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What are the alternatives to DRM with a viable business model for content producers in an increasingly decentralized market?

A new media landscape is unfolding, where revenue leakage does not stem from theft, but competition from participatory models and co-opetition from aggregation models.

Participatory models can be exemplified by Craigslist, blogs and Wikipedia. Users directly generate the content. Craigslist serves as a datapoint of disruption ($10M in revenue while disrupting $60M ). Blogspace is generating it’s own media as conversation Wikipedia is a constructive community that collaborates to create content. Production on Craigslist is driven by both market and social signals, blogs and Wikipedia largely by social signals. The first monetizes a subset of potential posting fees, the latter is all about ME, as in Monetize Elsewhere or repetitional benefits. All benefit from superior production economies, if not arbitrage conditions between social incentives and markets or firms.

Aggregation models can be exemplified by Edgeio, simplyhired and Google. Edgeio leverages contributions at the edge of the network into aggregated listings that are complete and complicit. SimplyHired is a vertical search engine for jobs that scours the web for summaries and links. Google search provides fair use summaries in result. All monetize attention wrought through aggregation, largely through advertising market-targeted to the externalities of attention. All realize production and search economies.

While the long bet may be that Wikipedia eats Google between these models, the game at play is between traditional media and participatory and aggregated media. The winners will balance freedom and profit-motive with social contracts that beget trust.

Quite frankly, traditional media cannot compete against participatory models.

Simon Waldman thinks out loud:

Fact one: aggregation is a fact of online publishing life – now, and even more so in the future.

Fact two: even if it’s just headlines and links back to content owners sites – if an aggregator is making money from this, they are effectively making money from our content.

Fact three: there is currently no structure for content owners and aggregators to have a useful conversation about rights/ licensing etc, beyond the mutual assertion of you need us more than we need you’.

Fact four: ultimately, individual aggregators dealing with individual rights holders/ content creators is unworkable for both parties.

His solution is a centralized rights agency, the solution that worked for record labels and radio stations. Unfortunately, that solution was invented in an analog era, and applying it in a digital era will lead to digital rights management.

Information wants to be free is an expression first recorded as pronounced by Stewart Brand at the first Hackers’ Conference in 1984, in the following context:

“On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.”

In 1990, Richard Stallman put a normative spin on Brand’s slogan:

“I believe that all generally useful information should be free. By ‘free’ I am not referring to price, but rather to the freedom to copy the information and to adapt it to one’s own uses.”

Creative Commons offers a baseline option, a set of standardized contracts for licensing content that range from all rights reserved to public domain. CC offers a new business model, by baking in attribution. Some businesses recognize that reserving all right still results in reuse and remix, and even in some cases of fair use, credit and increasingly valued attention does not come their way. These externalities are largely positive, and when attribution is leveraged, the attention can derive profit.

Alternative to DRM

Others have argued effectively that DRM destroys value.

I came up with the model for sell side advertising out of a desire to better incentives for quality advertising content. An open ad is created, the ad has commercial terms baked in but has unrestricted use, publishers choose which ads to place, even copying the ad off of other publisher properties, and are duly compensated. I believe the same model can apply to content.

The core construct that is needed is standardized commercial contract that is watermarked to only restrict use for compensation.

Watermarked content with these terms can be administered by a rights clearinghouse that has two duties:

  • register and track watermarks and distribute royalties
  • protect the core license that enables paid reuse

In this otherwise decentralized model, a publisher could locate content on another publisher’s property, look up the terms, acquire and republish with the only restriction being payment.

Immutable requirements

This can only work with three immutable terms:

* A presumption of innocence for users and publishers

* The content includes an identifier, such as a watermark

* The content may not technically restrict reuse

The Central Tenant

Web 2.0 and even Enterprise 2.0 rests upon a central tenant. Nothing ado with the alphabet soup from Ajax to RSS. It is simply, sharing control creates value. This common pattern can be found across social software and it’s practices of use. Unfortunately, as Steven Weber first pointed out, while we have buy vs. build frameworks for the valuation of property, we do not have a framework for informing the decision to open.

When you open property for others to innovate upon, I believe the following should be valued:

  • you grant real options that create, in turn, real options for innovation
  • you reduce search and distribution costs for qualified buyers
  • you gain commons-based peer production based on social signals

The costs of opening are relatively nominal, but the risks are not:

  • you grant arbitrage opportunities to the market
  • you open yourself to scenarios of inappropriate use according to some moral values, but letting go of control can reduce liability

What’s wrong with this model

I’m sure I’ll learn more after posting this, but my fear is even with baking in requirements, it could trend towards DRM as well.

Disclosures, even for implicit cause: Socialtext is the first wiki company. I’m on the board of advisors of dabble, which is at the heart of remix models.

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Ross Mayfield is CEO and co-founder of Socialtext, an emerging provider of Enterprise Social Software that dramatically increases group productivity and develops a group memory.

He also writes Ross Mayfield’s Weblog which focuses on markets, technology and musings.

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