Virtual Goods, Scams, Investigative Reporting And The Media

from the all-in-one-package dept

For many years, we've been quite skeptical of any business model in virtual worlds/social networks that rely on "buying virtual goods." That's because these are all based on artificial scarcities, and as we all know (hopefully, by now), relying on artificial scarcities for a business model is incredibly risky, especially once people realize the scarcities are artificial. And yet, over the past few years, a number of businesses have been built on this very premise. In fact, Silicon Valley is crawling these days with businesses built on selling virtual goods, and if you talk to many VCs about it, you'll quickly note that they're positively giddy over the fact that people are paying for this stuff. What they don't seem to realize is that it's unlikely to last.

In the last couple weeks, Mike Arrington, over at TechCrunch, did an amazing job calling attention to the widely known, but rarely discussed in polite company, dark underbelly to most of those business models: quite a large part of their revenue is based on scammy offers that effectively trick unsophisticated purchasers (often kids) into signing up for expensive subscriptions to things they don't want. I was at an investor "roundtable" a couple months ago, which was mostly bankers in suits, and they were laughing about just how gullible people are on these things, and it's great to see TechCrunch exposing them, and pushing the worst abusers to clean up their act. Of course, even when some, like Zynga, claim to be cleaning up their act, Arrington was able to dig up a video where Zynga's CEO proudly talked about the scammy tactics he used -- and then noted that these same scammy tactics showed right back up on Zynga, after the company promised they were gone. Those who use these kinds of tactics may find that while they "bring revenue now," it may be short-lived. Companies that focus on such abusive tactics live to regret it (just ask RealNetworks).

But, the really amazing thing, as pointed out by Dan Lyons/Fake Steve Jobs, in an amazingly un-Fake-Steve-Jobs-like rant, is to compare the series of writeups by Arrington with the love letter to Zynga and other "virtual goods" companies in the NY Times, which came out after most of Arrington's posts, and makes no mention of them at all. As Lyons/FSJ notes:

So: they walked into this shit-storm and somehow, by some miracle, managed not to notice the fecal matter flying all around them. It's like covering a football game that took place in the middle of the blizzard and neglecting to mention the weather.

Now, maybe they did all the reporting before Arrington's stuff broke. In which case they should have gone back and updated their info. Or maybe, just maybe, Zynga's PR people teed up a Times story as a kind of rebuttal to what Arrington was reporting. Either way, that's what ended up happening: Zynga used the Times to deflect the bad shit flying at them from Arrington. They need good press because they're hoping to cash out by going public next year. That story in the Times will be worth millions. Many millions.

Meanwhile, Arrington, still digging, blasted again on Saturday night, reporting that sleazy ads had popped up again on Zynga, despite promises that they would be taken down.

Um, New York Times? If you guys are still wondering why people are dropping their subscriptions and getting their news from blogs instead of you -- this is why.

After which, Lyons/FSJ notes:

And to all those people who go around wringing their hands and saying what are we going to do when the "real newspapers" all die and we have to get our news from Gawker and HuffPo and TechCrunch? Friends, I think we're going to be just fine.... What really cracks me up is how often I still hear people say that bloggers are mere "aggregators" and the "real journalism" gets done at places like the Times. Because time after time, blogs are simply beating the shit out of the newspapers. They're the ones who still dare to go for the throat, while their counterparts at big newspapers just keep reaching for the shrimp cocktail.

Of course, there's just a bit of irony in noting that Dan Lyons wrote one of the quintessential blog bashing articles four years ago, when he was writing for Forbes, at one point suggesting that blogger "journalists" were no different than notorious (NY Times) maker-up-of-stories, Jayson Blair. Nice to see he's coming around to recognizing things perhaps aren't so bad in the blog world.

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Australian ABC Promises To Stay Free; Mocks Murdoch And Paywalls As 'Old Empire' Thinking

from the take-that,-rupert dept

One of the key points we've raised in the past about the futility of newspapers putting up paywalls is that doing so would only open up a huge opportunity for other, smarter journalism organizations to take their market share by remaining free. And, indeed, more and more organizations are starting to point out that's exactly what they would do. Reader Jamie writes in to let us know about a speech by the managing director of ABC in Australia (not the Disney owned ABC in America), Mark Scott, taking on the "old media" thinking around such things as paywalls:

Scott's most virulent words were saved for News Corporation (owner of The Australian) chairman Rupert Murdoch and CEO Europe and Asia, James Murdoch.

He called Rupert Murdoch's recent call for content providers to charge online distributors for content as "a classic play of old empire, of empire in decline. Believing that because you once controlled the world you can continue to do so."

"When you have been so powerful and dominant for so long, it is hard to believe that empire is slipping away," he said.

Scott argued traditional media companies had been out-thought by technology companies in strategy.

