumph of the human spirit, he watches. He can do no more unless, like the Star Trek groupies, he joins a movement to keep a program on the air. Thus the viewer cannot reward the broadcaster who exceeds minimum expectations.

The system also imposes a ceiling on how much can be spent on making the programs. The most a viewer can be worth to an advertiser is the profit from a sale multiplied by the probability that the sale will occur. This is not a giant sum, even for a popular program. For a program with a thin potential audience, it is paltry.

The market system has more to offer

One should not be surprised that few programs represent triumphs of the human spirit. Triumphs usually take considerable time and work to produce and thus require money, which is necessary to sustain the artists' flesh while their spirits toil. The overall result is a system that many tolerate and no one much likes. It is designed to keep as large an audience as possible barely on the plus side of the decision to watch.

As for the sponsorship model of the Internet, it is already in trouble, as surfers realize that "recommended" links may be those that paid the most to the proprietor and as advertisers steadily reduce their estimates of the value of having a pair of eyeballs race past their banners.

Contrast the characteristics of such sponsorship systems with those of market systems. In a market, the product is composed of the content -- the music, the program, the book, the article. The audience members are the customers, whose desires are paramount. Their decision is not limited to yes or no because intensity can be measured by altering the price.

A customer who values something highly can offer to pay more. Sellers of content can make tradeoffs between many copies at a low price or a few copies at a high one. People like Trekkies, who value something highly, are regarded as treasures rather than nuisances, and are not reduced to begging TV executives not to cut them off.

Hybrid models also exist. Magazines combine sponsorship and purchase, and the advertising is an attraction for the self-selected group of subscribers. Premium cable-TV channels provide customers with a package of programming. Much high culture is supported partly by the box office and partly by systems whereby like-minded patrons sweeten the pot, often in exchange for social benefits.

These diverse market-based forms provide a feast of options. One can like or dislike many of the individual products they support, but the profusion cannot be denied. And there is something for every taste, however high, low or firmly in the middle.

The consumer's prayer

So those who think eliminating payment systems will produce a better world should think it through. Once they become the product -- the piece of meat up for auction -- rather than the customer, they will pay in many ways, such as lost choice, dignity, time and autonomy. With every free download, they are building their own prison.

Instead of calling for more, they should be saying: "Hey, technologies like Napster are potentially great because they create new possibilities for the rapid, low-cost dissemination of intellectual products. But I personally do not want to be turned into a product, worth only about two cents to some advertiser. I want to be an in-charge consumer, courted by artists, record companies and publishers, paying for quality as I define it. I want to insist on value and I am willing to give value in return, and I want the flexibility offered by variable prices. Please invent some good encryption systems quickly so we can restore the market, which is the only moral way to run things."

That would be a prayer worth having answered.