VIEWPOINTS : Finding a Balance in the Slippery Economics of an Information Age : Depending on Your Perspective, Data’s Free--or Priceless

Information wants to be expensive. The right piece of news, data or advice at the right time can be beyond price. An adroit piece of electronic entertainment or a sophisticated computer program can represent the product of decades of costly labor.

If you’re the seller, you want a steep price. Attaching the price tag can be tricky, however.

It’s an Information Age, we’re all told, with more than half of the American work force now engaged in churning information. But the information economy is a slippery, hazardous business environment, whose rules and strategies are still emerging.

“A Nobel Prize is waiting for the person who figures out the economics of information,” claims Jay Ogilvy, a former researcher at the SRI International think tank and currently an adviser to the London Stock Exchange.

In my research, I believe that I’ve stumbled across one useful pattern: There is a trend in the emergence of new successful information businesses that flies in the face of price-for-value because the very form of what’s being valued is changing.

The director of the Media Laboratory at MIT, Nicholas Negroponte, founded the $46-million facility on the idea that all communication modes are converging into one broad discipline of computerized media.

Films, television, music, money, telephones, books, newspapers--even personal correspondence--are all becoming subsets of one enormous “bit” business in which everything is connected to everything else and everything is transformable into everything else.

Magazine covers are distributed by satellite. Telephones are show biz (976 numbers). With digital sampling, musicians have gone beyond nabbing each other’s riffs to transmuting their instruments electronically. Suddenly, it is a deeply casual distribution world, because it’s all just computer data.

Information wants to be free. It’s so easy to copy, send and transform that the price tag gets left far behind.

People copy and hand around personal computer programs costing hundreds of dollars, even sending them error-free through phone lines, free. People copy expensive TV entertainment with their VCRs and then zip past the commercials.

People cut out the cable TV middlemen with backyard satellite dishes. People record and listen to copyrighted music with audio cassettes and soon with DATs--digital audio tapes--free. Ah, blissful sharing.

The situation is giving hives to everyone with an intellectual product. They are clamping down everywhere and every way they can, lobbying for government controls and the scrambling of TV signals, indicting every transgressor they can corner. That’s completely understandable, and due effort needs to be made to curb real piracy, but it’s lousy market research.

The newly fluid information economy is creating whole new industries and subindustries, and the way to find out where and what they are is by following the free-flowing information.

Once there, next to the new self-defined customers, you can set up a service perfectly adapted to the new media and new needs, with a meter charging a fair price.

Your competitors would be left far behind still trying to control the old information environment. Forget about the money; follow the information. Do that right and the money will come.

The major marketing innovation in personal computer software is called “freeware” (or “shareware”), which began when a few programmers decided to stop fighting casual copying by customers and flow with it instead.

They encouraged customers to copy excellent programs such as PC Write (word processing) and Red Ryder (telecommunications) and spread them around free.

Customers who wanted a good manual or the next versions of the program were invited to send some money to the author/distributor, and they did.

Good money was made, and the standard software distributors still haven’t caught on to the lesson: Computer software changes so frequently, it’s not a product you buy, it’s a service to which you subscribe.

The standard software distributors did catch on, late, that their copy protection devices were a mistake.

Knight-Ridder blew $50 million on its failed videotex project, which published news on video monitors rather than newsprint, without sufficiently looking into the behavior of the innumerable computer bulletin board systems run free by volunteers on personal computers.

The company would have learned that videotex works worst using TVs and works best on home and office computers, that warm human communities form on these systems even though the humans never meet face to face, and that electronic mail is the universal binding agent. (Others that have failed in efforts to commercialize videotex are Times Mirror, Time and CBS.)

Sometimes free information hobbyists concoct new technologies as well as new markets.

Amateur radio operators (hams) back in the 1920s forced the government to accept shortwave radio as a viable means of communication. In 1961, hams put up the first non-governmental communications satellite. Recently, they devised “packet radio,” which sends computer data by radio--a technology now being exploited by Federal Express.

When cable TV started being distributed by satellite, $4 billion of backyard satellite dishes came out of nowhere, built by garage-based businesses.

Punitive, Not Adaptive

The networks and cable stations fought an unsuccessful rear-guard action to make them illegal instead of studying to see what people who had 120 channels to choose from really wanted.

Even now, the decoder boxes being used by some to watch scrambled channels have more of a punitive than adaptive quality.

In places like East Africa (where I spent some months two years ago), pirated VCR tapes are television. They’re all that anybody watches. They are building and defining a vast world market for electronic entertainment, with wondrously diverse tastes. Study it now; figure out how to charge later. Seed some stuff, try things, ask people what they want, help them make their own product (it might sell here). The information economy is an intensely global economy, still figuring out what it’s made of.

Let’s predict the future of digital audio tape, which lets the user record music with a compact disk level of quality. The Recording Industry Assn. of America will continue to scream and thrash and resist, threatening the end of the music business if DATs come in. People will blandly buy and use DATs, and the music business will be better than ever, with ever more first-rate (and computer-adept) musicians and musical styles emerging from the young populations of DAT users and swappers worldwide. The commercial distributors who buy into DAT earliest will be the ones closest to the new markets and most profitable in them. Some of them will be companies that don’t yet exist.

Information wants to be free, but usually not for very long. Information wants to explore, always. Smart marketers quietly follow.