Who Will Buy?

As some of you know, I’m a karaoke junkie. But it’s my wife who has the classier repertoire, including “Who Will Buy?” from the musical Oliver!:

Who will buy this wonderful morning?
Such a sky you never did see!
Who will tie it up with a ribbon
And put it in a box for me?

Of course, the trope that the best things in life are free predates musical theater, let alone the web. But recent years have witnessed dramatic changes in our price sensitivities in every genre of digital (or digitizable) content, and I’m curious (sometimes morbidly so) about where it goes from here.

I won’t make you suffer through a rant about the malaise of the music and news industries–those topics, important as they are, have been overplayed in the blogosphere. If you need a refresher, I suggest Lawrence Lessig and the Nieman Journalism Lab as some of the more rational voices contributing to the discussion.

But it’s not just news and music that are experiencing the effects of the “information wants to be free” movement. Consider these industries:

  • Books. Many publishers worry that the Kindle has been setting a consumer expectation that a book should only cost $10. Indeed, a recent price war between Amazon and Wal-Mart drove some of those prices down to $8.99. Is this a boon for consumers, or a body blow to the publishing industry? It’s easy to evoke the $0.99 / per song expectation set by iTunes–but that change was more about disaggregating albums than about changing the per-unit cost. Besides, books have not yet had to confront the scale of unauthorized distribution that we see in the music industry. Legal or not, free is a potent source of price pressure.
  • Software. Wolfram Alpha just made headlines by releasing a $50 iPhone app. Many have reacted that such a high price is outrageous and will doom the application to failure. They may be right on that latter point–the market will vote with its clicks soon enough. But I’m old enough to remember $50 as being in the ballpark of what it cost to purchase a new consumer software application. Even then, unauthorized distribution was an issue–remember the “don’t copy that floppy” campaign? Today, my impression is that few people consciously purchase consumer software–a trend that I at least date to Microsoft’s strategy of bundling its software into PC purchases. The most noted exceptions are console games (which are impressive holdouts in the consumer software space) and iPhone apps–with the caveat that only a tiny minority of apps make enough money for the creators to live on. (Update: just saw this note about how EA Sports President Peter Moore sees the current console game business model of cartridges and discs as a “burning platform”.)
  • Television. Between Boxee and Netflix, there is a real chance that digital content’s cash cow, cable television, will see its regional monopolies disrupted. I can’t imagine that anyone will shed a tear for the cable companies. And yet I can’t help but wonder what happens as the notion of premium content is subsumed by an expectation that video content should be free. Are we heading towards a proliferation of cheaply produced reality TV, contests, and game shows–all sponsored by rampant product placement?

If we are to believe Mike Masnick, then the price of content is driven to its marginal cost. It’s pretty clear that the marginal cost of distributing most digital content is, while not free, close enough to be a rounding error. Should we be looking forward to a world where no one can charge consumers for content? Folks like Jeff Jarvis and Chris Anderson are cheerleading such a world as not only inevitable but a good thing–though both of them have had the sense to make some money on non-free books while the going is good.

Yes, there are and will always be business models to support content creators. In particular, one-time content (live events, consulting services) has some degree of insulation from the inexorable trend toward free. But what an inefficient turn of events, if people are rewarded for creating one-time content but not for creating far more valuable content that is useful to a broad audience of consumers!

I know that there are non-financial incentives that drive scholars, open-source developers, and activists to create free content. Indeed, I personally write this blog without any direct financial incentive. Perhaps these incentives will be the driving forces for content creation in the 21st century. One way or another, I hope we find a way to fund the things we value, rather than devolving into a locally optimal rut where value creation isn’t economic for the creators.

p.s. You can find the lyrics to Oliver for free online, and you can easily view an free (unauthorized) copy of a performance of “Who Will Buy?” on YouTube. Or you can buy the song for $0.99.

By Daniel Tunkelang

High-Class Consultant.

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