Soaring on Ridgelift

Digital Media – Pet peeve

Whether it's the desire to do something positive about global warming or simply to drive down costs in a business model that is already failing, the transition of newspapers, magazines etc. from paper to digital is a good thing.

If the transition is such as good thing, why oh why are the publishers making it so clumsy for me to use? Every last one seems compelled to implement their own format – most requiring that I download yet-another-reader.

Am I doomed to replace the untidy piles of publications waiting to be read with an untidy and unmanageable collection of software of every computer I own? No I tell you!!!! I won't!!!!

I can already see some of the emails and comments to this post in my mind – "Stu, you know that this is simply because there isn't a single digital publication standard…", "Every publisher has their own idea about how to improve the reader's experience…" – baloney to all these! We don't need a new standard and don't try and improve my reading experience – I like the one I have with paper – it works, its fast – just give me the same thing in a digital format.

A simple PDF of the publication would be a HUGE step forward – I already have Adobe Acrobat Reader installed on every computer I use and PDF documents aren't bloated with some well intended ideas to "improve my experience".

So in the meantime, I say no to Times Reader, Network World's efforts to get me to switch their shrunken magazine from paper to digital and NO to Amazon's Kindle.

I would never have believed it… I can be a Luddite too!

MusicIP – analytics for Music

MusicIP today released a new service for artists interested in how (and where) their music is being consumed.

You can see an example of one of reports in the graphic at the top of this post – click on it or here for a larger version – this shows the world wide distribution of Plain White T's track "Hey There Delilah".

I first wrote about MusicIP over a year ago in my post "Revenue from Control" where I described the MusicDNS service that is provided by MusicIP. MusicDNS lets you look up a track of music from a unique audio based fingerprint and recover the associated metadata for the track. I wound up joining the board of MusicIP earlier this year.

MusicIP Reporting Service flows from the data that is collected about track consumption – all data is anonymous with strict concerns for maintaining privacy – for example, the IP address of the consumer is discarded immediately after the approximate location is looked up – there's no record of the IP address kept after the lookup and no identification of the user.

For the first time, artists can see how their music spreads and also compare how their tracks are positioned relative to other, similar sounding music. MusicIP is a company with deep intellectual property for the analysis of music. For example, the technology that identifies similar sounding music is phenomenal – almost uncanny in its matching ability – backed up with a database of over 30 MILLION tracks and growing.

You can try out that technology by downloading the MusicIP Mixer – check it out, the playlists generated by Mixer are very good and a great way to explore your music collection.

You can get a sample of some of the other reports from visiting the MusicIP analytics page here.

MusicIP's Reporting Service is available on-demand with self-service via the MusicIP web site. It's a great example of building a business around a database generated from a service.

Who pays for streaming video?

As streaming video services expand and build audience, who pays for the costs of streaming video to the audience? Most communication networks are built on the assumption that only a subset of users are active at any time but with increasing amounts of time being spend "online", we're seeing network design assumptions breakdown with the emergence of new services such as streaming TV over the Internet.

There's an interesting article on this issue on the UK site "The Independent" covering the reactions of UK based broadband providers to the BBC iPlayer streaming video service. The core of the issue is covered in the first couple of paragraphs of the article:

"Some of the largest broadband providers in the UK are threatening to "pull the plug" from the BBC's new iPlayer unless the corporation contributes to the cost of streaming its videos over the internet.

The likes of Tiscali, BT and Carphone Warehouse are all growing concerned that the impact of hundreds of thousands of consumers watching BBC programmes on its iPlayer – which allows viewers to watch shows over the internet – will place an intolerable strain on their networks."

Broadband access networks such as DSL, Cable etc. rely heavily on "over-subscription" – the system is designed to give good service when a subset of the users are active at any one time – this design principle factors into the sizing of the provider's link to the Internet core, router and switch capacity etc. Too many simultaneous users or higher average bandwidth per user can quickly invalidate these design assumptions and service declines for everyone.

Unfortunately, the answer isn't simply increasing the size and capacity of the network links – you have to apply more intelligent design and caching to the network so that you don't keep dragging the same content multiple times across the entire network. I wrote about this over a year ago but there hasn't been much in the way of new developments in the caching area.

Ultimately, these kinds of services can only be sensibly scaled by caching and serving content from the edges of the network. We're going to hear a lot more on this topic as services like Joost, iPlayer etc. grow their audience base.

 

RSS – the publisher’s Frenemy

RSS – Publisher's Friend or Foe?

After spending some time working with a content publisher and having the opportunity to delve into their analytics – web and RSS, I think "Frenemy" (a term I first heard from Sir Martin Sorrell of WPP) is the appropriate description.

Why?

Bottom line comparing web page impressions versus RSS:

• Percentage sell through of inventory is higher for web than RSS
• CPMs are higher (by a significant multiple – 5x or greater) for web impressions than RSS
• Web provides more detailed demographics and analytics than RSS

I suspect the last point is the root of the first two – advertisers have little information about the demographics and behavior of RSS readers compared to viewers of web pages.  RSS analytics have a long way to go even compared to free web analytics like Google; RSS analytics provide basic data such as number of times an article is read but nothing about user location, loyalty, and activity by hour of day etc.

