I spent last week at the Monaco Media Forum, which was quite an event overall. Of course, as with many such events, many of the most interesting and valuable parts happen outside of the main sessions in the conversations and meetings you have with people separate from the scheduled topics. The good thing that I took away from the event was a pretty wide sense of optimism about the vast media world that we're heading into. Having attended plenty of entertainment industry conferences lately, which seem to be surrounded by doom & gloom predictions, this event was blissfully full of a pretty optimistic viewpoint, which was refreshing and a bit encouraging. Of course, as a caveat on that, there really weren't that many actual media people at the event. Instead, there were lots of technology/infrastructure companies as well as ad and marketing firms -- and all of those have plenty of incentives to be as optimistic as possible. Perhaps it's the media folks who are depressed... but they stayed away.

One exception was James Murdoch, who was actually a "co-chair" of the event, and he gave an interview discussing a wide range of things that are happening around News Corp. The entire video is about 37 minutes, but it's quite interesting: Having questioned many of James Murdoch's recent statements on paywalls and copyright, I have to say that my initial impression was actually to be impressed. Here's a guy who -- without much experience -- is running a huge swath of the media industry around the world, and seems to have a very strong working knowledge of what's going on across the board, and can speak knowledgeably about them all. Many people I spoke with at the event felt the same way. On top of that, I actually agreed with many of the larger points he made about innovation, and the need to make bets on innovating, rather than just protecting their businesses and milking them for cash.

However, when he got down to the specifics, I went back to questioning many of his assumptions, and thinking that his world view may, in fact, be a bit skewed by his previous success (after, it should be noted... a string of failures, not mentioned at the interview) at BSkyB, a satellite TV provider in the UK. The more the interview went on, the more I realized that Murdoch appears to view much of the media world through that lens, and seems to saying that, in the end, the media world will end up like a giant pay TV system, with a big subscription. I think this is more wishful thinking, rather than where the internet is actually heading, and treating the internet that way will almost certainly result in failure -- such as with his paywall experiments.

He talks up the various successes with pay television (satellite and cable) around the globe, including Italy, Germany and India, and again that seems to influence his views. He points out, repeatedly, that no one really thought that going into those markets would work, but News Corp. proved all the doubters wrong -- as he no doubt believes the doubters on the internet will also be proven wrong. He gets into the discussion with the following statement, which got most of the attention (and a bunch of Twitter messages of support from those in the audience):

I think there's a lot of talk about monetizing content and there was hand-wringing and for years and years... I remember in the late 90s I was in Singapore, and people were talking about mobile media and what is it going to be and what are the killer apps and all that sorta stuff... And I guess, I just look at it more simply. I think the first rule of is if you're going to monetize something is that you should probably not give it away for free.

This is at 14:25 in the video, and you really have to see the sarcastic eye rolls when he says that last line. And, you can immediately hear the laughter in the audience (which was much louder). But here's the thing: he's wrong. And he must know that he's wrong. Media businesses have made tons of money for years while giving away stuff for free. The very, very successful network television business (of which News Corp. owns one), for example, was always based on giving stuff away for free, but selling the attention of viewers. The newspaper business (which is where News Corp. originated) wasn't based on giving away stuff for "free" totally, but on subscriptions that never even covered the cost of printing and delivery.

No, this doesn't mean everything should be given away for free, but as the CEO of a large chunk of News Corp's media business, and supposedly being thought of as the guy at the company who "gets" new media and new media economics, it seems troubling that he so flippantly ignores the basic economics of non-excludable, non-rivalrous content, and how it can be utilized as part of a larger business model, by making other things more valuable and selling them.

So if you think about it and you're investing in things and you say 'I'm trying to figure out how to make money for this,' and then you give it away, it doesn't seem to work.

James might want to check out a little company called Google, which has done rather well giving away lots of things for free.

