INTELLECTUAL PROPERTY ON THE NET
by Esther Dyson
The laws of physics seem to change when you enter a new environment, such
as the gravity field of the moon -- or the Internet and its easy
replication of content. In this issue, we argue that the newly revealed
physics of information transfer on the net will change the economics and
perhaps ultimately the laws governing the creation and dissemination of
intellectual property...call it content to avoid the presumption of
ownership.
What happens to intellectual property on the net? Perhaps the question is
best answered with another: What new kinds of content-based value can be
created on the net? We believe the answers include services (the
transformation of bits rather than bits themselves), the selection of
content, the presence of other people, and assurance of authenticity --
reliable information about sources of bits and their future flows. In
short, intellectual processes and services appreciate; intellectual assets
depreciate.
The net poses interesting challenges both for owners/creators/sellers and
for users of intellectual property. Because it allows for essentially
costless copying of content, it dramatically changes the economics of
content. In this new world, competing with the old one, it will be easy
to copy information, but hard to find it. It will be easy to program, but
still hard to define the problems and questions that software programs
must handle. Creativity will proliferate, but quality will be scarce and
hard to recognize. Creators will have to fight to attract attention, and
to get paid. Logistics alone used to add value to IP; it does so no
longer.
The intrinsic value of content in the aggregate will remain high, but most
individual items will have a short commercial half-life on the net. The
problem for providers of intellectual property is that although under law
they can control the pricing of their own products, they will operate in
an increasingly competitive marketplace where much intellectual property
is distributed free and the number of suppliers is exploding.
While content won't be entirely free, the economic dynamics will tend to
operate as if it were. Content (including software) will serve as
advertising for services such as support, aggregation, filtering, assembly
and integration of content modules, or training -- or it will be a
by-product of paid-for relationships. (For precise descriptions of how we
use many of these terms, often used loosely, see the glossary on page 7.)
The likely best defense for content providers is to exploit that situation
-- to distribute intellectual property free in order to sell services and
relationships. The provider's task is to figure out what to charge for
and what to give away for free -- all in the context of what other
providers are doing and what customers expect.
This is not a moral decision but a business strategy. The issue isn't that
intellectual property laws should (or will) disappear; rather, they will
simply become less important in the scheme of things. Free content and
contractual relationships with strong IP protection will proliferate at
either end of an inverted bell curve; intellectual property that can be
copied easily probably will be copied, destroying premium pricing in the
middle of the curve. As noted, much content will become a form of
advertising -- information or entertainment distributed free in order to
attract attention or create desire for things or follow-on services that
can be charged for. Advertising has a poor reputation in many quarters
because most advertising is designed for a broad market. But in a
one-to-one world, advertising will often be tailored and of higher
quality. Those with more money to spend will get higher-quality
advertising.
On the other side, the leading content providers will be paid for their
efforts: Much content will likely be developed and provided under service
contracts, either between supplier and customer (high-value), or between
supplier and a third-party sponsor/advertiser (low-value), or between
finder/filterer and customer (free content). Note that the way to become
a "leading content provider" may be to start by giving your content away.
This issue explores what will happen as these and similar trends
intensify. How will people -- programmers and others -- be compensated
for creating value? What will almost-free software and proliferating
content do to the market? What business models will succeed? We will
consider several kinds of intellectual property, and several other kinds
of value.
What are we saying here? We are not saying that content is worthless, or
that you can get it for free. What we are saying is that content
providers should manage their businesses as if it were free, and then
figure out how to set up relationships or develop ancillary products and
services that cover the costs of developing content. The creator who
writes off the costs of developing content immediately -- as if it were
valueless -- is always going to win over the creator who can't figure out
how to cover those costs. Other players may simply try their hands at
creative endeavors based on service, not content assets: filtering
content, hosting online forums, rating others' content, custom programming
or performing.
Imagine you're a farmer in the nineteenth century. The intrinsic value of
food won't go away, but as it becomes cheaper and cheaper to produce, the
share of economy devoted to agriculture will shrink. Better to get into
manufacturing, or at least into food-processing. But fast-food
restaurants -- that may be a little premature...
Slow implementations = long half-life
The short half-life of the market value of content (as opposed to
"fundamental value," whatever that is) is a new phenomenon. Here's a
condensed and simplified (filtered?) history: Long ago, content used to
be manifested physically -- first in machines and in people who knew how
to do thngs; then in books, sheet music, records, newspapers, looseleaf
binders and catalogues; and most recently in tapes, disks and other
electronic media. At first information could not be "copied:" It could
only be reimplemented or transferred. People could build new machines or
devices that were copies of or improvements on the original; people could
tell each other things and share wisdom or techniques to act upon.
(Reimplementation was cumulative; reuse did not take away from the
original, but the process took considerable time and physical effort.)
Later, with symbols, paper and printing presses, people could copy
knowledge and it could be distributed in "fixed" media; performances could
be transcribed and recreated from musical scores or scripts. Machines
could be mass-produced.
With such mechanical and electronic media, intellectual value could be
easily reproduced -- and the need (or demand from creators) to protect
intellectual property arose. New laws enabled owners/creators to control
the production and distribution of copies of their works. Although
reproduction was "easy," it was still mostly a manufacturing process
rather than something an individual could do easily. It took time and
money to set up.
Quick copies = short half-life
Now we face a new situation: Not only is it easy for individuals to make
duplicates of many works or to reuse their content in new works; their
physical manifestation is almost irrelevant. Over the net, any piece of
electronically represented intellectual property can be almost instantly
instantiated anywhere in the world.
Controlling copies (once created by the author or by a third party)
becomes a complex challenge. You can either control something very
tightly, limiting distribution to a small, trusted group, or you can rest
assured that eventually the "product" will find its way to a large
nonpaying audience -- if anyone cares to have it in the first place.
A (market) offer you can't refuse
Frustratingly to creators of content, the value of their work doesn't
generally get recognized without broad distribution. This means that any
artist or creator must somehow attract broad attention to attract high
payment for copies -- which means you give the first performances, books
or whatever away in hopes of recouping with subsequent works. But that
very breadth of distribution lessens the creator's control. In principle,
it should be possible to control and charge for such works, but it will
become more and more difficult. People want to pay only for that which is
scarce -- a personal performance or a custom application, for example, or
some tangible manifestation which can't be easily reproduced (by nature or
by fiat; that's why we have numbered lithographs, for example).
The trick is to control not the copies but a relationship with the
customer -- a subscription. And that's often what the customer wants,
because he sees it as an assurance of a continuing supply of reliable,
timely content.
You can of course charge a small amount for mass copies -- which is what
is likely to happen (and metering schemes will allow vendors to charge
according to usage or users, a proxy for value, rather than copies). But
is that charge really for the content, or for the delivery of the content?
Mostly we expect advertisers to pick up the tab for content; promoting
such content and then benefiting from its popularity is one of the few
ways they'll have to gain attention in a world overflowing with content.
(See Release 1.0, 12-93.)
A rose is a rose is a rose...
Even "worse" for creators than the proliferation of
manifestations-on-demand is the rise of a truly efficient market for
information. Content used to be unfungible: It was difficult to replace
one thing with another. In fact, most information is not as unique as its
creators would like to believe -- if you can find the alternative.
