A Manifesto for the Content Industry 14. Do not sue your customers.

I know this is the same as 1 but it’s so important I thought I’d say it twice.*

Well here we are at the end and you’ll be relieved to know that this final entry will be very short.

The bottom line is that, as part of the content industry, your business exists to serve your customers.

If you choose to provide a service that is worse than the competition (be that legitimate or otherwise) then you can expect to lose customers.

If you choose to provide a service that excludes certain sections of your potential customer base then you can expect to lose customers.

If you choose to provide a product that is more restricted that that offered by the competition (legitimate or otherwise) you can expect to lose customers.

And finally, if you choose to treat your customers like criminals, and make them feel like criminals when they do support you, you can expect to lose customers.

But, as I’ve hopefully explained, you don’t have to choose to do any of these things…

* With reference to Red Dwarf: “Kryten: A superlative suggestion, sir, with just two minor flaws. One: we don't have any defensive shields. And two: we don't have any defensive shields. Now I realise that, technically speaking, that's only one flaw; but I thought it was such a big one, it was worth mentioning twice.”

A Manifesto for the Content Industry 12. The gravy train has stopped; it’s time to get off.

You are no longer the gatekeepers to content and you no longer have a monopoly. Lobby if you like (and we know you do) but you’d be better off coming to terms with it and adapting.

Let’s go back to the difference between middlemen and gatekeepers: What are you bringing to the table? If you’re adding something to the mix (distribution, promotion, technical expertise, access to fans / artists etc. etc.) then you’re a middleman. If all you’re doing is charging people to get to the table then you’re a gatekeeper and, let’s not beat around the bush, you’re doomed.

Before the advent of recorded media things were pretty simple. If you wanted to listen to some music you either played it yourself, went somewhere where someone would be playing it or (for the very rich) paid for someone to come to you and play it.

There were no movies of course, but the theatre was there and off you went.

The gatekeepers were just that, the men on the gate and, in some cases, the booking agents, but they were relatively few and far between. The middlemen were the tavern landlords, the ticket sellers and the folks who stuck up the bills.

With the advent of recorded media the game changed. Suddenly the option of bringing the entertainment to you existed for everyone, not just the very rich. But producing, distributing and advertising this content was expensive, very expensive. It also took a long time and required a lot of very specialist resource.

This meant there quickly became a clear divide between the amateurs and the industry-backed professionals, a divide that led to a massively successful set of industries for about 50-odd years and an ever expanding set of restrictions on what could be done with the output of these industries.

Towards the end of the last century, along with the rise of the personal electronics and the increasing availability of home computing, three things happened that started an inexorable change for these industries:

1) cheaper hardware and software brought media creation capability to the masses. Prices have continued to fall and quality has continued to rise to levels unimagined just twenty years previously. £1000 will buy you a brand new computer, the recording software, a solid-top acoustic guitar and a condenser microphone. With that you could record music that will surpass a lot of the stuff from some of the professional studios of the seventies and 80s.

2) The internet arrived and then, critically, morphed into web2.0, shifting from being yet-another-mass-media-distribution- channel to being a true many-to-many distribution mechanism for User Generated Content (UGC). In the music world sites like myspace (RIP), cdbaby, last FM, bandcamp, soundcloud, thesixtyone and many others sprang up to help artists distribute and advertise their work directly to fans. Amazon, Lulu and others are providing the same service for authors and crowd-funding tools like Kickstarter are offering aspiring film-makers and game designers (see 3) the chance to make this shift as well.

3) Computer games and consoles made the shift from the arcade and nerdiness to the front room and mainstream acceptance. In a world where digital content is effectively infinitely abundant, disposable income is still depressingly finite. The music, movie and publishing industries have been forced to adapt to a new competitor for these entertainment dollars and, in general, it’s a competitor that is born of the digital revolution and is reacting to the changing world more quickly and more profitably.

Content will always be produced, fans will always exist but the gates are going or, in some places, have gone entirely. There will always be a place for those who can add value to the connection between fan and creator, but if your business model exists solely to stand at the gate demanding admission then your ex-customer will just walk over the ruins of the walls around you.

Or, to go back to the original metaphor, the gravy train has stopped at the buffers, the passengers and artists have disembarked and are mingling on the platforms planning new journeys on new trains, cars, planes, bicycles and everything else under the sun. How long are you going to sit in the carriage waiting for them to come back?

A Manifesto for the content industry 11 - This is a global market

If you charge western prices to the third world then people will find a way to get the content for free. 99c might not be a lot to readers of this blog but it’s a day’s wage to large amounts of the globe. The bad news is that you can’t stop a European going to an African website and buying from there, your unit cost is zero, expect your prices to trend that way.

This will be a short entry because it’s really just simple economics (even if it’s frequently missed by a great number of corporations who should know better).

Point 1: Once something is on the web it is effectively available everywhere. Sure you can try blocking things by regions and this will work for casual users and non-techy folks* but these things are easy to work around.
Point 2: Your unit cost is effectively zero**, everyone understands this, your unit price will have to be close to that for people to feel that they’re not being ripped off.
“Close to zero” is a variable though. In Western Europe or North America you can just about get away with 99c (or 99p) being “close to zero”. In the Far East, Eastern Europe, Russia, India and other areas of Asia, South America, anywhere in Africa, 99c gets ever further away from “close to zero” and ever closer to “a day’s wage”.
People will not pay a day’s wage for a digital entertainment file.

