The End of Profitable Scalability

To say that the internet has decimated the media world is putting it mildly. Newspapers are dying as people go online for news. Record companies sink as people get their music through Limewire. You know Hollywood is next.

Old media had an advantage. Their product was tied to a physical medium--paper, plastic, vinyl, celluloid. Because these items cost money to produce and reproduce, pirates were kept at bay by these hurdles. Despite being free and in the public domain, Moby Dick is still purchased on paper because it is more convenient to read a book than a computer screen. The Kindle may change this, but I have my doubts.

The old model went like this. You created a book, song, or film, and it was issued on a physical medium controlled by a company that raked in huge profits. The internet destroyed this relationship by eliminating the high cost of production and distribution. It is virtually free. These media companies will certainly die in much the same way buggywhip makers did after Henry Ford decided to change the world. New media companies are in no better shape with YouTube posting no profit at all. So, who are the big winners on the internet?

The big winners are Netflix, Amazon, and eBay. They win by selling old fashioned products. Netflix may fall as DVD's are replaced with videos on demand. These will be hacked and made into pirated downloads. Amazon diversifies into other products other than media. It might become the new Wal-Mart except that Wal-Mart does a better job of being the new Wal-Mart.

The reality is that the gig is up for producers of media content. Gone are the days when an author or an artist could create some writing or music and rake in millions as the magic of scalability kicked in. The reality is that you can produce and distribute content online, gain numerous fans, and still not make enough to cover the rent. Old media content providers who try to sell their stuff will find their revenues shrinking by the day. Where will it all end?

I see a return to the physical world. The idea that information is a moneymaker seems ludicrous now. Google makes a killing, but it comes from advertising products you can buy in the real world. In short, I see money being made in non-scalable endeavors like manufacturing or services. Musicians are returning to performing and giving better shows while the recorded music serves as marketing material. People won't buy music, but they will buy tickets and product.

The internet has been a boon not to media companies but to consumers. It has lowered the price on information to zero. There has never been a better time for writers and artists to get their stuff out there and to be heard, read, or seen. But charging for this content isn't going to happen. Rupert Murdoch might try to charge for the WSJ, but people will simply turn to the media that is already out there.

Television seems to be the only medium that continues on with less impact. The internet is not unlike television. Television is not a physical medium. The same programming can be carried on the internet, but people are watching the same shit they weren't paying for in the first place.

The money in content comes from advertising, and advertising has taken a hit. But it will come back as the economy rebounds. Content makers like bloggers can make money, but it is commonplace money like a bricklayer would make. The new dream is not a book and a movie deal but merely to be able to work in your underwear.

Where am I going with all this? I'm just pointing out reality. The information age has given us a wealth of info but not much else. You can't build an economy on pure information. I see the backlash building. The future is in commodities and industry. The careers future is in blue collar areas providing real goods and services.

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