Creative destruction continues

Kris Tuttle at Research 2.0 has an excellent article today entitled "Who Pays?" which discusses the latest New York Times attempts to get people to pay for their content*. He examines the many issues surrounding free versus paid content, and the problems that arise from "existing companies trying to apply old models to the new online medium."

Kris notes the connections to other forms of content, such as music. On that subject, we would also recommend Steve Waite's Research 2.0 article from earlier this month covering the Digital Music Forum in New York City. Here again, the discussion highlights the plight of businesses hoping somehow to apply old models in a world that has dramatically changed.

One of the positive aspects of capitalism, according to economist Joseph Schumpeter, was that it not only allows innovation and radical new advances, but it actually makes them inevitable when free enterprise and competition are not blocked by the government. Using examples from one industry after another, he wrote that free-market capitalism "incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism."

Ironically, the published content of the New York Times typically takes positions that belittle the positive effects of free-market capitalism: we have highlighted several examples in the past, such as this one, this one, and this one.

It's not surprising that those who reject the economic insights of pro-free-enterprise economists such as Schumpeter also have a difficult time perceiving the revolutionary aspect of certain technological advances, such as the ones that now pose a lethal threat to the Times' entire business model. Over three years ago, we criticized the shortsighted thinking in a New York Times article that declared that not enough Americans had high-speed internet connections to make web-delivered movies a good business, and contrasting that with the insights of George Gilder, who published a book all the way back in 1990 entitled The Death of Television predicting exactly the sort of revolutionary changes that the web is now wreaking on the delivery of content.

There are plenty of companies -- perhaps even the New York Times -- that will continue to have a business in providing content of value to those who are willing to purchase such content, as Kris Tuttle and Steve Waite discuss in their articles. But it will certainly help their own cause if those companies avoid trying to apply old business models in a radically different landscape, and if they accept the truths about business available from far-sighted authors such as Joseph Schumpeter and George Gilder.

* At the time of publication, the principals of Taylor Frigon Capital Management do not own securities issued by the New York Times Company (NYT).

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