by Dana Blankenhorn
Volume IV, No. XI
For the Week of March 13, 2000

This Week's Clue: Most Moguls Still Don't Get It

This Week's Clue: Most Moguls Still Don't Get It

SSP (Shameless Self Promotion)

Fogdog of War Obscures A Key Clue

Russell, Russell, Russell

"Open" Access

Clued-in, Clueless

Big companies, and clueless reporters, always predict they are about to "own" the Internet and the rest of us should just get out of the way.

Whether it's in content (the Media Metrix Top 50 is now dominated by Web giants and old media), the ISP space (broadband is supposed to eliminate the "mom and pop" ISPs), or in retailing, (everything is supposed to fall before Amazon (or Wal-Mart)), the predictions keep coming. Despite this the number of companies in the Web space keeps growing.

At the Jupiter Consumer Online Forum in New York I saw a great illustration of why this is so. Sportsline head Michael Levy was the first man I saw on the podium, bragging about how his well-publicized alliances with a TV Network, sports leagues  and sports stars  have ended the race for the future of sports. He figures it's a two-horse race between him and Disney, and most reporters believe him. Yet his trailing year revenues are just $60 million and (because the game is over) his stock is in the tank. The game ended, in other words, before the market was proven. 

That is generally true everywhere. Stock investors and arbitrageurs, along with the reporters who cover them, don't care what you've done for them lately - they want to know the "story" of what you'll do tomorrow. Once the real world of developing a market begins they've anointed "the winners" and everyone else should go away. So Amazon's stock has fallen, while CDNow can't get up, even though etailing revenues are a tiny fraction of what they will be in just a few years. The speculation has moved to Linux and b2b, where deals and alliances make Wall Street rich but mean very little on the ground, where it counts.

The fact is, however, that you don't need the whole market to succeed. You only need to find and sell your customers. With scale comes bureaucracy, and that always means opportunity for those who are smaller and faster. Markets grow like forests, and there are plenty of niches under the shade trees. Dinosaurs can't evolve rapidly - yesterday's T.Rex is today's chicken dinner.

This is especially true on the Web, where the bottlenecks are not where people expected they would be. The bottleneck isn't traffic, or bandwidth, or storage, or money. The bottleneck is talent. So outfits with money and scale like Seagram's Universal Music Group will never get musicians to sell their souls again. Music deals will have to look a lot more like movie deals before the musicians will sign them. Newspapers will never be able to keep talented writers slaving at low wages because they own the city's biggest printing presses. Any server is a printing press, and talent (like the customer) will have its way. The power of brand is now the power of a relationship, the relationship being the one between the producer and consumer. 

Ironically this became obvious decades ago where Levy works, in the sports industry. Leagues like the NBA now routinely guarantee players half their gross. In the movie industry deals based on percentages, of net profits or gross revenues, are common for the directors, stars, and even writers. This is what will happen in the music industry and (eventually) in journalism. Those who give talent the best deals will win. The day of a musician taking 15% of his record and selling control of his music to a mogul are over. 

That's why the battle between intermediaries on the one hand, talent and consumers on the other, has moved to the courts. Media conglomerates are trying to use the Digital Millenium Copyright Act to halt the spread of technology threatening their gatekeeper function . Before the Internet I would have agreed with them, but now I see what's really at work. The DMCA is really a barrier to competition, the free and open connection that should exist between the producer of content and its user. People don't mind paying for what they like, but they'd rather pay the person who made it, not the middleman. The Web allows for that. 

So the gatekeepers are falling, not through government fiat but through the reality of technology. If you can write, or draw, or design, or play a musical instrument, you're no longer at the bottom of the corporate pyramid. You're talent - you should be in charge. The companies that recognize this and put talent in charge will dominate the next decade. Those which do not (or which only pretend to do so) will fail. 

SSP (Shameless Self-Promotion)

We have moved our server  and finally have a set of e-mail addresses that make sense. From now on you can always reach me via dana@a-clue.com. You can also reach me at danablankenhorn@mindspring.com. If you know anyone who could benefit from a few good Clues, send this issue to them and let them know subscribing is FREE from our home page.

I write daily for ClickZ, and weekly at Andover.News. I write monthly for  NetMarketing, Boardwatch, and  Intellectual Capital. I've been in Advertising Age and the Chicago Tribune .Once every other month I'm in CLEC Magazine. You can always buy my book . Subscription instructions are at the bottom of each issue.

