Techdirt. Stories filed under "value"

Confusing Value And Price, Choir Demands £3000 Per Download

Tim Cushing — Mon, 7 Jan 2013 05:39:43 PST

If you asked most people what a single track is worth, most would answer with the going market price, which ranges from ~$0.79-$1.29. This is what the market has shown, for the most part, that it will bear. You veer too far away from the high end of that range and you'll find most people will opt for other music, cheaper music, or your music, fully detached from the high-end price tag.

Now, if you ask this same question of a certain 22-piece self-described "feminist alternative choir," the answer would be much, much different. Your initial estimate would need to be upped by approximately $4,850. Gaggle, the 22-member choir, has announced that they are selling their new single for £3,000 per download (no physical option exists). Why? Because they've chosen to use the persuasive power of economic fallacies to get people talking about "value."

Here's the womanifiesto:

"The Power of Money. What does money mean to you? How do you put a value on the things you care about? Is money the same thing as worth? Like it or not, money means that some people are rich and others poor, some considered successful, others failures. It determines your healthcare choices, education, clothes and how long you have the heating on for – whether you can have the things you want. But money is made up. Without our participation in the illusion, it's meaningless – in fact, if meaning equated to value, we would happily burn all the money tomorrow. Gaggle, of course, uses money. But Gaggle is an exercise in the power of other things as well – otherwise we wouldn't, and couldn't, exist. The Power of Generosity, Inventiveness, Courage. The Power of Flirting, Improvising, Blagging, Hard Work and Being Nice and Polite. The Power of Friendship, Faith, Obligation, Ambition, Anxiety…..Dreams. Without these Powers this track would not have been made. This song is precious. And yet, we're told that 'a single' is almost valueless. And that pisses us off. So we have done a budget of how much this single 'cost'. The many hours it took to write, arrange, compose, master; the expertise of all the musicians, technicians, designers, producers involved; the combination of all the Powers described above and more – we've totted it all up as best we can and… …we are putting this tune to market for the sum of £3000. The power of money? Let's see."

Well, good luck with that. It's been said time and time before, the customer has little to no interest in your fixed costs. This factor is completely irrelevant to purchase decisions, which are most often based on a more subjective perception of "value." While Gaggle may value their creation highly, it would be ignorant to assume that potential purchasers will value the track accordingly. In an era where creative output is at its highest, the sheer number of competing, cheaper options would be enough to bury this track's chances, even if Gaggle decided £5 was a reasonable amount to ask. (It isn't.)

Beyond that, there's some questions as to Gaggle's math. Are they intending for one sale to reimburse the entire creative effort? 10? 25? Wouldn't it be better to sell a few thousand copies at a price that people will actually pay, rather than pin the hopes of the collective on sales in the single digits? For that matter, wouldn't this scenario be more likely as well? And is it really fair to ask purchasers to support 22 musicians through the purchase of a single track? Aren't you running about 10-15 members over the upper limit for potentially successful bands that aren't named Broken Social Scene or Chicago?

But the issue at hand here really isn't £3000 or the perceived value of a single track versus the true cost of production. Gaggle's move here is a publicity stunt, primarily aimed at raising awareness of the band with a secondary aim of opening a dialogue about the value of artistic endeavors. All well and good except that it's rather hard to hold a discussion with a group whose opening gambit is to hurl themselves off the deep end while everyone else looks on in bemusement.

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Not This Again: IEEE Plays Up Bogus 'Digital Sharecropping' Argument Again

Mike Masnick — Thu, 4 Oct 2012 12:13:24 PDT

Nearly six years ago, we wrote about the ridiculousness of Nick Carr's suggestion that Web 2.0 was all about "digital sharecropping", in which online service providers are somehow "exploiting" users to take the fruits of their labors. I would hope that, with six years of hindsight, people would still remember what a completely nonsensical argument this is -- based as it is on the economically clueless suggestion that the only possible benefit someone could get from using an online service is money. Of course that's not true. The reason that so many people use something like YouTube isn't because they're being exploited, but because it enables something wonderful and powerful for free. Prior to YouTube, if you wanted to put up a video, you had to install complex or expensive server software, pay a ton for bandwidth... oh yeah, and hope that whoever wanted to watch the video had the proper software to view it. YouTube took all of that away, and made it all free (and even added easy ways to monetize it). If that's exploitation, sign me up to be exploited. Similarly, look at a platform like Twitter, which has enabled amazingly powerful real time communications that has connected me with people worldwide in ways never before possible. That's not exploitation. It's called providing something of value.

So it's a shame to see the IEEE basically rehash Carr's silly argument as if it were still relevant, setting up a strawman about how "Web 2.0" (really, is anyone still using that term?) was all about empowerment, but the reality is that (*gasp*) there are companies involved. And some of them... (wait for it...) make money!

But the road to Utopia all too often ends up detouring through the business district, and Web 2.0 has been no exception. By offering the means of production free to their users, other leviathan sites, such as Facebook, Twitter, and YouTube, have generated enormous amounts of content at almost no expense. Even better, this content is a gold mine for targeted advertising.

Over in Utopia, the “workers” who generated all those articles, photos, tweets, and videos would get a cut of the profits they helped to generate. In the business district, however, users retain their amateur status, while the companies they labor for rake in billions. Worse, contributors don’t even own the content they create. The smallest of the small print in the terms of use, which you must agree to in order to get an account, states that the company can use your content as it sees fit.

Beyond the fact that this is a common misreading of the terms of service of most of the sites he's talking about (which merely request a license to make sure that their hosting of the content you put up is legit), author Paul McFedries completely ignores the tremendous value that people get for using those platforms... almost all of which is given out for free. While economic value is often measured in dollar terms, that doesn't mean that people don't get value if actual dollars aren't exchanged. The people using these platforms aren't being exploited -- they use them because they really, really value them.

Anthony De Rosa, a product manager at Reuters, calls this digital feudalism and laments that we “are being played for suckers to feed the beast, to create content that ends up creating value for others.”

And this is equally misguided. All sorts of things people do create value for others. Almost no economic activity is entirely contained so that only the person doing the initial activity retains 100% of the benefits. Concepts like externalities and spillovers exist in economics for a very good reason -- and part of the problem is people who don't understand that creating excess value that benefits others is actually a core reason we have economic growth in the first place. Creating value for others is of tremendous economic value. The problem is that people ignore the fact that those doing the creating are getting back more than enough value directly or they wouldn't be doing the activity in the first place.

It's a shame that we're still having these discussions today, after we've had many more years of experience with all of these valuable services to recognize that it's not exploitation to get a tremendously useful service for free, while also increasing value for others. It's actually how we innovate and grow the economy itself.

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Musician Chris Randall: Music Has No Monetary Value But The Connections It Forms Are Priceless

Tim Cushing — Mon, 20 Aug 2012 05:12:21 PDT

Guitarist Chris Randall, formerly of Sister Machine Gun (and founder of Positron Records, along with running plug-in creator Audio Damage) has an epic post detailing his thoughts about the music business (and the recording industry) and the monumental changes it has gone through over the last decade. He pointedly declares that his post (in PDF form, due to limitations of his site) is not a manifiesto. Randall calls it "more of a mission statement, really," and it does exactly that, with many stops along the way.

The underlying current of the piece is that music (along with other forms of art) cannot honestly be discussed in terms of monetary value. The sale price of an mp3 or an album has very little to do with how the fans value the music. No one talks up how much they spent on something when discussing their connection with a band or singer. Instead, they talk about more ethereal concepts, like where they were when they first heard a certain track or who turned them on to a certain band. Randall gives a personal example, as seen through the artist's eyes:

The funny thing about music is that people can tie a certain song to a specific event in their life that occurred when they heard that song; the two become inseparable... I first noticed it in 2004, on the last real tour I did as a performing artist. The first day of the tour, I was in the audience waiting for the opening band to go on, and someone came up to me and said “it’s so cool you’re here! The first time I heard you was...” and then went on to describe a particular life experience that was occurring when he first heard a song I wrote. There were over sixty shows on that tour, and a night didn’t go by that I didn’t hear that speech, or a variation of it, at least once. It quickly became a running joke, The First Time I Heard You, and soon after that it became a conversation I dreaded. It was a heart-rending thing to hear, night after night, because I thought they were saying “you used to make things I liked. Now you don’t, but I’m here out of nostalgia.” It took an epiphany to realize that the First Time I Heard You conversation is is meant as a sincere form of flattery. “You are an ARTIST. You created something that MADE ME FEEL. This is IMPORTANT and I need to TELL YOU so you know that we have a CONNECTION.”

