Precursor to Freemium?

On June 28, 1915, the Brooklyn Tip-Tops of the Federal (baseball) League hosted the Chicago Whales in a contest at which all would be admitted for free.  Brooklyn owner Robert B Ward had a substantial bakery in New York.  Perhaps he figured that more fans would see his outfield ads for bread and so forth.  Of course we know what happened to the Brooklyn Tip Tops and the whole Federal League.

Wagons Circling: APM Marketplace Tech Report Rings Our Bell Twice This Week

In the past week, Marketplace Tech Report from American Public Media has been picking up on some themes that have been voiced on Chronicle of a Solution, and nowhere else.  First, on October 13, 2011,   Max Dawson, professor of radio, TV and film at Northwestern University, in critiquing Ultraviolet (the new digital rights authentication and cloud-based licensing system introduced by some major motion picture studios), said:

"Its success will largely depend on two factors. If this requires you to ditch your entire media collection you got through iTunes, the consumer will reject it. The other thing is compelling content; neither "Green Lantern" or "Horrible Bosses" falls into that category. As much as I'd like to see studios be able to achieve success, I'm not too sure this is the right solution."

These problems cited by Professor Dawson are problems we've highlighted here.  And of course are problems that only the DCE can fix.    


First, you do not have "to  ditch your entire media collection" with the DCE's patent-pending backward-compatibility method.   In fact, the DCE is somewhat counting on your not ditching your old media collection.  We want the vinyl records, VHS tapes, everything that was legally issued.  All of those past issues have some value.  We would not want those legacy media items to be off-exchange any more so than a stockbroker would want your grandmother to keep her old shares of IBM in a coffee can under the sink. *


Second, we have long said, going back to our US patent application, our original white paper and our Google book case Amicus brief,  that we are the only answer to the problem of selection.  We even solve the ultimate problem of lack of selection, the orphan works problem.  Videos which are registered at the request of the buyer and then immobilized in the cloud, become a modern  Alexandrine Library (with music and books included of course).  Next, our method of verification enables this library to be loaned digitally.  Finally, in contrast to the limited offerings for sale at Ultraviolet, the DCE creates a market of upwards of every movie ever commercially released, to the extent that there is at least one DCE user who is willing to part with a movie they own for the right price, (in the securities industry, this is called an offer).     


And then today, again on the radio, discussing "the Cloud":

Of course, "cloud" is a woefully inaccurate name for what's going on here. It's not up in the sky, floating, ethereal. We're talking about real computers owned by someone else, stored somewhere else ....  [Security expert Cristofer] Hoff says don't think of it like meteorology, "It's kind of like a bank. You give them stuff that matters to you, you expect that they'll take good care of it."

~Marketplace Tech Report from American Public Media, October 21, 2011

We at the Digital Content Exchange have been making this comparison for a long time.  The comparison is contained in the very header of this blog.  Our white papers and slide decks always make reference to banking or securities. And we have been a virtual Paul Revere on counterfeit media.     


The question for you if you are in the media or tech industry becomes this: "Now that you recognize that there is a banking-like quality to a cloud, are you so sure that your media executives/developers know everything there is to know about handling fungible bank-like commodities that have value?  Or do you want to bring in someone who has worked with these types of digital assets all his life?  Is there nothing you can learn from the securities industry, which is well-recognized as having learned how to handle and move fungible commodities and prevent forgeries?".  


*The backward compatibility feature of the DCE solves "the legacy problem".  Note that the legacy problem has been successfully overcome by the securities industry. Shares of stock were voluntarily turned in for registration and immobilized so that the shareholder could do more with them, more efficiently. Registration was preferred by users because the advantages of the new technology outweighed the old user preferences (including the illicit user preference of being able to use forgeries in place of authentic).  The addition of physical items to a board of exchange is no big deal . It has been done with physical shares of stock and is done at the bank every day when you turn in cash. The DCE grants access to people's music through cloud storage. Just like a bank or a stock brokerage gives its customers access to their accounts on the internet.

Worldwide multi-million dollar fencing operation for illegal music sets up shop today

iCloud launches today. The iCloud is an example of content owners (the big 4 music labels) encouraging people to illegally download material. (Yes, you read that sentence right).  This is because there is no verification of legal ownership in the iCloud.

As of today, we become the sole voice on the Internet for the proposition that the cloud should not be a massive fencing operation for illegally obtained stuff.

Why media streaming apps need to be licensing-free to survive

Recent analysis has it that Spotify is incurring "gargantuan" losses, $68 million in four years.  And this is even with paying artists bupkus.  And it is all being blamed on licenses with content providers which are crippling Spotify and, according to some prognosticators, bent on killing it.

This highlights another superiority of the digital content exchange. We don't need no stinking licenses! If you understand the Amazon cloud player, if you understand Google music beta, you understand the DCE. We put stuff that you own in the cloud and serve it back to you. (And let you sell it to other users and let you lend it to friends or strangers just like a library would do, i.e., on a one for one basis ... no copies!). 

But unlike Amazon and Google we make sure you really own it. So, whether it is a video, a book, or a piece of music, we are providing a basic service to a user, are doing it on an ethical basis, and doing it better than anyone else because we are the only ones that have the securities industry background (where they really know how to handle and move fungible commodities and prevent forgeries).

That being said ("we don't need your license"), we invite content owners to participate. It is very easy in this system to pay royalties to people that want to cooperate in helping us scale up and keep to scale long-term. Nonetheless, just like IBM cannot prevent IBM stockholders from trading their shares of IBM, no one can stop a user from doing what he or she paid for when he became an owner of a media item.

Once everything that you've ever bought in books music and video is placed on the exchange, immobilized in the cloud, it becomes the lingua franca of your media collection. Content owners can then come in and authorize as many units of new material as they want, and charge what they want and get nearly 100% of what you, the buyer, pay them.

