What happens to intellectual property when it
gets on the Internet?
The Net dramatically changes the economics of content.
Because it allows us to copy content essentially for free, the Net poses interesting
challenges for owners, creators, sellers, and users of intellectual property. In this new
world of the Net, it is easy to copy information but hard to find it. It is easy to
program software to solve problems but hard to define those problems and questions
precisely.
In the new communities of the Net, the intrinsic value of content generally will remain high, but most individual items will have a short commercial half-life. Creators will have to fight to attract attention and get paid. Creativity will proliferate, but quality will be scarce and hard to recognize. The problem for providers of intellectual property in the future is this: although under law they will be able to control the pricing of their own products, they will operate in an increasingly competitive marketplace where much of the intellectual property is distributed free and suppliers explode in number.
What will almost-free software and proliferating content do to commercial markets for content? How will people - writers, programmers, and artists - be compensated for creating value? What business models will succeed in this foreign economy? -
In a new environment, such as the gravity field of the moon, laws of physics play out differently. On the Net, there is an equivalent change in "gravity" brought about by the ease of information transfer. We are entering a new economic environment - as different as the moon is from the earth - where a new set of physical rules will govern what intellectual property means, how opportunities are created from it, who prospers, and who loses.
Chief among the new rules is that "content is free." While not all content will be free, the new economic dynamic will operate as if it were. In the world of the Net, content (including software) will serve as advertising for services such as support, aggregation, filtering, assembly and integration of content modules, or training of customers in their use. Intellectual property that can be copied easily likely will be copied. It will be copied so easily and efficiently that much of it will be distributed free in order to attract attention or create desire for follow-up 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 the one-to-one world the Net promises, advertising will often be tailored and of higher quality. Those with more money to spend will get higher-quality advertising.
What should content makers do in such an inverted world? The likely best course for content providers is to exploit that situation, to distribute intellectual property free in order to sell services and relationships. The provider's vital task is to figure out what to charge for and what to give away - all in the context of what other providers are doing and what customers (will grow to) expect.
Of course, there still will be ways for content creators to be paid. Much content will be developed under service contracts. A supplier will create high-value content, such as a market research study directly for a paying customer (or a limited set of customers). Newspapers and online news services will pay reporters and editors to produce content, which will then be resold cheaply in conjunction with advertising that covers most costs; that same content may also be distributed "free" as part of a subscription service. Certainly, advertisers will continue to pay people to develop advertising content for them, even if that content is to be distributed free.
I am not saying that content is worthless, or that you will always get it for free. 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. Or players may simply try their hands at creative endeavors based on service, not content assets: filtering content, hosting online forums, rating others' (free) content, custom programming, consulting, or performing. 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. The way to become a leading content provider may be to start by giving your content away. This "generosity" isn't a moral decision: it's a business strategy.
The half-life of value
Imagine you're a farmer in the 19th century headed into the 20th. The intrinsic value of
food won't go away in the new century, but as food becomes cheaper and cheaper to produce,
the share of economy devoted to agriculture will shrink, and so will your margins. Better
to get into manufacturing, or at least into food processing. (But fast-food restaurants.
That may be a little premature.)
Now imagine you are a content maker in the 20th century headed into the 21st. Until now, content has always been manifested physically - first in people who knew how to do things; then in books, sheet music, records, newspapers, loose-leaf binders, and catalogs; and most recently in tapes, discs, 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 cumbersome and re-use did not take away from the original, but the process of building a new implementation - a new machine or a trained apprentice - took considerable time and physical resources.) Later, with symbols, paper, and printing presses, people could copy knowledge, and it could be distributed in "fixed" media; performances could be transcribed and re-created from musical scores or scripts. Machines could be mass-produced.
With such mechanical and electronic media, intellectual value could easily be reproduced - and the need (or demand from creators) to protect intellectual property arose. New laws enabled owners and creators to control the production and distribution of copies of their works. Although reproduction was easy, it was still mostly a manufacturing process, not something an individual could do easily. It took time and money. Physical implementation contributed a substantial portion of the cost.
Now we face a new situation: not only is it easy for individuals to make duplicates of many works or to re-use their content in new works, but the physical manifestation of content is almost irrelevant. Over the Net, any piece of electronically represented intellectual property can be almost instantly instantiated anywhere in the world.
Esther Dyson
Since 1993, Esther Dyson has been president of EDventure Holdings, which publishes Release 1.0, a computer-industry monthly newsletter, and is sponsor of the Annual PC (Platforms for Communication) Forum. Ms. Dyson is editor of both Release 1.0 and Rel-FAST, a quarterly publication that covers the emerging computer markets in Central Europe and the former Soviet Union. Fluent in Russian, Ms. Dyson has been a speaker at various computer conferences in Moscow and Bucharest and a published author on Western business.
Ms. Dyson is a member of the board for the Electronic Frontier Foundation, the Santa Fe Institute, the Global Business Network, and the Institute for East/West Studies. She is a founding member of the Russian Software Market Association, a member of the Software Publishers Association and a limited partner of the Mayfield Software Fund. Ms. Dyson was a one time securities analyst for New Court Securities and Oppenheimer and Company, where she followed the computer and software businesses. She also served four years as a reporter for Forbes Magazine. Ms. Dyson graduated from Harvard with a bachelor's degree in economics.