What The RIAA Efforts Have Really Been About: Controlling Channels

from the let's-get-real dept

A few folks have been writing in about the latest in a long line of lawsuits against the RIAA, this one focusing on how its entire lawsuit strategy has been a legal sham. This particular lawsuit isn't really all that different than some of the previous lawsuits against the RIAA, and unfortunately, judges haven't been all that accommodating to such lawsuits, so I'm not really expecting it to go very far. However, within the lawsuit, there is a pretty good explanation of why the RIAA and the major record labels have been conducting this braindead, short-sighted and self-defeating legal campaign all along. It's had nothing to do with "educating the public" or "protecting artists' rights" as representatives have claimed in the past. No, it's all been about one single thing: protecting a monopoly on distribution and channel relationships.

In the old business model, the record labels made their money because they had near total control over the production of content, the distribution of content, and all channel relationships with retailers. The internet and new digital technologies broke all of that down. It made it easier for anyone to produce content, distribute content or even build channel relationships themselves. What the record labels got upset about wasn't "file sharing" per se -- but the fact that file sharing went around all of their channel relationships and effectively killed the one major scarcity they controlled.

So, don't believe the entertainment industry lawyers who laughably claim that the RIAA's legal maneuvering has nothing to do with business models. It's always been about business models. The lawsuits were just a way to try to stuff the genie back in the bottle, and prevent these alternative channels and means of distribution and promotion from seeing the light of day.

Filed Under: business models, channels, lawsuits, music
Companies: riaa

Neil Young (And Warner Music) Should Learn To Respect YouTube... And Music Fans

from the this-is-getting-tiresome dept

After Warner Music got greedy and demanded money from YouTube that the company is under no legal obligation to pay (safe harbors, people), Google and YouTube demonstrated to Warner Music how little leverage the record label has by taking down all Warner Music videos. This is making plenty of Warner musicians quite angry with Warner Music for pissing off their fans and in some cases breaking the artists' own websites. So, rather than back down and admit that it overplayed its hand, Warner Music is pulling out the old school strategy it has used for years to win such arguments: trot out some well-known musician to whine about how it's just not fair that he's not getting the "respect" he deserves.

This time around, it's Neil Young, who has taken to his own website to claim that he and Warner Music aren't getting the proper respect from YouTube, and that YouTube needs to pay up to provide that proper respect. And what about all the musicians who Warner Music's policy is harming right now? What about all those musicians whose fans are pissed off that they can't see videos with the music they like? The problem isn't that YouTube isn't respecting Warner Music -- it has no legal obligation to do so. The problem is that folks like Neil Young and the execs at Warner Music don't respect their fans at all, and fail to realize they want to access their music through YouTube, and doing so provides those musicians with a great benefit in terms of better connecting with their fans and opening up new opportunities to create valuable relationships that will pay much more money in the long run.

In the meantime, when you look at the actual statement on Neil Young's site, it seems like a a pretty blatant copy of the NY Times. We're guessing he didn't pay the NY Times anything. So why isn't anyone demanding that Neil Young "respect" the NY Times?

Filed Under: business models, copyright, music, neil young, respect, videos
Companies: google, warner music group, youtube

Network TV Just Now Realizing The Media Landscape Has Shifted?

from the it-took-that-long? dept

As we watch the newspaper industry struggle with trying to respond to changes in the market that were obviously on the way a decade ago, it's funny to see network television just waking up to the same issues. Apparently, they're just now (?!?) realizing that the advertisers who kept them in business all these years have many other options on place to advertise -- and the viewers who used to have three options for what to do on a weekday night (ABC, CBS, NBC) now have hundreds of channels, billions of internet websites, movie rentals, video games and many, many, many other options. Yes, the market has shifted -- but that shift began quite a while ago. The fact that the networks are just now realizing that maybe they need to treat the business slightly differently certainly seems like they're a bit late to waking up to reality.

Filed Under: business models, network tv

What Dying Business Has Survived By Raising Prices On An Inferior Product?

from the good-questions dept

Charging for the sake of charging

Another weekend has gone by with another series of articles from journalists who are complaining about the state of their industry, without bothering to come up with business models that actually work. David Lazarus, the LA Times columnist who a couple of years ago suggested newspapers should sue anyone sending them traffic, kicks things off by insisting that newspapers absolutely should charge for content online. Once again, as with almost everyone else who has suggested the same thing, this is a business model based on wishful thinking. Nowhere does he explain how the newspapers would add enough value to make people want to pay for news online. Instead, they all seem to assume (incorrectly) that people will suddenly flock to paying for news online.

