This is an idea that I have been kicking around in my head for a little while, and though I can't say I've worked it out to the point where it is a full-fledged, submit to journals essay, I think I've brought it to the point where in needs to get out of my head for a little while and see what, if anything, other people think of this idea. (You know, aneurism prevention.) Basically, one of the defining coming conflicts in our economy is between subsidized content and unsubsidized content and how this conflict works out will determine what role artists, writers, journalists, and other creators have in our economy and whether anybody, with the exception of a few superstars or corporately anointed shills, will be able to actually make a comfortable living writing, critiquing, painting, singing, making movies... But first some definitions.
Unsubsidized content is content in which the ultimate (as in final or last) consumer pays the full cost of production and distribution of the content.
Subsidized content is content in which the ultimate (as above) consumer only pays a portion of the cost of production and distribution of the content and the rest of the cost is born by some other mechanism.
Once you start looking at how we buy the things we read, watch, and listen to, you discover that the vast majority of our content is actually subsidized. Perhaps the archetype of subsidized content is the newspaper. At time of publication a Sunday Boston Globe costs $3.50 even though it is the result of hundreds of hours of effort by dozens (or more) writers and editors, plus the hours of effort from the support staff, plus the cost of materials, plus the cost of distribution, plus the (rather tiny) cost of retail sales. I would really like to see someone break down what it actually costs to get a Sunday Boston Globe from the head of the editors to your door, but it isn't $3.50. The cost to consumers is subsidized (see what I did there) by advertising revenue. Obviously, the same goes for magazines that include advertising and pretty much all television. Whenever you see an ad attached to some kind of content, you see an example of subsidized content. But there are other ways to subsidize the cost of content to consumers. Once you look beyond the ad revenue model, you find even more subsidized content.
For example, the ticket prices at movie theaters are subsidized by concessions sales. As anyone who has ever bought bulk popcorn kernels knows, you don't get $10 worth of popcorn and butter flavoring in those buckets at the movie theater. The much higher margin on the concessions allows movie theaters to have a lower margin on reel costs and ticket prices. Much like TV, magazines, and newspapers, we generally understand that movie ticket prices are subsidized and accept it, to some degree as an inherent part of enjoying these particular kinds of content. We accept the ads in newspapers and the over-priced brown sugar water at the movie theater in exchange for having a lower content price point.
But we're seeing a new kind of subsidized content, one that, willfully or ignorantly, obscures the cost of content from consumers, cheapening it in their eyes, and making it more and more difficult for content producers to make a living. Books on Amazon are much cheaper than books at independent bookstores. This is not because of Amazon's business model, though they do reduce some distribution cost and thus can offer a not-insignificant discount that way, but because Amazon subsidizes that content through other means. They use profits from more profitable product and service sales, the strength of their stock on Wall Street, and outright capital losses, to subsidize the price of books they offer to consumers. This is similar to how Apple initially sold music on iTunes. There were some distribution and production reasons why a ten song album cost $15 at your local record store and $.99 a song on iTunes, but that lower price was also subsidized by iPod sales. The sales of a different product and the ability to absorb initial capital losses subsidized the price of the content.
Once you really start looking, about the only place you can find unsubsidized content (of the take home variety, as opposed to the go-to-Broadway variety which I'm not discussing here) is at indie bookstores. (And even then, there's probably a lot more subsidizing than you would expect. That book of poetry you're holding, probably even odds there's an NEA grant or prize or non-profit or charitable donation hanging out somewhere in the acknowledgments. And even then, there's always chatter about advertising in books.)
The goal of subsidized content is to present consumers with as low a price point as possible, whether or not that point reflects the cost of production and distribution. Essentially, subsidized content tricks consumers into believing content is cheap. However, this doesn't necessarily need to lead to conflict. In fact, one could argue there have been and continue to be great benefits to the subsidized content model. There's no reason why cheap content needs to create other problems in society.