--------------
Carving value up into components is nothing new: It's what happens
every time an author negotiates a contract with his agent, and every
time the agent negotiates a contract with a publisher for a variety
of rights. Convention assigns the ratios between the values of the
various components, but these ratios adjust over time. (Look what
has happened to margins and discounts in the packaged software
business.)
--------------
In the world of software, it's becoming easier to define and find (or
create) equivalent products. Unknown vendors who can guarantee
functionality or who are certified by the reliable testing/rating services
of the future will squeeze the prices of the market leaders. Of course
the leaders (e.g. Microsoft) will win out in the end because they can use
almost-free content to sell ancillary products or upgrades, and because
they've invested in the distribution channels (even though they don't own
them).
It will become easier and easier either to reimplement the functionality
of a product -- or more significantly to implement the solution to a
particular problem using ever more efficient automated programming
techniques and application assembly from components. The definition of
the problem (rather than its solution) will be the scarce resource.
In business information, it will become easier to find precisely the
information you were searching for; finding and interpreting rather than
producing the information will be key.
In entertainment and art, there will be unique content, but pricing as a
whole will trend downwards as more and more creators compete for attention
using low-cost, easy-to-use production tools. More artists will find
their audiences within their local communities -- geographical or
net-based -- rather than hit the big time. Local barriers to entry will
be low, but global competition will be strong. There's the odd movie star
or work of art for which no substitute is acceptable, but most
entertainment is a way of spending time -- not a unique experience. As
Mark Stahlman of NewMedia Associates points out, people unwittingly value
entertainment by the hour.
Paradise lost?
The idea that intellectual property can lose its value horrifies most of
its owners/creators, but it's not such a new situation. Indeed, it's
happening already, to a large extent, in the software business. Most
software products are becoming commodities, not because they are easy to
duplicate, but because they are easy to knock off. Customers tend to want
the original product, and that forces prices down as the knock-offs
attempt to gain market share and the original attempts to keep it by
lowering prices. (Software metering schemes will help with payment, but
not with pricing.)
--------------
The question is not, Is it fair to charge someone for something
which can be delivered at no incremental cost? It is rather, How
should we allocate the cost of developing that value among the
people who benefit from it? How should we allocate the rewards for
doing so? Should we assume that costs should be recovered within a
year, or not at all? Do users really get more benefit from
almost-free software? Or do they get less, because they are the ones
who find and report bugs or imperfections that get corrected for
later users? Are online forum hosts users or providers and how
should they get paid?
--------------
Paradise regained
Overall, in each market there are likely to be a few leaders who create
and protect content with a strong identity (perhaps promoting it with free
content). Other players in each market will have a difficult time selling
content as assets and will have to find new ways to collect rewards for
their creativity. "Owning" the intellectual property is like owning land:
You need to keep investing in it to get a payoff; you can't simply sit
back and collect rent (see page 19). To some this state of affairs may
seem unfair. It certainly is if you grew up by the old rules and don't
want to play in a new game. But if you look at the new rules by
themselves, they have a certain moral flavor: People will be rewarded for
personal effort -- process and services -- rather than for ownership of
assets. There will be a closer tie between individuals and rewards;
corporations can't own a creative person's creativity (although they can
have a contract with that person).
Laws will still stand as the underpinnings of contracts concerning the
dissemination of use and information and memberships in electronic
communities, but the relationships will go far beyond the transfer of
intellectual property. In the same way, the rules of land ownership
exist, but the business of real estate is increasingly concerned with
location (not the amount of land but the infrastructure and the other real
estate around it) and ancillary conditions such as zoning rights and
obligations. Yes, land ownership matters, but it is hardly the most
interesting factor in real estate today.
Value over time
The value of content follows strange curves. (Throughout this issue you
will find charts of such value curves, created by Jerry Michalski.) When
only a few people are interested -- attend the party, watch the tv show,
shop at the mall -- it's not very valuable in the aggregate. When or if
an item becomes a standard, it gains in value, both in the aggregate and
often per user as well. Users can cooperate with each other and share
data; Juan and Alice can share the experience of watching John Malkovich
in "Art is my mission"; the price of gold goes up as more people believe
the price of gold will go up; the party's more fun when all your friends
are there. But at some point that value peaks: The party's too crowded;
the star is passe.
By contrast, other kinds of value are greater when they're exclusive:
You're the only one in the market; you have a special formula for
toothpaste or you know a special place to find oil. But many kinds of
information flow from one bucket to the other; the first guy gets the
advantage, but after that the total value is maximized by spreading the
knowledge widely or post-processing -- i.e. adding synergistic value on
top of it.
GLOSSARY: WHAT ARE WE TALKING ABOUT?
content-- information, data, etc. The most inclusive term: we usually
include software as content unless the context indicates otherwise.
intellectual property-- content, including software, defined by law as
protectable. Its owner/creator has rights to define how it may be sold or
used, and that its integrity and authenticity are inviolable.
intellectual value-- the value of intellectual property, whether or not it
is protected. Basically, the benefits content brings to users of the
content; this is usually higher than its market value (which may be zero),
since by definition no one will pay more than it's worth.
market value-- what people are willing to pay for intellectual value.
In order to understand the new economics of intellectual property/content,
we address three kinds in this issue. Other examples include patents,
chemical formulas, industrial, commercial or artistic designs (perhaps
loosely included under business information), brand names and trademarks:
executable software (with behavior and functionality).
Software performs valuable functions. Its value lies in what
it does, and in how easy it is for people
to use it. It must also interact with other software packages, and manipulate
formatted information. It can be used to manage business information (below).
Its value depends in part on the existence of people who know how to use it, and
data designed or formatted to work with it. Thus the more widely used a package
is, the more people want it. On the other hand, software rapidly grows obsolete:
people want follow-on versions with new features and other improvements, which
may or may not come from the original vendor. Software can also be the vehicle
for other value in services, such as help, consulting, training, implementation,
programming, and bugfixing -- which may or may not come from the original or
licensed partners. Or its functionality may be sold and delivered as a service.
entertainment/amusement/games/literature/media/political platforms (some of
which may be "functional" in that they perform actions such as shooting an alien
on command). Some of this is "art"; some is entertaining but of little intrinsic
value (sez who?). While business information should be "true," this kind of
content generally aims to affect human emotions in some way. Just as software
gains value from standardization, so does some entertainment/amusement/
games/literature/ media gain value from its familiarity: Pop stars grow more
popular through exposure; popular movies attract viewers who want to share
experiences with millions of other people. (These identities operate like brand
names, and often bring a premium to whatever they're associated with; see
Release 1.0, 12-93.)
business information/data. Business information takes many forms, with a variety
of price-to-time curves. Some loses most of its value quite quickly, such as stock
prices; some gains value as it is widely disseminated -- more people following the
pronouncements of a particular guru or business school, for example, or adopting
a standard legal contract. Much business information is in textual or even image
form and can be hard to sift, classify and cross-reference. It is even harder to
judge its quality -- except by knowing the source. Human editors and analysts
can add great value to such information. What may be common knowledge to
insiders -- a retail chain's sleazy financial practices, for example -- gains value
and impact when it is disclosed in a publication such as the Wall Street Journal.