This led Randall to the following conclusion:

That epiphany, and a realization that the act of creation can and should be entirely decoupled from the business of commerce, is what I want to talk about. In fact, let's boil it down to a pithy aphorism: the coin of this realm is reputation, and our imagination is an ATM.

Many artists and (especially) artists' "representatives" have argued that the current market for all things artistic is unsustainable, a race for the bottom fueled by cheap technology and piracy. That their efforts have done little to reverse the process hasn't made them any happier and it certainly hasn't made their few, minimal attempts any smarter or any more effective. Randall went through the whole process as an artist, having the "rug yanked out from under him," and joining the chorus of disaffected artists cheering on the destruction of their former employers. This cheering, while admittedly fun, did little to actually change anything. Major labels kept acting like major labels, signing everyone they could talk into a contract. Meanwhile, the internet changed things for those wired into it, with little effect anywhere else:

There was a brief period where it was kind of fun to watch the entire music industry collapse in on itself, like a dying star. Can we get more of Metallica suing people for liking them, please? But Seans Fanning and Parker didn’t make Napster because they were moved by the plight of the working musician. They did it because they could, and the act itself, the act of petulant children bent on destruction, was nothing more than a path to greater things for them, increasing their reputations. The music industry, for its part, was eminently destroyable, as it had created an economy of artificial worth, by virtue of its “throw all the spaghetti at the wall and see which noodles stick” business model.

Napster effectively made music free, and yet, for several years, record labels continued to overspend and overvalue their own music:

That’s fine, and business is business, but the problem is that all those bands think they are special flowers (and the labels are in no small part enablers of this thinking; they spend a lot of time and effort making those artists feel like special flowers), and if their record cost $500,000 to make, then it is worth $500,000... Simple economics: a product’s worth is what someone will pay for it, for the most part, not what it cost to make. Hence the utterly false values ascribed to music today.

Plenty of new services have arrived which seem to push the "value" of music down even further. Lots of criticism has been leveled at Spotify for its "low" payouts. Artists have noticed that streaming services' per-play rates aren't going to be much help if you've sunk thousands of dollars into recording an album. This isn't the listening audience's fault, though. This is still just a matter of artists valuing their art above what the market will actually bear. Randall points out that, if anything, Spotify's per-play rates are too high, if compared to the public's valuation of the music in question:

Something happened to me a little while ago that makes me think the Spotify valuation is high, if we’re using currency as our means of valuation. SomeoneI know, who is in the military, was recently deployed to Iraq. While she was there, a friend of hers gave her a portable hard drive with 250,000 songs on it...

To her, this hard drive was “cool,” and furthermore “a neat present.” That it contained roughly 1/8th of all the commercial music ever recorded by Western civilization didn’t change the fact that, on a visceral level, the worth of it to her was essentially the cost-of-replacement of the physical drive itself, because she could always get another copy. If you want to affix an actual monetary value to music, that value is now, and ever was, a function of two things: the true cost of the medium it is stored on, and how easy that medium is to duplicate. The quarter million dollar fine the U.S. government could theoretically levy as punishment for copying that hard drive reflects the false economy the labels have created, not the actual value of the music itself.

To be clear, I am in no way implying that art doesn’t have intrinsic value. But that value is not quantifiable in dollars. If we extrapolate the cost of that hard drive to the individual songs, we can say that each song cost roughly 4/100th of a cent. While this is about 2/3 of the payment for a typical Spotify stream, the money went to the drive retailer and the manufacturer that made it, and none whatsoever went to any artist, publisher, or label.

So, if it can be argued that the monetary value of music is zero, how does any artist hope to make a living? Randall argues that the first step is to realize that music's power to create emotional experiences is "priceless" (in the good sense of the word) and work from there. The true potential lies in the connection, not the value ascribed to someone's songs by an outside force.

As an artist, if you choose to fight this battle over monetary value, know this: you will lose. That is a foregone conclusion. In fact, you have already lost. All of that nonsense with numbers and who’s getting paid and whether life is fair or not is all inside baseball, and the average person (the one ultimately footing the bills, it must be said) couldn’t give two shits. To them, pieces of art are tied to memories and experiences; they are either trying to recapture the emotions they felt when they first experienced the art in a particular context, or trying to create new emotions to go with new contexts. They are willing to spend a certain amount of money, for altruism’s sake, if it’s convenient.

This is where the artist needs to step in and connect. Not only are they fighting against a zero-dollar valuation, they're also competing for the hearts and minds of potential audience members (and customers) who are blessed with more choices than ever before. Barriers-to-entry are all but gone and the world is filled with people creating because they suddenly find that not only are the tools more powerful, but the options for dissemination are nearly endless. If you can get past the "valuation" issue, you can do great things, and quite possibly, make some money as well. But first you've got to do some letting go.

[I]n my honest assessment, the opportunities are far greater now, and the rewards as ample or perhaps even more so. It’s easy. Just forget about money. Seriously. Let it go. You’re not getting paid? Join the club. Robert Johnson and Scott Joplin were the founding members. Muddy Waters, HP Lovecraft, and Jackson Pollack each got an achievement award. David Crosby gets the Bad Life Decisions Honorable Mention. You’re in good company. You should be proud.

Randall points out that he's not trying to make the case that creating art in hopes of making a living is the wrong angle to take. As he says, there are still several creative people collecting paychecks, including session musicians, graphic designers and various positions in the game, computer and television industries. He also makes it very clear that he's not, for lack of a better term, One of Us. [broad emoticon wink at TD regulars]

Neither do I want to come off as a neck-bearded freetard. Nothing could be further from the truth. There are not many groups of people I disdain more than the Doctorow mashup crowd and their inspired thinking that art + art = better art, and everybody has the right, nay, the responsibility to make their own Mickey Mouse movies. If that’s the sort of thing that floats your boat, so be it, but on your head.

Randall offers this alternative plan for struggling artists: the currency of reputation. Build a solid one of those and people will throw money at you. He points out the astounding success of Amanda Palmer's Kickstarter project. Did she need all that she collected to move forward with her career? Very definitely, no. But people showed up in droves and helped her, as Randall puts it, "cash in some of that reputation for real-world money." The same thing for Penny Arcade, who "chose to cash in their reputation that they earned through years of slogging it in the trenches." Your first step as an artist is to start "banking" reputation.

These Reputation Credits, an arbitrary unit of my own devising, are a reflection of how earnest you are in tending your public-facing persona... [I]f you contribute to the human cultural experience, you do earn them, and the more you contribute (or, perhaps, the higher the quality of your contributions) the more you earn. You can then turn these in for real-world dividends that can, for instance, pay the rent or buy sushi.

And how, exactly does on do that? By utilizing these four steps, many of which echo a familiar mantra around these parts:

Make art.
Put it in front of as many people as possible.
Engage the resulting audience.
Repeat.

The more you do this, the better you’ll get at it, the more Rep Credits you’ll have, and the further they’ll go when you need to spend some of them. People want to be entertained. They’ll go all honey badger on some good entertainment. Give it to them, for fuck’s sake, and stop bitching about money. That’ll come in its own good time.

There's a ton of great writing and insight in Randall's wordbomb. (It runs over 4,400 words.) I encourage you to take a look at the whole thing. It's not often a musician will offer up this sort of clearly-laid-out perspective on the last decade+ of the music world.

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Musician Jonathan Coulton: I Value The Internet A Lot More Than The Record Industry

Mike Masnick — Wed, 28 Mar 2012 09:13:44 PDT

We've written plenty about Jonathan Coulton over the years, including two recent stories. The first was his revelation that he grossed about half a million dollars last year -- even with his music being offered under a Creative Commons license such that you could share it. He made a lot of his money because people still pay him for the music just to support him, and also from touring. We also wrote about his thoughtful discussion over what the shutting down of Megaupload meant.

Last month he went on Jerry Brito's Surprisingly Free podcast where he talked more about both of those things, as well as his general thoughts on his career and related issues. Where it got especially interesting was a bit further into the discussion, where he admits that he certainly still has an emotional reaction to finding out someone downloaded his music without paying for it, which makes his relationship with copyright more "complicated." However, he then talks about how important the internet is to him, and how in the long run, if it comes down to the internet or copyright law, he's got to side with the internet:

... where you fall on this issue, a lot of the time, comes down to how much you value things like a "free and open internet." And, for me... if, as a consequence of nurturing this amazing thing, called the internet... if as a consequence of letting that do what it wants, we destroy a number of industries, including the record business, and maybe even including the rock star business, I think that humanity will be better off. I, for one, think that the internet is one of the greatest human achievements, ever. It's an amazing tool and we have only just begun to explore the possibilities. To me, it feels like it's a part of our evolution as a species. I value it as much as I value the Bill of Rights....