From there, he talks about "fair" pricing, and how they want to invest in content and price it fairly knowing that not everyone will consume it. But, of course, that's not really the issue. It's not about "fair" pricing. It's about market pricing. And if everyone else is offering market pricing and you're focused on "fair" pricing -- and your so-called "fair" pricing is above the market pricing, it's not that "not everyone" will consume it, but almost no one will consume it. And that's where you run into problems. Hell, I put a ton of work into this site. Let's say I think a "fair" price for anyone reading this site is a dollar a day. But, the market says otherwise, so my job, as someone running a business, is to figure out a way to get that money by offering something of value that can be priced not fairly, but competitively that the market will want to buy. That's what business is about. It's not about "fairness." It's about understanding the market.

Now, that said -- the point he makes following this is one I agree with wholeheartedly -- which is that if someone is not willing to pay, then it doesn't mean that it's the users' fault, but that as the content producer/copyright holder/etc. It's News Corp's job to innovate and convince people that there's something worth paying for. That's the whole basis of my "reason to buy" concept. But, the problem here is that simply designating a "fair price" when it's way above market price, is usually not a reason to buy, especially when your product is in a highly competitive and dynamic market, as is the case with news.

It's the next bit where you realize how much he's still focused on the pay TV business. He notes that, in Europe and Asia, 70% of the company's revenue is from subscriptions -- rather than advertising. He uses this to suggest that people online were so focused on reach and audience share, that they weren't focused on actually making money. Again... he's right on the facts, but wrong on where that leads him. It's true that many in the online world did not focus on making money, and that was a huge mistake. But that doesn't mean that putting up a paywall is a good strategy to make money. And that's where I think the major disconnect comes in.

He then makes the specific statement that the online news business will become like the cable business, with bundles and affiliate revenue. Here he's making the classic pay TV industry error of being so infatuated with the fees that are being passed around to carry channels, that they're hoping to recreate such a world online. But, this ignores the reason those setups have developed (limited competition and scarcity of access -- both of which don't apply in the online world) as well as the incredible frustration this has created with consumers, who are fleeing in droves (something Murdoch more or less tries to dismiss during the Q&A by saying many of the cord cutters in the US are doing so because the "deals" to get people to switch from analog to digital TV are up).

It's a bit amusing to hear him note that iPad apps for newspapers are much more cannibalistic than news websites. Again, I believe that point is absolutely true, but he seems to ignore the implicit other point he's making here: which is that web pages really weren't all that cannibalistic of newspapers.

Of course, the other funny thing is that you can see pretty clearly throughout the interview that one of his key talking points is this idea that "News Corp." isn't that big. Towards the beginning he starts to call it a big media company, but then corrects himself and says "mid-size." Later, he makes sure to note that Apple is ten times the size of News Corp., and that a company like BT is making much more money in the UK. The banker interviewing him mentions Amazon as a larger company. But that's all smoke and mirrors. News Corp. is the third largest media company in the world, only behind Disney and Time Warner, has over $30 billion in revenue and $54 billion in assets. Sorry, James, you're not a mid-sized business. You're a big, big business.

Towards the end, in response to an audience question about cord cutting and how it will impact News Corps.' business, Murdoch again brings up how they'll just make it like cable to some extent, and then falls back on the "but content is really expensive to make" line, by pointing out that, while other industries may find that things get cheaper thanks to technology, that's not true in content production. He pops out this lovely line:

There is no new technology that makes athletes not greedy.... And I think that's really something that the telco industry and a lot of the tech industry hasn't really understood -- that there's (chuckle) a whole economy behind this...

It gets a laugh, and afterwards I heard a lot of people say they agreed and it was a good point. But, I think it's a line that sounds good and masks that he's discussing two separate things. The first question is the cost of producing content. The other question is how do you make money. But those two are not the same question. No one has said that you don't make money. Saying that your business model has to change is not the same thing as saying you don't make any money. If your content is expensive to produce, then yes, of course, you need to figure out a way to have it make money, but that doesn't mean that simply charging for it is the way to do that. You can get away with charging for ancillary things (convenience being a big one), but it's important to recognize what people are really paying for, or you risk alienating them quite a bit, and driving them to alternative means of content consumption.

On the whole, I actually came out of this more impressed with Murdoch than when I went in. However, I still think that he's making some pretty serious mistakes in his assumptions, and it's going to come back to haunt him and News Corp. in the long run. The failure of the paywall for The Times is just the early warning sign.

