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Apart from potential actions by Congress, there are implications for business from the changes that are brought into view by the Napster and DeCSS disputes. If we, as business people, get up above the legal particulars in these cases, it is clear that they offer a glimpse of large shifts in how businesses derive value from digitally distributed intellectual property. The changes grow from the transition from a focus on content to a focus on the process of using the content.
Perhaps the strongest message from these cases is that the locus of value is moving downstream. If Napster, with Bertelsmann's help, is successful in inventing new ways to derive value from recorded music, it will almost certainly take the form of providing a service. The game will not consist simply of recording music, promoting it, and then selling copies of discs. Instead it will shift to emphasize continuing relationships with subscribers, continuing to add value after the song is delivered.
The strength of this shift in value from content to process is even more evident when one looks at business applications that are less closely tied to traditional publishing. For example, consider Contract Research Organizations (CROs) working within the pharmaceutical industry, running the clinical studies that are central to new drug research and development. The obvious "product" from CROs is the clinical data -- content comprised of patient demographic data, administrative information, test results, comments by researchers and reviewers, and so on. But as CROs move to digital data delivery, the center of balance shifts to include downstream value, such as worldwide, electronic access to research results, data analysis, and specialized professional services such as providing oncology expertise and cardiovascular expertise. Digital content has allowed CROs to greatly expand their services beyond simply collecting and publishing results. Consistent with the direction suggested by the DeCSS case, they key to unlocking much of this added value involves use of specialized, secure delivery environments and a shift from focus on content to focus on the processes associated with using the content.
The second big message grows from the first: digital content is more consistent with revenue models built around licensing and the sale of services than with models depending on sale of product, particularly when the product is a copy of some published work. Once again, Napster provides a clear example of this: Rather than selling CDs for $16.98 the focus shifts to selling a license to download and play music. Similarly, Ebrary, rather than selling a copy of a book, charges a license fee to quote and otherwise reuse work.
The third shift is toward creating value through aggregation of content. If I write a great book, you might buy a copy -- but you won't subscribe to a service unless it can aggregate many useful kinds of information over time. Or, as an example of very different kind of content, consider the usage, temperature, vibration, and other performance data that is automatically collected by devices such as industrial engines and centrifuges. Taken individually, each device can create a "report" concerning usage data and impending failure conditions. (Note that remote monitoring of such digital content, once again, moves the value downstream, creating opportunities for service offerings.) But additional value is available from the aggregation of this individual reports into profiles that can be used to direct maintenance procedures and buying decisions.
On the surface the copyright debate is about music, movies, books, and other published content. But the fact that lies beneath the surface of these cases is the reality of digital content. Digital content is not corporeal -- counting and controlling copies makes no sense. The movement to licensing, as opposed to sale of copies, when coupled with the fact the digital content needs reading devices to be useful, moves the transaction associated with the content closer to the point of end use. Value shifts from content to process. The immediate results for all businesses are that:
These are big shifts that apply far beyond the bounds of music, movies, and other publishing. It is also true that developments in these particular, early conflicts will have impacts that reach far beyond the immediate confines of the lawsuits. The experimentation with licensing models for peer-to-peer exchanges that is at the heart of Napster's recent development efforts is relevant to any business that needs to create, distribute, and protect information. The critique of the DMCA that is embodied in the case between Emmanuel Goldstein and the studios will be critical to determining the degree to which market opportunities can grow around the new value point in information distribution, centered around the reading device. These cases, and others like them, are worthy of any business' attention.
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