RSS subscribers don't translate into active readers or viewers of articles.  I know from my own RSS readership that only about a third of the subscribers are active readers and that seems to be on the high side compared to some of the other numbers I've seen.  Moreover, a typical web impression might deliver 2 or 3 ad impressions versus a single impression for the same content on an RSS feed.

It's led me to wonder whether the publisher wouldn't be better served by eliminating their RSS feed completely. 

For sure this would lose some number of readers but the high value (loyal) readers would likely go back to reading the web site and getting a more complete experience (and one at the control of the publisher, not the author of the feed reader or the feed middleman). 

This is something to seriously consider for any publisher looking to monetize their content via advertising and syndication.

RSS desperately needs better analytics and better marketing in order to even the value equation and provide value to the publisher as well as the readers.

The Friction-less Internet and business models

Sunday's New York Times Magazine has an article – "Sex, Drugs and Updating Your Blog" – that is a must-read not just for folks in the music business but as a prime demonstration of the power of the Internet for friction-less sales, marketing and distribution.

It's a set of anecdotes that demonstrates the new wave of business innovation that's at work right now – not just in music but across media AND information technology.

This wave of business innovation leverages the effects of convergence – the convergence of the Internet, Mobile and Information Technology and the disruption that results.

The combination of the Internet and Mobile gives you access to almost 3 billion people and 95% of companies that you really care about.  You can use this access to get essentially zero-cost reach and with that many people and businesses, no matter how small your interest or niche, it adds up to a reasonable size market or better.

We've seen the use of the Internet for sales (e-commerce) and distribution (Salesforce.com with software-as-a-service or YouTube for media distribution) many times before but precious few examples of using it for sales, marketing and distribution combined within the same business.

Basic information technology is now a commodity – think about computing hardware (PCs, notebooks, servers), purchasing decisions are based on cost, brand recognition and service/support.  Prices are the same within a narrow range and switching costs are low. With software you have a choice - proprietary (Windows, Oracle, …) or open (Linux, MySQL, …) – you can choose your software environment and implement it on any hardware.  Combine basic IT with the Internet and you can access compute resources on demand and at the scale you need (think Amazon EC2, S3 and what will follow).

If you look at these effects combined, you have a business model with two critical attributes – friction-less sales, marketing and distribution coupled with elasticity where the business can scale its expenses as revenue grows – I call this the FL/EL (friction-less, elastic) model.

Gone is the need to build and operate a data center with its associated capital and operating costs, gone is the need to build a large direct sales force and invest in expensive marketing campaigns to create customer awareness.  The cash requirements for a new business drop precipitously as a result.

The NYT article shows how musicians are using the Internet to build their business – independent from record labels, radio stations etc.  The equipment they need to record, produce and release music is inexpensive and using the Internet, their costs for promotion, sales and audience interaction are very low.  The need for the record label to identify and promote talent is dwindling away.  The Internet provides a real-time "American Idol" with greater reach and more dynamic feedback.

This same approach – combining friction-less sales, marketing and distribution over the Internet with an elastic cost structure – can be applied to many different businesses.   Think outside the box – think about how you can use the FL/EL model to disrupt the incumbents or deliver capabilities at a price point that enables much bigger markets to be served profitably.

Over the next few days, I'll post a few examples to illustrate these points – as the saying goes – Watch this space!

Chasing the crypto tail…

With the entire hullabaloo about public revolt and the publishing of the HD DVD encryption key, I'm surprised to see so little coverage of the (two week old) response by the Advanced Access Content System Licensing Administration (AACSLA). The latest news section of the AACSLA web site has a press release dated April 16^th, 2007 announcing the expiration of encryption keys…

"In response to attacks against certain PC-based applications for playing HD DVD and Blu-ray movie discs, Advanced Access Content System Licensing Administrator, LLC ("AACS LA") announces that it has taken action, in cooperation with relevant manufacturers, to expire the encryption keys associated with the specific implementations of AACS-enabled software."

The press release also has pointers to the web sites of two of the vendors of PC software players (Intervideo and Cyberlink) where consumers can download updated players that are necessary to avoid playback of the AACS-protected content being disabled.

The Interim AACS adopter's agreement has a provision (section 10, page 57) that provides for a mechanism to expire keys either based on time or if there is evidence that the key has been compromised. I haven't dug into the specification in detail but the folks who put this spec together thought through what would be needed to deal with compromised keys.

While the revocation process takes time to be effective, it's surprising that the AACSLA didn't just quietly expire the affected key back in January when the compromised key was published on the Internet.

Copyright Review Board denies streaming music appeal

The web news services are reporting that the Copyright Review Board today denied the appeal by Internet streaming music services to reconsider the CRB ruling regarding per-play fees that threaten to put these services out of business.

