Content is King… Louis XVI

Marc Andreessen has a thesis that Holywood (where big studios rule) might become something more like Silicon Valley (where entrepreneurs usually remain stock holders in their creation). He describes it as:

“a shift of power from studios and conglomerates towards creators and talent”

And the very next day I found two interesting items that corroborate his thesis:

First, check out Killer Bean Forever - a full feature animation film apparently created single-handedly. Here’s how Jeff Lew, it’s creator describes his work:

“For the past 4 years, I’ve been working at my computer 14 hours a day, 7 days a week. I’ve spent my entire life savings and maxed out credit cards. After all this time and effort, my movie is almost done. I present to you a preview of my feature film directorial debut… Killer Bean Forever.”

Sounds just like a technology entrepreneur describing his startup.

Second, here’s yet another example for how marketing doesn’t need big budget - “Producer Thanks Pirates for Stealing His Film.”:

“Our independent movie had next to no advertising budget and very little going for it until somebody ripped one of the DVD screeners and put the movie online for all to download. Most of the feedback from everyone who has downloaded “The Man From Earth” has been overwhelmingly positive. People like our movie and are talking about it, all thanks to piracy on the net!”

Obviously, that wouldn’t work if the film sucks - then you’ll need a serious marketing budget to push it.

In any case, I’m banking on this trend to deliver some good movies instead of the crap that’s produced by Holywood studios today. I just watched Ocean’s 13 (yet another crappy sequel) on DVD, and one of the previews was for No Reservations - which seems like a crappy rip-off of a very good German film I watched a while back - Bella Martha. If content is king in Holywood then right now it’s King Louis XVI.

MLM 2.0

“Consumers trust their friends and acquaintances far more than any other source.”

So says a Forrester “strategist”. Makes sense. But the corollary is wrong:

“Facebook, which brings a unique solution evolves advertisements to endorsements and encourages members to subscribe to a brand in what we are calling “Fan-Sumers” (an evolution of the consumer). As consumers share their affinities, brands can advertise using trusted social relationships.”

Apparently, in order to be a strategist at Forrester you need to be good at coining new terms (fan-sumers), that are rip-offs from your betters (Toffler’s prosumers - Update: Jeremiah says it wasn’t a rip-off, and I apologize. Nevertheless, Toffler is basic reading if you’re any kind of strategist). However, Mr. Strategist doesn’t have to ask “why?” - why do consumers trust their friends and acquaintances more than other source?

Here’s why I sometimes trust a friend’s opinion more than an expert, and always more than an ad - because it’s honest. It’s because I believe that my friends have my own interests in mind when they recommend a product, and not any commercial interest. More than that - if a friend was ever to try to promote some product to me in order to receive a benefit from a third party without disclosing that, I’d never trust their opinion again, and would seriously question whether they’re actually my friend.

Facebook’s “amazing” strategy that Forrester is touting seems more like MLM 2.0. Make money working from home, touting products to your social network friends, only you don’t even make money…

Fortunately some clear thinkers realize that. Nick Carr’s “The medium is the message from our sponsor” had me rolling on the floor…

(Real) Competition-Blindness

So a major TV network (NBC) has finally launched a service that lets you download shows to your PC. Not surprisingly, they still don’t get it right:

“First off, it’s Internet Explorer only, then once you download the player, if you don’t have the latest .NET framework, you’ll be downloading that also. Next: Windows Media needed a security update on top of it all. On a Mac? Sorry, can’t help. Outside of the US? You’re out of luck too. “

Don’t they realize that they have to be better than competition?  They probably do. It’s just that they choose to ignore the real competition. Let’s parse those (non)issues:

1. It’s internet explorer only. Mininova etc. work on firefox as well.

2. You need to download the latest .NET framework. I guess I could live with that one

3. Windows media needs a security update. Screw you.  Playing DivX torrents doesn’t require any “security” updates that securely send information about me somewhere else.

4. On a Mac? No problem. Lots of bittorrent clients work on the Mac.

5. Outside of the US? Even better, in most countries MPAA hasn’t got lawmakers in their pocket (yet).

Some More Shoddy Statistics

Founders know best, says USA Today: “Firms tend to prosper with founders at the helm“.
As a startup founder myself, I was naturally intrigued - what data supports this conclusion?

“Going back 15 years, stocks in founder/CEO companies have surged an average 970%, vs. a 222% gain for the S&P 500, according to data from S&P’s Capital IQ.”

Oh. See the problem? If not, read on…
The article goes on to try and explain (unsurprisingly, with no further hard data) why it is that founders are so successful at managing their own companies. No further consideration is given to the idea that this may just be a false correlation.
So here’s the problem: Del Jones and Matt Krantz, the USA Today reporters, compare the 15 year performance of companies with founder at the helm vs. companies in general.
What about an alternative explanation: public companies that have the same CEO at the helm for 15 years must have a damn good CEO. Otherwise they wouldn’t be successful and the board would find someone else for the job.
It’s nice that they use a system called “Capital IQ”, but a little more of it (or a passing understanding of statistics, or a minimum level of critical thought) would have prompted them to dig further and compare those founder/CEO companies to other companies that had the same CEO for the past 15 year. Would that study yield the same result? Or would that just lead to no article and an angry editor?

Or maybe it isn’t reporters fault:
“Ohio State University finance professor Rudi Fahlenbrach”. This is from a top-60 university?

