The economics of content creation
Posted by Tobold's Blog [HTML][XML][PERM][FULL] on 10 March 2014, 11:08 am
I have been reading a lot of interesting blog posts lately about the economics of content creation. Apple Cider Mage argues On Funding and Revenue "that people should be compensated for their time and efforts" of creating content, including blogs or podcasts. Herding Cats replies that Blogging for Cash is a zero-sum game, where "financial support received by Blog A is financial support not received by Blog B". Meanwhile Chris from ihobo argues that Games are not Shoes, trying to counter the argument of Nicholas Lovell that in shoes it is the marginal cost of making another shoe that determines the price of shoes, so the marginal cost of games being zero would drive the market towards free games.

I think that there are a lot of good ideas here, and a lot of confusion. First of all, not all content is created equal. Some content is made because the author has a need to express himself, while other content is made because a client wants it. Think of it that way: If by law tomorrow it would be illegal to pay for content, what content would survive? Lots of blogs wouldn't be affected at all, while triple A games and blockbuster movies would disappear.

I don't know how many people have read content that I wrote. My blog had 6 million visitors, but the same person reading this blog every day is then counted as a visitor every day, so it is far less than 6 million people. But even if I just say that "thousands" of people read my content, there is less than 1% of them who use the donate button on the upper right of this page to give me money. That makes me think that the market value of my blog posts is very close to zero. If we say that opinions are a dime a dozen that might actually be rather close to the economic truth of blogging in general.

If Apple Cider Mage says "that people should be compensated for their time and efforts", then I need to ask where that "should" is coming from. If I decide to build a cathedral out of matches in my garage, why should anybody compensate me for my time and effort? I could then put the finished cathedral in a public place and ask for donations, but there is absolutely no "should" involved. Just like the donate button on my blog, people *can* donate to show their appreciation, but there is absolutely no moral requirement for them to do so.

Just as I blog basically for free, somebody could make games for free. The kind of games this results in would be akin to Flappy Bird. Most of the games we play are too complicated for that, and require a team, with some people coding the game, others making the artwork, others the music, and so on. A garage band type of game development team is theoretically possible, but not very common. Most games are produced with the intent to make money of them. And that reverses the notion "that people should be compensated for their time and efforts", into the consideration of an entrepreneur: Can I make more money with the game than the compensation I will have to pay to people for the time and effort to make it? That means that sometimes the entrepreneur is wrong and we get a game for cheap because he miscalculated. But overall it means that we as the community of players need to pay the cost of making games, otherwise games won't be made.

"Free" games in this discussion are a red herring. The reason why we get more and more "free" games counter-intuitively is that game companies often make more money with free games than with fixed price games. League of Legends made $624 million last year, so Riot Games makes a big profit on it, and can continue to make games. As LoL has 30 million active players, and we need to assume that at least 90% of those never pay a cent, many of the people who pay of League of Legends actually pay more to play this game than they would pay to play a game that comes in a box with a price tag and has no subscription. If the EU comes through with their proposal to ban the use of the word "free" for games that aren't actually completely free, "free" games would mostly disappear.

Free opinions on the internet on the other hand are here to stay. Attempts to monetize them are mostly doomed to failure. You can ask for donations, but you would get more donation money with a fake charity website or a scam Kickstarter project than with a blog that requires a lot of time and effort.
Tobold's Blog

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