He later says (as we've talked about over and over again) that there are all sorts of ways to compete with infringement -- and offering all works at a reasonable price in the formats people want, is a really, really good way to compete and get people to actually buy.

Towards the end, he also points out that the research still hasn't really shown that piracy has harmed artists:

You need to reassess whether or not piracy is actually a problem. A lot of people assume it is... and they could be right. But I don't think we've really determined the answer to that question. And I don't think we can make smart policy decisions until we know the answer to that question. If, in fact, there is some small harm or no harm, then we need to look and see: what do we want to do with this society? Is it better for us to have some small amount of piracy, in exchange for all the other goodies we're going to get if we stop spending so much time and effort trying to squash things.... We make decisions all the time about what we think is morally right and wrong, and more and more people are making decisions that are out of step with the laws. And that's an interesting phenomenon, and we haven't really unraveled what it means yet.

Again, this isn't some "freeloader" as critics often like to label all sorts of folks who make these kinds of arguments. This is a very successful professional musician, whose success hasn't come from the traditional gatekeepers, but from embracing the internet and what it allows, and developing new business models.

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How Important Is Attribution In Copyright Issues?

Mike Masnick — Tue, 27 Mar 2012 23:33:34 PDT

Many, many people think that attribution is a key part of copyright law, but in the US it's really not a part of the law at all (with a few tiny, nearly meaningless exceptions). Attribution issues may come up in situations of plagiarism, but they have little do with copyright infringement, which is infringement with or without attribution. Elsewhere, there are issues of moral rights, but for the most part, the US does not recognize moral rights in copyright. Of course, many have argued that perhaps attribution is more important than much of what is in copyright law, and at times there have been efforts to focus more on the question of attribution over infringement. A recent study has tried to quantify some issues around this idea and put questions about the value of attribution into context. Eric Goldman points our attention to this recent paper by Christopher Sprigman, Christopher Buccafusco and Zachary Burns which is entitled Valuing Attribution and Publication in Intellectual Property.

The paper's authors seek to get a real sense of what the tradeoffs are for content creators -- and they quickly discover that content creators are willing to accept significantly less money in exchange for attribution and publicity. They also discover -- as their own previous studies have shown -- that content creators tend to significantly overvalue their own works. But the key finding is that attribution has tremendous value to content creators -- both amateurs and professionals alike. You can read the full details of the experiments in the study, but the researchers came up with a clever way to effectively get photographers to value a work with the possibility of getting a large cash reward for it vs. the possibility of having the image published with credit in a major publication. Notably, the impact was much stronger with professional photographers, since to them making people aware of their work had much greater value, even if it meant getting paid much less. It was also interesting to see that amateurs valued publication without attribution less than just getting paid, but for professionals, they were willing to get paid less if the image was published somewhere major even without attribution. Not surprisingly, getting published with attribution was the most desirable, and for that the pros were willing to accept the lowest payment.

I know that some copyright maximalists love to bash those of us who point out that there is significant value for content creators in getting their works out there and accessible in ways that people see/hear/experience them -- and this study presents some empirical evidence to support the idea that it's a pretty strong effect. Towards the end, the study digs a bit into the policy questions and suggests that requiring attribution (a la moral rights) as a mandatory part of copyright law actually could be harmful, in that it would take away a key negotiating point over which prices could change drastically. Coupled with the fact that artists have been shown to overvalue their rights, such an attribution right actually makes it more difficult to come to an agreeable price on content, and limits how much content is likely to be sold. Definitely an interesting read overall.

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HP Tablet Fire Sale Lets Us Put A Price On The Value Of A Strong Development Community

Derek Kerton — Thu, 1 Sep 2011 15:13:33 PDT

A couple of weeks ago, HP made the significant decision to get out of the consumer hardware business, simultaneously shutting down their PC business and their mobile device business built around the WebOS purchase that came with Palm, Inc. When they abruptly did so, HP also announced they would be clearing out the supply chain by offering their very capable, $500+ TouchPad tablet for $100 (16GB models).

What followed was a mad rush of purchasing, with people clamoring for a cheap, but powerful tablet. This is by no means a bad device: remember that the WebOS was critically acclaimed, and this tablet had a 9.7" screen, webcam for video chat, lightweight, 1.2GHz dual-core processor and more. These are flagship-grade tablet specs, and although we've learned that UX is more important than specs, good hardware is a definite plus. The biggest problem with the device was the lack of developer support for the ecosystem, so there are "thousands" of apps available according to HP, but not the 'hundreds of thousands' that work with the iPad.

This fire sale has provided a fairly interesting experiment in the market clearing price for non-iPad tablets. The base iPad sells readily for $500, and is often sold out. This is the high-water mark for tablets, which no other has matched. Other vendors have built competitive hardware and tried to sell it in the same price range (Motorola Xoom, Samsung, Playbook) but were rewarded with lackluster sales. Some of those devices, on paper, are arguably better than the iPad, so the most likely reason Apple can extract a premium is the power of their App developer community. An iPad can do much more than a Xoom partly because of what Apple offers, but mostly because of the 'whole product' which includes 400,000+ apps.

Device industry executives must stay up at night wondering how to price their tablet. The HP experiment will prove useful. Now we know that at $500, buyers walk away from the deal. But at $100, they literally rush the store like Walmart on Black Friday. This tells us that the correct price for a good tablet with weak developer support is between $100 and $500. That's a fairly wide range. I wish HP had set the price higher, to provide a better test. Unfortunately, whenever an OEM company sets the price, what we get is their desired price, but not the market value. For that...we have eBay. Many of the buyers at HP's firesale were just arbitrageurs looking to flip the tablet to make a quick buck, and those tablets quickly showed up on the auction site. A look at eBay today reveals a high number of TouchPads on offer, and sold for a market price of ~$250.

If the hardware alone is valued at about $250, how does iPad sell for $500? Well, we'll have to attribute some of the premium to the "cool, sexy" mystique of Apple products. But I wouldn't go too far with that. The Samsung Tab or HP TouchPad are both very slick looking products. A chunk of the premium has to be allocated to Apple's excellent and easy UX. The mass market doesn't want to geek out, they want easy products. But Honeycomb and WebOS aren't so far behind...

No, the dominant reason that iPad can sell out at $500 (even as sales have tipped well beyond the fanboi segment) is the value brought by apps. Apple is making cake because it has the biggest developer community coding around the OS, and the value of that community is currently worth something on the order of $200-250 per tablet. It's going to be tough for any other tablet to breach this market, where Apple already has the supply chain dialed in, the developer community, the innovation lead, and the brand. Android may progress bit by bit, but for now Tablets are Apple's private playground. Competition will heat up if Android tablet versions of the Nook and Kindle go to market around the $325 range (making their profit on books instead). Note that the TouchPad has an estimated $318 Bill of Materials (BoM). In a few years, Moore's Law and steady Android progress will reduce the cost and app advantage iPad now enjoys.

HP will be emptying the supply chain in a couple of weeks with the final production run of TouchPads. I wish they would bump up the price to see if the market would bear $318 direct from the manufacturer (ostensibly, a more desirable seller than eBay members), but it seems that they will keep the current fire sale price.

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The Dear Hunter: Recognizing The Importance Of Adding Value, Connecting With Fans

Mike Masnick — Fri, 22 Jul 2011 01:23:33 PDT

Joe Fleming points us to a clip of an appearance by the successful indie rock band, The Dear Hunter (a project of Casey Crescenzo) on Attack of the Show. It's worth watching the whole thing, but if you skip ahead to around the 7 minute mark, Kevin Pereira asks Casey about the future of the music business, and Crescenzo points out a key point that some of us have been saying for years: the future isn't in selling music, but in adding value, and making things worth buying:

Pereira: You seem to be doing something right. So what is so wrong or broken with the music industry right now?

Crescenzo: I would say the main thing is that no one's ever going to buy music just for the sake of buying music anymore. There's no reason to just buy....

Periera: I was unaware you could still buy music. That's awesome. So do you go to a store? How does this work?

Crescenzo: ... I don't know. Craigslist. No, I think it's a matter of people realizing that you're never going to sell... it's never going to be the thing where you have a ton of bands selling a million records. And, instead of concentrating just on sales or on selling something, you have to make something worthwhile.