And... oh yeah, if Murdoch goes paywall, Scott promises to do the opposite:

He reiterated the ABC would continue to provide free online news content and said the ABC must remain audience-focused

Not just that, but he seems to be recognizing that the way people interact with news has changed, and they want to be much more involved:

... he noted the only media organisations to survive will be those that: know and accept that all the rules have changed; are endlessly inquisitive about the new; empower their audiences to contribute, to create and share media....

Nice to see some news business execs who seem to recognize what's happening.

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Yet Another Study Shows File Sharers Buy More Media

from the but-they-just-want-stuff-for-free? dept

We've seen a bunch of studies like this in the past, but people keep submitting this, so figured we'd do a quick post on it. Yet another study has shown that people who are more active in unauthorized file sharing, also tend to spend more on authorized entertainment purchases. Now, to be fair, the study was paid for by a file sharing provider -- so, take it with a rather large grain of salt. But similar studies have been done in the past as well, and it seems to once again call into question the rallying cry in Hollywood that people just want stuff for free.

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James Boyle On: Strategies For The Digital Age: Beyond Mocking the Clueless

from the fun-though-it-is dept

With our CwF + RtB experiment in full swing, we've asked some of the participants involved to provide some guest posts. The post here is from James Boyle, whose book, The Public Domain is a part of our Techdirt Book Club (signed by Boyle). If you order both the Techdirt Book Club and the Techdirt Music Club before midnight PT, August 3rd, we'll throw in a free Techdirt hoodie, or a free lunch with Mike. We asked Boyle to give his thoughts on new media business models from his perspective, and he came back with this incredibly thought-provoking post that ought to create quite a bit of conversation:

The Associated Press recently released the details of their plan to develop a new metadata/Digital Rights Management format for news stories. (It wasn't described as DRM, but I agree with Techdirt that it certainly sounds that way.) Particularly ominous was this phrase "The system will register key identifying information about each piece of content that AP distributes as well as the terms of use of that content, and employ a built-in beacon to notify AP about how the content is used." (My italics) Even those without a strong dose of civil libertarian paranoia might bridle at the thought of having their practices of reading and sharing newspaper articles tracked by a central repository (other than Google, that is.) "He sure is reading a lot of articles about gay rights!" Pamela Samuelson calls DRM'd articles "texts that rat on you." Somehow it doesn't sound like a good slogan for a sales campaign. (AP says it has no interest in tracking on the individual user level.)

The response of the tech-savvy was, predictably, pretty savage. Techdirt ("it's difficult to think of anything quite this useless") at least offered some principles on which sustainable web businesses might be built. Others were not as kind. Someone even created an extremely profane and sometimes juvenile, but nevertheless quite funny anonymous graphical translation of the AP's diagram to explain the new plan. The criticisms of the plan (clueless graphics aside) centered around two tenets that are familiar to Techdirt readers.

1. an argument that DRM is a.) doomed to fail technologically and b.) has in fact already failed in social and economic practice. The general line here is that the arc of history bends towards technologies that are copy-friendly and anything that tries to turn that feature into a bug will soon fail if it hasn't already.
2. an assertion that "old media" (other names include "the clueless" "dinosaurs" "non digital natives" "the walking dead" etc.) are demonstrably incapable of understanding the potential upside of the sharing economy, or copy-friendly technologies, still less the business models that can be built on top of them. This tenet is so sweeping that it would be much harder to defend if history didn't give us such fabulous anecdata to back it up. My own favourite quote was about the technology that lowered the cost of copying in a prior technological era, "The VCR is to the movie industry what the Boston strangler is to the woman alone." That was Jack Valenti, the late head of the MPAA. Actually, unless the answer to that puzzle is "What is a savior?" Mr. Valenti would turn out to be wrong. Movie rentals to fill the -- cheap -- VCR's that the movie industry had failed to criminalize, tax or enjoin soon provided more that 50% of the industry's revenue.

Personally, I am at best agnostic about tenet #1. I am not a technological determinist. I think that DRM has failed spectacularly in some areas (root kits on CD's), provoked mild irritation and a pressure towards more open alternatives in others (the move towards selling open MP3's rather than protected streams or DRM'd iTunes tracks) and become standard (even if not loved) in others. Most of you are still being forced to watch the FBI warnings on your DVD's and fuss with region control. Sure you could get around it. But how many people bother to? Life is too short. I do think news is a particularly bad candidate for DRM or even "beacons," but that is a specific judgement not a general one.

On tenet #2, I think we are thinking too narrowly. Behavioral economists have identified specific deviations from economic rationality in human psychology-- we tend to value potential losses asymmetrically from potential gains, to use simple heuristics even when they are shown to be false and so on. In my new book, The Public Domain (freely available online, of course) I argue that we have a measurable cognitive bias against "openness" -- I call it cultural agoraphobia, and I argue that it impedes us in understanding the creative potential, productive processes and forms of social organization that the web makes possible. The source of that bias (by which I mean a demonstrated tendency to ignore certain kinds of possibilities in a way that the data does not support) probably lies in the fact that most of our experiences with property come from physical goods -- sandwiches that 1000 people cannot share, absent divine intervention, fields that might be overgrazed or underused if not subject to single entity control. Even digital natives still spend most of the hours of their day in a world in which goods are both "rival" and "excludable." Reflexes picked up in that world tend to lead us astray when we are dealing with the kind of property that lives on networks. "Like astronauts brought up in gravity, our reflexes are poorly suited for free fall." I would even argue that this cognitive bias, even more than industry capture of regulators, is one reason why our current intellectual property policy is so profoundly and utterly misguided. But its implications are wider still.

