Archive for April, 2010

Information Has NO Value

April 28th, 2010, by Ted Shelton | located in Conversations | No comments yet | trackback
Information has no intrinsic value. It is what you DO with information that creates value. Perhaps this seems obvious or even useless to point out, but if you read through this post, perhaps you’ll agree that it is an important key to understanding the future (and past) of all media businesses.

When you read news about why a company will do well or poorly you might invest more intelligently and make money. You listen to music. A joke makes you laugh. Each of these is a use – make money, listen, laugh… value begins when you are doing something with or because of information, not in the information itself.

Why is this distinction important? Information business models must be evaluated in terms of what the creator (or owner anyway) can gain through uses of information and what the recipients would gain. Not from something about the information itself. And there are some important places in which the benefits for creator and recipient are aligned and some where they are at odds.

A simple example — malfeasance by a government official is a kind of information that as long as it is secret protects the job of that official. But it is in the public interest to have this information known widely so that whatever abuse is occurring can be stopped. Creators want it private, the rest of us want it to be public.

In media businesses we assume that the interests of creators and recipients are aligned — but this is often not the case if we dig a little bit deeper.

Value Conflict 1: Restricted vs Broad Distribution
In the news business there are stories that are more valuable for the recipient if fewer people know about them so that acting on the info is limited (info about a company which will make a stock go up or down). And some stories that are more valuable if a large number of people know about them (the description of how a computer virus is passed between computers) so that acting on the info is widespread.

But a news company’s business model might not be aligned with the value for recipients. It might be skewed toward broad access (the more subscribers the higher the revenue) even when restricting access would create more value for individual subscribers. Or toward restricting access (fees for reading online articles) even though all recipients would benefit more from broad knowledge of the content.

Value Conflict 2: Immediate vs. Long Term Returns
Time frame is another important component of recognizing value conflicts. Take music for example — on the one hand a musician would like everyone to hear his songs as this helps build awareness and appreciation for that musician over time. Doing so may lead to more attendance at concerts, use of the song in advertising, and even future sales of related products. But in order to make money from selling copies of recordings (a shorter term benefit from the music) access to the music must be restricted. For recipients easy access is essential in a world in which far more music is available than can be heard.

Value Conflict 3: Constraints Imposed by Media Format
In some cases the delivery medium confuses the value proposition. For a newspaper owner, there is a clear efficiency in bundling information of a variety of mostly unrelated types into one rolled stack of pages in a plastic bag. But for the reader this is a very inefficient model for consuming information. Why wade through section after section when looking just for job listings or sport scores?

Similarly TV with its limited bandwidth and time slots needs an executive decision process to determine which programs go into which limited time slots but this isn’t at all convenient for the consumption of content. As consumers we each want to start watching when we are ready and watch the program of our choice at the time of our choosing.

Internet Deconstruction
The wonderful and horrifying thing about the Internet is that it collapses the constructs which have created value conflicts and forces us to entirely reexamine our institutions and business models that create and distribute information. The key to developing new successful models will be to analyze the ways in that value for creators and recipients of information can be aligned.

For example news organizations reporting on politics have to focus on business models which earn money through the largest number of people consuming their content because a democracy functions most efficiently when all people are aware of the issues and positions and can debate and vote on them intelligently.

Musicians could focus on creating great experiences of listening to music, and communities of listeners. Value created for listeners would then result in more loyal fans who attend more concerts and buy more non-music products and increase the likelihood of other commercial uses of the music.

What is certain is that where business models exist today in which value to the recipient is frustrated by the attempt to extract value by the information creator (or owner), the business model will be defeated by a more aligned model.

So to create value in new media business models focus on what we DO with the information.

And remember that the information in itself has no value.