If you price your product that way then you can expect a high proportion of piracy in those countries. So you have two options: local pricing or acceptance that that market is not going to provide you with any income from digital downloads***.
However if you go for local pricing we get back to this “global market” thing. I have a friend who buys all his MP3s from a Russian site. It’s all completely legit (as far as he’s aware), but only a 10 th of the price. No laws broken, no copyright infringed, 1/10th the outlay.

But maybe 10 times the risk?
I’ve never used this site for two reasons:
1) I’m not comfortable giving my credit card details to a Russian website.
2) I’m not convinced that any of that money will ever make it back to the original artist.

And those two reasons mean a business opportunity still exists.
Let’s face it, a lot of the countries that have the lowest standards of living are also rife with corruption, if you run a trusted, 1st world web-company then that alone will be reason for some people to buy (see Amazon and iTunes for examples).
Secondly the success of things like Kickstarter, NoiseTrade and Bandcamp shows that there are a lot of customers out there who want to support the artist.
If you can facilitate that, show that you’re helping to get that content made, and provide a trustworthy service, then there’s a place for you.

* Warning, non-techy folks are a decreasing proportion of the population, building your business model on them is not a long-term strategy.
** I know that there are hosting and management costs for large businesses, but those large businesses are shifting lots of units.
*** It could still provide you with income from other channels though, don’t write it off.

A Manifesto for the content Industry 10 - Free Your People

If you’re doing the other stuff right your people should have some pretty interesting jobs. I bet they’ve got interesting stuff to say. Do they blog? We do. Do they comment in chatrooms? We do. Let them join the conversation, it should be part of their job.

The entertainment industry is an aspirational business. I don’t know how many applicants you get for even the most minor role but I’ll bet the glamour of either the music of movie industries pull in a bunch more candidates than the equivalent roles in engineering or finance.

Journalism and writing are also aspirational jobs. Pretty much any industry where you’re paid to express yourself (or facilitate that expression) is going to be an attractive one to a lot of people.

Which is why seeing articles like this one is a bit depressing: Sky News clamps down on Twitter use

Basically, in implementing this ruling, each of their individual twitter feeds became less valuable. In fact, you might as well cancel the individual feeds and just link to the website.

If we go back to our old techdirt equation of Connect with Fans + Reason to Buy = $$$, this appears to be a clear case where the institutional instruction is reducing both of those factors; by restricting people to only tweeting about their field it makes it harder to make a connection with readers (fans) and by forcing everything through the central news desk it slows down the transmission of information and potentially reduces the value of their feed (reason to buy).

In a market where the legacy players are fighting to preserve both their reputations and their relevance the expertise of their staff remains one of their most powerful weapons. Restricting access to that expertise (or vice versa) undermines the business.

The entertainment industries in particular are suffering something of a crisis of perception as much as anything, contempt for the inherent imbalance in current copyright law, and the continued head-in-the-sand behaviour of the lobbying groups has meant that “the industry” is widely seen as “the bad guy”. Actually engaging with those disenfranchised fans (rather than suing them) is going to be necessary to rebuild the industries’ reputations* and the people on the ground are the ones to do this – not the CEOs or heads of the lobbying groups. Why? Because of Stephenson’s sixth law**:

I’ve recently discovered a blog run by a bunch of creators*** (mostly musicians) who appear to be trying to do something around that connecting with fans and, judging by some of the comments, they appear to be having some degree of success in terms of persuading people. Unfortunately they also appear to be trying to approach the whole debate from a moral standpoint (ignoring the underlying economics is rarely a good idea) and also by thinking of things in terms of a zero-sum game – they seem to be trying to attack pretty much every web-based service as not-paying-as-well-as-the-old-model rather than paying-better-than-nothing.

Additionally some of their writers have a tendency to embark on aggressive, expletive-fuelled rants about the people they’re trying to win over, which doesn’t seem a particularly good strategy.

But anyway, it’s a good example of trying to free up your people and helping them connect with their current & potential future fans – and they’re getting a lot of hits on their articles.

So whilst I may disagree with a lot of what they say, it’s a prime example of getting your message across without falling foul of the sixth law.

* Assuming that the industries update the rest of their business models as well. White-wash won’t work.

** This, of course, has absolutely no data to support it at all.

*** I’m told that there’s a rumour (could I be less specific?) that this site is in fact supported entirely by a major music label and is what is known as an “Astro-turfing” site, but I have seen no evidence on this and it’s largely irrelevant for the purposes of this instalment.

A Manifesto for the Content Industry 9 - Be Genuine

We’re sick of spin, we’re sick of hype. If you churn out repetitive and unoriginal content whilst claiming it’s the best thing since last year’s clone, we’ll stop listening and go elsewhere (a lot of people already have).

“The best thing since sliced-bread” gives over 3 million hits on a google-search, I wonder how many of those things really are?

There is a theory that for any headline that ends with a question-mark*, the answer is “no”.

“You can tell when a politician is lying, his lips move.” Gets you over 500 hits on Google.

“Don’t believe the hype.” By Public Enemy reached number 18 in the UK chart

“So what?” I hear you ask. Well, we, as a populace, and hence as customers, are becoming more cynical. Advertising is pervasive but untrusted, techniques such as having the volume of the commercial breaks louder than the host programme and releasing ad campaigns that are designed to be offensive safe in the knowledge that any ASA activity will be retroactive further heighten the sense of intrusion.

