This is just a pointer to an interesting interview with Tim O’Reilly conducted by Edge. It related to the Clothesline Paradox previously discussed here by Shane Greenstein. Just a taste:
But what’s really interesting, when I dug into YouTube, is that it turns out that the monetary economy there is about to explode. It is exploding. It’s going to be one of the big Internet stories of the next year or two. YouTube has come to be taken for granted and while it really exploded as a medium, it was written off by most people as a money-maker. But I was really struck when I went and did a little bit of research. I was told anecdotally about a major pop star who actually makes more money on YouTube than on iTunes, and more of the money comes from ads run against videos that are uploaded by users than from the ones that are put up there by the music companies themselves.
The trick is that YouTube auto-detects the musical signature of a song, and so when a user, for example, puts up their wedding video and it has a pop song as the soundtrack, the music company gets paid, not the person who uploaded the video. There is an emerging set of business models by which a peer economy, a sharing economy, actually gets monetized. Often the value creation is only partly perceived by the people who created the content, and sometimes it’s received by other people downstream.
The interview does refer to Clayton Christensen’s “The law of conservation of attractive profits.” This is,
When attractive profits disappear at one stage in the value chain because a product becomes modular and commoditized, the opportunity to earn attractive profits with proprietary products will usually emerge at an adjacent stage. That is, the location in the value chain where attractive profits can be earned shifts in a predictable way over time.
It appears to be what we used to call ‘general equilibrium theory.’