Of course, they may learn that first-hand soon enough. Last week Cablevision announced plans to start charging for the online content in Newsday which no one wants to bother with (seriously, as Jay Rosen pointed out, Newsday is dead last among the top 30 newspapers in terms of the amount of time users spend on the site). Yet, rather than recognizing they need to improve the content, folks from Cablevision seem to think that because it costs money to produce, people will pay. This is a fallacy that we hear all too often in businesses being undercut by new business models. It's based on the idea that fixed costs matter in pricing. They don't. Anyone who has taken a first year economics class should know this, but it's a myth that gets repeated over and over again. Fixed costs are meaningless to the buyer, who only cares about the value they receive from the content. Yet, that didn't stop someone stopping by from a Cablevision IP address to insist that we knew nothing about good reporting or writing. That may be true, but we can see from the data that most people don't think Newsday knows much about it either.

More lemmings take the leap

And, now, it appears that the Hearst Company is looking to go down the same route, trying to charge for content, but again ignoring any reasons why people might want to pay. On top of this, Hearst has the bizarre idea of building its own digital reading gadget. Why do that when more and more people already own perfectly good digital reading gadgets: computers and smartphones. These newspapers aren't looking to add value. They're looking to lock things up in a ridiculous belief that there really is some scarcity they can "protect."

Alternatives abound...

But that's ridiculous. Even as these newspapers are locking up content, the folks who provide wire services are growing, and even local news providers are rapidly expanding as well. Many small local news shops (who are not printing newspapers) are doing fine through this recession, as the local newspapers lock themselves out of the market, and you have to figure that more people will find these alternative providers. Meanwhile, smarter publications are looking to jump into the market. The NY Times, for example, is kicking off its own citizen journalism project in two Brooklyn neighborhoods. If I were running the NY Times now, I'd also look to expand that program to Long Island, just as Newsday plans to take itself out of the market. This hybrid model has lots of potential -- letting experienced journalists interact with lots of folks who are interested in talking about what's happening in their neighborhoods.

The problem, of course, is that companies like Hearst and Cablevision are still blind to the way people view the newspaper. The community that reads the newspaper has always been the newspapers' biggest asset. Newspapers don't make their money from selling the content to readers (that doesn't even cover the cost of printing and delivery). They've always made their money selling the attention of their community to advertisers. But, when they treat that community with contempt at the very same time that the community has many other options, it should be no surprise that the community goes away. In an article about the state of the newspaper business at the Washington Post, the editor at large of Hearst's San Francisco Chronicle admits: "the public was seen as kind of messy and icky and not something you needed to get involved with." And now they want that same icky public to prop them up, when that icky public has so many other options that treat them like humans and allow them to take part in the process? Other options that allow them to help write the news, to share it, to spread it, to discuss it and to shape it -- so why would anyone pay for the same old news that not only fails to offer these features, but actively discourages them with paywalls and unnecessary barriers?

And don't think that others won't rush in to fill up the void left behind -- and don't think they won't be better than some of the professional "journalists" left behind. In a great (but looooooong) post in the Chicago Reader, Whet Moser, points out that a journalist's job isn't just about collecting the news, but explaining it -- and a large part of that was reaching out to "experts" and then trying to take what they had said and repeat it to the audience. But, there's a problem, many of those experts are doing a damn fine job going direct to the public themselves via their own blogs or other publications. They don't need these middlemen who often got the story wrong. And the experts get "paid" by boosting their own reputations, which helps them do plenty of other stuff which pays them in cash. So the world is better informed sometimes when the experts can route around the journalists, contrary to the claims of dying journalists about how we'll all be worse off.

Damage your biggest asset, destroy your product, and complain when others do a better job...

In the end, the fact is that newspapers have been providing people with a poor quality product for too long, neglecting their biggest asset (the community) and have been totally unwilling to recognize the onslaught of competition coming from multiple angles. And, to that, their response has been to say that they'll raise the price on that very "icky" community? And that somehow people will "miss them" when they're gone? That seems unlikely. Jeff Jarvis points out an excellent point raised by John Thornton concerning the decision to charge: can you name a single dying business who raised prices and survived?

