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Why The Entertainment Industry Is Wrong About Everything Pt. 2: Sports Broadcasters

OK, I say “sports,” but I’m going to stick to the area I know best which is football (or “soccer,” if you swing that way). I think the issues are pretty much the same for all sports, mind.

Sometimes the Swiss aren't so neutral.

In some ways, I think there are easier issues to deal with here than music or film. Sporting events have the greatest audiences on the day the events are taking place – either live or highlights; only important matches or ones with extraordinary outcomes tend to make much impact in, say, DVD sales. Clubs can monetise the audience over the longer term through season tickets, merchandise and the like, whilst broadcasters tend to rely on subscription fees and the odd one-off payment for special events. And in this episode, I reckon there’s an answer to that whole interweb “problem.”

Now then. 20 years ago I was one of the first people I knew with a Sky box. For about £18 a month I could get The Simpsons, the footy (in every division and country in the world just about), “movies” (or “films,” as they used to be known) piped right into the house.

Everyone remembers that episode, right?

And it was ace. I found friends that would magically appear on a Sunday for the treble bill of football, The Bill omnibus and The Simpsons – popularity guaranteed for under 20 spons a month. Not bad.

Flip forward 20 years and surely things have got even better, right? I mean, that’s what progress does, doesn’t it, make things better? Nope. As a consumer, things are rubbish. Let’s say I want to be able to watch all the games for my chosen team – I only care about club football these days and I don’t have time to watch everything. First, I search for things like “Club X TV fixtures” or “When are Club X on TV?” and a number of related searches. The results are perplexing – smart keyword buyers have managed to associate everything from blogs to football kits and boots to website forums and comment pieces. Finding a list of fixtures and what channel they are on is not something natural search does well. So, we go to the club website and trawl through their own TV channel listings and other sundry items before finally finding a list of matches and TV channels. But wait – something’s missing:

That’s right – listings only go up to a couple of months in advance – TV channels don’t want to have to bet in advance on which teams will be doing well / playing attractive football “for the neutral” so far upfront, so the televised games are selected later in the season.* This is fundamentally troubling – after all, there is a choice between ESPN & Sky for coverage. Maybe I can only afford one – what offers best value for money? Well, I choose my subscription by the year, not month, so I could choose Sky now only to find that ESPN have all the good games later. So, I have the functionality available to bet on a match in January 2012 (which is always highlighted by the fixture), but I can’t tell what channel it’s going to be on? This situation suits the broadcasters, but not the fan. Moreover, I follow my club for the whole season, not just some of the games. I don’t like going to pubs and being forced to endure the commentary by fellow “fans” who parrot what they heard on phone-ins that morning as “opinion.” I want it in my house. And that’s going to cost.

In fact, when it comes to package selection, there is just too much choice, it’s way over-complex, and the price is unbelievable. OK, so the latter might just be me being a miserable old git, pining for the days when I could have all the channels and still have enough change from a £20 note for fish and chips and a can of Coke, but it seems like there is very little change from £100 a month.

"Sky or ESPN.... Sky or ESPN... or how about those nice chaps from Setanta... they still make football, right?"

Bear in mind this is 2011 and we have HD tellies so who wants non-HD? (I’d throw 3D into the mix but – ha- that viewing experience is just rubbish for football, so I’ll leave it out for now), but even with a deal on installation etc as a new customer, Sky plus ESPN plus a basic channel package in HD plus the ability to watch it in more than one room (honestly, the chutzpah!) comes  in at around £80 per month. The club I support has season tickets which cost around £725 a year for an adult and £300 for a child (cheap for a Premier League club). A year’s worth of telly – which is never going to be the same as going to the game – comes in at around the same price. Telly was always regarded as what you did because you couldn’t afford to go to the game – now it is priced on a par with the real thing. And that seems wrong. Sure, I get a whole load of crappy channels thrown in and that has some value, but it’s not what I want. I am a consumer – I have demands and they are not being met. My money stays in my pocket.

