New video: TedXWarwick: Friction is Fiction (the future of business)

18 minutes can be quite short, I think; I always feel a bit rushed as a consequence. But either way, I would love to get your feedback on what you think about this  fast-paced presentation; so please leave your comments below or email me.  To make this a bit easier, here is the PDF (18MB) of my slides: TedXWarwick Gerd Leonhard PDF. Provided under the usual creative commons attribution non-commercial license, just like all my other slideshows and videos. Most other TedXWarwick can be found here. You can download my book "Friction is Fiction" here (free and hopefully 'friction-less' PDF), or buy a dead-tree version here.

 

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Is traditional content licensing fit for the digital age?

It seems like every single day I read about how Internet and mobile companies are struggling to obtain the rights for what they want to do, whether it's about music, videos, TV shows, films, articles, text and images.

Here are some quick examples:

• GoogleTV just can't seem to get the TV studios seriously interested in allowing them to even search their online offerings, while...
• Netflix seems to have been more successful at tackling this wicked problem of content licensing, at least  to some degree, by - as cnet aptly puts it  - 'building relationships in traditional means' (I guess this means playing nice with Hollywood? Read the article - those are good, old-fashioned golf-club paradigms I'd say)
• Spotify is a fantastic music service, no doubt; very much along the lines of what Dave Kusek and me envisioned as 'music like water' in our 2005 book 'The Future of Music', and subsequently expanded on in my follow -up book, Music 2.0 (free PDF here). Spotify is not officially available in Switzerland but I have been successfully using it via a UK paypal account (after trying simfy.de and not getting anywhere with their really awkward and crash-prone iPhone app). Unfortunately, Spotify just can't seem to get the music labels and national rights organizations to bless their launch in many other territories, including the U.S. (read this Slashgear piece for more details ). All of this - you guessed it - because the record companies and the music publishers have not agreed on the licensing and deal terms for those countries, yet, and despite the fact that Spotify is already spending most of its VC money on paying for the music licenses. The fact is that there are no compulsory licenses available for on-demand streaming and flat-rate access services so unless these deals are negotiated nobody can touch it. Read about it here, or here (my Spotify-related blog posts), or via my July 2009 blog post on specifically why I think Spotify is unlikely to survive, or peruse the Zemanta-enabled links below for more enlightenment by some smart people

 So here is the point I am trying to make: I don't think a purely free-market-driven and  unregulated approach will work, in the future. Many large, incumbent media companies, publishers, record labels and other traditional intermediaries (i.e. the 'industry' as opposed to the actual creators) have every reason NOT to be flexible or even slightly forthcoming with their licensing terms and thereby support the deployment of new cloud-based, access-on-demand and flat-rated services. This is simply because their very existence may quickly and  irreversibly change the entire playing-field, and may make it very hard for the incumbent rights-conglomerates to continue to effectively control distribution (and by extension, advertising prices) in the same way as before. These changes aren't for the better when you currently run the entire show, so why should you agree?

This is why Warner Music Group's Edgar Bronfman has said many times that he will not license any unlimited streaming-on-demand service, why Netflix - despite of (or because?) its vast growth - has been back and forth with the Hollywood studios on getting more content deals done, and why Hulu is losing steam because of the studios' concerns over future cable-TV  revenue streams. Clearly, this is all about controlling and milking the market (i.e. the 'people formerly known as consumers') as long as possible. Yes, sure, just like the big telcos used to do before they had to let competition in. This is not about 'getting the artists / creators paid' or about fighting digital piracy - it's about maintaining a comfortable and lucrative monopoly position for the longest possible time. Which is OK, too - if it wasn't for the criminalizing effect it has on every single Internet user.

Most large, international media companies (disclosure: many of which are or have been my clients in some way or the other) and almost all major TV, film and music rightsholders are used to absolute control over the distribution of the works (and artists / producers) that they own or represent, and this simple fact used to result in getting much higher license fees - the other party had no choice but to take it or leave it; no license simply meant no (legal) business. This may sound somewhat reasonable in a mostly offline world (i.e. until  just recently, when the mobile Internet started to take of), but on the Net, in a truly networked society, this kind of thinking plays out quite differently: refusal to license at a price that is affordable (and / or financially viable for a  new, potentially huge but legally unprecedented player) simply encourages and produces piracy, because the desired content will become available anyway, legal or not, one way or the other.  The reality is that there is no real control of distribution of digital content, any longer, and all models based on re-achieving that control will fail miserably. Witness the 100s of illegal movie sites that now stream pretty much any movie on-demand, or the many new IP-cloaking and re-routing services (commonly used to access locally restricted content services) that are currently flooding the market. Not licensing content  to new players on actually survivable terms simply lets other, parasitic entities prosper by offering it without permission. Everyone loses.

