Intellectual Value [Esther Dyson]

A radical new way of looking at compensation for owners and creators in the Net-based economy.

What happens to intellectual property when it gets on the Internet?

The Net dramatically changes the economics of content. Because it allows us to copy content essentially for free, the Net poses interesting challenges for owners, creators, sellers, and users of intellectual property. In this new world of the Net, it is easy to copy information but hard to find it. It is easy to program software to solve problems but hard to define those problems and questions precisely.

In the new communities of the Net, the intrinsic value of content generally will remain high, but most individual items will have a short commercial half-life. Creators will have to fight to attract attention and get paid. Creativity will proliferate, but quality will be scarce and hard to recognize. The problem for providers of intellectual property in the future is this: although under law they will be able to control the pricing of their own products, they will operate in an increasingly competitive marketplace where much of the intellectual property is distributed free and suppliers explode in number.

What will almost-free software and proliferating content do to commercial markets for content? How will people - writers, programmers, and artists - be compensated for creating value? What business models will succeed in this foreign economy?

In a new environment, such as the gravity field of the moon, laws of physics play out differently. On the Net, there is an equivalent change in "gravity" brought about by the ease of information transfer. We are entering a new economic environment - as different as the moon is from the earth - where a new set of physical rules will govern what intellectual property means, how opportunities are created from it, who prospers, and who loses.

Chief among the new rules is that "content is free." While not all content will be free, the new economic dynamic will operate as if it were. In the world of the Net, content (including software) will serve as advertising for services such as support, aggregation, filtering, assembly and integration of content modules, or training of customers in their use. Intellectual property that can be copied easily likely will be copied. It will be copied so easily and efficiently that much of it will be distributed free in order to attract attention or create desire for follow-up 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 the one-to-one world the Net promises, advertising will often be tailored and of higher quality. Those with more money to spend will get higher-quality advertising.

What should content makers do in such an inverted world? The likely best course for content providers is to exploit that situation, to distribute intellectual property free in order to sell services and relationships. The provider's vital task is to figure out what to charge for and what to give away - all in the context of what other providers are doing and what customers (will grow to) expect.

Of course, there still will be ways for content creators to be paid. Much content will be developed under service contracts. A supplier will create high-value content, such as a market research study directly for a paying customer (or a limited set of customers). Newspapers and online news services will pay reporters and editors to produce content, which will then be resold cheaply in conjunction with advertising that covers most costs; that same content may also be distributed "free" as part of a subscription service. Certainly, advertisers will continue to pay people to develop advertising content for them, even if that content is to be distributed free.

I am not saying that content is worthless, or that you will always get it for free. 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. Or players may simply try their hands at creative endeavors based on service, not content assets: filtering content, hosting online forums, rating others' (free) content, custom programming, consulting, or performing. 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. The way to become a leading content provider may be to start by giving your content away. This "generosity" isn't a moral decision: it's a business strategy.

Author Note: Esther Dyson

Esther Dyson (edyson@eff.org), president of New York-based EDventure Holdings, is editor of Release 1.0 and runs its annual PC Forum. She is vice chair of the Electronic Frontier Foundation, a director of Cygnus Support, and the founding investor of Poland Online, a membership-oriented information service start-up based in Warsaw.