The Studios Look For An Island In The Set-Top Storm

The Motion Picture Association of America really, really doesn’t want the FCC to tear up the set-top box. So much so that its filing with the commission last week regarding the final report of the Downloadable Security Technical Advisory Committee (DSTAC) contained a thinly veiled threat of litigation should the FCC mandate disaggregation of pay-TV services into parts that can be reassembled at will, and on constitutional grounds no less.

“Mandating such a regime…could violate content owners’: 1) contracts with distributors regarding how their content may be presented, monetized, and accessed; 2)

Wallpaper: Sunrise of the Sea

exclusive rights under section 106 of the Copyright Act to determine how their content is copied, distributed, and publicly performed; 3) First Amendment right against compelled speech; and 4) Fifth Amendment right against taking of property without due compensation,” the MPAA warned. “If third-parties wish to offer a subset of content, services, features, and functions rather than all the choices distributors offer customers in the way that they offer them, the appropriate course is through individualized negotiation, not regulatory fiat.”

What has the Hollywood trade group so exercised is a proposal by one faction within DSTAC, included in the final report, to require cable and satellite providers to unbundle their video feeds from other elements of their services, including the user interface, interactive features and billing, so those feeds can be incorporated into the UI of a third-party device and integrated with other video services. Only then, proponents of unbundling argue, can consumer electronics makers create devices that can compete fully with or replace set-top boxes provided by pay-TV operators. Read More »

Apple's media strategy: There's an app for that

It’s here. After nearly a year of carefully orchestrated speculation and hype, Apple has finally unveiled: the “iPad,” thus causing millions of women across the blogosphere, in unison, to go, “eewwww.”  (Are there no women in the marketing department at Apple?)

Among the less lunationally sensitive, the verdict has been more mixed, but the rough consensus seems to be that, at this point at least, the iPad is basically an iPod Touch on growth hormones: neat, but not quite overwhelmingly amazing, fantastical and way-cool the way the iPhone seemed when it launched.

Particularly disappointing to some, or at least puzzling, was the relative scarcity of media apps at launch for a device that was billed as revolutionizing the media industry, leading many to wonder what you’re supposed to do with the thing.

I have no doubt those apps will come, however, not only because Apple has already released an iPad SDK but because of what it offers media companies. Read More »

Could online ad exchanges work for news, too?

Last week, Google launched its long-expected bid to conquer the online display advertising business to complement its domination of the search ad market by unveiling the new, auction-based DoubleClick Ad Exchange, built on the ad-serving company it acquired in 2007 for $3.1 billion and has spent the two years since steering through the regulatory process. The new exchange will function a bit like a stock market, allowing web site publishers to put their display inventory up for auction, and advertisers to bid on placements in near-real time, much as they do with Google AdWords today.

Tokyo-stock-exchangeThe idea isn’t new. Both Yahoo and Microsoft already operate online ad exchanges. But byopening its new display ad exchange to the hundreds of thousands (millions?) of web sites that are already part of its AdSense network for  search ads Google will bring enormous new liquidity to what has been, up to now, a pretty small market. In principle, that should lead to more efficient price discovery for advertisers and higher inventory yields for publishers.

Even so, the DoubleClick Ad Exchange has a long way to go before it can dominate the online display ad business. Most online display ads are sold either directly by publishers or through proprietary ad networks–the largest of which is run by Yahoo–which syndicate ads to web sites on behalf of marketers. Only a small percentage of online display ads are currently sold through exchanges. Read More »

Selling the news

The most depressing, if least surprising aspect to the flap over the Washington Post’s now-abandoned plan to sell access to public officials and its own editorial staffers in the form of big-money “salons” for lobbyists was the Post’s naked fetishizing of “those powerful few” who “actually get it done” on Capitol Hill.

newspapersI live and work in Washington, so I know how it goes here. But for an organization at least institutionally committed to free and open debate it’s just sad that the Post would see its salvation in burrowing ever-deeper into its Beltway barrens by promising a “select” guest list–“typically…of “20 or less”–and trumpeting  it’s “off-the-record” solicitude.

