NBC Universal Boss Jeff Zucker Lies To Congress About Boxee

from the but-what-about-the-corn-farmers dept

NBC Universal management gets more and more ridiculous every time we come across anything they do. While they've left most of the more ridiculous statements to their chief lawyer, Rick Cotton (who is worried about the poor corn farmers harmed by movie file sharing), CEO Jeff Zucker has made his fair share of whoppers. While he got a lot of attention last month for his cowardly handling of the whole Leno/Conan mess, his latest move is to flat out lie to Congress. In a hearing in front of Congress as a part of NBC's effort to merge with Comcast, Rep. Rick Boucher asked Zucker about Hulu being forced to block Boxee (a battle that's gone back and forth a few times). When the whole thing started, Hulu management was very upfront about how they were pressured by their content partners like NBC to block Boxee, which is just another browser. It was quite clear that Hulu didn't want to do the block, but had no choice due to pressure from the likes of partial owner NBC:

Our content providers requested that we turn off access to our content via the Boxee product, and we are respecting their wishes....

The maddening part of writing this blog entry is that we realize that there is no immediate win here for users. Please know that we take very seriously our role of representing users such that we are able to provide more and more content in more and more ways over time. We embrace this activity in ways that respect content owners' -- and even the entire industry's -- challenges to create great content that users love. Yes, it's a complex matter. A tough mission, and a never-ending one, but one we are passionately committed to.

For those Boxee users reading this post, we understand and appreciate that you're likely to tell us that we're nuts. Please know that we do share the same interests and won't stop innovating in support of the bigger mission.

So how did Zucker respond when asked about it by Congressman Rick Boucher? He blamed Hulu for making the decision, and falsely claimed that Boxee illegally access Hulu content:

Rep. Rick Boucher (D-VA): What about Boxee? Mr. Zucker you probably are in a better position to answer that. Did Hulu block the Boxee users from access to the Hulu programs?

Zucker (NBC): This was a decision made by the Hulu management to, uh, what Boxee was doing was illegally taking the content that was on Hulu without any business deal. And, you know, all, all the, we have several distributors, actually many distributors of the Hulu content that we have legal distribution deals with so we don't preclude distribution deals. What we preclude are those who illegally take that content.

Of course, that's a flat out wrong, as Boxee was not illegally "taking" the content at all. Boxee is a browser, like Firefox. If what Boxee does is illegal so is accessing Hulu with Firefox or IE. But it's even worse than that, because last year, in a different situation, Zucker admitted that he had been a part of the decision makers to have Hulu block Boxee, telling Kara Swisher that "our vision" was to block Boxee in an effort to keep "Hulu being an online experience" rather than one you could access via a TV.

So why would Zucker flat out lie during a Congressional hearing, and throw Hulu under the bus while doing so? Does he not understand how Boxee works? Did he forget his own dealings with Hulu? Or is he just making stuff up in a Congressional hearing?

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Of Course Most Content Shared On BitTorrent Infringes; But That's Meaningless

from the who-cares? dept

I was going to ignore this, because based on what's known there's not much interesting or surprising, but people keep submitting the research done by a student of professor Ed Felten of a sample of some content available via BitTorrent (erroneously described as a "census" rather than a "sample") that suggested that 99% of what was available on this particular slice of the BitTorrentsphere was infringing. While there may be some legitimate concerns with the methodology, I have to say that my response to the original was: of course. So what?

Of course the majority of files shared on BitTorrent are infringing. And I don't see how it much matters if the percentage is 60% or 90% or 99%. I don't think anyone has ever denied that a ton of infringing content is shared on BitTorrent -- and, as some have rightly suggested part of the problem is that those who provide the content haven't done a good job making alternatives available, and that drives people to these potentially illegal options.

But what I don't get is the claim by industry lobbyists and lawyers that this somehow proves that BitTorrent needs to be stopped/fixed/held back/filtered/whatever. I read into it exactly the opposite. It shows what a piss poor job so much of the industry has done figuring out how to embrace the obvious demand that's out there, and how to leverage that smartly. The fact that so much is infringing should be a siren waking the industry up that it's time to stop fighting what people want, and start figuring out how to serve them. And for those who think this is evidence that BitTorrent needs to be blocked (wow) because so much is infringing, I'm wondering how they defend the legitimate parts that do get tossed out along with that. So just because NBC Universal is too clueless to figure out how to take advantage of a great distribution and promotion mechanism, people who want to use those tools and want to embrace better forms of distribution and marketing shouldn't be able to? That makes no sense to me.