Lots of talk today about the fact that Newsweek, the struggling magazine that's been around for 77 years, has merged with two-year old website The Daily Beast, which never really picked up all that much traffic considering its ambitions. But in an odd move, reports now are saying that the plan is to shut down the Newsweek site and to keep The Daily Beast running. If that's the case... um... why merge at all? Newsweek has the more well known brand and much more traffic. This sounds like an ego merger, where the idea is just to promote the fact that The Daily Beast devoured Newsweek. And that gets you, what, the attention of a tiny group of media business insiders for a couple weeks?

Earlier this year, we wrote about Vision Media TV, a company that appeared to be participating in a questionable game of convincing non-profit organizations to pay tens of thousands of dollars to be featured in a television program with broadcaster Hugh Downs that would appear on "public television." The implication is that these shows will air on PBS, but that's not the case. In fact, PBS has a warning on its website telling people it's not associated with these offerings at all. We've even been approached by similar offerings (though, not involving Hugh Downs -- and the one where we were approached involved getting an "award" for "best small business" or something similar). About a year and a half ago, the NY Times wrote an article trashing Vision Media TV. The company insisted that the article was false and defamatory but, tellingly, chose not to sue.

Instead, it later sued the small site 800notes.com, because some people there had written negatively about Vision Media TV in explaining who was calling from Vision Media's phone number. Paul Alan Levy, from Public Citizen, who is defending 800Notes, also found himself targeted, after Vision Media sought to bar him from posting public documents about the case on Public Citizen's website -- an attempt that failed. Of course, it did help Levy find more info about the company, including that similar pitches have come from differently named companies, using the same address as Vision Media TV, that pitched (instead of Hugh Downs), Walter Cronkite and Mike Douglas -- both of whom ended up suing the company, claiming they were misled by the company.

Levy says he's asked Vision Media why it never sued the NY Times over its article, and the company's lawyer responded "I should have," but supposedly the statute of limitations had already passed. Well, now Levy is pointing out that Vision Media has a second chance to sue a big media player, since NPR just did a devastating takedown of Vision Media TV and its practices:

"They are selling something that they generally cannot deliver," says Garry Denny, program director of Wisconsin Public Television and a past president of the professional association of programming officials for PBS member stations. "In fact, they are probably not carried by any public television station around the country."

Officials at PBS and at PBS member stations in California, Colorado, Kentucky, New York, South Carolina and Virginia were all aware of the Hugh Downs spots. Yet not one knew of a concrete instance in which the spots featuring Downs appeared on their stations or those of others. PBS and its member stations say they adhere to guidelines banning marketing programming paid for by subjects of the programs.

To be fair, the article and Vision Media point out that the videos can be useful as marketing materials or infomercials even if they don't appear on public television -- but the whole pitch involving Hugh Downs is where things get questionable. His contract only lets him be involved if the stuff is on public television, and the marketing focuses on Downs involvement, even if that's unlikely to happen for most organizations who pay up -- which certainly suggests misleading marketing:

According to both Downs' agent and Vision Media's Miller, the retired anchor's contract limits his involvement to public television. Yet for many people approached by Vision Media's cold-calling pitchmen, he's by far the strongest selling point.

One of the firms recently pitched is Portland, Maine-based Putney Inc., which develops generic drugs for pets. "Hugh Downs! I know that name," said Jean Hoffman, Putney's CEO. "We were of course pretty excited, pretty interested, and pretty eager to cooperate."

It seemed like a splendid opportunity, until Hoffman and her colleagues started to bore in on the details. "They send the signal that they're doing a story" as journalists, Hoffman said. "Then, they try to sell us what under questioning was revealed to be advertising."

Others, who did buy into the videos, claim that the pitch about public television was what got them interested in the first place:

Robert Biggins is past president of the funeral director trade group and owner of a funeral home in Rockland, Mass. He said Vision Media's promise of a presence on public television and the involvement of Downs were crucial.

"He brings a credibility in reporting," Biggins said. "I felt that dealing with an organization that he's so intimately involved in gave us the opportunity to share our message, and to do so in a warm and gracious manner."

If their spots did not air on public television, Biggins said, "That would be a serious concern."

