An Internet Economy or “Ecommony?” Growing pushback against “Information wants to be free”

February 25, 2009

The recession has created new urgency for multiple content industries to find a better way to protect and monetize their property/content in the digital world.  The dotcom bubble ethos that “information wants to be free” is like a gross mold destroying the incentives to create and distribute valuable content digitally. (Be sure not to miss the shocking analysis at the end of this post comparing revenue generation per user in the digital “ecommony” versus the real economy.)

The first point of this post is to connect-the-dots why several content industries are currently in the news actively pushing back against the “ecommony” anti-business model, where content owners are expected to effectively give away their valuable content to the open Internet/digital commons without the requirement of permission or payment.

The first broad and serious counter-movement by business may be in the offing to ensure that valuable content is indeed paid for when distributed digitally. Serious financial and business risk is driving creative thinking about how to better protect and monetize valuable content digitally.

Growing business model innovation:

Leading network owners and cable providers are exploring innovative business models to distribute valuable video content online. These new models would make the content only accessible to paying subscribers in order to ensure that the popular branded shows that consumers most demand, can have a reasonable digital business model. See stories by:

  • WSJ:Cable firms look to offer TV programs online,”
  • NYT: “Don’t count cable out online,” and
  • AP:Cable companies want a way to win with online TV.”

Leading newspaper interests are also exploring innovative business models to distribute their valuable reporting and analysis online. They are exploring alternative business models like micropayments, in order to ensure that the journalism can be monetized profitably in the future. Pieces by:

  • Time: “A bold, old idea for saving journalism” by Walter Issacson
  • NYT: “Battle plans for Newspapers
    • ‘Culture of free’ is suicide” Steven Brill
    • Fewer readers paying more” Joel Kramer
  • Seattle Times:Wake up to Google’s threat to Journalism
  • WSJ: “Quote of the day”
    • op-edInformation wants to be expensive” Gordon Crovitz
  • AdAge:look at… whether journalism should be not for profit.”
  • Blog Herald:Time to hang up the pajammas
  • FreePress: StopBigMedia.com; “What’s so bad about Big Media

Book authors/publishing interests are also struggling to find business models that pay them for their value creation –in all forms like audio-books — when “ecommony” interests want their works available for very little or free.

  • NYT op-ed: “The Kindle Swindle? A new technology to shortchange writers
  • GlobeAndMail: “Googleopoly — Google is poised to become most powerful literary force in the world.”

Atrocious “Ecommony” Revenue Production

The second point of this post is to explain why there is, and should be, a business counter-movement emerging organically that is pushing back on the digital “ecommony” utopian ideal. The severe recession, focuses minds on real economics and real return on investment, and not on Web 2.0 commons pixie dust that  “information wants to be free.” (The estimates below are based on data from Veronis Suhler Stevenson’s Annual Communications Industry forecast 2008.)

  • First, the worst of the “ecommony” models claiming to be successful is eBay’s Skype which generates a beyond pathetic three cents of revenue per user per month. That is hundreds of times less than companies in the real economy generate.
  • Second, the hot web 2.0 business of social networking has a business model in the pathetic range. Facebook is estimated to generate 16 cents in revenue per month per user. MySpace does better but still just about 66 cents per month per user.
  • Third, applying this comparison to the Yahoo and Google “ecommony” advertising business models and one learns that the much-hyped ability to target relevant ads generates an anemically bad $1.16 and $2.60 of revenue per user per month, for Yahoo and Google respectively.
  • Fourth the ultimate irony, is that the subscription business model of AOL, which the “ecommony” utopians have derided and destroyed with the “information wants to be free” ethos, still generates more revenue per user per month than even Google does — about $3.16 per user per month.
  • Finally, how do the business models do in the real economy that produce valuable content that people/advertisers will pay up for?
    • TV/Cable/Satellite/Newspapers all generate roughly $40-$60 of revenue per reached consumer per month which is:
      • ~15 times more than AOL;
      • ~20 times more than Google;
      • ~300 times more than Facebook; and
      • ~1650 times more than eBay’s Skype.

Bottom line:

The revenue line for content in the digital “ecommony” is atrocious. Companies/industries have to explore innovative business models to protect and appropriately monetize the value of the content that they create and distribute.

  • I can already hear the push back from the “ecommony” utopians… “but look at how much money the consumer saves by getting information for free on the Internet.”

If no one pays what is costs to produce and reward content producers, the quality of content will inevitably plummet. In the end you get what you pay for.

We should not forget that communicatons broadly is the fifth largest economic sector in the U.S. economy per Veronis Suhler, almost one trillion dollars in sales.

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