Wednesday, February 28, 2007

I Wish Someone Would Invent: A Decent E-Economy

Have you ever thought about an invention that maybe YOU can't make, but it sure would be nice if someone else did?

No, I didn't stutter, I wish someone would invent a decent e-economy. That is, a way to buy and sell information on the internet that doesn't involve any physical media for a decent price. It's not too bad at the moment. iTunes is as good a way of buying music as any, I guess. It's better for TV shows and movies. I mean, a 48-minute TV show costs $1.99. A 3-minute song costs $.99. Come on! I don't blame Apple-- I know that the music industry has given them weird mandates that they can't really get around at the moment. But the problem with the e-economy as it exists now is that things cost way too much considering how little things cost to distribute and package as opposed to their real-world counterparts. But more to the point, it's too expensive considering how much people want to pay.

We've gotten past all serious talk of micropayments, apparently, especially with Bitpass going under. Bitpass was the first real payment system that allowed vendors to charge small amounts-- as small as a dime-- and they sold Scott McCloud's The Right Number for a quarter per chapter. The Right Number had chapters of about, say, 100 panels each: approximately what you'd have in a regular comic. I jumped at that because I'd been waiting for more McCloud stuff, and I was eager to see his philosophy jump to the mainstream-- the philosophy that large amounts of information should cost small amounts of money. But my thought was that it was a little expensive. It sounds strange to say, since obviously 25 cents is a very small amount of money, but really, 100 panels of free comics online is not exactly a rarity. Far Arden, just to choose an example. So I got it, and it was good (so far-- there's a third chapter that hasn't been done yet), but nothing about the transaction struck me as anything other than proof of concept.

I had some extra money on my BitPass account after that purchase, so I looked around for some other vendors that accepted it. One that interested me was called Dime Novels. A novel for a dime? Wonderful! I'll take it! But the thing was-- they weren't novels. They weren't even novellas. They were about ten pages long. With all the free stuff online and all the great content that people are putting up just for the heck of it, these were a total ripoff. If someone put up a hundred-page novel and charged a quarter for it, I'd get it just to see what it was about. I might not even read the whole thing if it wasn't that great, but I'd never feel like I'd wasted my money. The problem with these products is basically that they failed the sniff test. Does something seem like a great deal? Then people will buy it. Does it seem like it's barely worth it? They won't. 25 cents for a Scott McCloud comic is worth doing once or twice, but I'd start to feel like I was just throwing money away after a half-dozen, even if it wasn't that much money.

A lot of the talk about micropayments was about things like charging a tenth of a cent for a daily comic strip, but to me, that sort of thing just sounded like it would make a good portion of the web a giant pain in the neck. I liked the idea of charging a quarter for a LOT of content, rather than an infinitesimal amount of money for five seconds of entertainment.

Some people bristle at the idea of paying anything for content on the web, and I certainly understand that. There is the feeling that nothing is free anymore, and that browsing anything is a commitment. But I think that if vendors understand that they are competing with huge amounts of quality free material, they would quickly price themselves at a reasonable rate. Little things, like daily strips, would not last long as a paid commodity. But five years of that comic strip in a convenient file format for a quarter sounds like a pretty good deal. The money spent would simply be a small fee for not having to search the whole internet with a peer to peer client.

There are a lot of things to be had online that are not 100% legit that, if they were packaged inexpensively, and I mean REALLY INEXPENSIVELY, could be sold by the creators and copyright holders. One hundred issues of old X-Men comics in pdf format? One dollar. Fifty old-school arcade game ROMs? Five cents. All the Philip Marlowe radio dramas? Buck fifty. A Doc Savage novel? A dime.

It would take some experimenting to find that sweet spot where you're not just giving it away, and still attracting customers, and one might have to find some solutions for bandwidth (like BitTorrent), but isn't that the purpose of an economy? If those things are so readily available for so little money, who (in large numbers) would look for them illegally, except out of sheer cussedness? And (particularly in the examples I've given) if the material is old and out of print, there is little to keep publishers from putting it out there. In most cases they're not making money off it anyway.

Online payment systems, like PayPal, shouldn't have any barriers to transferring small amounts of money from one PayPal account to another-- it's just moving bits-- and charging a small percentage of the price as a transaction fee.

I mean, think about it. What are some big things you'd pay a dollar for?

Scott McCloud's micropayment comic and micropayment essay
Sean Barrett's "upay" response



At 4:11 PM, Blogger Tad. said...

As much of the internet as possible should be free. If you can't supply your content for free, then by all means, charge a monthly membership fee or something, but don't charge on a per-item basis, and don't create artificial content-walls that only come down after they pay.

I believe you should do everything in your power to supply your content free of charge. Sell merchandise-- hard copies of your comics, t-shirts, coffee mugs, baseballcaps, etc-- if there's a demand for it. Ideally, though, you should be selling your audience to advertisers and supplying your audience with free content.

Charging a fee for access to electronic content that can later be copied and redistributed without permission on a torrent site (and be just as good as the content you provide) is bad business. Sure, if you're Microsoft, Adobe, or the Music industry you can sue individuals and mildly discourage the piracy, but if you're joe-shmoe looking for a way to make a living from homemade entertainment (like comics), you're much better off giving it away for free and selling ad space instead.