You don't build your business by damaging your biggest asset. Raising prices on the very community the newspapers need the most, while offering a subpar product in the face of increasing competition has to be one of the most self-destructive moves in the history of business. And plenty of people know this. Yet, the management of various newspapers is still going down that path. It's like watching the Titantic steer directly into a huge iceberg, even as a bunch of folks with bright shining lights are pointing the way to a clear channel of water. What a shame.

Filed Under: business models, journalism, newspapers

Why Piracy Is Not Actually A Problem For The Music Industry

from the look-around dept

TorrentFreak is running a great guest post from someone responding to the IFPI's laughable claim that unauthorized file sharing is the root cause of the recording industry's problems these days. That's simply not true. The post does a good job laying out the details on eight other reasons why the recording industry is in trouble that have nothing to do with unauthorized file sharing. Basically, there's competition from other forms of media (video games, the internet) and there are more efficient markets and technologies that have siphoned off some of the excess profits the industry used to enjoy. It's a great list, but what it leaves out is the next step: what does that actually mean for the industry. And, the answer is that if they are willing to change their business model to adapt to this changing market, they can do amazingly well. That's because many of the inefficiencies that have been taken out of the market were costly to the record labels. By embracing what the new market allows, they can decrease their own costs, while creating an even larger market for themselves. The fact that they have chosen not to do so has nothing to do with "piracy." It has to do with their own unwillingness to change.

Filed Under: business models, copyright, music, piracy

Cure Singer Blasts Radiohead, Saying Name-Your-Own-Price Can't Work; Apparently Unaware That It Did Work

from the it's-not-like-the-info-isn't-out-there... dept

While we're not huge fans of the pure "give it away and pray" name-your-own-price business model, it still seems pretty ridiculous to see people like The Cure's Robert Smith blasting Radiohead for its experiment, claiming "it can't work" (thanks to Chris, for sending this in). Smith is uninformed on a number of different fronts. First, so many people get so focused on the "name your own price" part, that they forget that wasn't the only business model at all. That was just a part of the business model. At the same time they announced the pay-what-you-want downloads, they also announced an impressive boxset that cost quite a bit. Furthermore, contrary to Smith's assertion that "it can't work," it did work. In fact, it worked phenomenally well. The band sold more albums than it had in the past and it made more money. Actually, as the article points out, that Radiohead album did much, much better than the Cure's last album. Oops.

All of that info came out months ago. Apparently, Smith was too bothered "violently disagreeing" with Radiohead to notice how much money the band was pulling in. He also might want to brush up on his economics. His explanation for disagreeing with Radiohead confuses price and value drastically:

"You can't allow other people to put a price on what you do, otherwise you don't consider what you do to have any value at all and that's nonsense. If I put a value on my music and no one's prepared to pay that, then more fool me, but the idea that the value is created by the consumer is an idiot plan...."

Which, of course, has it backwards. If the music had no value, no one would want it, free or not. And, it's not that fans are "creating the value" in setting the price, it's that they're deciding how much they want to reward the artist. That's all. Perhaps instead of spending so much effort violently disagreeing, Smith should spend some time understanding the actual business models being put to good use by many different musicians, sometimes allowing them to do much better than the Cure... even if the music is "free."

Filed Under: business models, free, music, radiohead, robert smith, the cure

What If Newspapers Follow The ESPN 360 Model?

from the there-would-need-to-be-enough-value dept

Mark Cuban, picking up on the rumors last week that the cable companies are negotiating with content providers to offer their channels over the internet, has a suggestion for newspapers: do the same deal. Specifically, he's suggesting that newspapers get broadband providers to pay them to provide access to their content to subscribers. The idea is that in a sort of Coasian bargain, it allows the newspapers to get more money (from just a few companies, rather than from tons of advertisers and subscribers) and it allows the ISPs to differentiate. In reality, this is just the controversial ESPN 360 model all over again. ISPs pay a content provider, and only subscribers to that content provider get access to that content. The content provider gets easy cash, and the ISP gets differentiation. It basically just hides the paywall. Rather than individuals paying for the content directly, they pay for it indirectly via their broadband connection.

What could go wrong?

Well, plenty, actually. First of all, that content really does need to be differentiated. That might sorta (but not totally) work with ESPN, but it's not going to work with most newspapers -- where the competition is pretty strong. The ISPs won't be willing to pay very much because the "value" in differentiating isn't very high. The fact that ESPN is getting away with this isn't so much a statement on how good a business model this is, as it is an indication of just how lousy many other sports content sites remain. That, however, represents a nice opportunity for other sports sites to step up and provide better content.

