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Monthly Archives: July 2008

How much does free cost?

Chris Anderson tries to tally the free economy, counting the money made from advertising, “buy one, get one free” gimmicks, and free services subsidizes by paying customers (like Flickr or MYSQL).  The numbers are huge, talking hundred of billions of dollars in each category, if not trillions.  Anderson’s point is that free has been a business tool for a long time, using infinite goods like TV shows or loss leaders to sell more valuable scares goods.  Companies used to charging large amounts for their goods, like music and movie companies, are finding it hard to understand the free economy and how much money can be made there.

Anderson is promoting his new book, “Free” about leveraging free as a business model and I’m hoping he leads by example, proving the point of his book through his own leadership.  “Free” isn’t due in stores until next year when I hope the book is sold extremely cheaply, subsidized by Anderson’s certain to follow speaking tour.  The promotion from the book would make Anderson a more sought after and thus highly paid speaker (time is a scare good).  Books have a higher marginal cost – the cost of printing, paper, binding, etc. – so some price for production might be need.

Anderson could also release digital copies of the book (and audio) for free online.  Matt Mason is doing just that (at least in book form) with his book “The Pirate’s Dilemma” about how file-sharing helps businesses make more money.

To further prove his point, Anderson could release his four year old book “The Long Tail” online for free (and lower the price on those $30 audio book copies).

This is a man trying to change the way companies think about business and the concept of free. I really hope he thinks about it himself.

Twitter is not the future of news, but it helps

While newspapers, it seems fun to find alternative news outlets.  Twitter gets lots of hype for being the newsroom of tomorrow. The most recent example is Twitter users being the first post about the LA earthquake.

But Twitter is not a newsroom. It’s not meant to be a newsroom. It helps news spread, but so do water coolers and and town criers.  But 140 characters of information doesn’t make a newsroom, but it helps the newsroom find news.

Newspapers are in trouble so looking for the next thing is a popular topic, but trying to anoint something as the “Future of…” is shortsighted. Twitter is still an experiment, one that doesn’t make money and gets crushed by its popularity. Twitter could be replaced by the next-big thing in a few months.

Twitter should, for now, be another tool in a journalists arsenal. A tweet alluding to an LA earthquake should send the journalist to their phone for confirmation.

News can be an bit of information, but a newsroom provides more. A newsroom needs to provide relevant information, context, what has happened, is happening, and will happen next. A tweet can’t provide that.  Even rapid fire wire services like AP and Reuters churn out several hundred words on events that happened minutes or hours before. Tweets might help cut that response time down.

The key difference is journalists should read Twitter. Everyone else will still read the journalists.

Geek-Out Moment: King Kong versus T-Rex

king_kong Giant gorillas don’t have a hard time impressing the ladies.  King Kong took on the King of the Dinosaurs in an epic throw down of stop-motion magic.  Corny by today’s standards, the fighting figurines were impressive technological feats of the day, and a rousing battle between six inch giants. If toys aren’t your taste, try the computerize remake where Peter Jackson throws Kong into a good 20 minutes of T-Rex fighting, complete with broken jaws and puppetry.

NBC’s Olympics a lost opportunity for innovation

NBC is planning to saturate August will more hours of Olympics coverage than all Olympics TV before combined. 2,000 hours will be featured online and the rest spread across NBC and its assortment of cable stations. But the big numbers cloud NBC’s flawed new media strategy that still focuses on limited, controlled content, missing the perfect opportunity to build new business models.

NBC is limited the popular events to its networks and leaving fencing and kayaking online along will lots of behind the scenes footages only the most die-hard will watch. Other news organizations are banned from using any videos of the events and even have to take down footage of the Olympic trials once the games start.  NBC is also hyping its anti-piracy efforts to keep footage off other video sites with China promising to “attack” websites hosting unlicensed footage.

Ironically, with all this effort, NBC plans to loose money on the Olympics.  Spending $800 million to air the games lets the network publicize its own shows and fall line-up.  If the Olympics are all about promotion, then why doesn’t NBC want it promoted?

