At the recent Apple Special Event one of the more exciting announcements centered on Apple's CarPlay technology, an embedded extension to the iOS platform baked into the dashboard of over 40 new 2015 cars. Apple CEO Tim Cook shared that "every major car brand has committed to delivering CarPlay" and indeed he'd be right except for one notable exception: Toyota.

While the CarPlay news was exciting, Google's competing product Android Auto is close behind with a rapidly growing list of car makers who have pledged to support both platforms. Once again, except for Toyota. In fact, Toyota is a curious standout as the only car company refusing to support Apple or Google integration, a fact confirmed by a New York Times Article, where John Hanson, National manager of Toyota's advanced technology communications said Toyota had "no plans to adopt Android Auto or CarPlay." 

Does Toyota somehow believe it can engineer an end-to-end data/service/entertainment/social/mobile/information platform that is better than iOS and Android? Can they somehow convince consumers to give up all the networked lifestyle-centric data and services they carry in their pocket in favor of a tiny walled garden in their dashboard? Seriously? How 90s of them.

The challenges go far beyond the basic functions of a map or Bluetooth phone connection, the automotive interface is just the tip of an expanding iceberg of cloud services, data integration, app developer ecosystems as well as all the other enabling functionality and creative innovation empowering a mobile operating system--this is ultimately what Toyota will NEVER be able to reproduce. Samsung hasn't built traction for a proprietary OS or app development ecosystem especially with their support for MirrorLink an open standards based competing automotive solution, Microsoft can't get ecosystem traction and Blackberry who's powered automotive OS platforms for years will never achieve the holistic scope of services needed to compete with Apple and Google, but somehow Toyota will? <laughing at the sheer hubris!> Nope! Ain't going to happen.

Perhaps Toyota's plan involves device syncing? Right. Remember back when we all had to constantly (try to) sync our devices to different platforms? That worked. But even sync requires some degree of device integration and even if Toyota could somehow magically sync all our static data (is there such a thing as static data anymore?) what about real time processes like voice integration between car-centric systems and external control for TXT messages, and email--even Google Now and Siri barely function at voice recognition. Then there are the additional wireless carrier device fees, privacy, security, malware threats, and ongoing device support for services like Audible or Pandora to solve. Without 100% integration, our attention will continue to be split between our dashboard and our device which will remain a dangerous recipe for disaster, at least inside a Toyota. 

So why has Toyota stalled out on the information superhighway?  Money.  The auto industry is a low margin business compared to big-data and consumer data is valuable! Toyota is hoping for an ongoing revenue stream for every driver. Cha-ching! If you're driving by a restaurant, that restaurant would gladly pay a bounty for every driver who responds to a geo-targeted ad. Coupons for tires? Loyalty programs for gas? Will you need to pay Toyota for real time traffic data rather than using a free App like Waze on your mobile device? 

Consumer revenue is the driving force behind the battle for your dashboard, just like for your cable TV, PC and every other screen in your life designed to suck in your data and sell that data to the highest bidder. You're being tracked everywhere you go in cyberspace, now you can be tracked everywhere you go--period. What are your driving stats worth to your insurance company?

It's an interesting strategic reversal for Toyota who made their brand synonymous with technology and innovation which allowed Toyota to blow past the old guard like GM to become the biggest car company in the world.  Has Toyota jumped the shark? Will Apple and Google get into the car business and replace Toyota, at least as innovators?  

As someone driving a second Prius, I say lets bring back Toyota's old slogan: "You asked for it! You got it!." I'm asking for it, in fact we're all asking for it.  



Posted
AuthorRichard Cardran

1.) The number one reason Apple should buy Time Warner Cable (TWC) is to step up and be the agent of change to boldly redefine two industries--Cable TV and ISPs--both in desperate need of a good swift kick in the pants. Be the game changer! Do it better! Thats a big part of the Apple brand promise.

We'll show up on time!

We'll show up on time!

Apple could profoundly demonstrate to the big Multi Service Operators (MSOs) like cable and satellite as well as the entrenched media brands that there is life after cord cutting. It is time to show there is a profitable business model and a world of new innovation and audience engagement to be had.

The MSOs are afraid to go on-demand for fear of pissing off the media brands, the media brands are afraid of devaluing their distribution deals with MSOs everyone is afraid of everyone else and they are all paralyzed with the fear of the unknown. Someone needs to just step up and DO IT. Apple is one of the few believable candidates to pull that off.

2.) The second reason is; it makes good business sense for Apple. Apple can finally bring Apple TV into the market in a meaningful way. There is no technical reason we can't have a cloud based DVR service to watch cloud based TV content that is on demand and available across all the platforms and screens in our lives. The hurdles are the legacy content business deals, exclusivity deals, and all the other exclusionary content prisons that prevent innovation. Even Intel had to abandon their cloud DVR technology due to the impasse of content deals.

But Apple and TWC already have content deals. Yes, the deals would need to be evolved, but the combined pressure of Apple+TWC, together might be enough to quickly get them 75% or 85% there. The last few hold outs would be eventually pressured to participate, except CBS, who will spend their last dying gasp in court litigating all forms of innovation. For CBS, the glass isn't half empty, it's just empty.

If I'm paying $100 or more for Cable programming on my TV, would I pay the same for a cloud DVR service on all my screens including my TV? Netflix $7.99, + Apple TV $99 you betcha, sign me up! 

3.) The third reason is that a new Apple ISP business along with Google fiber can independently (or jointly) define a best practices and a forward vision for all ISPs and put meaningful market pressure on the entrenched monopolies like Verizon, AT&T, COX and others to lower prices and increase speed and reliability.  Apple wins if they can ease up on the squeeze and open the pipes so high quality content can flow at reasonable prices.

Apple also wins by adding additional MSO/ISP services such as voice (iPhone's version of Google voice?) and perhaps more importantly, the emerging home automation and security product sectors that are well serviced by a direct wired connection into the home. Home automation products like NEST and Philips LED lighting as well as next generation security products offer Apple a huge new set of hardware products to add to their stagnating product categories. Their stock price would go through the roof.

4.) The fourth reason is to flip TWC on the issue of Net Neutrality (NN) and begin to lobby the FCC with a fresh, consumer-focused voice that counteracts the self-interests of the Comcast, AT&T, and Verizon cartel. All of Apple's products and services will thrive in a world rooted in NN. Users can download iTunes music and movies without busting a data cap, or buffering from peering slowdowns. It's time that Google and Apple get a meaningful seat at that table.

5.) Fifth and last, but not least, the ISP business is at best a commodity, a utility, or at least it should be. But that doesn't mean there isn't money to be made purely as an ISP. The potential Comcast+TWC deal maxes out against anti-trust regulations, but an Apple+TWC deal has a ton of headroom to grow and consolidate, potentially offering enough market pressure to ensure fairness and pro-consumer practices across both the MSO and ISP sectors for years to come.

Apple, everyone wins, especially you!  It's not like you don't have the cash or credit to blow up the Comcast deal to the cheers of missions of consumers. It's a slam dunk!

Posted
AuthorRichard Cardran

What would happen if people discovered that EXXON was routinely selling 43 octane gas at pumps labeled 87 octane? Or what if you paid for a 100mg prescription but only got 25mg, or a placebo? What industry is allowed to legally sell a smoke and mirrors service that it never, ever delivers? Thats right, its Broadband which explains why my Time Warner 30Mbps "Extreme Service" routinely fails to deliver a sustained or dependable 5Mbps speed for services such as YouTube and Netflix. 

When I call TWC customer service they blame "the Internet" but always end up trying to up-sell me, they claim I should upgrade (supersize) to a faster service tier, but wait, how does that fix "the Internet" when my connection speed already averages 19Mbps? OK, 19 is not 30, but its way more than the 5 required for Netfix HD, so where's the problem? 

The problem isn't the Internet, the problem is peering.

Basically, peering is the interconnection between an ISP, such as Time Warner, and the outside world such as YouTube. By not proactively or reactively investing in upgrades, peering connections become saturated or jammed which is why there is a growing mountain of evidence and escalating criticism from knowledgeable Internet professionals against the big ISPs obfuscation of their culpability. 

What most people don't know, is that peering regulations were specifically excluded from any net neutrality regulations. There was a poison peering pill lodged into the Open Internet Order of 2010 (net neutrality) regulations that AT&T and others lobbied hard to get. There were, and currently are, exactly zero regulations surrounding peering. So even if net neutrality hadn't been shot down by the District of Columbia Circuit Court of Appeals, it wouldn't change the problem we routinely experience today with Netflix and YouTube playback. 

real-buffering.jpg

ISPs hide behind net neutrality "talking points" with factually accurate statements such as "unfettered access," and "we don't  throttle," claiming full compliance with the defunct Open Internet regulations while still leveraging unfair practices. The official Time Warner press release on the Verizon vs. FCC verdict stated: “Time Warner Cable has been committed to providing its customers the best service possible, including unfettered access to the web content and services of their choice. This commitment, which long precedes the FCC rules, will not be affected by today’s court decision.”

