Thursday, 16 July 2009

The Post-Scarcity Economy

Do the music corporations really want to go down this road? A woman is being fined $2.4 million dollars (AUD) for downloading a total of 24 songs. What about forcing ISPs to disconnect customers who file share? It seems that there's a great disconnect between what the market wants, what the product that is being provided and the technology. Business seems largely stuck in the old way of doing things, but this is a post-scarcity marketplace.

The will of the market
A post scarcity economy can be contrasted with a scarcity one. Society has been moving towards a post-scarcity economy for decades now, the invention of personal video recorders and cassettes were the first in a line of technologies meaning that an item's value meant it was as simple as knowing a source and having the right equipment and one could make an imperfect copy. With digital technology and digital media, there's no need for even finding a local source. Within a few clicks, one can be downloading a copy from the other side of the world.

File sharing is not something new in society, ever since consumerism pushed technology to be able to replicate information, humans have found ways to share it. But this is a truly revolutionary component. Now information is digital, and it can be digitally replicated for essentially no cost. Now this means that consumers have more power than ever before about what to do with the product, replication is easy. And it seems the consumers have spoken. The success of file sharing shows that consumers are taking that road, much to the detriment of the corporate model.

As internet speeds have gotten faster, the quality of information and types of information have increased. While Napster was allowing for MP3 transfer 12 years ago, it was unthinkable to download TV and movies. But as speeds have gotten faster and compression technology better, there's no need anymore for the original product. Combine this with a global market, now if a show is aired in the US months before here in Australia (if at all) it means an individual can get the product within a few hours of it airing.

Yet corporations seem frightened of this kind of technology. Despite the overwhelming consumer demand for such technologies, the businesses have instead gone down the path of trying to take us back to the pseudo-scarcity economy by restricting what people can do with their products (which is easy enough to get around) and threatening individuals who do circumvent it. They have been pulled kicking and screaming into the 21st century, whereby the internet services we have now are scarcely a competitive alternative to pirating. But, there's one company who I feel deserves full praise for adapting to such a society.

The Steam model
I've got to say that Valve have done a great job with steam. It now has an impressive range of titles, it keeps games constantly up to date, and it gives incentives to buy. While there is still a form of DRM (that you need to have the game registered to your account to play) it has taken advantage of this post-scarcity business model to provide the consumer with incentives to pay. And it seems that it is working quite well.

I was at a mini LAN a few weeks back and we wanted to play Team Fortress 2. One of the people didn't have a copy, so we were able to make a backup of the data and give him that. Then loaded him up with a free 3-day pass and we were all able to game legally. It might have meant another sale for steam in the future even. Yet this simple gesture shows the power of such a business model. If we wanted to do it legally under the old system, this would mean going to a store and buying a copy. Hardly something one can do at 8pm on a Saturday night. Previously such a situation would have probably led to piracy, and why pay after one already has the product?

Now this business model is great for gaming. It's not perfect, there's still a few kinks - such as the ability to on-sell a product like one could do with a physical disk. But still it works, it meets market expectations and does so at what is an affordable price. This model would not obviously work for things like television shows or albums, but it shows that it can be done. And that's a positive step in the right direction.

For the likes of television shows and movies, why isn't there something like netflicks but in a digital age? Surely a subscription-based service much like Pay TV would be a potential path to operating in the post scarcity environment. Same goes for things like music - why not have a legal equivalent to oink where individuals can download what they like again for a subscription. The iTunes model is a bit of a joke, this individual pays for a apple-locked product is not a substitute.

The bottom line
Using fear tactics will not work, and one cannot adequately police what individuals do inside their own homes. Cracking down on file sharing won't stop file sharing, it'll push it into more cryptographic channels, and it is forcing people to use a system they quite clearly don't want to use anymore. There is potential for adaptation and success in a post-scarcity business model. And they need to because this infrastructure is here to stay. Giving half-arsed compromises like DRM or iTunes is not a substitute as is clearly demonstrated.

The internet has sprung up overnight on the societal scale of things, the business people successful in the last generation of things evidentially don't have a clue how to use this business model for success. But surely it is also evidenced that there is the possibility to be successful on the internet, and that the consumer must be afforded a certain degree of power. It's a risk putting this kind of business model out there, but it is needed because this post scarcity economy is not going away. Information is no longer a valuable commodity, and it's time that notion was accepted and we could move on to the user-centric model like the market is demanding now.

No comments: