March 17, 2009

The Internet Economics - Part 1

You may think this post is few years too late but I believe there is some relevant issues to discuss. The Internet have been quite a force and I think we do not yet understand its full impact. I did not say potential, because its has a positive implication, I'd rather use impact because we really do not know.

Its impact on our social behaviour is still developing, but its impact on some industries is felt deeply by all. I want to share some thoughts on the affects of the Internet on the following industries( I will do so over several posts so I do not bore you to death, or bore you several times):
  1. Media, news papers in particular,
  2. software,
  3. computer hardware, and
  4. Free labour, not an industry but there are many profit from it.

Media, the first casualty:
Newspapers are going into bankruptcy and shutting down exponentially these days. Some, to mitigate the impact, are shifting their distribution model to online only model. I think that will fail as well.

Newspapers will be burdened with legacy costs of their traditional operating model. Once they are online only they will discover that news papers on the Internet are unbundled. People read one article at a time independent of the source. And that will lead to their demise yet again.

The economics are totally different and culture is too instilled in traditional news papers to adapt to the Internet economics. Traditional news papers are sold as a bundle making some sections profits subsidizing others, i.e., classified are actually a subsidy for investigative reports, which costs a lot of money but produce no interest from advertisers. I think newspapers, who consider their reporters to be the starts of the system, will overpay those reporters with no benefit to show for their work. As a result, it saddens me to say that the investigative journalist job may disappear and society will be lose the knowledge and content they produce.

This brings me to bloggers and their content as a substitute for traditional news papers. Bloggers have self-proclaimed that their content is as good as traditional news papers. I say that is a total arrogant bullshit. Most blogs out there would have no content to create if it was not for traditional media. The content generated by blogs are mostly reactive to what is written in traditional media by providing opinion and off-the-cuff analysis.

In my next post I will detail my observations on the software industry.

"Big Switch", Nicholas Carr

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