My thesis is that - just like telecom deregulation - we urgently need new, open and public mechanisms that first significantly encourage and then possibly even enforce the licensing of copyrighted works for new services that require a new and more experimental approach, and that may end up serving the consumers much better than the traditional services. A 'use it or lose it' rule may be useful to that end; and as far as music is concerned I have been proposing a new, public digital music license for a long time.

In any case, I think that a system that continues to be based on deriving future benefits ONLY for the largest and most powerful rightsholders (again, by that I do not mean the actual creators, but the industries that represent them) is, in my view, simply unsustainable  and socially indefensible in this  dawning broadband-culture and in a connected, networked and interdependent society. We need better and more transparent EcoSystems and less EgoSystems; less empires and more Open Networks.

Let me have your feedback please! 

Note: if there is some kind of problem with my comment box on this blog, please use Facebook or Twitter for comments, for now, or email me and I will post them.

 

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Cross-posted from my Techdirt Guest Post: The Future Of Content: Protection Is In The Business Model - Not In Technology

Last month, Mike Masnick invited me to do a guest-post on Techdirt.com one of my favorite online destinations. It went live last night and is getting quite a few comments - check it out here. Comments and discussion is here.  Retweets are here.

Image by gleonhard via Flickr

If I received a dollar every time I get a question along the lines of "how can the content industries compete with FREE?" -- I would be traveling first class everywhere I go. Underneath this question I often find my favorite toxic assumption: "less control over distribution means less money."

This belief is as tired as it is poisonous: enforcing control (when trust is really what's needed) will yield instant disengagement, which swiftly and surely will translate into dwindling revenues -- as the music industry keeps proving again and again. If you believe in control rather than value and trust, the content business of the future is not a good hunting ground for you.

Take eBooks: despite clear and present proof that DRM has proven disastrous in selling digital music (and now is pretty much history), technical protection measures are still being looked at to 'secure distribution'. When will they ever learn?

The thinking that the digital distribution of content must be controlled to achieve any kind of reasonable payment is fundamentally flawed because of this not-so-futuristic realization: in our open, mobile, social and digitally networked economy, content publishers need to offer their goods in a way that no longer centers on the distribution of units (digital or physical) as the key revenue factor. The idea of just selling copies is toast - selling (i.e. offering) access is where the money is. Kevin Kelly said it years ago: we must sell what can't be copied, what's scarce, not what is ubiquitous.

The irrefutable trend is that the window of opportunity of 'selling copies' (be it iTunes, eMusic, the Kindle or the iPad) is rapidly closing. The real opportunity, the TeleMedia Future, is in selling access and presenting a constant stream of up-sells (i.e. added values and offering content-related experiences). Remember, as Mark McLaughlin so righly pointed out in the HuffingtonPost recently, consumers have never really paid for content - they paid for distribution! And now, distribution means Attention and Access.

Imagine when buying access to eBooks, you wouldn't just pay for the authorized enjoyment of the authors' words, but you would also gain instant access to highly curated and socially-networked commentary, a fire-hose of meta-content provided by your most important peers and friends that may also be reading these books, and their ratings, explanations, slide-shows, images, links, videos, cross-references -- and maybe even some direct connections with the author or the publisher. In an access-based, bundled and cloud-centric content ecology, being a legitimate and authorized user enables engagement, conversation, relevance, personalization, meaning... i.e. it unlocks really valuable benefits for the user. Connect with Fans + Reasons to Buy (as has been mentioned on this blog a few times, before, I believe) - that's where the money is.

In music, streaming-on-demand will without a doubt be available 'for free' (i.e. bundled and packaged by 3rd parties) or advertising supported, while many added values above and beyond the mere reproduction of music will not - no matter whether WMG's CEO Edgar Bronfman thinks it's a good idea 'for the industry' or not.

Just imagine where an access-to-the-cloud model could go next: if I want a high-definition version of my favorite opera or that Blue Note Jazz Club concert from last night I could buy a premium package that provides it. If I want to share my personal play-lists, ratings and comments with my Facebook friends, and get access to their content, as well, I can add the 'social network option' to my package. If the price is right (micro-transactions, anyone...?), I'll buy - because I am already hooked on the music.

The music industry needs to ask itself this question: if a permanent, unprotected download of a song would cost only $0.10, or if an ad-supported version of a on-demand, all-you-can-eat music service would be seamlessly bundled into your mobile phone subscription - would anyone still bother to scour the web to find badly ripped, virus-laced tracks for free? Would we need 3-Strikes or HADOPI or Digital Economy Bills?

