More on parasite technologies, in response to Adam and Jim:

Ray Gifford:

First, it seems to me making the distinction between complementary and parasitic is quite difficult — and not one that law is necessarily prepared to make. Notionally, TiVo puts itself in the position of a fourth party to a three party bargain. (Note, you could also say VCR here.) The old bargain is between advertisers, broadcasters and viewer. The first two pay for and distribute the content — the latter one consumes it. The only contract here is between the broadcasters and advertisers.

The viewer can avoid the ads by leaving the room for a bathroom break, hitting the mute button (is the mute button parasitic? In part, yes), or just not paying attention. TiVo then comes along and allows for much easier wholesale avoidance of the ads. It can, in other words, potentially destroy the bargain or diminish the value of the bargain between broadcasters and advertisers. So what? In the aggregate, this means less “free TV” is produced, but it’s not clear to me less content is produces absolutely. Broadcasters can demand more money from end-viewers (like Disney does with ESPN), or content can migrate to explicitly paid platforms like HBO or on demand.

So what effect has the ostensibly parasitic TiVO had? Well, it diminished the amount of free TV by making the advertiser/broadcater deal worth less. But it does not necessarily destroy it. Indeed, you can think of it being efficiency enhancing for end-use consumers because through the price system they get to more directly communicate their preferences. Now, like Congress, if you think free TV is important for a universal service or democratic pluralism reason, you might want to restrict TiVO. Otherwise, what’s the problem?

posted by Solveig Singleton @ 3:03 PM | Academia, General, Markets: Business, Investment & Innovation

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