Clay Shirky has a great essay up, “Newspapers and Thinking the Unthinkable.”

Back in 1993, the Knight-Ridder newspaper chain began investigating piracy of Dave Barry’s popular column, which was published by the Miami Herald and syndicated widely. In the course of tracking down the sources of unlicensed distribution, they found many things, including the copying of his column to alt.fan.dave_barry on usenet; a 2000-person strong mailing list also reading pirated versions; and a teenager in the Midwest who was doing some of the copying himself, because he loved Barry’s work so much he wanted everybody to be able to read it.

One of the people I was hanging around with online back then was Gordy Thompson, who managed internet services at the New York Times. I remember Thompson saying something to the effect of “When a 14 year old kid can blow up your business in his spare time, not because he hates you but because he loves you, then you got a problem.” I think about that conversation a lot these days.

Gives new meaning to “Killing them with kindness.”

Obviously, there’s the Business Risk aspect of this all–when your biggest fans are the worst enemies of your business model, you’ve got a serious problem. The problem with the model is probably that it’s based scarcity, and scarcity is no longer the basis of a business model for anything but physical commodities.

Now, I’m starting to wonder what the next business model to succumb to the Marginal Cost Of a Copy Approaches Zero. I’m going way out on a limb, but I think the next model will be basic IT services.

What?!, you’re probably thinking. Work with me here. The incremental cost of adding a row to a database has been essentially zero for some time. When I was working in online dating, the cost of adding a new user was close enough to zero that it almost wasn’t meaningful to try to accurately measure it (too many variables to wind up with a value that was both meaningful and accurate except at the highest aggregate levels). We effectively had a fixed cost which we then distributed across our subscriber base.

Gmail, Yahoo mail, and Hotmail email all brought a similar cost model to email. As the cost of adding an account fell, the variety of options for generating enough revenue fell with it. I think I pay less than five dollars per year for email hosting of my domain, and that’s for something like 25GB of storage and unlimited inboxes. The key is that email hosting is no longer costs enough that I consider it worth tracking.

The challenge today is not about finding the next digital asset or service whose marginal cost-per-copy is zero at one copy. It’s about determining how to manage the risk that it happens in some way that your firm is not well-positioned to adapt to (or, more honestly for most firms, attempt to prevent), either because it’s taking money out of your pocket as a provider or costing you competitive advantage because your competitors are better able to take advantage of the situation than your firm.

Extra credit to all of those who know where “][” comes from, even if it has only the most tenuous relationship to this post.
Photo from Boston Globe’s “Big Picture”