It's all about the rents, part one million and twenty-six
Yggles has a nice little catch here, but does he generalize? Of course not.
Nicholason Carlson from Business Insider extracts the fact that AOL’s business at this point is mostly dependent on a pretty crude ripoff—selling internet access to old people who already have internet access:
In his big New Yorker profile on AOL this week, Ken Auletta explained that 80% of the company’s profits STILL come from AOL’s subscription business.
What’s troubling about AOL’s subscription business is who the subscribers are and why they may be sticking around – in Auletta’s words, “older people who have cable or DSL service but don’t realize that they need not pay an additional $25 a month to get online and check their email.”
A former AOL exec explains that this is AOL’s “dirty little secret” – “that 75% of the people who subscribe to AOL’s dial-up service don’t need it.”
Auletta’s piece isn’t online, so I’m going to check it out in print. But here’s an audio feature with Auletta talking about it. If we take these numbers seriously, that means 60 percent of the profits of what’s still a major enterprise are coming from a high-volume, small-scale scam.
Indeed. And the same scam is run by countless other enterprises, not just the hapless AOL. I mean, "high volume, small-scale scam" is the very definition of bank fees, credit card "deals," cell phone pricing, supermarket rip-offs, heck, high frequency trading, and on and on to on. It's a business model, Matt, it's not some sort of weird aberration. All rents tend toward fraud (lambert's law....)
Oh, and you might check to see if any of your relatives or friends have AOL, and make sure they're not being ripped off.
NOTE Lambert's Law has a nice ring. Is it true? Any professional econimalists out there?
UPDATE Making sure your grandmother isn't paying rent to AOL for a service she doesn't need is absolutely "political," and it's also something you can do yourself today. If your working assumption -- it's mine -- is that a parasitic class of rent-seekers has paralyzed and hollowed out the economy, then it's a meritorious action to deny them their rents, and if enough people make merit in that way, it's going to do make it easier for the body politic to rid itself of them.