The conflict is coming because the traditional ways of subsidizing many types of content are no longer adequate to support the creation of content. This problem first hit newspapers and hit newspapers the hardest. Under the newspaper model, advertisers paid for opportunity. They paid for the chance that their ad would be seen by hundreds, thousands, or maybe even millions of potential customers. It wasn't particularly efficient, but, in many ways, it was the only game in town. But internet advertising works much differently, to the delight of advertisers and the sorrow of newspapers. With online advertising you can generally either pay for impressions or clicks. Rather than paying for potential, advertisers are able to pay only for those potential customers who actually see the ads (impressions) or only for those potential customers who actually respond to their ads (clicks). It is vastly more efficient for advertisers and vastly less profitable for newspapers. In abstract theory, given how little consumers have always paid for newspapers it really shouldn't have mattered whether the content was read for free online or paid for in physical form, but, the mechanical differences of online advertising made it catastrophic.
For the moment, the other major advertising revenue subsidized content, TV, is finding ways to work within these new mechanics, so much so that online services like Netflix and Hulu are actually able to produce their own content as well as distribute the content of others. We just watch so much damn TV, so much of the time, that the advertising revenue, even if it is in smaller internet sized chunks, and when augmented by subscriptions for premium services, is enough to continue to fund production and distribution. Throw in the fact that DVDs made it possible for people to reasonably buy TV shows and that cable companies control what they sell to you, and you have something that looks, for the moment, to be a stable model of content production and distribution.
But naturally, advertisers are going to look for more efficient (i.e. cheaper) ways to advertise. So for example, why spend money on an ad played on the radio when you can only estimate how many people will hear it, when you can spend less money at Pandora or Spotify for an exact number of people (living in an exact region of the world, probably of an exact age and gender) to hear your ad? And if these sites tend to pay far less in royalties to the content producers than traditional radio stations, well, that really isn't your concern. Is it really that hard to imagine someone developing software that tracks how many shows are DVR'ed versus watched live and would it be that irrational for advertisers to demand lower rates for their ads that end up being fast-forwarded through? Will the ability to hyper-target reduce ad revenue even more? And, if so, will, like writers and musicians, TV producers be willing to just keep on making TV even as their personal earnings sag. (Or will we see an even greater shift to the lower-production cost of reality TV, as has happened on the History Channel, the Discovery Channel, and others.)
So what is at stake? There are some types of content that are going to continue to be produced no matter what the economics of their production and distribution are. Books, stories, and poems will be written. Paintings will be painted. Art will be made. Music will be played. But some content won't be, no matter how important it might be to society. We have already seen a catastrophic attrition of journalism, one that greatly hinders our ability to be citizens. Will high-quality (or at least high budget) TV shows continue to be made, if the advertising revenue that supports them erodes like it did with newspapers? Or if content producers are forced to shift to more subscription based models (not necessarily a bad thing) will people used to not paying for specific TV shows, make the switch fast enough for the economy to adjust? Though books will be written, if Amazon absorbs the whole publishing industry, what books will get wide distribution and why? There is absolutely a chance that the economics of subsidized and unsubsidized content work themselves out in such a way that society gets the content it needs to function (which, in a democracy, it does need) and content producers get to eat and pay rent and there is a chance that our content production ends up almost completely centralized in massive, sociopathic corporations.
There are a lot of different potential solutions to the precariousness of contemporary subsidized content. Furthermore, much of the challenge of unsubsidized content comes, not from the cost of the content itself but from our radically unjust economic system ensures that Americans have much less money to spend on content than they have had in the past. Expensive content isn't necessarily a problem when most people have some money left over after eating.
But here's what's interesting about how we value content. Amazon got to where it is now because people want books. Apple got to where it is now because we want music. People came to Amazon for the books and, if you'll note, pretty much all of their major public announcements are in some way book related. Even though they don't separate books from other media in their profit reports, even though they consistently lose money on books, even though they sell absolutely everything, Amazon wants us to think about them, when we think about books. We go to Amazon for the books, we stumble upon the lawn chairs and lingerie. And the problem with newspapers wasn't that people stopped reading newspapers. They just read them in a way that didn't pay for production. This tells me that there is an inherent desire for human creation. Which tells me there is a chance we can be convinced to pay what content is worth, once we figure out how to make sure we all have enough money to do so.
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