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Bad Web Experience: This Article Removed Because Of Copyright?

from the wake-up,-get-with-the-times dept

I've really never understood news sites that "remove" old articles. Talk about breaking the way the web works. At Techdirt, we receive a good bit of traffic to our archives, and that's valuable traffic. Not only do such visitors actually tend to be more likely to click on advertisements (regular readers have ad blindness), but they're like fresh "leads" to get regular new readers. And yet, so many publications ruin all that traffic by sending them nowhere. The Associated Press is particularly bad about this, forcing partners who pay the AP for content to remove it after a month. In those cases, visitors are just given an error page. But here's a bizarre one. Jake points us to a story at The Guardian's website, where the headline and the little blurb, along with an image are left in place, but in place of the actual article is just a message saying, This article has been removed as our copyright has expired. How annoying is that? Why do publications even agree to post stories that they will then be forced to pull down in the future? It completely kills the web experience. It breaks any links to the article. It kills off any discussion about the article. It's exactly how not to do things on the web, and it shows, yet again, what the traditional newspapers -- even one that seems to "get it" as much as The Guardian does -- still has a long way to go in adapting to the online world.

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The Value Of The Link vs. The Value Of The Content

from the which-is-more-important dept

At this point, we've probably discussed the newly planned NY Times paywall enough, but a blog post by Reuters' Felix Salmon made such a good point that it's worth highlighting. In talking about the paywall, he notes, as I did originally, that people have a lot less incentive to link to the NY Times as they know it will be harder for others to make use of that link. That I understood, but Salmon made a key point that I hadn't really thought about:

I suspect that what's going to happen now is that as the moment of truth approaches, bloggers will increasingly search around for the NYT's replacement as online paper of record: the way that blogs work is that they're backed up by links to reliable sources, and a link is worthless if the person clicking on it risks running straight into a paywall, unable to read the information in question. The NYT's journalism might well continue to be reliable, but its website won't be, any more.

That point highlights the difference between valuing the content vs. valuing the conversation (or even valuing enabling the conversation). The top folks at the NY Times (and many other publications) seem to over-value the content and undervalue the conversation. Thus, they think that the content needs to be paid for, but don't realize that they devalue their role in the conversation.

If you want to make the bet that the internet is more about content delivery than conversation and communication, then perhaps this makes sense. But, almost all signs point to the fact that it's the conversation that's the really important thing online, and devaluing that is almost certainly a mistake.

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TV Exec Upset When Daughter Doesn't Want To Bring TV To College

from the your-lot-in-life dept

Just about a year ago, ABC TV exec Anne Sweeney was telling people at CES that they were in the providing good content business, and she wanted to see it delivered however people wanted to watch it, on whatever device they wanted. But, it's a little more difficult to apply that message to her own family, apparently. In the opening to an article about the whole "web vs. TV" debate (as if there really is one) in light of the Comcast/NBC deal, the piece opens with a story about Sweeney forcing her daughter to bring a television to college, despite the younger Sweeney's protests that she had no need for a TV:

"Mom, you don't understand. I don't need it," her 19-year-old responded, saying she could watch whatever she wanted on her computer, at no charge....

"You're going to have a television if I have to nail it to your wall," she told her daughter, according to comments she made at a Reuters event this week. "You have to have one."

Perhaps it's time to recognize that more and more people don't need a TV?

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AOL's New Strategy Is To Fill The Internet With Crap?

from the pollution-is-in-their-genes dept

Remember how AOL first became "famous"? It cluttered the world (and our garbage dumps) with millions upon millions of CD-ROMs offering "try AOL for free!" It seems that pollution is in AOL's genes, and it just can't get away from it. How else to explain AOL's new plan to rebuild its brand: to flood the internet with poorly written, but quickly written, content based on whatever search terms are hot. Danny Sullivan points out the amusing fact that AOL is looking to leverage search engines for more traffic this way, at the very same time as others, such as Rupert Murdoch, are claiming that Google is "stealing" from him in sending traffic, and he's considering opting-out.

But, of course, that doesn't make AOL's strategy very well conceived either. Farhad Manjoo makes the case for why this is a dumb plan, and there's plenty to agree with:

The trouble with AOL's plan, then, isn't that it's based on data-mining. Instead, it's what the company will likely do with search data--publish quick, vapid posts that do little to advance any hot story and instead feed readers a collection of factoids gathered from other places. How do we know this will happen? Because AOL's model is strikingly similar to that of Demand Media and Associated Content, two start-ups that also use search data and user contributions to build Web content. Indeed, AOL's Armstrong--who was an advertising executive at Google until earlier this year--is reportedly an investor in Associated Content, whose CEO is also a former Googler.

Associated Content stands as a cautionary tale for anyone looking to do news by the numbers. It is a wasteland of bad writing, uninformed commentary, and the sort of comically dull recitation of the news you'd get from a second grader.

