What’s the value of content in a post-scarcity world?

August 30, 2023

Los Angeles, United States - January 10, 2016: Close-up of the famous Hollywood Sign. Photograph taken from Mulholland Drive.

It seems to have dropped off the radar, but did you know the Hollywood writers’ strike is still going on?

Although it was meant to end in May, many creatives in Tinseltown are still folding their arms and refusing to pick up the pen (or the keyboard) until better pay conditions are met.

As a recent Washington Post article pointed out, the more popular a piece of “content” is (such a terrible word for creative art), the more leverage this should give creators to demand higher royalties. However, streaming services like Netflix tend to keep all the viewership data to themselves which means writers have no benchmark for how well their projects are going and therefore no leverage.

And in terms of piracy, nothing much has changed since 2007. The entertainment industry tried to resurrect 3D movies about 15 years ago just to force people to buy movie theatre tickets again. But that didn’t work. Aside from a few big blockbusters every season, people still prefer to steal a movie rather than spend $20 to sit in a dark cavern on a Friday night.

Of course, piracy is not a complete evil since there’s no such thing as bad publicity. If a million people download a copy of a book for free and pass that book to their friends, that book will likely be optioned for a movie. That option alone might be worth more than any royalties the writer would have earned from the subset of that million people who didn’t buy their $8 print copy.

But overall, the writer’s strike highlights something no one wants to talk about: while it requires labour to create new content, it requires zero labour to reproduce it.

That’s going to be a big problem for the intangible asset of content, far bigger than piracy ever was.

In a “post-scarcity” economy, how do you put a price on a digital asset that can be copy-and-pasted for infinity at no loss and with no extra input? This sounds theoretical, but it is a very real issue baked into the structure of the internet. In fact, it’s the one question studios don’t want the creators to ask because the studios have no solution either.

No one yet knows how to solve this problem. Everyone is just hoping others won’t notice that there’s no need for middlemen in the digital world since online intangible assets are not “scarce” at all. If a person can copy and paste a company’s precious data during one cyber-attack, what exactly was the value of that data in the first place? That’s a scary question.

Data has a value, of course. It is generated by real people (or devices) doing real activities which are, by definition, scarce. In that sense, collected data has value. But once it is created, all that data can be replicated at will – forever.

This is an important point to hammer home because we’re not really talking about “value” at all. What’s really meant is “price.” The question every creative wants to know is: what price should they put on their digital content? What price should a company put on its intangible assets like content or data in a post-scarcity world? Again, no one really knows.

Price and value are two different concepts. The full value of a creative work is not solely its price. A good illustration of the difference would be when someone downloads a book, they probably do so to avoid incurring costs. These costs include the price of the book, the opportunity cost of going to the bookstore, the costs of reading the books in a less convenient format (paper), etc.

Unlike video, where “loss” on the playback of pirated content can still be an issue, books and photography can be duplicated losslessly and at no cost to uploaders or downloaders in either bandwidth or time. So, this means for most people piracy becomes the option with the least cost.

The pirate is simply not incentivised to consider the full value of a creative work – their calculus only considers the cost (to them) of securing the book. The fundamental problem here is that piracy sets the value of a work as equal to the cost of the medium in which it exists. After all, if computer bits are nearly worthless, then creative works should be valued at nothing as well. That’s how pirates think.

It is regrettable that people have become so used to plucking high-effort content out of the air whenever it is convenient for them to do so without fully compensating the artist for their effort. Only the exchange between consumer and producer can re-establish the value of a work as greater than the cost of the medium. Old-world revenue streams may earn an artist some money, but it does nothing to enforce the notion of value for the work in the consumer’s mind.

In a post-scarcity world, the only real way to set a price is to re-introduce scarcity. One way to create artificial scarcity is through regulations that add friction to a process, which then resurrects the need for a middleman who can navigate those regulations. It’s a self-licking ice-cream cone, really.

Unfortunately, most attempts to deal with the legal issues that occurred as creative content moved online have failed. Creative Commons, copyleft, open source, etc. All of these are dead ends. As large content providers become more emboldened to use online content as they see fit, in full understanding of the teapot-sized tempest to come later, the tweaks to the allocation of rights always end up hinging on the creator’s willingness to litigate. Content providers know most creators simply don’t bother or lack the personal funds to fight for their rights.

Nevertheless, there are three ways to better protect an artist’s work while simultaneously compensating them.

The first is enforcement. Massive, widespread enforcement. The enforcement entity must be empowered to automatically target downloaders (the peers) and uploaders (the seeds) for copyright enforcement. This entity would need to be ruthless – the moment someone begins to torrent copyrighted material, the ISP itself should get a notice, every time. Where names are available, litigation would ensue. This entity must be large enough to support the hiring of programmers whose only job is to uncover all the different ways pirates will adapt to the enforcement.
The second approach would be to create a gating mechanism for content viewing on devices. For example, if music can only load onto an iPod through the iTunes store, then iTunes is the gate. Likewise, if a Kindle only allows eBooks to be loaded through authorised stores, then there’s no need for enforcement in that gate either.
The third approach might be a surcharge or tax on internet connections. The funds generated from this tax would be funnelled into a pool for redistribution among authors and content producers according to some proportionality formula. It is a mystery why this hasn’t happened already. Essentially, this is all Netflix is – a one-stop shop for content that uses customer fees to pay royalties to studios and creators. It shouldn’t be too difficult to take this to the ISP level.

An ultimate solution will probably be a combination of all three. But there’s really no other way through this legal mess that doesn’t result in creatives working for next to nothing in this post-scarcity economy.

If content is going to have any value in the future, then it’s crucial to find a way to enforce that value against consumers’ desire to “get something for free.” If that means artificially creating scarcity, inefficiencies through litigation, new gating technology, or taxation on digital devices, then so be it.

Because, right now, why shouldn’t a company use ChatGPT to churn out content if it’s just going to be stolen? The result is that everyone gets robotic, sterile content on Netflix.

That vision of the future sounds horrible. And yet, we are rapidly creating this dystopia because we don’t know how to value intangible assets correctly.