Is Content Worthless?

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

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

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

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

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

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

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

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

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

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

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

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

Comments

[jsarets]

Yes. Content is free, context is king.

[ChrisPressure]

Pardon me, but isnt this the same tired old fluff thats been circling the net since the mid 80s?

[cynicalidealist]

Jon,

Refreshing post. I find this analysis to be midpoint between Lee Siegel's neo-Ludditism and Chris Anderson's "Free" thesis. I will reference your post in my weekly column tomorrow. Some initial thoughts: We're in a flux moment. I argue that the past half-century has been a retreat - that, in effect, mass culture killed culture. Now that barriers are down for publishing and a range of artistic expression, "prosumers" do want to get in the act. Motives? Some - as in the case of Wikipedia - see a greater good. But where compensation is concerned - some will bristle at doing work for free when they discover that the host (see: Jimmy Wales) has an a business model that will ultimately realize profit. You can bet revenue shares will grow more desired as they become more transparent. I disagree with you about the heterogenity of content. Netflix is not the exception, it is the vanguard. More frequently I look to content from BBC; this was not possible even 3 yrs ago. And as a former book publisher, I fervently believe in the backlist. As far as copyright - there was a time when publishers and studios served a need. They protected and defended content creators and exacted their price. Now they are less necessary and they have overreached where financials are concerned. Yes, twentysomethings don't have the same relationship with copyright - and content has been devalued - but that speaks to the need for a new (c) law -

[Abroad]

"In the eyes of consumers, content is becoming a commodity -- more a commoner than a king."

Rather than faulting the public for their lack of interest in content, "journalists" and commentators such as yourself should consider talking to readers or viewers rather than consumers, and report some sort of relevant information. (What have contractors done with all that money in Irak? What on earth is wrong with the VA for all these vets to be left drying in the sun? What happened to the funds raised for the victims of hurricane Katrina? etc..)

You want an example of content providers who found an audience? Just go to the Frontline web site.

Rehashing the same old observations (i.e. content free blogging) such as you've just done in this piece doesn't bring anything.

[NetParrot]

Back in ye olden days when the American economy had an industrial base, parents who had never been to college saved money to send their children to college to become doctors, lawyers, chemists and engineers. Then *those* kids grew up and sent their kids to college to become film studies and English Lit majors, figuring that Chinese and Indian students would pick up the slack on all that hard stuff.

I will leave it to the enterprising HuffPo audience to figure out how this relates to the "content glut" and the corresponding monetary devaluation of this content.

[babar77]

I see what's happening right now is an extremely good thing. It's just the progression of the wave that is sweeping though. What this blogger fails to realize is that there is a light at the end of the tunnel for media. We can look no further than the MP3. When MP3s first came out, 120 kbps were the rave, and manufacturers of MP3 players claimed that consumers were willing to give up quality for convenience. That convenience created a flood of low-quality MP3s on the market, Napster was loaded with these. Now the trend is reversing. People are starting to pay attention to the quality of MP3s they are purchasing because data storage rates and bandwidth to download became cheaper.

What I think this means is that at the end of this, what will give professional content it's value will be it's respectability, reliability, and the ability to make sense of all the noise. This is why Professional content is failing so bad now. The MSM is absolutely horrible at providing the three things I just mentioned. Which is why I believe all of this collapsing of the old MSM is a very good thing for us all, and money will show itself again in the future.

[joebaggadonuts]

Thanks for thinking about htis Jon. You said...when everyone's a creator, there's less room for high-quality professional content. I couldn't disagree with this more. The result of so much content is that the really high quality stuff gets paid for (because it's outstanding or else it gets bupkiss) and the rest of it needs to learn to survive in the "long tail."

[InofTouch]

Well there alot content in youtube, the problem is what define quality...because it hard to find but people don't mind apprently.

[ShawnMichel]

Replace the word 'content' with 'art', and you'll get the real gist of what's being sold here. And what's being sold is crap.

[Bonifer]

What Brand pointed out, and what continues to be true, is that Context, and not Content is king.

From the Gutenberg Bible to Google Ads, context is the most important factor in determining the value of content.

Creators of context can always acquire content cheaply (or for free). Creators of content almost always pay a premium to acquire context.

I was once at a conference on film financing and the moderator from First Boston asked the question of the audience, "What is the most valuable commodity in the motion picture business?" The answer given was '52 weekends a year'. That rang a bell of truth for me. Whether or not it's quantifiable, I do not know. The point made by the moderator was that the movie studios competed WITH content, but what they competed FOR was context. If you could own a significant percentage of those 52 weekends, a significant percentage of the context, you'd be the reigning King (or Queen) of the film industry.