Remember that it's still journalism that keeps the Clues coming. Give me a shout at 404-373-7634.

Takes on the News

Fogdog of War Obscures A Key Clue

Many big new entrants to the Web don't understand that, precisely because they don't pay for e-mail, folks take it personally when something arrives in their inbox unbidden. Fogdog.com, a sports etailer backed by Nike, is quickly losing ground as a result, according to e-mail ombudsman Mark Welch .

"I spent several hours on Tuesday trying to convince Fogdog.com that their current "Draft-A-Friend" unsolicited commercial email campaign is Wrong," he writes. "Fogdog is soliciting its customers and affiliates to provide the company with their friends' email addresses (no more than 25) in exchange for rewards based on the number of friends who place orders with Fogdog. Fogdog then sends an email solicitation to the 'friends,' with the Fogdog customer or affiliate listed as the "sender" of the email."

Notice the quote mark around the world "friends." The program can easily destroy goodwill when users refer enemies or strangers, or when "friends" decide they don't like being used in this way. It's a "spam a 'friend'" plan, and incredibly stupid.

Notice the word "draft" in the name of this offering - it's Fogdog that will soon feel it. "I have trouble comprehending the notion that any friend of mine would draft me." The word is an unintentional pun - it's an involuntary call-up that will blow up in the face of any marketer stupid enough to try it.

Russell, Russell, Russell

Russell Shaw has been a close personal friend since the mid-80s. In another life he wrote about rock and roll, but now he writes about business and technology. Since he moved to Portland a few years ago, we've become e-mail pals rather than drinking buddies (for which my liver thanks him), but when he gave me these nuggets recently I just had to pass them along.

"If I see one more splash page, I'll scream. They are strictly an ego exercise or an opportunity for a design team to show off to ownership or senior management that they are getting their money's worth. Haven't seen one yet that can be justified." (Now don't be shy, Russell. Tell us what you REALLY think.)

"If I see one more Media Info or Press area on a site without contact info for (the Public Relations) person I'll scream. I'm talking about those sites with lots of posted press releases but no contact info except info@blahblah.com. Sometimes e-mails to this address reach the right person, but it often takes quite long. This makes me nervous. Companies I have challenged on this say they do this because of P.R. turnover. That's the lazy way out." (Amen to that brother.)

Another problem is lack of customer service integration. How many times have you heard monoliths talk about synergy of services, only to have services serviced by different call centers without any cross-company knowledge? Example: try to ask AT&T Cable what the phone number for AT&T Wireless or WorldNet is. For synergy to happen, it must be drilled down all the way to that new hire on the third shift of that out-sourced call center..." (You go, boy!)

"Open" Access

The "turn-around" by America Online on open access (following by some months a similar move by AT&T) doesn't end the matter. It merely puts the question in the light I gave it many months ago. (reference)

Cable modems will never dominate the access market. The problem isn't just the cost of providing service, it's the wealth of alternatives available. DSL provides similar access without a network upgrade. Wireless provides similar access at a fraction of the cost.

The issue will now subtly shift. Last year Excite president George Bell pointedly noted that the whole Web would be accessible fia @Home cable modems. That's for the paid service. The new hope of the monopolist is Digital TV. It will be a standard offering in future cable offerings, a "free" add-on aimed at maintaining market share against wired and wireless telephony. But it comes with a catch. The only sites available on the free service will be those the cable operators program - in other words those which pay for carriage.

Regulators are ready to accept this new form of Web control, as evidenced by their decision against letting Internet On-Ramp force operators to let it lease channels, on the same basis as cable networks. Cable operators, in other words, are not yet common carriers. In the future consumers will see those networks that don't provide the whole Internet for what they really are - private networks and not ISPs.

Clued-in, Clueless

Clued-in is NBC President Robert Wright, who figured out that for a broadband portal to have any chance of success if must first have leading services, then must provide real personalization. (This is something Microsoft didn't learn until it was too late, leaving them with a search engine front end.)

Clueless is Edgar Bronfman of Seagram's, who told the Jupiter conference that building, buying and suing sites are all it will take to keep musicians crawling to publishers. What will save the publishers' business is a better deal than musicians can get anywhere else.

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