It’s no answer to argue, as Media Memo’s Peter Kafka tries to do, that these are desperate times for newspapers calling for desperate measures:

This certainly wouldn’t be the first time that the Post has been at the nexus of power, money and influence. In fact, Weymouth’s grandmother, Katharine Graham, was famous for hosting gatherings much like these at her house. And publications of all stripes, including this one, as well as Dow Jones, which owns this site, frequently charge fees to attend networking events where their editorial staffs participate.

And you’re likely to see more of this stuff, not less, as publishers search for revenue streams besides advertising to stay afloat. Any tempest you see about this today is going to look quaint in a couple of years.

That’s taking a dive for the short-end money. If newspapers want to be contenders in the future, they should be looking for ways to bring more voices into the conversation, not fewer. They should be building applications to equip readers with their own tools for gathering and disseminating information, not looking for ways to exclude them with promises of “intimate” and “off-the-record” assignations.

Exclusivity is a one-way ticket to palooka-ville in the digital age. If that’s all the Post has got it might as well take the express and get their sooner. — TMW

I linked the news today, oh boy

newspapersI’m assuming a judge and scholar as smart as Richard Posner of the Seventh Circuit Court of Appeals doesn’t really believe copyright law should be extended to cover the paraphrasing of news reports without the permission of the copyright owner, as he seemed to suggest in a recent blog post (h/t TechCrunch). Instead, I’ll assume he simply meant to be provocative.

Posner’s subject was the parlous condition of the newspaper business in this twilight of the print era. After surveying the declines in hardcopy readership and ad revenue, and the baleful effects of cuts in the ranks of professional journalist (I feel your pain), he comes to this conclusion:

Imagine if the New York Times migrated entirely to the World Wide Web. Could it support, out of advertising and subscriber revenues, as large a news-gathering apparatus as it does today? This seems unlikely, because it is much easier to create a web site and free ride on other sites than to create a print newspaper and free ride on other print newspapers, in part because of the lag in print publication; what is staler than last week’s news. Expanding copyright law to bar online access to copyrighted materials without the copyright holder’s consent, or to bar linking to or paraphrasing copyrighted materials without the copyright holder’s consent, might be necessary to keep free riding on content financed by online newspapers from so impairing the incentive to create costly news-gathering operations that news services like Reuters and the Associated Press would become the only professional, nongovernmental sources of news and opinion.

Others have already discussed the obvious First Amendment problems with this suggestion (the reason I think Posner is not really serious), as well as Posner’s  misdiagnosisof all that ails the newspaper business (he doesn’t even mention the impact of Craigslist, which has nothing to do with free-riding on copyrighted content). I would raise another objection: his assumption that news-gathering must necessarily be financed by newspapers. Read More »

Nothing to ad

Got a business plan for a digital media application and looking for funding? Better take out that part about, “and they we sell ads against it” and come up with Plan B.

According to a panel of venture capitalists at the Digital Media Conference in Washington, DC, Thursday, ad-supported is not a viable online business model.

gupta“We’re really looking for consumer-pay models,” said Arun Gupta of Columbia Capital. “We would really shy away from any digital media idea that is ad-supported at this point. Ad-supported can be part of it, especially if you already have some traction building value in other ways. But ad-supported is the gravy, it can’t be the meat.”

Ditto Kuk Yi, managing director of Best Buy Capital, the electronics chain’s VC arm.

“You need pretty massive scale to make ad-supported work,” according to Yi. “If you have a viable business that is not based on selling ads it’s pretty easy to layer the ad piece on top of that. But it’s very hard to build a busine ss that requires the ad piece to be there.”

Kuk-YiBest Buy Capital invested in an early-stage games compan, Yi said, that creates paid games that get embedded on social networks and mobile platforms. Another company in its portfolio is generating revenue of $1.5 million a month selling virtual goods online.

“Ads may eventually be  part of both of those but that can’t be the whole business,” he said.

Grotech Ventures general partner Don Rainey offered a somewhat sarcastic dissent.

Rainey“You can do ad-supported if you have 2o or 30 million visitors a month,” he said. “The trick is getting to 20 or 30 million visitors.”

Rainey added that, unlike years past, VCs in the digital media space these days are looking for ideas “that are actually good ideas, and can scale and become big ideas.”