But, more importantly, cutting off open access to news in this manner creates the same exact problems that paywalls created. It cuts off the ability to interact with the news: to share it and spread it to others. You can still comment on it... somewhat, but the inability to have everyone you interact with see the same content is a greatly limiting factor in discussing a particular story. It actively decreases the value of the news, which is the last thing news organizations should be doing these days. It shrinks their one real asset: their community. The problem is that Cuban (and many others) still seem to be thinking about the issue from the perspective of a broadcast media company, pushing a message out to people, rather than a communications media company. When you realize that news operations need to be communications companies, the idea of making content harder to access seems more and more ridiculous.

Either way, we may soon get an example of how poorly this works in practice. Many are suggesting that Cablevision's decision to charge for access to Newsday is really a way to test this in action. The company can give Cablevision internet service customers Newsday for free as an extra incentive. But, once again, that assumes people think that's actually an incentive.

Filed Under: business models, cable companies, newspapers, paywalls

Newsday Decides To Charge For Online News...

from the good-luck-with-that dept

I grew up reading Newsday, a newspaper covering some of New York City and its suburbs. In fact, when I was 11 years old, that was my first job: delivering Newsday to neighborhood homes. When various newspapers first started to go online, I tried to visit Newsday pretty often, but it put up an annoying registration wall early on, and I found plenty of other, better sources of news. The quality of reporting in Newsday already paled in comparison to many other newspapers, so it just wasn't worth the hassle -- even once it removed the registration wall. I almost never visit the website any more -- though, occasionally I check the sports pages there. Last year, Cablevision bought Newsday, and today, along with announcing it was writing down a huge chunk of that purchase, said that it's going to start charging for access to Newsday online, making it that much less likely that anyone will care enough to visit Newsday's website. The major area news is much better covered by the other newspapers, and various "hyperlocal" websites are popping up all over the place to cover the local specifics. Deciding to charge for Newsday online is basically a death sentence for the paper.

By the way, if you want more evidence of how badly Newsday is at handling the relevant news: at the time I'm writing this, you can't find news of this pretty big change on Newsday's site at all. Instead, I'm relying on a Reuters report. That tells you pretty much all you need to know about Newsday's ability to keep its website relevant. Why pay for worse news when others give you a better product for free?

Filed Under: business models, newspaper, paywall
Companies: cablevision, newsday

No, The Death Of Newspapers Does Not Mean An Age Of Corruption

from the let's-think-this-through-a-bit,-shall-we... dept

A few folks have sent in Paul Starr's long but thoughtful article in The New Republic, which worries that, thanks to newspapers dying, we'll be entering a new age of corruption, since no one will be watching government officials like investigative reporters have in the past. The article is well worth reading, and brings up a number of interesting points -- but, in the end, fails to make a compelling case for a number of reasons -- most specifically that it relies on both a faulty model of news production and a faulty understanding of economics. This isn't to knock Starr or the article, because the mistakes are subtle, but important.

The first mistake is in looking at news production itself -- and specifically investigative reporting. Starr seems to significantly overestimate how much investigative reporting newspapers do. In fact, investigative reporting is a fairly new phenomenon and has never been a major focus of newspapers. Those bemoaning the supposed "loss" of this function don't seem to recognize how little money has been put towards such investigative reporting in the past. As that second link suggests, most newspapers spend more on their comics pages than on investigations.

Furthermore, the article brushes off the fact that the increase in information out there, and the ability for almost anyone to consume different media, means that a lot more people can participate in the process itself. Starr does mention some of this, but seems to brush it off without a deeper investigation. And that leads to quotes like the following:

Altogether, according to the governor's office, the number of full-time statehouse reporters in New Jersey has fallen from more than fifty to fifteen in the past decade. That is a lot fewer pairs of eyes to keep watch over state agencies.

Which of course assumes that the only people who can monitor government agencies are reporters. That's simply not true. There are many more "eyes" watching over state agencies -- it's just that they don't do it as a full-time job. That doesn't mean that as a group they're somehow less effective. If well organized, they can be much, much, much more effective -- enabling multiple people to assemble different pieces of the puzzle and work together as a team to unearth problems. This is often brushed off as useless because some of those people might be "biased" or have an "agenda," but, in practice, that issue is often negated. Those with obvious biases or agendas are usually pretty quickly outed.