Effectively, it's a plan based on adding crap into the system to trick search engines. It's pollution and web spam as a business model. But as folks like Umair Haque are fond of pointing out, business models based on tricking people and not adding any real value aren't business models that will last. They're short-term scams. Manjoo, in his writeup, helps explain why:

Will this plan do wonders for AOL's bottom line? It very well might, at least in the short run. If AOL can replicate the success of Associated Content across its network of sites, it will surely see huge gains in traffic and renewed interest from advertisers. But this plan hinges on something that can't be guaranteed for long--a weakness in search engines. By any measure, stories like those found on AC don't deserve top billing in search results. If you search for "Tiger Woods mistress pictures," you should get pictures of Tiger Woods' alleged mistress, not a story that repeats that phrase a dozen times. Google and other search engines constantly battle search engine spam, and over time they're sure to steer people away from sites that rely on such trickery to get visitors. Then what? Associated Content gets 90 percent of its traffic from search engines. Once Google and co. wise up to AC's schemes, its business model is toast.

A short-term strategy based on polluting the internet with bad content may be a last-gasp effort to revive a dead brand, but it's difficult to see how that's any sort of long-term strategy to survive.

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Entertainment Giants Looking At The Future... And See Cable?

from the future-hazy,-please-try-again dept

We've discussed in the past why we think that the cable companies' "TV Everywhere" strategy is destined to fail. If you don't recall, it's the way the cable companies are looking to respond to the rise of competition in the form of Hulu, Netflix, Redbox, Boxee and others -- not by offering something more compelling, but by putting up a giant wall around content and forcing you to keep your cable subscription (which fewer and fewer people seem to want) if you want to access TV shows online. Reid Rosefelt has a nice rant explaining why this won't work, pointing out (quite accurately) that all those competitors are winning because they deliver what people want, and locking things up doesn't make customers want cable any more:

Why do we enjoy free-with-ads sites like Hulu and Crackle? THEY HAVE FEWER ADS! And we can watch what we want whenever we want to.

What do we like about Netflix? For a fraction of the cost of cable, it gives you DVDs by mail plus the ability watch a lot of movies instantly, either on your computer or with their many compatible set-top boxes.

What do people like about Redbox. One buck! Pick it up and return it to the supermarket!

What do we like about cable?

Ummm, cable is a monopoly. You only get one store. You may only want a pair of socks and a shirt, but you are forced to buy a Yankee cap (even if you are a Mets or a Sox fan), cufflinks, perfume, towels, ladies underwear, two ties, a bedspread, low-slung hip-hop shorts, and a lamp. The kicker is that the price goes up all the time and the Calvin Klein shirt you actually came to buy costs extra. And of course LOTS AND LOTS OF ADS!

It's not that we don't like cable any more--we've always hated it!

But the key insight in the piece is how this, combined with Comcast's attempt to buy NBC Universal, show the backwards thinking of industry execs:

There's one tiny hitch though. Every single TV show and movie from NBC and Universal is available for free to anybody who has ten seconds to look for them. So what exactly is Comcast locking up? This isn't 1995, you know. Either you just shrug your shoulders about file-sharing or you start offering some alternatives that have benefits that people are willing to pay for like Hulu, Netflix, Redbox, and iTunes. Or maybe you work a little and come up with something new? Bill Maher said recently that the Republicans looked into the future and saw... radio. These entertainment giants are looking into the future and they see... cable.

Bingo. It's yet another case of execs looking to lock up content and block value, rather than providing additional value to users. It's people thinking about the way things used to work and trying to recreate it with a digital facelift, rather than looking to actually take advantage of what the new technology enables. That's only a snippet of Reid's analysis, so go read the whole thing.

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Companies Realizing That Content Is Advertising Via Web Series

from the well,-it's-a-start dept

The NY Times has an article about the rise of online "web series" shows that are suddenly popular, noting that many brands are creating such things as a way to produce interesting content online while getting some attention for their brand. It's yet another realization that advertising is content and content is advertising. The key point, that many say they realize (and hopefully they live up to it) is that none of this works if the content itself sucks. So they're working on these shows with a focus on making them good and enjoyable to watch first, and including the sponsorship as a secondary part of the effort. I'm sure there may be some backlash over this idea, but it actually makes quite a lot of sense. It gets more good content out there, and helps brands get themselves noticed and remembered not for intrusive and annoying advertising, but for sponsoring something cool.