Programmes such as The X-Factor are routinely referred to as “glorified karaoke” and the shelf-life of the winners is generally planned only to last until the next series (anything else is a bonus).

Media conglomerates have control of so many different channels that it is easy to find an advertisement for a TV programme masquerading as an article in a paper owned by the same company (or vice versa).

We, the customers, have known this for a while but, with the advent of a truly interactive web, people are finding out how to route round the hype, the misinformation and the adverts and are finding their own trusted sources.

Many legacy companies are seeing this as a threat. This loss of control means that their influence is reduced accordingly:

If people are TIVO’ing shows then they’re not watching your expensive adverts

If people aren’t listening to commercial radio they’re not hearing your carefully selected play-list

If people aren’t reading the newspapers then they’re not reading your trend-setter’s latest must-watch / -read / -listen to recommendations

But overall spend on entertainment is going up, especially for independents. So where are they getting their recommendations?

Well, the same way that they always did really, from friends, peers, colleagues, trusted reviewers, fanzines etc. It’s just that now, most of these are online and can have a far wider influence than they did previously.

And the reason that people are listening to these sources is that they respect the opinions and advice given. These new sources have established a track record on honest and reliable output that allows people to make a judgement based on that history.

This is an opportunity, and an easy one to open up. Most aspects of the content industry have their talent scouts (in one form or another) who could easily open up a credible dialogue with potential fans and customers, but very few are doing so.

More often than not this gap has been filled by amateur  / semi-pro bloggers and websites.

Sometimes industries will embrace these new sources, frequently they will do so in a confused, contradictory and ultimately litigious fashion.

This link [http://www.techdirt.com/search.php?cx=partner-pub-4050006937094082%3Acx0qff-dnm1&cof=FORID%3A9&ie=ISO-8859-1&q=dajaz1] shows the list of articles about popular hip-hop blog Dajaz1, a blog that was taken offline for hosting infringing content, a significant chunk of which was found to have been provided by the record labels for promotion.

There are plenty of other examples of fan-supported sites being closed down for copyright reasons that, ultimately, just drive people away from legitimate content.

From accounting practices to promotion techniques the legacy content industries (particularly music and movies) don’t have a good history of honesty. That’s a gap in the market, that’s an opportunity.

P.S. As well as my recurring concern about companies adapting before I’ve finished writing this I sometimes wonder if I’m going the wrong way with some of my analysis. Fortunately there is no shortage of regular reminders that reform is needed, generally in the form of one of the industries taking some ridiculous legal action. After writing this up last night my vindication came with this article from techdirt** about how skipping commercials might be considered illegal.

* e.g. Did radio-active, nazi gerbils kill Elvis in JFK cover-up?

** My go to source for all that is wrong in the Intellectual Property world.

A Manifesto for the content industry - 7. Be Brave

Be brave. If you’re focussing on sequels, glorified karaoke acts, this year’s answer to “X” or trying to build a brand then you are guaranteed to miss the next trend when it comes along.

First, as has become traditional, some numbers:

Rather than copy and paste a big picture please have a shufti at this Infographic from techdirt showing the numbers in an expanding industry http://www.techdirt.com/articles/20120129/17272817580/sky-is-rising-entertainment-industry-is-large-growing-not-shrinking.shtml

What this shows us is that the overall entertainment sector is growing, both from a creation side and a sales side. So why do we hear so much about a dying industry being decimated by piracy?

Well, it’s partly because of that column on the left. The gaming industry of 20 years ago was niche and pretty negligible compared to the established movie and music industries. That’s all changed now and the customer’s entertainment dollar has a whole new market to play in.

So that’s part of it, and it’s partly because most people don’t know what decimated means, but we’ll step past that…

Having had a look at the top 20 singles, albums, tours, movies, paperbacks and video games (mostly courtesy of that other growth industry – Wikipedia) I notice the following things

The singles market is dominated by a few major artists.

The biggest movies of the year were mostly sequels, as were the video games.

The biggest tours were all by long-established by acts.

Novels alone still seem to have a good presence of debut works.

This tells me one of two things, either all the best stuff has been produced and there’s nothing good coming out of the ever increasing amount of new content, or the respective industries are scared of this new fangled internet thing* and are banking on their known, well, bankers.

Hence we’re seeing the sequels, cross-overs, franchises and the building of “brands” from the majors whilst most of the truly original content is coming from the independents and smaller subsidiary production houses.

This isn’t new, but the extent to which it is happening is, and it’s particularly galling in the music industry. Here we have an industry that has always defended its 90% take** on the grounds that it needs it to invest in new and developing artists. But speak to those within that industry who are tasked with that job and you’ll find there’s less and less money and time going that way. The general approach is now to let the scene develop organically and then cream 2 or 3 artists off the top when a lot of the hard work has been done by the artists and local enthusiasts.

If the content industry really wants to get back on the front foot they need to stop playing it safe and start hunting out the cutting edge; they have the skills and the resources to be shaping a new zeitgeist rather than perpetuating last year’s trends. But it means being brave, it means taking some of those profits and gambling with them, it means trying to reverse that process whereby companies go from creative start-ups to legislating dinosaurs.

It will pay off in two ways, firstly it increases your chance of finding the next being thing and being in at the start of a new scene and secondly it gives your customers a reason for some brand loyalty and, to go back to the techdirt equation***, a reason to buy (and then come back to buy again).