The National Funeral Directors Association provided NPR with a copy of the contract it signed with Vision Media. The association paid $22,900 in 2007 for the production of different versions of the spot, plus an additional $3,000 as a "location fee" -- presumably for travel costs. The contract and additional material from Patrick Wilson of American Artists, the segments' distributor, stated the "estimated reach is over 40 million households" on public television stations. The brochure also suggests the spots will reach 84 million households nationwide on cable -- the overwhelming majority of all homes subscribing to cable television.

So, if Vision Media's lawyer said he wished he had sued the NY Times over a very similar article from a couple years ago, will he now sue NPR? Or is it easier to focus on small sites with much smaller budgets?

Someone anonymously submitted a decent writeup by John A. Byrne, the former editor-in-chief at Business Week who recently left (amid the shakeup due to Bloomberg buying the magazine) to start a new media effort called C-Change Media. In this blog post, Byrne argues that the media complaining about Google sending them traffic is biting the hand that feeds them. There's really not much new in the writeup, which runs over the same ground we've covered for a few years now, but it's a nice succinct summary of the situation:

Rupert Murdoch's protestations aside, there is no doubt that Google is driving vast amounts of traffic to websites run by traditional media companies. In recent years, most of BusinessWeek.com's growth came from search optimization and direct traffic. Up until only three years ago, the number one referring domain at BusinessWeek was always a portal until Google's popularity replaced Yahoo Finance and MSN Money as the top referrer. Search--largely Google--now accounts for some 45% of the traffic at BW.com, up from less than 20% in 2006. That simple little box is driving vast amounts of advertising inventory (and therefore revenue) to the site. It's a similar story everywhere else.

In the war between the traditional media brands and Google, the old cliche about biting the hand that feeds you is certainly in play. Some of the complaints from media can be attributed to sour grapes. Many incumbents resent that most efforts to find information on the Web no longer starts with a brand. It starts with Google which is largely brand agnostic. So, in effect, Google has become this massive transaction machine, and as everyone knows, transactions are the antithesis of relationships. If a brand wants a relationship with its audience, Google is getting in the way. It's how Google was able to siphon nearly $22 billion last year in advertising from traditional media. And it's the most obvious proof that media brands have diminished in value. People are more routinely turning to Google to get information, rather than a brand known for its expertise in a given area. They'll google (yes, I'm using Google as a verb) leadership before going to The Wall Street Journal, Fortune, BusinessWeek, or Harvard Business Review. They'll google President Clinton before going to The New York Times, Time, or Newsweek. Why? Because they trust Google to serve up unbiased results; because they want to see what is generally available out there and not tied to a brand, and because most brands no longer wield the power and influence they did years ago.

Instead of complaining about this and threatening to block Google from crawling a site, media companies would do well to step back and more fully understand what they really need to do: rebuild the relationships they have with their readers, viewers, users. To offset the massive transaction machine that Google is, media brands need to focus on restoring relationships with users. That's why "user engagement" is not an idle phrase to throw around but is essential to making a brand successful online. Original content isn't enough. Gee-whiz tech tricks aren't enough. Neither is a fancy design or a search trap gimmick. You need an audience that is deeply and meaningfully engaged in the content of a site, so engaged in fact that many of those users become collaborators, and that requires tremendous amounts of work and editorial involvement with the audience.

Indeed. It's the point we've been trying to make for ages. Newspapers were always in the community building business. They would bring together a community of folks and then sell their attention to advertisers. That was the business. But they thought they were in the news delivery business, and that's confusing them -- leading them to do things that are anti-community and anti-relationship (registration walls, paywalls, etc.) that actually harm the value of the community and limit that. Thus, people are going elsewhere for community -- whether it's other media publications or social network sites -- and newspapers are lashing out at the wrong party: the one who sends them traffic.

For many years, we've been quite skeptical of any business model in virtual worlds/social networks that rely on "buying virtual goods." That's because these are all based on artificial scarcities, and as we all know (hopefully, by now), relying on artificial scarcities for a business model is incredibly risky, especially once people realize the scarcities are artificial. And yet, over the past few years, a number of businesses have been built on this very premise. In fact, Silicon Valley is crawling these days with businesses built on selling virtual goods, and if you talk to many VCs about it, you'll quickly note that they're positively giddy over the fact that people are paying for this stuff. What they don't seem to realize is that it's unlikely to last.