So far, this sounds similar to the standard technophilic critique of existing institutions -- albeit with a behavioral psychology chaser. But it isn't. Just because it's a bias doesn't mean it's always wrong. It may be that, even once one discards the bias, there may be no immediately obvious way of carrying important social functions into the world of the Net. I don't care where on the techno-optimist spectrum you are (It ranges from "get their eyeballs and their wallets will surely follow" to "the only alternative you seem to be proposing is Google ads, cover charges and lots of T-shirts.") Unless you believe that markets spontaneously self-correct for everything (hint, check your IRA balance before you answer this question) you have to acknowledge that the problem that the AP is responding to may be our problem (how to pay for the kind of expensive investigative journalism that is a real boon to democracy and liberty) as well as their problem (how not to die in the immediate future.)

Don't get me wrong. The world of the future will clearly have media that in some respects are far better than what we have today, even when measured against the most rigorous standards. I am pretty sure, in the world of 2020, pollution levels in Silicon Valley and school performance in Palo Alto will be covered with a wealth of data, expert systems, and interactive mapping in a way that would have seemed a dream in 1990. That will be true for most areas that have wealth, a wealth of data, and a highly educated citizenry with lots of personal liberty and strong personal and ethical reasons to be focused on a particular subject. It will be much less true for areas where those conditions do not hold true, particularly if you have a powerful in-group with strong reasons to want to keep the eyes of the world away. Twitter and the camera phone can do a lot. But they can provide neither the culture of professional journalism, nor the sustained effort and resources to develop a story over years. And there is an oft unnoticed corollary to the claim that the dinosaurs are clueless. It means they are unlikely to solve the problems themselves. Unless you think that markets and technologies spontaneously self-correct for everything, that leaves the rest of us.

In Robert Putnam's fascinating book Bowling Alone he describes the way in which the threads of civil society and of trust frayed during the 20th century -- and offered a convincing social science case that the implications were profoundly negative for our culture. But the book was not a depressive one. Putnam pointed back to the turn of the 20th century. Then, as now, people noticed their society changing around them -- industrialization, the acceleration of migration to cities, urban isolation. But Putnam points out that this prompted an extraordinary entrepreneurialism in civil society. Groups were founded that today seem quaint to us -- the Kiwanis. the Rotarians and so on -- all aimed specifically and solving this failure of civil society. The message was not, in other words, that these problems would self correct through markets and technology. It was that we would need an entrepreneurialism outside the market -- one that experimented with institutions and communities to solve the problems of the day. For me, a glance at AP's DRM business plan prompts the same thought. Some of the functions that newspapers now perform are going to be located elsewhere in society -- in universities, in foundations, in government, in blogs. Some of that will happen spontaneously -- but a lot of it will not unless we innovate in social organization the same way the citizens of the early 20th century did to meet the problems of urbanization.

I was lucky enough to be involved with Creative Commons from its inception and to help found Science Commons and ccLearn. Those organizations were designed to solve a particular problem for which there was a market and legal gap -- the problem of failed sharing. Jesse Dylan's brilliant video on the subject explains it better than I could. Are there equivalent institutional innovations that could help in the area of news gathering? I don't know. Journalism isn't my field. But without the kind of institutional innovation and experimentation in civil society that Creative Commons (or the Kiwani's) represented, I think that we are unlikely to solve its problems. Web 2.0 business methods alone, even with a Techdirt crystal ball, will not be enough. If I am right, mocking the clueless will be a poor consolation.

James Boyle is William Neal Reynolds Professor of Law at Duke and the author of The Public Domain: Enclosing the Commons of the Mind. He writes a regular column for the Financial Times and tweets sporadically as thepublicdomain.

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Is The NY Times Looking To CwF + RtB?

from the sure-looks-that-way dept

One of my big complaints with all the stories from newspaper people about how they're suddenly going to put up paywalls and charge, was that they never actually talked about adding more value. They seemed to just assume people would pay, when the truth is that they've never really paid for the content. But, of course, if you can really connect with people, and give them a reason to buy, then that's something different. But "the news" alone is not a reason to buy, because it's not scarce. It's quite abundant, and if someone charges, then people will just go elsewhere. But there are plenty of scarcities that you can charge for if you're smart about it -- and it looks like the NY Times may actually be taking a more intelligent approach to its own business model.