Of course, much content is a mixture of all three: A software package may
include executable code, some entertaining features and artistic screens
(and perhaps a training game or even an add-in solitaire package just for
fun). Frequently business and other information is included in
"software," such as geographical data, financial formulas or historical
indices.
The other kind of intellectual value
All these things can be "fixed" into some medium and copied. Then there's
another kind of intellectual value -- or at least it's not tangible
property -- which is less fungible and certainly less reproducible. That
is human attention and interaction. It too comes in business (useful) and
leisure (fun/artistic) forms. It comprises performances,
teaching/training/coaching, analysis of specific questions applied to
specific situations, and personal attention -- someone reading and
responding to your e-mail, answering questions or watching you on a video
connection.
This other kind of value is also simply the presence of other people,
interacting casually. This value makes the difference between a packed
stadium and watching a pickup ballgame with a couple of friends. It's the
difference between the $500-a-plate dinner with a thousand people in a
hotel ballroom and the $10,000-a-head 40-person reception beforehand in
the presidential suite. It's the difference between an off-the-rack
special and an original from Dior -- or the "free" gown your mother wore
at her wedding 50 years ago. Value and uniqueness interact in mysterious
ways.
This kind of intellectual property (some call it context) can't be so
easily replicated over the net. And unsurprisingly, it depends on the
activity or presence of a person -- locally or remotely, in realtime or at
least in individual response. (Consider the friendship of dogs and the
like as another category, not covered here.)
The basic difference is that the first kind of intellectual property is
the embodiment or automation of effort, replicable easily for all, while
the second kind of value is the effort, service or process itself; it can
sometimes be shared, but the effort can't be "replicated" without another
person to do the same task.
Precisely because it is scarce and unreplicable, this second kind of value
is likely to command the highest rewards in the commercial world of the
future.
But first, let's look at the software business....
THE VALUE IN SOFTWARE
While most packaged software vendors continue to fight the perennial
battle against software piracy, some others are adopting a different
business model. Except for the leader in each field (Microsoft, Oracle,
Autodesk, a couple of others), few software companies can survive on the
sale of intellectual property alone. The price of most packaged software
is tending towards (although not yet reaching) zero.
So what happens in a world where software is basically free?
Successful businesses are adopting business models where they are rewarded
for services rather than for code. Developers who create software are
rewarded for showing users how to use it, for installing systems, for
developing customer-specific applications. The real value created by most
software companies lies in their distribution networks and brand names
rather than in their code. (For Microsoft, one big chunk of value lies in
contracts with hardware OEMs.)
Software license fees (and the discounts/commissions) are more or less a
proxy which enable licensed dealers to charge for support, training and
upgrades (for which Novell has charged them). What Novell is really
selling is its investment in training Certified NetWare Engineers,
Instructors and Administrators, and its perceived ability to produce and
sell widely the next release of NetWare. Note that publicity for
vaporware is not just a spurious form of advertising: it works in the long
run only if it is legitimate. Indeed, well-managed vaporware enables
developers and customers to plan effectively, is part of the value a
software vendor can provide. (See also page 27 on the value of
visibility.)
Advertising for whom?
The packaged software business works primarily on the basis of "shrinkwrap
licenses." That is: "If you open this package, you thereby acknowledge
that we own this software, that you may not do anything with it without
our express permission, and we have the right to come in and seize it for
any reason whatsoever -- and sue you, too, if we feel like it." Well, not
quite, but that's the idea. Did you read the fine print on the last
package of software you opened?
Packaged software is a product (by contract), but in many ways it is
becoming simply an ad for follow-on goods and services -- bug-fixing,
support, upgrades, training, implementation and development services. The
price of the software is enough to cover production and distribution; the
intellectual content is free.
Unfortunately for many packaged software vendors, they are advertising not
their own follow-on services, but those of Corporate Software, Upgrade
Corporation of America (both below), Alexander & Lord, Sykes and other
third-party service firms.
It's 10 pm. Do you know who your vendor is?
Many software vendors are almost giving this follow-on business away.
Here are some examples of who's taking it:
Cygnus Support successfully sells support and implementation services,
along with free copies of software from the Free Software Foundation (GNU
C compilers, UNIX, tools, etc.). The five-year-old company had 1994
revenues of more than $5 million and is profitable, with customers
including Cisco, Hitachi, Motorola and Sun. Much of its work is porting
system software to a particular vendor's hardware implementation, a task
paid for by the hardware vendor. The resulting implementation is freely
redistributable (as provided by the rules under which the free software is
distributed). But of course the hardware vendor gets the benefit of its
existence, since it makes his hardware products more attractive.
Cygnus is currently working on a plan to provide glue for many of the
public-domain tools floating around the Internet (of which Mosaic is only
the most visible example). All these tools are handy, but they don't
quite work together; the output of one doesn't flow smoothly as input into
another. Now the task is to find some customers who would be willing to
fund such a project -- not for the rights to use the results exclusively,
but in order to have a more hospitable environment in which to conduct
their business. Cygnus may end up concluding that it is such a company
itself: After all, its business long-term depends on a ready supply of
free software to which it can add value for specific customers.
Incidentally, Cygnus is also doing ports for a system-maker which is
considering putting its real-time OS into the public domain. This is an
indirect way of leveraging not only whatever it pays Cygnus, but hundreds
of applications (many of which it does not own). Each of these
applications will need to run on the "standard" OS; if that happens to be
the one on which the system-maker in question has based its devices and
its applications, so much the better. That is, by making that OS a
standard, the system-maker would raise demand for the devices it builds
which include the OS and lower the cost of applications; the OS itself is
only a small part of the value. (Does something here remind you of what
Apple didn't do?)
Corporate Software, with revenues of $600-700 million in 1994, distributes
packaged software for discounted prices. In this guise, it not only
resells copies; it also administers usage- or user-based licenses, manages
system administration, version control and configuration for customers.
In addition, it supports many users directly for a fee, and acts behind
the scenes as the support department for many well-known software vendors
(paid by the vendors). It has an advantage in this business for two main
reasons:
Its employees know the packages of several vendors, and can handle typical
customer problems which occur when two vendors' products clash.
Its employees are first-class citizens and take pride in their work,
whereas in product companies support people are usually relegated to
secondary status with no hopes for advancement.
The observer might wonder whether Corporate Software is outsourcing (in
the traditional sense), or whether it's taking over the core competence
and value-added of the suppliers for whom it is providing support...
Upgrade Corporation of America handles logistics for software vendors. It
was founded four years ago by Jordan Levy and Ron Schreiber, who founded
(1981) and ran Software Distribution Services, a traditional software
distributor acquired by Ingram in 1985. Their original premise for UCA
was to sell software upgrades, but now the company performs the full range
of activities except for development of software (and supports some
hardware vendors too). Its revenues for the year just ending should reach
$150 million -- with the margins of a service provider paid by vendors
rather than the thin markups of a distributor. Its work includes lead
management (trades shows or ads), follow-ups with literature or
telemarketing, seminar registration, other pre-sales programs, order entry
and fulfillment, phone or electronic registration, and dealer referrals.