And the “experts” seem to fall for it with no trouble at all:
“I should’ve attached more attention to it over the years,” says Rob Sellar, a money manager of Aberdeen Asset Management.
Really, Mr. Sellar? How about “attaching” more attention to what’s missing from the data? After all, there no telling in this “research” whether all companies headed by their founders succeed, just that public companies that had a leader successful enough to stay at the helm for the past 15 years are successful…

Strike Back for Freedom

Finally, someone is trying to use the media industry’s own weapons against them.

TechCrunch reports that Veoh, an online video website, is suing Universal Music, after being continually threatened by them.  While their chances in court are probably not very high, its heartening to see that some entrepreneurs aren’t easily intimidated.

Incidentally, I ran into this quote of a judge today:

“There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary public interest. This strange doctrine is not supported by statute nor common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back, for their private benefit.”

Unfortunately, the speaker isn’t a real judge, he’s a fictional one, in Robert Heinlein’s classic short story Life-line, written in 1939! (I’ve been reading some classic scifi lately). Too bad that this paragraph, written 68 years ago by a true libertarian to criticize corrupt business, is still relevant today. Even worse, no real life court today would say the same.

Growing Revenues in the Music Industry

This article from eMarketer shows that artists’ revenues from recording performance rights (i.e. payments by radio and TV stations) as well as synchronization licensing (i.e. the licensing of music for commercials, television shows, films and videogames) are growing fast. Together they totaled nearly $4 billion in 2006.

So while the recording industry, i.e. the people who sell CDs, is in trouble, the people who actually create music have many potential sources of revenue even if the end user isn’t paying for CDs.

Major Lables are not to blame for Music Business Demise

A NY Times article by Tony Sachs and Sal Nunziato tells the story of the independent CD shop that they owned in Manhattan for 12 years, until it closed in 2005.
They are full of criticism for the major record labels, whom they blame for making all the wrong moves in the face of the file sharing revolution, mistakes that they claim have led to their shop going out of business.
It is an important read, that helps you realize how the revolution does not hurt just big faceless corporations or multimillionaire-but-still-gready musicians. It also affects small business owners, who lose the business that they had spent 12 years nurturing.
But as much as I share their loathing for the big record labels, Mssrs Sachs and Nunziato are plain wrong. The labels are not responsible for the demise of their shop, and rather than make mistakes, I believe that they soon enough realized where all this is going, and began fighting for their lives with all the tools at their discretion (basicly money, which is used to influence lawmakers and public opinion).
Sachs and Nunziato’s shop had closed because its many of its customers no longer had a need for it. It’s great that their staff, unlike Best Buy’s actually “knew who Van Morrison was”, but people now go to the internet for music advice. It’s fun to claim that Tower Records had “the entire history of recorded music under one roof”, but that claim is plain wrong, and in any case, we can turn to file sharing to really find any piece of music ever recorded, and searching for it is easier too.
They continue by claiming that “the customers who had grudgingly come to trust our opinions made the move to online shopping or lost interest in buying music altogether. Some of the most loyal fans had been soured into denying themselves the music they loved.” Come on guys, people don’t deny themselves of the music they love. Instead they have a much better source now, and they still spend endless hours browsing and building themselves a great collection, but it doesn’t cost them money.
They end by saying that “the occupation we planned on spending our working lives at is rapidly becoming obsolete. And that loss hits us hard — not just as music retailers, but as music fans.” Again, while it’s heart wrenching that someone’s life creation is becoming obsolete, you can’t stop technology. Too bad that you share your lot with the buggy drivers, but that’s life. You can’t blame the major record labels for this. Change is an inevitable part of our world, better learn how to handle it. Finally, we should also keep in mind that recorded music, the basis for the CD shop business (the entire music business actually), was enabled by a technological advance. Some times these advances are good for you, some times they’re not.
Finally, as self-described “music fans”, these guys should be happy with the change. What it really means is more music in the hands of more people. Business has nothing to do with it.

How the book market should be: Author to Reader, Direct

Chris Anderson points us to the long tail characteristics of the romance novel market.

What caught my eye was the following quote:

“One told me that at $4.99 she felt her novel was “priced wrong”. I nodded sympathetically at that shameful discounting. Wrong. She felt she was priced too high.”

Most of those $4.99 go to the retailer, the publisher and various other middlemen, so she probably makes $1 or less per novel sold, and still she things it is only right to go down further. Wouldn’t it be great when she sells those novels in digital format, from her website direct to her readers, for $.49?

Also worth noting is that in the current system the author has no control over the pricing of the fruit of her labor. It is sold for what some MBA thinks is “right”. A better system would leave that decision to the creator. Better still, if it is reached through a dialog between her and her readers.

Content Business Going in Reverse

I was reading a post by Scott Karp dubbed “Is Content Still A Business?” and was struck by his claim that creating content is fast becoming something you can’t make money from. It sounds very true, and it flies in the face of the old media industry that still believes that content is king. Take for example Michael Eisner, who just launched a new company to create video content for the web.

 

I especially liked Karp’s claim that “Apple’s iTunes is not really a platform for selling music but rather for selling hardware.”

I’m wondering if that’s sustainable. After all, business have been moving for a long while towards a model that underprices the expensive hardware in order to sell you lots of perishables at exorbitant prices. HP sells printers for peanuts, but makes billions in profits from ink. Gillette tries to get you to buy their razor so it can make money selling blades, and Sony started with the Walkman and then TVs, but later bought into the media business to profit from the perishable content you use on those devices.

Now the idea of selling music in order to promote the hardware that plays goes wonderfully against the grain.