Last week, as you hopefully know, we kicked off our latest business model experiment, by launching our CwF + RtB options, based on the formula that we've seen many musicians use successfully: Connect with Fans (CwF) + Reason to Buy (RtB) = Business Model. So it's fascinating to see some of what the NY Times is exploring for its own premium offers. While these are still apparently works in progress, some market research shows that the NYT is considering two separate added value tiers. These aren't about locking up the content, but providing additional (scarce!) value that people may find worth paying for.

For example, in the proposed silver level ($50/year) people would get early access to some stories (a la our Techdirt Crystal Ball), as well as some additional features on the site, a choice of a tote bag, baseball cap or some other products, and early access for tickets to NYT's events. Not bad. The proposed gold level ($150/year) also gives the person access to exclusive events, direct access to some of the reporters/writers/staff at the NY Times (even a newsroom tour) and some other features. This is still preliminary, but it seems like the NY Times is definitely thinking in the right direction. It's not about locking up the content that's already there. It's about providing a real reason to buy something additional that's scarce and valuable. And, certainly, given the NY Times' reputation, it has connected with many, many people. So, now let's see what happens when it gives them real reasons to buy. Who knows what model will eventually be launched or how successful it really is, but it's interesting to see the NY Times apparently stealing our idea (that's a joke, people). In all honesty, it's great to finally see a newspaper looking at adding value, not trying to take it away.

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Media Consultant: Comments Are Bad, Please Shut Up

from the that's-not-strategy,-that's-being-a-curmudgeon dept

As newspapers have struggled to get the online world, most of them did the simplest thing of all, which was toss up some comment forms at the end of their articles. However, they never did anything to actually engage with commenters. Instead, they looked at the comment form as being a community, but never gave any incentives for the folks in the comments to do anything intelligent. They didn't tend to the community or have the authors of the articles respond to comments (in some cases they specifically barred it!). So if you treat your comments as a place where the riffraff is just going to say stupid stuff, don't be surprised when that's what happens.

But, it seems that some are getting the wrong message from this. Douglas Bailey, who apparently is a "media consultant" or a "media strategist" has simply determined that all newspaper comments are dumb and should be done away with. Instead, he suggests you write a letter to the editor or an op-ed.

But his reasoning is backwards (and makes me wonder why anyone would hire him as a consultant). First, he gives a few apocryphal stories to make his point -- which isn't exactly compelling since they could be entirely made up. Second, he assumes that because plenty of comments on newspaper sites are dumb the problem is the commenters or the very act of commenting itself. Apparently, it never occurred to him that perhaps the problem is the way the newspapers set up the comments. Those newspapers didn't do anything to try to build up community or to encourage people to post more insightful comments. The problem isn't that the commenters are dumb and pointless, but that the newspaper failed to put in place incentives to encourage smarter comments. The newspapers failed to actually engage with their community and talk with them rather than to them. Any newspaper that wants to hire a media strategist these days should probably find one who looks for ways to help a newspaper better engage their community, rather than one who tells them to ignore the community.

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FCC Considers Propping Up Old School Journalism, As Copps Blames The Internet And Bloggers

from the say-what-now? dept

Citizen Media Law alerts us to a rather troubling "state of the media journalism" report issued by FCC commissioner Michael Copps. While the report doesn't really mean anything right now, it's seen as an indicator of where the FCC may go in its rule-making process. And if that's the case, it's quite troubling, though the old school newspaper folks screaming for protection may find it comforting. Basically, it focuses on "the decline of traditional print and broadcast outlets" and seems to blame the combination of "the internet and bloggers" with the deregulation of media ownership.

This makes almost no sense, and is, in fact, contradictory. The rise of "the internet and bloggers" has massively increased the diversity of people involved in reporting and distributing the news. The barriers of entry to being a journalist have been lowered to almost nothing at all, and people have flooded the market. Copps views that as a problem, but apparently doesn't note the total contradiction in then immediately lamenting the decrease in diversity of journalists in traditional media jobs:

"We're not only losing journalists, we may be losing journalism," he said. "Some blame the Internet and bloggers, and that's certainly a part of the story. All that consolidation and mindless deregulation, rather than reviving the news business, condemned us to less real news, less serious political coverage, less diversity of opinion, less minority and female ownership, less investigative journalism and fewer jobs for journalists."

What's really troubling is that he seems to think this is a problem that the FCC needs to fix. This certainly seems to go well beyond the FCC's mandate, and it takes an impressive amount of conceptual blindness not to see that the solution is exactly what he described was a part of the problem.

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Teenager Talks About What His Friends Do Online; Media Flips Out

from the someone-please-explain dept

The media seems to be falling all over itself to report on the "insights" coming out of a "report" put out by Morgan Stanley about how teens are using technology today. The report, it appears, isn't an actual research analysis or anything. It's just a 15-year-old intern writing about what his friends use technology-wise. That's not to say it's not interesting. It certainly gives a decent view of what's happening in one kid's social circle. Nothing in it seems all that surprising. Kids communicate a lot on the internet. They don't buy music (oh yeah, he contradicts that "other" questionable study of the day that claimed streaming was replacing downloads by noting that his friends prefer to actually have the files, but don't pay for them). It's difficult to see why this is a big deal, but because Morgan Stanley put its logo on it, suddenly it's getting a ton of coverage from Bloomberg, The Telegraph, The Guardian, The Financial Times and others. It's as if none of them have ever thought to actually ask a teenager what kind of media and technology he or she uses. But the key point here is that while there are some useful insights raised by the kid (though, nothing too surprising) it's still just the anecdotal musings of one kid.