Yes, I know, that price point sounds ridiculous for those record label CEOs that used to sell CDs for 15-25 Euros a piece, but hang on a second: if they can get 95% of the users to buy access at a much lower price (and almost zero cost of duplication and distribution!), and in that process really engage with them, the fans would also do the marketing for them - i.e. share the links. Sounds like a great model to me. But of course: selling access at a much lower (or feels-like-free) price to quite literally everyone only makes sense if it actually connects directly and smoothly to a multitude of up-selling possibilities, such as interactive versions of eBooks, high-definition versions of online radio shows, albums or concerts, in-depth analysis and audio/video commentary for news, etc.

Now, content storage is starting to move from my own computer or my hard-drives into the cloud - and I think this is very good news for content creators, publishers and rights-holders because it makes it even easier to engage and up-sell to those new generatives. Crucially, the answer to the constant quest of monetization is also in the cloud: I believe most people will soon stop sharing the actual media files (since they are getting increasingly larger and larger, and therefore more unwieldy) and will share only the links, the bookmarks, the metadata or the tags, and that should be a boon for the content industries.

The perfect test bed for 'Media as a Service' (MaaS) may unfold soon, with Apple's new iPad or Google's Tablet (hopefully). Extending the concepts mentioned above, rather than blocking my wife or my kids from sharing an eBook with me it would be much more logical if I could easily read her book, as well; but beyond the 'copy of the words' all else would not be available without a micro-transaction on my part, i.e. I would not have instant access to the cool video clips, the updated links, the footnotes, the ratings, etc; i.e. all that valuable context that will make eBooks so much more powerful would be out of my reach until I validate my own access.

The bottom line: content sharing isn't the real problem: high price points, outmoded, pre-web toll-booth concepts, broken relationships and processes, low values for high prices, bad technology and service, and utter lack of conversation and engagement are.

Here is my message to publishers and content owners: lower the prices for access to your content to the point of unanimous excitement, use open standards and technology platforms that work for everyone, everywhere; bundle and package as attractively as you can (then: repeat). Team up with ISPs, mobile operators, advertisers and device makers.

Remove all the reasons that your users may have to avoid your new toll-booths and skip the desired conversion to 'paid' - the lower the hurdle for legitimate usage and paid engagement, the higher the added values, the less you will have to worry about 'competing with free'.

33 Comments | Leave a Comment..

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Social Media and the Future of Football (Slideshow)

This slide-show is the public version of a presentation I gave for the pan-European football association yesterday, in Cyprus. Football (and most other sports businesses) needs to embrace the web as a platform for going directly to their target markets - in parallel to their traditional broadcasting deals - and help the players connect with their fans and followers, in every aspect of the game, and its production, marketing and distribution. It's no longer just The Networks that matter - it's also The Networked - and guess which one is shrinking in size, viewership and future relevance?

Mobile, social, real-time is where it's going; control fades as the top concern while trust becomes tantamount. Who owns the relationship with the fan and user fka 'the consumer' - the broadcaster or the football club...or the players, themselves? TV is completely converging with the Internet, and a lot of branding and advertising funds will shift towards digital, social, video and interactive in the next 2-3 years -so what does this mean for a the football ecosystem? Where is the new money? Why is selling the experience - in any and all its shapes, including augmented / virtual reality - more important than controlling the flow of 'copies' and raw content on the web? How to protect a club's intellectual property, content and media?

Social Media and the Future of Football

View more presentations from Gerd Leonhard.

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Shifting to the Open Network Economy: my presentation at the Fundacao Dom Cabral CEO event in Sao Paulo

It was a great pleasure to be invited to contribute to the Sao Paulo / Brazil-based Fundacao Dom Cabral's innovative CEO leadership program, led by my colleague and Swiss-Brazilian collaborator and leadership guru Didier Marlier, as a visiting professor. Below is a fairly large and long (95 pages - do not print!!) slideshow with most of the important stuff I presented; needless to say this was not the usual 45-60 minute session but took pretty much the entire afternoon. I was extremely impressed with the organization and their hosts (FDC / Dalton Sandenberg) as well as with the fast and agile minds of the CEOs that attended - we had some very inspiring conversations. And Caipirinias, too;).  Update: Low-res download of PDF here: PDF 11.5 MB Open Network Economy Gerd Leonhard FDC SP Low-res

Enjoy. Share. Retweet. And get my free iPhone app before it turns 'freemium'.

Shifting to the Open Network Economy (FDC CEO Event in Sao Paolo)

View more presentations from Gerd Leonhard.

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UK government: disconnect those that share, return to Total Control asap?

Bizarrely, the UK government, led by Lord Mandelson, the UK Business Secretary, seems to have done a 180-shift in the past 2 weeks by once again proposing to disconnect alleged file-sharers from the Internet. In other words: if the content industry can't get people to buy music or films, or other so-called content, by offering relevant, fair and affordable new ways to do so, maybe the government can help to force people back into buying the old-fashioned way, i.e. by the unit / copy?  Rather than actually change the industry's business model, let's just change the consumers' habits - problem solved!