UCA also manages technical support for nine clients, using 65 people
currently. "Support" means not just telling CD-ROM users how to plug
things in (although that's a big business right after Christmas), but
high-end counseling for Informix users. The company expects to perform
1.8 million registrations by phone, says president Levy. Overall, says
Levy, it has 70 million customer records, "although we joke that we have
only a million unique names." (Each vendor demands that its own customer
records be kept separate...now what would be the value of that piece of
assembled content?)
Customers include Seiko, IBM, Informix, Microsoft, Apple, Novell/WP,
Symantec, Borland, Powersoft, Oracle, Broderbund, Activision, Compton,
Walt Disney, Delrina, MathSoft, Stac, Apple, IBM, NeXT, Sun and
Packard-Bell.
Use-based models
Many packaged software licenses are drawn more as service contracts, with
copyright stretched if necessary. Customers pay for use, for number of
users, for number of servers, for time... You could call this a copyright
issue (and of course it's related), but it's really a way of measuring and
charging for value. It also enables a vendor of high-value, small-market
software to lower the cost to small users by apportioning the fees
according to customer benefit.
Smart customers know the economics of their vendors, and how little cost
their incremental usage adds; on the other hand, they also don't want
their suppliers to go broke. This is a long-term issue. In the end
they'll have to pay for the cost of developing software one way or
another. It may end up being resolved by a service bureau approach -- but
customers also like the perceived convenience of having the software
resident on their own workstations. As elsewhere, a variety of business
models will prevail.
How will such measurements, and particularly meters on the screen, change
user behavior? Phone companies, for example, don't like to remind you of
their time charges, but customer companies might well welcome a little
meter on the screen reminding employees just how much their activities
cost.
Bug-fixing
One common question is, Won't software companies introduce bugs just so
they can have the (lucrative) pleasure of fixing them? Of course, that's
possible. But customers won't stand for such tactics in the long run.
Ideally, support is more a matter of value-added training,
function-extension and customer-specific improvements than remedial
bug-subtraction. Innovation in making a product easy to use is one of
those short-half-life innovations that can help a company establish a lead
in the marketplace -- and sell services and products around its own
content rather pay to learn to support (or mimic) a competitor's.
Who gets the business?
Won't third parties simply snag a vendor's support business, leaving the
vendor with the burden of developing the intellectual value without the
ability to collect on the aftermarket? Conversely, one consultant asked,
How can I find the time to develop some software to build services around?
I'm a one-man band.
The answer to both, of course, is that a single company may create the
intellectual property, while others may provide support services. The IP
creator leverages its value by training or licensing the support vendors.
On a legal rather than an economic basis, a distribution contract is
frequently the equivalent of a license to support a particular product.
The payments a vendor gets for product sales are more a payment for the
training and trademark than for the IP itself.
LEVERAGING CUSTOM DEVELOPMENT
Other companies are using commodity (almost-free) software to build custom
systems for their customers. Of course, any software company gets better
at doing a particular kind of work, but the "intellectual property"
remains in the heads of the company's people rather than in the code. The
vendor is paid for the process of programming (and the benefits) rather
than for the code as a product.
In the long run, with object-oriented or modular software, the custom
developer's challenge will be more and more to design systems, find
appropriate code modules and parameterize and assemble them for specific
applications and customers. The value will be in this customization
process rather than in the modules themselves. (And the results of the
process will generally not be applicable to any other user.)
Where will the modules come from? Yes, they will probably be copyrighted
-- but like most content, they probably won't cost much more than the cost
of identifying and testing them. Competition will drive the actual IP
value towards zero, but it will be hard for users to find exactly what
they want -- or to assess its quality. Users will pay for quality
control, integrity and authenticity -- and the task of fitting the modules
together.
Competitive advantage for users
A complementary trend is the role of software (or embodied process) as a
source of competitive advantage. A would-be customer might decide he
wants a certain application, and simply hire a firm to write it. Here the
value is protected by treating it as a trade secret, since it is worth
more to the owner as unique functionality than as a tradable asset. The
reuse of the software or knowledge would be governed by a specific
contract (with the underlying assumption that the actual code and some
modicum of features/ functions are copyrighted; see page 16).
By and large, to take a hypothetical example, Macy*s wouldn't ever want to
sell its Macy*s Magic Markdown system to Nordstrom; it wouldn't want
Nordstrom to use it at all. Yes, there will be a market for user
companies to share their software; that's where many of the code modules
assembled by custom developers may come from. But the truly interesting
stuff is likely to be treated as trade secret.
In a variation on this model, a software customer might contract for the
development of some kind of software by which it could support its
customer base -- an ordering system or a particular EDI package, for
example. (See Release 1.0, 11-92.) Consider that software "advertising"
for the other products or services the software customer sells. Or
consider that the cost of a reservation system is indirectly charged to
the hotel rooms (advertised and) reserved through it.
Value is as value does
That's one way of realizing commercial value. Another might be the return
to some extent of processing services and outsourcing: Send your data to
us, and we'll return it neatly washed and pressed. Or put your people
online to our service, and we'll deliver the results they need. Many such
services are best done in-house, but companies such as ADP and First Data
Resources have made a huge and profitable business handling payroll,
insurance adjustments and financial transactions as outsourced services.
Other such content/software-based services include accounting for small
firms, specialized indexing according to some canonical data
structure/thesaurus, or publishing services (such as preparing and
pressing CD-ROMs, a hot business right now), or translation from one
natural language to another.
Or take publishing -- the very model of what we've been talking about:
"Give us your information and we'll classify it and put it online and send
you a royalty depending on how many people access it or how long they
spend with it." Yes, the content owner is selling intellectual property,
but unless the content has a very strong brand identity the balance of
power will shift to the publisher, who controls the channel to the
customer. The content vendor's goal is to maximize distribution -- and
the publisher's goal is to leverage his publishing and indexing software
and to be more convenient than the next publisher of that same content --
or some substitutable equivalent.
The sponsored project model
We expect to see more and more customers get together to fund the
development of software they need. For example, CommerceNet, a nonprofit
consortium of companies who want to do commerce over the net, has
contracted with for-profit Enterprise Integration Technologies to develop
much of the software infrastructure its members will have the right to
use. (Much of that infrastructure is based on free software that is being
hooked together by EIT.)
Or take the example of PRT Corporation's project for Merck -- not a clean
implementation of a business model, but the kind of true, convoluted
arrangement that actually happens, based on individually negotiated
contracts. Merck originally hired PRT, a systems integrator, to develop
an add-on data-conversion and testing tools for the high-end human
resources package it had licensed from Tesseract. In order to cover the
costs, it encouraged PRT to market the same code to Chevron and
Bristol-Myers. PRT and Merck shared the license fees from those two
customers; going forward PRT had promised to provide Merck with free
maintenance and upgrades, based on its ability to sell them to the other
customers. The end of the story (so far) is that Tesseract reacted by
offering an equivalent capability for free. Now the three are still using
PRT's software, and PRT supports it for a fee as necessary, but PRT is
doing no more development on it.
Indeed, some vaporware marketing is an invitation to buy on such a basis;
if enough people show interest, the product will be developed. Then the
software is governed by a contractual arrangement.