To refer to the previous chapter, it takes you away from content as a commodity and starts to return it to being culture.

The other way that the industry needs to be brave is in terms of how it connects its fans to its creators. We’ve talked about this before and we’ll come back to it again, but pretending the internet doesn’t exist is not going to work.

P.S. I love the wording from the US constitution at the bottom of the infographic, “to promote the progress of science and useful arts.” Does that mean that non-useful arts shouldn’t get copyright? Damien Hirst, I’m looking at you.

P.P.S. I know it doesn't mean this.

 

* An MPAA spokesman recently admitted that “the internet isn’t a platform we’re comfortable with”.

** On average, some of the older, more established bands do better, the manufactured ones don’t tend to get close to that.

*** Connect With Fans + Reason to Buy = $$$

A Manifesto for the content industry 6 – Focus on Quality

Focus on quality. A corollary to adding value; you cannot compete on quantity, it’s you vs the world, you have to be better than good.

So what do I mean by focusing quality? Well, simply put, it is finding and exploiting (in a positive sense) the great stuff.

First though, some numbers to explain why quality is the differentiator for any kind of business based on digital content:

•At least 35 hours of content is uploaded to Youtube every minute.

•The movie featured in this blog post was shot on an $800 SLR.

•Garage Band recording software is available from £13 and a fully specc’d copy of Cubase from £190

•e-books now outsell paper books on amazon and can be produced with free software and the cheapest pc you can find.

•Portable digital recorders with condenser mics now cost less than £100.

•You tube, Picasa, Bandcamp, and oodles of other sites allow creators to upload and share / sell their content for free.

•Over $100million was pledged to Kickstarter projects last year.

•There are over 200 million blogs and this number rises every year.

What all of this means is that it is easier than ever for creators to produce good content, easier than ever for them to share it directly with their fans, and easier than ever for people to find new content.

What’s not easy to do is find the best content. There’s so much good stuff out there that finding the great stuff, and getting in front of the right people, is a challenge for creators and consumers alike.

As with adding value, focusing on quality is where middlemen have a role.

We touched on this in the previous instalment (I used the example of the difference in production values on albums by The National) and these two aspects do sit together to a great extent, getting top quality content in front of the right audience is still a real challenge at all levels of the industry.

In the TV and music world there is currently a focus on the reality TV shows and their offspring, Big Brother, X-factor and their ilk. This is very much a lower-end-of-the-market play and, whilst it offers high returns for low overheads in the short term, the numbers indicate that this may have a short life span. Audiences for Big Brother and similar shows have fallen heavily since their early highs and whilst the X-factor continues to grow its TV viewing figures, the sales of singles are falling (even when downloads are taken into account). The limited longevity of the acts also means that there is very little “long tail” to be capitalised on.

By focusing on the lower end of the quality scale the output becomes a commodity rather than “art”, which, as well as removing any long-term re-sale value from the product, makes it open to competition from lower / zero cost producers, removes a lot of potential for any brand loyalty and makes the operation very vulnerable to a sudden shift in public opinion.

The competition for consumers attention is more open than ever, whilst the major content producers also own the major media and distribution channels a demand can be created, but as the net democratises the flow of information, and as peer-recommendation outgrows media hype, the money that people have to spend on entertainment will move towards quality output, even as they continue to watch and listen to the mass produced output.

* This may be my first ever blog post that has no asterisk'd footnotes. Oh wait.

It's not over (or A new world order)

The debate over SOPA and PIPA (and the eventual shelving of those bills) has been framed in various terms from its inception. According to the supporters of the bill it's about Freetards vs Creators. According to a lot of the pundits (mainly in the mainstream media) it's about The Internet Geeks vs Hollywood.
But both of these positions are false.
Sure there are people out there who will happily take content for free without a thought for the creators, but there are a great many more who will happily pay a reasonable price for unrestricted content; especially if they know that most of what they've paid is going to the creator. That's why so many artists, musicians, actors, and programmers have come out against the bill.
And sure the MPAA have been driving this bill and it has been internet-based agitators who have orchestrated the challenge to it. But it's not just the geeks who've been overloading the congressional switchboards and filling up the senate's inboxes. After all, everyone who reads this is an internet user, but would you describe yourself as an online activist or a geek?
To ascribe to one of these positions is to miss a wider affect that has the potential for much greater change.

What really happened over the last few days was Lobbying vs The People.

That it came about over a bill to regulate the internet is perhaps fitting as it's this same medium that has enabled everyday people to see exactly how the legislative process in the US works. When these bills first started being discovered and discussed there were many in the online world who thought that their protesting was ultimately going to be fruitless. The internet wasn't a big issue to a national audience and the millions of dollars at the lobbyist's disposal (in an election year) meant that most of those early protesters thought that this would be a forlorn hope.
I am so incredibly proud of everyone who took a moment to contact their senator and congressman to stop this happening and provide a rare victory for the people over the vested interests of a few companies.
Make no mistake, it is a rare victory and it is not over.
Those bills (and doubtless others like them) have been shelved not scrapped, they will be back, in one form or another and we'll be relying on the same group of activists to keep us aware.
The lobbyists haven't changed their tactics, they still think that they can buy new legislation and, if necessary, new legislators.
But they have failed to recognise that, in their hubris, they have woken a slumbering beast.
Now it may be that the american people will roll over and go back to sleep and, if so, a great opportunity will have been lost. But it may be that the american people will wake up and start looking at how their rights have been eroded by lobbyist dollars and vested interests and how far from their purpose that their elected representatives have strayed.
We can hope.

