Update on the New #Conglomerates

My blog on the New Conglomerates has proven to be one of the most popular I have written. I’d been contemplating an update for a while, even before I heard this week’s announcement that Verizon is buying the bulk of Yahoo!. Talk about being prescient…. So, just over two years later, it feels very timely to return to the topic.

Image sourced from dc.wikia.com

Image sourced from dc.wikia.com

Of the so-called FANG tech stocks, when I was writing back in May 2014, Facebook had recently acquired WhatsApp and Oculus VR. However, apart from merging Beats Music into its own music service, Apple has not made any big name deals, but has made a number of strategic tech acquisitions. Meanwhile, Amazon has attempted to consolidate its investment in delivery company, Colis Privé, but got knocked back by the French competition regulators. Netflix finally launched in Australia in March 2015, and within 9 months had 2.7 million customers, a growth rate of 30% per month. Finally, Google has since renamed itself Alphabet, and purchased AI business Deep Mind.

Over the same period, Microsoft appears to have reinvigorated its strategy: back in May 2014, Microsoft had just completed its acquisition of Nokia. Since then, Microsoft has announced it is buying LinkedIn (following the latter’s purchase of Lynda.com in 2015), but has also shut down Yammer, which it had only bought in 2012. The acquisition of LinkedIn has been framed as a way to embed corporate, business and professional customers for its desktop and cloud-based productivity tools (and maybe give a boost to its hybrid tablet/laptop PCs). On the other hand, Microsoft has a terrible track record with content-based products and services, as evidenced by the Encarta fiasco, and the fact that Bing is an also-ran search engine. I think the jury is still out on what this transaction will really mean for LinkedIn’s paying customers.

So, what are the big tech themes, and where are the New Conglomerates competing with each other?

First, despite being the “next big thing”, VR/AR is still some way off being fully mainstream (although Pokémon GO may change that….). Apple and Google will continue to go head-to-head in this space.

Second, content streaming is not yet the new “rivers of gold” for publishing (and the sale of Yahoo! might confirm that there’s still gold in those advertising hills….). But music streaming (Apple, Spotify, Amazon and Google – plus niche services such as Bandcamp and Mixcloud) is gaining traction, and Amazon is building more content for SVOD (to compete with Netflix, Apple and Google). But quality public broadcasters such as BBC, ABC and NPR are making great strides into audio streaming (via native apps and platforms like TuneIn) and podcasting. One issue that remains is the fact that digital downloads and streaming still suffer from geo-blocking, and erratic pricing models.

Third, Amazon continues to build out its on-line retail empire, even launching private label groceries. Amazon will also put more of a squeeze on eBay, which does not offer fulfillment, distribution or logistics and is a less attractive platform for local used-goods sellers compared to say, Gumtree.

Fourth, Amazon is making a play for the Internet of Things (which, for this discussion, includes drones), but both Apple and Google, via their hardware devices, OS capabilities and cloud services, will doubtless give Amazon a run for its money. Also, watch for how Blockchain will impact this sector.

Finally, payments, AI, robotics, analytics and location-based services all continue to bubble along – driven by, for example, crypto-currencies, medtech, fintech, big data and sentiment-based predictive tools.

Next week: Another #pitch night in Melbourne…

 

 

 

 

Whose IP is it anyway?

Why should we claim ownership of our IP? This was the topic up for discussion at the recent Slow School dinner on Collaborative Debating presented by Margaret Hepworth. I won’t reveal how a collaborative debate works (I recommend you sign up the next time Slow School runs this class…), but I do want to share some of the issues and insights that were aired. In particular, the notion that shared knowledge is the basis for greater prosperity.

The use of Creative Commons means knowledge becomes easier to share (Photo by Kristina Alexanderson, image sourced from flickr(

The use of Creative Commons means knowledge becomes easier to share (Photo by
Kristina Alexanderson, image sourced from flickr)

First, the discussion centred on IP issues relating to ideas, content, knowledge, creative concepts and theoretical models. Not surprising, as the participants were all independent professionals, consultants, bloggers, creatives, facilitators, teachers and instructors. So we didn’t address the areas of patents, registered designs or trade marks.

