Future of Information Commerce

Since the first Future of Publishing workshops in 1991, we have observed a paradigm shift; workshop participants confirm that the industry is moving toward multimedia, networked information, custom publishing and, most recently, toward the personalization of information. The last refers to information sold in "chunks" or pieces rather than in whole entities, for example, as chapters, articles, images, photos, video clips, single songs and sound bites rather than as books, journal issues, movies, and complete music CDs.

At the same time, the Internet has exploded, business presence on the World Wide Web is becoming required, pointers to Web home pages are becoming common on business cards, and information providers and publishers are trying to figure out whether the Web is a threat or an opportunity or both.

The next shift in the paradigm is coming. It builds on the personalization of networked information and adds an ingredient that has been missing: advanced technologies for rights management that allow, even encourage, usage-based charging. Forget premium pricing, premium services, premium anything. This will be a world with a very high volume of lower-margin transactions.

We call this new paradigm "information commerce." We believe that major players in the information, computing, online, and telecommunications industries will make significant technology and service announcements in 1995 and 1996 inaugurating the broad shift toward information commerce.

We believe that this new paradigm will be so significant, we are renaming our public workshops, Mapping the Future of Information Commerce. The next will be held in San Francisco, April 13-14, and in Boston, April 18- 19, 1995. A Registration Form can be found at the end of this brochure.

The Future of Information commerce workshops will use the same Future MappingŪ process for scenario planning we've used before. An overview is presented on the next page.

The Superdistribution Model

Although we believe information commerce is developing, we do not have a privileged crystal ball. We do not know exactly how the world will turn out. Instead, we have developed five alternative visions (endstates) of information commerce for the end of the century. These endstates are summarized on page 3.

Our workshops will continue to address earlier themes and issues, but we believe that the information and publishing industries will become significantly more transaction based. It is just this shift toward information transactions that is enabled by advanced rights management and metering technologies.

In the offing are new business models based on the combination of networked information and advanced rights management technology: methods for the control and metered usage of digital content and associated billing and payment infrastructures. For example, one emerging business model is that of "superdistribution," the notion that digital content in cryptographic envelopes [a friend calls them "cryptolopes"] could be duplicated and transmitted without (apparent) cost. A brief discussion of relevant cryptographic methods and their uses appears on page 7.

Rights management and metering systems now under development will allow rightsholders to implement new pricing models. These pricing models can be based on "pay-per-use." The "best of class" metering systems allow for charging on a micro-transaction basis if the rightsholder wishes and if the user agrees. These micro-transactions would entail any or all of several operations, including searching, modifying, duplicating, printing, exporting from the controlled environment, browsing, transmitting to others, excerpting, and anthologizing.

Let's make a big initial assumption: rights management and metering technology has become widely deployed on desktops and integrated in common software systems and applications. Now each person who receives an envelope can decide whether they want to pay for using the content. Some will; some won't. And of the ones who do, some percentage will like the content enough to redistribute it to several of their friends (still in the cryptographic envelope), who in turn....

The superdistribution model entails important multiplier effects. The information distributor and other rightsholders share a piece of the revenue stream, but no additional distribution costs after the initial sale. The term "initial sale" may be inaccurate here. For example, if having browsed a title or an abstract I then ask my Web browser to deliver the cryptographic envelope to my computer over the net, I may not incur any charges until I actually open the envelope, which may be upon receipt or some later time. Thus, the "purchase/sale" of the object is divorced from the act of having it transferred across the network from the information provider to the user.

Instead of pricing models based on subscriptions or units (books, issues of journals, etc.), information distributors, repackagers, authors, and publishers could choose to charge a very small amount for small

New technologies are often used first to improve or automate what already exists. The first computers were used to automate repetitive calculations and to summarize massive amounts of data. When general purpose personal computers were introduced, they were first used for word processing, replacing both typewriters and specialized word processing computers such as those from Wang.

