Three Minutes With Jack Valenti

from the Jack-uses-Kazaa dept

PC World has an interview with Jack Valenti where he does his usual act. He dances around certain questions, completely ignores others, and gives misleading answers to a few more. It’s classic Valenti. He also rewrites history a bit in a discussion of the VCR, leaving out that whole embarrassing “Boston strangler” part, and insisting that the lawsuit against the VCR was really part of a (failed) strategy to get Congress to levy a tax on every VCR tape. In the interview he also says that he logs onto Kazaa every week or so “just to see what’s happening”. But, the best part, is when he says (in his usual colorful language): “There is no business model ever struck off by the hand and grain of man that can compete with free. It can’t be done. If I have a Pizza Hut and I’m selling pizzas at $1.50, somebody puts up a Pizza Hut next to me and gives them away, who do you think is going to get the business?” I’ve used the pizza analogy myself in the past, so I’m glad that he likes it as well. Pizza, of course, is different than content, because it isn’t infinitely reproduceable at a marginal cost of zero – but I think Valenti needs to relearn his business lessons. If someone is competing against you by giving away something for free – then, clearly they have a bigger business model in mind, and the free pizza is acting as a promotion for something else. If they’re just giving away pizza, they’ll go out of business. But, if they’re giving away free pizza in order to entice people to buy something bigger, it’s a different story, isn’t it? Companies give away free things all the time. It’s called advertising. In the case of the content industry, since the content can be copied and distributed for free – it’s promotional material that doesn’t even have variable costs. The content industry needs to take a step back and see the bigger picture to find a new business model. Just because Mr. Valenti isn’t creative enough to figure it out, doesn’t mean it’s not there.

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Comments on “Three Minutes With Jack Valenti”

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Michaela Stephens says:

Making file-sharing profitable for both artist and

I’ve been thinking about this problem of online music distribution, and I came up with an answer that will both prevent illegal file-sharing but will minimize unfriendly DRM features. The answer is to encourage LEGAL file-sharing.
Coming up with legal file-sharing will take some major thinking outside of the box for big record companies, because their focus is on getting money from customers, and making money off of artists, and avoiding paying artists what they are worth. However, if you start thinking from the perspective of the customer, it is easy to arrive at legal file-sharing as a solution.
I’ve written to you before that I want to start an online music business and implement my solution, but I don’t have much financial resources or programming experience with music files to do it all myself, so I will tell you about it in the hopes that you will steer some good programmers my way who would be willing to help. (At present, I’m in the middle of figuring out expenses and where a break-even point would be, so I don’t know how much compensation I could offer.)
I analyzed how music distribution today has developed inefficiencies and then I envisioned what conditions would create an ideal flow of music from a musician to customer over the internet. I came up with a few theorems to describe an efficient distribution that would take into account both the desire of musicians for financial profit, and the desire of music lovers for inexpensive music with almost no restrictions.
Theorem 1: Distribution without music is just as worthless as music
without distribution, so it follows that those who do distribution/promotion should divide their sales equally with the artists whose songs they sold.
Theorem 2: The more people who distribute/promote an artist, the more popular the artist.
Theorem 3: The lower the price of a song, the easier it is for a person to justify buying it.
Theorem 4: The chances of a song file being downloaded increase directly in proportion to the number of websites online that offer it for download.
Theorem 5: The chances of a song being downloaded on a website increase with the popularity of that website.
Theorem 6: As a musician becomes more popular, the market becomes more and more saturated with the musician’s popular song. Sales obviously go down. In response to saturation, and in order to continue the flow of income, the musician must create more music.
Theorem 7: Most file-sharers wish there was a way to legally download music from each other’s computers, pay a fair (read “low”) price for the music, and know that the money he paid was split fairly between distributor and artist. They want the sale to directly help the artist.
Corollary A: When the price asked for legal music downloads is too high, music file-sharers will continue to share music files illegally.
Theorem 8: If a distributor offers downloadable music files at a low price, AND enables a music buyer to recoup the cost of a song by selling it to friends (or even profit), then the music buyer will act according to theory 7, not pirate the music, and the music buyer will be an aggressive promoter of the music to their friends.
Theorem 9: A person is more likely to respond positively to the recommendations of their friends than to the marketing efforts of a music distribution company itself. The friends have more credibility, more sway, more of a relationship, etc. Allowing legal file-sharing would capitalize on this friend network, allowing the spread of music more quickly.

I plan to construct my business using these 9 Theorems of Efficient Music Distribution using the Internet. I would offer all music for download. Each song would be programmed to last a set number of days, then it would disappear. (My tentative number of days would be 15.) When the user downloads music off of my site, they will also be able to print off a statement with a barcode for each song. They must send in this statement with money for the songs they wish to buy. Price would be a dollar per song, period. They can send cash or check. (I don’t want to have people worrying about whether my site is secure enough for credit cards, or worrying about employees stealing credit card data. Also, it would allow younger people without credit cards to buy music.)
Upon receipt of orders and money, each order statement would be scanned to determine which artists receive pay and how much. Of each song dollar, half would belong to the artist, half would belong to my business, because my website distributed the song. People who sent cash would immediately get an email saying their order and payment was received, and for which songs. Then I would email some kind of software key to turn the expirable music file on their computer into a non-expirable music file. I would burn the songs they ordered and paid for onto a cd, and then I would enclose a software program that would allow them to sell those songs on the internet to people, on condition that they 1) sell it for the same price as they bought it, 2) that they give half that money to the artist, 3) and that they also send the buyers a cd with the bought songs and music-selling software. People who sent checks would immediately get an email saying we had received their order and payment, and that we were checking to see that the check was good. Once we find the check good, we email them that payment was received, and then email them the software key and sent them a cd with the songs and the music selling software.
The advantage of this business method I have described, is that it can speed up the spread of music. The other side of that coin is that I will have to recruit artists way faster than the present music industry does. However, I also have another plan up my sleeve for concerts.
I’d like to call my business Emuz (pronounced EE-mooz) and have an emu as part of my logo. So far I have about 7 pages worth of business plan I have written down, with a plan for incremental implementation of improvements and features, but I’ve given you the general view of it all.

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