Ahh, for the good old days. — TMW

Creation and the Internet

Last week saw two interesting developments in the ongoing debate over effects of file-sharing and what to do about it. On Thursday, a federal jury in Minneapolis ordered Jammie Thomas-Rasset to pay $1.92 million to Universal Music Group and other record labels after finding she had downloaded 24 songs illegally. That works out to a staggering $80,000 per song.

thomas-rassetEven Sony BMG’s lead lawyer in the case, Wade Leak, admitted to being “shocked” by the size of the verdict.

On Friday, two Harvard Business School economists, Felix Oberholzer-Gee and Koleman Strumpf, released a working-paper version of a new study (PDF), which found that, pace the media companies, the conclusion that rampant file-sharing and other types of digital piracy will reduce incentives to produce new music and movies ultimately harming the public, has no empirical foundation.

In fact, the data point in precisely the opposite direction. The researchers found that the number of new albums released each year soared from 35,500 in 2000, to nearly 80,000 in 2007 (including 25,000 digital-only albums), despite a decrease in gross revenue from CD sales over that same period. Similarly, the number of feature films produced worldwide each year rose from 3,807 in 2003 to 4,989 in 2007.

The increase in film production held true even in countries where film piracy is rampant, such as South Korea (80 to 124), India (877 to 1164) and China (140 to 402). Feature film production in the U.S. over the same period rose from 450 films in 2003 to 590 in 2007.

What does one development have to do with the other, apart from their coincidental timing? Read More »

Morning read: Jolly Roger flies in Europe, Copyright Summit in US

Hoist the Jolly Roger maties, the Pirate Party has claimed at least one of Sweden’s 20 seats in the European Parliament (and possibly two) as a result of thisweekend’s voting across the 27-nation bloc. The party, which ran on a platform of legalizing file-sharing and rolling back government surveillance powers, garnered 7.1% of the vote, putting it ahead of several more-established parties.

pirate-partyTurnout in Sweden was 43.8%, slightly ahead of the 37.1% turnout in the 2004 election, despite predictions of record low turnout heading into the weekend. TorrentFreak does the mathandestimates about 200,000 Swedes voted Pirate this time around, a nearly five-fold increase over the 35,000 votes the party garnered in the 2006 national election. The party saw a surge in membership in the wake of the conviction in April of four of the founders of The Pirate Bay, one of the largest BitTorrent tracker sites.

Apart from the immediate implications of the Pirate Party victory, the election results in general are likely to lead to some hand-wringing in EU capitals. Governing parties in about a dozen EU countries suffered defeats in the election, most notably in Britain, where Labour claimed only 16% of the vote, its lowest total in decades.

In general, small, even fringe, parties did well across the EU, including the Whites-only British National Party and far-right parties in the Netherlands, Hungary and Austria. The  anti-Europe British Independence Party also scored gains. Across the bloc, right-leaning parties scored significant gains while center-left parties were generally pummelled.

Back home, the 2nd World Copyright Summit is scheduled to open in Washington, DC on Tuesday. The two-day conference is sponsored by the International Confederation of Societies of Authors and Composers (CISAC), and will feature some 500 delegates from 55 countries.

The Pirate Party victory is sure to be a topic of discussion. The full agenda is here.

And oh, yeah, Apple Worldwide Developers Conference  blah, blah, blah, new iPhone, blah, blah, blah, Steve Jobs is risen, blah, blah, blah, and he is separating the righteous from the the wicked, and the righteous shall have their apps approved and the wicked shall be cast into the Palm of eternal darkness blah, blah, blah.

Up against the pay wall

newspapers1Zachary Seward has a very smart post up today at Harvard’s Nieman Journalism Lab blog about yesterday’s meeting of top newspaper capi in Chicago to discuss “Models to Monetize Content.” Seward lists four important but often-overlooked points  in the debate around newspapers charging for content online. Two in particular are worth underscoring:

2. Pay walls aren’t necessarily intended to generate revenue.It’s counterintuitive, but charging for the website may be an effective way to protect the print edition, which still provides 80-90 percent of income at most newspaper companies. In fact, MediaNews Group’s president, Jody Lodovic, recently told Editor & Publisher that while the company plans to erect pay walls, it doesn’t expect a windfall from them. “The whole idea is to stop the erosion from print to online and encourage people to become print subscribers,” she said.

