This document summarizes key points from a lecture and reading about new media institutions and business models. It discusses commercial vs volunteer production of information goods, challenges to strict copyright law, and different strategies for dealing with intellectual property like exclusive rights vs non-exclusive strategies. Key non-exclusive strategies discussed include cost minimization to obtain information inputs at low costs, and reliance on relationships and social networks rather than asserting exclusive rights. The document provides several examples to illustrate different strategies like scholarly lawyers, software publishing, and open source communities.

1. New Media as Institutions:
Ownership & Business
Models
Stephanie Gokhman
COMM 2450: Communication & Technology
Guest Lecture 6.19.12

2. Today's Reading
Benkler, Yochai. 2006. “Some Basic Economics of Information
Production and Innovation,” Chapter 2 of The Wealth of
Networks: How Social Production Transforms Markets and
Freedom. http://yupnet.org/benkler/archives/10

3. Summary of Benkler
Commercial vs Volunteer
- Commercial makes cars, steel and wheat
- Volunteering makes science, software and public radio
Challenges the exclusive rights culture (strict copyright law) to
make an argument for the effciencies of non-exclusive strategies
for dealing with information and intellectual property.
Outcome: Copyright economic strategies & Commons-Based
Peer Production: the value of the cathedral & bazaar, open
source paradigm, leveraging volunteer contributors and the
power of the many to overcome ineffciencies in the information
economy

4. Rival vs Nonrival Goods
Nonrival (information): when its consumption by one
person does not make it any less available for
consumption by another. Once such a good is
produced, no more social resources need be invested
in creating more of it to satisfy the next consumer.
Rival (apples): when its consumption by one person
makes it unavailable to another. Once such a good is
produced, more resources need to be invested in
creating more of it to satisfy the next consumer,
which often also impact other markets.

5. Public vs Private
Public Goods: nonrival goods like scientifc fact and
literature whose marginal cost is $0. A candidate for
nonmarket production.
Pure Private Good, or Economic Good: rival goods, in
which market production turns a proft. This can be
through turning a public good into a publication,
which involves a marginal cost and generates revenue.

6. Information as an Economy
“on the shoulders of giants” effect (Isaac Newton)
- Information builds from other information
- Information is both input and output of its own
production process (somewhat recursive)
Given this, then strengthening intellectual property rights
INCREASES the prices for those who invest in producing
information today for yesterday's information.
- Danger of too little consumption of information today,
but also too little production of new information for
tomorrow

7. The Ineffciencies of Modern Copyright Law
“From the perspective of a society’s overall welfare, the most
effcient thing would be for those who possess information to
give it away for free—or rather, for the cost of communicating
it and no more. On any given day, enforcing copyright law leads
to ineffcient underutilization of copyrighted information.”
- Benkler, Paragraph 3
MORE (in Benkler's words “effcient”) access to information
promotes more creativity and innovation to benefit society,
outweighing the exclusive rights that lead to proft over
information's marginal cost ($0).

8. Intellectual Property & Empiricism
Supreme Court case of Eldred v. Ashcroft:
life of the author + 50 years → life of the author + 75 years
or from 75 years to 95 years for copyrights owned by corporations
Josh Lerner:
investment in R&D decreases slightly when patent law is strengthened
– consistent with “on the shoulders of giants” effect
– increases costs that current innovators have to pay on existing
knowledge more than it increases their ability to appropriate the value
of their own contributions
For information, this strengthening of law is theoretically ambiguous and
lacks empirical basis: what do we gain (if anything) by treating
information like property?

9. Cost Minimization & Beneft Maximization
Cost minimization: obtaining as many of the information inputs
as possible at their marginal cost of zero (converse: buying
licenses to inputs): materials from the public domain, materials
the producer itself owns, or by sharing/bartering for
information inputs owned by others in exchange for one’s
own information inputs.
Benefts: reliance on asserting one’s exclusive rights, or by
following a non-exclusive strategy.
What are these strategies?

10. The Romantic Maximizer
Exclusive-rights-based strategy where the information producer as
a single author or inventor laboring creatively—hence romantic
—but in expectation of royalties, rather than immortality,
beauty, or truth.
Example: An author selling rights to his book.

11. Mickey
Exclusive-rights based industries where a larger frm that already
owns an inventory of exclusive rights, some through in-house
development, some by buying from Romantic Maximizers.
Reworks their own material.
Ex: If Disney bought Winnie the Pooh.

12. RCA
Exclusive-rights-based strategy where there is bartering among
the owners of inventories.
Example: the patent pools, cross-licensing, and market-sharing
agreements of the radio manufacturing industry

13. Scholarly Lawyers
Non-dependent on exclusive rights strategy where sometimes
using an information good that one has produced makes its
users seek out a relationship with the author and the author
charges for this relationship.
Example: Doctors and lawyers who publish and become well-
known.

14. Software publishing
Strategy relies on sales based on copyright, accounts for a little
more than one-third of the industry’s revenues.
Dyson & Perry Barlow (1990s) argued for more or less free
access to copies of recordings distributed online, which would
lead to greater attendance at live gigs. Revenue from
performances, rather than recording, would pay artists.

15. Know-How
Non-exclusivity strategy where innovation is necessary to stay
state-of-the-art, and barter information for access, and/or
exploit the information generated and informally shared by all
participants in “learning networks”.
Example: IBM and Linuxrelated services

16. Joe Einstein
Non-exclusivity strategy of universities and other research
institutes; government research labs that publicize their work,
or government information agencies like the Census Bureau;
individuals, like academics; authors and artists who play to
“immortality” rather than seek to maximize the revenue from
their creation.
Example: Oratorio Society of New York playing Carnegie Hall
annually

17. Los Alamos
Non-exclusivity strategy where there is reliance on internal
inventories by some nonmarket organizations.
Example: secret government labs (public funding, private info)

18. Music & Remix Culture
From hired musicians playing passed down/reappropriated folk songs
(revenue in instruments and performance halls) – Scholarly Lawyer and Joe
Einstein
→ the phonograph (revenue in recording, copying, and distributing,
advertising/preference formation, ) – Romantic Maximizer and Mickey
→ computers (low production and access costs, reemergence of
decentralized, relation-based markets for professional performance artist
and consumer) – Teacher & Viking Ships example
Similar paradigms: the telegraph, radio, flm, etc.
For more info see Lessig “Remix: Making Art and Commerce Thrive in the
Hybrid Economy”

19. Social Capital & Economic Capital
5-7 minutes.
Break into groups of 2.
What are some ways in which the modern music industry
relies on social relations and social media? For every
artifact you name, determine whether it is rival or
nonrival.

20. “Where does innovation and information production
come from, then, if it does not come as much from
intellectual-property-based market actors, as many
generally believe?”
1. nonmarket sources—both state and non-state (ex: science
funded by NIH, NSF, DOD, etc)
2. market actors whose business models do not depend on the
regulatory framework of intellectual property (ex: daily
newspapers' low cost for purchase & high advertising revenues)

21. Motivating Non-Proprietary
- the majority of businesses in most sectors do not rely on
intellectual property as a primary mechanism for
appropriating the benefts of their research and development
investments
- mainstream economists believing that there is a substantial
role for government funding
& that nonproft research can be more effcient than for-proft
research
& that nonproprietary production can play an important role
in our information production system

23. Amateur

24. Professional

25. Break Out!
Grab a partner
Take 5 minutes
Why would Benkler argue that it’s possible
for the amateur version to be better than the
professional?

26. Last comments? Questions?
Contact: sbg94@cornell.edu