Christopher Herot's Weblog

P2P and the Efficiency of the Music Business

Seth Belzley has an article in the most recent Virginia Journal of Law & Technology on
Grokster and Efficiency in Music.  You may recall Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. as the US Supreme Court decision that held the Grokster second generation peer-to-peer file sharing  system responsible for copyright infringement by virtue of the way the service was marketed.  Notably the court did not outlaw P2P file sharing per se, which is a balance Belzley says is exactly right.

Belzley illuminates the difference between wealth and welfare.  They are both measures of public good, but wealth is necessarily measured in dollars while welfare encompasses more intangible qualities.  In Belzley's analysis, P2P technology may reduce the revenues to the record companies (wealth) but may actually makw music more widely available (welfare).  He makes a compelling case for how the reduction in the former may not necessarily reduce the total production of music, since most musicians never see any royalties anyway.

Video Snacking

"If anybody says they've figured this out right now, they haven't."
-Christina Norman, President, MTV Music Television

The New York Times Magazine ran a story today, The Shorter, Faster, Cruder, Tinier TV Show, about the possibilities and challenges of video for the "third screen" - P.D.A.'s, iPods, game players and, most importantly, cellphones, using Sway Calloway's made-for-cell series Sway's Hip-Hop Owner's Manual as a case study.  "Filming to the phone" requires tight shots and avoidance of camera motion in order to produce videos that are compelling and clear.  Even the process of holding a meeting to review the material can be a challenge, as in  "Do we all stand behind each other or what?"

Marketing may be less of a problem, since the well-known techniques of getting the attention of 18-24 year-old males still work:

when the network began uploading cellphone clips of the new insult-takedown show "Yo Momma," and gave them titles like "Friday's 'Yo Momma' Sneak Peak," the snippets did O.K., but not great. Then they changed the titles to ones like "Yo Momma Is So Nasty" and "Yo Momma Is So Poor." The clips were consistently among the most-viewed of MTV's mobile shows.

Some memorable additons to the lexicon:

mobisode - short episode of a TV show especially crafted for mobile devices
video snacking - with the implication of brevity and empty calories

Some sites for short-form, consumer-produced videos:

SeeMeTV - British site for 12 second clips.  From 3, a 3G mobile system of Hutchison Whampoa Limited.
Heavy.com
YouTube
Google Video
StupidMedia.net
Weak Game
Mojo Flix
iFilm

IPTV vs. Internet Television

The recent Streaming Media East in New York brought into focus the difference between two seemingly similar terms, IPTV and Internet Television.  Both refer to the use of Internet Protocol and associated technologies to deliver video to consumers.  Both imply that the sound and images are in digital form on their way from the camera to the screen.  But while the technologies are similar if not identical, the business models and thus the user experiences are very different.

IPTV, as the term was used at the recent NAB Conference, is an upgrade to the cable TV business.  It preserves the existing model of content producers, channels that aggregate content (e.g. HBO), cable headends, wiring, and set-top boxes.  The difference is that computer technology is used in the distribution process down to, and including, the set-top box, allowing a number of new services to be provided, such as video on demand and personal video recorders.  While the content could theoretically be viewed on a variety of devices, most IPTV schemes include a set of tightly controlled, overlapping digital rights management (DRM) systems, to ensure that the content is only used in an approved manner.  These systems go as far as encrypting the links among devices so, for example, only an approved screen can be connected to an approved tuner.  This has the practical effect of limiting IPTV to two comparatively closed environments: home TV sets and mobile phones.

In contrast, Internet Television, as described by Jeremy Allaire in his keynote, is the distribution of video on the public Internet.  While some of the content comes from the same sources that supply conventional TV, such as Comedy Central, there is also a long tail of more niche-oriented content, such as Shipwreck Central and the type of stuff found on YouTube.

The business models resemble cable TV in that there are producers, distributors, and consumers, but the hardware, software, and payment options are far more varied and, some would say, unproven.  To the extent that money changes hands, it is mostly for advertising, although various types of subscription and pay-per-view are also possible, and much of the material is offered as a means of promoting content in other venues.  For example, when Beth Lewand of Comedy Central was asked how they felt about clips of their material showing up on YouTube she replied that their feelings were "very mixed."  While they do want to protect their revenue opportunities they also see the promotional value of having their material widely distributed, especially if it can be branded in such a manner as to draw people back to their site and to the cable shows.

The synergy among different formats is becoming more important in a world where digital video recorders such as TiVo are widespread and the consumers have more choice about what to watch.  According to one panelist, at this year's Upfronts where the TV networks present the fall line-up to the ad agencies, the agencies were not interested in a show unless it also came with an interactive Web experience.  In an age where viewers can fast-forward through commercials, and where the young demographic most attractive to advertisers are all digital natives, the PC screen may be the place where advertising may be more effective.