"Unfettered access" must be another way of saying "we'll leave our peering connections unfettered from any interference (such as upgrades)." Um, would you like to supersize your word salad? 

The peering deceit and denials have gotten so obvious that reports are now routinely popping up in conservative media such as in the Wall Street Journal's recent story "Netflix-Traffic Feud Leads to Video Slowdown" where they share that "Netflix Inc. subscribers have seen a lot more spinning wheels lately as they wait for videos to load...the long simmering conflict has heated up and is slowing Netflix..." According to the Journal, "People familiar with Cogent's and Netflix's thinking say the cable and telephone companies are delaying upgrading existing connections."

Time Magazine's recent page turner "Here’s Why Your Netflix Is Slowing Down - Financial disputes over peering are threatening the video service" claims "An escalating battle between Netflix and the largest Internet service providers is degrading service for the streaming video company’s customers, according to multiple reports."

Netflix's ISP report card clearly shows the falling rankings of big US ISPs placing the US just 0.02Mbps faster than Mexico in 11th place behind Colombia, Brazil and Chile and still falling. American exceptionalism? Not when it comes to ISPs--which begs for an explanation as to why republican FCC commissioner Michael O’Rielly is opposed to any intervention by the FCC: “the FCC [should not] be devoting its resources to adopting new rules without any evidence that consumers are unable to access the content of their choice.”  I'm guessing Netflix works great in Washington DC thanks to upgraded ISP peering investments paid out of lobbying budgets.

double-dip-in-real-estate.jpg

So why you might ask? Why would ISPs want to piss off their customers? Well, first off, they don't need to care about their customers, they're an unregulated monopoly. What they want is to charge customers for access to content AND charge content companies for access to customers, in other words, they want to get paid at both ends. To double dip--all the while waving the American flag of freedom for "a free Internet" visa-vie their so called compliance with net neutrality. Perhaps even more insidious is that they can effectively shape traffic though peering shenanigans to hijack customers away from innovative or competitive content into sub-par services they either own, or partner with. It's a win, win for big ISPs. In reality, isn't peering just a modern version of Payola?

You'll hear big ISPs claim that regulation will stifle innovation and competition. Lets try a thought experiment; pretend for a moment you're a small media startup. Unless you can successfully negotiate reasonable terms, sign deals, and pay protection money to every single Internet Service Provider across the US (what is that, hundreds, perhaps thousands of them? How many business development employees will that take?) you'll be hard pressed to succeed when your video streams choke due to the jammed-up peering backwater relegated to non-payers. The lack of net neutrality regulation is exactly what will kill innovation for all but the Time Warner's of the world--and we all know how "innovative" they are.

Worse than the nightmare that content companies might face, is what you the customer will likely face once the cable TV / ISP companies are free of all regulation. Broadband fees? Data caps? That's just for starters. How about access tiers, just like the ones cable already impose on their television service. Buzzfeed has nicely illustrated this potential in their "Net neutrality nightmare scenario" shown below.

A little over four weeks after Verizon's death blow to the FCC's enforcement of net neutrality, FCC chairman Tom Wheeler said he intends to move forward with new rules on blocking Internet traffic or discriminating against content providers. Unless these new rules address peering practices in a meaningful way, the FCC should save us all the trouble and turn the reins over to the two republican FCC commissioners Mike O’Rielly and Ajit Pai whose analysis was summed up in his public comment  “Net neutrality has always been a solution in search of a problem.” 

Well, the search results are in. Problem found. 

Posted
AuthorRichard Cardran

I imagine a day when I might have a choice of high speed Internet providers. I live less than 1.5 miles from downtown Los Angeles and there is no FTTH (Fiber To The Home) and my wireless is at best, unreliable. My only broadband option is Time Warner Cable. So I guess you could call that a marketplace--my choices being slow vs. unreliable vs. Time Warner Cable. This is what I like to call a Markopoly; when a market really isn't a market.

Recently Senior Republican FCC Commissioner Ajit Pai appeared on The Communicators, C-SPAN's weekly series featuring interviews with people who "shape our digital future" where he compared FCC regulatory oversight--specifically net neutrality--to outdated models such as 19th century railroad regulation. 

The Fox Broadcasting Company holds all rights to Family Guy

The Fox Broadcasting Company holds all rights to Family Guy

What he was referring to was the The Interstate Commerce Act of 1887 that required railroad rates be "reasonable and just," while at the same time preventing government from setting the rates. This was born of the massive public outcry against the railroad baron's monopolies and price gouging.  It also brought market transparency to unfair pricing practices whereby special back room deals favored large partner entities and discriminated against smaller customers. Sound familiar?

But in Ajit's world--regulation is bad. He was formerly the Associate General Counsel at Verizon Communications Inc., the very company that sued the FCC and won a court challenge against net neutrality. At Verizon's urging, the District of Columbia Circuit Court rejected a key part the FCC's regulatory implementation of net neutrality. Republican FCC Commissioner Pai made statements publicly defending Verizon and the ruling against  his own FCC thanks to the revolving door between the railroad--er, I mean--media barons and Washington DC. 

During his CSPAN interview, Ajit made a case that competition is creating a healthy marketplace by pointing out that television, telephone and internet are "no longer silos, my telephone at home for example is my video provider - cable companies are making inroads on telephone companies market share when it comes to voice and in terms of broadband competition too, the vast majority of people have a number of different choices."

Let's break down his statement.

I agree telephone has benefitted hugely from the breakup of the Ma Bell monopoly thanks to the 1982 antitrust suit against AT&T that enabled widespread competition, innovation and competitive pricing in both local and long distance markets. Indeed, telephone is now a true marketplace and Mr. Pai, thanks to anti-trust actions and government regulation, you are correct, the vast majority of people have a number of different choices.

And to a lesser extent, I acknowledge his rationale on television. While cable TV is still a geographic monopoly, a marketplace has emerged through competition from satellite, and in some rare geographies, FTTH alternatives. I'll agree people have choices.

Where I take issue is the analysis found in his afterthought comment--where he slipped in the phrase: "and in terms of broadband competition too" at the end of his statement. Really? Is broadband a marketplace? A monopoly? Or a markopoly?

For rural customers, dial-up, more rarely DSL, and expensive Internet satellite services are far from a viable alternative to high speed broadband. Wireless carriers may someday be an alternative, but they still lack widespread or meaningful penetration into home networks. Additionally the dreaded data caps, although annoying on handsets, are total deal killers when it comes to watching Netflix at home. And FTTH has less than 10% penetration in the high-speed broadband market.

Do you live in a broadband marketplace? Try consulting the broadband map maintained by Mr. Pai's FCC to see what broadband alternatives (defined as greater than 3Mbps) exist at your address. When you get all excited about the long list of results, do some homework and you'll likely see similar results to mine:

I have 5 separate wireless providers (although I have horrible service where I live) so even without data caps, wireless is not an option.

I have Megapath DSL (copper) and AT&T DSL (copper) who both told me I'm too far from the switch to get broadband speed DSL, although Megapath said I could connect my existing cable to their system and get 50Mbps service for $379 per month.

Which leaves me Time Warner Cable. I live in a monopolized market, not a marketplace. Thank you FCC for the misleading data--now I see where Ajit gets his talking points, he just makes them up.

Mr. Pai's intellectually dishonest comment that "the vast majority of people have a number of different choices" is true perhaps for voice services and television, it is absolutely not true for high speed broadband unless you define "choices" as low quality, low speed, high priced alternatives to cable-speed broadband, if they even exist. He is intentionally conflating separate issues to make his policy position seem rational.

Had industry insider Ajit Pai been a commissioner in 1982, should we believe he'd have supported the government breakup of the Ma Bells? Likely not. Clearly not a very republican, or insider thing to do. However--and its a big however--the AT&T breakup was the very government action that delivered his holy grail of a telecommunications marketplace--the very market he points to as evidence that the government shouldn't interfere. In the off chance he might claim to be supportive of the government's AT&T break-up, then Mr. Pai, remember this exact history lesson as you consider the upcoming Comcast/Time Warner merger. 

If FCC Common Carrier Title II rules applied to ISPs, we might have multiple competitive options at the end of our cable, like many do with DSL at the end of their copper.

But wait, it gets even worse.

Companies like COX Cable, Comcast, Time Warner, Verizon and AT&T are high paying members of The American Legislative Exchange Council (ALEC), the right-wing public policy organization that manufactures beneficial legislation for corporate members in the form of ready-to-vote bills that are 1.) adopted by right wing legislators and 2.) promoted by ALEC's national network of lobbyists to get these Trojan horses passed in various state legislatures. 

