Collapse of Information Markets?

Jeff Jarvis picks up on the work of Columbia professor Eli Noam, who predicts that the information sector will collapse due to commoditization.

...we need to recognise that the entire information sector - from music to newspapers to telecoms to internet to semiconductors and anything in-between - has become subject to a gigantic market failure in slow motion. A market failure exists when market prices cannot reach a self-sustaining equilibrium. The market failure of the entire information sector is one of the fundamental trends of our time, with far-reaching long-term effects, and it is happening right in front of our eyes.

The basic structural reason for this problem is that information products are characterised by high fixed costs and low marginal costs. They are expensive to produce but cheap to reproduce and distribute, and therefore exhibit strong economies of scale with incentives to an over-supply. Second, more information products are continuously being offered to users. And information products and services are becoming more "commodified", open, and competitive.

The main result of these factors is that prices for content, network distribution and equipment are collapsing across a broad front. It seems to have become difficult to charge anything for information products and services...

Jeff rightly points out that demand for information is elastic (although there are the constraints of attention) the costs of production are falling as well as cost of distribution. The industry is shifting from economies of scale and speed to that of span and scope. To describe this in industry parlance, margins come from versioning and bundling (scope) and aggregation (span). Somewhere in the span, the line between producer and consumer is being blurred. New combinations of goods are further decommoditized through the very act of consumers participating in production. But all products and industries trend towards commoditization, embrace it.

UPDATE: Kevin Werbach rightly points out that syndication is a business model that embraces the trend of commoditization to its own advantage.