Tag Archives: #Content in Context

F for Facsimile: What are ‘Digital Forgeries’?

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Last week, I attended the 2014 Foxcroft Lecture, given by Nicholas Barker, entitled “Forgery of Printed Documents”. The lecture prompted the question, what would we consider to be a ‘digital forgery’?

Make Up

The lecture was an investigation into a practice that emerged in the 18th century, when reproductions (‘fac similes’ – Latin for ‘make alike’) of early printed texts were created either as honest replicas, or to enable missing pages from antiquarian books to be restored to ‘make up’ a complete work. In some cases, the original pages had been removed by the censors, for others the pages had been left out in error during the binding process, and mostly they had simply been lost through damage or age.

Other factors created the need for these facsimiles: the number of copies of a book that could be printed at a time was often limited by law (censorship again at work), or works were licensed to different publishers in different markets, but printed using the original plates to save time and money.

Despite the innocent origins of facsimiles, unscrupulous dealers and collectors found a way to exploit them for financial gain – and of course, there were also attempts to pass off completely bogus works as genuine texts.

Replication vs Authentication

Technology has not only made the mass reproduction of written texts so much easier, it has also changed the way physical documents are authenticated – for example, faxed and scanned copies of signed documents are sometimes deemed sufficient proof of their existence, as evidence of specific facts, or in support of a contractual agreement or commercial arrangement. But this was not always the case, and even today, some legal documents have to be executed in written, hard-copy form, signed in person by the parties and in some situations witnessed by an independent party. For certain transactions, a formal seal needs to be attached to the original document.

Authenticating digital documents and artifacts present us with various challenges. Quite apart from the need to verify electronic copies of contracts and official documents, the ubiquity of e-mail (and social media) means it has been a target for exploitation by hackers and others, making it increasingly difficult to place our trust in these forms of communication. As a result, we use encryption and other security devices to protect our data. But what about other digital content?

Let’s define ‘digital artifacts’ in this context as things like software; music; video; photography; books; databases; or digital certificates, signatures and keys. We know that it is much easier to fabricate something that is not what it purports to be (witness the use of photo-editing in the media and fashion industries), and there is a corresponding set of tools to help uncover these fabrications. Time stamping, digital watermarks, metadata and other devices can help us to verify the authenticity and/or source of a digital asset.

Multiplication

In the case of fine art, the use of digital media (as standalone images or video, as part of an installation, or as a component in mixed media pieces) has meant that some artists have made only a single unique copy of their work, while others have created so-called ‘multiples’ – large-scale editions of their work. (The realm of ‘digital works’ and ‘digital prints’ produced by photographers and artists is worthy of a separate article.)

Making copies of existing digital works is relatively simple – the technology to reproduce and distribute digital artifacts on a widespread scale is built into practically every device linked to the Internet. Not all digital reproduction and file sharing is theft or piracy – in fact, through the wonders of social media ‘sharing’, we are actually encouraged to disseminate this content to our friends and followers.

The song doesn’t remain the same

Apart from the computer industry’s use of product keys to manage and restrict the distribution of unlicensed copies of their software, the music and film industries have probably done the most to tackle illegal copying since the introduction of the CD/DVD. At various times, the entertainment industries have deployed the following technologies:

  • copy-protection (to prevent copies being ripped and burned on computers)
  • encryption (discs and media files are ‘locked’ to a specific device or user account)
  • playback limits (mp3 files will become unplayable after a specific number of plays)
  • time expiry (content will be inaccessible beyond a specific date)

Most of these technologies have been abandoned because they either hamper our use and enjoyment of the content, or they have been easy to over-ride.

One technical issue to consider is ‘digital decay’ (*) – mostly, this relates to backing up and preserving digital archives, since we know that hard drives die, file formats become obsolete and software upgrades don’t always retrofit to existing data. But I wonder whether each subsequent copy of a digital artifact introduces unintentional flaws, which over time will generate copies that may render nothing like the original?

In the days of analogue audio tape, second, third and fourth generation copies were self-evident – namely, the audible tape hiss, wow and flutter caused by copying copies, by using machines with different motor speeds, and by minor fluctuations in power. Today, different file formats and things like compression and conversion can render very different versions of the ‘same’ digital content – for example, most mp3 files are highly compressed (for playback on certain devices) while audiophiles prefer FLAC. Although this is partly a question of taste, how do we know what the original should sound like? With a bit of effort, we can re-process an ‘original’ downloaded mp3 into our own unique ‘copy’ which may sound very different to the version put out by the record company (who probably mastered the commercially released mp3 from studio recordings created using high-quality audio processing and much faster data sampling rates).