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Sneaky Way To Get Past Section 230 Safe Harbors To Force Content Offline

from the this-should-be-watched dept

We all know the importance of Section 230 safe harbors that protect a service provider from actions done by its users. While there have been a few cases that chipped away at those protections, on the whole, they're quite solid. However, Eric Goldman brings us the story of how some lawyers seem to be dealing with this. They've stopped suing the sites directly, but they then file a lawsuit against the party who actually created the content they want taken down -- but if that person does not show up in court, then the suing party can get a default judgment, and then use that default judgment to get the content taken offline -- since the default judgment can be used to enforce injunctions against third parties. From the perspective of the suing party, then, they have every incentive in the world to try to get a default judgment, rather than even fighting with the real person in court. Then, with the default judgment, they can force a site to take down the content. As Goldman notes:

For the price of a complaint and a defendant's default (which can be engineered by targeting a phantom author), plaintiffs obtain an effective cudgel to excise unwanted content throughout the web.

That's not a good thing.

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Content Is Advertising: Free Local Commercials, Sponsored By Another Company

from the get-yourself-a-home.-or-don't.-i-don't-care. dept

Via Adam Savage, I heard about a fun project that highlights the advertising is content, content is advertising concept in multiple ways. It's a site called ILoveLocalCommercials.com, which features two filmmakers going around the country making (free -- and awesome) TV commercials for local businesses that are nominated on the site. As mentioned, the commercials are really quite impressive, such as the "brutally honest" commercial for Cullman Liquidation ("get yourself a home, or don't, I don't care") or for Ray's Midbell Music that involves a rap about how being in the school band is cool:

The commercials are really entertaining in their own way, and have garnered hundreds of thousands of views -- again, demonstrating how good advertising is content. The guys making the videos also put up a short "behind the scenes" version of each video as well, to explain the backstory a bit more. The backstory on Cullman Liquidation is pretty entertaining as well.

But why are these guys doing this? Well, the whole thing is actually part of a promotion from another company, MicroBilt, that's trying to promote its own line of small business services. So it's paying for the whole thing -- showing how content is advertising. None of the videos are actually about MicroBilt, but in sponsoring the entire site and the whole process, it's helping to get its name out there in a fun (non-intrusive, non-annoying, non-sneaky) manner. It's not about product placement or trying to "sneak" a brand into something. Everything's totally upfront. But it's a fun project, with highly entertaining content that shows both how advertising is content and how content is advertising.

Oh yeah, and it appears that Cullman Liquidation has also picked up on the whole "looooooooooots of t-shirts" concept. On the Cullman Liquidation website, the company is selling t-shirts based on the commercial...

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Dear Hulu: Stop Treating Me Like A Criminal

from the if-you-don't-want-me-to-watch... dept

I mentioned recently that, for some idiotic reason, Hulu has stopped letting me view any of its content. That's because I use WiTopia's VPN service for security reasons. It seems that plenty of other WiTopia users are discovering this, as well, and are getting annoyed. The issue is that Hulu wants to block people from outside the US from viewing its content (for licensing reasons, even if they're pretty pointless in today's world). But, for some bizarre reason, it's been decided that anyone who uses any sort of VPN or proxy can't use Hulu at all because they might be coming from a foreign country. I'm sitting here in California and Hulu tells me I might be illegally accessing its content, so it doesn't allow it. So, instead, I don't give Hulu any additional ad views and I don't watch the content I wanted to watch. How does that help anyone? It appears to make everyone worse off. And it's not like WiTopia is some free anonymous proxy -- it's a pay-service that has been around for ages and is used regularly for WiFi security purposes. Many of its users are US-based (the company is based in the US, and most of its servers are in the US as well). So, because (gasp!) a small group of people outside the US might dare to catch a video (with ads!!), all of Witopia's US customers can't watch any content at all? This is the same ridiculous content industry mindset that drives so many people to unauthorized file sharing: they treat you as a criminal first and force you to prove you're not (or sometimes, don't even let you prove otherwise). The problem the industry is facing isn't due to some guy in Europe catching The Colbert Report from across the sea. It comes from turning off legitimate customers and users who are sick of being treated like crap.

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Making The 'Significant Objects' Project... Even More Significant

from the recycling-for-profit dept

Back in July, we commented on the Significant Objects project where 100 authors are writing up 100 stories involving 100 various trinkets -- and then selling those stories along with the associated items on eBay for a tidy profit. (The project originally struck me as an experiment to see if the one red paperclip stunt could be mass produced in some way as a sustainable publishing business.) Now, just a few months later, Slate has teamed up with the Significant Objects folks with a contest for Slate readers to submit their own 500-word stories about a cheap tchotchke -- a BBQ sauce jar bought at a thrift store for $0.75. The contest attracted over 600 stories to be judged by Slate and the Significant Objects founders, and the winner gets the honor of being picked as well as the proceeds from its eBay auction -- which has a current bid (and profit) of about $20.