The spreadsheet was perhaps the first new application to go beyond the typewriter and simple calculator. We forget how revolutionary VisiCalc and then Lotus 1-2-3 were when they were introduced. Since then, computers have been put to uses that were hardly envisioned 10 years ago.

We expect that transaction pricing will be phased-in over two to five years. The earliest uses of metering and rights management technologies will probably be to control digital content and enforce subscription pricing. Initially Control will be used to prevent export from the metered environment, to ensure the integrity of the content, and to make it difficult for end users to anthologize or create derivative works.

Metering systems are comprised of many parts. First, for the author, publisher, information distributor, and information repackager, there are applications ("envelope stuffers") that put content into cryptographic envelopes along with associated control, permissions, and pricing information. Using traditional search and retrieval methods, the information consumers identify those pieces of information they want. They might accomplish this in one of several ways, including title, subject, abstract, or full-text searching.

Using common Internet applications, such as electronic mail and file transfer, or higher level applications such as Web browsers or Gopher, the cryptographic envelopes are conveyed from the information source to the user. On the user's computer is an application or function that opens envelopes and keeps track of usage, pricing, and costs incurred.

When a user first opens a cryptographic envelope, the metering system "phones home" to establish credit, download an amount of money to be stored in the meter, or verifies that the information distributor has granted credit up to some limit. The most robust metering technologies are compatible with several kinds of billing and payment systems, including credit cards (Visa, Mastercard), charge cards (American Express), bank debit cards, anonymous digital cash transactions, and charge accounts and lines of credit for individuals and companies. The financial clearinghouses- there will be several on the network-thus mediate between the metering systems on desktops and information servers and the established banking and credit card clearinghouses that make up the national banking and credit systems.

collected by the metering and billing system, will there be any limits on the downstream use of these transaction data? Information providers need to be able to assess market response to the information content itself-does anyone really want it? - and to their control and pricing schemes. Consequently, some have argued that the most detailed usage transaction data should be made available to publishers and information distributors. After all, banks and other financial institutions have handled detailed transaction data from credit card use for some time now.

Others have raised questions regarding the privacy of information consumers. They raise the specter of "Big Brother." If detailed transaction data exist, the data will fall into the wrong hands or be put to the wrong use. It is no one's business what information a given person reads or sends to whom. Just as rules came into being regarding the uses and misuses of credit card and other sensitive financial transaction information, it may be that new laws will be proposed to protect the privacy of individual and organizational information consumers.

Another approach is that of a third party acting as a clearinghouse for transactional data. There are numerous precedents, for example, ASCAP and BMI in the U.S. music realm or Copyright Clearance Center in the area of photocopying and more recently in corporate electronic information use. Here someone like CCC would aggregate detailed usage and financial information and report periodically to rightsholders.

Transaction-based revenue will eventually exceed the revenue from the same traditional print products. However, to succeed, publishers may have to cannibalize existing print, subscription, and connect-time businesses as they transition to metered transaction pricing. This means that revenue from traditionally-priced products may decline faster than the increase in revenue from metered transactions.

A critical problem is how to get from subscription and unit pricing to transaction pricing without excessive cannibalization of existing businesses. We refer to this as the Valley of Death (VOD). On the near side stand existing businesses. On the far side stands a stable transaction based set of businesses. Getting across is the problem. New entrants may be particularly favored in the Superdistribution scenario since they will offer new material rather than cutting into existing backlist.

But all who want to play in the Superdistribution world face other difficult issues. For example, questions abound regarding the acceptance of usage- based pricing. Information consumers generally like to have predictable costs that can be related to particular tasks. The actual cost of accomplishing a particular task will depend on the charging algorithm, the pricing established by the rightsholder, and the efficiency of the person doing the work. But will the information consumer be able to relate the bill for these activities to a task such as "create a report based in part on external information from Dow Jones?" One "worst case" scenario is that rightsholders set transaction prices much too high on the theory that it is always easier to lower prices than to raise them and, by doing so, make the transition to transaction pricing more difficult.

These are just a few of the intriguing questions addressed in the Future of Information Commerce workshop. Please join us.

