Wednesday, April 04, 2007

Making Nerd Culture Pay: Google vs. Viacom

My growing research interest is in the family life of the knowledge class, the class that makes its living from the control of knowledge. Google is a central knowledge class tool. Google, the company, is also a model of knowledge class culture. It has found a way to make money – gigantic vaults of money – out of distributing other people's knowledge. Google was recently rated the best place to work in America. It is the current epitome of nerd culture.

Google bought YouTube, and with it bought a copyright suit for all the TV shows that its many users upload and download without paying the producers of the TV shows. Shows like Viacom's "The Daily Show" – which led Viacom to file the biggest copyright suit ever. According to Clive Thompson's interesting article in New York magazine, Viacom and Google will probably settle for a pile of money, after rattling intellectual sabers about copyright freedom.

The interesting part of the conflict for me is the core Google idea that all information should be available to anyone – they just sort it. Yet my first reaction tells me that I fall in the middle between corporate culture and knowledge class culture. It seems obvious to me that if Viacom pays a bundle to make TV shows, then millions of people see the show without paying Viacom or even watching its advertiser's ads, then Viacom will not have enough money to make new shows in the future. This is an argument I had with Napster-using students before the courts drove a stake through the old piratey Napster's heart.

In the end, these two corporations will settle it the good corporate way: with money. In the larger cultural struggle between the knowledge class and the corporate class, though, I think the rising knowledge class needs to develop a more sophisticated theory of knowledge production. The Google/Napster/teen pirate theory is all about consumption: the corporations have already made the knowledge, and already made their profit from it, so now it belongs to the people, man. An exclusive focus on consumption, without any thought to production, is a perennial failing of the soft-headed left. Now, though, the knowledge class is in a real position of power, and therefore of responsibility. The distributors of knowledge have to be concerned about how knowledge will be produced tomorrow. This concern is both high-minded and self-interested, driven by both the love of truth and their interest in having something to distribute tomorrow.

I don't have the answer yet, but it helps to have the right question: what should the knowledge class theory of knowledge production be?


Mark Smith said...

"soft-headed left"

Pretty snarky.

Anonymous said...

Not merely descriptive? :-)

Brendan said...

Gosh, where to start with this one.

The knowledge class theory of knowledge production is this: knowledge is data. Distribution of data costs only bandwidth. Bandwidth is cheap, and attempts to limit the distribution of data that people want--via DRM encryption, lawsuits, scowling PSAs or what-have-you--are ultimately useless. You can't sue everyone, and DRM only needs to be broken once. This isn't a matter of what "belongs to the people, man," it's a matter of inevitability. An exclusive notion of intellectual property cannot stand in the face of unlimited perfect copies.

Companies like Viacom arose chiefly out of the fact that distribution used to be very difficult. Running a cable channel (or a broadcast channel, or a radio station, or a CD distribution network) requires a large investment that only pays off with large economies of scale. But distribution is now very cheap. Attempting to keep your data out of cheap distribution channels in order to keep using your old business model is shortsighted, chilling to innovation, and eventually useless (but only after causing everybody a lot of headaches). Major-label music companies are the worst about this, but few movie or TV houses have handled the shift well either.

Keep in mind that Google has already put a blanket offer of compensation out there: if you authorize downloads of your video content and tell them what that is, they'll split the ad revenue with you. Google is flush with cash, so the ad revenue must be worth something. Viacom is just listening to its lawyers more than its accountants--and the lawyers are the ones who will benefit the most from a protracted lawsuit with a huge settlement at the end. (Another case of profiting via difficulty in distribution.)

Consider also that Viacom's everybody-pays-or-watches-ads ideal of TV is starkly wrong. Since commercial-driven television arose, many or most people have been hitting mute, switching channels or going to the fridge during the ads. Does that make them pirates? What about people who used VCRs to time-shift, commercial-skip and redistribute? (Sony infamously insisted as much, and sued Betamax all the way to the Supreme Court, before they realized the bulk of their profit was to be made in home video.) Viacom's revenue depends entirely on how well it can manipulate the Nielsen numbers, a tiny sampling which allows people to lie if they like (even now, most Nielsen families use handwritten diaries) and only counts during February, May, July and November.

