Profiting from Progress

I was reading some comments on Google+ in their “what’s hot” stream. The comments were about a news item that said that telephone companies were complaining about  losing money on texting and voice calls as a result of people migrating over to social networked based services, like Facebook and Google Plus, and apps like Google Voice or even Skype. Instead of messaging one another, ticking up their per-message fees and messaging allowance, people are simply messaging as a function of standard Internet activity. The comments went on to comment that the telcos weren’t really losing any money, instead, their profits were less than were desired. Services and apps within the social network structure, like Google Voice is having also having impact on the talk minutes as well. Instead of using up cell phone plan minutes, again, conversations are taking place as normal Internet activity. In essence, there is great logic to buying the cheapest, low-minute plan and then putting a high volume data plan on the account. This invariably comes out cheaper for the customer by at least half. The telephone companies are seeing their revenues decrease and don’t like that because they like profits for many of the same reasons customers like cost savings.

Let’s jump a minute over to television service providers like satellite and cable. People have to select between different plans, with no real way to get a la carte services. eg: To buy on a channel by channel basis rather than to take packages that include channels they want with channels they don’t. Believe it or not, the TV providers would like to sell their services that way, but they can’t because they buy their programming packages from programming source providers who lump junk programming they invested in with more highly desired programming. In essence, they pick up channels and resell them because they get to charge for them. To counteract having no one buy them, and thus reduce their costs, these pigs with lipstick channels are attached to channels that are highly desired, thus being able to sell them regardless of the audience demand (or lack of it) for them.

Now let’s look at motion picture providers. In-theater releases bring in a lot of initial cash, and then DVD sales provide the next higher income tier, albeit stretched over longer periods. Thus they really don’t think much of online streaming, which is the lowest form of revenue production. Aside from that, online distribution opens up a whole can of worms in terms of copy protection. As a result, programming sources want to ensure they get every possible dime from the low tier income streams and so we hear all of the hoopla about piracy and even bogus associations between piracy and national security. Witness the failed attempt to invoke draconian protection through SOPA, the Stop Online Piracy Act. It wasn’t about national security, it was about waning profits.

If you look at all of these things, a definite pattern emerges. It’s about money, certainly, and I’m not going to sit here and say how bad all these companies are for trying to profit from their products. People should be paid for their work because that’s the system we have. It would be nice to think about the world of Star Trek where there is no money and so everyone has equal free access to goods and services. Perhaps in a different reality we might have evolved such a culture, but I kind of doubt it. While people can be philanthropic, it’s also my experience that we’re self-interested because we all compete for finite resources. Our survival, no less comfort, is based in competition for these resources.

So we have to work within a system that favors for-profit endeavors because that’s the system we have. That, not Star Trek, is our reality. As such, this also means that we wish to be reserved in the efforts we extend to create our profit. More work for a given dollar equals lower return of investment, and so becomes undesirable. This is where things get a little hosed up. The world has changed pretty significantly as a function of the technological rise we’ve experienced. Many companies prefer the ‘old ways’ or doing things because that’s what they’re geared up for, and that’s the environment they best understand. The greater understanding one has for a given thing, the more easily they can exploit that thing. Ergo, less work for greater return.

The bugaboo is that the consumer also plays by these rules too. We want to get more and pay less for it. Technology offers a magnificent panorama of efficiency and cost savings. It manifests a greatly cheaper way to get at services and products and a more efficient way to deliver them. That translates into a demand for lower cost as well because people aren’t stupid, they understand that technology also means lower distribution costs. Ergo, their demand for the products to go up while their willingness to pay goes down. This could work just fine in our economic system, except that the providers like the look of the higher per-item pricing and wish to keep that along with their lower distribution costs. That equals higher profits, which is what the system is all about. So they balk at really embracing the capabilities of technology, and balk at reshaping and repricing their products to exploit it properly.

That’s where the angst of the issue really is. Back to the telephone companies, they need to be reshaping themselves as data providers. The realms of personal communication and interaction are in a new paradigm. The companies just can’t get off of the idea that they should be able to exploit lower distribution costs while keeping their pricing the same. They don’t want to upgrade their business models and infrastructures of delivery because that goes counter to the concept of maximized profits. In the doing, they are forcing themselves into obsolescence. Their view is too short sighted, especially for a world so now enamored with immediate bottom lines.

In many ways, this attitude is doing the nation and its people a terrible disservice. We can easily see what a failure to invest in the future is causing. Our highway system stands testament to a failure to not just stay equal to need, but to see past today into tomorrow. So now we have a failing infrastructure. The same thing is happening all around us, and we are now hearing about it in the complaints of companies who foolishly turned their backs on tomorrow trying to make the most out of today. In normal circumstances of the marketplace, the companies that failed to address the future would perish and be replaced by companies that did. Which happens to a degree. But our economics has become politicized. The old guard companies are spending terrific sums of money trying to manipulate laws to counter progress –and succeeding. The sad truth being that had they invested that time and money into embracing the future, they would be securing a strong bottom line into the future. Instead, they hold everyone back with their adherence to antiquated measures and business models.

It felt good to read the comments attached to the Google+ news item. It showed me that a lot of people get it. They understand the situation and are steadfast in their demands for better, more efficent, higher quality service at lower prices. But it also showed me that there are a lot of people who don’t get it as well. They constitute a great enough number that they give traction to the forces opposing progress we desperately need in order for our nation to remain a first world postition among the nations.