: Eli Noam of Columbia gave a keynote at David Isenberg’s WTF nonconference today (and I’m still morose at not being able to make it). He caused much comment with a piece in the FT arguing that the information industry was in collapse (my original post here; followups here and here). I’m grateful that Fast Company’s Heath Row put up a partial transcript of Noam’s comments at WTF here. I think Noam is still missing the forest for the treest (or is that the macro for the micro?). He refuses to see that the information industry may be in a restructuring more than a collapse. Old institutions may well collapse. But new institutions are growing quickly. Says Noam:

Market failure exists when market prices cannot sustain a market structure. The failure of the entire market segment has far-reaching, fundamental effects. We are causing it because we are so successful. The information product has high fixed cost, cheap distribution, economies of scale with incentives to oversupply, and commoditization. Prices for content and network distribution are collapsing across a broad front. It’s become difficult to charge anything for information products and services. That’s a symptom of a chronic price deflation that shows no sign of abating. That’s good news for consumers and bad news for providers. The price is approaching marginal cost, which can near zero.

He’s acting as if the information industry is based on revenue from its consumers. It’s most definitely not. The information industry (aka media) is fed by revenue from advertisers, who can easily shift their dollars from one medium to the next and they are doing that.

The shift is only just underway. Look for a huge migration when, for example, the FCC and Congress succeed in sanitizing broadcast media and their audiences shrink and get undesirably older; more and more money will shift to new media: the Internet and satellite. Until now, broadcast TV audiences could shrink yet broadcast ad rates could grow; that will end, I predict, in a year or at most two. Noam continues:

But there’s more trouble ahead. With convergence, the sub-industries in the information sector affect each other more than ever before. The swings of the overall economy were the swings of the sub-industries. Before, those were relatively dependent. They’re much more interdependent now. The collapse of Web sites affects tech magazines, which affects telcos and R&D.

First, I don’t see any overall “collapse of web sites;” a few collapse but as a medium, it is still growing in audience and traffic and, most importantly, revenue. In any case, I don’t see how the collapse of any number of web sites affects tech magazines (talk about micro) and I absolutely don’t see how that affects telcos!

I invited Noam to lunch before and never heard from him. I’ll extend the invitation again here; he needs to hear about the practical P&L of the media industry. Noam dismisses hope of innovation here:

The key strategy is to innovate and differentiate, but that’s not something everyone can do. People’s attention does not increase at the rate of Moore’s Law. You can’t run an entire economy on niches. That’s the embarrassment of niches. So people will consolidate to maintain prices. As a result, hopefully, prices will rise, which will lead to expansion, entry, and a new price collapse.

Again, he gets the fundamentals wrong. Niches are more efficient and more valuable for all except the old, mass players. So an online publication that speaks just to, say, home owners is more efficient than a print lifestyle publication that speaks to a mass audience; it costs less to produce; it costs much less to manufacture; it costs much less to distribute; it garners higher rates for the audience it attracts. The economics improve once they reach critical mass (but critical mass is easier to reach online than in print!). He concludes:

In some ways, the notion that an information-based economy will be inherently prosperous must be reconsidered. Yes, information wants to be free. Now we have to cope with the consequences.

Yes, we innovate and develop and adapt and grow.

: I never saw the earlier speech Noam brags about at WTF, in which he asked whether the Internet is bad for democracy. Here’s the text; here’s a write-up that makes me think this guy is either clueless or contrarian for sport.

“There is such a thing as being too politically informed, as being too mobilized,” said Noam, who believes that excess information can lower voter participation. If people are overwhelmed with information, he contends, they will start to believe that what they say doesn’t matter….

If everybody on the Internet has a voice for his or her political message, said Noam, then each message must be made more powerful than all the others just to be heard. In order to “punch through the clutter,” said Noam, message production becomes slick and expensive; therefore the barriers to political involvement take on a new form. According to Noam, messages will have to increase their hype, shrillness and simplicity, and they will undergo the “15 minutes of fame” compression….

“Political stability depends on a little bit of a lag, a little inertia,” said Noam. “This is a revolution, and revolutions destroy.” Noam lists a variety of other ways in which increased technology – i.e., increased facts, information and opinions – will affect social dynamics: Broad social agreements will be harder to reach, and there will be decentralization, further decay of urban centers as geography becomes more irrelevant, and a decline in the coherence of the nation-state.

Boy, has experience proved him wrong on every point.

Can you ever have too much information? That’s so 1970, so much about the fear of “information overload,” so inherently insulting to the citizenry. The truth is that technology is helping us select information better.

We have seen in this campaign that more information and — more important — the ability for all to have a voice has led to greater involvement and I still take that as a good thing.

The messages are, to my ear, less shrill in citizens’ media than in major media, which tries to portray us as a nation at war, red-against-blue, while online, I see people talking to people, still quite opinionated but more open to conversation. I believe that broad social agreements will be easier to reach as the conversation grows wider.

Noam keeps thinking from atop a power-law curve, where only big matter. He should slide down to the middle, where the people — the market, the citizenry — matter.

Is this revolution destructive? Sure. It destroys old, entrenched power in favor of openness. But that’s a good thing, professor, a very good thing.