• January 25, 2012
  • My Aussie friends have an interesting saying that seems part complement and part benediction.  Good on you.  They pronounce it with an accent on the second word so that the phrase becomes a single word in the mouth, more like goo-don you.  At any rate, good on you.

    Last week’s smack down of the PIPA and SOPA legislation designed to build a back door to controlling the Internet was both instructive and fun to watch.  It showed the power of social media and of regular people coming together to let their voices be heard.  As the New York Times reported, it was something of a coming out party for the technology community both the new corporations and us users.  It was amusing to see the Tweets and posts from heretofore sponsors of the legislation that said, just kidding, never mind or “I was against it before I was for it…” and the like.

    Last week was also a clear power shift from the paradigm of entrenched corporate interests to the commonwealth.  How long it lasts is anyone’s guess.  It didn’t hurt that the bad guys in all this were seen as the big media corporations in film and music especially.

    I love music and movies and most forms of entertainment and as a rational economic actor I want those who produce these things to make a decent profit — why else would they work so hard?  But it says a lot that the industry’s preferred method for solving a serious problem like piracy was legislation and not some more typical response like engineering.

    If this were the biological world, pirates would be equivalent to invading microorganisms like bacteria and viruses.  An organism’s typical answer to such an invasion is to mount an immune response.  That means building elaborate safeguards like antibodies and strategies to thwart the invaders.  The media corporations thought they had a better idea, which was to get someone else to fix the problem for them.  They enlisted congress in a vain effort to make Internet companies handle the problem and you know what happened.

    The media companies have always had a business model problem and last week simply accentuated it.  Forever they’ve been selling a scarce commodity as a product that was nonetheless was consumed as a service.  They sold recorded media and tickets to shows and the public accepted it as a more or less fair bargain.  This partly explains the record industry’s eagerness to bring suits against individuals calibrated in units stolen.

    Artists put up with the status quo because it was the only game in town even though the corporations ran their businesses more like plantations than as entities with any modicum of respect for artists.  So in a real sense, The corporations have always been the bad guys.

    In those times packaging was sufficient for media companies to protect their assets but it is no longer.  Strategies beyond packaging have to be built and implemented.  What are the solutions?  Not my job.  You figure it out.  Just leave the internet alone.

    In 1960, when Frank Sinatra finally completed his studio recording contracts, he started a record company, Reprise Records, owned by Warner Brothers today.  If you doubt my labeling of the corporations as bad guys, look up the meaning of “reprise” and you will know everything you need.

    According to Wikipedia, which was not doing business in English last Wednesday,

    “Reprise (pronounced rih-PREEZ) was formed in 1960[1] by Frank Sinatra in order to allow more artistic freedom for his own recordings. Hence, he garnered the nickname “The Chairman of the Board.”… “One of the label’s founding principles under Sinatra’s leadership was that each artist would have full creative freedom, and at some point complete ownership of their work; including publishing rights.”

    Publishing rights were a big deal because they were tightly held by the record labels so Reprise’s approach caused an earthquake in the industry.  So from the IP ownership perspective last week’s action by some of the biggest names on the Internet was something that several generations could identify with.

    But the greater impact is what will inevitably come next.  First, the Internet community, aided and abetted by the social media community, has proven that the public can have great impact not only on brands but also on the nation’s public life.  In doing this, we may have reawakened some civic impulses that have been dormant for several decades as we have narrowly focused on technology as something that only makes life faster and cheaper.

    Last week, we rediscovered the commons, a place where people from all walks of life, not just the young, hip and technologically savvy, can meet, empathize and support each other.  Everyone in the CRM and social media communities should take pride in this accomplishment because this is where everything started.  But we ought not rest on our laurels because the next challenge is just around the corner.

    Published: 12 years ago

    When the French have a problem with particularly egregious government regulation or sometimes even when one is proposed, they call a general strike or perhaps just a slow down.  Farmers have been known to drive their tractors to Paris to parade them down the Champs Elysees to protest farm policies.  I was there nearly a decade ago when a strike shut down the airports on the day I was to fly home.  It was mildly inconvenient causing me to use a bit more French and to sample some more of its wonderful food and wine.  Hard duty to be sure.

    In America, few things unite us enough to spawn a strike, it’s not our style.  At least that’s been the case until now.  Today many Web destinations like Wikipedia (24 hour English language shut down) are staging some form of protest to air their displeasure with proposed legislation — the Stop Online Piracy Act in the House and the Protect IP Act in the Senate — that would crack down on piracy while only damaging personal rights a little bit.  Hey this is war time, right?  Welcome to strike Wednesday.

    The sides have been chosen pretty much like you might expect with big business — major media companies — mostly supporting and the Internet community in uproar.  There are many reasons to be on either side of the issue and there is enough material out there to inform you of each side’s ideological purity.  I want to skip that and look at this from a business and economics perspective.

    The media industry including the major studios, record labels and TV networks have taken it on the chin in the last couple of decades.  Good, fast and cheap computing power and the Internet have made it nearly impossible to protect intellectual property from being massively and freely distributed without the copyright owners’ consent — at least given the current approaches to protection.  That’s what this legislation is all about.

    The choice that the media companies have is to figure out solutions to protect themselves or to use their muscle to lobby congress to make law.  The legislative approach is much easier because the politicians are so much more cost effective than technology development.

    Sidebar: I am continually amazed that politicians can get hundreds of millions of dollars or more set aside in earmarks or other gimmicks for their supporters and when it’s revealed we find that their campaign coffers have swelled only by tens of thousands of dollars.  But I digress.

    Here’s my economic analysis.  The media have for a long time had a cushy ride.  They own the means of distribution, which enables them to cut outrageous deals with artists and others.  For example, a typical book contract is an 85/15 split with the lion’s share going to the publisher.  Record labels aren’t much different.  The media houses cite high costs of production and marketing but when you see what they’re willing to do to actually earn the split through marketing and promotion, you become jaded.

    The media companies don’t have a copyright problem per se, they have a business model problem.  Their model is based on selling product in an era where the economy is moving rapidly towards subscriptions.  Subscriptions provide a relative drip of revenue rather than a torrent.  There are so many drips as to create a different kind of torrent but all of those drips must be collected through technology and there is the rub.  It’s a tough problem.  The media companies would rather foist the problem on others than either create a solution of their own or collaborate to create one.

    But now the technology giants are correctly saying, that’s not exactly our problem either and we’re not going to do your bidding.  If anything the current controversy is the result of a completely uncreative approach to a problem.  In a situation where any number of solutions could be discussed, tested and tried out, one side has decided to dig in its heels and legislate.  That’s sad.

    I am going to brush up on my French because I think I’ll be reading Wikipedia in another language soon.

    Published: 12 years ago