A Manifesto for the Content Industry – 5. Add Value.

Add value. What are you doing that your customers can’t do with 20 minutes and the internet? What are you doing that a creator can’t do for themselves? If you’re not adding value, why would someone pay you?

Now you’d think that this would be a pretty redundant article, after all, why would you be involved in a process if you weren’t adding value to it? Sadly large parts of the content industry have drifted a long way from this position.

At this stage it’s probably important to take a look at the content industry and the difference between middlemen and gatekeepers because, I think, you have fundamental difference in what they add to the artist-customer relationship. At least, this is the terminology I’m using so I’ll set out the distinction here:

A middleman is someone* who facilitates either the production of the work or the interaction between customers and creators.

A gatekeeper is someone* who restricts access to content until some kind of fee is paid.

Frequently a company can be both of these things. A record label may provide the upfront fees for a producer or session musicians, but then block the release of material via a non-traditional medium.

Frequently a company or organisation is supposed to be the former but ends up being the latter.

With the rapid improvement of consumer electronics and multitude of distribution options now available to anyone it might seem like the opportunities for a middleman to add value have disappeared. I’d argue that this is fundamentally untrue and there is still massive value that can be provided by the major players. A few obvious areas and examples are:

            Publishing: In a market that is still dominated by physical objects, distribution is key, and once your product is in the shop it needs to be visible on the shelf. You could try doing that as a self-published artist but good luck...

            Music: The difference that a good producer can make to a recording is probably analogous to the value that a good editor adds to an author, and it’s no real surprise that almost every novel you read will have the editor listed for thanks in the opening pages.

            Movies: unlike either writing or music, making movies is expensive. There’s no getting round the fact that even a budget production will probably cost you tens of thousands of dollars. And then you’ve got to find somewhere to show your film…

I could go on and talk about publicity and opinion makers and all kinds of other things, but however you look at it there is still a huge part that the established industries can play.

Unfortunately a lot of these companies seem to have decided that every interaction should also be a transaction and the only value that matters is shareholder value.

Hence they have become gatekeepers.

Where a middleman adds value to both the customer and the creator, a gatekeeper does the opposite by trying to drive a fee out of every interaction between the two. This might appear by way of a simple restriction of content (separating the customer from the creator) on you-tube “This video is not available to view in your country” – Sorry what? I’ve googled the official video for the new single and I can’t watch it for another 6 weeks because I don’t live in the US? Or by putting DRM on a video game (reducing the value) so that you can only play it if you’re connected to the web – Sorry what? I bought a single player game that I want to play on my laptop as I do my daily train commute, now I discover I can’t do that? Or a combination of the two, for example, by delaying the release of a series box-set on DVD so that advertising can be maximised via re-runs on a secondary channel – Sorry what? This was released in the US 6 months ago but I still can’t buy the box set and watch it at my convenience because you have a re-run on Sky-Atlantic.**

So to go back to our opening paragraph, one of the biggest challenges to any creator is getting their product seen/heard/read, and there’s so much good stuff out there it’s hard for the customer to find the great stuff. Connecting those two dots is value add.

Looking at the same situation from a different perspective, there’s a lot of good stuff out there that just needs a little bit of polish to really stand out. The aspiring film-maker in Spielberg’s Super 8 keeps going on about production values as a means to make his film standout in the upcoming competition and the principle holds in other fields as well***. Taking something from a “gifted-amateur” feel to a “professional-product” feel is value add.

Essentially it comes down to the title point; if you’re in the supply chain you should be adding value.

* Or a company

** Interestingly in almost all of these cases you'll be able to find an unauthorised copy for free with none of the restrictions. But try telling the respective industries that their behaviour is driving piracy...

*** Having recently listened to the first album by The National it sounds like a demo-tape for their later stuff; the talent and skill are there but the production values are in the “gifted-amateur” range compared to their more recent output.

A manifesto for the content industry 4 – You can compete with Free

You can compete with free. Seriously, there are plenty of working business models out there, study them. You are better placed than anyone to make this work, failure to do so is not about not being able to compete with free, it’s a failure of your business acumen.

“You can’t compete with Free” is one of the most frequently quoted arguments that you’ll find on blog comments and discussion boards when discussing how to make money in an environment where digital copies are abundant and easily available for those who are willing to do a quick bit of looking.

It also frequently occurs in conjunction with someone complaining that they tried making their content available for free and didn’t make any money / didn’t see any increased traffic / didn’t immediately become rich and famous.

So let’s make one thing completely clear: ‘Give it away and hope’ is not a business model.

We’re going to come to adding value in section 5 and that will, hopefully, begin to set out how you might devise a working business model. This section links very closely to that and is about working out how you identify potential opportunities to compete.

Content basically comes in two flavours: legal and illegal. Essentially there is stuff that the owner of the material has put out into the world to be shared and that which has been shared without the permission or the rights holder. This then, is your first mechanism for competition. There are a lot of people who don’t like feeling like they’re breaking the law, even when they’re doing as eminently reasonable as copying the contents of a cd to an MP3 player. Give people a legal option, some folks will happily pay a fee to know that they are doing “the right thing”.