This contest is brilliant in that it not only highlights the concept that every product is a bundle of scarce and infinite goods, but it also demonstrates that content can be used to engage with an audience as a form of entertaining advertising. For the price of a bauble and some editorial judging, Slate connected with its fans and gathered a bit of demographic information on its readers who sent in a story (submissions had to be accompanied by an email address and location). Imagine if Slate had instead put a banner ad on its website with a form to fill out for personal information, the response rate for that would likely be much much lower. But with this contest, the cost of the BBQ jar was negligible, and Slate editors spent their time reading stories and got a peek into the creative minds of its readership. Okay, the drawback is that the submission judging process is actually not a trivial task, especially when there are more than a handful of entries (and more than a couple judges). Even Google hasn't exactly figured out how to judge its own Project 10¹⁰⁰ contest. However, the search giant opened up the judging to let anyone vote on winners to help narrow down the selection. (And there are other examples of crowdsourced judging processes like Threadless's tshirt designs.) So I envision the next generation of advertising contests reaching out to audiences, calling upon more volunteers, and trying more and more creative campaigns to produce scarce goods out of thin air.

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Lawyers Discussing Business Models

from the dancing-about-architecture dept

Doug Lichtman's latest "IP Colloquium" podcast is on the question of whether or not "content can survive online." Specifically, it's a discussion about "online content business models." Oddly, though, rather than having business model experts, it's a conversation with four lawyers, starting with Doug, and including Brad Smith, General Counsel, Microsoft; Scott Martin, Executive Vice President, Intellectual Property, Paramount Pictures; and Dan Cooper, Vice President, Legal & Business Affairs, MySpace. Lichtman starts it off, oddly, by stating -- as if fact -- that talking about business models online is depressing because there's just not much in the way of business models online for content. I think that's damning things a bit early in the process -- something that comes up again later.

While I realize that the podcast is a legal podcast, it still strikes me as odd to bring together four lawyers to have them discuss business models, when their expertise is not in business at all, but in the law.

The podcast starts out with a discussion on the Google Book search and settlement, but oddly no one even seems to give any credit to the fair use question. But, again, since these are lawyers we're talking about, there really isn't much of a discussion on business models around Google Book Search, but on legal questions -- including a hope that Congress steps in to solve it. Amusingly, Microsoft's Smith early on suggests that it's a question Congress could solve "if the industry got behind it; if copyright holders got behind it." Striking, huh? He basically admits how copyright law works in this country. It's not about what's best for the overall society or economy. It's not about the politicians fixing things where they see a problem. It's not about consumers. It'll happen if the industry gets behind it. Welcome to the way things work in DC. The rest of this part of the discussion is interesting -- and it's one (rare) case where I mostly agree with Lichtman, that as a resource, Google's Book search is incredibly useful, and we should figure out some way for it to happen.

From there, the discussion moves on to other business models, and quickly seems to head off in directions that I don't think are accurate from a business model standpoint. It starts off with two premises set forth by Lichtman, each of which I think is suspect. First, he claims that piracy is a problem because "you can't compete with free." Frankly, I'm sick of this argument because it makes no sense economically or from a business standpoint. Economically, saying that you "can't compete with free" is the same thing as saying you can't compete -- period. It assumes, falsely, that the only way to compete is on price, but the history of the economy shows that's not true. You compete on price or you compete on benefits, and competing on price is often a losing battle anyway. Saying "you can't compete with free" just means you only know how to compete on price. If that's the case, you shouldn't be in business.

And, to make that point clear, tons of companies compete on benefits, and allow other companies to offer lower priced offerings. The popular example, of course, is "water," whereby it's free (or near free) to drink out of the tap, but the bottled water business is a multi-billion dollar business. Why? It tries to compete on other factors -- such as convenience, quality or safety (though, there are arguments that many of these benefits are perceived rather than real). But it's true in just about any other business as well. In the automobile business, a BMW costs more than an entry level Ford, and that's because BMW is seen to have a lot more scarce value. Ford could "copy" BMW, but BMW has its reputation and some amount of prestige that Ford simply can't copy.

Anyone who's in business recognizes that you don't just compete on price. So why is it that so many seem to assume that the only way to compete in the content market is on price?

Lichtman's second premise is that online business models don't work. He says that Hulu hasn't been a success because it doesn't make as much as TV, and that if Hulu displaces TV we "won't have the money to pay for" expensive TV show production. He claims that even if Hulu is really successful, it'll never make enough money to pay for the production of a show like Battlestar Galactica. First off, huh? How does he know that? If Hulu is successful, it absolutely could pay for such production. Already, we're seeing that some of the online ad rates are higher than TV ad rates. Hulu's barely been around for two years at this point. I'd be willing to bet that Hulu's revenue today greatly exceeds the revenue of television two years after it was invented. Give it time, Doug!