By limiting how and when and where people can watch the games only means people won’t watch them or will go behind NBC’s back to get what they want.  If pirated copies of the games meet consumers needs, then that’s what consumers will find.

NBC had a gold mine here where they could flood the web with all the Olympics footage possible.  Provide some embedding code and let the steaming video spread. People could then watch the videos where they want when they want with streamed ads in tacked.  Providing the same content on demand brings more people to Olympics websites, where they can be exposed to more information on events, merchandise, and shows, even if the video isn’t found on an NBC affiliated site.

The fact that NBC already plans on taking a loss should encourage them to take risks with their online strategy.  Instead NBC is pushing leftovers on the internet and keeping the fresh meat for the networks. If its online strategy fails to meet expectations, NBC will unlikely consider the poor choice in content.  If it successful, whatever that means, then I’ll wonder how much better it could have done with real, shareable content.

Yahoo DRM latest to screw paying customers

After Google Video and Microsoft’s PlayForSure showed what not to do, Yahoo Music decided it wanted to be an example for what not to do in digital media.  Yahoo announced it will discontinue support for its DRM at the end of September, locking DRMed tracks to a single computer.

Microsoft tried to discontinue its PlayForSure DRM a few months ago, but has agreed to leave it up for a few more years.  Google Video discontinued its DRM, offering refunds for all purchases.  Only after some outcry did Yahoo agree to refund customers or provide DRM-free tracks.

All this ends up being expensive for everyone involved, whether its maintaining servers or refunding every customer you’ve ever had. Soon consumers will realize DRM deprives them of value they expect, like owning the music tracks they paid for.  Of course, consumers can always go to file-sharing networks which are free and DRM-free. That’s the competition, remember.

Shameless plug: I’ll be at the Flow Conference Oct. 9th in Austin, Tex. speaking on a roundtable about music and DRM in case anyone’s in the area.

The reason for Dark Knight’s record-breaking box office

dk_joker The Dark Knight hit theaters two weeks ago to monumental hype, an unmatched marketing budget, and rave reviews from critics and fans. But according to Warner Bros., the Dark Knight’s record $158 million opening weekend came all thanks to the movie company’s anti-piracy efforts.

The LA Times decided to regurgitate corporate spin profiling Warner Bros. “painstaking care to thwart pirates” preventing the movie from hitting file-sharing networks.  The six month anti-piracy bonanza kept camcorder versions of the film off the web for a whole 38 hours, by Friday night.

Warner Bros. is once again missing the point.  Dark Knight did this well because it’s an amazing movie people wanted to see.  That’s why IMAX theaters were sold out into August before the movie opened.  A theater experience, especially IMAX, is a different experience than a person can get at home, whether its a social outing or better quality facilities with surround sound and bigger screens. Word-of-mouth likely helped Dark Knight break the record for second weekend gross, a week after pirated copies surfaced.

The LA Times tries to support Warner Bros. theory, but ends up proving otherwise.  It cites Ang Lee’s 2003 Hulk got leaked two weeks before the movie opened leading to terrible reviews from fans.  The movie wasn’t that good, though it still made $62 million its opening weekend, even with pirated DVDs having a two week head start.

The LA Times also points out Star Wars: Episode III Revenge of the Sith had DVD-quality screeners leaked online days before the movie opened.  But good reviews and word of mouth led the movie to gross $380 million domestically.

What the LA Times left out was how much money and man power Warner Bros. wasted on its anti-piracy efforts and how much of that could have been shifted to marketing or merchandising or just saved.  Pirates will get copies of movies and they will share them.  Movies succeed when they are quality pictures offered in compelling ways so people want to see them.  Maybe Warner Bros. should lessen its six month anti-piracy efforts and think up ways to make the movie experience even more compelling.

Geek-Out Moment: This is Spinal Tap

spinal_tap_band Spinal Tap has giving us decades of brilliant music, thought-provoking messages, and a never-ending parade of soon-to-be-dead drummers that make hearts melt and panties fly.  Featured in the classic mocumentary This is Spinal Tap, the band provided insight into their unique operations, dealing with oppressive record labels, aging, and a waning fan base.  Most memorably, the band helped enhance rock and roll like no other with its innovative amps, providing 11 levels of volume instead of 10.  Why 11 and not 10? Because it goes to 11.