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Media Analyst Calls Hulu 'Anti-American' For Providing Free Content

from the apparently,-she's-never-watch-TV dept

We see all sorts of confused analysis when it comes to how "free" works in economics -- which goes back to our assertion that the human brain tends to run into a mental block when it encounters a zero and rather than recognize the rest of the economic equation, it just pops out an error message. That's the only explanation I can find for the so-called analysis by Media Metrics' Laura Martin of how Hulu is "anti-consumer, anti-media employees, and even anti-America" and supposedly putting $300 billion worth of market value "at risk" (thanks Ben for sending this in).

Wait... what? Anti consumer? Offering consumers more of what they want at a better price is anti-consumer? How?

Anti-media employees? Offering a better product that can be better monetized through smarter means should be good for media employees.

Anti-America?!? How? Martin's claim is apparently "Media companies will lose a lot more revenue by giving shows away for free online than they will from pirates." Oh really? How does a person like Martin get and keep a job if that's her analysis? Apparently she's never heard of a little something we call "television" which has made a tremendous amount of money for years giving shows away for free and supporting it with ad dollars. Furthermore, the idea that media companies stand to lose more by competing with piracy by offering something better is the most twisted economic analysis we've heard in a long time (and, boy, we've heard some twisted economic analyses over the years). The fact is more and more people were moving to online to watch shows anyway. Pretending that didn't exist is economic suicide. Offering a better experience allows the networks to compete.

On top of that, Martin apparently hasn't looked at much of the actual research out there if she thinks that online shows are somehow cannibalizing TV revenue. In fact, most studies have found the opposite. They've found that putting shows online for free helps make the audience more engaged and convinces more people to watch the shows on TV, because if they miss an episode they can just catch up online.

It's hard to fathom how any media analyst in this day and age can actually think that using "free" as a part of your business model is not just a "bad idea" but "anti-consumer" or "anti-America." If you don't understand basic media economics, how can you be a media analyst?

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Media Dinosaurs Look To Set Up iTunes For News

from the haven't-we-seen-this-before? dept

Well, there they go again. Three big "media" names, who have been trying to convince themselves that there are enough people out there clamoring for someone to give them a way to pay for news, have decided to put together a company that will do just that. Stephen Brill, L. Gordon Crovitz and Leo Hindery Jr. have teamed up to create a system to charge for news, with the idea that any newspaper can sign up and use their system. Clay Shirky calls this an RIAA for news, while Mathew Ingram points out that it may be more accurate to call it an iTunes for news.

The problem, of course, is that this is all based on the faulty theory that people want an iTunes for news. This, of course, is great for other newspapers who know better, and decide to skip out on this plan, and get all the traffic that these newspapers give up. As Jeff Jarvis points out, in looking for news about this very venture, he was blocked by the paywall at some sites, and found the best coverage at a free site.

And, of course, it's especially ironic that Stephen Brill is behind this. That's because he's tried this before and it failed. Miserably. Meanwhile, Hindery in the past has shown that he also is one of those guys who tends to overvalue content and undervalue everything else people do online (communicate, share, discuss). This whole model is based on this single faulty assumption: that it's the news itself that's important to people. It's not. The news is important, but people want to be able to share the news, spread the news and discuss the news -- and you can't do that when it's behind a paywall. The very act of putting up a paywall diminishes the value of the content.

Still, it's a great opportunity for competitors of any newspaper short-sighted enough to sign up for this program.

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Media Giants Asking Google To Weight Its Content Higher

from the if-their-content-were-more-valuable... dept

A bunch of folks have been sending in the story from Ad Age, where a bunch of media giants have apparently been demanding that Google change its weighting algorithm, because they're upset at how low they appear, compared to other sites, including blogs. This is pretty amusing for a variety of reasons. A big part of the reason those media sites appear so low in the Google rankings is their own damn fault. For years, they tried to lock up the content behind paywalls and registration walls, and made their sites as un-user-friendly as possible. Thus, no one linked to them, they weren't a part of the conversation, and Google treated them exactly as it should. It's only now that those publications have realized the importance of the web that they're demanding that Google change to work with them? It seems more reasonable to simply point these media giants to an explanation of how the algorithm works, and tell them to get back to work creating a site that is more user friendly, with great original content, such that more people link to it. And then they'll be fine. But, apparently, that's just too much work.

