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Producers, Consumers and Intermediaries

This is a work in progress, published in this state, but which needs substantial revision to finish it.

In the real world the things we want as consumers are often supplied by a chain, where some form of intermediary sits between us and the ultimate producer of whatever that thing was, for example

Farm or Factory -> Retailer -> Consumer

Writer -> Publisher -> Reader

Our place in this chain will very according to what we are doing, when a writer buys food, they switch from a producer to a consumer. The ability to specialise accounts for much of human progress, and the intermediary also has an important role and should add value to the process.

Problems in the system tend to come down to abuses of power, usually because one element of the chain has some form of monopoly which prevents, for example shoppers from going to an alternative shop to buy some product, but, for example aggressive negotiations by supermarkets may force farmers into being unable to sell their products are a sustainable price.

Risk and reward

The intermediary is sometimes taking a risk, for example a shop purchases goods, and sells them at a profit, but the profit has to cover the goods which the shop buys and then is unable to sell.

Problems arise if, for any stage in the process, the profits are either excessive in relation to the risk, or fail to cover the risks. In free market theory, competition should prevent this from happening, for example if a shop is making excessive profits, then a competitor will notice an easy profit to be made and move in to undercut the original, profiteering shop.

If this is prevented by some form of monopoly then the system breaks down. Again, in theory, there are markets build around a natural monopoly – for example the supply of utility services to houses. Although an element of competition can be introduced, for example by creating a market in gas intermediaries, the pipework carrying the gas has to be run by a body which is controlled by regulation rather than competition.

Licensing and Copyright management

Publishers, Record Companies, YouTube, CCLI potentially add value by collecting money from people who watch media or listen to music and the artists and musicians who create it.

In the case of YouTube, in general for their advertising supported model, they are not taking money directly, but receiving money from advertisers

The situation becomes complicated in the case of intermediaries (collective rights management) who are not really in the chain, for example PRS for Music – as they do not actually know whose content is actually being used. At least the Public Lending Right tries to match library loans to author remuneration.

For all creative content a major issue is ensuring that revenue generated from that content is distributed appropriately down the chain, from the purchaser through the intermediary they deal with, for example Amazon for Kindle books, then possibly other intermediaries, such as a publisher, and finally the author(s). For a paper book, bought from a high street bookseller, they will have costs, such at rent and rates to pay, which an online seller will not have at the same level, so the purchaser should expect to pay more. It would help someone trying to make ethical decisions on any kind of creative content to have more transparency on where their money is going.

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