Very strong public key encryption technologies involve generating a pair of encryption keys with special properties. One key is made public, the other kept secret by the key owner. One person (or computer) wanting to communicate with another person (or computer) first gets that person's public key and encrypts a message with it. This encrypted message can be decrypted only by the receiver's private key, which is never made public and carefully guarded.

Among the advantages of public key technology are that it eliminates serious problems related to safe key distribution. If there were only one key and that single key could both encrypt and decrypt a message, then it might be unsafe to transmit that key to the person with whom you want to communicate. Sending a public key entails no such problems.

Public key algorithms for actually encrypting information are relatively expensive in computational resources. For large amounts of information, so-called "bulk encryption ciphers" are more practical. The same key is used to encrypt and decrypt the text and hence must be kept secret. A common use of the public key technology is to exchange secret keys safely. Some other uses of public key encryption are incorporated in the most sophisticated information control and metering technologies. These are digital signatures, user and computer authentication, and digital time stamps. A digital signature does two things. First, it is an integrity guarantee. When the incoming message is decrypted, some calculations are performed in such a way that the receiver can tell immediately if the contents of the message have been tampered with. Second, a digital signature allows the receiver of the message to determine whether the person claiming to be the sender of the message is indeed the sender.

The same technology can be used to ensure that the computer claiming to have sent or received the message is actually the one that did so. For example, if someone has metering technology on a personal computer, every so often the computer will report back to the billing function how much information has been used and how it has been used since the last report. Computer authentication is one method for assuring that the usage and credit card information is being sent to the correct billing computer and not to someone else masquerading as the billing computer who wants to steal credit card information.

For some purposes, it may be important to "time stamp" a chunk of information. For example, a meter may send an encrypted message back to the billing function over a network in such a way that the envelope may not be received for a day or two. The contract with the publisher may specify that billing information be returned on the last day of the month. By time stamping the message, the user can prove that the message was sent on the last day even though it might not have been received until the second day of the following month.

The information and publishing industries are changing nearly as quickly as the computer industry. To succeed in this new, fast-paced world, information creators, distributors, repackagers, and even information consumers need planning tools that can cope with this accelerating rate of change. Future MappingŪ is a powerful discovery learning process that uses highly interactive processes to accelerate personal and organizational learning and decision-making. These processes leverage participants' current knowledge while creating enhanced understandings of the dynamic forces that are changing the information industries, indeed, all the copyright industries. The Future MappingŪ approach drives the planning process from the big picture view down to the level of actionable events. Understanding competitors, technology, the market, industry structure, and especially one's own company in terms of specific events allows organizations to stay one step ahead of their competitors consistently. By doing so they create their own dynamic competitive advantage.

Workshop participants explore and evaluate alternative visions (or endstates) of the future of publishing and related industries. The endstates distinctly define different competitive market environments representing various schools of thought about how their industry will look in the year 2000. They provide a rigorous approach to problem definition and put conflicting viewpoints on the table for open discussion, analysis, and modification (endstate synopses follow later in this brochure). Participants also learn to recognize and monitor milestone industry events by analyzing a diverse information base (provided by the facilitators) of 165 or so possible future events. These events are hypothetical future occurrences with a headline, a date, and a description. Events are not trends, but they do reflect trends in four categories: publishing and related industries, technology, political/regulatory, and socio-cultural. Each workshop participant joins a team that will complete two key tasks. First, teams select events they believe are either highly likely or highly unlikely to occur. These choices are computerized and fed back to the group and serve to make explicit the group's current mental model (or unconscious assumptions) of the industry five years from now. In the second exercise each team advocates, as in a debate or role-play, one of the endstates. The team analyzes and selects the key events that must (or must not) occur for its endstate to come about. Team members think proactively about what it would take to make the industry evolve toward one particular vision rather than another. In doing so, participants think carefully and creatively about the strategic issues that are most important to their own work as well as to the industry as a whole. Role-playing in this context encourages participants to set aside old beliefs and "try on" new ideas and points of view. The result of the Future MappingŪ process is a shared awareness of the range of options existing in the industry. At the conclusion of the workshop, attendees are able to calibrate their personal knowledge and beliefs against a wide range of opinions, gathered from previous public seminars, about many specific events and the endstates. Our public workshops conclude with an exercise that shows participants how to make use of what they have learned once they are back home and on the job. Most participants tell us they have learned to read the newspaper and trade press in new ways, make more informed decisions within their companies, and anticipate, recognize, and interpret key events that are milestones and turning points for the industry. NCRI consultants combine knowledge of strategic planning and industry dynamics with information technology expertise to help you use powerful new technologies to stay one step ahead of your competition. We bring both process and content expertise to help you solve complex problems involving business strategy, information technology, and organizational change. We ensure your success by working with you to create innovative solutions to difficult business problems.