So, would the re-processed version be a forgery?

(*) Thanks to Richard Almond for his article on Digital Decay which I found very useful.

 

 

 

 

 

 

 

Amazon, Apple, Google: Are they the New Conglomerates?

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Are Amazon, Apple and Google the new conglomerates? If so, should we be concerned that these leading digital businesses increasingly resemble ‘old school’ industrial behemoths?

The classic model of a conglomerate generally describes a holding company that either owns or has controlling stakes in a diversified range of operating businesses, often in unrelated industries.

Conglomerates largely went out of fashion in America and Europe in the 1980’s and 1990’s (following an era of acquisitions and asset-stripping in the 1960’s and 1970’s), resulting in leveraged buy-outs, spin-offs and partial IPOs, etc. as owners and investors  realised that the total value of the individual parts was greater than the amalgamated whole. Although some major cross-sectoral mergers and acquisitions did occur after this period (e.g., AOL and Time Warner, Vivendi and Universal) most M&A activity was confined to single industry players, in pursuit of market share, economies of scale and other business synergies.

Despite this trend, various types of conglomerates (grounded in the ‘traditional’ industrial model) still exist – including the Chaebol of South Korea, Japan’s Keiretsu, China’s mega-SOEs, the trading houses of Hong Kong, and the FMCG “House of Brands” that fill our supermarket shelves. The UK-based Virgin Group and India’s Tata Group  represent contemporary examples of ‘old’ conglomerates as they operate across very separate and distinct businesses and industries.

Conglomerates are usually created by a need for vertical/horizontal integration or a basic desire to build diversified revenue streams. Some build on a core competence, then find an opportunity in a seemingly unrelated field – thus a company like General Electric, with deep expertise in power generation, storage and transmission, diversified into financial services as a way to help customers fund the purchase of its products.

Sometimes, conglomerates evolve as a result of financial necessity – Canada’s Thomson Corporation (now Thomson Reuters) once owned interests in North Sea oil and gas alongside its newspapers and media companies, but then divested most of these assets to focus on its publishing businesses across legal, scientific, financial, tax and accounting information.

For a long time, it also owned a vertically integrated travel business in the UK, comprising a charter airline, a package holiday company and a chain of high street travel agents.

As it was explained to me when I first worked for Thomson in the late 1980s, the rationale for this diversification was simply a question of cashflow: most of the information businesses were subscription-based, with revenues usually collected in the 4th quarter. Although summer package holidays generated a far lower margin than the information businesses, customers paid up front – normally in the 1st quarter, and up to 6 months in advance, creating more consistent cash flows across the business.

At times, conglomerates may need to diversify into new geographic or sectoral markets to avoid anti-trust measures if they come to dominate a particular territory or industry. However, as we have seen in recent years (Microsoft, EMI, Thomson Reuters) anti-trust measures have been used to force divestment or corporate restructures, across jurisdictions and markets.

Whether they have done so by design or by default, the case can be made that Amazon, Apple and Google have become the new conglomerates. Let’s take each in turn:

Amazon – began as an on-line retailer of hard-copy books, and has since moved into sales and distribution of digital content (books, films, music, games, software); a trading and sourcing platform for a wide range of consumer products; an electronics manufacturer (Kindle); cloud computing and data hosting services; and its own branded credit cards.

Apple – originally a manufacturer of personal computers and proprietary operating systems, now a vertically integrated digital content distribution business; a bricks and mortar retailer; a smart phone manufacturer; a key platform for the capture, creation and playback of audio-visual content (with a growing presence in broadcast television); a provider of cloud services; and now exploring opportunities in the automotive sector.

Google – what was once a late-entrant to on-line search has probably become the closest of these three internet giants to being a ‘true’ industrial conglomerate. In addition to its e-mail and social network offerings, Google has developed its own mobile device operating system (Android) and web browser (Chrome), plus smart phones (Nexus) and laptops (Chromebook). It rivals both Apple (most notably in mobile phones and apps distribution) and Amazon (principally for ebook distribution), and is making inroads into Microsoft’s dominance of productivity software. Plus, with Google Cars, Google Goggles (not forgetting Google Maps, Google AdWords, the Google Books Library Project and the 2006 acquisition of YouTube), Google is clearly on a path to being a diversified technology-based business, with integrated businesses across digital content, entertainment, transportation, navigation, archiving, streaming….