Second, as someone who has worked in the publishing, data and information industries for nearly 30 years, I believe it is essential that authors, artists, academics, musicians, designers, architects, photographers, programmers, etc. should be allowed both to claim copyright in their work, and to derive economic benefit from these assets. However, I also recognize that copyright material may often be created in the course of employment, or under a commercial commission or as part of a collaborative project. In which case, there will be limitations on individual copyright claims.

Third, the increasing use of Open Source and Creative Commons means that developers, authors and end users have more options for how they can share knowledge, access resources and foster collaboration through additive processes and “common good” outcomes. A vital component of these schemes is mutual respect for IP, primarily through acknowledgment and attribution. Equally, an online reputation can be established (or destroyed) according to our own use of others’ material, especially if we are found to be inauthentic.

Leaving aside the legal definitions of IP and how copyright laws work in practice, the discussion explored the purpose and intention of both authors (as “copyright creators”, narrowly defined) and end users (as “licensees”, broadly defined). There was general agreement that sharing our content is a good thing, because we recognise the wider benefits that this is likely to generate.

But there is a risk: merely acknowledging someone else’s authorship or copyright is not the same as accurately representing it. Obviously, plagiarism and passing off someone else’s ideas as your own are both copyright infringements that can give rise to legal action. Even with the “fair use” provisions of copyright law, a critic or even an acolyte can mis-interpret the content or attribute a meaning that the author did not intend or even anticipate. As one participant noted, “Copyright is not just concerned with what we claim ownership over, but what others may claim as their own.” Not for nothing have we developed “moral rights” in respect to authorship of copyright material.

Although we did not discuss specific issues of copyright remuneration (e.g., through royalties, licensing fees or financial consideration for copyright assignment), there was a proposition that establishing copyright protection can lead to social, intellectual and even economic limitations. The understandable, but often misguided need to protect our copyright (as a form of security) is driven by fear, underpinned by scarcity models. Whereas, a more generous approach to copyright can actually lead to greater shared prosperity, based on the notion of the abundance of ideas and knowledge. And since, as one speaker put it, “there is no such thing as an original concept because all ideas build on previous knowledge”, the inherent value in IP is in how we contribute to its nurturing and propagation.

At the end of the discussion, and reflecting on my own recent experiences with copyright infringement and geo-blocking, I found I had shifted my position – from one that tends to take a more absolute view on copyright ownership, to one that identifies the need for some further modification to the current copyright regime, along the lines of the following:

  • Copyright ownership should not entitle the owner to abuse those rights – if anything, the copyright holder ought to be placed in a position equivalent to a trustee or custodian, to ensure that they act in the best interests of the IP asset itself, not merely their own interests. That should not preclude the owner from being compensated for their work or being allowed to commercialize it, otherwise, why would anyone bother trying to create new ideas or content?
  • Establishing copyright in ideas and creative concepts needs to be supported by a notion of “intent” or “purpose” (a bit like mens rea in criminal law). For example, if the intent is to merely prevent anyone else using or sharing the idea, then any copyright protection might be limited to a much shorter duration than the usual “life of author plus XX years” model.
  • Equally, under a “use it or lose it” provision, if copyright owners (and/or their publishers, distributors and license holders) elect to take their content out of circulation from a market where it had been widely available, then they would need to establish good cause as to why the copyright should not be open to anyone else to use and even commercialize (subject to reasonable royalty arrangements).
  • If we accept that all knowledge is additive, and that the proliferation of collaboration and co-creation is because of the need to share and build on what we and others have already created, how can we ensure the integrity and mutual benefits of open source and creative commons initiatives? One analogy might be found in the use of blockchain technology to foster contribution (adding to and developing an existing idea, concept, model or platform) and to support authentication (to validate each idea extension).

Perhaps what we need is a better IP model that both incentivizes us to share our ideas (rather than rewards us for restricting access to our content), and encourages us to keep contributing to the furtherance of those ideas (because we generate mutual and ongoing benefits from being part of the collective knowledge). I’ve no idea what that model should look like, but surely we can agree on its desirability?

Next week: Finding purpose through self-reflection

Is this The Conversation we should be having?

