structured viral communications: the political economy and social ...

2009) http://www.lightreading.com/document.asp?doc_id=181548&site=lr_cable. ... distributor of high-quality video programming has reached the tipping point .
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STRUCTURED VIRAL COMMUNICATIONS: THE POLITICAL ECONOMY AND SOCIAL ORGANIZATION OF DIGITAL DISINTERMEDIATION MARK COOPER* INTRODUCTION ..................................................................................... 16 I.  THE TRANSFORMATIVE POWER OF STRUCTURED VIRAL COMMUNICATIONS .................................................................... 19 A. Viral Communications Overwhelms Centralized Communications .................................................................. 19 B. The Challenges and Advantages of Structured Viral Organizations ....................................................................... 21 II.  DIGITAL DISINTERMEDIATION IN THE MUSIC SECTOR ........ 22 A. The Tight Oligopoly in the Physical Music Business ............ 25 1. Collusion on Price ............................................................ 25 2. Anti-Consumer Bundling ................................................ 28 B. The Emergence of a Digital Music Business .......................... 30 1. The Transaction Cost Transformation ............................ 30 2. The Artists’ View .............................................................. 31 3. The Welfare Economics of the New Industry ................. 37 C. Extensions of Digital Economics to Other Sectors ................ 38 1. Newspapers ....................................................................... 38 2. Book publishing ................................................................ 38 3. Video................................................................................. 40 4. Avoiding the Nightmare on Elm Street ........................... 41 III. POLITICAL ACTION AND THE OBAMA CAMPAIGN ORGANIZATION.......................................................................... 47 A. The Magnitude of Change ..................................................... 48 B. The Internal Structure of the Structured Viral Organization Model ............................................................. 49 * Dr. Mark Cooper is committed to public interest advocacy and academic research. He is Director of Research at the Consumer Federation of America. He is also a Fellow at the Vermont Law School Institute for Energy and the Environment, a Senior Adjunct Fellow at Silicon Flatirons, and a Fellow at The Donald McGannon Communications Center of Fordham University.

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J. ON TELECOMM. & HIGH TECH. L.

[Vol. 9

1. Recruitment and Training ................................................ 50 2. Motivation and Monitoring ............................................. 52 3. Management and Coordination ....................................... 57 C. Exploiting the Communications Resource ............................. 62 CONCLUSION ......................................................................................... 67

INTRODUCTION This paper applies a new institutional economic analysis of what I call “structured viral communications” to two of the most interesting stories of cyberspace: (1) digital disintermediation in the music business; and (2) the 2008 Obama campaign. The paper positions the analysis between two extreme views of the digital revolution’s impact on traditional business models. At one extreme is the Internet fairytale of “free everything”;1 on the other end are the copyright-holder sob stories of pirates “stealing everything.”2 While there is a certain amount of truth in each view, both overstate their case and, consequently, offer a fundamentally flawed account that provides a faulty basis for policymaking. The “Internet fairytale” dramatically overestimates the ease of cost recovery in a world of low marginal costs. Moreover, it underestimates the challenge of organizing the economic relationships needed to recover substantial average costs and achieve long-term viability. The Internet fairytale also violates the first principle of the free software movement: “‘[F]ree’ as in ‘free speech,’ not as in ‘free beer.’”3 The failure to carefully define what