Content could be described in two other flavours: permanent and temporary. There’s the temporary stuff that sits on youtube / spotify etc that you can only access when you’re connected to the web, and there’s the permanent stuff that you download to your repository of choice (hard-drive, phone, MP3 player, kindle). Again, some people will happily pay a fee to own* a copy that they can play at any time or in any location.

Or you could split content into two camps another way: easy to access and difficult to access. For quite a while this has been the bane of the legacy industry’s life. Getting access to legal content was a complete pain whereas illegal content could be obtained with a search and a click of the download button. Then came I-tunes, suddenly here was a lot of content, easily available, reasonably(ish) priced and not bundled into unappealing packages. Unsurprisingly i-tunes has sold quite a bit of content. Amazon now offer a one-click alternative (assuming you’re signed in) that is as easy to use (if not easier) than the illegal alternatives, this also is doing quite nicely.

Funnily enough there are lots of other ways you can split the content on the web; trusted and risky is another way. If I buy something from Amazon, I-tunes or direct from an artist’s website there’s very little chance that I’m being sold malware or a virus masquerading as content. If I torrent something illegally I have no such feeling of comfort.

Here’s another way you can split it: that which rewards the creator and that which doesn’t. A lot of people will happily pay to support an artist they like, many will seek out the best way to support those artists from the available mechanisms. This might mean buying a CD at a live show rather than via a retailer, or just going to the show instead of buying the CD. One group have even discovered that since publishing a breakdown of how much they earn via different means they have not only increased their entire take but the sales have shifted to the items that they make the most return on. The swing side of this is that you are a rights holder who doesn’t pass on much money to the content creator you might find that this actively works against you.

Restricted and Un-restricted might be another way of looking at it. Once I’ve bought some content I want to be able to do what I choose with it, when I like and on the device that I prefer. Putting DRM on something is a sure-fire way to make your product less attractive than an illegal alternative. Perversely there are those in the industry who still view this as a “feature”.

There are almost certainly other ways you can cut it and other incentives that can be provided to persuade people to consider paying for content that is also available for free. I’m not for a minute suggesting that all of these will work for everyone or even that any of these will work for most people, but one thing I can guarantee is that you if you’re not making your paid-for content as easy to get hold of as free content then you will be losing sales.

* This becomes very important later on (see section 12 when it comes), have a look at the increasing number of cases of artists suing their labels over I-tunes royalties in the meantime.

A Manifesto for the content industry – 2. One shared file does not equal one sale lost

It appears that I have published chapters one and three but omitted chapter 2. My apologies, please accept this correction...

One shared file does not equal one sale lost. It really doesn’t. People will accept something for free that they won’t be prepared to pay for, don’t kid yourself otherwise. A shared file is equally likely to lead to more sales rather than fewer.

Whenever you hear or see stats being bandied around by the content industry, this is the principle on which they base their calculations; that each unlawfully shared file* represents one lost sale.

This is the biggie for the music industry but it’s increasingly being misunderstood by the movie business as well so let’s look at various reasons why this might be the case.

Firstly you have your hard-core never-pay-a-penny file-sharers. These are the ones who think that the labels have been sticking it to them so long that they somehow owe someone something so try to stick it back by never buying anything that they can get for free. These are your lost sales. But arguably, since they wouldn’t buy your product anyway (so they claim), which sale has been lost?

Anyway, assuming that the die-hards above are all bluff and would really be out there buying records if that pesky internet would just go away, why else would one shared file not equal one lost sale?

Here’s a few reasons:

1.  I’ve heard the single but I like this band and I’m going to buy the album when it comes out anyway, why would I pay twice for the single?
2.  I already own the song on an earlier format, I could go through the hassle of rigging up my record deck and copying it across but that’s illegal too and more hassle than just downloading a copy.
3. I would happily buy a copy of this but because it's an old song / movie you no longer sell it. How can I buy something you're not selling?
4. I’m not sure if I like it. I’ve heard it on the radio but I need a couple more listens to determine if I want to buy it. Try before buy marketing
5. It’s not worth the cash. Now that cash might only 79p**, but when you’re talking about something with a unit cost of zero, that’s still a value judgement. I have a copy of William Shatner’s Rocket Man on cassette, I think it’s a pretty funny listen, but I’d never pay money for it, it’s just not worth it. Similarly I have old mix-tapes from the radio with various chart tunes on, if they turn up as a free download or magazine-cover cd then I’ll take a copy, but it’s not worth paying to replace them.
6. Because it’s not being offered in the format that the consumer wants. Some bands / labels are rejecting the MP3 format altogether and only releasing things on hard copy. An increasing number of people are ditching hard copies altogether and moving everything to a digital file. If you’re not selling what I want to buy it’s not a lost sale.

And that’s not even considering the fact that some of the Industry numbers are counting shared playlists on social media sites (like Spotify) as shared files.

But in summary yes, some of those shared files are lost sales, but it’s not even close to all of them. Using statistics based on this premise undermines the argument and the public’s trust in the content industry.

* Including Format Shifting.

** On a separate note, can anyone justify the increase in cost of downloads when the technology and storage costs are only coming down?

A Manifesto for the content industry – 3. Content will always be produced and consumed with or without you.

Continuing from my previous blogs on this subject.

Content will always be produced and consumed with or without you. You are just a facilitator. If your entire industry disappeared overnight, people will still create and they will find other ways to share and appreciate it. Never lose sight of this.

