For the Week of February 3, 2003
The fecal matter is hitting the rotating blades on the Copyright Wars.
On one side is the power of government, shackled to the power of lobbyists and giant corporations, buttressed by courts, cops, and a biased press. Usually that's a winning hand.
On the other side is the economy, an unannounced, unsponsored, unorganized, unsupervised, and unusually effective economic boycott of a huge industry, musical recording.
Who's winning? Let's take a look.
Total worldwide music sales fell for the second year in a row in 2002 , by 9% according to Soundscan . The industry excuse that piracy is entirely to blame is no longer believed, even by the industry, which eased-out Hilary Rosen as RIAA president as this was being written .
In her last major speech Rosen demanded that ISPs pay her group for users' file-sharing , a threat that ignored how new peer to peer systems use any open port, even Web and e-mail ports .
The industry is winning all the battles. Here are some of the battles the industry won in the weeks leading up to Rosen's announcement. The industry won the Eldred case, extending copyright to 90 years in the U.S. It won the Verizon case, so those with large shared directories can be identified and, presumably, jailed for making them available . It won an agreement with the technology industry not to pass fair use legislation , and then Microsoft offered new technology to deny fair use on future CDs .
Yet the industry is losing the war. This is a point that isn't emphasized enough. None of the industry's victories in court will raise sales. The industry has become totally estranged from its market. Online sales, which should be rising, actually fell 25% in the last reported quarter . The charts are dominated by groups whose teenage or urban fans are least likely to be technology sophisticates.
The entire "middle ground" of the business is disappearing, and the industry as a whole is now losing money. These events are related. If you can't make money on recordings that sell in the 10s or 100s of thousands, if only sales of mega-millions will do, then your risks on each effort multiply. The number of viable artists is reduced to a handful.
Following Tommy Mottola's recent resignation from Sony Music, and his replacement by former NBC News chief Andrew Lack, The New York Times offered a summary of these problems. "The record business is bracing for a seismic shift and is increasingly reconciled to the fact that the current priorities of senior executives are outmoded."
Rumors are the number of major record companies will be cut from five to three by merger, that the record companies will target artists' concert and merchandise sales in future contracts, and that jobs will be cut.
But the biggest problem remains the Copyright War. The industry has yet to offer an online product with pricing, terms and conditions consumers find acceptable. The industry, in other words, has yet to seriously negotiate with the market.
What might such a product offer? It would offer the entire industry catalog going back to, like forever. It would offer fair pricing, perhaps lowered for some by ads, and perhaps using concepts like the idea of "Time as Money" offered here a year ago . It would make file sharing unnecessary and redundant, in other words.
It would be an easy system to introduce. Start with a new, better file format than MP3, one that includes cookies so files can be tracked, but with better sound quality. Continue with a new attitude about that tracking - it's market research, and it's followed not with lawyer-letters but with sales pitches. You downloaded Track 1, would you like to hear Track 2? Would you like to buy the album, be informed of when the group is playing near you? That's right, fans - database marketing.
If you have a running account with the Big Jukebox, at $20/month minimums, that lets you download the equivalent of 4 albums, and earn extra downloads by taking files from new acts (related to those you like), filled with opportunities to buy CDs and DVDs at great prices, would you want to deal with the hassles (technical, legal, etc.) of Kazaa and the like? Now, consider what $20/month from even 5 million people might mean -- $2.4 billion! And that's the entry fee. Look at all the back-end opportunities!
The recording industry needs to understand, once and for all, that its problems will not be solved in court. Consumers are not sheep, and they're not thieves. Fair service at a fair price that supports fair use will thrill us, and make us want to spend more. The industry's solution lies in the market.
SSP (Shameless Self-Promotion)
"The Blankenhorn Effect" is now available at Amazon.Com You can use that ASIN number, 1553953673, and recommend it to readers of other, similar books. You can also save on shipping when you buy the book at Amazon, over the cost of buying it elsewhere.
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Takes on the News
Living in the Blogosphere
I've been blogging for some time now, and I've written here a few times about what the space needs in order to get serious.
But until recently I hadn't spent much time studying the space, looking for the keys to success and identifying trends. Let's make up for that now.
Blogs are "ranked" based on the number of other blogs which have permanent links to them, called blogrolls. (The process of adding such links is called blogrolling.) This is really an unfair comparison. It can be manipulated by bloggers who are just good at getting reciprocal links. But there you go.
Blogstreet , Technorati and the Blogging Ecosystem have Top 100 lists, and the differences among them are vast. Blogsteet claims to track over 56,000 blogs, Technorati about half that.
Blogstreet's Top 5 are Glenn Reynolds' Instapundit , Dave Winer's Scripting News , Cory Doctorow's BoingBoing , Slashdot , and the Metafilter Community . (Notice a problem right there - Slashdot is not really a blog, but a discussion forum. So is Metafilter.)
Technorati's list has SixApart's Movable Type followed by Ben, Blogger, Google and Userland. (Winer founded Userland, whose Weblogger program is one of the two big dogs in the space (the other being Blogger itself). There's not a blog on the list.
