Monday, August 8, 2011

"New Media" and Scarcity: A Geek's Perspective

I've read hundreds of articles on how information technology and access to greater amounts of content with fewer barriers is changing all forms of media, and written a few myself. Recently, I've encountered concepts online that ring true with my experiences these last six months. The “old way” of making a profit for large media companies, from the record, game and film industries to those who report the news, is based on certain assumptions about scarcity. If there are a small amount of companies producing quality content, then those that have the capacity to do so may charge whatever they want. Even if there is a lot of content out there, most of it won't be very good, and access to the best content has traditionally been artificially limited by an army of corporate middlemen. In decades past, if you wanted to watch quality TV or movies, you had your choice of a few studios and networks. Want to read the news? Maybe you have a handful of newspapers to choose from, or you are back to the TV networks.

Things have changed, but a lot of big companies don't want to hear it.

What changed? The barriers to creating and distributing content of all types have come crashing down, and the sheer amount of music, news, movies and programs... even books is massive. Even filtering out all but the best 5 or 10 percent of content produced in each of these categories there is still a lot. Currently, there are so many sources of quality content that the capacity for people to absorb and enjoy it all (or even most of it) is completely overwhelmed. We can see what that did to scarcity, with regard to supply and demand. The demand for amazing content has remained a constant, but technology has increased the supply to a point where old models for business don't make sense anymore. News agencies attempt to set up paywalls in front of their content while competing with sites that offer the same information for free. The piracy issue gets out of hand when businesses clinging to a dead strategy insist on erecting “walls” around content to create artificial scarcity so they can maintain their profits. People see this, and they see an illegal but convenient way to get the same content for free.

Am I saying that there's no such thing as scarcity anymore? Far from it. Supply and demand functions as it always has. What's changed is that it isn't the content that is scarce anymore. The available attention span of the average consumer is what is scarce, and as technology improves, the supply of quality content competing for a little bit of that becomes effectively infinite. What would happen if every person had instant and free access to all the best games, movies, music, television and news programs? I can say from experience that the Paradox of Choice kicks in. When presented with too many options, people become paralyzed with indecision. With content, this works a little differently. When presented with too many “good” options for what to do or watch, I've found myself bored by all of them. The brain can't process which of the hundreds of choices is the most satisfying one psychologically, so the default answer that kicks out is: none of it.

Companies love "New Media" as a buzzword, but on how to actually make
money from it without falling back on dead strategies? That's a little fuzzier.

Does this mean that as the price of content trends lower and lower, that people will inevitably be bored with everything regardless of the quality? I don't think so. More is clearly not always better, but that doesn't mean that the optimal solution is to have less content created. What I personally like is different from what someone else does, and the trick is to provide “filters” for people to see only what matches their personal tastes best. Recommendations based on preferences isn't new on the internet. Reddit and StumbleUpon, two massive portals for content sharing have become incredibly popular doing just that. Recommendations and filters on their own are not, for now, something that people are willing to pay for. However, many people seem willing to endure advertisements on sites that help them “filter out” more choices, and donations to the communities created around these recommendations and filters keep quite a few people employed.

People are used to this. Offer content for free, or for such a low price that it psychologically isn't all that different from free, and offset costs (and turn a profit) with advertising. That's the model that first made television and radio successful. The companies that will be most successful in the coming decades won't be the dying dinosaurs that thrash about with litigation and political pressure to hang on to the way things used to be. The new success stories will be the companies that help people decide what kind of content they want to be exposed to, and build a community around that. Those communities are valuable to targeted advertising for physical goods, and loyalty to a community that someone is proud to be a part of can reap the benefits of paid sponsorship, donations and merchandise sales. The most successful webcomics know this already. How long will it be before other types of content follow suit?

Will how we choose what to watch, read or listen to be determined by companies
that show us how to filter out what we don't like?

I'd be interested to see what happens when books, movies, television and games come around to and fully embrace these ideas. The free-to-play movement in gaming is an example of these principles gaining ground, with online games being provided for free, with optional micropayments for additional content or “extras” financing the game in terms of profitability. News aggregators and portals have optional paid memberships or sponsorships, and most sites offset the costs of users that choose to pay nothing with advertisements. How long will it be before streaming audio and video fully embrace the inevitability of a changing marketplace, and how will it all work? We're seeing early experiments with sites like Pandora and Thesixtyone for music, and I'm certain that TV and movies will follow suit shortly. The voluntary reduction of choices based on reviews, recommendations and personalized content filters may soon be considered more valuable than the content itself.

I wonder if a world that has completely transitioned from an old business model to this newer one would look at our current debates on media piracy, paywalls and Digital Rights Management as comically quaint. Who will be the big companies to reap the profits from a changed market, and what new challenges will a business face if the market accepts the new way of doing things as the default, rather than desperately clinging to a sinking ship? Maybe this discussion is moot or already out-of-date, and I've overlooked sites and services that are new, or just new to me. If you have an opinion about all this, or more information, please... sound off in the comments.
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Jay said...

i think it really boils down to ad/commercial time. a lot of advertisers still cling to the air time they get from the days of radio, which is a pity because of all the awesome content that could attract more customers if most ads weren't so damn annoying. :|

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