In the last couple weeks, Mike Arrington, over at TechCrunch, did an amazing job calling attention to the widely known, but rarely discussed in polite company, dark underbelly to most of those business models: quite a large part of their revenue is based on scammy offers that effectively trick unsophisticated purchasers (often kids) into signing up for expensive subscriptions to things they don't want. I was at an investor "roundtable" a couple months ago, which was mostly bankers in suits, and they were laughing about just how gullible people are on these things, and it's great to see TechCrunch exposing them, and pushing the worst abusers to clean up their act. Of course, even when some, like Zynga, claim to be cleaning up their act, Arrington was able to dig up a video where Zynga's CEO proudly talked about the scammy tactics he used -- and then noted that these same scammy tactics showed right back up on Zynga, after the company promised they were gone. Those who use these kinds of tactics may find that while they "bring revenue now," it may be short-lived. Companies that focus on such abusive tactics live to regret it (just ask RealNetworks).

But, the really amazing thing, as pointed out by Dan Lyons/Fake Steve Jobs, in an amazingly un-Fake-Steve-Jobs-like rant, is to compare the series of writeups by Arrington with the love letter to Zynga and other "virtual goods" companies in the NY Times, which came out after most of Arrington's posts, and makes no mention of them at all. As Lyons/FSJ notes:

So: they walked into this shit-storm and somehow, by some miracle, managed not to notice the fecal matter flying all around them. It's like covering a football game that took place in the middle of the blizzard and neglecting to mention the weather.

Now, maybe they did all the reporting before Arrington's stuff broke. In which case they should have gone back and updated their info. Or maybe, just maybe, Zynga's PR people teed up a Times story as a kind of rebuttal to what Arrington was reporting. Either way, that's what ended up happening: Zynga used the Times to deflect the bad shit flying at them from Arrington. They need good press because they're hoping to cash out by going public next year. That story in the Times will be worth millions. Many millions.

Meanwhile, Arrington, still digging, blasted again on Saturday night, reporting that sleazy ads had popped up again on Zynga, despite promises that they would be taken down.

Um, New York Times? If you guys are still wondering why people are dropping their subscriptions and getting their news from blogs instead of you -- this is why.

After which, Lyons/FSJ notes:

And to all those people who go around wringing their hands and saying what are we going to do when the "real newspapers" all die and we have to get our news from Gawker and HuffPo and TechCrunch? Friends, I think we're going to be just fine.... What really cracks me up is how often I still hear people say that bloggers are mere "aggregators" and the "real journalism" gets done at places like the Times. Because time after time, blogs are simply beating the shit out of the newspapers. They're the ones who still dare to go for the throat, while their counterparts at big newspapers just keep reaching for the shrimp cocktail.

Of course, there's just a bit of irony in noting that Dan Lyons wrote one of the quintessential blog bashing articles four years ago, when he was writing for Forbes, at one point suggesting that blogger "journalists" were no different than notorious (NY Times) maker-up-of-stories, Jayson Blair. Nice to see he's coming around to recognizing things perhaps aren't so bad in the blog world.

One of the key points we've raised in the past about the futility of newspapers putting up paywalls is that doing so would only open up a huge opportunity for other, smarter journalism organizations to take their market share by remaining free. And, indeed, more and more organizations are starting to point out that's exactly what they would do. Reader Jamie writes in to let us know about a speech by the managing director of ABC in Australia (not the Disney owned ABC in America), Mark Scott, taking on the "old media" thinking around such things as paywalls:

Scott's most virulent words were saved for News Corporation (owner of The Australian) chairman Rupert Murdoch and CEO Europe and Asia, James Murdoch.

He called Rupert Murdoch's recent call for content providers to charge online distributors for content as "a classic play of old empire, of empire in decline. Believing that because you once controlled the world you can continue to do so."

"When you have been so powerful and dominant for so long, it is hard to believe that empire is slipping away," he said.

Scott argued traditional media companies had been out-thought by technology companies in strategy.