Another example of group efforts is the internal service that becomes a
commercial resource, such as the airline reservation systems that were
originally developed by a single airline and which are now offered, at
high profitability, to other airlines (partly due to customer demand for
consolidated data). American Airlines' Sabre system is the premier
example, still owned by American but sold as a service to other airlines
and thousands of travel agents. By contrast, Galileo/Amadeus is now owned
by a consortium of airlines.
Please note that these groups are (we hope!) different from a standards
organization, where a group of semi-hostile companies try to build
products by committee for the public domain. Frequently, companies who
originally want to share the costs and the burden through a standards
committee will get fed up and decide to perform the job themselves.
MITCH'S METHOD
So, is software a mug's game? Is all the value being squeezed out by
copying and low-rent knockoffs? In principle, intellectual property
rights in software are protected by copyright for the object and source
code, and possibly for a program's look and feel (screen design and some
features), although recent court decisions contradict one another. There
may also be patent protection for underlying algorithms -- and for some
schemes that don't deserve protection at all, such as putting ads in
software.
Neither of these two approaches really addresses the unique value of
software -- its behavior. So Mitch Kapor and three colleagues led by legal
scholar Pamela Samuelson correctly argue in a recent paper, "A manifesto
concerning the legal protection of computer programs" (cited in Resources,
page 29). They propose a new "market-based" protection scheme that would
protect the behavior of software from unfair exploitation by others.
Their notion: The essence of software design which should be rewarded and
thereby encouraged is its behavior -- the useful things it does. (Ease of
use is fundamentally a feature of behavior which may be enhanced by
intelligent, lucid screen design.) The idea is to propose some time period
(a year or two, most likely) during which the original creator would have
sole rights to the economic value of given behavior; after that, the owner
might be required to license it for a fair fee to other comers.
The market would determine the fair value, much as it does for patents.
The mechanism would be much like patent licensing combined with
registration of the value/property involved (rather than the patent
examination process). The underlying value would be not a unique way of
doing something internally, but a unique set of tasks accomplished in
response to a user's or complementary software's actions.
Consider software on a computer as a machine, says Kapor, and you start
with the right metaphor. Now consider that new machines can be built
overnight, and you see the problem. In the old days, the sheer physical
difficulty of tooling up to build a new kind of machine gave the original
creator time to exploit his invention before imitators pile in; now that
physically determined period for exploitation no longer exists. Even if
it is not a case of copying code, programmers can copy many programs'
functionality within weeks or months -- depriving the original creator of
reward and incentive. New techniques -- both for program generation (such
as object-oriented programming) and for program decompilation -- make it
easier and easier and easier to duplicate the functionality of a product
without copying the code.
Of course there's a lot more to this idea than we describe here; it took
the authors some 160 pages and a daunting 500+ footnotes. But the basic
notion is to enhance the protection of executable software by protecting
its true value rather than stretching some not-quite-relevant laws to
cover it.
The authors are not proposing legislation -- let alone suggesting the
precise time period for protection. They simply want to focus attention
on software's true value -- its behavior -- rather than its internals or
its appearance. From a different perspective, we're in agreement: It's
what intellectual property does rather than what it is that produces
value.
THE VALUE IN MEDIA/ENTERTAINMENT
Would you pay more for Michael Crichton's words, or for the ability to
suggest a new plot to him? How much was his book worth to the movie
Disclosure? How much was his name worth?
In the world of media and entertainment, somewhat different economics
apply, despite the difficulties of protecting intellectual property.
There is not much of a support or training market, per se (classes in
playing Fig Mutant Space Rangers, anyone?). The payments to creators are
likely to come not from the viewers, readers or listeners, but from
companies who will use the content as -- or to deliver -- advertising.
The challenge for advertisers is not being paid, but making sure that
their advertising messages are inextricable from the content (see Release
1.0, 12-93). In some cases, it will mean that advertising will be as
"good" (whatever that means) as editorial content would be: truly funny
commercials, truly informative and truthful product information, and so
forth. (With luck, an efficient information market will force vendors to
produce better products about which they can be truthful.)
What will happen to popular creators of content (whether individual
contributors or teams)? In turn, the advertisers will pay for the
services of the creators, if not necessarily for the content itself. As
is happening now, famous people (for whatever reason) will contract to
promote products or companies. Another version: The advertiser promises,
"We'll make you famous, but then you have to stick by us [until you lose
your reputation through bad behavior or you get overexposed]."
In essence, advertisers will sponsor lives and online forum hosts rather
than content. Creators and performers will be under contract -- the best
ones at high prices, since they will be free to negotiate for the highest
bid. Just as prominent patrons such as the Medicis sponsored artists in
the Renaissance, corporations and the odd rich person will sponsor artists
and entertainers in the new era. The Medicis presumably had the pleasure
of seeing or listening to their beneficiaries and sharing access to them
with their friends. This won them renown and attention as well as a
certain amount (we hope) of sheer pleasure at the art. Of course, they
could also hike over to the studio at any time to watch their artist at
work (and perhaps find him at play?).
Free content
Overall, entertainment will become cheaper and cheaper, since so much of
it will be sponsored. Rights to transmit, display or whatever will still
exist and will be purchased by third parties rather than consumers -- but
those rights will be hard to protect. Much more information/entertainment
will simply be disseminated free, since consumers won't pay and competing
suppliers will bid prices down. The advertiser will gain from being the
first to deliver the content, and possibly from redistribution of its ads
along with the content.
With the means of production growing cheaper and easier, more and more
people will produce for smaller audiences of their friends, and those
seeking large audiences will give their stuff away -- and try to persuade
influencers to recommend it. People with the time and money will sponsor
themselves. Juan's best audience will be Alice, but she won't pay him.
But watching his videos will fill much of her spare time and give her less
incentive to pay for anything else; making those videos will fill his
spare time. Finally, Alice will spend a fair amount of time creating
videos to send back to him. (But will he watch them, the heartless
wretch? Or will he simply send another set of his own videos to Irene?)
We're back to a nonmarket economy where production and consumption both
occur within a noncommercial community. Outside that community, people
may become hunters and gatherers of information supplied "free" by
advertisers.
Discovering Alice
So who will discover Alice and send her into the big time? The
intellectual activity of agents -- talent scouts, advisors, creative
packagers -- will be valuable and richly rewarded.
The only unfungible, unreplicable value will be people's presence, time
and attention; in order to sell that presence, time and attention outside
their own community, creators will have to give away content for free. As
John Perry Barlow points out in "Selling wine without bottles" (see
Resources, page 29), that's exactly what the Grateful Dead do by
encouraging people to tape their performances. Enough of the people who
copy and listen to Grateful Dead tapes end up paying for hats, T-shirts
and performance tickets. The ancillary market is the market.
What makes a performance? It's not just the Grateful Dead on the stage;
it's all the people there with you. (See.Release 1.0, 3-92, on the
attention society.)
LOCATION, LOCATION, LOCATION
What makes real estate valuable? It's not just buildings and facilities.
There's a complex interaction between the tenants and visitors, the
physical plant and services, and the location (just ask any restaurateur).
Space in cyberspace works similarly.