Which brings us back to the issue of DRM.  While both IPTV and Internet Television provide for ways to control how content is stored and used, the IPTV world is obsessed with the idea of total control over every aspect of distribution, storage, and viewing, creating a closed universe of trusted devices, where none of the content can leak out in to the dangerous world of the PC where users can not be trusted to lean back passively on their couches but instead are likely to rip/mix/burn and otherwise personalize the content for their own use.  From what I saw at the conference, the people who produce the content seem to understand that accomodating their viewers and allowing more flexibility will be good for their business and perhaps essential for their survival.  On the other hand, the cable and telephone companies, who were conspicuous in their absence, may find that their rigid, proprietary systems may not deliver them the returns they expect.  To the extent that they can't lock customers in with DRM, they will fight back by witholding bandwidth, but that's a topic for another post as the network neutrality debate heats up.

Sorellina

Sorellina recently opened in the space formerly occupied by Salamander.   Chef Jamie Mammano, who started the nearby Mistral and the almost as nearby Teatro has opened this contemporary Italian-Mediterranean.  The space is dramatic, the clientele affluent and attractive, and the food is pretty good as well.

For appetizers, we had the Yellowtail Crudo with crushed cherry peppers, citrus and sea salt ($16), Macheroncelli - "Kobe" beef meatballs, barolo sauce and pecorino loscano ($14), Arancini - crab cakes ($16), Tortellono with parsnip, ricotta, peas, morels, and asparagus ($12), and Escargot with tomatoes and capers (not on the menu).  All the appetizers were delicious, if expensive.  The Crudo was the best.

For the main course almost everyone had the Veal Milanese ($38) which was a veal chop pounded flat and sauteed with lemon and an endive salad, but we should have had the Scallops ($33) with celery root and truffled celery salad.

With dessert and and some modestly prices ($45) bottles of wine, the damage, including tip and tax, came to $100 per person.

A word about the decor and seating:  The space is dominated by a large, backlit, monochrome mural.  It creates a dramatic impression, but you don't want to sit to close to it.  You have been warned.

Sorellina
1 Huntington Avenue
Boston, MA
617-412-4600
www.sorellinaboston.com
Reservations Accepted - Make several weeks in advance for Saturday dinner
100 seats
Valet parking

Palm Treo 650 Keypad Warranty Repair - not!

I purchased a Palm Treo 650 last June shortly after seeing it at D.  In many ways it's the ideal device - large enough to hold all my phone numbers, appointments, and random notes, and still small enough to fit in my pocket.  It's Quad-band so it works everywhere there is GSM and since I purchased it in unlocked form directly form Palm so I can put a local SIM card in it when traveling and thus avoid exorbitant international roaming charges.  It even has a camera, although like all such camera-phones it's really just for emergency use - such as if you are out walking the dog and need to take a picture of some extraordinary event such as space aliens landing in your neighborhood.

The phone does occasionally freeze up and require rebooting it, although not nearly as often as a PC running Windows.

A few weeks ago, I noticed that the keypad was becoming a little funky.  Specifically, the "F" key sometimes required a few presses before a character was produced.  This key also doubles as the center "5" key when dialing the phone, which is probably why it wore out first but is also why its failure is especially annoying.

Since the warranty expires soon I figured I had better get it repaired now.   Starting at the Palm web site I went through eight screens (entering my model number four seperate times) until I got to the page where it said "Currently, Palm is accepting online service requests for Out-Of-Warranty repairs only."  So I followed the link to yeat another page, where I looked up my model number a fifth time and called the repair number, which in addition to admonishing that I should have gone to the web site, served up just about every standard phrase, including:

• Thank you for calling Palm
• We are experiencing higher than normal call volume
• <without any intervening prompts> Thank you for calling Palm U.S. Customer Support
• Your call may be monitored or recorded for quality improvement purposes
• Please listen carefully before making a selection as our menu of options have changed

By the time I was prompted for my first "selection" a full 55 seconds had passed.   Fortunately in only took a few seconds to get a live human being on the phone, but that's when the real fun began.  After typing all my information into the computer, the cheerful support rep informed me that my one year warranty did not cover problems with the keypad.  Apparently the warranty does not include "physical damage to the surface of the product" and since the keypad is part of the surface it isn't covered.  Since I wasn't getting anywhere with her, I asked to speak with a supervisor, who did come on very quickly.  He patiently read the warranty to me over the phone, although I think he, too, was struggling to twist its language into an excuse not to repair my phone.  The actual language is:

EXCLUSIONS: This warranty excludes (1) physical damage to the surface of the product, including cracks or scratches on the LCD touchscreen or outside casing; (2) damage caused by misuse, neglect, improper installation or testing, unauthorized attempts to open, repair, or modify the product, or any other cause beyond the range of the intended use; (3) damage caused by accident, fire, power changes, other hazards, or acts of God; or (4) use of the product with any non- Palm device or service if such device or service causes the problem.