Here’s a barbecue topic for Australia Day: What is happening to the quality of public discourse? Over the holidays, I read The Conversation’s 2015 yearbook, “Politics, policy & the chance of change”. It’s a collection of individual articles from the past 12 months, grouped into broad themes, covering key issues of the day, at least among the academic and chattering classes. As a summary of the year in Australian political, economic, cultural and social reportage, it’s not a bad effort. With “news” increasingly bifurcated between a dominant commercial duopoly and a disintermediated social media maelstrom, The Conversation can offer a calm rational voice and an objective alternative.

Screen Shot 2016-01-24 at 6.43.50 PMThe title promises a new direction in political debate, and I went to the book’s Melbourne launch at the start of the summer, where Michelle Grattan, The Conversation’s Chief Political Correspondent held court in an audience Q&A. I was looking forward to the event, because part of The Conversation’s remit is to foster informed debate that is more than tabloid headlines, news soundbites and party room gossip. It has also positioned itself as a non-partisan, independent and authoritative source of news analysis.

I was hoping the Q&A would provide a considered discussion on some of the key policy issues facing the country – long-term tax reform, addressing climate change, updating Federation, dealing with the post-mining boom economy, improving the quality and efficiency of our education, health and infrastructure systems, etc.

Instead, the first three questions from the audience concerned Mal Brough, Ian Macfarlane and Tony Abbot. How demoralising. Haven’t we moved on from this cult of personality? Haven’t we learnt anything from the past 10 years or so? If the same event had been held during Julia Gillard’s term as PM, the names would have been different (Craig Thomson, Peter Slipper, Kevin Rudd?) – and for quite separate reasons, I hasten to add – but the context and implication would have been very similar: “Never mind policies, what’s the chance of (another) leadership spill? How are the numbers stacking up in Parliament? When’s the court case?”

Although I admire the aims of The Conversation, and I understand why it exists, I have some concerns about the type of discourse that The Conversation is actually fostering among its audience. As with many public institutions, I appreciate that it’s there (even though I am not a frequent reader), but like other news media, it risks confirming the bias and prejudices of its audience. It can also feel as if it is serving only the vested interests of its contributors, partners and sponsors.

So much of Australia’s recent political history has been dominated by self-delusional egos, nefarious party factions, insidious vested interests and character assassination (which I blame for giving us five prime ministers in as many years).

When it was my turn to ask a question, it concerned the recent bipartisan compromise between the Coalition and The Greens to publish the tax records of companies generating more than $200m in revenue (as a step towards tackling corporate tax avoidance). I asked, “Should we expect to see more of this seemingly new approach to politics?” Although Ms Grattan gave a detailed (and somewhat technical) explanation for this particular Parliamentary outcome and its likely implications, I felt that most of the audience were not interested. They would probably have preferred to be talking about the ins and outs of the party rooms. For me, this does not bode well for the level and quality of public debate we are having on (non-party) political issues that really matter.

I also have a few other niggles about The Conversation and the 2015 Yearbook:

  1. By only sourcing content from “recognised” academic experts and policy wonks, I think this overlooks contributions from commercial and industry experts which are just as valid. As long as such authors also declare any interests, it should ensure balanced commentary – but to exclude them from the debate just because they don’t have academic, public or research tenure is self-limiting.
  2. The site as a whole (and the book in particular) is rather thin on actual data references, and when research data is included in articles, there are rarely any charts, tables or infographics. I think this is a shame and a missed opportunity.
  3. The book hardly mentions the critical issue of tax reform (which barely merits half a dozen pages). Whereas, reform of the education system (including academic research funding) gets around 40 pages – which rather smacks of self-interest (and bias?) on the part of the academic authors

Finally, The Conversation provides a valuable (and from what I have seen, an impartial) service via its factcheck section, which in tandem with the ABC’s Fact Check is doing a sterling job of trying to keep our pollies honest (at least in Parliament…). More power to it.

Next week: David Bowie Was – “It’s a god-awful small affair”

 

Will streaming kill the music industry?

The resurgence in vinyl sales is certainly not enough to save the music business. But will streaming finally cook the goose that once laid Gold Discs?

statistic_id273308_music-album-sales-in-the-us-2007-2014

US album sales (in all formats) are in decline. (Source:  Statista)

What can we learn from the music industry based on the apparent rebound of vinyl sales in recent years? Is streaming doing enough to halt the decline in total music revenue? Will CD’s soon disappear altogether? What future for LPs in a world of “Album Equivalent Sales”, “Track Equivalent Albums” and “Streaming Equivalent Albums”?