The knowledge class theory of knowledge production includes compensation for the people who actually produce knowledge: musicians, writers, directors and actors. Witness the rise of eMusic, the fastest-growing music-subscription service, which sells cheap and un-DRMed independent content and isn't going to sue anyone for sharing. Apple's iTunes and Wal-Mart's video download service are both raking in cash by selling movies and TV shows for less than the associated DVDs, and iTunes has recently begun making even more by selling DRM-free music tracks for thirty cents extra; it's only a matter of time before they apply that model to their video downloads. People are willing to pay for content if they know they can redistribute it on their own terms. People are also willing and happy, increasingly, to buy directly from artists they like rather than their production houses. But they're tired of arbitrary restrictions, lawsuits, and lockdowns imposed by lumbering, panicky middlemen.

Anonymous said...

Who would make the next "Star Wars" if they knew the first print would be distributed free to anyone who wanted it?

Brendan said...

I would!

Gruntled said...

Do you have $100 million to donate to art-for-arts sake? Would you trust your investors' money to fans paying on an honor system? An indie band with rented equipment can make back their investment through eMusic. I don't see how expensive productions could.

Jim said...

I don't think expensive productions will exist in fifty years. They just won't be economical. We are already witnessing an explosion of amateur creativity. Sure, the production values are lower than we're used to, but not by that much, and the overall quality varies from horrible to brilliant, just like the more expensive professional content.

I think the knowledge class theory of content production is this: it's a hobby. You do it for fun and share it for free. If people like it, you get fans. If enough people like it, you can sell them t-shirts and other secondary products, but only a few lucky people will be able to do it for a living.

In a way it's like sports, or the music industry today. Lots of people play baseball for fun. A few make it into the minor leagues. A handful make a fortune in the majors. Most people will never earn a dime from playing baseball, or from playing the guitar, but they still enjoy it and they do it every time they get a chance, which isn't too often since they have to work full time.

How will the bulk of these creative types make a living, then? The same way creative people always have: working at jobs that bore them. For every Steven King, there are ten thousand unpublished writers who bang out advertising copy and corporate newsletters by day and try to write the next "Carrie" in the evenings.

A decade ago their work was invisible except to their spouse, their agent, and a handful of editors. Today? Their writing can be shared for free over the internet. They make just as little money from that as they would from being rejected by a traditional publisher, but at least people can see it. We all benefit from that. And if their work develops a following on line, then those editors might take a second look at the manuscript they initially rejected.

Gruntled said...

Shareware/open source culture is great for amateurs. I think it would be a loss if we never had a "Star Wars" again.

Brendan said...

A minor point: the first Star Wars didn't cost $100 million; it cost $11 million, or about $36 million today. (If "piracy" is given as the reason they don't make any more prequels, I'm perfectly happy about that.)

But nowhere in my commentary or Jim's do the words "art for art's sake" appear. I'll reiterate: the knowledge class wants to pay creators of good content. But just as with taxes, charities and coffee growers, they are more attentive to where their money is going.

Beau, you disparage the "honor system," but the fact is that such a system has been in place since the first VCR was sold. My grandmother has two VCRs, and whenever her cable company offers a week of free HBO, she tapes every movie on the schedule and puts the tapes in drawers. She has a whole wall of them. She doesn't rent movies otherwise, and rarely sees them in the theater. Is she a pirate? Or is she just a few cents slopped over the side from HBO's marketing budget?

The Supreme Court said no to the first question, and when one starts honestly considering the second, the whole black-and-white pirates/consumers picture presented by the MPAA begins to degrade. The one thing every media company wants desperately, right now, is mindshare. If your movie or TV show is out on peer-to-peer networks, you've got it, and that means you can sell eyeballs to advertisers. Sure, YouTube videos eliminate the commercials. They don't touch product placement, network badges or the millions of subscribers who are paying a portion of their cable bill to Viacom and never flipping to any of the channels it owns.

There is no technological or legal measure short of unplugging the Internet that will make the "honor system" go away. But just as Sony grew wealthier than ever on the home-video market it once tried to abort, more agile business models will find new ways to profit off of creativity. I hope that means artists will be getting paid 85% of the profits and their distributors 15%, instead of the current reverse. I guess we'll find out.

Gruntled said...

I am not worried about your grandma. I am worried about one multimillion dollar production being distributed to a mass audience who never pay.