So, while the nature of the beast may change, there's little evidence that corruption will suddenly be free to roam. Especially in the political realm, where there's so much interest in digging up "dirt" on opponents, it's increasingly hard to keep corruption secret.

The second mistake is much more subtle and quite easy to understand. It's in focusing on the idea that "news" is somehow a public good. Much of the discussion, then, about public goods is based on an older understanding of public goods and what that implies from an economic standpoint. But, that thinking on public goods has gone through something of an economics revolution in the last decade or so, with much of the research being so recent that plenty of well-known economists are still digesting it. The claims that public goods are necessarily "under-produced," because there isn't enough incentive for private providers to supply them, knowing that there will be free riders, is looking less and less true -- especially when it comes to information.

That mistake is based on a simple misconception (which many still hold), that the business model needs to be about the public good itself. When the product is information, that's not true. You can use the information itself to create different business models, by effectively bundling the information (or infinite) good with a corresponding scarcity. In fact, that's exactly what newspapers have done for years, in reality. They've used the information to attract a community -- and then sold that community to advertisers. The problem newspapers face isn't that they're producing a public good -- it's that they never fully realized that they were selling their community's attention, and were unprepared when that community found other places to go.

Starr, unfortunately, only focuses on "non-market" production of public goods, using Yochai Benkler's excellent discussion on "The Wealth of Networks." That's a useful starting point, but it's hardly the end of the discussion. Through bundling and creative business models, you can very much create very strong market production of such infinite goods (which are misnamed "public goods"). The issue is just setting up those proper business models, and we're starting to see more and more examples of those pop up every day.

When you correct for both of these mistakes, you realize that the widespread participation of the community, combined with newer business models for the production of such infinite goods, allows such "investigative reporting" to be done more cheaply -- while actually providing an even larger revenue stream. I recognize that last statement seems like a bit of a leap of faith (especially to those who are worrying about dying newspapers), but as you look through the economic evidence, it's difficult to find a market that wasn't greatly enlarged by the injection of more "infinite goods," combined with a more efficient system for participation.

Don't fear the changes that are coming. They may take a little while to sort out, but the opportunities are huge, and they will be too tempting for some to pass up.

Filed Under: business models, corruption, economics, investigative reporting, journalism, news, paul starr

When Will Journalists Stop Treating Google As The Enemy?

from the let's-hope-it's-before-they-are-all-unemployed dept

Alex Klein sends over a speech by the former editor of the Baltimore Sun and LA Times, John Carroll. The speech, given at the University of Kentucky, perpetuates many of the misconceptions about the future of journalism that we have addressed repeatedly in the past. The most maddening, though, is the continued belief that search engines are a threat to traditional media (and therefore democracy):

"Overnight, [Google, Yahoo, MSN and other "portals"] have become primary sources of news for millions. And overnight they have made billions of dollars. Rich as they are, though, the portals employ few reporters. Last I checked, the most successful of them, Google, had no reporters at all. Why originate news when news is free? The trend here is evident. The trend is that a tide of money is flowing decisively away from those who employ reporters and to those who don't. You don't need a degree in economics to see what this implies for journalism. And you don't need a degree in political science to see what it implies for democratic self-government."

Now, I have a degree in neither economics nor political science, but what Mr. Carroll snidely presents as self-evident is patently misleading. Search engines are not the "primary sources of news for millions." As he notes, they do not even pretend to be competitors with newspapers. What search engines do for online news sources is send them absurdly high amounts readers. For free. The flow of news customers is not to Google; it is from Google to NYTimes.com, LATimes.com and the multitudes of other online news sources.

What Mr. Carroll is actually lamenting is the end of the monopoly era for news sources. Citizens now have more sources of news, and advertisers now have more platforms for reaching customers. As anyone who actually has a degree in economics will tell you, more competition is a good thing. And as anyone with a degree in political science will tell you, avoiding monopolistic news sources is good for democratic self-government. Of course, it still isn't clear how to fund some journalism, especially investigative work, but blaming Google isn't the answer. Instead, the newspaper industry needs to focus on the glimmers of success showing at Spot.Us, ProPublica and a host of other innovators.

Filed Under: business models, journalism
Companies: google