What a concept! Make something worthwhile. The interview goes on and they talk about the fact that Crescenzo traveled across the country to get to the interview by car and had emailed a fan list telling them about this and offering to play house concerts (for free) at various stops along the way. Of course, as we've discussed, house concerts are becoming more and more popular. They're a great way for artists, who are comfortable doing them (and, no, we're not saying they're for everyone), to really connect with fans. And while Crescenzo decided not to charge, we've been hearing about more and more artists making pretty good money doing house concerts for reasonable fees.

I know some critics have brushed aside the house concert phenomenon as only making sense for artists, who can't do otherwise (a statement that's clearly untrue for many who have embraced house concerts), here's a case of a very well known, very successful act realizing how useful house concerts can be as well.

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Theater Owners Still Oblivious To The Fact That They Can Compete With Home Viewing

Mike Masnick — Wed, 6 Jul 2011 11:34:00 PDT

We've been arguing for nearly a decade that movie theater owners were overreacting to the threat of people viewing movies at home eating into theater revenue. After all, they've been complaining about this for decades. As we talked about last year, back in 1959, Mary Pickford, who was a Hollywood star (or, rather, at the time, the Hollywood star) who also cofounded studio giant United Artists and the Academy of Motion Picture Arts and Sciences (the folks who put on the Oscars), claimed that cable TV would kill theaters. Then, of course, Jack Valenti famously said the VCR would be the "Boston strangler" to the movie business.

Yet, now, with home theaters, video on demand, streaming services and (yes) infringement, the theaters are once again insisting that this time theaters are really in trouble.

The BBC has a good article discussing the details of the fears of theater owners, and even mentions both the Pickford and Valenti quotes. It talks up how theater windows are decreasing, and the theater owners are decrying how that's just going to make things worse and worse.

But what's amazing is that not once in the article does anyone mention that theaters compete on more than just the content. This is the core blindness that seems to effect most (but certainly not all) folks in the theater business. They keep whining about how they can't compete with the ability to watch movies at home. But what they're really admitting is that their theaters suck. Yes, the movie itself is a key part of deciding to go out to the theater, but it's the overall theater-going experience that really drives people. Lots of people decide they want to "go out to the movies" before they even decide what movie to see.

Going out to the movies is a social experience, and the problem that theaters are facing isn't that home theaters get the content too early, but that the big theaters have made the theater-going experience suck. The theaters are cramped, uncomfortable, noisy. The food prices are ridiculous. The sound quality or video quality sucks. But that's not the fault of home theaters. That's the fault of theater owners not making the experience good.

There certainly are some who recognize that making the theater experience better is the strategy that will work, but they're in the minority. The big theaters just keep worrying about windows and online streaming and "piracy," and don't seem to make any effort to give people reasons to go to the theater. People want to "go out." People want to have a special experience and enjoy being out with friends. That's what theaters should be capitalizing on. People can stay home and eat, but restaurants still do fine business, because people want that better experience of going out to eat. The same is true of going to the movies, but only if the theaters recognize that they have to make that an experience worth going out to.

And, yet, oddly, none of that makes it into the BBC article. Even worse, the theater owners in the article seem to want to blame everyone else. Check out this discussion, where a top lobbyist for theater owners seems to pretend that theaters are helpless here and at the whims of everyone else:

"Our concern is people won't go for this eight-week window," says Patrick Corcoran, California operations chief of the National Association of Theatre Owners.

"If [studios] are really intent on making this sort of thing work, they have two options: one is to shorten the window, the other is to put it at a lower price, or both.

"The closer it gets to the theatrical release and the lower price it gets, you start to get into this self-competition market that already affects the home entertainment market.

"The theatre business is a fairly marginal business so a few percentage points loss in admissions will end up closing some theatres.

"And if film companies do focus on [home entertainment more], they won't be able to justify current budgets so you will just end up with a lesser film."

Or, you know, the theaters you represent could spend some time focusing on improving the experience so that even if they have options at home with the identical content, it's still worth going out to the movies. But, apparently, that line of thought just hasn't occurred to many theater owners yet.

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Another Example Of The Difference Between Value And Price: Free Mosquito Nets Are More Valued

Mike Masnick — Tue, 14 Jun 2011 22:27:03 PDT

We've pointed out time and time again how price and value are not the same thing. They may be related, but value tends to explain the demand curve, whereas price is determined by the intersection of supply and demand. To think about it logically, we buy stuff all the time because we value what we buy more than the money we're paying for it (the price). That's why the economic transaction happens. Or, to put it another way, you'll pay the price for something if it's lower than what you value it at, but that doesn't automatically change the value of it to the price. Now, there are some reports that suggest that the price, acting as a signal, can impact perceived value, but that appears to be limited only to a few specific situations.

We saw another example of the difference between price and value in a recent episode of Planet Money, which involved a discussion with the authors of the book Poor Economics, about their very data driven look at various economic questions. An early part of the discussion looked at the question of whether or not people in poor countries don't value mosquito nets when they get them for free. Apparently some economists have argued that you have to make poor people pay for their mosquito nets or they won't "value" them. Tragically, it seems that even some economists don't recognize the difference between price and value.

Thankfully, the folks who wrote this book went out and did real research, and the data shows that people in poor countries actually seem to value the free mosquito nets even more than when they have to pay for them. That is, people who received free mosquito nets seemed even more likely to use them than those that were paid for. I'm a sucker for data driven economics, so it's always nice to see stories like this one.

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RIAA Says There's No Value In The Public Domain

Mike Masnick — Fri, 3 Jun 2011 04:57:57 PDT

While I've already written about the hearings for the Copyright Office concerning copyright on pre-1972 sound recordings, but I wanted to call out one particularly egregious and ridiculous statement from the RIAA. The RIAA's Jennifer Pariser claimed that there's no value to a work in the public domain. Apparently Pariser is unfamiliar with the works of Shakespeare. Or Beethoven. Is she serious? I mean, you could make the argument that it makes life more difficult to sell those works for the labels she represents, but those works have tremendous value. Pariser, of course, is famous for making ridiculous statements, sometimes under oath. Back when she worked for Sony-BMG she made some statements, on the stand and under oath, in the Jammie Thomas trial that were blatantly untrue. Only much later, after the jury had ruled, did the RIAA admit that Pariser "misspoke" while on the stand. One hopes she "misspoke" here as well, but I get the feeling she actually believes the blatantly incorrect statement she made.

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Don't Try To Make Sense Of LinkedIn Share Price

Mike Masnick — Thu, 19 May 2011 19:07:00 PDT

The big Silicon Valley IPO today was LinkedIn going public. In many ways, it's a great story, in that LinkedIn isn't an overnight sensation by any means, but really was a company that built up a strong and loyal user base over many years. However, Silicon Valley has been pretty starved of "celebrity" IPOs for quite some time. Of course, in typical Silicon Valley celebrity IPO fashion, the stock shot up much, much higher than its offering price. In the past I've talked about how this is really about a company having left a ton of money on the table (i.e., LinkedIn only got $45 for all of the shares that hit the market, so the stock trades over $100 are between others, and doesn't directly -- immediately -- impact LinkedIn's cash position, though later stock sales can obviously benefit).

I've always found the obsession with the "first day pop" kind of a weird infatuation in Silicon Valley, often done by people who don't recognize what it really means (i.e., that it was priced low). However, there's been a lot of hand-wringing about how LinkedIn's valuation from the super high share price seems ridiculous based on its revenue. And, I agree. It's nearly impossible to match the valuation to the company's actual financial situation. However, this is the nature of the game. Certainly one part of the problem is that some of the buyers and sellers in the market don't really understand what it is they're buying and selling and how to value it. That's just the way things are with the stock market. However, the bigger issue is that people buying and selling the stock are really judging price on two separate factors. The underlying value of the stock is certainly important, but for many people, rather than betting on that, they're betting on everyone else. That is, they're not buying and selling based on a long-term concern for the actual value of LinkedIn, but they're trading short-term by betting on what they think everyone else will value the stock at. In the long-term, that's not sustainable, but it's the simple nature of "the game."

On the last Planet Money podcast, they explored whether or not there's a "gold bubble,", but they actually do a nice job explaining how bubbles form, even though "rational economists" suggest it shouldn't be possible. In the podcast, there's a great story about some experiments, in which students (including business students who should understand this) are given opportunities to buy and sell a single stock with a very clearly defined value... and yet bubbles still form, where people (who can't even explain why) overbid on the price of the stock, even though the real underlying value is known.

