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Esther Dyson
Intellectual Property on the Net (1994)

Язык оригинала: русский

The laws of physics seem to changre when you enter a new environment, such as the gravity field of the moon or the 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 service (the transformation of bits rather that 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-live 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 sofware) will serve as advertising for service such as support, aggregation, filtering, assembly and integration of content modules, or training or it will be a byproduct of paid-for relationships.

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 coping 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 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 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 to start by giving your content away.

This issue explores what will happen as these and similar trends intensify. How will people programmers and other 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.

We 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 endeavours based on service, not content assets: filtering content, hosting on-line 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...

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 and 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 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 accordding 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 rations between the values of the various components, but these rations 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 force prices down as the knock-offs attempt to gain market share and the original attempts to keep it by lowering pricess. (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 noincremental 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 benifit 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 showld 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. 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 amound of land but the infrastructure and the other real estate around it) and ancillry conditions such as zoning rights and obligations. Yes, land ownership matters, but it is hardly the most interesting factor in real estate today.

In Russian: Интеллектуальная собственность в компьютерных сетях