The CRB decision stated:

" ... none of the moving parties have made a sufficient showing of new evidence or clear error or manifest injustice that would warrant rehearing. To the contrary ... most of the parties' arguments in support of a rehearing or reconsideration merely restate arguments that were made or evidence that was presented during the proceeding."

So much for pricing set by a willing buyer and seller in a market transaction!

The judges did agree to allow the streaming services to estimate their audience using Aggregate Tuning Hours for 2006 and 2007 to allow implementation of systems to record the number of tracks played per listener (necessary to comply with the new royalty rates that are per track, per listener).

Unless the Court of Appeals agrees to hear an appeal, this is going to need a rethink in the business models of the streaming music services. As I wrote last month, I suspect that there will be a move to subscription services for Internet Radio. Assuming some appropriate clarification about the definition of a "channel" is made, even at the 2010 rate of $0.0019 per track, a $9.95 per month subscription at 50% margin would pay for 2,618 tracks for a listener – at 3 minutes average per track that's over 130 HOURS of music per month!

Watch for changing business models in Internet streaming music – this is reminiscent of the first wave of Photo hosting sites during the bubble that had to make the move to subscription or print sales to pay for all the disk space being consumed. Evolution at work!

Digital media and user behavior

What do declining CD sales, piracy of video content and the adoption of IP TV have in common? They are all affected by the changes in user behavior.

Today's press is full of coverage of the announcement of EMI to ship digital audio content without digital rights management so you might have missed an equally interesting article in today's New York Times about "Warner's Digital Watchdog…". The article covers Warner's efforts to track down and reduce digital piracy of their content. A key element of the article is commentary from Darcy Antonellis who oversees Warner's anti-piracy efforts.

After reading the article, one quote really summed it up:

"If we don't encompass the last piece in our thinking — how consumers want to use content — then we are going to miss it," said Miss Antonellis. "Just think how consumer behavior has evolved in the last two years."

User behavior has changed because the convergence of the Internet, Mobile and Information Technology has enabled users to consume content in an always-on, anywhere paradigm that enables content consumption how, when, and where it is convenient to the user. We are at a crossroads in content consumption – the current forms of content packaging and distribution are at odds with the needs and demands of the user.

Whether the content is news, books, music, video,… or the adoption of IP TV, the key to future business models is to deliver a compelling user experience. Rather than providing in-house knock-offs of YouTube etc., the content owners need to do what they do best – think outside the box and bring the user experience into the 21^st century.

Only that way will they avoid another notable quote from Ms. Antonellis about her niece's fish Mortimer:

"Mortimer took the leap to freedom," she said. "He said, 'I'm free, but I'm dead,' " said Ms. Antonellis.

Clarifying Copyright

A law is only useful when a majority of the population understands it, finds it appropriate and obeys it.

Copyright law is far from clear even to lawyers so to expect the typical Internet user to understand the finer points of what they can and can't do with digital content is unrealistic.

Mark Cuban has had a theme going on his blog (Blog Maverick) about the issues of Google/YouTube and copyright infringement. One particular post that got me thinking was this one – "Subpoenas and Gootube" where Mark posed this thought:

"But I want to know if they feel that Google endorses and supports uploading and streaming of pirated content. I want to know why they ignored the warnings that are on the video upload page."

If you look, the terms and conditions of use for YouTube are explicit:

"In connection with User Submissions, you further agree that you will not: (i) submit material that is copyrighted, protected by trade secret or otherwise subject to third party proprietary rights, including privacy and publicity rights, unless you are the owner of such rights or have permission from their rightful owner…"

So why do people upload content to which they don't have a license or own? I suspect the reason is that the consumer thinks that what they are doing is fair and appropriate and so they aren't violating the rights of the copyright holder – of course, ignorance of the law is not a defense but how can you enforce copyright when you have multi-million infringements under today's law by otherwise law abiding people?

Walt Mossberg's column in today's Wall Street Journal provides some interesting observations about fair use and the need to clarify copyright law to help protect the consumer. You don't have to agree with all the points in the column but my conclusions are twofold:

1. The definitions of "fair use" for copyrighted digital content need clarification and simplification so that the consumer can understand their obligations.
2. The real battlefront is between the content owner and the consumer – the content owners need to package content in ways that are consistent with the changing use patterns of the consumer.

It's up to Congress to tackle the first problem and that will take time but it's good to see the content owners respond to the second point with NBC's announcement today which I covered in my earlier post today. We're going to see a lot of change in this space – that much is for sure!

Taking back distribution

In the spirit of "if you can't beat them, join them!" NBC Universal and News Corp announced this morning that they were launching a service later this year to allow Internet users to re-distribute their content.

There is a good summary of the announcement in the online version of the Wall Street Journal. It will be interesting to see how this unfolds especially given this quote:

"But instead of only trying to lure viewers to a new Web site, the companies also plan to spread their content around the Web."

This is a great example of using new distribution opportunities to create business benefit.