At this point it’s probably worth my iterating exactly who this manifesto is aimed at; content creators and major Intellectual Property (IP) rights holders are rarely one and the same. It varies greatly by media type but at one end you have the publishing industry (where a lot of authors maintain the copyright on their text) and at the other you have the music industry (where hardly any artists signed to major labels (or their subsidiaries) have any rights on their creation).

This manifesto is aimed at the rights holders; this entry in particular is aimed at those towards the music industry end of the continuum.

A common argument proposed by copyright supporters is that without our ever-increasing copyright terms (and ever-increasing lawsuits) there would be no incentive to create. Who, they argue, would go to all the trouble of taking an idea all the way through to a product if there was no return at the end of it? Surely no-one will go through all that effort and expense if there was no guarantee or a return?

It has been famously said that the business of the music business is business not music (by Billy Joel I believe) and the idea that people create something for a return on that is plainly a business-led idea not a creativity-led idea.

As has been pointed out previously, for hundreds of years artists have starved in obscurity, then, for a brief period in the last 50-years or so, some artists became very, very rich. The bit that tends to be forgotten is just how small a percentage of artists (particularly in the music business) actually become successful. On average, thanks to some interesting record label accounting*, fewer than 1 in 10 albums ever recoups (i.e. makes a profit for the recording artist). And bear in mind, that’s the figure for signed acts, it takes no account of all the people playing on the amateur scene.

So, extending the argument that people create for the return on copyright, in the period before the last fifty years and in the internet years there should have been very little content creation at all.

I have no idea of there was less content creation in the first half of the twentieth century or the second but it only takes a few minutes on Bandcamp, Facebook, Blogger, Youtube, Soundcloud, The Huffington Post (or any one of a myriad of other platforms out there) to see that there is a huge, huge amount of content being produced, the vast majority of which is never expected to make a financial return.

People will always create, frequently they will do so for nothing more than their own personal pleasure with no intent to share, sometimes they will want to share it with as many people as possible. What’s changed in the last decade is that this ability to share it widely has become available to everyone with a decent internet connection.

Couple that ability to share with ever decreasing costs for consumer electronics and what it means is that if you’re a content creator then your tools of the trade are getting cheaper and you’re closer than ever to the people who might want to consume your work.

If you’re a middleman, be it an aggregator, publisher, record label, movie studio, collection agency or any other part of the chain, then you are going to have to work ever harder to add value into the product lifecycle because creating has got easier and sharing has got easier.

Alternatively you could try lobbying, sadly that’s got easier too.

* See also Hollywood Accounting

A Manifesto for the content industry – 1. Do Not Sue Your Customers

Expanding from my previous blog this is the first in a series whereby I use you, my faithful readers (both of you), to sense-check my work and point out my idiocy. Thank you.

Do not sue your customers. Seriously, just don’t. It’s the economic equivalent of going to war. If, in the words of one CEO, you say “We’re going to sue the [expletive deleted] out of generation Y”, exactly how many of generation Z do you expect to buy your products? If someone is taking content you have the rights to and selling it on commercially, sure, take ‘em to the cleaners. But blocking up the legal system with 25,000 individual cases of people downloading The Hurt Locker is not only targeting a bunch of people who have no impact on your business model, it’s also an abuse of the legal process.

Taking legal action against someone is an act of aggression. In most walks of life it’s a last resort once all other options have been exhausted. If you have an argument with your partner, you talk it through, you might get counselling, you might end up at Relate, but you don’t phone the divorce lawyer straight away.

Similarly if your neighbour won’t return the lawnmower, you go round and ask for it back, maybe a couple of times, you don’t dial 999 as soon as the clippings have been emptied into the bin.

Most people would agree that the first thing to do in any disagreement is to talk to the other party and see if it can be resolved amicably but, for some reason, that doesn’t apply to the content industry. In the world of Intellectual Property, intellect is left behind and the first course of action is, all too frequently, a call to the legal department.

So ask yourself, are you getting hot under the collar about nothing? If a pre-mastered copy of your movie get’s leaked onto the web before all the special-effects are done, is this really going to stop people going to the cinema to see it when it’s done? Before you reach for the lawyers consider if you could be better served by going out there and talking to people. Explain that what they can download isn’t the finished article, empathise with them, if they’re going to that effort they’re probably some of your biggest fans. Handle it right and they can be some of your biggest advocates as well.

But let’s move on from this opening argument though and consider what to do if you think that you are genuinely being financially deprived due to someone else’s actions. There are three things to consider here:

1.  Are you targeting the right person?
2.  Are you using an appropriate means and claiming an appropriate recompense?
3.  Are you fully prepared for any backlash?

We’ll tackle these one at a time.

1.  Consider the defendant: are they an end-consumer who you haven’t effectively served in the market, or are they a middle-man profiting off your work without authorisation? If they’re the former then you’re barking up the wrong tree. Ventures like Spotify are increasingly showing that if you provide a decent legal experience that serves your customers, they don’t feel the need to get around copyright or distribution restrictions.
2.  Having identified that someone is wilfully, criminally distributing your product, you need to make a targeted and proportional response. If a torrent site in Norway has been distributing your software, use the existing legislation to find out who the uploader is and target them for proportional damages. Don’t sue the torrent site for the statutory maximum. There are two reasons for this, one is that if you take the maximalist approach the chances are that the site will close, declare bankruptcy and you won’t see a penny, the second reason is backlash (see point 3). Don’t be tempted by the dollar signs and go for the end-users either, it will sting you. The makers of the Hurt Locker are currently in the process of contacting 25,000 people and demanding $1500 dollars or threatening them with legal action (on the most flimsy of evidence). That’s what we call a shake down and it’s winning them no friends, even in the courts.
3.  Backlash. You’re probably familiar with the Streisand Effect. If not, take a moment to google this. Memory refreshed? Right, consider this and the quote at the top of the page. The internet is not going away. No matter how much lobbying is done. The current crop of rights holders are not going to remain the gatekeepers forever; there are too many alternative distribution methods now. If you aggravate and disenfranchise your artists’ fans both they, and the artists, will route around you. In some cases (see ACS Law) they may take active steps against you. This doesn’t mean you can’t take action when it’s needed; but you’ll need to be on the front foot with your web presence and you’d better have a good and honest explanation.