To some extent, it's that people don't intrinsically understand statistics and value. Part of it is that people get tied up in "the game." And part of it is just psychology. But the fact is that bubbles form all the time, and trying to rationally value something in a bubble isn't a particularly fruitful game in the short term, because the length and extent of a bubble are nearly impossible to determine (long term is a very different story). So, for everyone fretting about the price to value question on LinkedIn, unless you're looking for a long term investment, at this point, it's a meaningless question. What's happening now is gambling and entertainment masquerading as a serious "investment" issue.

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The Secret Contagious Mojo That Makes People Value Stuff Connected To Famous People

Mike Masnick — Fri, 11 Mar 2011 06:09:11 PST

There is sort of an odd article in the NY Times that looks at some of the psychological research that goes into why people like to own stuff that celebrities owned or touched. The report suggests that it comes back to a subconscious belief in "celebrity contagion" and "imitative magic." That is, people sense that if they own something that someone famous touched, they somehow get to "capture" some element of that person's essence. The report covers two separate things. First there is the obsession with owning something someone touched -- where it's noted that people value it less if it's been washed (highlighting the whole "essence" concept). Second, is a look into why people want to buy exact replicas of a celebrity's things. For example, the report highlights an exact replica of a famous Eric Clapton guitar. The replica is right down to the specific nicks and scratches on the guitar -- even though Clapton has never touched this one. So if it was just "essence" this guitar wouldn't be valued that highly. And while it's obviously valued less than the real version it's based on (which sold for just under a million dollars), it's expected that the replica will still sell for $20,000. The thinking here is the value of "imitative magic." That if you have something just like what a famous/successful person had, you'll be able to get some of the same "magic" powers out of it.

Frankly, some of this sounds pretty ridiculous -- a sort of inflated market version of cargo cult science -- but if you're looking to understand the psychology behind people who go to great lengths to feel some sort of connection to celebrities, it seems like worthwhile reading just to understand the underpinnings. Indeed, over the years, we've seen artists incorporate this kind of thinking in their own business models. They can often sell off things that they're closely connected to, for a premium, and the buyers are quite happy. We sometimes hear from our usual critics that these business models involve finding "suckers." But the buyers don't seem to feel like suckers, and some of this research seems to explain why.

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Why The Arguments That The Huffington Post Must Pay Bloggers Is Misguided: Payment Isn't Just Money

Mike Masnick — Thu, 10 Feb 2011 09:37:29 PST

We didn't mention the whole AOL buying Huffington Post story earlier this week, because there just didn't seem to be that much to say about it. It was an interesting deal, to be sure, and I'll be curious to watch what AOL does with the property, but, beyond that, it seemed like just another content acquisition deal. However, almost immediately after the deal went through, I started seeing some rumblings on Twitter, picking at the scab that has always annoyed a certain group of people about The Huffington Post: that it doesn't pay most of its writers. Sure enough, it didn't take long for this issue to start to spread, with the inevitable summary line of: "Hey, HuffPo became famous because all these people worked for free, and yet, they don't get a cut of the sale."

That story is now snowballing. Dan Gilmor wrote a blog post arguing that it was the "ethical" thing to do to start paying bloggers. Douglas Ruskoff said that he'd no longer blog on the site for free. And, of course, a bunch of cranky HuffPo contributors have created a whole campaign arguing that Arianna Huffington had no right to sell the site, since it was built off of their free labor.

They're all wrong.

Of course, we've been through this before. Five years ago, Nick Carr tried to argue that all the various big Web 2.0 sites like (at the time) Digg, YouTube and MySpace were really digital sharecroppers exploiting labor. As we argued at the time, this was hogwash. People were using those sites because they provided a valuable service. The reason they provided labor was because they got something of value in return -- whether it was attention or hosting or distribution or reputation.

Three years ago, we saw an almost identical controversy after AOL bought Bebo and musician Billy Bragg demanded some of the $850 million AOL paid (in retrospect, a massively bad decision). Bragg argued that Bebo made this money based on all of the "free labor" of musicians who used the site. But that ignored the fact that those musicians got tremendous value in using the Bebo platform to connect with fans and distribute their music... all for free. The folks who got to keep the money were the ones who took the actual risk. The ones who had to cover the expenses to keep the site and the service running, even when it wasn't making enough revenue. They took the risk, they should get the reward. The people who used the site did so of their own free will knowing quite well that the benefit they got from using the service was worth it to them at the time. Along those lines, if Bebo had struggled and faced bankruptcy instead of a massive buyout, would Bragg have felt obligated to give them money to keep it going? Similarly, if HuffPo had been running out of money, and Arianna had gone back and demanded that those who used the platform pay up retroactively, how would these people have reacted?

There are more ways to "get paid" than with money.

The reason that people chose to blog for free at the Huffington Post was because it's a fantastic platform for exposure. It brings traffic like no one else out there, and if you want to present something in a way that's likely to get more attention than on your own blog that no one visits, posting at HuffPo can be quite a good way to go.

And that's the point: the people who chose -- of their own free will -- to post at the Huffington Post for free did so because they clearly got value out of doing so. Otherwise, why would they have done so in the first place? To then say that the only proper thing is to pay them is completely missing the point. It's an attempt to retroactively go back and change the terms of a deal. If you wanted to get paid directly for what you write, fine, don't write for the Huffington Post. It's that simple. Go out and pitch your stories to publishers who pay freelancers. But don't go back and complain afterwards when the folks who actually did take the risk of putting together the site, financing it, organizing it, hiring the staff, buying the servers, paying for the bandwidth, and building it up so that it was such a successful platform, then get paid for their efforts.

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If Artists Don't Value Copyright On Their Works, Why Do We Force It On Them?

Mike Masnick — Tue, 8 Feb 2011 10:30:23 PST

In William Patry's book, Moral Panics and the Copyright Wars, there's an excellent chart that highlights the fact that many content creators who have copyright available to them clearly don't value that copyright very much. The chart looks at the rates of copyright renewals in 1958 and 1959. As you hopefully know, back then, you had to register your work to have it covered by copyright, and you had to renew it to keep that copyright. Yet a huge percentage of content creators simply chose not to renew their copyrights, because they knew there was little or no value in the copyright itself. Depending on the type of product, the lack of renewals paints a pretty stark picture: only 7% of books had the copyright renewed. Only 11% of periodicals. Only 4% of "works of art." Music was only 35%. In fact, the only type of work that had a renewal rate higher than 50% was movies, which came in at 74%. If looked at with a common sense filter, it seems obvious that this suggests that the content creator clearly is no longer getting any benefit out of the copyright at that stage, and thus reverting the work to the public domain makes the most sense. So it was quite disappointing when we changed our laws in 1976 to the point that people didn't even have to register their copyrights in the first place, and never had to review, but that they automatically get a copyright for a ridiculously long amount of time (much longer than was available in 1959). Now, you can still register, and there are significant benefits to copyright holders for doing so, so many people still do.

So it's interesting to see Tunecore ask the musicians who use its service whether or not they register their copyrights, with only 56% saying they absolutely do (found via Hypebot, who incorrectly suggests that the others don't get a copyright at all): What's fascinating here, of course, is this means that there are 44% of the musicians on Tunecore who don't really see the need to have a registered copyright, and yet they still end up with a copyright which they're unlikely to ever use or enforce. That suggests a system way out of whack with the stated purpose of copyright law. This is content that can and should be available to make the public domain more fruitful and to enable new creative works -- and yet it gets locked up anyway, even though the very people copyright law is supposed to protect clearly don't value what copyright gives them. So why do we still automatically give them copyrights, thereby harming the public domain, while adding little to no benefit to the content creators themselves?

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Will Hollywood Kill The Golden Goose By Squeezing Netflix Dry?

Mike Masnick — Thu, 20 Jan 2011 08:22:39 PST

Back in December, we did a little back-of-the-envelope calculating to show how much more expensive it is for Netflix to license movies for streaming, as compared to just buying DVDs and shipping them out. The differences are staggering. And apparently it's only getting more expensive. The Hollywood Reporter has an in-depth article highlighting the love-hate affair that Hollywood has with Netflix, including details on the sorts of prices that the various players are demanding (and often getting) from Netflix. What's not surprising is that they keep asking for more and more (and some are still complaining that Netflix doesn't pay enough). But the numbers being thrown about are simply staggering. And at the rate they're going up, it will make it increasingly difficult for Netflix to actually afford all of those deals. Once again, it seems like a situation where the content providers are overvaluing their content, and undervaluing the services that make that content more valuable. That is, they look at how Netflix is succeeding (especially as they're failing to adapt themselves online), and they start to get jealous, and assume that Netflix really should be paying them more money. Basically, they don't think Netflix deserves to profit at all, since it's really all "their content." What they ignore, of course, is that (despite multiple weak attempts) they were the ones who failed to provide a compelling streaming service themselves. Either way, if Hollywood keeps pushing those numbers up, they may discover that they end up killing the golden goose.