It’s obviously not a great longterm strategy. But when we consider whether pay walls will work, it’s important to realize that newspaper executives may have a different definition of success here.

[…]

4. Even if pay walls are the future of newspapers, they aren’t the future of news. Newspapers face a very specific financial situation that’s driving their choice to charge for content or not. These companies are giant ships with dim prospects for quickly turning around in this economic tempest, so naturally they will turn to stopgap measures. It would be a mistake to read much more into it than that.

I would add another: Too often, the argument in favor of pay walls is addressed at the wrong problem.

To hear newspaper publishers tell it, their biggest problems online are copyright infringement (aggregators and other third parties that “appropriate” content) and free riding  (people consuming content without paying for it).  And if those are your main problems, simply putting everything behind a pay wall might make sense. It would certainly reduce free riding and would raise the bar for aggregators.

Trouble is, those are not only, or even the biggest, challenges newspapers face online, and putting all their efforts into solving those two problems isn’t really going to get news organizations where they need to be.

Copyright infringement and free riding are essentially market problems: They undercut the scarcity of a good or service by which value is created and maintained in traditional commodities markets. Putting your content behind a pay wall would restore some measure of scarcity.

But the Internet is not a traditional marketplace. It’s a network. Value is created in a network not by scarcity but by use, through network effects. The extent to which content is aggregated and recontextualized online is not a measure of appropriated vaule but in a proportional reflection of the positive network externalities it generates by virtue of being embedded in the network.

The big problem confronting news organizations (and indeed nearly all traditional content creators online) is that they lack the tools (i.e. applications), organizational structures and the economic models to internalize (i.e. capture) those positive network externalities.

In fairness, it’s not at all clear yet what those tools and organizational structures should be. It will take time to experiment with different types of apps, different ways of organizing metadata, different modes for aligning production costs with revenues. And, as Seward points out, many newspaper companies may simply be out of time, having squandered the last decade first ignoring the problem and then focusing on the wrong problem.

But eventually, new types of news organizations will emerge, with business models built around internalizing positive network externalties. Whatever the new tools and structures turn out to be, they’re likely to be geared toward promoting the use of content, not restricting it.

Pay walls may even turn out to have some role to play in supporting as a feature of or supporting the new tools and systems. By themselves, though, they’re bound to crumble.

Paying for news

newspapersSpeaking of newspaper publishers, a group of leading news industry executives held a hush-hush meeting in Chicago today on the topic of “Models to Monetize Content.” In the room were top execs from The New York Times, Gannett, E. W. Scripps, Advance Publications, McClatchy, Hearst Newspapers, MediaNews Group, the Associated Press, Philadelphia Media Holdings, among about two dozen others (including, one hopes, one or more anti-trust lawyers).

Sessions included one on something called the Fair Syndication Consortium/Attributor, which was described in the program as a “presentation on technology/service to track content on the Web and to extract payments from third-parties and ad networks that have appropriated newspaper content.” Read More »

Music labels finally getting a clue

Interesting piece by Brad Stone in this morning’s NYTimes on the music labels’ shift away from imposing punitive terms on digital music start-ups in favor of terms that might let them stay alive long enough to actually create some business for the record companies.

imeem-universalStone uses as his hook the recent experience of Imeem, which was on the verge of shutting down because its ad revenue could not begin to cover the millions it owed the labels in licensing fees, but was given an 11th-hour reprieve when Warner Music Group agreed to forgive Imeem’s debt and both Warner and Universal Music modified their licensing terms with the online music service. That allowed Imeem to raise new financing and stay in operation.

“We are trying to figure out how to restructure partnerships and develop a healthier ecosystem where entrepreneurs can continue to innovate,” Warner Music’s Michael Nash told the Times. Read More »

What media companies could learn from OpenTable.com

UPDATE: OpenTable successfully sold 3 million shares in its initial offering Thursday at $20 a share–well above its target range of $16 – $18. The shares closed up nearly 60% in their first day of trading, to $31.89.

We’re a long way from the heady days of a decade ago when justaboutanything.com could go public almost before it launched and in spite of having no profits, few assets and no idea how to make money.

Good times. Read More »