The bottom line is, if you’re relying on taking legal action to try to prop up a business model that’s no longer serving your customers, then you’re failing both your customers and the artists you’re claiming to represent. Adapt or be forgotten.

A manifesto for the content industry

Following on from my previous blog about the gender discrepancy between the charts and the amateur scene I’ve been doing some further thinking about how the music industry, and the wider content industry / rights holders* might want to behave if they are to survive (and even prosper) in the post-digital economy.

So, the manner of the Cluetrain Manifesto, I have produced a Manifesto for the Content Industry.

Now, before we get onto the manifesto, I want to head something off at the pass. This is not about whether it is right or wrong to copy and distribute files via the internet. This is not a moral debate. File sharing happens and, in one form or another, will always happen. This is a suggestion for how companies can accept this economic reality and still remain a viable business.

Right, now we’ve got that out of the way, here are my founding principles for a modern content provider. They’re in no order apart from number 1 and I'll expand on them in turn in future blogs:

1              Do not sue your customers. Seriously, just don’t. It’s the economic equivalent of going to war. If, in the words of one CEO, you say “We’re going to sue the fuck out of generation Y”, exactly how many of generation Z do you expect to buy your products? If someone is taking content you have the rights to and selling it on commercially, sure, take ‘em to the cleaners**. But blocking up the legal system with 25,000 individual cases of people downloading The Hurt Locker is not only targeting a bunch of people who have no impact on your business model, it’s also an abuse of the legal process.

2              One shared file does not equal one sale lost. It really doesn’t. People will accept something for free that they won’t be prepared to pay for, don’t kid yourself otherwise. A shared file is equally likely to lead to more sales rather than fewer.

3              Content will always be produced and consumed with or without you. You are just a facilitator. If your entire industry disappeared overnight, people will still create and they will find other ways to share and appreciate it. Never lose sight of this.

4              You can compete with free. Seriously, there are plenty of working business models out there, study them. You are better placed than anyone to make this work, failure to do so is not about not being able to compete with free, it’s a failure of your business acumen.

5              Add value. What are you doing that your customers can’t do with 20 minutes and the internet? What are you doing that a creator can’t do for themselves? If you’re not adding value, why would someone pay you?

6              Focus on quality. A corollary to adding value; you cannot compete on quantity, it’s you vs the world, you have to be better than good.

7              Be brave. If you’re focussing on sequels, glorified karaoke acts, this year’s answer to “X” or trying to build a brand then you are guaranteed to miss the next trend when it comes along.

8              Use your experience. There’s a lot of noise out there, but there’s also a huge amount of good stuff, your job is to find the great stuff. For example, if you’re a newspaper then do the investigative journalism, get into the detail and find the facts behind the story. I can get opinion and newsfeeds faster than you can go to print, get me the truth and I will buy your paper.

9              Be genuine. We’re sick of spin, we’re sick of hype. If you churn out repetitive and unoriginal content whilst claiming it’s the best thing since last year’s clone, we’ll stop listening and go elsewhere (a lot of people already have).

10            Free your people. If you’re doing the other stuff right your people should have some pretty interesting jobs. I bet they’ve got interesting stuff to say. Do they blog? We do. Do they comment in chatrooms? We do. Let them join the conversation, it should be part of their job.

11            This is a global market. If you charge western prices to the third world then people will find a way to get the content for free. 99c might not be a lot to readers of this blog but it’s a day’s wage to large amounts of the globe. But the bad news is that you can’t stop a European going to an African website and buying from there, your unit cost is zero, expect your prices to trend that way.

12            The gravy train has stopped, it’s time to get off. You are no longer the gatekeepers to content and you no longer have a monopoly. Lobby if you like (and we know you do) but you’d be better off coming to terms with it and adapting.

13            The customers are out there. A corollary to 8; the argument that people are unwilling to pay for content has been proven false by the success of I-tunes, Spotify, The Financial Times and numerous others. You have to figure out who you’re trying to serve and what their needs are (Hint, the answers aren’t “everybody” and “everything”)

14            Do not sue your customers. I know this is the same as 1 but it’s so important I thought I’d say it twice.***

So there you go, that’s my stab at a set of principles for a 21^st century content provider. What do you think?

* Please note, I am using the term “Content Industry” as a catch all to cover the major players in the Intellectual Property market (Studios, Record Labels, Publishers, Newspapers, Software houses) rather than the actual creators of that content (Artists, film-makers, authors etc) as the behaviours and ambitions are generally very different.

** Take legal action against your competitors if you must, but be aware of the Streisand affect. You can lose as much business being in the right as you can being in the wrong.

*** With reference to Red Dwarf