He then jumps on Redbox -- sarcastically saying "we're renting movies at a dollar per day?" Suggesting that this will never sustain the development of movies. Really? I always find it amusing when people insist that problems in the DVD market will mean the death of Hollywood. It really was just 25 years ago that Hollywood insisted that the VCR would kill the industry (Boston Strangler, anyone?). Now they finally get their "original" wish, and find that putting movies on recordable media is going away, and it's the worst thing in the world?

Either way, the economic fallacy that Doug seems to be relying on here is twofold. First, he assumes that early business model experiments are set in place and no further innovation will occur that allows them to flourish. He assumes that the markets won't grow, and some of these experiments won't click and get much bigger. Second, he seems to assume that the old revenue numbers for these industries need to be sustained. He doesn't consider that the old revenue numbers may have been a result of monopoly rents, limited competition or technological limits. Markets change all the time, and usually what comes out in the end is much better (subjective, I know, but I'm a believer that the world is a better place today than it was 25 years ago -- and that it will be even better 25 years from now).

But, of course, no one challenges him on this. Scott Martin at Paramount, of course, worries quite a bit about piracy of movies. While he admits (finally!) that he's just the lawyer, rather than the business guy, he discusses it in the terms of adding more windows to movie releases, rather than any discussion of adding more value to the product, or giving people reasons to buy beyond just the content. Then Martin repeats the myth that you can't compete with free, but leads in with a different myth -- claiming that the "copyleft" people say that piracy would go away if they just priced their movies better. That's a strawman argument. Perhaps someone out there made that argument, but it's hardly common. Then he says that "the idea that if we charged $2 a download instead of $10 a download, we'd get rid of piracy is a myth." Sure, it's a myth, but no one said that. You can't get rid of piracy. No one thinks you can get rid of piracy. No one suggested anything you do would "get rid of piracy." What many of us are suggesting is that you can build business models where that piracy isn't a problem. Even the people suggesting you just charge $2 instead of $10 aren't saying it would "get rid of piracy," but that at $2, enough people would pay for it that it would increase profits beyond what the $10 DRM'd version gets you.

Anyway, the discussion goes on from there, including a discussion of the DMCA that again doesn't make much sense to me, but the business/economic analysis throughout doesn't strike me as accurate at all. It's still an interesting discussion, but frustrating because I wish there were at least someone on the panel who would challenge a lot of the "accepted wisdom," put forth by everyone, that doesn't seem to be accurate. Brad Smith, at one point, does point out that this is all a "revenue" problem, and does a pretty good job describing the revenue problem... but then falls into the trap of saying the law needs to "fix the piracy problem" because without that, business models can't be built up.

The last analysis I'll talk about that is again faulty from an economics standpoint again comes from Scott Martin at Paramount, where he tries to defend the importance of DRM, noting that if he flies into JFK he has various price options on transportation: he can buy a car, rent a car, take a cab or take a train. So there are price differentials. He says that without DRM, content is like saying his only option is to buy a car. That is, if he had DRM, they could offer different "rental options" for content, with "one day pricing or one week pricing." But that's totally wrong again. There's a reason for the differential pricing in the transportation options: it's related to the marginal cost of each option and the competitiveness of the market. That's what sets the prices. But with content, the marginal costs are zero, so what he's doing is trying to set up an artificial barrier to pretend the markets are the same.

While I like listening to these discussions, I just find the economic fallacies frustrating.

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WSJ Editor: Those Who Believe Content Should Be Free Are Neanderthals

from the that,-or-people-who-understand-economics dept

Danny Sullivan has an excellent analysis of some of the more ridiculous statements from WSJ managing editor, Robert Thompson, trashing pretty much everything online. Most of Sullivan's analysis focuses on how ridiculous it is for Thompson to claim that Google makes news readers "promiscuous," so I won't address that again (though, you really should read Sullivan's writeup). Instead, I wanted to focus in one little bit that Sullivan mentions, but doesn't explore too much (other than to mention how insulting it is). Thompson declares that there are "three types of people" online, starting with:

There are the net neanderthals who think everything should be free all the time.

Pretty scary that someone who's the managing editor of the most well known and well-respected business newspaper out there thinks this, huh? First off, I don't know anyone who thinks "everything should be free all the time." People are more than willing to pay for scarce goods of value. Where they fundamentally have issues is with being charged for content that can be made free at no additional cost. And that's not "neanderthal" thinking, it's good old classic economics -- the kind we thought the WSJ supported.

