By Nate Zelnick, InternetWorld
The majority of mass-media mergers are driven by big companies’
collective need to ensure their future success. Similarly, they all
dislike unexpected changes in the competitive landscape that might
turn the advantages that big companies generally enjoy–like
established business methods, long-term relationships, and instant
brand recognition–into weaknesses.
For example, the music industry shrank over the last 30 years
from a few big companies and hundreds of independent labels to a
handful of huge companies and virtually no independents. “Hitmen,”
Frederic Dannen’s book on the rise and fall of CBS Records, tells
how CBS, Time Warner, Sony, and their ilk boosted independent
promotion–a payola system for getting music on radio
stations–until it shut the small labels out. In the end, the
independents were forced to sell out to the five conglomerates that
now control 90 percent of worldwide distribution.
Music is the most extreme example, but the same thing is
happening across the information industries. Vertical integration
of content production and distribution has been the trend for more
than 20 years. While those involved publicly cite illusory
“synergies,” the real driver is fear of change.
But gigantism is a losing battle. The technology shift of the
past five years is among the most dramatic ever seen–and the
impact of cheap processing power, cheap memory, cheap storage, and
universal connectivity is only just beginning to be felt. These
changes, taken together, mean it’s only a matter of time before the
landscape changes sufficiently to turn a mega media company’s
advantages into liabilities.
And it’s time for that to happen. It only takes a quick glance
to show how poorly gigantism serves both ends of the supply chain.
A typical recording contract amounts to a form of modern-day
sharecropping, under which the label dictates how the monies it
advances an artist for promotion and production must be allocated
to its collection of “company store” partners. The royalty it
returns to the artist in exchange for acquiring all copyright to
the music is a tiny percentage of the wholesale price the company
pays itself to distribute the work. More than 90 percent of artists
end up in debt to the label at the end of the contract.
Replace music with any other content and the story is a
variation on a theme.
On the consumer side, the logic of bigness has resulted in the
mega-hit mentality. When a label or a publishing imprint’s
responsibility is to contribute profits to a huge multinational, it
quickly realizes that one big hit is easier to manage than lots of
little successes. This creates an innate conservatism that puts all
resources behind a few creators with proven selling power. This
rush to the middle, of course, leaves out the building of new and
interesting content.
Since entertainment depends on novelty, of course, this is also
a losing strategy, resulting in frenzied premiums paid for the few
dark-horse hits–or technologies that might be destabilizing–that
get out through other means.
That’s why the ironies of the Gnutella story are so delicious.
Created by the folks at Nullsoft after AOL swallowed the company
for its dark-horse hit WinAmp, Gnutella represents the antithesis
of everything giants like AOL and Time Warner–which AOL agreed to
buy shortly after it bought Nullsoft–stand for. Not surprisingly,
once the Gnutella news reached AOL’s upper echelons, Nullsoft’s
unauthorized project was stomped. But since AOL only found out
about it after an alpha version was posted–along with the source
code–it was too late. Ten thousand copies of the alpha version got
out, and the Gnutella Portal Project took over further development.
Thousands of servers are running all the time, and variants, ports,
and extensions pop up daily.
Gnutella, Napster, and their many cousins are massively
distributed peer-to-peer search-and-retrieval systems that provide
no means of central control. Because there’s no one in charge of
Gnutella, there’s no one to sue, and therefore it is even more
threatening to media conglomerates than Napster, which will likely
die at the hands of the Recording Industry Association of America.
I love Gnutella’s spirit and its technology. But Gnutella is
entirely reactionary. In the end, it and similar open file-sharing
systems actually will hurt artists, as the RIAA says (although it’s
debatable whether it will hurt them more than the recording
industry itself).
What’s needed is a hybrid system that gets around the
bottlenecks of big media and provides a system in which creators
can get paid for their work. In fact, I’ve resigned my position at
Internet World to pursue just such an open source project. I’ll
still be writing this column and hope to report at some point on my
progress.