If you want to be puzzled, just read the UK government's announcement (PDF via Arstechnica). The Net is buzzing with news on this topic; see below. The FT has a good recent update called 'Claws & Effect' here; wherein I read (with little surprise): "Senior music industry figures, such as Lucian Grainge, head of Universal Music International, have been influential in mobilising Westminster to act". Lobbyists succeed again?

The bottom line can be summarized like this: "Let's just see if we can still force people to consume music in the way that suits us better". Never mind that the very similar French Sarkozy-'Bruni' proposal was just recently deemed illegal by the French Constitutional Law as well as by the European commission - maybe some good lobbyists can revert that, as well?

Here are a few quotes I have collected on this topic:

Those who like this idea

"John Kennedy, chief executive of IFPI, the organisation representing the recording industry worldwide, says: “It is not enshrined in any law anywhere that one has the right to steal music, films and books. There is a crisis in the economy, and as well as respecting rights we have to think about the economy and jobs” (FT) Related read: John Kennedy at RSA

“We welcome the government’s recognition that this problem needs to be addressed urgently, so today is a step forward that should help the legal digital market to grow for consumers,” the BPI, the music industry trade body, said. “The solution to the piracy problem must be effective, proportionate and dissuasive” (FT)

Those who don't like this idea

"Charles Dunstone, chief executive of Carphone Warehouse, one of the UK’s biggest providers, says: “We are going to fight [being forced to disconnect customers] as hard as we can. Our fundamental duty is to protect the rights of our subscribers” (FT)

"A Virgin Media spokesperson said: “We share the government’s commitment to addressing the piracy problem and recognise that new laws have an important role to play in this. But persuasion not coercion is the key to changing consumer behaviour as a heavy-handed, punitive regime will simply alienate mainstream consumers. The government should be ensuring a balance of action against repeat infringers and the rapid development of new legitimate services that provide a compelling alternative to illegal file-sharing" (FT)

"Internet provider TalkTalk said it would "strongly resist" government attempts to oblige Internet service providers to act as Internet police. TalkTalk said disconnecting alleged offenders "will be futile given that it is relatively easy for determined filesharers to mask their identity or their activity to avoid detection" (HuffPo)

One of my favorite quotes, via Labour MP Tom Watson:  “Challenged by the revolutionary distribution mechanism that is the internet, big publishers with their expensive marketing and PR operations and big physical distribution networks, are seeing their power and profits diminish. Faced with the choice of accepting this and innovating, or attempting, King Canute-style, to stay the tide of change, they’re choosing the latter option, and looking to Parliament for help with some legislative sand bags” (FT)

Some important facts and other related snippets (quotes from various sources):

• Proposed EU telecommunications legislation includes a clause stating that internet access is a fundamental human right (FT)
• In Ireland, internet companies UPC and BT Ireland have refused to comply with music companies’ requests to cut off suspected pirates (FT)
• The Sunday Times claims that Lord Mandelson, the business secretary, has been persuaded that pirates should be deprived of internet access altogether after dining with “Hollywood mogul” David Geffen *via FT (no surprise here, either;)
• Petition (38degrees)
• OpenRightsGroup Statement
• UK Pirate Party comment.

 I have been saying this since 1999: the solution to illegal filesharing is to legalize the way that people share content online, to create new, public, compulsory licenses for content, starting with music (yes, just like the Radio / Broadcasting license), to create fair and flexible licensing standards, and to reduce control in favor of compensation.

The UK's trend towards increased criminalization is just plain old wrong, technologically absurd and utter fantasy, culturally 500% retro, and socially unjustifiable. Techdirt's Mike Masnick sums it up nicely: "You may kick people off the internet, but does anyone honestly think that will actually get people to buy again?"

Here are some of my many contributions on this topic:

• Compensation not Control: Video, PDF on slideshare
• Music Like Water (essays)
  
• My comment on Paul McGuinness's version of the Internet (Midem 2008)

Once I am back from Japan I will comment further. In the meantime... please comment or retweet using the tools below.

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Arianna Huffington on the future of journalism (video)

She's got some great points here. If you want to watch the entire U.S. Senate Hearing on the Future of Journalism, go here.

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New York Times Publisher on Whether There Will Be a Print Edition in 10 Years: "Walled Garden Era is Over"

Link: New York Times Publisher on Whether There Will Be a Print Edition in 10 Years: ‘We Can’t Care’... via FolioMag.com.

"Embracing the hyperlink ethos of the Web to a degree not seen before, news organizations are becoming more comfortable linking to competitors acting in effect like aggregators. Fundamentally we are addressing a common desire for comprehensiveness. The desire of people to find the news and information that they want from their most trusted sources. The era of the walled garden is over."