How to turn money into more money.

How to turn money into more money.

ALEC has nine "task forces" including the Criminal Justice Task Force; (the force behind Arizona's Papers Please Law and Florida's Stand Your Ground Law). The Public Safety and Elections Task Force (behind the majority of State Voter ID Suppression Laws) and for our purposes; ALEC's Telecommunications & Information Technology Task Force.

Commissioner Pai has met with, and been a featured speaker for ALEC's Telecommunications & Information Technology Task Force who aggressively pushes bogus legislation to ban broadband competition by municipalities. One example was Kansas bill SB 304, the anti-competition bill to limit Internet network investments.  It just so happens that the ALEC board of directors includes Sen. Susan Wagle, (R) Vice Chair of the Kansas Senate's Commerce Committee, and Ray Merrick (R), Speaker of the Kansas State House of Representatives. 

In response to SB 304, a letter to state lawmakers was signed by a variety of tech companies including Google who stated: "SB 304 would prevent municipalities from working with private broadband providers, or developing...broadband infrastructure that will stimulate local businesses development, foster workforce retraining, and boost employment."

So what was this really all about? Google Fiber in Kansas City. Let me rephrase that; the threat of competition to cable's monopoly. It is the unrestrained and transparent efforts of a few media barons to prevent ANY competition, fair or otherwise.

But it's not just Kansas, last year North Carolina became the 19th state to create barriers to community networks, effectively outlawing competition.

Once the Comcast and Time Warner merger happens (as it indeed might) the market power of such a behemoth will only embolden the broadband monopoly machine.

Ajit Pai is swearing to "to maximize the benefits of competition and innovation for all American consumers."

Ajit Pai is swearing to "to maximize the benefits of competition and innovation for all American consumers."

I find this amusing, during his FCC confirmation Mr Pai said: "In discharging my responsibilities, I always would be mindful of the implicit goal of communications policy: to maximize the benefits of competition and innovation for all American consumers, whether they live in a big city or rural Kansas." 

Hey Mr. Pai, its time to share the pie.


Posted
AuthorRichard Cardran

Imaginary conversation; Eddy Cue tells iTunes "let's start a band!!"  Imagine for a minute that iTunes iBand is now topping the music charts as the next big pop sensation. How about Pandora touring their QA team in a live concert circuit? Imagine LastFM as a hit rock band or Spotify tearing up the next country music awards show. Seem like a farfetched business plan? When was the last time a technology company suddenly turned into a top-tier content creator? Intel tried it and failed. AOL tried it and failed. Now, YouTube has tried it and ...failed. Seems there's a lot more to content than just financing, or corporate ego.

Kudos to YouTube for sharing revenue with their channel partners and content creators, a case where everyone wins.  But acting as a promoter, a talent agency, as the arbiter of taste and trends, well, that apparently is a case where most everyone looses, especially YouTube.

Rather than trying to be the rock-band, how about being the radio station? How about paying talented DJs (read VJs) to find the content, talent, the creativity and indeed the hits to play?

The music industry continues to lead the digital revolution and blaze the trails of discovery and curation across the likes of Pandora, Spotify and LastFM. Youtube's playlists seem to be an after thought, badly showcased and impossible to find. The creators of those lists are the tireless, unpaid volunteers sucking up the vacuum of discoverability and shouting their discoveries to a deaf ear.


Rewarding Curation

What is YouTube's biggest competitive differentiator? Content. Mountains of it. Petabytes of it. Including billions of hours of some of the most boring, repetitive unwatchable trumpery ever created by mankind, with the possible exception of the Lifetime Network.

But as it turns out, more is more; more bad--and more brilliant--if fact the wealth and depth of brilliance on YouTube likely outshines every network, every show and every celebrity on TV if for no other reason than the shear volume of creative, interesting, beautiful, funny, compelling and eminently watchable content. If you can find it that is. 

Somewhere there's a geek that could provide an algorithm for how many mining hours it takes to find 10 solid minutes of YouTube gold, which probably is easier than mining Bitcoins, but in the end, at least Bitcoin pays off.

Speaking of algorithms, YouTube uses several, but Polish (the language) and polish (the floor wax) are still just Polish(?) to YouTube. The signal to noise ratio on pure machine matching is not yet viable and it takes actual human curators and trend makers and VJs to make meaningful recommendations that deliver.

If you're creating amazing playlists, the definitive cat on Roomba list or the best covers to Stairway to Heaven or whatever it is, you have no power at the 'Tube. Your time is worth nothing, no revenue share, no promotion, no above the fold visibility, and no dedicated navigation categories. If you do create a channel, clicking on videos presents an empty page, unless your audience clicks a drop-down to reveal "playlists." Like I said, an afterthought.

Feb 21, 2014 Update. At least you can now see the menu item for playlists.

You are not valued even though you might be generating millions of views for the content creators who's content you've showcased. Are DJ's (VJ's) really worthless? Radio never happened? Isn't TV just one big content curator? YES that's it! TV is curated! Curation makes it easier for audiences to find the kind of content they like, as well as building trust in the brand promise to suggest new content. It's just more complex than a simple "people who liked this also like that" formula.

Hey YouTube, if you want to really be the next big thing, take a hint from Radio and TV and see why they continue to be the most successful media forms in the history of mankind. They're picky. ESPN curates content differently than MTV does. A Channel isn't necessarily a collection of shows by a single content creator--otherwise TV channels would be organized by production company rather than audience targets. Sometimes traditional approaches are worth keeping if for no other reason than they have proven themselves successful through generations of trial and error.

When you want to order dinner in, the last thing you want are the contents of a supermarket dumped onto your driveway when perhaps you're just in the mood for a pizza. 

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Posted
AuthorRichard Cardran

Around a million years ago, I led the user experience and technology area of a project that attempted to quantify audience sentiment and acceptance for digital marketing and advertising practices. The project was funded by Intel, run by AOL and used sample campaigns from Hilton and Nissan as well as FexEx and others through a partnership with IPG and Omnicom. The Nielsen organization led the research which paid people to participate. There were various living room sets built inside CompUSA stores and the test subjects were paid between $10 and $50 to participate depending on their life status (a doctor might get paid more than a student). 

johnny_automatic_whole_ham.png

Several ad models were sandwiched into typical web video viewing sessions that included long and short pre-roll ads (before the video such as YouTube), post-roll ads (after the video), commercial breaks (like Hulu) as well as other more abstract models.

Months and months of physical research and painstakingly compiled metrics normalizing the data against demographics, psychographics and geographics, yielded a clear and indisputable result. People hate ads. Wha?

Ok, now we know. Now we know quantifiably, not just intuitively. The interesting part was a more nuanced area of the exercise that looked at targeting, specifically providing information to users that was of interest, but in the form of soft advertising.  What we learned was the basis for Google's billions of dollars of valuation thanks to their AdSense technology. If users are looking for something, and you can return a reasonable answer or resource that addresses their desires, the experience becomes informational, appropriate and well received—flipping the signal-to-noise ratio or ham-to-spam ratio into a workable relationship with the consumer.

o here's my suggestion. As a consumer, I'd be more than willing to give advertisers a lot of information about who I am and what interests me if they promise to transform their spam into ham, or even bacon.

Here goes; I don't have kids, so no more diaper ads! I do have a dog, so send me some dog-treat coupons ok? I'm a techie; drive a Prius, I'm turned on by LED light bulbs and I'm an Apple user. I don't eat ice cream, I do drink mineral water, and I'm fond of Thai. Vampires or zombies? Definitely vampires. And, *squirm,* I'm a Brony - TMI?

ey all you wary consumers, give it up! Be willing to give up some voluntary information. You don't have to admit to smoking cigarettes or being a boozer (your grocery loyalty card data has already been sold to your health insurance company) you might stand to get some relief without ever seeing that HEAD-ON commercial again!  

What we need is a Netflix prize, but for marketing standards.

Instead of invasive violations of our basic privacy, how about we create an opt-in large-scale predictive modeling algorithm based on a voluntary and updatable set of data?

The Netflix Prize was an open competition that began on October 2, 2006, to award $1,000,000 for the best collaborative filtering algorithm to predict user ratings for films based on previous ratings. This kind of rating system could serve as the basis for recognizing patterns in consumer supplied data about products and services.

The Netflix challenge happened over a three-year period, 40,000 teams from 186 countries made submissions. On September 21, 2009, the grand prize was given to a seven-man multinational group named BellKor’s Pragmatic Chaos, a team of Bob Bell, Martin Chabbert, Michael Jahrer, Yehuda Koren, Martin Piotte, Andreas Töscher, and Chris Volinsky that bested Netflix’s own algorithm for predicting ratings by 10.06 percent. The winners represented a collaboration of multiple teams that mashed up a variety of mathematical models to produce the winning algorithm, rather than relying on a single approach. In other words, an algorithm to wrangle other algorithms.