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New Report Says Mass Media Is Really, Really Evil For Kids

from the get-rid-of-it! dept

Well, here we go again. USA Today has a report on a "review" of "173 of the strongest papers" from the past 28 years, which found that 80% show some sort of link between mass media and something evil happening to kids, whether it involves obesity, smoking, sex, drug and alcohol use, attention problems or poor grades. And, of course, the folks behind the review are claiming this is all very damning and "something must be done" to "protect the children!" Of course, we've seen this all before. In almost every case, when you look at the actual details of the study, the link is never quite as strong as it's made out to be. In many cases, the link may be a correlation, rather than a causal link (i.e., kids who get bad grades may watch more TV, but that doesn't mean that TV necessarily caused them to get bad grades). Other times, the study's findings are greatly extrapolated in the writeup -- such as the studies that showed that kids get "excited" when they play video games, and extrapolated that to claim kids are more violent because they play games. This isn't to say that mass media for kids is healthy, but we've seen so few studies that actually support a causal link, that it's difficult to take this sort of fear mongering seriously.

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A Look Back At Michael Crichton's Mediasaurus Prediction

from the pretty-dead-on dept

I have to admit that, while I have read a few Michael Crichton novels, I was never much of a fan of his work. However, it was still sad to hear that he died last week from cancer. Given the renewed focus on Crichton's works, a friend just sent me a link to the essay Crichton wrote in the fourth ever issue of Wired Magazine in 1993 (based on a speech he had given) called Mediasaurus, all about Cricthon's prediction for the end of traditional media organizations. While the timing may have been a little off, his analysis now seems pretty prescient. He points out criticism of the news media, and how they simply fail to recognize that people wanted something different. You have to wonder, in retrospect, if the big media companies had actually paid attention if things would be different today:

According to recent polls, large segments of the American population think the media is attentive to trivia, and indifferent to what really matters. They also believe that the media does not report the country's problems, but instead is a part of them. Increasingly, people perceive no difference between the narcissistic self-serving reporters asking questions, and the narcissistic self-serving politicians who evade them.

And I am troubled by the media's response to these criticisms. We hear the old professional line: "Sure, we've got some problems, we could do our job better." Or the time-honored: "We've always been disliked because we're the bearer of bad news; it comes with the territory; I'll start to worry when the press is liked." Or after a major disaster like the NBC news/GM truck fiasco, we hear "this is a time for reflection."

These responses suggest to me that the media just doesn't get it - doesn't understand why consumers are unhappy with their wares.

His diagnosis for how this happened is quite interesting as well:

The media are an industry, and their product is information. And along with many other American industries, the American media produce a product of very poor quality. Its information is not reliable, it has too much chrome and glitz, its doors rattle, it breaks down almost immediately, and it's sold without warranty. It's flashy but it's basically junk. So people have begun to stop buying it....

In recent decades, many American companies have undergone a wrenching, painful restructuring to produce high-quality products. We all know what this requires: Flattening the corporate hierarchy. Moving critical information from the bottom up instead of the top down. Empowering workers. Changing the system, not just the focus of the corporation. And relentlessly driving toward a quality product. Because improved quality demands a change in the corporate culture. A radical change.

Generally speaking, the American media have remained aloof from this process.... [The] news on television and in newspapers is generally perceived as less accurate, less objective, less informed than it was a decade ago. Because instead of focusing on quality, the media have tried to be lively or engaging - selling the sizzle, not the steak; the talk-show host, not the guest; the format, not the subject. And in doing so they have abandoned their audience.

On top of that, he clearly recognizes the changes that are underfoot as a result of technology ending the old monopoly of the news media:

When I was a child, telephones had no dials. You picked up the phone and asked an operator to place your call. Now, if you've ever had the experience of being somewhere where your call was placed for you, you know how exasperating that is. It's faster and more efficient to dial it yourself.

Today's media equivalent of the old telephone operator is Dan Rather, or the front page editor, or the reporter who prunes the facts in order to be lively and vivid. Increasingly, I want to remove those filters, and in some cases I already can. When I read that Ross Perot appeared before a Congressional committee, I am no longer solely dependent on the lively and vivid account in The New York Times, which talks about Perot's folksy homilies and a lot of other flashy chrome trim that I am not interested in. I can turn on C-SPAN and watch the hearing myself. In the process, I can also see how accurate The New York Times account was. And that's likely to change my perception of The New York Times, as indeed it has. Because The New York Times seems to have a problem with Ross Perot. It reminds me of the story told about Hearst, who remarked upon seeing an old adversary on the street, "I don't know why he hates me, I never did him a favor."

But my ability to view C-SPAN brings us to the third trend: the coming end of the media's information monopoly - a monopoly held since the inception of our nation. The American Revolution was the first war fought, in part, through public opinion in the newspapers, and Ben Franklin was the first media-savvy lobbyist to employ techniques of disinformation. For the next 200 or so years, the media have been able to behave in a basically monopolistic way. They have treated information the way John D. Rockefeller treated oil - as a commodity, in which the distribution network, rather than product quality, is of primary importance. But once people can get the raw data themselves, that monopoly ends. And that means big changes, soon.

