How Much Is That Info in the Window?

Digital Economics in the Age of Information Abundance

May 24, 1995

By Scott Rosenberg

In the beginning, there were the hackers. Long before the word had acquired any sinister cast in the public imagination, they were simply idealistic young engineers playing with the first computers at places like MIT in the late '50s and '60s.

One tenet of these ur-hackers, as chronicled by author Steven Levy, was: "All information should be free."

That was fine for a while, when all it meant was that hackers shared code among themselves. Then computers and their offspring became a multibillion-dollar industry.

Today, the libertarian culture of computer users and the corporate culture of software manufacturers are locked in an epic ideological debate. "Whole Earth Catalog" founder Stewart Brand mapped the two sides in his 1987 book, "The Media Lab": "Information wants to be free because it has become so cheap to distribute, copy and recombine. . . . It wants to be expensive because it can be immeasurably valuable to the recipient."

Who decides what information costs? The producer, who invested time and money to create it? Or the consumer, who, in the digital age, usually has the ability to copy it for free?

As digital technology swallows one industry after another -- movies and TV, print journalism, book publishing, music, financial information and telecommunications -- these questions are likely to spark a cultural war. And their answers will not only affect bottom lines but also shape the creative environment of the future.

At the recent E3 Conference in Los Angeles, Howard Lincoln, chairman of Nintendo of America, took aim at digital counterfeiters who, he said, had robbed his company of $2.5 billion worth of 1994 sales of video games like Donkey Kong Country. (Such figures, of course, beg the question: Would everyone who bought a cut-rate knock-off have paid full price for the real thing?)

You could easily understand Lincoln's anger at companies in Hong Kong and Taiwan that manufacture machines with one function: to "suck the code" out of Nintendo game cartridges so consumers can make their own copies. But complaining about copyright piracy abroad isn't going to change the nature of the business that Nintendo entered when it started making software.

Digital information can be copied at essentially no cost; with the rise of the Internet, it can be distributed just as cheaply. That makes an information business fundamentally different from any commodity business where the product is a physical object.

At E3, Lincoln attacked "the absurd rationalization that "information wants to be free.' This, of course, has all the inherent logic of the auto thief who explains to police that the minivan in your garage just wanted to be free."

Not quite. Steal a car and you've robbed its owner of its use. Copy a program or game and its original owner still possesses exactly what he started with; you have a functionally identical copy. The auto theft analogy only makes sense if you can picture an auto industry in which it was possible to make instant and exact duplicates of vehicles. And that would make Detroit a very different place.

In the software world, some companies have taken tentative steps away from the commodity-business mentality and begun to explore alternate ways of profiting in an information-rich economy. Instead of fighting the technology's quick-copy capabilities, they've found ways to make it work for them.

Id Software, a tiny Texas start-up, used the Internet to give away free copies of its game Doom last year. Once hooked on the "freeware" version, players could buy a more complete game from the company.

Doom became an overnight best-seller -- and one example of how a company can turn the "hacker ethic" to its advantage. Similarly, Netscape grabbed a huge chunk of the World Wide Web market by giving away copies of its Netscape Navigator browser. Qualcomm's Eudora is a popular e-mail program that's distributed in similar fashion. Other firms are beginning to copy this approach.

These companies are going beyond the old-fashioned "give away the razors and sell the blades" gimmick. They've recognized that, in a digital world, information products are plentiful; anyone with an Internet connection has quick access to insane quantities of news, games and programs. What's scarce is reputation and good-will. If you have a cool product and let people play with it and test it out, you won't find them unwilling to pay for it later.

This dynamic tends to scare traditional businesspeople who may, like Nintendo, be committed to a commodity technology like game cartridges. At E3, Lincoln tried to argue that creativity will only prosper in an economy that holds a tight clamp on intellectual property:

"Today in the U.S., thousands of small companies are struggling for success in the emerging field of multimedia. . . . But should any of those entrepreneurs strike it rich, and create a breakthrough product that finds an enthusiastic audience, it still must face the threat of counterfeit. Long before that product ever reaches the mass market, its value may well have been stripped clean by people who had no part in its creation -- who simply stole it. And that visionary company will disappear."

Funny -- neither Id nor Netscape has disappeared yet.

Wired -- the 2 1/2-year-old San Francisco-based magazine that, as much as any publication, has defined the digital revolution -- made the cover of the New York Times Magazine Sunday.

Such coverage from the cyber-suspicious East Coast journalism establishment can only reinforce Wired's place as digital-culture arbiter -- and contribute to the success of its sister venture on the World Wide Web, the recently revamped HotWired.

On the other hand, writer Paul Keegan painted an ambivalent portrait of Wired's own culture: "Are Wired's digerati cynical manipulators of techno-babble, hyping a utopian "revolution' that conveniently allows them to cash in before retirement? Or are they truly visionaries, the only ones with enough technological sophistication to lead us into a complex and more egalitarian world?"

You decide. Wired is on newsstands; HotWired is at http: / / www.hotwired.com.

Devotees of work at the intersection of pop music and digital art will want to attend the Music and Multimedia Conference Tuesday at the Masonic Center. Among the featured premieres is "Eve," Peter Gabriel's CD-ROM follow-up to "Xplora." For information, call (415) 749-0779.

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