The Pricing Paradox of Information


In Adam Smith’s paradox of value, he wondered why, if water is vital to life and diamonds are not, diamonds are worth so much more than water. The pricing paradox of information presents a similar quandary: If information is so much more valuable to society than entertainment, why is it so hard to build a business — namely, journalism — around selling access to information? Journalism at its most useful is information-rich but information is quickly commodified. Entertainment, on the other hand, is unique and engaging and — for reasons I’ll explain in a moment — receives greater legal protection under copyright than information does. We have conflated journalism as an information business with entertainment as an engagement business in large part because both are are built on “stories.”

Information is less valuable in the market because it flows freely. Once a bit of information, a fact, appears in a newspaper, it can be repeated and spread, citizen to citizen, TV anchor to audience: “Oyez, oyez, oyez” shouts the town crier. “The king is dead. Long live the king. Pass it on.” Information itself cannot and must not be owned. Under copyright law, a creator cannot protect ownership of underlying facts or knowledge, only of their treatment. That is, you cannot copyright the fact that the Higgs boson was discovered at CERN in 2012, you can copyright only your treatment of that information: your cogent backgrounder or natty graphic that explains WTF a boson is. A well-informed society must protect and celebrate the easy sharing of information even if that does support freeloaders like TV news, which build businesses on the repetition of information others have uncovered. Society cannot find itself in a position in which information is property to be owned, for then the authorities will tell some people — whether they are academics or scientists or students or citizens — what they are not allowed to know because they didn’t buy permission to know it. Therein lies a fundamental flaw in the presumption that the public should and will pay for access to information — a fundamental flaw in the business model of journalism. I’m not saying that information wants to be free. I agree that information often is expensive to gather. Instead I am saying that the mission of journalism is to inform society by unlocking and spreading information. Journalism frees information.

Entertainment operates under an entirely different business and legal regime. Entertainment is a unique treatment of knowledge, ideas, and creativity. Its products can be owned and controlled. Entertainment can flourish behind a paywall, protected by copyright (though, of course, digitization of content makes the copying of it without the right to do so easy; I’ll explore that matter next). There is only one Sopranos and so I happily paid HBO to enjoy its stories. Journalists tend to believe that their work should be treated in the market and by the law like an episode of the Sopranos because journalists are storytellers. There’s where our confusion lies: In journalism, we came to conflate information and entertainment because we used a common form of both — storytelling — to convey information. Gutenberg’s press, the book, the newspaper, the magazine, and the TV show forced us to create a format for filling their pages or minutes and presenting information in the form of a story. We built our business on the presumption that readers were engaged with our storytelling. But let’s be honest: Most news — the sewer board hearing, the price of pork bellies, the appointment of a new parks commissioner — isn’t inherently entertaining. When we try to make it engaging, we often corrupt our mission. We create tabloid headlines that play up conflict. We look for the edge case that makes a compelling yarn with villain and victim. We turn every political action into a drama — or a horse race, if you prefer — whose ending we want to foreshadow. News — day-to-day, useful, practical, and important news and information — isn’t entertainment and does not operate under entertainment’s business model.

Mind you, entertainment can be informative and enlightening and news can be engaging and even entertaining. See most any issue of The New Yorker. I bought Michael Lewis’ Flash Boys: A Wall Street Revolt to be engaged and came away informed. One of our graduates, Samantha Gross, founded a business called Story Tour to take stories to the streets, so storytellers can engage the listeners formerly known as readers where the tales occur. Another graduate, Noah Rosenberg, built Narrative.ly to produce engaging, mixed-media narratives about New York that would each fill a week online. In her latest of many professional incarnations, Tina Brown promises to develop what she calls live journalism: “summits, salons, flash forums, and debates,” all forms of informative entertainment. And I will happily sell you my previous books. Each of us is competing for customers’ attention and dollars with other forms of media and entertainment: novels, movies, TV, music, games, sports. Just because news can occasionally be entertaining and be sold as a product doesn’t mean the workaday stories of the Podunk Daily Disgrace should be sold like a movie. This confusion about the lines between information and entertainment — their business models, value propositions, and legal status — has contributed to the will to build paywalls. If Tony Soprano can have a wall, then why can’t Tom Friedman? Just because information and entertainment have shared a format — the story — doesn’t mean they are in the same business. Useful information is still the key asset we offer in news and as I explored in the second part of this essay, we can now offer it in forms besides the story.

I have argued that journalism should remake itself as a service that helps people accomplish goals rather than as a production line that makes content to fill products that can be sold. So what would a business built on information as service look like? You might well argue to me that customers do pay for services. I pay my plumber to install my sink. If a journalist informs me, shouldn’t I pay her? Some people do pay for information: the customers of Bloomberg or Thomson Reuters, for example. Tom Glocer, former head of Thomson Reuters, used to say that the information his company sold was most valuable in its first three milliseconds of life — which happens to be the basis of the story Michael Lewis tells in Flash Boys. Everything else that Thomson Reuters produces from that information — from its wire service to its web site — is a byproduct worth fractionally less. This tells us that if you have information that is uniquely valuable to a customer and you can deliver it before anyone else, you can charge for access to it. But what you’re selling then isn’t so much information as speed. Here we face the factor of time in the pricing paradox of information: The more valuable the information, the faster it will spread and the faster it spreads, the less valuable it becomes. Where does this leave us? It leaves us with the need to consider new ways to conceive of media, audience, content, and intellectual property.


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