Meanwhile, all three have been investing in robotics; and surely telecoms (network carriers), biometrics, renewable energy, education, health, banking and financial services can’t be that far behind.

The risks for these neo-conglomerates are that they will either lose focus, over-reach themselves, or destroy the core businesses that lie at the heart of their success. Worse, they could fall foul of anti-trust provisions if they continue to become vertically and horizontally integrated – a threat equalled only by international moves to call tech-based multinationals to account for their cross-border tax planning.

As with all empires, the fortunes of conglomerates tend to wax and wane, and while the three companies discussed here have remained close to their core businesses, it will be interesting to see how each of them ensures that they continue to add value while not stretching the boundaries of their capabilities.

Pricing for the Digital Age

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Understanding the 4 Ps of marketing (Product, Price, Place, Promotion) has traditionally been critical to commercial success.

Theory has it that if you produce the right product for your target market, at the right price, make it available in the right place, and give it the right promotion, the market will buy it.

The model has worked well for both goods and services. But how is the model holding up in the digital arena?

In the Digital Age, a combination of technology, different transaction models and new marketing tools means that the Product (content), Place (internet) and Promotion (social media) not only co-exist, they are so inter-twined that in some cases they are almost one and the same thing: for example, a Justin Bieber video clip on Vevo, an in-app purchase for Angry Birds, BBC news headlines on Twitter. The boundaries are blurred between the content, the means of production, and the point of distribution and promotion.

So, how do content providers approach Pricing? If that’s the main point of differentiation, how do they compete on price (even though we sort of know that competing on price alone is often a race to the bottom, where nobody wins)?

In fact, even though the price of digital content sold via services like iTunes and Google Play is set by the content owner, they generally have to price according to set price bands and at specific price points determined by the retail platform – and often for particular territories (thanks to the practice of geo-blocking). The alternatives are to sell direct (which means creating a separate sales and distribution infrastructure) or via 3rd party platforms (which may not have the market presence of iTunes or Google Play).

With so much content available for “free” (as long as customers are willing to submit certain personal information, or are prepared to tolerate advertising) the current wisdom suggests that you have to give (some) content away in order to attract customers who might be willing to pay for it (over time). But is that a long-term strategy for success?

In my experience, pricing in the Digital Age is all about the 4 As:

  • Actual Costs – what are the costs of design, development, production and distribution (plus overheads)?
  • Acquisition Costs – what does it take to get new customers (and not just “followers” and “likes”)?
  • Adhesion Costs – what makes content “sticky” (and what will it take to keep your customers once they start paying)? Is it frequent new content? Is it service quality? Is it establishing brand loyalty?
  • Alternative Costs – what choices do your customers have (both traditional and non-traditional competition)? What are the switching costs?

Finally, when competing on price, especially if it’s not a like-for-like comparison, where are the acceptable customer trade-offs between your product and a competing service (e.g., do you know the customer drivers and the purchase decision processes)? What do your customers think they are paying for? Just because you place a high degree of value on some aspect of your content (e.g., exclusivity) does the customer value it the same way?

 

 

Integrity and the Acid Test: How Would it Look as Front Page News?

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We have been hearing a great deal recently about allegations of political corruption in Australia, culminating in the resignation of a State Premier. This has raised questions about integrity in public office, given the steady stream of stories concerning dubious donations to election campaigns, murky business deals involving politicians and party power-brokers, misuse of trade union members’ assets by officials who were also prominent party figures, opaque political lobbying by industry, tawdry backroom deals to preference election candidates… oh, and the gift of a $3,000 bottle of wine.

Premier Cru-elled de Chateau ICAC?

I won’t dwell on the whys and wherefores of Mr O’Farrell’s resignation, except to say this: If the Premier genuinely believed he did not receive the bottle of wine in question, and his assertion was subsequently shown to be wrong, does this amount to giving false witness? Surely, the act of giving false evidence involves the commission of a deliberate lie, either with the intention of causing a deception or creating an erroneous version of events. It seems that had Mr O’Farrell, as a Member of the New South Wales Parliament, remembered to declare the gift on his register of pecuniary interests, but later forgot about it or failed to recall it when giving evidence, he might have been made to look merely foolish. However, failing to register the gift was either a costly mistake or a grave error of judgement, and by forgetting it altogether (including his handwritten letter of thanks) it reveals a certain level of incompetence. Yet, how many foolish and incompetent politicians manage to keep their jobs, and even get re-elected?

