Cory Doctorow is a brilliant science fiction writer and one of the most eloquent voices on the Net today arguing against corporate lock-downs of intellectual property. But in catching up on my RSS backlog recently I did trip over something of a whopper in the middle of an otherwise typically persuasive rant against an ill-advised digital rights management scheme (in this case, Google’s):
Google’s really good at adapting to the Internet — that’s why it’s capitalized at $100 billion while the whole of Hollywood only turns over $60 billion a year. |
This comparison is, as I’m sure Doctorow would admit, pure apples-and-oranges. “Capitalization” is a number you arrive at by taking a company’s current stock price — the last dollar amount that a buyer and seller agreed upon for a block of shares — and multiplying it by the “outstanding shares,” or total number of shares in the company known to exist.
Google is doing quite well, and its high stock price gives it all sorts of advantages, but there is no pile of $100 billion flowing through its coffers. Its revenue — what it “turns over” each year, the number of actual dollars flowing into its operations — is more like $4-5 billion. That’s impressive, but smaller by a factor of 10 than the number Doctorow cites for Hollywood’s gross revenues (I found $63 billion as the global revenue figure for American movie studios).
Capitalization is a purely theoretical number. In the case of companies like Google, much or most of the value of stock that adds up to $100 billion is not being traded. If all or most or even just some significant fraction of the holders of that value decided, “Hey, it’s time to cash in,” and sold at the same time, the share price would begin a quick slide, and the capitalization would evaporate. Revenue streams aren’t permanent either, of course, but they’re a lot more tangible.
Google’s high capitalization essentially means that investors believe its impressive profitability growth will continue. (Or maybe they just believe that it’s 1999 all over again and not buying would mean missing out on a new bubble.) One thing’s for sure: despite the company’s claim not to be focused on short-term results, its management must be acutely conscious of the need to keep that growth charging along.
Which, ironically, is probably why Google is beginning to lose its user-friendly footing and adopt the kind of unpleasant, user-hostile DRM schemes that inspired Doctorow’s wrath in the first place.
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