As a consumer I want to be in control of the messaging and monetising that clutters up my life, I want more ways to participate, less noise and information that is meaningful to me.

The Buycott App

The Buycott App

The Internet news-sphere was burned up recently by he Buycott App.

This is a wonderful, consumer-empowering tool for consumers to make good choices in how they support or punish companies that are not politically or ideologically aligned to their beliefs.

Buycott describes the experience as "When you use Buycott to scan a product, it will look up the product, determine what brand it belongs to, and figure out what company owns that brand (and who owns that company, ad infinitum). It will then cross-check the product owners against the companies and brands included in the campaigns you've joined, in order to tell you if the scanned product conflicts with one of your campaign commitments."

magine this kind of technology tied to your Amazon account, your Browser profiles or the other unrelenting sources targeting your mind and wallet.

The way to gain power and control over our lives as marketing targets is to take a proactive and participatory role in the conversations and implementations.

Lets build a freely distributable "Like" and "Unlike" button technology, that we as consumers can click for any product, service or company we encounter and consequently add or block those resources in our "acceptable opt-in" marketing profiles. This profile would be the basis of an opt-in large-scale predictive modeling algorithm associated with our consumer profile data. Noise canceled. Everyone's happy and the bacon has moved closer.

All I can say is, you've got to give to receive, so "give it up people!" There's ham at the end of this maze.


Posted
AuthorRichard Cardran

I recently finished up an almost two year long assignment for the Disney Movie Studio helping them to develop programs and strategies to answer the question "How do we not become the music industry." While this was not the happiest place on earth to work, the assignment was fantastic and I threw myself in and did my best to bail out the ship of state and chart a new course into profitable digital waters.

"Disney doesn't have a stick up their ass, they have an entire enchanted forrest" --MKaye Illustraton: icky no.4. dann matthews

"Disney doesn't have a stick up their ass, they have an entire enchanted forrest" --MKaye

Illustraton: icky no.4. dann matthews

ecause of my NDAs I cannot speak of the work I did or the process we faced, but it's safe to say my 20+ months on the Studio's executive steering committee revealed, or at least confirmed what you might assume about the old media model.

These guys are, for the most part, old school pick and pack, supply-chain people suddenly thrown into a digital world and with some exceptions, extremely entitled and entrenched and unwilling to learn new things. Harsh? No actually not. The fact we were eventually able to develop amazingly innovative and cutting-edge digital distribution technologies and sustainable business models was really due to the genius and digital savviness of  the CEO of Disney, Bob Iger, without his mandates, the Studio never would have attempted to evolve on their own.

While I might sound bitter or disappointed in my relationship, the truth is I love Disney and I want Disney to succeed in every way, every way but one perhaps.

Disney recently tried to trademark the Dia de Los Muertos, to coincide with a new Pixar movie release. When I said the culture of Disney was entitled, this is exactly what I mean.  Disney went too far in trying to own the rights to a traditional indigenous Mexican holiday, but this is not the first or most outrageous copyright grab by the predatory mouse.

Copyright, copyleft and the copyfight, a brief background.

The raw act of creation applies to the creation of tools (technology and social systems) as much as it does to the use of those tools by artists in the act of creating their art. Disruptive change in mass-media culture on the scale we are experiencing not only brings challenges to the existing stakeholders but also introduces new problems unique to its own promise.

While skiing on January 5, 1998, Sonny Bono (pop icon of the Sonny and Cher duo and the Republican congressman of California’s 44th District) smashed head first into a tree and died. Of his many accomplishments, the 1998 Sonny Bono Copyright Term Extension Act (CTEA) might perhaps be his most-enduring contribution—ensuring that “The Beat Goes On” will go on forever. The CTEA law, also known disparagingly as the Mickey Mouse Protection Act, effectively froze the advancement date of public-domain content in the United States for works covered under the fixed-term copyright rules set forth in the Copyright Act of 1976.  One can only guess at Bono’s motivation; perhaps he’d seen one too many Cher impersonators murdering “I Got You Babe” and just had to do something about it.

In 2012, the Republican Study Committee published a policy report calling for radical changes to the copyright system which was published and then magically unpublished in a remarkable 24hour period. Skeptics have reported seeing fairy dust at the scene of the crime.

Of the various analysis and editorial depictions of CTEA, that of Lawrence Lessig, professor of law at Stanford Law School and founder of the Center for Internet and Society, does the best job of deconstructing CTEA in his 2004 book, Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity and, more recently, Remix: Making Art and Commerce Thrive in the Hybrid Economy.

While decidedly a leftist view of copyright law (Copyleft) as it affects miximal expression, Lessig’s work paints a clear and present crisis for all concerned stakeholders, which he made clear in a 2010 article in The New Republic titled For the Lover of Culture, in which he outlines that unlike the fair-use rules of copyright for works of print—specifically, the ability to freely use quotations with attribution—film and electronic media in general have no such understanding.

Lessig shares the chilling account about the documentary Eyes on the Prize, quoting Jon Else, the documentary’s producer and cinematographer, who describes the problem:

"[The series] is no longer available for purchase. It is virtually the only audiovisual purveyor of the history of the civil rights movement in America. What happened was the series was done cheaply and had a terrible fundraising problem. There was barely enough [budget] to purchase a minimum five-year rights on the archive-heavy footage. Each episode in the series is fifty percent archival. And most of the archive shots are derived from commercial sources. The five-year licenses expired and the company that made the film also expired. And now we have a situation where we have this series for which there are no rights licenses. Eyes on the Prize cannot be broadcast on any TV venue anywhere, nor can it be sold. Whatever threadbare copies are available in universities around the country are the only ones that will ever exist. It will cost five hundred thousand dollars to re-up all the rights for this film."

I’m happy to share with you that extraordinary efforts resolved this travesty for Eyes, but thousands of important works remain shelved and rotting due to the imprecise and overly broad wording of corporate-sponsored copyright laws.

Lessig shares his comments from the American University’s (AU’s) Center for Social Media, concluding that “rights clearance costs are high, and have escalated dramatically in the last two decades” and, in effect, “limit the public’s access” to documentary film. The consequence of this errant ecology of creativity is that the vast majority of documentaries from the twentieth century cannot legally be restored or redistributed.

Lessig "They sit on film library shelves, many of them dissolving, since they were produced on nitrate-based film, and most of them forgotten, since no content company or anyone else can do anything with them. In this sense, most of these works have been made orphans by a set of agreements concluded at their birth, which—like lead in gasoline—were introduced without any public recognition of their inevitable toxicity. "

Lessig illustrates an even more chilling account in reaction to the Google Books settlement. As stated under the settlement, Google will pay for rights to distribute up to 20 percent of copyrighted books whose author could not be found, and, beyond 20 percent, the public will pay to access the full book, with the funds given over to the new nonprofit Book Rights Registry. 

Lessig extrapolates the legal consequences for such a statute inThe Metering of the Printed Word from his New York Times interview: “The deal constructs a world in which control can be exercised at the level of a page, and maybe even a quote. It is a world in which every bit, every published word, could be licensed.” 

The ultimate extreme conclusion is easy to believe. Given the state of aggressive corporate legal departments needing to provide the “P” in their “P&L” (profit and loss) we seeing the same slash-and-burn mentality at work in digital media that has all but destroyed the cultural record of documentaries and other important artifacts.

Years ago, I produced a piece for USA Television. We did an interview near a shopping mall and later discovered that a very low, almost-imperceptible music track could be heard leaking into our interview from the background mall music. We “EQ’d” (equalized, or filtered out) the majority of the nuisance and covered up the balance of the annoying noise with licensed music inserted behind the interview. At the time, USA didn’t have a blanket rights license with ASCAP, so any music used in a production needed to be cleared individually. You guessed it: We were busted.

Copyright law exempts performance “without any purpose of direct or indirect commercial advantage,” yet ASCAP has brought suit against telecoms for mobile-phone ringtones. In the suit ASCAP was not disputing the legality of the sale of the ringtone, as long as the rights holder is compensated. What ASCAP was asserting is that ringtones overheard by passersby constitute a public performance. The Electronic Frontier Foundation’s senior intellectual property attorney, Fred von Lohmann, clarifies the challenge:

"Under this reasoning from ASCAP, it would be a copyright violation for you to play your car radio with the window down!"

The radical interpretation of current copyright law basically delineates that you “must defend” or risk losing control of your copyright. This notion has spawned a huge bureaucracy of legal insanity that risks destroying our cultural record, squashing creativity and creating an environment so hostile to artists that it will ultimately produce a culture lacking referential contexts of any kind. (Don’t quote me or I’ll sue!) (just kidding).