Superdistribution: Information distribution has become a business of high volume, low cost transactions. Metering technologies incorporated in desktop computers allow users to pay only for information used. The ubiquitous World Wide Web plus metering and content-control technologies allow digital information in cryptograhic envelopes to be duplicated easily and sent simultaneously to many people. This has created new business models in which the down stream redistribution of information, the "multiplier effect," is as important as the initial distribution. Custom publishing now has been widely adopted in business and other information- intensive markets. Some trade publishers are experimenting with print-on- demand technologies (locating printers in super bookstores) in order to reduce distribution and inventory costs. Authors, agents, repackagers, and direct (e)mail marketers have gained at the expense of traditional publishers and on-line services.

InfoCommerce Fast Forward: Computing and consumer electronics have converged. Inexpensive hardware, ubiquitous wireless, and the MTV generation's immersion in consumer electronics changes information access modes. Cheap, but often incompatible, advanced computing and telecommunications technologies are widely used; home entertainment centers consisting of television, digital audio, and powerful computers are networked together using cable and telco access to the several information superhighways. Advertising is focused on microsegments. Shared on-line information, education, and entertainment environments or "spaces" attract large audiences. On-line virtual reality video games with multiple players have become the rage. Inexpensive hand-held computers connected to information sources via wireless networks have made "just-in-time" information a reality for nomadic users.

Global Network Utopia: Global information utilities provide low-cost ubiquitous network access to megadata information and entertainment warehouses on the emerging Global Information Infrastructure. Advanced multimedia workstations and very fast networks enable new info- and edu- tainment products that integrate voice, data, and full motion, full screen video. Consumers demand significantly more graphical, audio and interactive content in education, information, and entertainment products. Electronic newspapers and magazines where readers interact with editors and authors are the rage. The highly visible entertainment production houses who early on acquired or developed the best talent (e.g., Disney, LucasFilm) now have a perceived quality advantage over traditional print publishers. Small, low-cost "multimedia production boutiques" flourish, too.

An Interactive Archipelago: High speed CD-ROM and multimedia standards are widely adopted together with hardware-based metering to protect digital property. Publishers make significant investments in CD- ROM text and multimedia products. CD-ROM multimedia games, magazines and catalog shopping have gained widespread acceptance. Proliferation of computers in elementary schools and the widespread use of flat-panel hand-helds have led to new interactive reference, education, and entertainment products. Trade publishing remains almost entirely a business of blockbuster novels and "how to" books. The "information superhighway" grew slowly; the Internet remains unreliable.

Knowledge Refining: Information commerce has become an industry of giants with deep pockets. Knowledge workers demand instant answers to complex questions. The latest innovation is knowledge refineries: sophisticated systems that provide answers more focused than those of traditional index, search, and document delivery systems. To meet market demand, on-line systems have been deployed that qualitatively change the interaction between users and the knowledge base. New visual metaphors (like the "information landscape") make navigating the sea of information easier. Improved ease of use has also enabled significant penetration of the home and education markets by information providers. Tenants of on-line information malls use powerful new interface customization tools to differentiate their infostore from others.