Moral of the story: Spotify and its ilk have overpaid for licenses in an attempt to get to scale.  In helping Apple get to scale, the Big 4 have given a license which rewards anybody who grabs free music by "matching" the counterfeit in the cloud.  You, the user, will bring the DCE to scale, piece by piece by joining the DCE. The more the DCE acquires scale, the more it will thwart the usability of counterfeits and the more it will provide buyers who will, in turn, provide  struggling artists, authors and filmmakers (who get to keep nearly 100% of all buying and borrowing fees) with a steady income.

Pandora catalog vs. Spotify's: Small, Smaller, Smallest

Pandora has 800,000 songs available from 80,000 artists. How many artists do you know (and like!) that have only recorded 10 songs in their career to this point? That has to be a woefully incomplete catalogue.

I first noticed this about Pandora when it kept trying to serve me the same song from the newly-released Keep an Eye on the Sky … the Big Star box set. They would only play one track from the 120 or so on the set. I smelled a screwed-up major-label licensing restriction, and I think I'm right.


Spotify, oth, reports 15 million songs. A lot better, right? Still, I and other people have noticed huge holes in its catalog.  And that's a self-reported number, as opposed to Pandora's which is a public company and therefore has the SEC looking over its shoulder.

Upshot: Pandora as a radio station is doing basically the same thing FM radio did in the 80s: A&R'ing music for you based on what it thinks you'll like (plus what they can affordably license). Somebody else is still making unholy choices for you, just like the old days of FM. You're only getting the tip of the iceberg in this "algorithm".

http://en.wikipedia.org/wiki/Spotify
http://techcrunch.com/2011/02/11/pandora-files-to-go-public/

The Digital Media Ecosystem and the Restoration of the Viability of Individual Copyrights

Contra Lefsetz on Netflix

"They could go back to buying DVDs, but that's still a bad deal compared to Netflix."

 ~Bob Lefsetz

You go over to a buddy's house. he tells you, "Let's watch [X title]." Do you care if it's rented or "bought"? Of course not.  Does the fact that its rented give you a better "experience"?  Of course not. If you owned that video for 24 hours and sold it back to a completely fluid used market, would it make a difference to you?  Of course not. A long as that video was there when you wanted to watch it.  

Transfer of ownership via cloud immobilization is easy to do.  It's what they do in the financial world with stocks and digital banking. It just hasn't been tried.  Because influential critics like Lefsetz think "renting" and "streaming" are something magic.  The magic, instead, is in the way the Internet allows us to account for which users have rights to content, and which users don't.

Lefsetz is making a fundamental error. He is confusing modes of delivery with types of ownership.  A user doesn't care whether a video is owned or rented.  He just cares, "Am I watching this when I want it?".  When a record store was on every corner of every city block, did people care that it was "bought" rather than "rented"?  Of course not.  It was called "access".  You bought a loaf of bread.  You bought a Beatles record next door to the bakery.  You were listening to the music then and there, when it was hot.  That's all you cared about.

You can own a DVD and stream it and then sell it back to the pool if you think you'll never want to watch it again.  But if you want to watch it again, it's better to own it.  It's your choice.  But: do you think the Internet is not up to dealing with a market where everybody owns a DVD for a length of time determined by them and then resells it by a click of a button? Or lends it to a friend?  Or lends it to a stranger?   Have you not heard of "cloud computing"?   When you put stuff up in a cloud it is immobilized.  It's one-for-one.  There is no need to "rent".  Ownership changes hands within an instant.

Rental itself was born in a physical era.  Yes, we can accommodate rental on a digital exchange basis, but it is not a magical talisman.  In order to rent a copy to its customers, Netflix owns copies.  Netflix is simply a library, no different from the one in your neighborhood.  It buys stuff.  It lends it out.  Streaming is just one of several ways to distribute the content to the borrower.  The point is that we need to account for each copy and keep track of who is a Verified Accessor of that copy so that the person who is the Verified Accessor can have his or her access switched on when they go to the cloud to stream it.  When the Netflix movie is returned to Netflix then Netflix is the verified accessor until the next time it is rented out.

All of this is possible through an Exchange.  We have one patent-pending, and an embodiment in beta-test right now.  It's called the Digital Content Exchange. Once the Digital Content Exchange is up and running, it will have a log of everyone who can watch The Kings Speech, from the cloud, at that moment.  That "right to watch" could be by virtue of ownership (digital download or physically-verified DVD), renting (Netflix) or borrowing (New York Public Library).  If you own you can also download to as many devices as you like.  If you are renting or borrowing, you can only stream (the Library and Netflix don't want you making copies of stuff you borrow, and the DCE will abide that rule). It's that simple.

And now, Lefsetz:

For those who say people will never rent music, remember people rented videotapes, bought DVDs, rented DVDs and now stream movies. Don't tell me what the people want, they don't know. Furthermore, what made streaming so appealing was two breakthroughs, Netflix-compatibility in television hardware and the iPad. Yes, imagine if the music industry had enabled tech innovation instead of thwarting it, maybe it would have been prepared for the future.

In case you've been under a rock, yesterday Netflix split streaming from renting, instead of one low price you got a whopping increase if you still wanted both. People are complaining, but as stated above, what is their alternative? They could go back to buying DVDs, but that's still a bad deal compared to Netflix. As for renting, where you gonna do it? The video shop has evaporated and yes, we've got coin-operated rental machines, but inventory is limited and you've got to leave your house.

So I'm laughing. It's the cheapskates revolting.

But they've got an alternative, streaming.

 

Unfortunately, the movie business is leading.

The music business could have killed the CD, could have driven people to subscription, but afraid of the future and wedded to the past it refused to do so to its detriment. We'll see what happens now.