The U.S. Constitution’s stated purpose of “promot[ing] the progress of science and useful arts” by limiting the perpetual protection or lifetime rights to works was challenged by the adoption of CTEA. Opponents saw CTEA as the beginning of a slippery slope toward a perpetual-copyright scheme that nullifies the intended outcome and violates the spirit of the “for limited times” language of the U.S. Constitution, Article I, section 8, clause 8.

Mickey goes to Washington.

Disney is arguably the leader of the corporate copyright police. Disney was about to lose the copyright protection of its golden licensing goose, Mickey Mouse, and set out to lobby Congress to extend the copyright act’s limitations in an effort to protect Mickey from emancipation. Without the CTEA, Mickey Mouse would have entered the public domain in 2004, Pluto was due to expire, in 2006, Goofy in 2008, and Donald Duck in 2009. As a result of CTEA, there will be no Disney copyrighted works due to enter the public domain until 2018 which gives the mouse plenty of time to buy more legislation. 

Mickey Mouse’s original film debut in Steamboat Willie (1928) was, in fact, borrowed from works in the public domain. The short was a parody of Buster Keaton’s 1928 Steamboat Bill, Jr. Besides Mickey Mouse, many of Disney’s animated films are based on nineteenth-century public-domain works, including Snow White and the Seven Dwarfs, Pinocchio, Cinderella, Alice in Wonderland, The Hunchback of Norte Dame, and many, many more. The Disney Corporation has built itself on the shoulders of other creative works and harvested enormous benefits from the public domain, the very basis for the U.S. Constitution’s stated purpose of “promot[ing] the progress of science and useful arts” by limiting perpetual copyright. If CTEA had been in effect at the dawn of Disney’s empire, Disney might never have existed.

The cultural expression by artists, writers, musicians, and filmmakers is born of inspiration and not created in a vacuum. Artists require a rich public domain from which they can draw inspirational resources. Just as Disney borrowed great public-domain works to produce a wealth of corporate riches and enrichment for audiences, so too should the next would-be Walt—empowered to build on the shared cultural record influenced by Disney. A story about “the little merman” might steal nothing directly from Disney or its profits, but even the abstract act of referencing cultural icons can lead to shock-and-awe legal nightmares.

 

Disney, along with other big media interests, pushed lawmakers to extend copyright protection. Motion picture, television, and recording studios and their parent companies contributed $6.5 million to federal candidates and political parties in the 1997–1998 election cycle during the CTEA wars.

A logo representing opposition to the CTEA, using a reference to its "Mickey Mouse Protection Act" pejorative denomination

A logo representing opposition to the CTEA, using a reference to its "Mickey Mouse Protection Act" pejorative denomination

Half the lobbying money came from the four top Hollywood media interests, such as Universal Studios, News Corporation, Time Warner, and Walt Disney. However, Disney took the leading role in pushing for H.R.2589 and S.505—the initial bills of the CTEA as cited in a brilliant doctoral thesis, The Public Domain Trapped by the Mouse: Walt Disney and Ramifications of the Copyright Term Extension Act by Seung-Hwan Mun of the University of Texas. Seung notes Congressional Quarterly reported that one week after an informal meeting with Disney CEO Michael Eisner on June 9, 1988, then–Senate Majority Leader Trent Lott (R-Miss) signed on as a co-sponsor to copyright-extension legislation on the very day Disney’s political action committee made a $1,000 contribution to Lott’s campaign committee (Schecter, 1998; Ota, 1998a).

You might remember Lott as the senator who likened homosexuality to alcoholism, kleptomania, and “sex addiction” in a television interview and later resigned his seat in 2007—a resignation that, according to news sources such as CNN and the New American, “was at least partly due to the Honest Leadership and Open Government Act, which forbids lawmakers from lobbying for two years after leaving office.” Not surprisingly, on January 7, 2008, it was announced that Lott opened a lobbying firm about a block from the White House.

A rich source of lobbying money, Disney led the copyright fight in Congress with contributions totaling nearly $800,000 to political campaigns in the 1997–1998 election cycle, according to the Center for Responsive Politics

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The Mouse Liberation Front.

The Air Pirates were a group of cartoonists who created two issues of an underground comic called Air Pirates Funnies in 1971. The lead features in both issues focused on Walt Disney characters, including Floyd Gottfredson’s Mickey Mouse cartoon strip depicting the Disney characters in various sex acts and drug use. Contributor Ted Richards took on the big bad wolf and the three little pigs in an effort to attack and expose Disney’s seizing of popular American and European folklore. Unsurprisingly, Disney sued. The initial decision by Judge Wollenberg in the California District Court, delivered on July 7, 1972, was in favor of Disney.

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The story is nicely packaged by Bob Levin in his book The Pirates and the Mouse: Disney's War Against the Counterculture. (2003) where he shares that undeterred, Dan O’Neill, founder of Air Pirates Funnies, continued to publish various Disney send-ups, claiming his right to parody and fair use; however, in violation of the temporary restraining order, Disney won another $200,000 preliminary judgment and another restraining order, which O’Neill continued to defy. Finally, in 1978, the Ninth Circuit Court ruled against the Air Pirates three to zero and, a year later, the Supreme Court refused to hear an appeal. 

Soon thereafter, O’Neill recruited assorted artists for membership in a “secret” artists’ organization, the Mouse Liberation Front. Art exhibitions by the Mouse Liberation Front (M.L.F.) were held in New York, Philadelphia, and San Diego. The crescendo to the saga happened when—with the aid of supportive Disney employees—O’Neill delivered The M.L.F. Communiqué #2 in person to the Disney studios, featuring his drawing of Mickey Mouse seated at an animation table smoking a joint. According to an interview with MLF member Bobby London, in Comic-Art.com, he accounts for the final outcome in 1980, weighing the unrecoverable $200,000 in damages and $2,000,000 in legal fees against O’Neill, the Walt Disney Company settled the case or, more accurately, gave up—dropping the contempt charges and promising not to enforce the judgment as long as the Pirates no longer infringed Disney’s copyrights.

In Bob Levin’s book The Pirates and The Mouse: Disney’s War Against the Counterculture, New York University School of Law professor Edward Samuels was quoted as saying, “I was flabbergasted. [Dan O’Neill] told me he had won the case. ‘No, Dan,’ I told him, ‘You lost.’ ‘No, I won.’ ‘No, you lost.’” Apparently, Dan O’Neill’s definition of winning was the fact that he didn’t ever go to jail. A winning outcome by one measure—but, as noted in Levin’s book, many believe “They set parody back twenty years.” 

First published in #74 (May 1967, "The JFK/DISNEY ISSUE") of The Realist under a copyright claim by publisher Paul Krassner, this poster was drawn by artist Wally Wood. 

First published in #74 (May 1967, "The JFK/DISNEY ISSUE") of The Realist under a copyright claim by publisher Paul Krassner, this poster was drawn by artist Wally Wood. 

One final irony; original Air Pirate member Bobby London was quoted in an interview as saying "A friend of mine had told me to try and get a job at the Disney merchandising art department here in New York. And after laughing wholeheartedly at this idea, I decided to give it a try." He got the job and apparently nobody ever mentioned the Air Pirates while he worked there, though in the interview he recalls a rather awkward moment when "...one day the art director, who had become a very good friend of mine, came out and talked to the artists as he customarily would do at the end of the day, and he made some sort of joke about dirty Mickey Mouse comics and the place got really quiet. I didn't look up or move or anything, I just kept working, and it just passed...apparently some people up there at Disney knew and they didn't mind because they got to know me and they got to like me. So, I kept the job."

mickey.jpg

The notion "Guns don't kill people, people kill people" might be an allegory for Disney, Inc. vs. the lawyers and myopic leadership therein. In the case of Bobby London, "We become what we hate," or at least at times simply benefit by our enemies. For me, Disney is not inherently evil, Disney is not my enemy, and is in fact a source of endless pleasure. The question is how often and I laughing with them, or laughing at them remains to be seen.

My personal beliefs.

For all of you who are right about now thinking that I’m a radical leftist, I’m actually fairly conservative when it comes to my strong beliefs that artists and copyright holders deserve protections and should be compensated for their work. Where I diverge perhaps is my equally strong belief that parody, quotation with attribution, and editorial fair use—for example, in historical, orphaned documentaries—makes an urgent case for a sane, responsible resolution to the insanity of being arrested for having one’s purchased, authorized, ringtone overheard.

Uploading of untransformed works, such as music, movies, or other literal works, in whole or in part, does indeed do damage to the artist. Even derivative clips significant enough to elude the “quotation with attribution” that are used outside of any material editorial context or presented linearly with no transformative perspective are, in my opinion, fair game for copyright sanctions.

Material on services, such as YouTube, that does however, employ editorial treatments, such as mashups, supercuts, or other creative or editorial processes, that are clearly transformative in nature rarely (if ever) prevents or circumvents commerce to occur for the native original work in question.

