5/13/2010

Micro-payment Feudalism

I'm about to propose that micro-payments are a system of capitalist exploitation, the scope and potential of which have not been seen since the days of feudalism.

Ready? Go.

The myth of micro-payments is that the little guy can make money off of what was free, by charging only a small amount for it. Because these payments are in the digital arena, there are basically no raw materials costs, and therefore any payment whatsoever is pure profit.

This is the dream of capitalism: a reduction of labor costs to zero, so that any amount charged is complete surplus value. A money making machine.

But what this forgets is the system of distribution. The system of distribution is fundamental to a market--in fact, it is the oft forgotten twin sibling of production. You cannot sell anything you produce unless it gets to those willing to pay, and so any value of your product is as dependent upon distribution as production.

The market of the Internet is of a feudal land market.

With land as the only material form of wealth, those with land will consolidate their land, using their land to increase the value of their land. In a feudal society, the land is the resource from which anyone lives. Of course, a square mile of land can support more than the people who live on it (i.e. relatively few users per mile) so an ownership class can develop, who are not working the land, but simply owning and coordinating it, providing limited access to their serfs in exchange for the surplus produce.

This changed with the industrial revolution, when a working class could be established that would further the owner-class' capital (value now dissociated from the land) by being paid, as long as profits were still collected. When value was pulled away from the land, and became "materials" or "labor" or "market share", capitalism was invented, because anyone could profit anywhere, as long as they found a way to charge a markup. Anyone could profit, except those working with their hands, of course.

Now that raw materials (at least in terms of media) are becoming valueless, and workers are in oversupply, we're moving back towards that feudalism. If raw materials for media still cost anything, some of that value might trickle back to the workers who are actually making it. But as it is, media is all over the place, and only distributors can make any money off of it. The consolidation of media is taking the place of land ownership, and the micro-payment is the deflationary liquidity by which it is valued. People might pay for some media, but the media with any actual value is the media that is circled tightly around already valuable media. Those with the ability to consolidate many micro-payments are actually making money, while the vast majority of people are working for pennies digging around in the mud compared to those with the distribution networks under their control.

Just because someone can flip you a nickel for doing your media dance does not mean that they aren't going to flip most of their nickels to the naked-on-demand-HD-video-constantly-updated-dance-network. I think there is a belief that because micro-payments are "micro", they will somehow spin straw into gold for the little guy. If anything, by INCREASING the value of money at smaller increments (making these sums liquid to those who can collect on the large scale) they will hurt people trading on small scales, because their fewer transactions will earn them less money. If a penny was all of a sudden the value of a $1 mil., you wouldn't be rich by reaching into the "take a penny" bin. The convenience store would be rich for having 17 cents just sitting on their counter that someone gave them for nothing. It's a type of transactional deflation. Think of it: YouTube starts charging a penny a video watch. At roughly a billion views a day, they make $10 mil. a day. Now, you try charging a dollar per view for your own video. You might have made $10 a day from your 10 video views, except that all those viewers are now going to YouTube for a 99% discount. If you charge the same as YouTube, you are clearing 10 cents, while YouTube is making 10 mil. You might as well make nothing. Micro-payments support capitalists, because it makes consolidation profitable.

We're led to believe that because ANYONE can collect micro-payments, ANYONE can collect a lot of micro-payments. But there is no evidence to support this belief. It is the dream of a minor merchant, hoping to be a lord.

Say you are a photographer, or a writer, or a musician. You produce your media and put it online. You put up a micro-payment system. Maybe you collect enough to keep doing it, to pay for hosting and tech fees. Maybe you even make a bit more, and have enough left over to micro-pay tips to your friends who are doing the same thing. You're basically operating at a digital barter-economy level.

But then, you hit it big. BoingBoing drops your link, the constant unfolding of which is driving they're own "micro-payment" of ad payments per view. Your micropayments sky-rocket. You have surplus wealth. What do you do with it? Distribute it to your friends? Or start your own podcast? Hire some staff writers for your blog? Set up digital-franchises?

Next thing you know, you're being bought out by Gawker Media. You're an editor now, a curator of content. You siphon your friends' media through your big micro-payment mainstream-blog farm, telling yourself its okay you're not paying them, because they each are getting trickle-down micro-payments from your powerful link distribution system. You make or break entertainers, using them to feed the network of links, each one generating a fraction of a cent, with you at the hub. You are the landlord now. How does it feel? Drink the milkshake. Drink it up.

The micro-payment theory of the Internet combines this feudalistic consolidation with a Manifest Destiny view of the infinite characteristic of markets. We could all achieve payment, and make a living, if there were an infinite amount of media consumers, with an infinite amount of nickels to give us. There are a lot of consumers, but they are not infinite. This is a gold rush, a New World. Most of us homesteaders are just going to end up moving back to the city, and working in the factory. None of us are going to strike it rich with micro-payments. The only people who will, will be those in control of the distribution. The big mine owners. Those who can set up the shipping companies. Those selling us the tickets to California. But while the cost of media's raw materials has evaporated, the influx of capital is the same as it ever was. The market is still a market, no matter how small.

So what do micro-payments do for you? Nothing, except re-orient the market so that your work is less valuable, and that those who are already making money can make more. But then again, to some people who are underwater on their mortgages, signing a share-cropping agreement with the bank might seem like a good deal. Or moving back in with mom and dad. Or, you know, like crawling back into the womb.

But, creative media has an advantage over capital. Creativity does not require investment to exist. The economies of entertainment, literature consumption, and media production do not strictly need cash investment--they need mental, attention investment. This is another marketplace that has a different sort of power. There are those who would horde attention as well--but luckily, the human's capacity to supply attention well over-fulfills the demand, and so the consolidation of attention is not as strong as the consolidation of capital. The demand for capital seems pretty near limitless. Maybe by playing this market over the capitalist markets that tend towards exploitation of distribution, we can organize. Attention is the seed of organization, after all--the same process, but different market. Someone is going to control the productive market--will it be those who can consolidate the capital, or those who can organize the attention?

Take away:

A) the myth of micro-payments lie in the idea that they improve market standing for the little guy by increasing "free" to "pure profit" in the digital arena.

B) this is a myth, because micro-payments actually constitute market deflation by consolidating value around pre-existing value mechanisms of distribution and market control.

C) micro-payments, in a void of other material costs (that might trickle back to the actual producers), represent a new feudalism by making cumulative value in distribution the only source of value, and thereby awarding real value only to those who already control value.

D) We're tempted, as always, to participate in the game by a distortion of the way the market actually works, and accordingly, the promise of advance from the bottom up.

E) The good news is that digital media doesn't need capital at all. And attention might be a trumping market.

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