And... oh yeah, if Murdoch goes paywall, Scott promises to do the opposite:

He reiterated the ABC would continue to provide free online news content and said the ABC must remain audience-focused

Not just that, but he seems to be recognizing that the way people interact with news has changed, and they want to be much more involved:

... he noted the only media organisations to survive will be those that: know and accept that all the rules have changed; are endlessly inquisitive about the new; empower their audiences to contribute, to create and share media....

Nice to see some news business execs who seem to recognize what's happening.

We've seen a bunch of studies like this in the past, but people keep submitting this, so figured we'd do a quick post on it. Yet another study has shown that people who are more active in unauthorized file sharing, also tend to spend more on authorized entertainment purchases. Now, to be fair, the study was paid for by a file sharing provider -- so, take it with a rather large grain of salt. But similar studies have been done in the past as well, and it seems to once again call into question the rallying cry in Hollywood that people just want stuff for free.

With our CwF + RtB experiment in full swing, we've asked some of the participants involved to provide some guest posts. The post here is from James Boyle, whose book, The Public Domain is a part of our Techdirt Book Club (signed by Boyle). If you order both the Techdirt Book Club and the Techdirt Music Club before midnight PT, August 3rd, we'll throw in a free Techdirt hoodie, or a free lunch with Mike. We asked Boyle to give his thoughts on new media business models from his perspective, and he came back with this incredibly thought-provoking post that ought to create quite a bit of conversation:

The Associated Press recently released the details of their plan to develop a new metadata/Digital Rights Management format for news stories. (It wasn't described as DRM, but I agree with Techdirt that it certainly sounds that way.) Particularly ominous was this phrase "The system will register key identifying information about each piece of content that AP distributes as well as the terms of use of that content, and employ a built-in beacon to notify AP about how the content is used." (My italics) Even those without a strong dose of civil libertarian paranoia might bridle at the thought of having their practices of reading and sharing newspaper articles tracked by a central repository (other than Google, that is.) "He sure is reading a lot of articles about gay rights!" Pamela Samuelson calls DRM'd articles "texts that rat on you." Somehow it doesn't sound like a good slogan for a sales campaign. (AP says it has no interest in tracking on the individual user level.)

The response of the tech-savvy was, predictably, pretty savage. Techdirt ("it's difficult to think of anything quite this useless") at least offered some principles on which sustainable web businesses might be built. Others were not as kind. Someone even created an extremely profane and sometimes juvenile, but nevertheless quite funny anonymous graphical translation of the AP's diagram to explain the new plan. The criticisms of the plan (clueless graphics aside) centered around two tenets that are familiar to Techdirt readers.

1. an argument that DRM is a.) doomed to fail technologically and b.) has in fact already failed in social and economic practice. The general line here is that the arc of history bends towards technologies that are copy-friendly and anything that tries to turn that feature into a bug will soon fail if it hasn't already.
2. an assertion that "old media" (other names include "the clueless" "dinosaurs" "non digital natives" "the walking dead" etc.) are demonstrably incapable of understanding the potential upside of the sharing economy, or copy-friendly technologies, still less the business models that can be built on top of them. This tenet is so sweeping that it would be much harder to defend if history didn't give us such fabulous anecdata to back it up. My own favourite quote was about the technology that lowered the cost of copying in a prior technological era, "The VCR is to the movie industry what the Boston strangler is to the woman alone." That was Jack Valenti, the late head of the MPAA. Actually, unless the answer to that puzzle is "What is a savior?" Mr. Valenti would turn out to be wrong. Movie rentals to fill the -- cheap -- VCR's that the movie industry had failed to criminalize, tax or enjoin soon provided more that 50% of the industry's revenue.

Personally, I am at best agnostic about tenet #1. I am not a technological determinist. I think that DRM has failed spectacularly in some areas (root kits on CD's), provoked mild irritation and a pressure towards more open alternatives in others (the move towards selling open MP3's rather than protected streams or DRM'd iTunes tracks) and become standard (even if not loved) in others. Most of you are still being forced to watch the FBI warnings on your DVD's and fuss with region control. Sure you could get around it. But how many people bother to? Life is too short. I do think news is a particularly bad candidate for DRM or even "beacons," but that is a specific judgement not a general one.