The initial appeal of real estate may be proximity to other space -- that
is, something that's easy to find on your way somewhere else. The net
equivalent (more or less) is a listing in someone's guide, for example, or
highlighted availability through a service such CompuServe or Poland
Online. The virtual space near any particular location is limited -- just
like retail space along Fifth Avenue in New York, Bond Street in London or
Nevsky Prospect in St. Petersburg. There are just so many services to
highlight or point to a particular location.
But you can also build your land up, so that more people want to pass
through it. You can add restaurants or tony shops. On the net, you can
add content, so that more people want to use your space. Content can be
used to draw people in: It can attract a certain crowd, tune out others
(cf. the story about mall owners playing classical music to drive the
teenagers away), and provoke interesting interaction with the visitors.
Just as shopping malls offer rides and drugstores offer counters where
people can meet or be discovered, so will cyberspace real estate provide
environments for social interaction. People draw more people; they are
"content" that no one owns, although you can contract with a juggler in a
mall or a popular bartender -- or an online host in an online forum.
Even though you don't own the people that pass through the arcade you
build on the ground floor, you can collect a percentage of the revenues
they leave behind. An online service owner likewise can charge for time
or content or both.
In the same way, you can continue to build value that you don't own with
other value that you don't own. Live performances and the presence of
other people can attract still more visitors or customers. Free copies of
performances, videos, etc., can serve as advertising for the real,
uncopiable thing : membership in the community where these things happen,
live performances, genuine two-way interaction with the performers.
Content and people (like goods) that get visibility in favorable locations
gain in popularity (to some limit), and can thereafter be used in other
locations to raise value elsewhere (within limits). This is all a delicate
game, appropriately reminiscent of the intricate arrangements of broadcast
programming and counterprogramming.
The popular notion is that cyberspace is infinite and unbounded, but in
fact it's limited by the amount of human attention. Does a place in
cyberspace that no one ever visits really exist?
A MODEST PROPOSAL
As illustrated below, there will be many new business models for content.
In many cases, people will distribute content freely, and charge for other
services -- performances, perhaps, or answering specific questions.
Rather than pay to receive the content of an online service, users may
read it for free, but pay to post to it: I.e., they pay for others'
attention, but even then only if it passes a reviewer's filter. After
all, there will be too much content, and not enough attention. It reminds
us of the sculptor who was asked how he created such beautiful works: "I
take a block of stone, and I just chip away what I don't need until the
sculpture emerges."
In the example below, would Dave Winer post anything for $10? Or just
what he likes? If he rejects a post, will he refund the $10, or keep it
as a fee for his rating services? Who is his customer: the readers or the
writers?
YOU KNOW ME, DAVE (with apologies to Ring Lardner)
Dear Dave --
Thanks for putting me on the list to receive your electronic newsletter.
I appreciate hearing your news and your thoughts about computer industry
events. I especially enjoy reading the "letters to the editor" from other
people on the mailing list, such as Bill Gates, Jean-Louis Gassee,
Philippe Kahn and [your name here]. It's nice to know I'm in such good
company.
Now it's my turn to volunteer a little feedback... But as a newsletter
publisher myself, I'm responding on a different level -- not to your
content, but to your entire business model. I'm sure some of us are
sitting here happily receiving your newsletter, thinking, "How nice! Dave
Winer is sharing his wisdom with some of his old friends." Since you're
an industry pioneer, your old friends include a who's who of the industry
(about 250 of them, plus thousands more reached indirectly). And since
you're smart and they know other smart people are reading it, they're
interested in what you have to say.
But most of us are pretty cynical -- even the ones of us who didn't go on
to become the heads of world-famous software companies. So many of us are
probably thinking, "Ha! You can't fool me." We're waiting for the catch
-- the message that says: "Enjoy reading the newsletter? Well, from now
on it's going to cost you $10 per month!" or something like that. A
pretty reasonable approach.
But I have what I think is a better idea...and I'm curious if you're on to
it too. In fact, I'm writing you this letter as an illustration of that
idea: I want your feedback and that of the group's -- and I want my idea
circulated.
It's very simple. We all keep on getting the newsletter for free -- but
it costs us, say, $10 to *write back*. Most of us are pretty short of
time, but we're always ready to say something when other important people
are listening. Sometimes, we're even humble enough to want to test our
ideas against other smart (or at least knowledgeable) thinkers.
It's the way the world is heading, Dave. There's too much noise out there
anyway. The new wave is not value-added; it's garbage-subtracted. The
job of the future is pr guy, not journalist. I'm too busy reading, so why
should I pay for more things to read? Anything anyone didn't pay to send
to me...I'm not going to read.
In a world full of content, I still want to know what your friends and
mine are thinking, but I want only what they think is so good that they'll
pay to have me read it -- because they honestly believe it will raise
their stature in my eyes.
And Dave, watch out -- because if you let the quality of the group go
down, not only will I not pay to read what they say, but I won't
particularly want their attention for what I have to say -- or pay for
that. You can't let the list get too large and let every Tom, Dick and
Harry in there; I need to know my words will be among a carefully selected
amount of mail that's not too much for even the busiest person to read.
So what's the purpose of *this* letter? Basically, I'm going to see if I
can get some print publication to use it -- along with whatever feedback
it gets from your list (with those writers' permission -- which I'm sure
they will grant). Ironically, such a publication will probably pay me a
small amount, even though almost any author would gladly let the Journal
or the Times print his article for free (should I get so lucky).
Again, I just want to be the idea to be noticed -- not paid for. I make
my money other ways: These comments may draw attention to my newsletter
(still charged for the old way, I blush) or my conference, or maybe they
will help me win a lucrative speaking engagement. Our old ideas about
intellectual property are going to be revised in a world where content is
abundant and rich people's attention is increasingly scarce...
Maybe Steven King will post his books on the Internet -- and start
charging for readings. University professors publish works basically for
free, and make money by teaching and by giving their institutions
respectability with their names. Already some software companies are
distributing software for free and charging for support. Consultants
publish free newsletters in order to win clients. And as John Perry
Barlow loves to point out, the Grateful Dead let you tape their concerts,
but they charge you to attend.
So, Dave, you can copy this freely. I'll even pay you the $10 if you tell
me where to send the check (or how to do it over the Internet). But make
sure you keep my name attached!
Yours,
Esther Dyson
THE VALUE OF BUSINESS INFORMATION
The range of business information is broad. It includes stock and
commodity prices (executable by machines with expert systems for trading
-- although watch out if the news is outside the ken of the system). It
also includes data and knowledge about customers and their needs and
internal politics, about competitors and their products and sales tactics.
Finally, it covers the general course of economies, markets, technologies,
rules and regulations, and social behavior.
Some business information can be interpreted and manipulated by computers;
it can also be quickly disseminated and reused. It tends to lose its
value rapidly for all the reasons outlined above. But for that very
reason, access to a reliable stream of updates for such information is
valuable.
Even more valuable is information that results from interpretation and
analysis by people -- but its value depends on the specific efforts and
skill of the people interpreting it. This is the executive recruiter's
tragedy/ opportunity: Even the best candidate in the world can take only
one fulltime job at a time. The best people can transform business
information, from myriads of little details, into a big picture (which may
or may not be "correct"), back into little details of a particular
organization's or person's appropriate response. For example: If suite
prices are really going down, should we get out of the suite business
altogether, or use it as a loss-leader to sell our communications
products? If we get hold of a competitor's alpha version, which features
can we expect to last into Release 1.0?
