Over the last couple decades, many goods have become digitized. Up until now, the primary targets of digitization have been media goods like music, movies, books, and video games. Once a good is digitized it becomes extremely easy to copy. This ease of copying has big economic consequences, since a proliferation of copies creates a near infinite supply and pulls down the market price of the good towards zero.
In order to save the value of their products, industries attempt to introduce artificial scarcity. They use intellectual property and digital rights management (DRM) to prevent copying, thereby ensuring a limited supply and an above-zero market price.
Because of rapid progress in 3D printing, many people are speculating that soon more tangible goods like tools, toys, and even instruments will effectively become digitized. This means that many new industries will increasingly lobby for artificial scarcity. For example, if you are a toy manufacturer, suddenly you will need to defend your intellectual property not only against overseas counterfeiting operations, but also against domestic consumers armed with desktop 3D printers and some cheap raw materials.
But we can take this thought experiment even further. Experiences represent another good that may soon become digitized. You purchase an experience when you go to a golf course, when you visit a museum, and when you go to a concert.
All that’s needed to digitize experiences is really good virtual reality. This already happens to a degree. We have golfing video games and live concert videos. Both of these technologies attempt to take an experience and compress it into a smaller, cheaper, and more portable form. However, this compression is far from lossless. A golfing video game does not capture the feeling of a 9-iron or the smell of grass. And a concert video does not provide 360 degrees of visuals or opportunities to meet other concert goers.
Improved virtual reality could potentially solve these problems. Granted some senses are easier to digitize than others. Our ability to digitize sound and visuals is far ahead of that for the other three senses. But just immersive sound and visuals have the potential to duplicate much of what is fun about a lot of experiences. Moreover, if the virtual space were shared and populated by other virtual reality users, than you could reproduce an important social component to many experiences.
Again, we see this sort of thing happening already, with video games on the leading edge. But while there’s nothing new about this idea, there is not a lot of discussion of the fact that virtual reality might increasingly compete economically with real experiences. For example, the music industry realizes it can’t make much money off of selling records any more, so they have started focusing on other revenue streams like live shows. And this works because right now I don’t think there are many fans who watch a youtube video of a band playing live and think “Great, now I don’t need to spend $25 and go see them.” But one can imagine that if virtual reality technology made a few large (but very conceivable) leaps forward, this equation might start to shift.
Keep in mind there are two steps to any digitization process: the scan/record step and the print/playback step. Both are critical. So when I talk about better virtual reality I am not just talking about the print/playback step—things like 3D goggles, surround sound, tactile feedback, etc. I am also talking about big advances in the scan/record part of the process. Advances that might make it possible to say, stroll through a theme park and surreptitiously record the experience itself. And I don’t just mean record the experience in a linear manner. I mean record enough salient details about the geography that a sufficiently advanced algorithm could then use that data to create a digital model of the park’s layout. Now imagine that as other people walk through the park, some of them are also recording and uploading details to help improve the quality of your model. Pretty soon you have a digital file somewhere that in some senses is a copy of the whole theme park, ready for illegal file sharing. The virtual theme park might be missing some details, like the smell of churros, but such deficits would be only a few technology cycles and software updates away from being corrected.
People who make it their business to charge for experiences are not going to take such developments lying down. They too, like the media industry before them, will likely turn to policies of artificial scarcity in order to prevent such unlicensed copying. Increasingly places might ask you to check your cell phones or other portable computers at the door, because that’s the only way they’ll know for sure that patrons are not illegally scanning the premises. More likely they will attempt a DRM solution, and use some sort of localized jamming device to try and cripple your logging equipment. Or they may—and this is the most concerning—try to expand the definition of intellectual property to cover experiences themselves.