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Movie Studios Purposely Crippling Rental DVDs In Misguided Effort To Get People To Buy

Mike Masnick — Fri, 10 Dec 2010 08:31:48 PST

What is it about the entertainment industry that actually makes them think that it's a smart move to take features away from consumers? They seem to focus on building business models by pissing off as many people as possible, and then wondering why those people seek out alternatives. Case in point, visual77 points us to the news that movie studios are increasingly offering up feature-limited DVDs for the rental market, and then encouraging you to buy the DVD itself if you want all the features. As Consumerist reports:

Consumerist reader Joseph brought this to our attention after he spent $3.99 to rent the DVD of Scott Pilgrim Vs. The World from Blockbuster. When he went to the disc's main menu and attempted to watch the Blooper Reel special feature, he was greeted by a screen telling him: "This disc is intended for rental purposes and only includes the feature film. Own it on Blu-Ray or DVD to view these bonus features and complete your movie watching experience."

This is the same thinking that leads the studios to seek to have rental places delay movies for a month. The entire business model seems to be centered on creating artificial scarcities that piss off people. Is it really so difficult for the industry to realize that they can make more money by adding value and actually delivering what people want?

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Viacom Plays The Insane Hyperbole Card In Claiming YouTube Ruling Would 'Completely Destroy' Content Value

Mike Masnick — Fri, 3 Dec 2010 18:03:00 PST

It should be no surprise, of course, that Viacom has now officially appealed its rather complete loss at the district court level concerning YouTube's liability for users' posting infringing works. What is a little surprising is the level of insane hyperbole Viacom chooses to use in its filing (included in its entirety after the jump) -- where it claims that if the ruling is allowed to stand it, would "completely destroy" the value of content:

If affirmed by this Court, that construction of Section 512(c) would radically transform the functioning of the copyright system and severely impair, if not completely destroy, the value of many copyrighted creations. It would immunize from copyright infringement liability even avowedly piratical Internet businesses.

To put it mildly, this is hogwash. First of all, it's exactly how the system has functioned since the DMCA came into being in 1998. If you see infringing content on a site, you issue a takedown and the site takes it down in order to keep its safe harbors. The idea that it would "completely destroy" the value of content makes no sense at all. First, you have to understand why it makes no sense that YouTube should be liable: it has absolutely no way of knowing, for certain, whether or not specific content is infringing. As it showed in the case, even Viacom itself had trouble figuring out what was infringing, and had sued YouTube over a bunch of videos that it had put on YouTube itself. How do you make YouTube responsible for determining such things when even the copyright holder can't figure it out? It makes no sense.

Second, the idea that the value of the work is "destroyed" again makes no sense. After all, the value of any particular content is intrinsic to the content and how any individual feels about it. The value of a piece of content doesn't change if someone puts it up on YouTube. Furthermore, YouTube quickly does remove content when it receives a takedown notice, so if Viacom is that concerned, it can send the takedowns. In fact, that's exactly what it did and the company complied. That's exactly what the law says it should do. On top of that, nothing in the DMCA's safe harbors immunizes those who actually upload the content, who are still very much liable for their own actions.

But the biggest evidence that Viacom's claims are complete and total hogwash is the simple fact that even after the ruling, there has been no "mass destruction" in value of content. As we've pointed out for years, the overall revenue for the entertainment industry continues to go up all this time -- though, perhaps less of it goes to the gatekeepers like Viacom. But those are normal market changes, not anything nefarious. Who knows how the appeals court will rule in the case, but Viacom seems to be going off the deep end with hyperbole in making its own case. They must be hoping that the judges don't do much thinking for themselves.

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Debunking The Claim That Giving Away Music 'Devalues' It

Mike Masnick — Fri, 22 Oct 2010 07:13:51 PDT

One of the popular claims from critics of this site is that giving away music (or even offering it much cheaper) "devalues" it. We've posted many times explaining how price and value are two different things. A lower price does not inherently change the value of a product. The simplest way to think about is the example we've used before: all of us value air a whole lot. We use it to stay alive. And yet, we don't pay for it directly. But I don't think anyone claims that this "devalues" air. Value is more a determination of the demand curve. How much you value something tells you whether or not you'll buy it at a certain price. If you value something highly, and it's offered at a lower price, you'll buy it at that lower price. That doesn't mean that the value to you has decreased, it means that you've received a surplus (you got more in value than you paid). That's a good thing.

Yet, recently, the whole "low prices devalue music" thing has come back again. There was the former record label exec who suggested selling albums at $1.60 and got trashed for wanting to "devalue music." Then, of course, we've written a few times about the indie label Asthmatic Kitty, which had worried that having Amazon offer its new album at $4 might devalue the music, since they believe music "is worth more than the cost of a latte."

Thankfully, Ian Port, at SF Weekly has come along to do a nice job of debunking those claims:

Several have argued that selling an album for less than a cup of coffee or a bottle of water would devalue the art of music. But people -- at least, young people who don't buy much music anyway -- don't judge the artistic value of music by what it costs. If they did, they would look down on artists who give away free MP3s and whose albums were obtainable on file-sharing sites. They don't.

The devaluing-the-art argument misses two other important points: First, coffee and water bottles can't be downloaded quickly and anonymously at no cost, while digital music can. Second, paying $3 or $4 for a tangible good (i.e., a cup of coffee you watched a person make especially for you) seems intrinsically reasonable in this day and age, even, I would guess, to a 13-year-old. But paying $10 to download a digital file that's a copy of a copy of a copy -- all of them made at no additional cost -- somehow doesn't.

I'm not saying musicians shouldn't be paid for their work. Selling digital albums for $1 or $3 would not stop superfans from paying $10 or $20 or even $50 for elaborately packaged CD or other hard-copy releases. Vinyl lovers will still pay cash money for virgin 180-gram translucent red plastic with big art. And even the $1 digital album, if it made piracy less attractive and increased sales volumes, could bring artists more revenues than they're currently getting.

It's good to see more people pushing back on the silly "low price devalues music" claim.

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Asthmatic Kitty Clarifies: It Never Meant To 'Guilt' Fans Into Avoiding Amazon

Mike Masnick — Wed, 20 Oct 2010 00:39:47 PDT

A few weeks back, we had written about the small indie label Asthmatic Kitty, who earlier this year, had impressed us with a really forward-looking attitude, when it came to the music industry, saying (in part):

I operate under the conviction that people buy records because they want to own them, not because they want to hear them. It is too easy these days to hear a record without having to buy it. I don't resent that fact, rather I feel we at Asthmatic Kitty embrace it through streaming albums and offering several free mp3s (even whole free albums). And why do they want to own it? They want it to illustrate to others their taste and identify who they are as a person. I also believe they want to be part of something bigger than themselves, they want to belong.

Our job is no longer to sell folks things they want to hear. They want an experience and to identify themselves as part of a community. Ownership then becomes a way of them supporting your community through investing in that community. Fostering that in an honest, transparent and "non-gross" way takes a combination of gracefulness, creativity and not taking oneself too seriously, while still taking art and music seriously.

So, we were disappointed last month when the label appeared to have sent out an email concerning the release of the band's biggest act, Sufjan Stevens, suggesting that Amazon's promotion of the album for $3.99 was somehow devaluing the music, telling fans:

We also feel like the work that our artists produce is worth more than a cost of a latte. We value the skill, love, and time they've put into making their records. And we feel that our work too, in promotion and distribution, is also valuable and worthwhile.

This seemed like a bit of an about-face, and we were also confused as to why the label would allow Amazon to promote its album if they didn't like the price. I also wondered if such promotional discounts even impacted the label's bottom line, as everything I'd heard suggest the labels still got the same cut on such discounted albums as they normally would.

John Beeler, who works for Asthmatic Kitty, now points us to an interview with the label's A&R guy, Michael Kaufmann, where he more or less admits that the label goofed in how it presented the email, and that it was never intended as a guilt trip or to suggest there was anything bad about the Amazon promotion. In fact, he now claims, they were actually excited about the Amazon promotion:

Unfortunately we poorly communicated this point. As Sufjan sings, "words are futile devices." When we first heard about the potential Amazon deal we were very excited to participate. For a small label like our own this was a great opportunity for essentially free marketing. It is a great program, Amazon is doing this as a loss leader, and therefore we still make the same amount of money we would have made at the regular sale price.