In the business sphere, people will mostly be rewarded for performing such
analysis (and persuading people to act on it); although many business
gurus and commentators make it on their stage presence rather than their
intellects. What won't make it anymore (we hope) is generic commentary:
Principles are easy to come up with, but matching them to specific
instances is the intellectual exercise that adds true value.
In a world of electronic expertise and expert systems, people will still
pay for the personal attention of a doctor, the ear of a psychiatrist, the
advice of a CPA or lawyer. All of these are delivering customized
intellectual property, if you will.
Service with a soul
Both these latter forms -- streams of periodically updated information and
analysis of information -- involve relationships between provider and
supplier (possibly through an intermediary) rather than simple duplication
of content.
Most paid-for business information will be probably be delivered and
priced in the context of a service relationship rather than as discrete
info chunks. As described further below, customers want to know whom
they're buying their information from. You can pretty much tell if a Gary
Larson cartoon is funny by looking at it, but it's much harder to assess
the value of a research report or the accuracy of market statistics
without knowing the source. Research firms are paid not just for the
information they produce, but for quality-controlling and certifying it.
(No one ever got fired for basing a business plan on Dataquest
projections...)
Free? information
More generic information will be released as broad, quick sound bites that
take the form of executive summaries or press releases. These are
essentially ads for the full, for-a-fee study, which comes with access to
the full study and its authors, some influence over the questions
addressed, and perhaps lunch with the firm's charismatic co-founder. Just
as consultants do now, many people will give away their generic advice for
free, and charge to apply it to a particular customer's business problems.
(How many free books, brochures, pamphlets and newsletters do you receive
from people who want your consulting business -- or your conference
registration fee? Calendars no longer do the trick.)
Intel's lesson
Many journalists now troll the Internet looking for stories -- either hot
tips or each new activity, from shopping to alcohol counseling to
game-playing -- that now occurs on the net. But the recent Intel episode
was the first where the news itself unrolled on the net. Intel carefully
tried to spin the story in the print and broadcast press, with press
releases, interviews and other traditional PR approaches. But on the net
the real story played itself out as the sheer unpaid information spread
out and confounded the traditional media coverage. The information
itself, without brand names or control, self-organized into a new version
of the truth: Intel had screwed up in attempt to minimize the Pentium's
flaw.
There were no votes and no editors -- just the emergent coherence of free
information fostered by the Net.
Information delivery
Finders will be paid a lot; their job will be to scour the nets for the
real thing (and of course they'll try to limit access to their particular
selections). Automated agents will also proliferate, cheaply or for free,
but they won't be able to select for quality except indirectly. The real
process of quality recognition will be done by humans; then, for example,
we'll ask our agent to select anything "certified interesting by Jim
Fallows."
Companies with unique classification/selection tools (such as Individual
Inc.) are likely to sell the service of selecting articles rather than
their software directly. They also contract with the intellectual
property providers, who do charge for their information. The relative
value of the content vs. the selection and delivery is moving in favor of
filtering services such as Individual Inc. -- but since the news providers
generally can't sell follow-on services they are likely to be more
vigilant in protecting their property than software vendors are.
Likewise, it is much harder to insert and keep third-party advertising in
straightforward text or data, so the advertiser-funded model such as for
entertainment content doesn't work too well (except for product or service
listings, as opposed to news). Thus we see more likelihood of success for
metering schemes for information -- particularly in high value areas such
as legal databases -- than for those two other kinds of IP.
It's news because we say it's news
On the other hand, some content providers will attempt to provide their
own quality control, interpretation and filtering services. They will try
to build (or maintain) a strong brand identity for their content --
attracting readers or advertisers who will pay for it -- and good
reporters or editors who deserve and want the imprimatur. For example,
the umbrella of the New York Times sanctifies the words of its reporters.
They are valuable because they are quality-controlled, and because others
believe them. The New York Times can almost make the truth -- for better
or worse. But that authority depends on wide distribution, and it is
funded by advertisers.
Custom information
Another option for business information is the syndicated studies. For
example, it's not unusual for a research outfit to propose a research
agenda, round up some sponsors, and then perform the study. The sponsors
get access to information that might not otherwise be generated, the
opportunity to influence the focus of the research, and a time benefit.
The information may in principle be kept secret, by contract, but the
sponsors have access to the people generating the info and they get the
info complete and early. After six months, it has probably lost much of
its value.
--------------
Next time you clean your office, pick up a year-old market study
and ask yourself what percentage of the original price you'd be
willing to pay for it today.
--------------
Inside information
Inside information is the canonical form of valuable, exclusive
information. Its value comes in two parts, however: First, you have to
know it and be able to act on it (whether legally or not); second, it has
to be revealed to be true. That is, the merger must occur and the stock
prices go up. More interesting is inside information such as knowledge of
a competitor's bidding strategy or an opponent's legal arguments.
Literature and scholarship
What does this mean for scholarly works? Maybe we'll go back to a world
where scholars are rewarded for original research and teaching by their
institutions, rather than book contracts with Knopf. In the world of
telelearning, universities will become places for original creative
research and collaborative scholarship, rather than dissemination of
received wisdom. But on the other side of the balance, there will be
genuine teaching institutions with creative teachers who connect with
their students, stimulate them and inspire them one on one. Good teachers
can facilitate learning and attract talent; they are catalysts for
insight. Such teachers should get rewards for this kind of creative
service -- which is rarely the case now.
BUSINESS STRATEGIES: HOW TO EXPLOIT A HALF-LIFE
With a short half-life to content, what is left?
Aside from a few leaders who manage to sell brand-name content widely and
cheaply, the most promising businesses will be services and processes.
They will include selecting, classifying, rating, interpreting and
customizing (applying) content for specific customer needs. Other
services will include performing, interacting with people, and all kinds
of other activities that require the time of a live, unique person. Even
those who sell content will invest in distribution channels, whether or
not they own them; the value in those distribution channels will be tied
to and enhance the value of the content they sell.
Much chargeable value will be in certification of authenticity and
reliability, not in the content itself. Brand name, identity and other
marks of value will be important; so will security of supply. Customers
will pay for a stream of information/content, from a trusted source.
Much of the payment will go to the middlemen and trusted intermediaries
who add value -- everything from guarantees of authenticity to software
support, selection, filtering, interpretation and analysis. The
redistributor's goal is to be the most convenient source of content and to
put its own attitude or personality around the content; the underlying is
unlikely to be exclusive, since the content provider wants to maximize
distribution.
The problem for owners of content is that they will be competing with free
or almost-free content including their own advertising as well as the
output of myriads of creators on the net.
How will the two bodies of content interact? This is the interesting
question. Obviously, people should go for the free stuff, no? Only if
it's as good as the paid-for stuff. Meanwhile, producers would prefer to
be paid. But they may well find that the new model of payment -- if they
can make it work -- is in fact more rewarding.