Are there parallels here with other content, publishing or entertainment sectors?

Back to Black

Last month the 8th annual Record Store Day was launched with a fanfare of upbeat data for vinyl sales. It was a good news story in an otherwise depressing saga of declining album sales, stagnating revenues, and mixed messages about the impact of digital downloads and streaming services on the music industry.

Coming off a very low base (like, near-extinction levels), the extraordinary sales growth of vinyl (especially in Australia) can be attributed to a combination of factors, although it is difficult to see how any single trend is responsible for this growth:

  • The growing popularity of Record Store Day itself (although it’s not without its problems – see below)
  • Baby boomers buying their record collections all over again
  • Hipster interest in analogue technology
  • Record labels mining their back catalogues
  • Niche market interest among audiophiles, collectors and the cool kids
  • New approaches to packaging vinyl with downloads and other bonus content
  • DJ culture
  • Secondary markets via E-bay and Discogs
  • Retailing switching from megastores to specialist shops

Infographic: Vinyl Comes Back From Near-Extinction (Source: Statista)

Where Is The Money Coming From?

Latest industry data suggests that digital sales (downloads and streaming) are now on a par with physical sales (CD, vinyl and the rest). Overall revenue has stabilised, having fallen from a peak in 1999. And streaming services are enjoying huge growth.

But the true picture is harder to establish:

First, while the IFPI provides global aggregated data, each local industry body (RIAA, BPI, ARIA etc.) likes to tell a different story from its national perspective. So it’s difficult to compare like with like. (For example, while Taylor Swift is supposed to be a worldwide phenomenon, she does not figure at all in the BPI data for 2014…..) One brave soul has tried to compile data for the past 20 years.

Second, because of the changes in distribution and consumption, music sales have to be counted in different ways:

  • Wholesale revenue vs retail sales
  • Physical sales vs digital sales
  • Per unit download sales vs streaming equivalents
  • Product revenues (e.g., album sales) vs licensing revenues (e.g., soundtracks)
  • Subscription fees (e.g., Spotify) vs per download revenue (e.g., iTunes)
  • Advertising income from video streaming vs royalties from broadcasting and soundtracks

Third, when more and more music is accessed via video platforms like YouTube, Vimeo, and Vevo, streaming platforms like Spotify, Pandora and Omny, or apps such as Bandcamp, Soundcloud, Mixcloud and Shazam, “sales” data starts to become less and less relevant. (And some people are still hanging on to the ailing MySpace platform….).

The bottom line is that despite the growth in streaming services, digital sales (in whatever format or media) are not yet enough to compensate for the continued decline in album sales in particular, and music overall:

The peak era of CD sales is over. (Source: Talking New Media)

Record Store Day Woes

The success of Record Store Day has divided opinion as to whether it is actually a “good thing” for the industry. It started as a campaign by independent record labels, distributors and retailers to revive the habit of buying records in-store. Labels produce limited edition and often highly collectible items for the occasion, and there are rules as to how, when and where these releases can be made available to the public.

At first, it really was driven by the independent labels, many of whom brought out interesting product that otherwise wasn’t available, such as label samplers, unreleased material and one-off artist collaborations.

Now, the major labels have jumped on board, meaning the market is flooded with unnecessary re-releases (do we really need Bruce Springsteen‘s ’70s and ’80s albums reissued on vinyl?) drawn from their extensive back catalogues (no need to pay for recording costs or new artwork!).

This means that smaller labels who release new vinyl records on a regular basis (not just once a year) get bumped from the production line, as the major labels exert their purchasing power over the pressing plants.

In addition, some Record Store Day releases are so badly distributed that stores are unlikely to take delivery of the items in time for the event. Or bad decisions lead to over-supply of certain items, which end up in the bargain bins (major labels again especially guilty of this offence).

Some store owners appear reluctant to participate because they feel embarrassed about the prices they may have to charge for many of the limited releases, which get bought by speculative customers, rather than collectors, fans and enthusiasts – a fact borne out by the immediate listings and inflated prices on E-Bay and Discogs….