He goes on to decry the way news becomes polarized -- he refers to it as the Crossfire Syndrome -- noting that it uses soundbites and extreme positions to ignore the real issues, and basically does the viewer or reader a disservice. And his premise is that the consumer of media recognizes this and would jump to alternatives. Ten years after he wrote this piece, Jack Shafer checked in with him to get his reaction to the fact that his prediction of the death of such media organizations appeared wrong. Crichton replied that: "I doubt I'm wrong, it's just too early."

And, indeed, earlier this year, Shafer checked back in with Crichton, admitting that many of his predictions did seem to now be on target. One of the statements Crichton made towards the end of that interview should be the mantra for the modern newsroom if it wants to be successful: "I want a news service that tells me what no one knows, but is true nonetheless. That's what I would value." He's not the only one.

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Dear Old Media: You Can't Delay The News; Nor Should You Want To

from the just-a-suggestion dept

David Carr, over at the NY Times, has a good column pointing out not just how silly NBC's efforts to block all websites from showing the Olympics opening ceremony before it broadcast the (long delayed) ceremonies itself was, but also how it didn't make much sense. Comparing it to the story last week concerning the Philadelphia Inquirer's braindead policy to delay stories until the print paper comes out, Carr notes the difference between viewing online as solely a "broadcast" medium, to one where much more is happening. For example, the stories Carr heard from his friends who got around NBC's media blackout resulted in him watching the official broadcast:

I was one of them, in part because as the day wore on, I saw all manner of oohing and ahhing on the Web from bloggers and friends who had peeked in and found themselves awe-struck. By the time the broadcast rolled around, my daughter and I had been nicely primed by the Web fanatics for what was, after all, a kind of epic movie made in real time that was best enjoyed on a big screen with good resolution.

In other words, rather than trying to block all the internet broadcasts of the opening ceremonies, just let them drive more interest in catching the full broadcast. He also points out that the internet isn't just a system for broadcasting content, but it's a way for people to interact with the content. That can be about promoting it to others (as people did concerning the opening ceremonies to Carr) or it could be in letting them contribute to the story, as others did in telling Carr's colleague about getting around NBC's block:

On Saturday, Mr. Stelter's wonderful article in The New York Times on how people were working around the blackout on the Olympic ceremony began as a post on Twitter seeking consumer experiences, then jumped onto his blog, TV Decoder, caught the attention of editors who wanted it expanded for the newspaper and ended up on Page One, jammed with insight and with plenty of examples from real human experience.

These aren't new ideas, but it's nice to see a media reporter from such a mainstream publication as the Times schooling other old media properties like NBC and the Philadelphia Inquirer in how it's done.

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Mainstream Media Way Behind on DRM and DMCA

from the behind-by-a-decade dept

The Guardian is a great newspaper and produces a lot of good content. So I was excited to see that it had done a story on Apple, digital rights management, and the future of the music industry. And the piece does a good job of summarizing the problems created by DRM and the business case against using it. However, one thing I found kind of amazing was the part where it notes an industry study suggesting that digital rights management has no effect on "piracy" rates. The Guardian says: "The assertion is remarkable. If DRM does not in fact discourage piracy, then it is merely a nuisance for the user." But of course the assertion isn't "remarkable" at all. It's a point people have been making for close to a decade. What's remarkable is that it's taken this long for the industry -- and mainstream reporters -- to figure out what a lot of us have been saying since the beginning.

But the even more annoying thing is that the article never mentions the DMCA (or its European equivalents). For example, it talks about the Microsoft PlaysForSure fiasco, and about the problems that users will have once Microsoft shuts off its "license servers." What it doesn't mention is that laws in the US, UK, and elsewhere make it illegal for third parties to offer software utilities to deal with the problems. That transforms the issue from an ordinary business blunder into a serious public policy issue. Microsoft has every right to shut down its license servers if it wants to. But consumers should have the freedom to download third-party software that would convert their PlaysForSure music libraries into an open format so they don't have to put up with Microsoft's arbitrary restrictions. So, for that matter, should customers of the iTunes store. But thanks to the DMCA, it's illegal to use such tools, and a felony to "traffic" in them.

