To understand how Netflix actually profits from uncertainty, it is helpful to imagine a handful of idealized Netflix customers, as Bassamboo and his colleagues do in their paper. The only thing all the customers have in common is that when a hot new movie comes out, they all want it. If Netflix imposed late fees on its customers, the company could be sure that every customer who wanted a particular new release would return their last-viewed movie, and automatically be sent that new release, within a narrow window of a few days.

Bassamboo and his colleagues discovered that for a hypothetical Netflix-like service with late fees, the company would have to stock as many copies of a new release as it has customers. Given that all those customers would probably only rent it once, the company would be hard-pressed to either remain profitable or offer a compelling subscription fee.

On the other hand, when Netflix allows customers to keep DVDs indefinitely, the point in time at which they return old discs and automatically request a hot new release is staggered. Some customers are going to return a disc the day a new release comes out, while others will take a few days or even weeks to return their last movie and request the new one. The longer customers wait to request that next disc, the more times Netflix can rent out individual copies of its new releases. It is this re-use of discs, or “multiplexing,” that makes the Netflix model possible.

Saying that if photographers all refused to do stock photography they'd all get paid more is like saying that if restaurants all refused to give customers napkins without charging they'd all make a bundle on napkin sales. It's like saying that if local bands refused to play for drinks at dive bars, they'd all make good money playing music.

It's also like saying that if news organizations stopped giving away content on the Web, people would pay for news content online. It's absurd.

The posters in that forum who are making that argument are failing, or refusing, to understand basic economics, if not human nature. All photographers are not going to refuse to do stock photography. The ones who do refuse will simply be opening up the market for those willing to sell their pictures cheaply, either because they're not in it for the money or because they can make a profit on volume.

And those arguing that Time should have paid more for this stock photo because it sometimes pays more for other photos, or because it has a lot of money, are forgetting a little thing called supply and demand.

We should note, though, that because Time prints so many copies, it is likely it had to pay iStockphoto for an unlimited-run license, and that its cost was more like $125 than $30. Still nowhere near thousands, and we should also note that Lam, the photographer, was thrilled with his Time cover at a price of $30, and plenty of his colleagues were thrilled for him.

The same pricing dynamic is in play in journalism. The price is not set by how much time, effort, talent or experience went into making the product, and it's not set by how much money the customer has. It's set by supply and demand. The supply of stock photography is very large. The supply of general news content is huge.

If Time hadn't found Lam's stock photo of coins in a jar for $30, or $125, it would have found a similar photo for a similar price. If news consumers can't get their news online for free from their favorite news organization, they'll find it for free somewhere else.

What happened with Lam's photo is not a failure of the system, not a case of photographers eating their own and not a matter of big, rich Time magazine taking advantage of the little guy. I doubt those photographers would expect Time, because it has such a big budget, to pay $3 for a postage stamp or $20 a pound for the office coffee.

What happened with Lam's photo is simply the way the industry works. Time paid what it paid for that image because that's about what it was worth.

When the barrier to entry is low, the supply of goods is large and the alternatives available to the buyer many, the price is going to be low. Wishing it were otherwise, as the photographers are doing in that online forum and as opponents of free content do in Future of Journalism nerdland, will not make it otherwise.