Friday, April 11, 2008

Is Content Worthless?

“Content is king,” many people believe, meaning that films, television shows, music, news and information are more profitable assets than the technology used to deliver them. But there's an older, cautionary aphorism that applies as well: “Uneasy lies the head that wears the crown.” Content may be king, but, ironically, its perceived value today is being driven towards zero. In the eyes of consumers, content is becoming a commodity – more a commoner than a king.

Everyone focuses on piracy, but there are actually six related reasons for the devaluation of content. The first is supply and demand. Demand – the number of consumers and their available leisure time – is relatively constant, but supply – online content – has grown enormously in the last decade. Some of this is professional content set free from boundaries of time and space, now available worldwide, anytime, and usually at no cost (whether legally or not). Even more is user generated content (UGC) – websites, blogs, YouTube videos – created by non-professionals who don’t care whether they get paid, and who themselves pay little or nothing to create and distribute it.

The second is the loss of physical form. It just seems natural to value a physical thing more highly than something intangible. Physical objects have been with us since the beginning of time; distributable intangible content has not. Perhaps for that reason, we tend to focus on per-unit costs (zero for an intangible such as a movie download), while forgetting about fixed costs (such as the cost of making the movie in the first place). Also, and critically, if you steal something tangible, you deny it to the owner; a purloined DVD is no longer available to the merchant, for instance. But if you misappropriate an intangible, it’s still there for others to use. That’s why, even before the Internet, sneaking into movie theaters – stealing the right to view a movie – seemed a mere rite of passage, whereas shoplifting a video did not.

The third reason is that acquiring content is increasingly frictionless. It’s often easier, particularly for young people, to access content on the Internet than through traditional means. When it’s easier to get something – when transaction costs decline – the thing costs less and loses value.

Fourth is that most new media business models are ad-supported rather than pay per view or subscription. If there’s no cost to the user, why should consumers see the content as valuable, and if some content is free, why not all of it? True, ads impose a cost in the form of user attention, but many online ads are easily ignored, and, today, even television advertisements can be skipped using TiVo.

Fifth is market forces in the technology industry. Computers, web services, and consumer electronic devices are more valuable when more content is available. In turn, these products make content more usable by providing new distribution channels. Traditional media companies are slow to adopt these new technologies, for fear of cannibalizing revenue from existing channels and offending powerful distribution partners. In contrast, non-professionals, long denied access to distribution, rush to use the new technologies, as do pirates of professional content. As a result, technological innovation reduces the market share of paid professional content.

Finally, there’s culture. A generation of users has grown up indifferent or hostile to copyright, particularly in music, movies and software. The reasons for this vary, but in music, for instance, some blame lies at the feet of the music labels, which maintained unrealistically high CD prices and attempted to sue piracy out of existence. Only now, almost ten years after Napster, are the labels offering the non-copy protected MP3’s that consumers demand.

All these developments have led to a migration away from paid media. Why buy music when there's so much free music available, albeit much of it pirated? Buy a movie or watch TV on a conventional set? No need, when YouTube and BitTorrent make videos, and pirated movies and TV, free for the asking. Subscribe to a newspaper or magazine? Don't bother; most are free online, and there are literally millions of other sources for news, ranging from blogs like the Huffington Post to user generated content. (Full disclosure: I’m a blogger, which makes me part of the problem.) The TV news? Also becoming irrelevant. And books, magazines and journals? So much information is available online that whole categories of publications seem less important.

It's true that people still consume media the old-fashioned way – but fewer and fewer do so every day. Most of the content industries are seeing flat or declining revenues and audiences. And these trends are particularly notable among younger people. As a result, the music industry is a shambles; the film and television businesses are running scared; and newspapers are disappearing or instituting cutbacks and layoffs. The handwriting is on the wall, or the laptop screen.

User generated content is often a poor substitute for professional content or traditional media. But that’s little comfort. Alternate goods don’t have to be perfect substitutes in order to acquire market share at the expense of the competition. And, yes, in some cases, new media make money for creators and companies – but the money’s much less than it used to be. As NBC Universal’s Jeff Zucker lamented, the content industries are being forced to “trade today's analog dollars for digital pennies.”

Another effect is that the market for professional content is becoming more concentrated and less diverse. Thus, at least in some media, audiences are shifting more of their spending to hit properties – the most popular movies and books, for instance – to the detriment of specialized content such as art house films and mid-list titles. Similarly, in a trend that predates the Internet but continues today, media businesses are consolidating and becoming conglomerates, as individual companies find it harder and harder to compete.

Some commentators welcome these changes. “Information wants to be free,” they say, and more content is good for users. Persuasively, they point to the variety of viewpoints that new technologies bring. That development is indeed valuable – very much so, in a democracy premised on freedom of speech. But when everyone’s a creator, there’s less room for high-quality professional content. It’s a dilemma with no easy answers. The future of traditional media is murky, but one thing is clear: disruptive change will be with us for many years to come.