And so we turn to where my demands are being met. For about the last five years, I have been able – pretty much wherever I am – to switch on my PC and watch my club. At this point, someone screams “piracy!” whilst the crowd look horrified, policemen prime their truncheons and delicate ladies faint in swoons of shock. Aren’t I taking something for free? Aren’t I stealing? I wouldn’t download a car, would I?

You wouldn't download a car. Unless you were playing, say, Gran Turismo. Then you probably would.

It is a measure of the sheer genius and efficacy of entertainment lawyers, PR peoples and lobbyists that this mindset has come to pass. Sadly, it has nothing to do with reality. Firstly, “free” is not free. Secondly, stealing a car deprives someone of that object – nothing I do deprives anyone of anything physical – I don’t stop the same thing being sold to anyone else. Thirdly, I am sat here with a sum of money that would be spent on football with whichever provider decided to comply with the laws of supply & demand. I have written more about the myths surrounding “piracy” here.

Firstly, then, watching without paying is not mere “freeloading.” Setting aside the nominal licence fee (a tenner or so a month) I have Freeview. All of those 70+ channels are not merely sharing my tenner are they? Mostly it goes on the BBC and, frankly, when compared to the price of satellite / cable, I see the licence fee as a bargain for news, documentaries, Match of The Day and various radio stations alone. But those other “free” channels are surviving somehow, right? Yes. It’s called “a-d-v-e-r-t-i-s-i-n-g.” You may have heard of it. You may also be aware that different channels charge different rates for their advertising – the more viewers they have, the more the ads cost. Amazing! So when I watch, say, a Champions League match on ITV (a free channel) am I thieving my footy? I am not.

And don’t forget sponsorship. The exact amounts involved are hard to discern, but three top sponsors pay in the region of £135m for a 3 year deal.  It’s worth that much because of the numbers that will be watching the games, of course. Those numbers are partially on subscription channels, partly from pubs and, yes, partly from “free” viewers. It is the total number that is important and it is made up of significant chunks of each – no one audience is sufficient by itself. That huge audience is, then, rather valuable – which is why so many broadcasters want it.

ITV, then, who paid c. £160m for three years’ worth of rights, clearly believe they will make that money back because of the value of ad sales. A cheeky enquiry to a colleague in a media-buying agency (the people who buy ad space on behalf of their clients) tells us that the cost of a 30 second slot for a regular Champions League game is c. £45,000 for ITV as opposed to c.£15,000 for Sky. For the final it’s more like £40,000 on Sky and £105,000 on ITV. Do you see that? The audience for “free” viewing is bigger and thus the ads cost more. Oh, and let’s not forget all the ads on players’ shirts and advertising hoardings around the ground. Someone paid money for those in the hope someone is watching. And they’re happy if more people are watching, too.

In other words, when I watch something for free on a channel that sells advertising, I am not a freeloader – I am a crucial part of the channels’ & sponsors’ business plans.

So, why do people host pirated football? Because – guess what? – there are people that will pay them money for hosting adverts whilst they show unlicensed sports. But surely this will be ads for dodgy porn, malware-infested fakes and all manner of under-the-table tomfoolery?

Well here’s the fun part: UK companies are already using these illegal channels for advertising. And not small outfits, either. Big ones. The biggest. Vodafone, Disney, big pharma, the lot. It’s not a few odd cases, it’s everywhere and it’s everyone.

This weekend, I saw UK adverts for washing powders, coffee and mobile phones. And let’s be clear: these weren’t European or Chinese versions of the ads that have somehow found their way onto my machine.

The European Commission, Vodafone, more pharma, Airwick. And there's plenty more where they came from. And I mean *plenty*.

These were the same ads I see on TV, with .co.uk URLs and British accents. And these were not just video trails (which tend to be served whilst streams load) but banner and other display ads, including interactive ones. In other words, the same advertising you would see on official channels. I’ll give them the benefit of the doubt and say that most media buyers probably don’t realise that this is going on as this would be wrapped up in the lower end of the inventory they purchase – probably listed as “miscellaneous websites: reaches 100,000 people, costs £X” – and is a very minor amount in comparison to the total, so it isn’t likely to be something that gets much attention. But for their clients, unless anyone flags it, why complain? You want to advertise to a certain audience, you go where they are – and if they’re watching pirated football, who cares? They’re still consumers.