Change is needed both to protect intellectual property AND to protect fair-use and parody. Support reform to better target the broad wording of proposed legislations such as the "Stop Online Piracy Act"/"E-PARASITE Act" (SOPA) and "The PROTECT IP Act" (PIPA) and all the rest that will inevitably follow. Make your voice heard.


Additional Sources.

Gaylor, Brett. “RIP!: A Remix Manifesto.” External Sites – NFB. 2008. Web. 22 Apr. 2011. <http://films.nfb.ca/rip-a-remix-manifesto/&gt;.

Levin, Bob. “Dan O’Neill.” Edward Samuels. 2004. Web. 22 Apr. 2011. <http://www.edwardsamuels.com/copyright/about/anecdotes/oneill.html&gt;.

“Liblicense: Definitions of Common Words and Phrases.” Yale University Library. May 2008. Web. 22 Apr. 2011. <http://www.library.yale.edu/~llicense/definiti.shtml&gt;.

“Air Pirates.” Wikipedia, the Free Encyclopedia. 13 Mar. 2011. Web. 22 Apr. 2011. <http://en.wikipedia.org/wiki/Air_Pirates&gt;.

“Mickey Mouse.” Wikipedia, the Free Encyclopedia. 20 Apr. 2011. Web. 22 Apr. 2011. <http://en.wikipedia.org/wiki/Mickey_Mouse#Walt_Disney_Productions_v._Air_Pirates&gt;.

Smith. “Walt Disney: Long Biography.” Walt Disney – Just Disney.com – Your Source For Disney. Web. 22 Apr. 2011. <http://www.justdisney.com/walt_disney/biography/long_bio.html&gt;.

“Steamboat Willie.” Wikipedia, the Free Encyclopedia. 13 Apr. 2011. Web. 22 Apr. 2011. <http://en.wikipedia.org/wiki/Steamboat_Willie&gt;.  


Posted
AuthorRichard Cardran

A great parable about human nature, Who Moved My Cheese? An Amazing Way to Deal with Change in Your Work and in Your Life, is a motivational book by Spencer Johnson. In the book, one pair of mice, Sniff and Scurry, discover that “Cheese Station C” no longer has any cheese. These mice are not surprised because they noticed the dwindling supply and assumed that, one day, they’d need to find another source. Later, the other set of mice, Hem and Haw, are angered and annoyed when they discover that the cheese is gone—having been unprepared, they believed the cheese supply to be a constant. The fable ends with seven basic morals about change and adaptation, the latter being that change keeps happening, get over it, deal, and move on.

While it might be easy to predict the change in the television business to a broadening set of distribution, the industry experts are quick to point out the slow adoption of cable cutting. While this is comfort food, it's not cheese. Comparing a rich and tasty, albeit expensive wheel of Gouda to a cheese-food-product like Cheese-wiz is bating the trap of false-equivalency with, well, not so good cheese.

The reality is that audiences have yet to be given the opportunity to engage in full, meaningful transparency across other distribution models. Imagine for a minute that you, the audience, choose one or more aggregation sources—say, your local cable company and perhaps the $7.99 per month Internet video portal Hulu, the first successful online video aggregator for long-form IP video. 

You choose to pay the cable company $89 per month for basic service and perhaps another $15 for HBO movie channels. Additionally, the cable company charges you $39 for Internet access, and your mobile phone company charges another $39 for broadband WiFi access on your phone (the "Smartphone tax").

Perhaps you also have a Netflix subscription for $8.99 per month that allows you to watch movies on your PC or your TV via a DVD or game box as well.

Your total cost for ad-supported content is $89; your HBO Hulu and Netflix subscriptions are $31.98; and your access to the Internet on both your cable and mobile accounts totals $78.

You are spending a minimum of $198.98 monthly for content and delivery across your entire set of devices and locations. But can you really access these services transparently? Can you, for example, see your HBO, Netflix, Hulu and basic cable channels all in one place?  No. Each is subject to their own corporate content prison even though your're paying for monthly access. What's the difference if I watch MTV on the TV or on the PC, I'm paying for monthly access. It's just hit and miss, which means there is no transparency of experience between corded and cord-cut households. If there were transparency, perhaps the adoption of IP based a-la-carte and on-demand services might rival cable, or even surpass it.

And worse, your mobile provider charges you on a per-device basis, meaning that you’ll pay AT&T for your home DSL service to access your email, you’ll pay AT&T again for mobile phone access to your email, you’ll pay AT&T a third time for your iPad access and a fourth time for your netbook access, all just to read your email.

By fractionalizing access, building arbitrary walled content gardens, and charging multiple overlapping access charges for every device, consumers are prevented from experiencing any meaningful value by fully cooperating with content and distribution providers even though they are already willingly paying for access and content from the Internet. It’s frankly easier to learn how to steal content from a peer-to-peer service than it is to navigate the minefields of the corporate-sanctioned content prisons.

Here’s a value proposition: Would you be willing to pay a universal HBO fee and have access to HBO from anywhere? Wouldn’t it be great to have your Netflix account affiliated with the HBO service, so you had one place to go and see all your content? How about paying a universal Internet access charge that worked with all your devices?

Imagine that you could go to one place and have all your channel subscriptions and movies and ad-supported content—everything in a single convenient place with a single convenient bill? You can. That’s right, it’s called your cable TV, the very thing we all know and love! The problem, however, is that it only works on your TV. What consumers really want is the same experience, but available anytime, anywhere, and on any device—but more importantly, they want transparency of their content, memberships, subscriptions, and content lockers across the ecosystem of their lives.

So let’s imagine that we have universal access and that it looks something like this: I pay my cable company a gateway fee—say, $29 for ad-supported cable-based video content (basic cable). I can access HBO online and on my TV because I’ve separately subscribed directly to HBO, which has authorized the cable company to give me access, thanks to my $15 HBO subscription. I’ve moved the HBO cheese profit center away from the cable company and directly to HBO.

I also pay the cable company for Internet access, and I watch HBO on my PC, which is connected to my TV. I’ve now moved the HBO cheese cost center to the cable company in form of higher bandwidth infrastructure costs.

In both cases—moving the subscription fees away from and adding bandwidth costs to the cable company, the cable company is now the loser—that is, unless the cable company charges you and me a fair rate for our Internet access, in which case, it’s still making cheese (money), but through a different division of the company.

Let’s take a different example: I want to watch Family Guy. If I watch it on my cable TV, the ad revenue associated with my participation goes to the Fox Broadcasting division of News Corporation. If I watch Family Guy on Hulu, all the ad revenue associated with my participation goes to the Hulu division of News Corporation. In both cases, News Corporation gets paid, but the Fox Broadcasting division takes a hit. The cheese got moved from one corporate maze to another, and the maze trolls are not happy—believe me.

Advertisers prefer the statistics they receive from online video-based advertising as opposed to the predictive ratings available from television. Online statistics also show that someone was actually sitting there, clicking, as opposed to ad skipping on their TiVo or in the kitchen making a sandwich. The audience size, however, is so much smaller for online than for broadcast that the bulk of the income for broadcast far outstrips revenue from online, so content owners are reluctant to cannibalize their main source of revenue even though potentially, with equal or greater audience numbers online, they could see parity or better.

The number of ads, however, is also a problem. Users online simply won’t sit through 12 commercials in a row just to watch a TV show, but the truth is that neither will broadcast audiences, who channel surf or skip ads or make a snack rather than watching endless commercials, so, in reality, there is a false equivalency in broadcast, in which both the broadcasters and the advertisers ignore the missing 800-pound gorilla in the room—basing their ratings numbers on pataphysics, the science of imaginary solutions.

Once again, the problem is the cheese—in this case, huge piles of fake cheese versus a smaller amount of real cheese. But there are other complications as well; frankly, the Internet simply doesn’t have the capacity to replace traditional television. In the satellite, cable, and broadcast worlds, it costs the same to deliver programming to one person as it does to 10 million. Online requires a unique connection and bandwidth to each user, causing a huge increase in the costs associated with scaling the offerings to larger and larger audiences. The infrastructure investments are expensive and have been traditionally repressed, ignored, and marginalized in favor of merger and acquisition investments to grow audience and market share.

So part of the problem is the artificial walls between divisions or operating groups of large media entities, where there is an internal tug of war for the cheese. The other problem is the tipping point for audience revenue, where the traditional environments are suffering significant reductions in ad cheese while new, potentially cheese-rich environments are stifled through artificial scarcity. And finally, network infrastructure that would enable robust transparency of TV across multiple delivery methods is inadequate and increasingly dependent on providers, such as Time Warner Cable, which no longer have a piece of the content cheese but must fully assume the cost of cheese delivery.

It’s the cheese’s fault, damn it.