And, of course, this also shows Thompson fundamentally not understanding the debate. For many, many years there's been plenty of "free content" in the terms of "free to the consumer" but which is supported in other ways. As Sullivan points out, News Corp., which owns the WSJ, also owns Fox -- which delivers free content, over the air, to consumers, but supported by advertising. Is that a Neanderthal opinion?

It really makes you wonder what they're thinking over at the WSJ or what sort of business smarts they have when they both consider Google to be a problem and think that basic economics on content pricing is "Neanderthal." It should call into question their thinking on other business topics as well. And, remember, this is the same company that is lashing out at "aggregators" like Google News, at the very same time that it's offering its own aggregator as well. If Thompson thinks Google News makes people promiscuous, why does his own site offer something similar?

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Disney's Keychest: Is Giving Back Your Fair Use Rights With More DRM Really A Step Forward?

from the redefining-fair-use dept

A bunch of folks have sent in different stories about Disney's new "Keychest" technology offering, which would (in theory) allow users to purchase content that would be stored online, and which they could then access from any "participating service."

With Keychest, when a consumer buys a movie from a participating store, his accounts with other participating services--such as a mobile-phone provider or a video-on-demand cable service--would be updated to show the title as available for viewing. The movies wouldn't be downloaded; rather, they would reside with each particular delivery company, such as the Internet service provider, cable company or phone company.

The idea, supposedly is:

to address two of the biggest hurdles blocking widespread consumer adoption of movie downloads: the difficulty of playing a movie back on devices other than a PC or laptop, and limited storage space on those computers' hard drives.

Now, while you must admit that allowing people to access the same content after a single purchase on multiple devices is definitely a step up from the "old" way of doing things, it does kind of ignore some important points: such as the fact that, for the most part, you could already do this on your own. As we know, it's legal to rip your CD's and then store that content on an iPod or on your computer and listen to the music how you want to do so. And, even though this is perfectly legitimate fair use of content for movies as well, Hollywood has used the worst provision in the DMCA -- the anti-circumvention provision -- to block people from doing what is accepted fair use with movie and television content.

So all Keychest really seems to be doing is giving you back your fair use rights on content -- but also wrapping it in additional DRM, such that it only works on "participating services." Oh, and it could include other limitations as well:

And Keychest would allow movie studios to dictate how many devices, connected to which distribution networks, a given title can be played on.

So, kudos to Disney for recognizing that people hate having to buy the same content over and over again and hate being limited on what devices they can view content on... but, creating a new, more permissive DRM solution, just to give back some of an individual's fair use rights, isn't really a huge win.

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How The Record Labels Are Killing Innovative New Music Services: No Money, No Content

from the death-by-stupidity dept

A couple years ago, we discussed how Universal Music CEO Doug Morris gleefully explained how clueless he was about technology -- while also being quite ignorant of basic economics and business models. It's amazing that Vivedi has allowed him to remain in charge. One of the more stunning statements was that the idea that you had to give up some money now to make more in the future just means "someone, somewhere, is taking advantage of you." Apparently, the guy has never heard of investing and has no bank accounts that earn interest, because that's just "someone, somewhere... taking advantage."

With that said, the following really isn't all that surprising. Gerd Leonhard highlights the explanation of why concert video site FabChannel shut down:

No money means no content. That is the way the labels (major and independent) look at potential partnerships with internet companies. Even when it is obvious a service provides added value in promotion and sales, the mantra stays the same: no money, no content. Even when a service invests substantial amounts of money in creating high quality concert footage and an award winning platform to show it to the world, the mantra stays the same: no money, no content.

When you look at it from a label point of view, it might even look logical. Their business models have been hammered the last ten years by decreasing CD sales. Their radio, TV and newspaper partners are not doing their promotional job as they used to. And last but not least: the majority of consumers are now downloading tracks for free. All bad things for companies that invest in recordings of artists.

So the most important feature that new partners have to have is: MONEY. Money to counter the decrease in CD sales. Promotion has turned into a dirty word. MTV for example got big and wealthy by showing video clips paid for by the labels. So now these labels think: We will not let that happen again. From now on everybody who wants to become a media partner online is going to have to pay up front to even start.

It's hard to think of anything more short-sighted or suicidal. Here are all sorts of online companies looking to help promote your works better so that you can make more money, and the you decide that unless they give money up front, they need to be shut down. And we've seen this over and over again. It's why every hot new music startup ends up getting sued by the record labels, with the end result being either the site gets shut down, or the startup gives a big equity chunk to the labels, in combination with promises of impossible-to-afford payments. The record labels with their "no money, no content" mantra have destroyed their own business. So many services that could have helped better promote musicians killed off because of this silly and suicidal mantra. It makes you wonder how the management at those record labels keep their jobs. Don't they have boards and parent companies who monitor what's happening?