Oh look: Disney, Bonjela, gambling and more

Next, I feel obliged to point out that downloading something for free is not the same as stealing something physically. ITV & Sky can continue to sell their services to other people, I am not stopping them. It is a complete fallacy to equate downloading something from one source as somehow depriving them of a sale. They simply don’t have what I want in a format I want a price I can afford, so they are “losing” precisely nothing. I was not going to spend that money with them, so how can they have “lost” it? Perhaps, instead of wringing hands about “lost sales,” the better answer would be to examine the pricing, format and availability of the product? Because, in fact, the rights-holders (clubs, leagues, official bodies) – as well as broadcasters – are all losing out on potential revenue by not servicing demand adequately.

Which brings us neatly to the third point – that supply and demand (aka everyone’s first lesson in economics) tells broadcasters exactly what they should be doing. At the moment, my personal demand is supplied by crappy streams. Why?

  • I can see whatever match I want
  • It is a reasonable stream
  • I can choose which broadcaster I want to view it with (including which commentary)
  • I can follow just my team, I don’t need a package of things I don’t want in order to do so
  • The price is right

The downside:

  • I have to search around a bit which is a bit annoying (although I usually find it quicker to track down a stream than, say, track down figures for what sponsors paid for Champions League rights)
  • The quality is occasionally poor
  • I may have to switch streams mid-match
  • I probably miss, on average, 10-15 minutes of the match through any / all of the above.

Various broadcasting friends wanted me to add that I also risk malware, viruses, penury and lupus too, but I like to think that my level of tech expertise avoids this. However, for many people this will be true enough. If you download the necessary software for viewing from official sites, no problem; but many streaming sites have links to software that is filled with malware, frankly. That’s because they are in control of how they get money from you; it’s not regulated or licensed so they do whatever makes cash and adding spyware means someone somewhere is paying them to do so.

Even so, ultimately, when faced with a choice of all the above, it’s streams every time. Had I the simple choice of being able to follow all my team’s matches for, say, £20 a month, nothing else included with them, I’d pay it. And so would hundreds of thousands / millions of other people.

But that requires something we are not used to in commercial models: non-exclusivity. If UK broadcasters pay £400m for TV rights, it’s because they know they become the only show in town. Once other people can show those games, their rights are worth less. If Tommy Streamer can show the game on his blog page then why is anyone going to watch ITV or Sky? Exclusivity guarantees the broadcaster they will have a monopoly on showing a game; that means they are guaranteed a certain minimum audience to watch the game and that means a minimum amount of income.

But the market supports multiple types of demand. At the prices they are charging, broadcasters only service a certain percentage of the potential audience – the rest of us would be happy with less quality for less money, either as paid-for or ad-supported streams. But the only people smart enough to tap this market are the “pirates” and the advertisers who serve ads on their networks. If I was a broadcaster I would offer those networks  a license to show streams at a maximum quality of, say, 50% of the HD streams I can offer and take a percentage of the advertising revenue.

I wrote about this yonks ago when I worked for a company that became EMC (and whose blogs have been similarly assimilated) as an idea for content distribution, the principle being that nobody should care who shows the content as long as they take the ads? Reward people for doing it too – even if it’s a small share of the proceeds it incentivises them for finding an audience and your revenue goes up with the growth in total audience size. I called this “microdistribution.” It has a lot in common with the Long Tail in that it recognises that a myriad of tiny niches may add up to something huge, a la Google Adwords etc.

