Arnold Kling  

Economics of Content

Imputed Income... Politics vs. Economics...

Clay Shirky writes that the Internet helps to break the link between fame and economic success for writers.

For an author to be famous, many people had to have read, and therefore paid for, his or her books. Fortune was a side-effect of attaining fame. Now, with the power to publish directly in their hands, many creative people face a dilemma they've never had before: fame vs fortune.

Another of the many quotable paragraphs reads,

Free content is thus what biologists call an evolutionarily stable strategy. It is a strategy that works well when no one else is using it -- it's good to be the only person offering free content. It's also a strategy that continues to work if everyone is using it, because in such an environment, anyone who begins charging for their work will be at a disadvantage.

Nash equilibrium, anyone?

Read the entire article. Shirky is very insightful, and he writes well.

For Discussion. I once wrote that "In reality, the economics of content are that most of the value-added comes from the filtering process, not the creation process."

My concern is that the cheaper that content is to create, the more expensive it becomes to filter. Is there any evidence at this stage that content filtering is something that people will pay for on the Internet?

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The author at in a related article titled Fame, Fortune, and Free Content writes:
    (via Arnold Kling) Keeping with our IP discussion, Clay Shirky has an interesting post on the economics of free content. In particular, he comments on how the internet shifts the balance of the "mandatory payment vs. voluntary donation" towards the... [Tracked on September 10, 2003 8:09 AM]
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Some of the best content filters on the web are Arts & Letters Daily, Tomalak's Realm and Corante. I can't imagine life without them but am not too sure if any of them are making money?

Mcwop writes:

The filtering process is at work everywhere not just in internet content. It works for selling goods (e.g. books, vacations). For example, Amazon just sent me 10% off on two video titles, but I already bought the titles 3 months ago. Good filtering of my previous purchases might have offered up similar subject titles, which I have not bought, for 10% off.

People have always filtered things, and have paid for it too. At many ski resorts you can pay a fee for a knowledgeable guide to lead you to powder stashes.

Just like more content is more expensive to filter , an ample supply of filters could keep that cost down. Persons/software that are better at filtering might command a premium.

Matt Young writes:

I rely on sites that pre-filter according to topic; like Free Republic, Capitalism Magazine.

Recently I was interested in classical music performances in Northern California. Rather than search for particular orchestras, I searched for web sites that re-linked to classical orchestras. In other words, I look for pre-filtered sites and interest groups.

The exception to this is when I research a particular, isolated issue. In that case I filter the mass of articles, removing those with a particular bias and isolating a good cross section of knowledgable writers.

Brad Hutchings writes:

The most interesting paragraph in Shirky's piece is:

"Because information is hard to value in advance, for-fee content will almost invariably be sold on a subscription basis, rather than per piece, to smooth out the variability in value. Individual bits of content that are even moderately close in quality to what is available free, but wrapped in the mental transaction costs of micropayments, are doomed to be both obscure and unprofitable."

Pretty much the same argument as Arnold has used for clubs. Yet, how do you explain the success of iTunes versus other contenders? The brand value that Apple transfered to iTunes has surely run its initial course, and iTunes is not capitalizing on iPod popularity on Windows yet. It does exactly the opposite of what Shirky says needs to happen, and it is wildly successful. Go figure.


Stephen Fraser writes:

Of course I'm biased because in some respect I'm defending the business model of the company I work for (, but I would argue along with one of the previous posters that humans filter everything - it's a constant, nearly compulsive activity. Community-building is itself a filtering behavior. I don't see the necessity of paying for content filtering because like expression itself, people will do it regardless of whether or not they are paid (and A&L Daily, by the way, is also my favorite site). is a good microcosm of the conundrum, really, because our site (at this early stage) is set up to allow potentially worthless content to proliferate infinitely. But the next step in the evolution of our content marketplace is to begin to provide more community-organizing tools so that groups of people can begin to filter their own content, separating out what is valuable to them from what is not. Do I sound too optimistic?

Brian Hayashi writes:

Shirky makes the argument for simplicity. Sprint initially broke open the long distance market by resolving all of the interstate tarriffs into a dime per minute program - easy to use, easy to understand.

If you can present a simple value proposition at a time and place where people are ready to buy, I think you have something. The ad weasels say that it's "the empty cereal box that makes the sale".

The problem is that there are too many places and too many confusing value propositions. Paid content has to be organized in a way that addresses people's real needs, and not be easily sourced elsewhere for free.

As far as Brad's argument re iTunes: downloadable music has been around for awhile (so people are comfortable, not just familiar with the activity), the threat of RIAA lawsuits DO have an effect on individual behavior (although not uniformly, to be sure), and lastly, Apple's brand is at least partially about making technology easy to use. Apple's brand name, an easy-to-use process and the above factors I think all help explain why iTunes is doing as well as it is.

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