So I am sure many folks are thinking, "What in the world is our problem?" What gave us pause was that we were also offering the album at a higher price and we wanted to make sure our customers knew that it would be available for half that price on street date through Amazon. We wanted to be honest and transparent about the coming deal so that folks who preordered at a higher price didn't feel like they have been misinformed, or had a lack of information to make an informed choice.

We never wanted to impose any sort of guilt on our consumers. To me this is in large part of what the record industry has been doing wrong: criminalizing music lovers. However, the message when taken away from the intended audience and often taken out of context read as if we were guilting people into buying direct from us. This was certainly not our intention, and if we had known this was how it was going to be perceived, we certainly would not have sent the email.

What we wanted to do was provide choices. And in the process we thought it would be an interesting opportunity to give food for thought on the perceived worth (or value) of an album. But that discussion should have taken place in a different context. The intent was certainly not to criticize of Amazon's approach. Rather, we hoped to spark conversation and examination of our methods of doing business real time with our customers. We didn't realize this spark was going to blow something up in our faces. Again, what we intended as a cursory thought of the email became the main focus of its criticism.

That makes a lot of sense, and I apologize for contributing to blowing the story out of proportion, and apparently not providing the proper context, which I was unaware of at the time. I'm still a little confused about the claims in the original email about the "value" of music, but I understand that's a different discussion. In the meantime, the label seems back to recognizing that it's important to connect with fans in whatever manner possible, rather than guilting them:

We want them to have the opportunity to hear our releases. We want them to have the opportunity to listen. We want them to take active part in deciding what it is worth to them to own our music by deciding how they purchase. The last thing we want to do is dictate price or guilt someone into a particular point of sale. That is pretentious for us to think we even can. It is a complex mechanism that involves supply, demand and all the other facets that make a market economy. We have our opinion, but that isn't meant to be an authoritative statement.

We do want to encourage folks to support us, and they are supporting us whether they buy it from Amazon, iTunes, eMusic, Bandcamp or from their local record store. So ultimately their decision of where they buy and how much they pay is trivial, because they chose to support us in an age where it is so easy to just download for free.

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Label Complains That Amazon Devalues Artists By Making Music Cheap

Mike Masnick — Thu, 23 Sep 2010 12:18:05 PDT

This is unfortunate. Nearly two years ago, we wrote about the indie music label Asthmatic Kitty, which seemed to take a really forward looking attitude towards the new music market. In that interview, the label noted the reality of the new world, and why it was important to focus on reasons to buy, rather than assuming that people would just pay to hear music. This is what was said at the time:

I operate under the conviction that people buy records because they want to own them, not because they want to hear them. It is too easy these days to hear a record without having to buy it. I don't resent that fact, rather I feel we at Asthmatic Kitty embrace it through streaming albums and offering several free mp3s (even whole free albums). And why do they want to own it? They want it to illustrate to others their taste and identify who they are as a person. I also believe they want to be part of something bigger than themselves, they want to belong.

Our job is no longer to sell folks things they want to hear. They want an experience and to identify themselves as part of a community. Ownership then becomes a way of them supporting your community through investing in that community. Fostering that in an honest, transparent and "non-gross" way takes a combination of gracefulness, creativity and not taking oneself too seriously, while still taking art and music seriously.

Apparently, however, they do resent Amazon for making music available cheaply. Reader Colin points us to a recent article about how Asthmatic Kitty has sent out a letter to fans of artist Sufjan Stevens, complaining that Amazon's pricing is too low and asking people to go to Bandcamp and pay more instead. They do admit to being somewhat conflicted about this, at least:

"We have mixed feelings about discounted pricing," the label explained.

"Like we said, we love getting good music into the hands of good people, and when a price is low, more people buy. A low price will introduce a lot of people to Sufjan's music and to this wonderful album. For that, we're grateful.

But we also feel like the work that our artists produce is worth more than a cost of a latte. We value the skill, love, and time they've put into making their records. And we feel that our work too, in promotion and distribution, is also valuable and worthwhile."

While they're certainly not attacking Amazon or fans, the whole email does feel a little off. The simple fact is, if people want the music (as the label seemed to recognize last year), they can find it somewhere for free. Amazon's prices are meaningless when it comes to the "value" of the music. Price and value are not the same thing. Rather than complaining about the price that Amazon sets on the album, why not give people additional reasons to pay directly at Bandcamp -- such as providing valuable extras if they do. Or discounts on other merchandise. There are all sorts of positive ways to get people to find it worthwhile to spend money without making them feel guilty and bad for paying a price that is legitimately offered by a retailer.

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Don't Blame Your Community: Ad Blocking Is Not Killing Any Sites

Mike Masnick — Mon, 8 Mar 2010 11:09:28 PST

Every so often we hear about a random blog or website that freaks out and claims that ad blockers are "stealing" or somehow damaging websites. But it's quite a surprise to see a similar argument from a site like Ars Technica -- one of the top techie sites out there, which is now owned by Conde Nast. Over the weekend, Ars wrote an odd post claiming that ad blocking "is devastating to the sites you love." Ars decided to run an experiment where it blocked access to its content to any user using an ad blocker (with no warning or explanation). Not surprisingly, this pissed off a bunch of readers, and Ars now admits that it was a mistake in how it was handled -- but that it still believes ad blockers are harming sites.

Frankly, such a position is insulting (though, even more insulting was the way Ars staff responded to complaints in its comments, dismissing people who don't like their ads as not adding anything and actively telling them to go away). If you're reading Techdirt, and the ads we serve are not good, you have every right to use an ad blocker. It's your browser, do whatever you want with it. I, personally, do not use an ad blocker because I don't find most ads annoying -- but if you do, more power to you. You're absolutely welcome here on Techdirt.

If the ads are bad, it's bad for the advertisers

Back in December of last year, we signed an experimental ad deal to run a series of ads on the site, where a single advertiser would effectively have all the ads for a 24-hour period. As a part of that, there would be an ad at the top that temporarily "pushed down" the content for a few seconds, before pulling back up. Nothing was covered. Nothing prevented readers from getting the content. And the "pushdown" ad only showed once per visitor and never again. We went back and forth about it, but decided it was worth an experiment -- especially since no content was blocked or covered. I won't name the advertiser who was in the first test... but many of you did notice, and did not like it. We got a lot of complaints. So we killed the additional tests. I won't lie: these deals were for quite a bit of money -- a very large premium on the amount of money we typically make from advertising. But when we saw how annoyed our users were, we realized immediately what a bad idea this was and told the others who were scheduled to run similar campaigns, "sorry." We gave up a lot of money to do so, but what it came down to in our mind was that it wasn't worth it.

And when I say "wasn't worth it," I don't mean just to us or our community -- but to the advertiser. Most of the anger we saw over the original ad campaign wasn't directed at us -- it was directed at the company doing the advertising. So we told a bunch of companies willing to pay us a lot of money not that we didn't want their money -- but that they didn't want to buy that kind of advertising, because it would only damage their own brands.

Advertising that works, not annoys

Now, compare that to another "project" that we did late last year. As you may recall, UPS sponsored me doing a series of "whiteboard videos" about topics that we regularly talk about here -- one on the economics of abundance, one on the innovator's dilemma and one on the difference between innovation and invention. Before releasing these, I was actually a bit nervous about how people would respond. But these videos, which were clearly labeled as being sponsored by UPS, actually were a huge hit, and we received lots of compliments about them. Even more interesting? Numerous comments on the videos thanked UPS for sponsoring them and making them happen.

A similar thing happened when we launched our IT Innovation website, sponsored by Sun and Intel. In that case, those two companies were sponsoring us to develop more general content around a topic that we (and many of you) found interesting. The editorial control was still entirely our own, but Sun and Intel received branding on the website, and the ability to offer up some whitepapers to download in the sidebar. The end result has been wonderful, and we'll likely do similar projects in the future. Rather than annoying readers, we lined up everything in a way that benefited everyone. It really was a win-win-win sort of setup.

Those types of projects are the kinds that we love to do, and which add real value to the community and to the sponsors. Those are the types of things that we think all media publications should be looking at doing. Things that add value, not take it away. Oh, and if you're a company that wants to do a project like this that gets people excited, rather than annoyed by your brand, feel free to contact us.