On tenet #2, I think we are thinking too narrowly. Behavioral economists have identified specific deviations from economic rationality in human psychology-- we tend to value potential losses asymmetrically from potential gains, to use simple heuristics even when they are shown to be false and so on. In my new book, The Public Domain (freely available online, of course) I argue that we have a measurable cognitive bias against "openness" -- I call it cultural agoraphobia, and I argue that it impedes us in understanding the creative potential, productive processes and forms of social organization that the web makes possible. The source of that bias (by which I mean a demonstrated tendency to ignore certain kinds of possibilities in a way that the data does not support) probably lies in the fact that most of our experiences with property come from physical goods -- sandwiches that 1000 people cannot share, absent divine intervention, fields that might be overgrazed or underused if not subject to single entity control. Even digital natives still spend most of the hours of their day in a world in which goods are both "rival" and "excludable." Reflexes picked up in that world tend to lead us astray when we are dealing with the kind of property that lives on networks. "Like astronauts brought up in gravity, our reflexes are poorly suited for free fall." I would even argue that this cognitive bias, even more than industry capture of regulators, is one reason why our current intellectual property policy is so profoundly and utterly misguided. But its implications are wider still.

So far, this sounds similar to the standard technophilic critique of existing institutions -- albeit with a behavioral psychology chaser. But it isn't. Just because it's a bias doesn't mean it's always wrong. It may be that, even once one discards the bias, there may be no immediately obvious way of carrying important social functions into the world of the Net. I don't care where on the techno-optimist spectrum you are (It ranges from "get their eyeballs and their wallets will surely follow" to "the only alternative you seem to be proposing is Google ads, cover charges and lots of T-shirts.") Unless you believe that markets spontaneously self-correct for everything (hint, check your IRA balance before you answer this question) you have to acknowledge that the problem that the AP is responding to may be our problem (how to pay for the kind of expensive investigative journalism that is a real boon to democracy and liberty) as well as their problem (how not to die in the immediate future.)

Don't get me wrong. The world of the future will clearly have media that in some respects are far better than what we have today, even when measured against the most rigorous standards. I am pretty sure, in the world of 2020, pollution levels in Silicon Valley and school performance in Palo Alto will be covered with a wealth of data, expert systems, and interactive mapping in a way that would have seemed a dream in 1990. That will be true for most areas that have wealth, a wealth of data, and a highly educated citizenry with lots of personal liberty and strong personal and ethical reasons to be focused on a particular subject. It will be much less true for areas where those conditions do not hold true, particularly if you have a powerful in-group with strong reasons to want to keep the eyes of the world away. Twitter and the camera phone can do a lot. But they can provide neither the culture of professional journalism, nor the sustained effort and resources to develop a story over years. And there is an oft unnoticed corollary to the claim that the dinosaurs are clueless. It means they are unlikely to solve the problems themselves. Unless you think that markets and technologies spontaneously self-correct for everything, that leaves the rest of us.

In Robert Putnam's fascinating book Bowling Alone he describes the way in which the threads of civil society and of trust frayed during the 20th century -- and offered a convincing social science case that the implications were profoundly negative for our culture. But the book was not a depressive one. Putnam pointed back to the turn of the 20th century. Then, as now, people noticed their society changing around them -- industrialization, the acceleration of migration to cities, urban isolation. But Putnam points out that this prompted an extraordinary entrepreneurialism in civil society. Groups were founded that today seem quaint to us -- the Kiwanis. the Rotarians and so on -- all aimed specifically and solving this failure of civil society. The message was not, in other words, that these problems would self correct through markets and technology. It was that we would need an entrepreneurialism outside the market -- one that experimented with institutions and communities to solve the problems of the day. For me, a glance at AP's DRM business plan prompts the same thought. Some of the functions that newspapers now perform are going to be located elsewhere in society -- in universities, in foundations, in government, in blogs. Some of that will happen spontaneously -- but a lot of it will not unless we innovate in social organization the same way the citizens of the early 20th century did to meet the problems of urbanization.