The Ecosystem has separate lists for links to and from blogs, with Instapundit the only blog on both top 10 lists.
Successful blogs can be placed into categories:
- Personal blogs are what most people think of when they think of the space. Here a writer offers whatever is at the top of their head. Scripting News is a good example. One day's feed includes briefs on technology, politics, foreign policy, and an article on San Francisco's old Ferry Building.
- Political blogs, like those of Andrew Sullivan or InstaPundit, give political reporters (or wannabe reporters) outlets for thoughts and links their bosses won't let them go with.
- Tech blogs, like Doc Searls' Weblog (and my own Corante blog) focus attention on new tools. Some are specific to what the author's using, others are more general.
- Community blogs, some of which (like Slashdot) pre-date blogging, have editors, defined beats, and (sometimes) even business models. (Plastic.Net and Metafilter are other examples.) Discussions are designed to be followed by readers with their own comments.
- Publication Blogs are done by real reporters, even staffs. The number is increasing as the blog software format appeals to newsrooms. One of the first among these to make the Top 100 is the Poynter Institute's MediaNews .
- Group blogs have several authors, and are a pretty new phenomenon. I work for two - Greater Democracy and NowEurope . Brooklyn's Morning News has the top ranking of those I've seen, #106 at Blogstreet.
- Link Blogs aren't so much blogs as collections of stories, linked either by a blogger's imagination or their desire for traffic. Drudge was the original Link blog. Buzzflash is its liberal counterpart. The "content" here lies in the choice of stories, the order, the headlines, and additional content provided by the editor.
The business of blogging consists, so far, mainly of software outfits and hosts (often one and the same). (Blogads is trying to build an ad agency model around blogs, as with the old Link Exchange, now part of Microsoft bCentral.) The hope (from a business standpoint) lies mainly in the professional blogs and community blogs, some of which are profitable.
But the publicity, the buzz, is focused mostly on the personal blogs, political blogs and tech blogs. An item on even a small personal blog can be picked up by one with more traffic and spread like wildfire. The fall of Trent Lott was widely credited to bloggers . Conservatives prefer to focus on how their bloggers harass their enemies .
On the whole, however, blogging is the NBDL of the pundit world, a vast farm system where stars (like Glenn Reynolds of Instapundit ) get discovered and faded stars like Sullivan (who reportedly earned $100,000 in contributions last year) get a second chance. It remains an entrepreneurial environment where talent, self-promotion, and some technical knowledge can go a long way.
That's going to change. Knowledge follows technology by a distance called learning, and the media is now going to school on blogging. Blogging today is an individual activity, but it was designed for use by groups. In two years the biggest blogs will be news services, with large staffs, chains of command and (most important) profits.
Your Clue is that while blogging is news, news is also blogging.
Losing the Future for Short Term Value
Speaking of news, Editor and Publisher reports that newspapers across the U.S. are moving toward forced-registration models on their Web sites. It's now "proven" that, while forcing registration cuts traffic at first, it provides demographic data that can sell ads. Besides, traffic eventually recovers.
This is short-term thinking at its finest. The problem with forced registration isn't the loss of traffic. It's the fact that it kills support for incoming links. Sites that force registration become cul de sacs, unable to engage with the larger Web.
The long-term answer is a shared database, so that if someone registers at, say, The New York Times, that cookie can be exchanged at other news sites, and the registration information can be copied. If a third party owned the shared database (as companies like Equifax own them in credit reporting) there are no anti-trust problems. There's even an incentive to draw non-traditional media into the mix.
But there are still problems of small time corporate jealousy. The Times may not want to share its hard-won data with, say, Newsday, or the Philadelphia Inquirer. So it won't happen.
And newspapers will thus remain cul de sacs, shouting more-and-more loudly into a smaller-and-smaller space until they just disappear.
The Waiting for Godot Bug
The "Slammer" worm, which hit Microsoft SQL Server databases recently , was yet another body blow to Microsoft's prestige.
This attack was so bad it even hit ATM networks which, thanks to the deterioration of the telecomm sector, are now getting tied into public circuits where they don't belong.
Microsoft did its best to patch the damage, and many system managers sprang to its defense. But the fact is that, until Microsoft offered patches, system managers were helpless, because you can't even look at Microsoft software, let alone fix it.
This isn't a problem with open source systems like Linux, even those with "proprietary" twists in application licenses. When you have a problem, not only can you get to work on it, but so can everyone else, even if that problem is in the basic code-sharing technology itself .
It could be Microsoft recognizes just how big a problem it has, because it has pulled the name "Palladium" from its security suite. But it will take more than a name change to get Microsoft back into the server game. Even 1,500 new salesmen won't be able to put this together again Until Microsoft addresses the basic flaw in proprietary computing, what I call the Waiting for Godot bug, it has no chance of turning things around.
Clued-in (maybe) are six major retailers buying the failed Echo online music store . This could eliminate the industry's disintermediation problem, and put people in charge of online music who know how to sell music.
Clueless (definitely) is Deep Junior , which lost to World Chess Champion Garry Kasparov last week. You can program a computer to beat a specific chess player, any player. The real test is how well a program does against all-comers.
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