Don't blame others for your failures

Mike Markson recently wrote up a blog post for entrepreneurs, talking about how every entrepreneur needs to learn the lesson that, whatever doesn't go right is your fault. It's a tough lesson for people (especially entrepreneurs) to learn. If you can't raise money, don't blame the investors. You were the one who failed to convince them. If you can't make sales, don't blame the sales people. You either hired the wrong sales people or didn't put together a compelling enough pitch or didn't have a good enough product. It's your responsibility as an entrepreneur to fix things. And I'm not saying this as a third party: I've been in both of the experiences discussed in this paragraph, and had to learn not to blame others, because that is the natural tendency. But it's not productive at all.

Along those lines, if you are running a media site, if you're having trouble making money, it's your fault. Don't blame your readers. Don't blame your community by telling them they're "devastating" a site by blocking ads or failing to pay for a paywall. As the producers of that site, it's your responsibility to do things to get that site paid for. If you don't like what we're doing on Techdirt, go ahead and block our ads. Sure, just like Ars, many of our ads are paid for based on impressions and we may make less money from those ads, but that's our problem and the problem of advertisers who aren't willing to do more unique, creative and compelling projects that benefit the community rather than annoy it. We want the advertisers, sponsors and partners we work with to get the best results possible in a way that everyone wins. And that's not by forcing people who don't want to see their ads to see them, or by pissing off our readers by blocking them if they use ad blocking. It's by taking on the responsibility ourselves to put together compelling programs that make everything more valuable for all participants.

There's lots of ways to value a community

And we value you as readers even if you're not seeing any ads at all. That's because you take part in the community. You share links to our posts. You comment. You tell others about what we've written -- and that's all incredibly valuable to us and the rest of the community -- much more than any CPM value we'd get from a few extra ad impressions. If you don't see an ad, that doesn't mean you have no value. Quite the opposite.

Claiming that ad blocking is harming sites is like the recording industry claiming that piracy (or home taping) is killing music. Or it's like the newspaper industry claiming that aggregators are killing them. It's passing the blame. If you run a company, it's your responsibility to put together a business model that works. And if people are somehow figuring out ways to do what they want where you don't get paid, then it means you're doing something that needs to change. A good business model is one where everyone is happy with the transaction, not one where one party feels forced or coerced into accepting something they don't want.

So, let's get past this idea of blaming others, and focus on building business models where everyone benefits.

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Behavioral Economist Dan Ariely Explains The Problem With The NY Times Paywall

Mike Masnick — Mon, 15 Feb 2010 06:48:47 PST

David alerts us to behavioral economist Dan Ariely's take on the NY Times' plan for a paywall, noting that people are unlikely to pay for what they've been able to get for free in the past:

The main problem of this approach is that over the years of free access, the New York Times has trained its readers for years that the right price (or the Anchor) is $0 -- and since this is the starting point it is very hard to change it....

Because we're not very good at figuring out what we are willing to pay for different products and services, the initial prices that new products are presented with can have a long term effect on how much we are willing to pay for them. We basically can't figure out how much pleasure the New York Times gives us in terms of $ -- so we go back and pay the same price we have paid before. This means that getting people to pay for something that was free for a long time will be very challenging, but it also means that if the New York Times were to offer some new service at the same time that they start charging, they might be more likely to pull it off.

Indeed. It's a point that we've tried to make in the past as well. It's nearly impossible to successfully charge for something that was once free, but it's absolutely possible to charge for something new, something scarce, that is separate from (or perhaps enhanced by) the free stuff. That's why we had hoped the NY Times would be smart enough to set up a business model around offering something else of value, rather than just a paywall, but it chose to go in the other direction.

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The Value Of The Link vs. The Value Of The Content

Mike Masnick — Thu, 21 Jan 2010 12:12:00 PST

At this point, we've probably discussed the newly planned NY Times paywall enough, but a blog post by Reuters' Felix Salmon made such a good point that it's worth highlighting. In talking about the paywall, he notes, as I did originally, that people have a lot less incentive to link to the NY Times as they know it will be harder for others to make use of that link. That I understood, but Salmon made a key point that I hadn't really thought about:

I suspect that what's going to happen now is that as the moment of truth approaches, bloggers will increasingly search around for the NYT's replacement as online paper of record: the way that blogs work is that they're backed up by links to reliable sources, and a link is worthless if the person clicking on it risks running straight into a paywall, unable to read the information in question. The NYT's journalism might well continue to be reliable, but its website won't be, any more.

That point highlights the difference between valuing the content vs. valuing the conversation (or even valuing enabling the conversation). The top folks at the NY Times (and many other publications) seem to over-value the content and undervalue the conversation. Thus, they think that the content needs to be paid for, but don't realize that they devalue their role in the conversation.

If you want to make the bet that the internet is more about content delivery than conversation and communication, then perhaps this makes sense. But, almost all signs point to the fact that it's the conversation that's the really important thing online, and devaluing that is almost certainly a mistake.

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Free Doesn't Mean Devalued

Blaise Alleyne — Thu, 12 Nov 2009 11:24:19 PST

The concept of zero took ages for societies to recognize, let alone understand. Mike has explained before how it's been a stumbling block in economics for some libertarian and "free market" types more recently. People who think about economics in terms of scarcity get upset when abundance pushes price down towards zero, as if the economic equation were broken. But if you flip the equation and think of it as a cost of zero, you realize that the trick is to use as much of those abundant goods as possible, adding value to complementary scarcities for which you can charge. Zero doesn't break economics, it just requires a different approach.

But artists and other creators hit a different stumbling block than libertarians (libertarian artists aside...). Zero is a problem because they feel like their art is worthless; they aren't hung up on scarcity, they're hung up on "devaluation." We've heard it from journalists. I hear it most often from fellow songwriters. The economic theory makes them feel as though their work is just viewed as some sort of cheap commodity. The thing is, value and price are not the same. Price is monetary value, but value is so much more than money. Price is what gets driven down to marginal cost, but value factors into the demand side of the equation. Expensive things aren't necessarily valuable, and valuable things aren't necessarily expensive. I value oxygen a lot, but it seems silly to pay for the air I breathe each minute, given the abundant supply.

More importantly, songwriters who get hung up on "devaluation" confuse recordings with music. They equate the two. A recording is not the song, it's just an instance of it, and a digital audio file is just an instance of the recording. Equating these reduces music to recordings to files. As important as recordings are, there's so much more to music. When you think of a song, do you think of the recording, or a memory you had connecting with the music? Do you think of the file and how much it cost, or the emotions, people and experiences that the music conjures up? The recordings are just a means through which we experience the music. Songwriters (of all people!) should know that the value in music is so much more than the price of a recording. It's not devaluing music to give it away for free, but it can increase its value by allowing more people to connect with it, to know, love and understand it -- to value it. It's through that experience that music is valued, not price!

Ironically, the underlying concern ends up being economic -- how will we make money? A price of zero for digital audio files doesn't mean that no one values the songwriting profession, or that no one is willing to spend money on music and keep songwriters in business. Sharing digital audio files makes the music more valuable and leads to more opportunities for monetization. When you give music away and connect with an audience, the opportunity for monetization is in the associated scarcities -- access, containers, community, merchandise, relationships, unique goods, the creation of new music, etc. -- by giving people a reason to buy. Getting hung up on "devaluation" is a distraction from the opportunity -- the necessity -- to experiment with new business models.

So, can we please stop complaining that free means devalued?

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Apparently Even VCs Get Confused Over Ratio Ownership Compared To Total Value

Mike Masnick — Mon, 19 Oct 2009 20:40:00 PDT

Venture capitalist Fred Wilson recently had a great post where he calls out a bunch of his colleagues in the venture capital business (not by name) for insisting on owning a certain percentage of a company in order to invest. Fred notes, correctly, that it's not the percentage that matters, but the actual value (and the appreciation of it) of the equity that one holds. In simplest terms: owning 10% of a $1 billion company is always going to be a hell of a lot better than owning 40% of a $1 million company.

But, what I find amusing -- and what Wilson doesn't mention -- is that this very argument is quite commonly presented to entrepreneurs from VCs. That is, when an entrepreneur frets about giving up a portion of his or her company, a VC will often make the point that "with our investment, we can take your company's valuation way up -- so even if you own a smaller percentage, your absolute value will increase." And it's a true argument (if the value increase happens). And, in many cases, it's the very same VCs who will use a line like this that then insist on owning a certain percentage. It makes you wonder if they believe what they're saying themselves, or if they're just using all of it as a negotiating tactic to take a larger cut of the deal.

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