When the line of reasoning about the keypad being part of the "surface" didn't work he said that because his own Treo 650 continued to work, mine must have malfunctioned because of misuse or neglect.  After some more discussion, he admitted that once the problem was described as a keypad defect his computer system automatically categorized it as an out of warranty repair, which would cost $169.00.  He did offer to discount that by 50% or I could call "corporate" where presumably they had more discretion.

More on that later...

Continuous Partial Attention

First there was multitasking, but now there is continuous partial attention, according to Linda Stone who coined the term and who spoke about it last week at GEL.   Multitasking, e.g. eating lunch while driving a car, was motivated by the desire to be more efficient.  Its more nuanced cousin, continuous partial attention, emerged in 1985 and is about not wanting to miss anything, to be "a live node on the network."  The most common example is reading one's email (whether via a laptop or Blackberry) while otherwise attending a meeting, a practice she said at least one high profile technology CEO had banned at his staff meetings.  (I checked later and it was a different one than I had worked for, so the ban may be spreading.)

Continuous Partial Attention is sometimes a good thing, as it allows us to continuously exchange information, some of which may be useful in our face-to-face activity, but Linda warns we may be taking it to excess, leaving us in a constant state of stress and not giving us the time we need to reflect.  Fortunately, people continue to adapt and are learning to be more selective about how we allocate our attention so we can focus on what's important.

In summary:

        1                                         2                                                   3
Multitasking                     Continuous Partial Attention     Focus on What Matters
Information Worker          Knowledge Worker                   Wisdom Worker
Functionality & Features    Ease of Use                            Quality of Life 

Revised 20 May 2006 after Linda sent along some additional clarifying points.

The Seven Kinds of Broken

Set Godin gave one of the best talks at GEL 2006 last week, describing the seven ways organizations can create less than optimal user experiences:

• Not my job
• Selfish jerk
• The world changed
• I didn’t know
• I'm not a fish
• Contradictions
• Broken on purpose

He cited some examples, many from Mark Hurst's This is Broken web site.

Not my Job

• Why is it that although movie theaters make most of their profit on the concession stand, they allow the lines to get so long.

• The warning label on a prescription for his dog that warned against using it with alcohol or operating heavy machinery.

Selfish Jerk

• "Organic" cigarettes.

The World Changed

• Lots of businesses selling "Vote for Pedro" t-shirts, but none of them look like the original in Napoleon Dynamite.
• A sign in the subway reading "Touching wire causes instant death - $200 fine"

Josiah Wedgwood

Everyone has heard of Wedgwood china, but most people know very little about Josiah Wedgwood, who in addition to founding the firm that bore his name, was the grandfather of Charles Darwin and was ranked by Forbes as the 19th most influential businessman of all time.  Phil Terry explained why in a seminar last week at GEL 2006.  Back in middle of the 18th century, Wedgewood conducted what may have been the first recorded practice of ethnographic market reearch.  He visited the homes of the gentry and observed how they ate and how they cared for their dishes.  As a result he changed the way he manufactured his pottery, switching from hand-turned to molded production and pioneering such marketing techniques as the use of celebrity endorsements (Queen Charlotte), aspirational marketing (selling the pottery associated with the gentry to the middle class), multi-channel distribution (catalog & showroom), glass-front cabinets in the showroom, and free samples.

The rest, as they say, is history.

IPTV World at NAB 2006

The digitization of everything has not bypassed the entertainment industry.  The recent NAB show, which drew 105,000 attendees to Las Vegas, has relabeled itself “The World’s Largest Electronic Media Show” and claims that “From entertainment to news to business communications, NAB2006 is the only global event that covers the entire spectrum of media.”   In the sessions and on the show floor, digital technology was pervasive.  Computers are built into everything from HDTV cameras to audio mixers, and transmission of audio and video has moved from analog, to proprietary digital and (just emerging now) to IP-based networks.  The latter was the topic of the IPTV World conference within a conference, produced by Michael and Zahava Stroud of the iHollywood Forum.

