Clay Shirky’s latest broadside, “The Collapse of Complex Business Models,” is as incandescent as ever. It’s a thoughtful and provocative piece on the way that “high quality” products (which are also complex and expensive) reach diminishing returns, where they are being made ever-more complex without any rise in value, because the institutions that made them don’t know how to be less complex. It’s a great commentary on walled gardens, paywalls, and the reflexive entertainment industry sneer that YouTube is made out of nothing but priceless pirated media and worthless videos of cats.
To pick a couple of examples more or less at random, last year Barry Diller of IAC said, of content available on the web, “It is not free, and is not going to be,” Steve Brill of Journalism Online said that users “just need to get back into the habit of doing so [paying for content] online”, and Rupert Murdoch of News Corp said “Web users will have to pay for what they watch and use.”
Diller, Brill, and Murdoch seem be stating a simple fact–we will have to pay them–but this fact is not in fact a fact. Instead, it is a choice, one its proponents often decline to spell out in full, because, spelled out in full, it would read something like this:
“Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that…”
In the future, at least some methods of producing video for the web will become as complex, with as many details to attend to, as television has today, and people will doubtless make pots of money on those forms of production. It’s tempting, at least for the people benefitting from the old complexity, to imagine that if things used to be complex, and they’re going to be complex, then everything can just stay complex in the meantime. That’s not how it works, however.
Shirky is always worth reading, even if you disagree with his point. He is one of those disruptive innovators whose very presence often spins off wonderfully creative ideas.
Here, he is examining the predilection of most people to believe that things will pretty much stay the way they have. This works most of the time but also puts blinders on them when something world-changing does come along.
For one – it is much easier and cheaper fro creative people to produce works that are highly entertaining without having to pay exorbitant amounts of money. This means that the middle men do not get their cut in the matter. That is one of the decentralization aspects of the Internet.
Mass markets may not be the major way to make a lot of money in the future. The masses may just want too much for free. But, smaller, fanatic markets can now be reached and, in a lot of cases, they may very well pay some money. A musician who collected $100,000 from just 300 people is quite an example.
There are several actors/directors who have a fan base that would very likely pay to watch what they produce. How much would some of these people pay to be the first to see a new production?
Being able to activate the long tail of fanatics is just one new business model that many of the mass market producers are simply missing, or, more likely, simply unable to effectively activate.
But the mass market producers have expenses that are pretty much unable to be reduced significantly. That is because their complex model is really based on mass consumption. These fixed costs are actually undermined by the Internet and new technologies in ways that few mass market companies can really address.
Shirky discusses how increasing complexity can be harmful to organizations. They lack resiliency and when one thing too many is extracted from them, they simply collapse. We are witnessing this right now. Look at the self-defeating price Time or the Wall Street Journal wants to charge for an iPad version of the magazine.
Shiry ends with this:
When ecosystems change and inflexible institutions collapse, their members disperse, abandoning old beliefs, trying new things, making their living in different ways than they used to. It’s easy to see the ways in which collapse to simplicity wrecks the glories of old. But there is one compensating advantage for the people who escape the old system: when the ecosystem stops rewarding complexity, it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future.
It may well be that these companies can not become simpler, can not adopt the new technologies. The mass market will just not support the prices they want to charge. So they should be working to identify who will pay them money. Or they will wither away.
Hopefully, though, as they wither, newer business models will fill the gaps. One can only hope.