As one store owner I talked to commented: “Every day should be record store day…”

What Else Does The Data Reveal?

For all the new young pop stars that the industry keeps churning out, there’s nothing like longevity and back catalogue to prop up the sales numbers. For example, Barbara Streisand was in the Top 10 for US album sales (and with new material!), and the likes of Pink Floyd, Led Zeppelin, Miles Davis, Bob Marley and Oasis feature in the top-selling vinyl records. Will Record Store Day 2025 herald the vinyl release of Justin Bieber’s pre-pubescent “demos”?

The decline of album sales has been particularly steep in the genres of Hip-Hop and R&B, while rock and pop continue to dominate the market. Some industry commentators have suggested that music sales are merely “in transition” as consumers switch from buying CD’s and downloading music to subscribing to streaming services. Meanwhile, in the US, country music’s #4 position by overall consumption reflects substantial album sales, as streaming is still a small component for the genre.

And those vinyl sales numbers? They’re simply a blip on the chart and largely driven by avid fans willing to shell out for deluxe editions….

The future is streaming?

Apple and others certainly believe (or hope) that streaming will save the music industry. Having demolished the market for CDs, iTunes is in a battle for its own survival among competing streaming services, where Apple itself is about to lead the charge having acquired the Beats platform.

But others are not so sure, predicting that streaming is already in decline, along with download sales:

First, the streaming platforms are yet to make a profit. Part of this is due to the cost of content that has to be licensed from the record labels and artists. Part is also due to the cost of acquiring customers, even if this can be done via social media, because the decline in music buying has been so abrupt, so the industry may be permanently damaged that streaming cannot bring back paying customers.

Second, even though streaming may overtake downloads by next year, there’s still nothing certain that teen pop fans (the target audience) will pay $7.99 – $9.99 per month to listen to music via so-called “freemium” services. Evidence suggests that consumers are happy with the free services, even if they have to put up with ads.

Third, while I agree that the freemium model is a fixture in the digital economy, the problem with Spotify et al is that they are not growing the market for music, but simply cannibalising it by displacing existing platforms (commercial radio, digital downloads, physical sales), while being tied to third-party distribution channels (the internet) and devices (smart phones, tablets and computers).

Anyway, subscription-based music streaming is nothing new, and was first launched over 100 years ago (and thanks to Mark Brend’s “The Sound of Tomorrow”, I learned that Mark Twain was the first subscriber).

If the “old” record companies are charging streaming services too much to license their content, then the streaming services should just find other sources – there’s plenty out there – but then, just like the major record labels, they are not really interested in music, only in shifting product and promoting “artists” (even if they are still figuring out how to make digital pay). The record labels don’t help themselves with their reliance on back catalogue, and their archaic territorial licensing practices either – forcing customers to circumvent geo-blocking barriers (legally or otherwise…).

Unfortunately, file sharing, illegal downloads and “free” streaming have meant customers don’t feel compelled to pay for digital music content. Personally, I prefer to curate my own listening, and not let someone else dictate what I hear, even if the service “knows” my preferences…

And the moral of the story is…?

More distribution platforms, more formats and more content may not be enough to save ailing industries, whether it’s music or television, newspapers or movies. These businesses will have to learn to live with lower margins and/or smaller market shares. The quality of a home-made movie uploaded onto YouTube may not be anywhere near that of a Hollywood blockbuster, but if cat videos are what grab punters’ attention (and by default, pull in the advertisers), the studios may have to find alternative strategies. And if music fans prefer to use free streaming services, the industry has to do a better job of producing content that consumers may be willing to pay for.

Ironically, in publishing, one sector that has been written off ever since the arrival of CD-ROM’s and the internet, teen consumers are still happily buying and reading print editions, alongside e-books. More so than other content industries, publishing has rapidly adapted to the new user-defined model: aspiring authors find it easier to self-publish (e.g., via Tablo and dedicated crowdfunding platforms such as Pubslush and Unbound); they can easily connect with an audience (especially in the realm of fan fiction); and a platform like Wattpad allows writers to test material before they commit to formal publication, and lets readers vote for what they’d like to read more of.

Next week: Making connections between founders and investors