This full day of sessions was targeted at telcos who want to get into the cable TV business, cable MSOs who are worried about the telcos, content owners who are considering distributing content through this new regime, and everyone else who wants to get on the gold rush.

What started this bandwagon was that when the telephone companies saw the cable companies entering what had been a highly lucrative voice business, they needed to find a new source of revenue, and figured they could amortize the upgrade of their network by using it to deliver voice, Internet, and TV programming.  This calculation has led to significant upgrades in the bandwidth to the home through the rollout of DSL and Fiber-to-the-home projects such as Verizon’s FIOS.  However, while the underlying technology is the same as used in the PC and the Internet, the intended result, IPTV, is a parallel, closed universe with only the most carefully controlled connections to the world of general-purpose computing.

The keynote speaker, Phil Corman, of Microsoft, and many of the subsequent speakers took great pains to point out that IPTV “is not the Internet.”  In Corman’s words, the IPTV is not:

• Best effort
• Video streaming over the Internet
• TV on the PC
• Based on unproven business model

And it is

• Competitive TV services over managed IP networks
• Broadcast TV
• All forms of all-demand connected entertainment services

In other words, IPTV is intended to provide the same experience as cable TV, including the ability to channel surf and do time-shifting with PVRs.  Great care will be taken to make sure “the rights of the content owners are protected,” i.e. multi-layered digital rights management (DRM) and conditional access systems will allow each piece of content to be tagged so that as it passes through the system it can only be used in a manner consistent with the rights that have been purchased and none of it can leak out into the wild and wooly world of the Internet.  In this way the telcos hope to persuade the studios  to part with their precious content while helping them avoid the fate of the record industry, whose woes they blame on Napster and its successors.  They also hope to finesse the Innovator’s Dilemma and ensure that the only business model that is disrupted is that of the cable companies whom they hope to displace in an otherwise unaltered value chain.

The main problem with this tidy scenario is that ossifying the existing business practices of the entertainment industry, and ensuring that only officially blessed uses can be made of licensed content may choke off the very innovation that would otherwise create the revenue streams of tomorrow.  At one point, the entertainment industry feared TV, Cable, FM radio, CDs, DVDs, and the VCR, yet these went on to become the major sources of revenue.  The same thing could happen with the Internet, although this time the major technology players are conspiring with the content owners to enforce a rigid scheme to allow only officially blessed applications, and they have successfully lobbied the Congress to give some of these schemes the force of law.

To see how these restrictions are affecting the market, take a look at the efforts to achieve interoperability among the various DRM schemes.  Just as in the portable music player business Apple and Microsoft have been pushing incompatible schemes for devices and music stores, there are multiple schemes for IPTV, except that this time there are more parties and more layers of technology.  At this point some of the overlapping regimes are:

• Digital Living Network Alliance (DLNA)
• Coral Consortium
• Digital Transmission Content Protection (DTCP) 
• High-bandwidth Digital Content Protection (HDCP) 
• Content Protection for Recordable Media (CPRM)
• Microsoft MSTV DRM
• Apple Fairplay
• RealNetworks Nelix DRM

The central notion of all of these schemes is that the content provider can restrict what the consumer does with the content that was purchased, even if that content passes through multiple devices.  For example, a movie could be restricted such that the set-top-box would send the output to a display for viewing but would not be sent it to a device for recording, or it could be recorded on a PVR but not output to removable media such as DVD.  To enforce this scheme, every device must be a trusted part of the scheme, and all the links among the devices must be encrypted.  Needless to say, while we are awaiting the fulfillment of this dream of cooperation, consumers are going to experience a lot of frustration when they find out that content they purchased does not work on all the devices in their home.  There are some signs that the industry is concerned about this possibility, must mostly they are coming from the device manufacturers who will deal with disappointed purchasers and not from the content owners who still seem more concerned that nothing happens to disrupt their existing business models.

The ability to offer a coherent solution across a wide variety of devices has created an opportunity for Microsoft to sign up telcos such as AT&T.  It remains to be seen whether the various committees will come up with a scheme that allows all the parties to play nicely together and whether Microsoft and Apple will cooperate with them.  In the meantime the consumer may face a bewildering collection of incompatible devices and services, and it will be all that much more difficult for a new company to join the club.   One wonders if a Google ever could have gotten started in an environment like this, which may be the point.

One bright spot is that there seems to be a recognition in some quarters that the consumers themselves could be a fertile source of content.  While most of the attendees had not heard of the long tail, some of the telcos have started to appreciate the idea of content that they don’t need to pay for.  Given that, according to a recent Pew study, the majority of today’s teenagers are content creators, those who want to make money at IPTV may need to allow them the freedom to create or they will find that no one is watching.