I was lucky enough to be involved with Creative Commons from its inception and to help found Science Commons and ccLearn. Those organizations were designed to solve a particular problem for which there was a market and legal gap -- the problem of failed sharing. Jesse Dylan's brilliant video on the subject explains it better than I could. Are there equivalent institutional innovations that could help in the area of news gathering? I don't know. Journalism isn't my field. But without the kind of institutional innovation and experimentation in civil society that Creative Commons (or the Kiwani's) represented, I think that we are unlikely to solve its problems. Web 2.0 business methods alone, even with a Techdirt crystal ball, will not be enough. If I am right, mocking the clueless will be a poor consolation.

James Boyle is William Neal Reynolds Professor of Law at Duke and the author of The Public Domain: Enclosing the Commons of the Mind. He writes a regular column for the Financial Times and tweets sporadically as thepublicdomain.

One of my big complaints with all the stories from newspaper people about how they're suddenly going to put up paywalls and charge, was that they never actually talked about adding more value. They seemed to just assume people would pay, when the truth is that they've never really paid for the content. But, of course, if you can really connect with people, and give them a reason to buy, then that's something different. But "the news" alone is not a reason to buy, because it's not scarce. It's quite abundant, and if someone charges, then people will just go elsewhere. But there are plenty of scarcities that you can charge for if you're smart about it -- and it looks like the NY Times may actually be taking a more intelligent approach to its own business model.

Last week, as you hopefully know, we kicked off our latest business model experiment, by launching our CwF + RtB options, based on the formula that we've seen many musicians use successfully: Connect with Fans (CwF) + Reason to Buy (RtB) = Business Model. So it's fascinating to see some of what the NY Times is exploring for its own premium offers. While these are still apparently works in progress, some market research shows that the NYT is considering two separate added value tiers. These aren't about locking up the content, but providing additional (scarce!) value that people may find worth paying for.

For example, in the proposed silver level ($50/year) people would get early access to some stories (a la our Techdirt Crystal Ball), as well as some additional features on the site, a choice of a tote bag, baseball cap or some other products, and early access for tickets to NYT's events. Not bad. The proposed gold level ($150/year) also gives the person access to exclusive events, direct access to some of the reporters/writers/staff at the NY Times (even a newsroom tour) and some other features. This is still preliminary, but it seems like the NY Times is definitely thinking in the right direction. It's not about locking up the content that's already there. It's about providing a real reason to buy something additional that's scarce and valuable. And, certainly, given the NY Times' reputation, it has connected with many, many people. So, now let's see what happens when it gives them real reasons to buy. Who knows what model will eventually be launched or how successful it really is, but it's interesting to see the NY Times apparently stealing our idea (that's a joke, people). In all honesty, it's great to finally see a newspaper looking at adding value, not trying to take it away.

As newspapers have struggled to get the online world, most of them did the simplest thing of all, which was toss up some comment forms at the end of their articles. However, they never did anything to actually engage with commenters. Instead, they looked at the comment form as being a community, but never gave any incentives for the folks in the comments to do anything intelligent. They didn't tend to the community or have the authors of the articles respond to comments (in some cases they specifically barred it!). So if you treat your comments as a place where the riffraff is just going to say stupid stuff, don't be surprised when that's what happens.

But, it seems that some are getting the wrong message from this. Douglas Bailey, who apparently is a "media consultant" or a "media strategist" has simply determined that all newspaper comments are dumb and should be done away with. Instead, he suggests you write a letter to the editor or an op-ed.

But his reasoning is backwards (and makes me wonder why anyone would hire him as a consultant). First, he gives a few apocryphal stories to make his point -- which isn't exactly compelling since they could be entirely made up. Second, he assumes that because plenty of comments on newspaper sites are dumb the problem is the commenters or the very act of commenting itself. Apparently, it never occurred to him that perhaps the problem is the way the newspapers set up the comments. Those newspapers didn't do anything to try to build up community or to encourage people to post more insightful comments. The problem isn't that the commenters are dumb and pointless, but that the newspaper failed to put in place incentives to encourage smarter comments. The newspapers failed to actually engage with their community and talk with them rather than to them. Any newspaper that wants to hire a media strategist these days should probably find one who looks for ways to help a newspaper better engage their community, rather than one who tells them to ignore the community.