I’ve been pretty harsh with the Coaxosauruses (Cable Dinosaurs), but even their modern avian cousins, the wireless Networktoryx (Wireless Networks), exhibit similar destructive generic traits. Fierce territorial instincts and the tendency for gluttony are creating a climate in which the delicate and symbiotic relationship required for nourishment is rapidly turning parasitic.

Device makers are increasingly dependent on the wireless access that brings life to the iPad, the netbooks, the ebook readers, and other network-enabled devices. Consumers are also increasingly dependent on wireless access that connects them to the world and to content distributors, including the app developers, information services, and the content owners of media and books—which all have a stake in the successful promise of wireless distribution. But the wireless networks have insisted on ultimate and tyrannical control of the gateway, limiting innovation, access, and, ultimately, the value to consumers who want to participate. The greater the value, the more consumers will be willing to pay. A symbiotic rather than a parasitic relationship is required for any sustainable model of success.



Posted
AuthorRichard Cardran
The movie Demolition Man - Taco Bell Scene

The movie Demolition Man - Taco Bell Scene

The 1993 American dystopian action film Demolition Man, written by Daniel Waters, Peter M. Lenkov, and Robert Reneau, forecasted that, in 2032, all restaurants will have merged into Taco Bell. As we look at the “too big to fail” narrative surrounding the banks and financial institutions, isn’t the same process occurring with media? American business schools are cranking out ambitious MBAs who increasingly believe in the inorganic consolidation growth model. An organic growth model would emphasize good products and services to build a brand promise and grow a loyal consumer base. That takes way to long. To succeed in the corporate culture of today, one must produce rapid cycles of business growth and profitability directly tied to one’s own performance. Any benefits of resourcefulness or ingenuity that take two years, four years, or more to deliver ROI, risks the associative connection—the glory, if you will—to the innovator. 

So the goals are better met through Mergers and Acquisitions (M&A) whereby the company lowers the quality and standards of their products and services as much as the they possibly can in order to harvest cash for buying increased market share through M&A. Much faster growth model than organic.

Let’s take the example of the cable giant Comcast that, after an unsuccessful bid to buy Disney for $54 billion in 2004, came back to the table with another plan for world domination.  According to Suman Chatterjee, Financial analyst and contributor to Motley Fool "In December 2009, Comcast announced that it was buying NBC Universal from General Electric at a total price of $30 billion."

This fits the consolidation model well, a massive content and delivery platform that spans theatrical movie distribution, cable, Internet, and other delivery methods. We saw this back in 2001 when Time Warner was purchased by AOL, combining the Time Warner content channels (e.g., CNN, HBO, Cartoon Network) with the Warner Brothers movie studio content, distributed via the Time Warner cable system and AOL’s Internet distribution.

So why, then, did Time Warner recently dump AOL and Time Warner Cable operations? On one hand, Comcast consolidates content and distribution, while Time Warner divests into a pure content model.

The answer is the same for both companies; content is king and distribution is a loser, or at least perceived as a loser. Don’t be surprised if you see Comcast divest the cable operations to become a pure content player. The cable giant is transforming itself, evolving, if you will, into a pure content company, whereas Time Warner has now completed the evolution into a pure content company.

How might you ask did harvesting billions of dollars for M&A create a better consumer experience for the customers of Comcast trapped in the forced monopoly of cable distribution? Ask one of them.

Recent fights between Viacom and Time Warner Cable illustrate the sea change of power. Viacom demanded fee increases for cable carriage of its channels, such as MTV, but Time Warner Cable argued that Viacom was eroding MTV’s value by releasing MTV’s shows direct to web. With few exceptions such as the TV Everywhere initiative, cable companies are losing their gatekeeper status and are rapidly becoming “dumb pipes” of Internet connectivity.

Dumb pipes are a commodity and require expensive infrastructure. Additionally, cable companies face stiff competition from wireless services, such as 4G, as well as fiber to the home by telecoms, such as Verizon and AT&T. While cable companies have diversified their television operations to include data and voice over Internet protocol (VoIP) services, the promise of expanded offerings is limited to the three services: TV, voice, and data, or the “triple play” that are ultimately available from any dumb pipe.

The cable company’s only hope of survival is based in providing robust network infrastructure and fast broadband services, which, to date, have been its enemy; high infrastructure cost and decreasing revenue through competition have created a climate of stalling, obfuscating, and resisting the ultimate outcome.

Many cable companies have imposed bandwidth shaping, also known as traffic throttling (prioritizing the quality and speed of Internet traffic in an effort to force users to their own proprietary broadband services), which has led to regulatory efforts known as net neutrality that will require equal access to all Internet broadband offerings.

Here’s the deal: Comcast was a pioneer in creating a branded, Internet content portal called Fancast Xfinity TV and here's how they want to monetize it.

Fancast is a website offering limited video content to anyone; however, Comcast cable subscribers can watch additional full-length network television shows, feature films, trailers, and clips, as well as specialty programming. Fancast gets its revenue from advertising, so more is more when it comes to audience. The theory goes like this: You are a Comcast broadband subscriber and want to watch a Family Guy episode online. You prefer to go to Yahoo! Screen for your online content, but the connection is so bad that it’s difficult to watch the video due to the stalls and stops, so you give up and head to Fancast to watch your show. Comcast has now hijacked the Internet in an effort to grab the advertising dollars. This is only an example, not a reality—at least not yet, or for a lack of trying.

Network neutrality is a regulation scheme proposed for user access through provider networks that advocates no restrictions on content, sites, or platforms, or the kinds of equipment that might be attached, or the modes of communication allowed. It would prevent Internet service providers (ISPs) from arbitrarily controlling the digital pipeline and thereby removing competition by creating artificial scarcity (of bandwidth) and consequently oblige subscribers to purchase their otherwise-uncompetitive services. Pretty much every telecom company, from Comcast, Time Warner Cable, and AT&T, to Verizon, is fighting this zombie (won't die) kind of regulation in an effort to limit their infrastructure costs and further monetize its subscriber base.

So companies, such as Comcast, are potentially fighting to limit bandwidth and maintain uncompetitive practices on their own sites (e.g., Fancast), but, as content owners of programming from broadcast networks (e.g., NBC), they also seek to have audience access available to their owned content properties from outside competing ISP subscribers. Aren’t they just arguing both sides of the same issue?

Not exactly. Content companies routinely syndicate content to multiple distributors, and, one way or the other, they get paid. Let’s take an example of the recent over-the-top (OTT) TV craze.

Starting (in earnest) somewhere around 2005, content channels, such as MTV, saw opportunity in creating branded websites that made programming available to their audience directly, OTT of the cable and satellite companies and other interlopers to create a direct one-to-one relationship between the TV shows and the viewers. OTT portals sprung up overnight, including MTV’s Overdrive, Comedy Central’s Motherload, CBS’s Innertube, Discovery’s Turbo, CNN Interactive, and others.

Audiences didn’t rush in quite the way the media brands had hoped. The truth is that viewers were used to aggregation. Audiences have been trained through tens of thousands of hours of watching TV and using a simple navigation feature called a TV remote. Having to go to multiple websites, learn the idiosyncrasies for navigating each site, subscribe, log in and search for content on the site, launch a media player, and wait for the content to arrive is far too complicated and frustrating to an audience routinely used to the simplicity of a channel up/channel down button. Additionally, few audience members had adequate bandwidth or video connections to their TV via their PC.

A few short years later, we found a different model emerging. It’s called TV—yup, the same old TV you know and love—but available through new distribution methods. After all the hand wringing, focus groups, high-paid strategists, pilot projects, and other desperate measures to reinvent television, we’ve come full circle. Television has evolved for eighty years into a sustainable business model, and, even with the current challenges, TV as we define it is a proven experiment. The only thing that is different is the pipe or, more accurately, the pipes that will deliver these aggregated experiences to the many devices in your life.

MTV’s efforts to capture OTT viewers flies in direct opposition to the traditional model for its revenue: syndication. If you’re the CEO of MTV, your objective is to be in front of 100 percent of every set of eyeballs in the country, not just Comcast Cable, or DirecTV, but everyone, everywhere. The same is true with the Internet; does it really make sense to limit the distribution of popular shows to MTV.com, or to syndicate the content to Hulu, Fancast, and frankly every aggregation point for Internet-based distribution? Every eyeball, everywhere, and yes, on every device. Netflix understands this better than anyone. The question is, will HBO figure it out on their inevitable direct-to-consumer offering of HBOGO, more on that in a future blog post.

TV is based on tiers: so-called free-to-air content paid for by advertising revenue; subscription tiers, such as HBO; and, finally, pay-per-view for high-ticket and first-run movies. The Internet is no different.

Viewers increasingly have PCs connected to their TVs, and many new TVs and connected devices, such as DVD players and game systems, connect directly to the Internet for watching IP-based video directly on the television. Despite the resistance of cable ISPs, levels of bandwidth are now routinely acceptable for viewing IP-based video content that has parity with broadcast and cable.