Low-priced content drives out high-priced
Creators worry that they won't be paid and creative effort may be
discouraged. The free-content market certainly will discourage redundant
effort, since the wheel won't need to be reinvented. The free-content
market might also discourage a lot of current marketing designed to draw
attention to content. Why market a book that's free? It should "sell" by
itself, drawing attention to the author, or not at all. There's no
external reason to sell it, so poor novels won't be foisted on the public,
and good ones may find their audience by themselves -- or through the
efforts of filter agents who get rewarded for finding (not creating) good
content. The novelist, then, will be rewarded by fees for his
performances, or perhaps by finding sponsors for his next works. He may
write serials and find people who will pay for his continuing service.
Content in the new world
Basically, intellectual value markets will bifurcate into high-value
protected content assets, and services and processes built around free or
cheap content. The commodity software business is likely to remain more
centralized with a few big players and a lot of software houses because of
the need for standardization. Entertainment is likely to evolve into a
few stars and brand names, but variety and personal familiarity have
strong appeal, so the market will have a lot of local talent. Generic
business information will come from certified sources, while specific
information will come from large numbers of problem-specific information
interpreters and specialized information sources. In both non-software
cases, value-adders and unique service providers rather than sellers of
content will make up an increasing portion of the business.
The world turns
To many people, such a world is frightening. The more so, since it does
not require any laws to change -- or be flouted. It's simply the
unfolding expression of economic laws -- of demand and scarcity -- applied
in the future world of electronic content and commerce. It's not the
world most IP owners have been planning for, contracting for, securing
rights for.
Of course, this new world will distribute benefits differently. But as
long as the rules are the same for everyone -- and predictable -- the game
is fair. The big issue is the transition.
And there will be rules: Copying content will be easy and acceptable in
most cases; protected content will be "special," presumed to be of high
value. (And it will have to be if the creator wants to keep his
reputation.) Protected content will be tagged and monitored, and use will
be metered. Some payments will be for content, some for time, some for
transactions, etc. This system of control will be managed by efficient,
well-designed computer systems -- a delightful intellectual engineering
challenge that will keep many programmers and companies busy for years,
and that will reward some venture capitalists.
There will also be strong legal and social pressures for authenticity,
integrity, trademarks and identification. Most often, you will be able to
copy something freely, but you can't claim for it an identity or origin it
doesn't have. Discrete works must be attributed; derivative works
(assembled or modified from original components) will have to find their
own value. (The question of derivative works is the most fuzzy -- worth a
whole essay in itself.)
Exclusive or widespread?
One practical question all this raises for owners of content, both
commercial and entertainment: Should you go exclusive? That is, can you
build up some exclusive high value, perhaps even form your own service, or
are you better off distributing it widely (and cheaply), in essence
advertising a serperate, exclusive service. Suppose you run a newspaper,
Lodz World, that wants to establish its own on-line presence. You could
start Lodz World Online, the only place people could get your info online.
You would of course also encourage subscribers to write letters to the
columnists, with their Lodz world views. You might attract a limited
audience of Lodz residents, who would dial into a local node -- no need
for Internet access. The Lodz World reporters' selection and
interpretation of the news is what is valued. People might subscribe to a
service that contains precisely that -- "guaranteed authentic."
Alternatively, you could license or even give away your content freely.
But in order to communicate with each other or to get the high-value
stuff, people would have to subscribe to your service. Of course, Lodz
World Online lurkers would copy and forward the best stuff to their
friends. You could get upset, or you could consider that marketing.
Thus except for certain high-value info or something like an exclusive
hotel guide, where the value of the information is based in part on
others' not having it, an information vendor has little incentive to be
exclusive. Good information enhances demand for itself.
And new opportunities?
New businesses will proliferate -- many of them involving personal service
or performance. The most obvious are online host and online
filter/editor. Rating services will abound; so will services that perform
out-of-the-ordinary searches (for people or content) that require complex
queries and quality assessment. Software houses will help customers
define their problems, and then assemble and integrate the software
components that will meet their needs.
--------------
In the traditional model a company's motives are primarily
financial. Charitable efforts are really a form of self-interest,
in the pursuit of employee satisfaction or good community relations
which pay off in productivity. Although companies are still owned
by stockholders with financial interests, stakeholders now
importantly include employees because companies are more open at the
sides...
--------------
OPENNESS: THE VISIBLE COMPANY
What's a company's greatest asset, according to many annual reports?
People and partners, of course, not computers or even reusable code
(intellectual property). In the new world of the net, a lot of things
will change. Everyone knows about flatter organizations, virtual
corporations, etc. But how does it play out in texture as opposed to
structure?
The short answer is that companies will -- must -- become more visible.
More of what any company sells will comprise information -- whether it's
plain bits over the net, or consulting services, design services,
management development, etc. Some people will sell products; others in
the chain will add value.
Of course, there will be contracts between these partners, but in a
knowledge world the quality of those relationships will matter more than
the contractual conditions (as in a marriage). The best cement is a
two-way flow of information -- or visibility. Companies will try to find
partners not by offering discounts but by sharing information about
themselves and wisdom. In order to make their wisdom credible, they will
have to be self-revealing.
Moreover, whether or not a company itself chooses to be visible, it will
happen. You can't hide. And the image you project -- on your Web home
page or elsewhere -- will and should be true.
Dun & Bradstreet and such services aren't the only reason. Your employees
will be visible...and they won't stay if you don't let them be so. It's
not just outsiders peering in; it's your own employees out in the
electronic world; they are the company. As both physical and intellectual
products lose their value (as described above), the outside world's
interactions with your people will be what you sell. (And the quality of
such interactions that you foster will be what draws employees to your
firm/community.)
Furthermore, partners will influence and feel part of the decisions their
partners make, even though companies will not necessarily allow outsiders
into the formal decision-making process per se. By being not just
transparent but two-way, they will in fact make better decisions.
People want to buy information-based services and products from visible
companies that operate as partners. They do not want commodity products
from black boxes.
RESOURCES & PHONE NUMBERS
Mort Rosenthal, Corporate Software, (617) 440-1000 x1001; fax, 575-9422
John Gilmore, Michael Tiemann, Cygnus Support, (415) 903-1400; e-mail,
tiemann@cygnus.com, wbaker@splat.baker.com John Perry Barlow, Dave
Johnson, Electronic Frontier Foundation, barlow@eff.org, djohnson@eff.org
Jim Moore, GeoPartners, (617) 492-3600; fax, 492-7822; e-mail,
jim@geopartners.com Gabor Bojar, Graphisoft, 36 (1) 251-1000; fax,
251-1890 Mitch Kapor, Kapor Enterprises/Electronic Frontier Foundation,
(617) 576-4590; fax, 576-4520; e-mail, mkapor@kei.com Doug Mellinger, PRT
Corporation, (212) 922-0800: fax, 922-0806 Jordan Levy, Ron Schreiber,
Upgrade Corporation of America, (716) 871-6400, fax, 871-6444
"The economy of ideas" (aka "Selling wine without bottles"), by John Perry
Barlow, WIRED Magazine, March 1994, and all over the net. "A manifesto
concerning the legal protection of computer programs," by Pamela
Samuelson, J. H. Reichman, Mitchell Kapor, Randall E. Davis and
forthcoming in Columbia Law
Review(probably January 1995).
-----------------------
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