The Costs of Free: Commodification, Bundling and Concentration

24 Pages Posted: 15 Feb 2017 Last revised: 21 Mar 2017

See all articles by Jonathan Barnett

Jonathan Barnett

University of Southern California Gould School of Law

Date Written: March 20, 2017

Abstract

Digital markets offer abundant free content but exhibit extreme concentration among content aggregation intermediaries. These characteristics are linked. In commoditized weak-IP markets, firms earn revenues by bundling free content for users with positively priced advertising services for firms. Intermediaries promote content commoditization, and the resulting reallocation of market rents from content producers to content aggregators, through free content distribution and political-influence activities that weaken copyright protections. The expected welfare effects raise concern. Scale economies, network effects, “infinite inventory”, ecosystem effects, and learning effects promote winner-take-all outcomes in the intermediary market while weak IP rights skew investment toward low-cost, short-lived projects in the content market.

Suggested Citation

Barnett, Jonathan, The Costs of Free: Commodification, Bundling and Concentration (March 20, 2017). USC CLASS Research Paper No. CLASS17-9, USC Law Legal Studies Paper No. 17-7, Available at SSRN: https://ssrn.com/abstract=2916859 or http://dx.doi.org/10.2139/ssrn.2916859

Jonathan Barnett (Contact Author)

University of Southern California Gould School of Law ( email )

699 Exposition Boulevard
Los Angeles, CA 90089
United States

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