  1. interesting article with some worthwhile point but as the digital revolution has taken hold the inherent nature of demand has changed and so should the new methods of distribution .This only slowly taking place and in truth this is why content owners are currently in the quandry their in. If people are downloading your movies make them avialable when they are released so people can make up their own minds whether want to watch them at home or at the cineplex.How films or music is bundled online gives people very little incentive to download it legally.rebundle what you offer and sell the madonna CD,or new film as part of a larger offering where you can buy the CD,DVD,Book,film,Tshirt and stream the concert direct to your living room and interact with other madonna fans in an exlcusive forum of which you can become a member of the community which has the real value.Live nation is the only company to cotton onto this way of thinking by signing Madonna and now Jay Z exclusively. Music Content is only part of the offering and the cultural change in our society through technolgy is that we want more then just the cd or the film we want a deeper level of interaction and we need to tailor our marketing to this demand not continue to sell music as a single offering and cry wolf when the return are poor. When this offering is changed and advertising is brought into the equation suddenly content and community has value once again and something which the fan wants to be part of.
    Yes the waters have been muddied but once the thrill of the new has calmed down the media companies who have taken time to reconfigure their offering with a deeeper level of engagement for their customers .whether this is by community or by advertising models I think the introduction of selling music on My space is just the tip of the iceberg whic will spawn a whpole host of community based distribution channels for people trying to sell goods and services.
    Yes there will always be shops selling good but those goods only have value when recommended by a friend or peer and what better place to do this in a community of like minded people.

  2. The idea that "content" has commercial value may well soon be relegated to the graveyard of previously useful concepts. The commercial value of a song, of a story, or of an idea separate from a real live person's embodiment of these things, only exists as a concept in the first place because of those limits on the portable media which communicate or deliver these things to an audience willing to pay for them.

    In a pre-industrial society, no one would have understood the idea that a "song" was something you would pay for. The only way you would be exposed to one would be to perform it yourself or to join someone else who was. You might pay for that experience, but you would not take that song away with you. You might like that song, that might even be your favourite performer of that song, but you had no way of owning it. The "song" itself could not be bought.

    That changed, of course. First, we developed printing & written music; later, we introduced recording technology. You could now buy yourself that song. Along with that you had some limited right of exclusivity, since not everyone could have what you have -- at least not without effort or payment.

    Now, in our post-modern digital world, it appears that we are coming full circle. Only this time, the issue is not that no-one can buy that song, it's that anyone can very easily duplicate it, control it, have it at their whim.

    What's left is what was there in the first place: we will pay for the means by which we can expose ourselves to these things. For an entire library of recorded music, that's what -- $150 US? There was no recorded music industry -- nor any analogue to one -- before the vinyl phonograph record, and there won't be one after the MP3 player. At least not like we would recognize it.

    But we are still people, with money, willing to pay for the experience, just like our pre-industrialized selves were. It's that mythological value of "content" separate from the form of its expression that will disappear. That doesn't make content worthless, however. It just means that the days of the "recording artist" are very probably numbered, as they are for categories like "print journalist" and, perhaps, "television producer."

    We will still pay to be entertained, informed, and immersed in new experiences. The idea that will still hold on to our outdated concepts of "content" is about as silly as the idea that we will hold on to our 8-tracks. The irony is that digitalization -- which reduces "content" to the point that it is damn near disembodied -- may ultimately lead to a resurgence in the relative value of the solid, real-world, live experience that we will pay our next generation of content producers to give us. Concerts. Plays. Poetry readings...?

  3. Huh. Just because somebody wrote an article don't make it so.

    Okay, like this blog, this is only my opinion:

    >Fourth is that most new media business models are ad-supported rather
    >than pay per view or subscription

    HBO is doing marvelously, because it has content. Showtime has stepped to the plate with content (Dexter, The Tudors, etc.). These are both paid subscriptions with no advertising. I would say that both of these companies are new media business models. They continue to be total innovators of form and content.

    People don't tune into American Idol for the commercials. They tune in for the content. It's the number one show on television. Last night, FOX earned a 10.4 rating/16 share.

    Now, American Idol is conventional media. The more people whine about not making money with conventional paradigms, the tighter the box in which they put themselves. So many people live in cages...and instead of freeing themselves, they decorate the cages.

    >But when everyone’s a creator, there’s less room for high-quality
    >professional content. It’s a dilemma with no easy answers. The future of
    >traditional media is murky, but one thing is clear: disruptive change will
    >be with us for many years to come.

    Nope. When everyone's a creator, everyone's a creator. Doesn't mean they'll be watched. There's exactly the SAME room for high-quality professional content..maybe .more now with cable and certain internet places. It just that more people are making content, so it gets more competitive...but the cream still rises to the top. Now anyone with an insane amount of talent, drive, and skill can make a movie. Now Cris Kentis can make "Open Water" on mini hi-def cameras during weekends in Bermuda, then fly back to work on Monday, then fly back for the weekend, believing in his dream. Twenty years ago, he'd need millions of dollars. Now, he needs a bunch of smarts and the passion to do it.

    I love disruptive change. It's the only way to be a star. Reasonable people people end up in a huge pool with all the other reasonable people. Unreasonable people think out of the box and create something special.


  4. Great article...

    I think it would be really constructive for you to stop thinking in terms of "professional" vs. "non-professional" creators. There is hardly a black and white line, and the grey zone grows in size daily.

    For example, this blog vs. the "Jurisprudence" column on Slate. What's the difference? Are you a "non professional content creator"?


    Also...hey Erik, re: "exactly the same room for pro content"...not really. That's the entire point of the attention economy; it's a zero-sum game. The more supply of free information, the less "room" (i.e. attention, or demand) there is for "pro" content.

    There is only room for great content, and that kind of meritocracy is source-agnostic.