The thing about the internet is that if you don't give it away for free, someone else will and that someone else is only a google search away from your website. Excepting die-hard fans, why should readers care whether they're getting Penny-Arcade for free vs The Right Number for 25 cents per click? They shouldn't. The average comics reader should look for the comics that're the easiest to access, and placing artificial barriers in the way isn't gonna get your comic read.

I'm tellin' ya. The future of e-commerce, as with print media and television before it, is advertising. Build up an audience, then sell that audience to an advertiser. If you don't like banner or text ads, implement a system like does with it's video content (you get to watch a short advert before the video you requested plays).

Unless your content is an extreme, exclusive, niche (waterskying muskrats) or a taboo subject that advertisers would never touch (porn), there's really no excuse for charging the people browsing your website for content. In fact, doing so is an act of self-marginalization.

At 6:02 PM, Blogger M-Tron said...


digital = infinite copies = huge supply = less demand

we're getting closer and closer to the ideal which is that the *inherent* value in information becomes an advertisement for itself. successful ideas run, not so great ones fail.

so long as we allow for discussion, patience and provided we have sustainable systems -- a perpetual issue that will hopefully solve itself one way or another -- the marketplace of ideas will evolve into a free-for-all of ideas.

funny thing is for all these ideas, there are some ideas that have always worked like Love and we're still searching for something to beat it. in all our searching, what can replace it? not much.

i like the idea of selling older things for cheap. like those Every Game systems for $50 or whatever.

At 8:15 AM, Blogger Zander Cannon said...

I'm certainly not advocating making everything on the internet cost money. I'm not even suggesting that things that are currently free on the internet should cost money. What I'm talking about are things that are not available on the internet legitimately because they aren't desirable to package in real world terms, but to put them up for free would be like admitting they are valueless.

For example, something like old Nintendo games. They can be repackaged and sold individually as cartidges for Gameboys for $20 apiece, which is madness, or they could be sold en masse on the internet (i.e. as pure information) for $5 for the whole shooting match. It would cost essentially nothing for Nintendo to put the stuff up online, and they would probably get a great deal of people getting them just to play one or two games. The tradeoff is that you have to play them on a computer, so if you want to play them on your Gameboy, you have to go and buy the cartridge. People appreciate packaging, so the packageless product should be cheap.

At 10:02 AM, Blogger Tad. said...

You have to think of it from a practical economics perspective as opposed to a wishful thinking perspective. Intellectual property laws do encourage you to think wishfully, but they're very very hard to enforce on the internet. Actual market forces play a much larger role on the internet, I think.

Let's try and use a hypothetical example... I like the old Final Fantasy games. FF1&4 especially. Although I have the games as hardware, they're a hassle to play because I have to hook up old consoles, and pray the old cartridges hold up, etc. If I had no other option, I would probably pay for a NES and SNES emulator for my laptop, and for the ROMs I'm interested in, but if I waited a bit, I most likely wouldn't have to.

Nintendo isn't really making any money off these properties atm, so it may be in their best interest to try selling Emulators and ROMs. How would they arrive at a fair price? Well, supply limitations relative to demand would be the most relavant charge. Initially bandwidth would limit supply... lets invent a figure of .05c per MB of transfer cost. They could probably get away with overpricing their intellectual property, but let's say the markup is 100%. Each of the emulators might cost .30c, each of the ROMs may cost .04c. Sounds like a good deal to me. I could get FF1&4 and both thier emulators for .68c.

This is where things get tricky though. As soon as I download the property, I can choose to become a supplier. It may not be legal, the legality of it isn't an important point at this juncture. If I'm downloading off a torrent, I become a supplier as the download initiates, almost instantaneously my bandwidth is used to transfer the file to other consumers, and likewise with them.

What does this do to supply and demand? Well, as long as the torrent is up, the supply and demand equilibrium graph would look pretty peculiar. As soon as someone's demand is noticed by the torrent, they become a supplier. They don't even need to complete their download to start sending out packets to other consumers. Basically, as demand moves towards infinity, supply also moves towards infinity. A peculiar economic situation. The problem is slightly more complicated... consumers need computers and access to the internet and a torrent client, but I don't think it's useful to drag those factors into the example since the initial supplier isn't selling computers or internet service. Anyway, when demand = supply (not numerically equivalent, but literally equivalent) value = 0.

Regarding the legality of this... a large corporation may be able to prosecute a few individuals, but this doesn't do anything to help a small business that's selling a product for a handful of knickles, and it wouldn't be cost efficient for the large corporations either, unless they really hiked up the price on their electronic products.

PC software developers have been finding all sorts of ways around this; putting copy protection on CDs, using product key identification numbers, requiring connection to verification servers that the developers own, and so on, but these are artificial blocks to supply and are not natural market forces. But this barely applies to internet content, if at all.

Now... an audience has a finite supply. And advertisers do demand. If Square and Nintendo put a free emulator and ROMs of old, out of "print" games on a torrent site they hosted, and added banner ads to the emulator, and a short 30 second advertisement video each time you fired up a ROM, this would make them money. They wouldn't need to waste resources prosecuting individual pirates since the ads would be built into the product. Consumers would be content, Suppiers would get paid, and advertisers would get fresh eyeballs on their offers. All good, and no artificial supply limitations.

Man I'm rambling...


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