And there’s another reason why this might improve the delivery of football. At the moment, I am stuck watching, say, Match of The Day on the Beeb or Sky’s full match programmes. MOTD is the last resort of the desperate fan – matches reduced to highlights which are ridiculously short to squeeze in every game. Here’s the build-up play, here’s the shot, here’s the goal. The replay is rarely anything more than the final ball and shot. But what makes a goal amazing is often the quality of the build-up, the passing, the bypassing of the defence through tactical executions. All of this is lost – and the result is the barf-inducing banality of football phone-ins which consist of people making comments about matches based on the few minutes they saw on MOTD and the commentary they heard. In other words, you are listening to opinions about opinions. As a result this promotes a shallowness in the way many people engage with the game. Tactics are reduced to quick soundbites – talk about a pressing game, playing two up front or one in the hole behind the striker – but tactics go much deeper than that.

In the 1990s, before we all agreed he was a bit of a twat, Andy Gray used to do a tactics session in the hour or two before a big game – full on tiddlywink counters and pushing them around, examining why certain managers chose different formations and so forth. It was a big part of my deeper understanding of the game; what had been based solely on a love of playing, mixed with the tribalism of being a fan, developed into something more. The various tactics sections on football shows of all sorts are now lamentable. A favourite piece of utter crap was Andy Townsend’s Tactics Truck on ITV – like so many ex-footballers, a nice chap just repeats the obvious, draws some circles around defenders who have lost their man and that’s it.

But this is because TV is broadcast to such a big audience – it’s not possible to cater to all the different tastes fans might have. I know not everyone’s a tactics nerd, but I’d liketo watch a real tactics nerd doing their thing. Allowing the little guy to broadcast would allow the niche interests to blossom – tactics, Alan Hansen-a-likes who only see the defensive errors, students of the cultured pass, the different chants, partisan commentaries which barely mention a single opposition player’s name except to berate them (which, in fairness, is what it’s like watching any footy on a club’s own channel). All these would be possible.

All of this and more. I get better insights from the cat.

This creates a “long tail” of football consumption. And in the long run, it’s better for the game because everything is catered for.  Again, it’s fair to say that specialist broadcasters do make an effort to vary the programming – there’s the Saturday morning “variety show,” or the highlights reels or the fan-led shenanigans. But consumers are way more varied in type than a broadcaster alone can deal with at times. Niche interests are often what keep subjects interesting to a wider audience; I can’t see anyone likely to broadcast, say, a programme just for referees or coaches. But I bet there’d be some people who’d like it. Search the net for football blogs and you’ll find women tacticians as well as “I love Thierry Henry’s thighs”; Villa fans who only want to discuss the 1970s, others who only ever discuss one player at their club. The “tail” may be lengthening but it’s just not long enough.

Broadcaster and event owners aren’t  going to give in easily – the one thing about selling exclusivity is that you get a big lump of cash if you’re the event owner and the chance to earn a big lump of cash if you’re the broadcaster – it’s a high stakes game with big rewards (unless you’re Setanta and screw up the maths / sales).

And that’s why chasing pirates seems like a better bet – who’s going to say “Yes, this year we shall forgo our £100m income for £25m with the potential to earn an extra £150m”? You’d take the lump sum every time. I get it, but it’s clearly short-sighted.

Free market exponents will consistently tell you that free market means more choice for the consumer. And yet, here we are, us disenfranchised punters, we buy our replica kits, matchday tickets, programmes, consume advertising on hoardings round the pitch, idents and ad-breaks, we’re happy to consume and maybe even pay you some money… but all we are is “thieves.”

Meantime, I’ll just leave this here…

*EDIT : I showed this piece to a number of friends who work in sports broadcasting – amongst the points they wanted to add were that “…the TV fixtures situation is not the great TV carve-up as many people would believe. There are great number of factors why [they] can’t set the fixtures for the entire season in advance: clubs, local authorities, transport providers, and the police influence dates/kick-off times. There is the performance of the clubs in the cup competitions to consider and the sheer logistical weight of organising the fixture list. Hence it is split into 3-4 phases. [Sports broadcasters] attempt to even out each club’s number of appearances on [TV] throughout the season.” Only fair to include that. It can’t all be hyperbole and invective.