It will be interesting to see how the digital distribution of feature films -- making Context less expensive to acquire -- will alter the balance of power in the movie business. Will the maker of a made-for-You Tube feature film with a budget of $2,775 ever own one of those 52 weekends?

[theblueAmerican]

I'm not sure I agree or disagree. I do feel that the economics of how content is paid for is different now. First there are more avenues for going after the dollars for content. Take games now, a big chunk of your entertainment dollars are now spent on games as opposed to movies or tv shows or music. Alot more companies are chasing after the same content dollars. Cable also, remember when the only TV was free, what then does HBO or pay per view represent. More ways that your dollars are spent. I have to pay for my internet access. I don't have to read a newspaper to get the news now. But trust me, I believe more in the NY Times then I believe in the Drudge Report. Same with not having to buy a CD to listen to music. But look how expensive concert tickets are now. The artists and the content producers will finds ways to make money such as product placement or corporate sponsership or advertising. I don't worry about them. And yes most of us still read books. I guess the way I look at how content gets distributed is now it's available to everyone as opposed to a select few. For better or for worse.

[InofTouch]

problem to with chance is that everything has to go, mean the people will have to reset and start all over and it hard to do that when you were once ahead. Just ask any employee working for some business for some life time only to find out that they have been let go and with some this close to retirement.

So a GM worker and a New York Times reporter do have something in common.

[Sumocat]

Is content worthless? Yes, it always has been. Well, not entirely worthless, but certainly worth less than its owners currently value it.

Before consumers could store content, they got it for free over the radio and TV. TV shows, in fact, were developed as a means to sell TV sets. Today, music labels value royalties more than album sales. Apple was the biggest music retailer in January, but they make money selling stuff, like iPods, not music. (They're actually benefiting from music piracy since it drives iPod sales.) Movie theaters make little money on ticket sales, but showing movies allows them to make money on concessions. And of course, TV shows now make most of their money selling ads, not selling episodes.

Content is king because content drives sales. Without it, the content providers have no opportunity to make money, but they make little money off the content itself. Making money from selling content is not the norm; it is the deviation.

[JScott]

Sadly it seems like that content called 'news' has become more like 'fluff'.

And if content generators generated some better stuff that's REALLY worth paying for (and extreme example might be 'the winning lottery numbers') consumers might actually pay for it.

Instead they whine that their usual menu of crap isn't generating enough $.

Got news for ya, it's not generating any $ for ya because it is CRAP!!!!

[InofTouch]

so your saying all news is fluff...even from the folks in PBS?

[cylindar]

The problems I see coming up are that if the professionals cannot make money (not overbloated sums) then the various industries will suffer that rely on talent. Basically no pay no work. The old truism that you don't get something for nothing is still true today. Society does not work on the something for nothing idea. Not even communist Soviet Union could do it. They had to work and they wanted compensation of some sort for their work to raise their families. When the younger generation has to reap the rewards for their work only to find out that another younger generation that they taught will want their content for free will then get the idea that oops! this shit does not really work after all. The chickens definitely will come home to roost baby! La-di-da!

[tanjab]

It's possible that content -- like information -- wants to be free?

From Wikipedia: The expression is first recorded as pronounced by Stewart Brand at the first Hackers' Conference in 1984, in the following context: "On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other."

http://en.wikipedia.org/wiki/Information_wants_to_be_free

[InofTouch]

to what extent is free...because do you want people have the infomation of your social security number...

[scottellington]

Content and attention have a natural affinity for one another, just as an entertainment and an audience belong together. This essay expresses the concerns of the industries that thrive on keeping them apart.

New content, new technology, new media, new deals, new industries, new definitions, new standards, new rights...versus old wrongs, old forms, old business models, Old Hollywood's power to prevent change. It can't all be bad, but it's certainly worth watching, even participating in.

[SparXaFire]

This is a superb articulation of what I've been fighting since the early 1990s... Thank you for summarizing it so well! As a professional business writer, I was making $30,000 per year in 1990. After some ups and downs (mostly downs) along the way, I now make $30,000 per year! Can you imagine??? When kids tell me they want to be a writer when they grow up, or major in journalism, I do everything I can to discourage them. It's like trying to make a living as an actor, or a ballerina... 0.01 percent can make a living at it, while there just no room for the other 99.99 percent.

[WilliePilgrim]

Well, isn't "fluff" a kind of content?

[Mrrar]

http://www.zefrank.com/theshow/archives/2006/07/071406.html

Oops. This is the relevant link