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Did Showtime Benefit By Giving Away Free Content?

from the apparently dept

Here is yet another example of how "free" can co-exist with paid content, even when the content is basically identical.

Recently, Showtime made the season premiers of their hit shows DEXTER and CALIFORNICATION on YouTube for anyone to watch for free.  So, did this gut their numbers when the shows aired on their subscription-only, kind of expensive if you ask me, premium cable network?

Both Dexter and Californication scored some huge opening numbers last Sunday with Dexter setting a new opening record for the cable network.

More than 1.5 million sets of eyeballs tuned to the season four opener for Dexter and 821,000 stayed to watch the opener for Californication. That's 3 million single eyeballs for Dexter and more than 1.6 million for Californication.

Guess not.

Crossposted from MyMediaMusings

David Title is an expert at the Insight Community. To get insight and analysis from David Title and other experts on challenges your company faces, click here.

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Paul Graham: Content Really Was Just A Way To Mark Up Paper

from the welcome-to-the-future dept

YCombinator creator Paul Graham is the latest "deep thinker" to grasp the deeper economic meaning of infinite goods: they can't be sold. In fact, Graham recognizes that there's never been a real content business. It's always been about selling the scarcity:

Almost every form of publishing has been organized as if the medium was what they were selling, and the content was irrelevant. Book publishers, for example, set prices based on the cost of producing and distributing books. They treat the words printed in the book the same way a textile manufacturer treats the patterns printed on its fabrics.

Economically, the print media are in the business of marking up paper. We can all imagine an old-style editor getting a scoop and saying "this will sell a lot of papers!" Cross out that final S and you're describing their business model. The reason they make less money now is that people don't need as much paper.

He goes on to explore how this applies to music, movies, books, newspapers and software. From there, he comes to the same conclusion many of us have been discussing for years:

What happens to publishing if you can't sell content? You have two choices: give it away and make money from it indirectly, or find ways to embody it in things people will pay for.

The first is probably the future of most current media. Give music away and make money from concerts and t-shirts. Publish articles for free and make money from one of a dozen permutations of advertising. Both publishers and investors are down on advertising at the moment, but it has more potential than they realize.

I'm not claiming that potential will be realized by the existing players. The optimal ways to make money from the written word probably require different words written by different people.

Good stuff and worth reading the whole thing, though I think he misses one key important ingredient. If you take a step back and look at the overall economics of such markets, you quickly realize how much bigger they get when you free the content from the constraints and scarcity of physical media. This is the hardest part for some people to see, at times, but the key to recognizing it is realizing that the content itself is a resource, rather than a final product, and you've just increased the availability and massively decreased the cost of that resource -- and you can then use it (for free!) to make many other things more valuable. That, in a nutshell, is the most exciting part about freeing up digital content.

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My Debate With The NY Times' David Carr Over Journalism Business Models

from the so-serious,-batman dept

Mark Glaser, from PBS's MediaShift invited me and NY Times columnist David Carr to have a back-and-forth debate over email, concerning business models for newspapers -- specifically questioning whether micropayments or a paywall of some kind makes sense. Carr supports some sort of "user pays" model for content, whereas I tend to think the idea would backfire badly. PBS has published the two part debate here:

• Part I, where we disagree about what people will pay for, and talk a bit about newspaper economics (they're bad...).
• Part II, where we continue to go back and forth, but eventually reach a bit of common ground in the middle (no, really!)

There's probably not that much surprising to folks around here if you read this site regularly, but it was a fun debate.

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Content Owners Force Hulu To Block Mobile Browsers As Well

from the seriously? dept

I still can't figure out the reasons why content owners allowed Hulu to offer up TV shows in a browser... but then absolutely flipped out when they realized that the very same content can be seen on browsers on other devices as well. In the past, we've noted that Hulu was pressured to block the Boxee browser (which lets you view content on your TV) and the PS3's browser (also for TVs). Now, via hamill8152, we learn that Hulu is also blocking content on Skyfire, a mobile browser for Windows Mobile phones. The reasoning is the same as always (and, at the very least, kudos to Hulu for being upfront about the idiotic pressure it comes under from clueless content owners). Hulu explains the whole "windowing" thought process of the folks in Hollywood, and suggests that these windows will eventually go away. Of course, it's worth pointing out that Hollywood so disagrees with this that the MPAA has been pushing for ways to add more windows. Either way, the whole thing is silly. If you're putting your content on the internet, you're putting it on the internet. Pretending that televisions or mobile phones can't also view content on the internet makes no sense. One day, people in charge will understand this. Until then...

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