 

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Why The Entertainment Industry Is Wrong About Everything Pt. 1

The coming of the digital age should have been a golden era for entertainment and, for some, it was: Amazon, Facebook and others appeared from nothing to conquer the world in a few short years. But for others? A darkness descended on the giants of old… Major music labels, broadcasters, production behemoths, newspapers, games manufacturers – their revenues plummeted whilst demand for their products actually increased.

"It's all about a long-term vision."

And there was one reason, above all, for all their misery; one thing that set them apart from other industries that had reaped the golden benefits of the digital age: these giants were – and often still are – steered by people whose idea of proficiency in ‘digital’  languishes somewhere around the Casio watch on their wrist. These are people who have never really used the things they are meant to be mastering, people who are simply not equipped for the job.

This series of articles will attempt to explain why, as a result, the entertainment industry is wrong about (just about) everything.

The first thing to do is shoot down a few myths that are repeated in every sector – enduring myths that, through their luscious soundbitey-ness, have become conventional wisdom. These mythical narratives are harmful because they are so cognitively appealing that they have become the whole debate:

  • You can’t expect to get anything for free
  • Piracy is theft, like stealing from a shop: aka “You wouldn’t download a car”
  • Piracy does only harm for artists and other content owners
  • Illegal downloads = lost revenue
  • Once people taste ‘free’ they never go back to ‘paid’
  • Telling people about piracy in a ‘zero-tolerance’ fashion is the only way to stop it

1. “You can’t expect to get anything for free”

Proponents of the age-old adage that ‘there’s no such thing as a free lunch’ point towards a truism: everything has a price. They are generally correct. But the mistake is to believe that the ‘price’ is always a directly or solely financial one.

We have many examples of every day consumption that – if not wholly free – are ‘free’ to use on a daily basis. We may pay a yearly licence fee for TV in the UK but (a) it’s only about £14 a month – compared to, say, upwards of £50 a month for Sky – so seems relatively insignificant to most people and includes payments for the whole BBC including radio, but more importantly it’s (b) not something you physically pay for on a daily basis.

Behavioural economists will tell you that because you aren’t paying for it there and then, it doesn’t feel like you’re paying. It doesn’t cost you any more to turn the telly on five times a day than it does to turn it on once.

Commercial terrestrial TV is a good example because it feels free. But it isn’t. In fact, commercial television relies on free viewers as advertising revenues depend on the size of the audience. The more people who watch, the bigger the fees advertisers pay. I can watch premium content on ITV – say Champions League football – and the cost to me has been subsidised by advertisers. If I watch a newly released film on Channel 4, it will have been subsidised (usually) by a sponsor who pays for a whole season of films, plus the advertisers who pay for slots in the middle of the film. The cost to me is that I don’t get to watch the film uninterrupted – I have to wait for the ads. If I want, I can buy the DVD or watch on a premium subscription channel and then I can have an uninterrupted viewing experience.

In other words, I pay a price but it isn’t directly financial.

The business plans of the broadcasters don’t depend on me paying them money, they depend on me watching. For free. It’s basic economics of supply and demand – the cheaper the price, the more people will watch. The more people watch, the more the advertisers have to pay them. This is true of radio, it’s true of websites like YouTube and Google, it’s true of me taking surveys to get free access to eConsultancy market reports. These things seem free to us, but our exposure to advertising is the price we pay.

So, the idea that ‘free’ is wrong is… wrong.

It’s vital.

2. Piracy is theft, like stealing from a shop: aka “You wouldn’t download a car”

Erm, no. If I steal a car, the owner of the car is deprived of it and cannot sell it to someone else to realise its value. If I download a song, the owner of that song can still sell it again. And again and again. It does not disappear from their repertoire. If I watch a film on terrestrial television it is the same: I do not deprive that film owner of the ability to sell it again. Digital products just don’t behave the same way as physical products.

You think people like visiting showrooms and being attacked by sharks with moustaches and cheap suits?