Geek-Out Moment: Watching the Watchmen

watchmen_characters Watchmen is remembered for not being your traditional super hero comic.  Alan Moore and Dave Gibbon’s classic is praised as the greatest super hero comic, providing a view of what super heroes might be like in a real world setting.  The dark tale set the stage for gritty and emotional spandex adventures with few matching the unique perspective Watchmen offered, one that begins with a simple murder mystery and ending with the astonishing twist where the villain wins.  Watchmen commented on the preceding decades of colorful adventures while setting the stage for a new generation of grown up comics, ready for something a deeper and richly thought provoking. Someday those comics will arrive.

Geek-Out Moment: Mario squashing goombas

NES_Super_Mario_Bros Boing. Even today I have trouble jumping without making the sound effect. Super Mario Brothers defined and shaped the video game industry for years to come with its simple yet addictive little plumber man. Mario’s quintessential moves, from jumping on goombas to throwing fireballs to falling down bottomless pits became the envy of all other games and gamers who wanted to be just like Mario. Saving the princess was just a cherry on the awesome sundae of finding secrets, exploiting hacks, and racking up points and coins till your thumbs bled.

Filtering the hype and useful in social media

Any web 2.0 business model must, by law, include five or more buzz words from user-generated content to API to social networking to get venture funding.  Companies are desperately trying to use social media like Facebook, Second Life, and even the iPhone to manufacture marketing and attention. The result is start-ups and established companies focusing resources because that’s where the hype is rather than where the smart business is.

Hype is the keyword here.  An already popular company like Facebook or Apple launch something new and obviously there’s hype.  But this hype is not contagious.  A former boss of mine said the reason we were developing an iPhone app before we had a mobile site was to “Get some attention when the app store launches.”

For start-ups limited in resources, jumping on the internet bandwagon is more often a waste and at best a distraction.  It’s best to focus on building your own features and worth to make sure once people find you, they want to stay.  Building applications for other platforms fragments your audience and time – what you build on Facebook needs to be rebuilt for the iPhone and rebuilt for Netvibes.

Second Life has become a prime example of hype overblowing marketing potential.  Last year, just as another company I worked for wanted to build a Second Life presence, Wired wrote about the marketing waste the virtual world had become. Coca-Cola, Reebok, IBM, Sears, and dozens more build huge islands with style and zazz, paying high-profile Second Life consultants and expecting the viral marketing to take off.  But no one visited.  The hype came from companies trying out Second Life, but no one ever posting resulting.  Since Second Life accounts are free, the 4 million users it boasts is misleading.  Only 1 million had logged on in the past 30 days and only a third of that in the past week.  Only 100,000 of those live in the U.S.  Those who do sign on spend most of their time in sex shops or gambling, not looking at marketing campaigns.

Facebook is likely to follow. Facebook itself is having trouble monetizing its massive user base, how do third parties expect to do better?  iPhone applications can be sold for money, which makes them less viral.  And working with any closed platform like Facebook or Apple puts the platform in control of your future.  Facebook suddenly blocked some of its most popular applications, Top Friends, Super Wall, and Social Me, with little notice and challenges to get back in the platforms good graces.

The opposite strategy of releasing your own API is more worth the time (if it makes sense for your product and not just a buzz word for investors) but has its own risks.  Twitter’s success and constant downtime are both due to their API.  Without the API, much of the sites usefulness wouldn’t have happened leading so many to join.  But because of the API’s popularity, the site can barely keep basic features operational.

So this is a lot of don’t.  The dos, unfortunately, are the hardest because it needs to be case-by-case.  Because there are so many platforms and APIs and doodads to try and sync up with, it’s impossible to say everyone should do this.  The key is when deciding how you want your product to integrate with the greater web world, think about your own strength and goals rather than bullet list features.  Everyone is pushing the same bullet lists.  You’ll stand out more by not.