So, at the end of the first millennial decade, what exactly is TV? The answer is, it’s still just TV. The only difference is that it might come from a cable or satellite source or an IP source, it might be on your phone and your PC, but the content and tiers of service will likely be the same. The content owners will still be paid through ads and subscriptions, and the only losers, so to speak, are the cable monopolies-turned-dumb pipes charging you for access in the low-margin, high-cost business of pushing bits.

Comcast is now a content company; AOL Time Warner is now a content company; Disney is a content company; Viacom is a content company; and Time Warner Cable, AT&T, Verizon, and others are fighting it out over network infrastructure and service fees. With the inevitable end game of net neutrality and open wireless service networks, such as 4G (thanks to Google), we can finally expect to someday connect any device to any network and watch any content. We’ll pay for the device; we’ll pay for the network access; and we’ll watch some content with ads, subscribe to HBO, and rent movies just like we do now. So what was all the fuss about?


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AuthorRichard Cardran

I consume pop culture like a binging omnivore. I’m also a gadget freak. A deadly combo. Beyond it being a simple obsession or a point of pride, I justify my digital obsessions through my career as a digital media strategist. I advise large media companies on the strategy, tactics, trends, and culture that are eroding their strangle hold on content creation and distribution—however, more so than not—I find myself being an insultant rather than a consultant.

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Please help: Our dinosaur is sick. “Keep it warm and give it plenty of liquids, I’ll send my invoice tomorrow.” While it isn’t fair to paint all of big media with a single big brush, many established media giants are afraid, really afraid. And fear is frequently a motivator for digging in, eating comfort food, and pulling the tent flaps tight. The meteor has hit, digital climate change is under way, and evolutionary tyrannicide is killing the tyrantosaurus wrecks. Okay, bad pun, but believe me: Humor is important at a difficult time like this.

Dynasty-turned-dinosaur media casualities are found across the full spectrum of the media ecosystem, but there are four endangered species that truly stand out: Gazetteopods, Coaxosauruses, Telecastodons, and the ever-terrifying Platteraptors.

Harsh? Too soon? Ask Kodak about it.

The Gazetteopods (Newspapers) were found in every major city; they dominated as news giants while thriving on forest resources and were routinely enjoyed by millions as part of a tasty breakfast. While reports of their demise seem imminent, the truth is that evolutionary Amazonian forces are desperately trying to rekindle their strength and transform them into digital domestications.

Territorial competition is rapidly deteriorating the traditional habitat of the Coaxosauruses (Cable), the once-monopolistic rulers of multiservice symbiosis; they are reluctantly evolving a robust backbone to lure their food source back into the habitat. 

Telecastodons (Network TV) once soared high in the air, broadcasting their dominance to the vast flocks of admirers. Who could have imagined their loud crowing all but silenced by a tweet? The pecking order has changed, which has contributed to their revenue laying an egg.

And let’s not forget the terrifying predators known as the Platteraptors (Music Labels), who at one time held all the records—they were the big fish in the big pond. Songs and lyrics will forever tell of their unwillingness to migrate to new fertile fishing grounds and how, in a fit of evolutionary suicide, they overgrazed—finally turning their anger toward the few prey they had left.

I don’t mean to be preachy or condescending; I genuinely mean no harm. In fact, quite the opposite. There are some brilliant people out there shaping a new future that is quite imaginative and full of opportunity. I truly believe that there are winning prospects and sustainable business opportunities across all the media sectors. They might not look exactly like they did in the past, but the audience is vast, and its appetite is unquenchable. Where there is an audience, there is a buck. Change is here, has been here, and will only become more undeniable—even to the most fervent of dinosaurs.

Death creeps slowly and inevitably to all living things, and the only hope for immortality is the evolutionary promise of procreation, the passing of control and power to one’s progeny born in new worlds and, in Bill Maher’s words, new rules. Some species are really good at this, such as Homo sapiens. Take Madonna: How many times has she successfully reinvented herself? She’s the walking poster child for evolutionary dominance. Corporations are also living beings (with First Amendment rights—so says the U.S. Supreme Court). They grow and mature and ultimately face choices (ahem . . . General Motors) about evolutionary progress, or the lack thereof.

Creative destruction eventually catches up with every market entity, and the survivors all have clear things in common: They evolve, they transform, and they define change as disruptive, not parasitic. The winners are able to cast off the lamps of corporate dogma, embrace the genie, and reinvent themselves in profound ways. The losers fall victim to bureaucratic rigidity and protectionist dogma; they hunker down and build bigger walls around the castle, eventually starving from the ubiquitous siege of market forces.

In their defense, it is difficult for large behemoths to move quickly, to turn the ship and risk change—especially when that change affects the bottom line. The incentives are simply not there. Research and development efforts are expensive and, long term, they take away from the immediate goals of increasing market share and quarterly profits. One great insight to this innovation challenge is found in Harvard Business Review's Managing your innovation portfolio by Bansi Nagji and Geoff Tuff. Absolutely worth a read.

Mergers and acquisitions are easier; companies simply can buy innovation born from young agile companies who think contemporarily and are directly motivated to generate opportunities that are free of oligarchic control.

This is even true of the innovation giant Google, which has acquired over 125 companies including two companies, Aardvark and AppJet, that were both started by ex–Google employees who left the nest to innovate and rapidly build technologies, only to find themselves right back at Google, albeit a bit richer for their efforts.

But this typical innovation cycle pales in comparison with the problems that traditional media face today—the disruptive change exploding in both the vertical and horizontal media market sectors is profound. The apogee of control and profitability is squarely in the rear-view mirror, and many corporate drivers are busy making U-turns to find where it went.

The relatively accessible media, tools, and the applications of creation and distribution have leveled the creative playing field between the mainstream media Goliaths and the independent Davids. Sophisticated film and audio production techniques, once the domain of big media, are now routinely available to the average fourteen-year-old.

T. S. Eliot’s book Notes Towards the Definition of Culture was a pivotal work that viewed high culture and popular culture as synergistic components of a complete culture. The term mainstream media is an expression historically used to describe high culture (the sanctioned form of media specifically designed to reach a very large audience). It was coined in the 1920s with the growth of national radio networks, mass-circulation magazines, and newspapers.

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Since the 1920s, the concepts of high culture or high art in mass media have given way to the “dumbing down” of sanctioned media by the Goliaths in an effort to gain wider appeal and ratings. Large-budget network television programs are quickly becoming a thing of the past due to falling ad revenues and the fractionalization of the viewing audience across new platforms and devices.

As the Goliaths dumb down their programming budgets and as the Davids are further empowered, we see a growing uniformity of execution between high art and low art. Reality shows are cheap to produce and have transformed everyday “reality” into a perception of entertainment. Bloggers are in competition with established newspapers, and record labels are competing with grassroots artist-direct distribution and free UGC (User Generated Content), including derivative and transformational works.

Many new devices allow for transparency of content delivery from multiple sources (web, mobile, cable, or satellite), as well as the merging of content libraries between traditional video on demand (VOD) and broadband content. As the mass-culture content styles and the origin of content become less important, the Goliaths are increasingly becoming irrelevant.

In 2008, the Academy of Television Arts and  Sciences, which controls the coveted Emmy, changed its entrance requirements and eliminated the test of “broadcast” as a bar to entry. Emmy-hopeful content entries can now be submitted for all award categories, no matter the original delivery method (mobile, web, or broadcast).

Movies are routinely released in ultra-widescreen 3D in an effort to combat the surround-sound, large-screen high-definition theater found in your living room, and the rise of blogging is certainly no friend to established newspapers. We’re rapidly finding a profound democratization of media across all channels—music, movies, TV, and print.

About the only advantage the Goliaths still have is the financial power to widely advertise and market their content and to include pricy celebrity “bait” in an effort to entice a mass audience. However, the trend is for celebrities to release content directly, such as English band Radiohead’s web release of its seventh studio album In Rainbows and actor Will Ferrell’s FunnyorDie.com, a comedy site that mixes so-called amateur and professional content from the “pros.” Many Goliaths are taking the position that, if you can’t beat ’em, join ’em. Indeed, HBO bought a 10-percent stake in FunnyorDie.com.

Assuming for a moment that there is a profound leveling of the playing field across all media sectors, what factors will engender large audiences, build brands, and ultimately make money for the artists? Talent, creativity, innovation and excellence. That’s a relatively easy answer. The harder question is, how will the business of media make money? How do the 22,000 people sandwiched between you and Jerry Seinfeld make money?

This blog will ask these and other questions and perhaps touch on strategies and tactics to help demystify the process of chasing large growing piles of Internet pennies rather than a shrinking pile of analog dollars.

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AuthorRichard Cardran