The fact is, for a lot of people the free downloading is similar to the behaviour in listening to something on the radio: a free – and thus slightly crappier – experience than the paid-for version. I don’t really like mp3s because I like hearing things at a certain quality that mp3s don’t deliver. I listen to digital music on the daily commute because even I’m not quite enough of a Luddite to use a CD Discman. But the things I love, I buy on CD because the quality is better. Some things I prefer to buy on vinyl (old punk and  reggae for example) because they were made for the format and digital doesn’t improve the sound. Not only has the entertainment industry missed out on realising the difference between ‘lost revenue’ and ‘lost opportunities’ but they’ve failed to recognise the value of the digital product – and priced it accordingly.

Simply, digital is, for many things, a worse experience with far cheaper distribution overheads – pricing it at the same level as the physical (or not significantly less) just overvalues the inventory. If you could download a car right now, it would be made of paper and need to be powered by wind and pedal-power.

3. Piracy does only harm to artists to and content owners

Ha. Funny thing – the most downloaded stuff is often also the stuff that sells the most. Which comes first, the chicken or the egg?

Back in the very early 90s, before the internet was something people had at home much, I had Sky. I loved the Simpsons. All my friends thought it was for kids and I was loving the subversive humour and telling people they were wrong. Some people came round on a Sunday and would get sucked into the couch with a bag of weed or a beer and it would click. But I was obsessional – I used to record Simpsons VHS tapes on long play, which means eight hours of continuousSpringfield. I did this mainly for myself and my housemates as Sky only broadcast two episodes on a Sunday back then.

But over time, once I had sufficient stock, a trusted friend would be given a tape to enjoy at their leisure – and they would show it to their housemates. Over time, they too would become infected Homerphiles and so forth. As Sky’s broadcasting of episodes increased, so did my taping. People used to beg to be allowed to borrow the tapes. I can confidently state that hundreds of people in the Hyde Park area ofLeedsin 1991-94 were converted to the show through my piracy. And back then, we all spent money on the show too – not only did we watch the show on Sky and thus had a part in improved viewing figures / ad revenues, but we all had t-shirts, pens, stupid bathroom kits, caps, whatever. When my mother found out I liked the Simpsons, that took care of 10 years of Christmas presents: alarm clock, sponge, shower radio (yes, what of it?), bubble bath, greetings cards. Endless revenue. Multiply that by the 100s influenced by those pirated tapes. How’s that working out?

Years of lucrative brand engagement, thanks very much

And it wasn’t just those shows. Over the years, the sharing of pirated material amongst my group of friends that has led to people being converted to fans has included Futurama, The Wire, Treme, Family Guy, South Park, American Dad, Fringe, Medium (only the girls, obv.), Lost… just about every major show that hadn’t yet made it to the UK. And those people talked about those shows, became part of the groundswell of opinion that eventually influenced UK TV stations in their choices of imports (NB a lot of those shows were picked up much later than, say, The Sopranos or Game of Thrones).

Piracy can be pure promotion for some entertainment. We used to license records for release in Russia knowing full well that Russian rip-offs would appear in nanoseconds (official sales used to number in the dozens but they’d be in every shop in every city a week later), but the artists used to make money from touring and we’d share the revenue from tour receipts and merchandise. Good days. If you didn’t have pirated material ordinary Russians couldn’t afford your stuff, nobody knew who you were.

Recently a pirated PDF of a children’s book parody called ‘Go The Fuck To Sleep’ was sent round by every parent I know. What happened to the poor unknown title / author? They went to number one on Amazon.

And whenever there’s a study that shows the beneficial effects of piracy, it’s suppressed by lawyers and lobbyists for trade organisations whose narratives are not served by the idea that, say, people who pirate movies are also those most likely to treat it like an extended preview / tester for things they go on to buy.

I have discovered hundreds of games, movies, TV shows and bands from having a pirated copy that I then go on to buy. I know dozens of people like me. I meet hundreds of people like me online. I can see empirical research that supports this notion. So why are the people who could most profit from this knowledge also the people who are shouting loudest against it?

Because they are just not that bright.

4. Illegal downloads = lost revenue

Now, let’s be clear – there is a difference between making the above point and advocating that piracy has no harmful effects and doesn’t deprive – in some cases – people of rightful income. It does, and especially with smaller independent artists and copyright owners who don’t get to make the revenue up from other sources as much as the big guys.

