How Will Retailers Harness Digital's Fragmented Future?
The following article originally ran in Carol Spieckerman's column for Licensing Industry Merchandisers' Association (LIMA) and was picked up by Retail Wire last week. A terrific discussion followed and may be accessed on the Retail Wire site.
In a recent article for The Guardian, journalist and science fiction author Cory Doctorow expounded on dynamics that he refers to as "positive externalities" which arise "when you do something you want to do that also makes life better for someone else." As an example, he describes driving your car slowly to avoid a wreck and thereby making the road safer for other drivers. His example may sound benign but the concept has far-reaching and potentially contentious implications for digital age dealings in content marketing and intellectual property.
Mr. Doctorow calls the internet the natural home of positive externalities. Google has built an entire business model on harvesting the byproducts of internet activity, while Facebook has created a platform that encourages people to socialize and then mines and markets the resulting data to retailers and brand marketers so they can leverage it to sell more stuff. According to Mr. Doctorow, both companies are essentially taking ownership of externalities by "locking them up in proprietary walled gardens," but he's far from opposed to the model. In fact, he calls resentment over the harnessing of positive externalities "our era's defining mania."
Mr. Doctorow cites various digital rights management (DRM) restrictions, such as those keeping people from selling used games, lending e-books, or even taking DVDs from one country to another as prime examples of externality phobia gone mad. He compared such restrictions to levying a fee whenever a book is used for a purpose other than reading, like propping up a wobbly table. Some argue that dropping DRM altogether would future-proof the publishing industry, since the future of e-readers is unknowable and doing so would ensure that publishers have the agility to leverage new formats and technologies. A DRM-free world would also provide more choice to consumers and allow smaller e-book retailers to stay in the game.
Meanwhile, businesses that monetize the run-off from personal technology usage and other businesses' activities are sprouting up and causing quite a bit of controversy. At the Consumer Electronics Show (CES), Aereo, the web TV service backed by Barry Diller, revealed plans to expand its budget-cable service outside of New York to 22 additional cities. Aereo's technology pulls broadcast TV signals into the cloud, charging subscribers $8 per month (or $1 per day) to access live TV on multiple devices. Is this a clear-cut case of Aereo stealing broadcaster's content? Management argues that since people can purchase antennas and pull in broadcast signals with impunity, Aereo's individually assigned subscriber antennas aren't an exception or a violation.
Mr. Doctorow has summed up the positive externality fear mindset in this way: "If something I do has value, I deserve a cut." The cuts may get thinner as media continues to fragment, and as more stakeholders grab at the shards.
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