Some commentators have suggested that the nature of the Premier’s resignation showed real integrity – but the truth is, once the facts contradicted his evidence, his position became untenable, and he realised he had no choice in the matter. (The relevant inquiry had in fact already cleared Mr O’Farrell of any suggestion of wrongdoing in the matter under investigation, but now his reputation is probably tarnished by the implication or perception of corrupt behaviour.)

The big lesson from these latest events is that when we get wrapped up in process or get sidetracked by personal, political or financial outcomes, we can easily lose sight of the need to act with integrity and to exercise our authority and powers of influence with transparency. Otherwise, we end up colluding which allows the smell of corruption to permeate. Politics is not alone in these matters – religious institutions, professional sport and corporate boardrooms have more than contributed to the current malaise.

I experienced a small but significant test of personal integrity early on in my career, when I was working as a paralegal in local government. Part of my role was to provide impartial legal advice to local residents facing housing problems. At the time, the area was undergoing intensive gentrification, and many private tenants were being “persuaded” to move out by landlords and property developers. In many cases, all I could do was advise parties of their respective rights, particularly the tenants who had protection from harassment and unlawful eviction under the relevant housing laws. In some cases, the council could mount criminal prosecutions for more serious offences, but this was rare.

So, one day, one of my “clients” (the advice service was free to the public) brought me a personal gift: a bottle of vodka and a bottle of champagne (probably no more than $50 in total value). I initially refused because I did not feel it was necessary or appropriate that he reward me in this way for simply doing my job. However, because my legal advice had enabled him to negotiate a lucrative payout from his landlord to vacate his home, and because he had been brought up to value displays of gratitude, he insisted I keep the gift and refused to take it back.

I could have just taken the bottles and not said anything to anyone, as there were no witnesses. But whether it was my conscience, or the thought that the client might have said something to a third party that may have compromised me, I immediately raised the matter with my manager. He acknowledged my honesty in reporting it (even though I wasn’t really sure what the council policy was on gifts), but said I could keep the present as it was of nominal value, and because I hadn’t sought or solicited a personal benefit. (He also said that if it was a bottle of gin, he might have taken it for himself… but I think he was joking?)

Nowadays, I’m not so sure that I would have got the same response, and over the years, having worked in some high-profile and highly regulated industries, I am aware that there is far more scrutiny around formal compliance, self-regulation, voluntary codes of conduct and business ethics. Of course, individuals need to feel comfortable about the organization they work for and the role they are expected to perform, to ensure there is alignment with their personal values. In addition, I’m often reminded of three questions you should ask yourself in corporate life whenever you have any doubts about the integrity of your actions:

  • Would you still do it if the CEO or Chairman was watching?
  • What might your clients or your shareholders think?
  • How would it look if it made front page news in the morning?

I think the problem for many modern politicians is that they hardly ever say exactly what they are thinking, for fear of letting slip a personal opinion that may differ from their public persona or their party’s stated policy position. (How often nowadays do Ministers resign on a point of personal principle?) Worse, it has been suggested that “loyalty to party” has been displaced by “loyalty to faction”. As a consequence, they are compromised because they forget about individual accountability; and they collude because they either prefer to toe the party line or hide behind the collective shield of cabinet, ministry or faction. In doing so they demonstrate a lack of personal integrity. Unfortunately, when even “benign” or “innocent” collusion emerges, corruption is never very far away.

 

POSTSCRIPT:

Since drafting this blog, I have heard several “wise after the event” comments from the chattering classes, which can be summarised as follows:

  • If the original enquiry was not interested in a bottle of wine, was the Premier “mere” collateral damage of the anti-corruption investigation?
  • How could he possibly have forgotten about such a significant gift, and his written note of thanks? What was going on? What was he thinking? What were his staff doing?
  • The 1959 Grange vintage is somewhat overrated (and well past its best drinking) – which might suggest it was worth less than $3,000 (NB: gifts under $500 do not need to be declared on the Parliamentary register of MPs’ pecuniary interests…)
  • On the other hand, bottles of 1959 Grange are being advertised at over $4,000 because the notoriety has boosted its value
  • It again raises questions about whether the electorate can trust any of our politicians – the backdrop being “lies” and “broken promises” over pre-election commitments