Unfortunately, while there's been increasing coverage of the problems with DRM, there has continued to be little real discussion of the DMCA. Which is a real problem, because the millions of customers who made the mistake of purchasing DRMed music would really benefit from the freedom to use their legally-purchased music as they see fit. Indeed, a lot of them might be inclined to exert political pressure on Congress to change the law if they knew that the problem was largely Congress's fault in the first place. But because press accounts of the issue don't even mention the legal problems, most consumers assume it's just a garden-variety technical glitch and the law doesn't get changed.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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AOL Struggling With Life Outside The Walled Garden

from the what-business-are-you-in? dept

On Tuesday morning 1200 AOL employees received their severance packages as the company continues trying to find its footing outside of the walled garden. Evidently, the transition to an advertising-supported web portal isn't going as well as they hoped. A memo from AOL CEO Randy Falco suggests a couple of the reasons they might be having problems. First, it's not clear whether they consider themselves fundamentally a technology company or a media company. Some of their products—especially email and MapQuest—face technology-focused competitors like Google and Yahoo who have been rapidly improving their products' capabilities. Others, such as "Food" and "Money & Finance," are competing more with traditional media outlets like CNN or the New York Times. The two types of companies tend to have different corporate cultures and pursue different business strategies, so being evenly split between the two might not be such a good strategy. Falco's memo also focuses a lot on AOL's advertising platform, but that seems like putting the cart before the horse; if you don't have a compelling product and growing traffic numbers, the best advertising platform in the world won't help. AOL may also be handicapped by the perception by many (including me) that AOL is the Internet for beginners. That was a great perception to cultivate when a lot of people were using the Internet for the first time, but it's not so great once most Internet users start to feel comfortable with the Internet and want to take the training wheels off. I have a feeling that this week's layoffs won't be the last of the painful changes at AOL.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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Murdoch Seems Poised To Drop WSJ's Paywall As Well

from the better-for-long-term-business dept

With the New York Times finally realizing (two years too late) that paywalls don't make sense for online newspapers, the one major remaining holdout is still the Wall Street Journal. So, it should come as little surprise that reporters wasted no time in tracking down new owner Rupert Murdoch to see if he stood by earlier comments suggesting that he'd make the Wall Street Journal free online. It certainly sounds like he's still leaning in that direction, saying that he doesn't see how making it free would hurt the paper, and that, if done right, it could help make the paper a lot more money. Indeed, though, we're still waiting for an explanation for why it's taken the pre-eminent business newspaper in the world this long to understand the larger picture.

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NY Times Does The Math: Pay Walls Don't Make Business Sense

from the about-time dept

As was rumored last month, the NY Times has decided to pull the plug on its TimesSelect paywall service, making all NY Times content from 1987 forward free online (they're also making all of the content from 1851 to 1922 free, but that's already in the public domain). This move comes two years after the paywall was first put in place. At the time, we were one of many who pointed out that this was going to make the NY Times a lot less valuable, and it seems that the business folks at the NY Times finally did the math and came to the same conclusion. They note that subscription growth was slowing (something that was obvious over a year ago) as advertising growth was ramping -- and that they hadn't counted on how many people would be drop-in visitors, coming from other sites. That seems like an odd statement, since it was quite obvious more than two years ago that search engines and other sites tended to drive a tremendous amount of traffic to news sites. Either way, like others before it, the NY Times should be congratulated on doing the right thing, while questioned for what took it so long (or even what made the company make the mistake in the first place).

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News Outlets Decide Not To Give Rugby World Cup Free Publicity

from the have-it-your-way dept

Just earlier today we had a post on how the NFL still thinks it can tell news organizations how they can do their job, in spite of fair use, and well, logic and reason. The Rugby World Cup kicks off Friday, and its organizers are involved in a similar spat with media groups covering the event. Back in April, organizers tried to put restrictions on the number of photos news outlets could publish online, and also how they were published (lest anything cover up a sponsor's logo). Major media outlets, including the AP, Reuters and AFP aren't playing ball, though, and are boycotting the event until the dispute is resolved. As much as the World Cup organizers would like to think they don't care, they depend on widespread media coverage and the free publicity it generates to drive their money machines. They say they're acting to protect companies that have paid for certain broadcasting rights, but what they're really trying to protect are the huge fees these companies have paid. They seem to think that letting news outlets print photos online threaten things like TV rights, but it would seem that the opposite is true. By reducing the amount of news coverage for the event -- which acts as publicity -- they're going to hurt the amount of interest people have in it. In turn, perhaps they won't be nearly as interested to follow it on TV or radio or anywhere else rightsholders have paid to deliver it. That's what really threatens their revenues, not the fact that people can go online and see photos from matches.

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Surprising Survey Results Reveal That Movie Download Sites Do, In Fact, Suck

from the how-much-clearer-can-we-be? dept

It's incredibly obvious -- to everybody but the Hollywood movie studios, apparently -- just how bad movie-download sites are. When the first studio-backed efforts launched several years ago, the problems were clear. In the following five years, they haven't been fixed, despite plenty of reviews pointing them out. The studios made "protecting" their content with ridiculously restrictive DRM their top priority; delivering a good user experience came in somewhere down towards the bottom. Now, a new study has yet again pointed out that consumers don't like these services, and yet again makes it clear why: poor selection, unreasonable prices, poor quality. Add in the general difficulty in getting video from the services to users' TVs, and you've got a recipe for failure. These are many of the same points that have been made over the download services' lifetime, but that the studios and companies running the services have largely failed to address. It's little wonder, then, to see a site like Movielink, the studios' own download site, get sold at a huge loss since it's going to take wholesale changes to give it any chance of success.

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