But this argument is often used to back up the idea that piracy costs an entertainment sector £X billion a year and so forth.

This is a crude fallacy.

Supply and Demand is one of the basic elements of a free market and is lesson #1 in high school economics. If the price of something is too high, there will be lots of people willing to sell it (supply) but fewer people will want to buy it because it’s too expensive (demand); if the price is too low, there will be lots of potential buyers but fewer people will want to sell it at that low price. The smart move is to price your product just right, so that lots of people will want to buy it but it’s also profitable to produce. In other words, moving the price up and down affects demand for a product. See the graph below:

It's the economics, stupid

What the entertainment industry does is look at the demand for illegal downloads and put a price on it on a per-download basis – the price in the marketplace today. But those downloads are actually priced at ‘free’ – which explains why the demand is so high. If, in fact, the cost of getting that download was the market price, there would not be so many downloads. This is so basic that it makes me want to cry that anyone can have the gall to stand there and tell me that the lost revenue calculated this way is a real figure. It isn’t. It’s not even close.

This MPAA pdf is a good example. It twists the data to fit a point of view but has very little basis in reality – you cannot “lose” sales that would never have happened. This is not to say that there wouldn’t have been some losses – of course there are.

If the price had been 10p a movie download, and it was delivered easily, in an agreeable format and quality, you might have seen, say (just for example), 85% of those people choose the legal option. Had they done that, the legal income on the 5 billion or so movies it takes to make up their “illegal download” figures would be around $500 million. And suddenly all their maths-based hyperbole falls to bits.

This whole approach is unfit for purpose. And that’s not all. I don’t agree with him on a lot of his conclusions but Lawrence Lessig put his finger on the discrepancy between perception and reality as long ago as 2004:

“In 2002, the RIAA reported that CD sales had fallen by 8.9 percent, from 882 million to 803 million units; revenues fell 6.7 percent. This confirms a trend over the past few years. The RIAA blames Internet piracy for the trend, though there are many other causes that could account for this drop. SoundScan, for example, reports a more than 20 percent drop in the number of CDs released since 1999.

“That no doubt accounts for some of the decrease in sales… But let’s assume the RIAA is right, and all of the decline in CD sales is because of Internet sharing. Here’s the rub: In the same period that the RIAA estimates that 803 million CDs were sold, the RIAA estimates that 2.1 billion CDs were downloaded for free. Thus, although 2.6 times the total number of CDs sold were downloaded for free, sales revenue fell by just 6.7 percent… [So] there is a huge difference between downloading a song and stealing a CD.”

And that, as they say, is that. Yes, there are losses, but they are way smaller – and have way less effect – than we are being led to believe.

5. But once people have had it for free, they won’t pay for stuff right?

Wrong… so very, very wrong.

I used to hear this a lot in the music industry. In 1999 you should have heard the screaming. For a while the mantra was “once music has been free, people will never pay for it again.” And then, within a couple of years, there was iTunes.

iTunes gave people what they wanted in a format they accepted at a price they deemed reasonable. And if my memory serves me well it did OK, no?

Supply and demand tells you this – the price may be free, but everything from quality to ease of finding something to format is not well-served by ‘free’. iTunes does it better and punters buy it because of it.

The presumption is that people download illegally because they are either fundamentally criminal or simply don’t understand that content has a value. There may be a little truth in either point, but I’m going to let you into a secret : the real truth is that the vast majority of people download stuff because they want it.

And whoever makes it easiest for them will win. People pay a price for ‘easy’ – understanding demand helps you define “easy” and the basics of supply and demand should tell you what the price is.

"OK, but first we need to sue you."

6. The only response is “zero-tolerance” enforcement

Yeah, hard to believe this was a joke sometimes.

The funny thing about that Onion article is that in the 1920s and 1930s record companies got drawn into lawsuits against radio stations as artists feared they were being robbed of both record sales and performance income (they thought if people had radio they wouldn’t pay to see live performances. Here’s a good tale from 1935.

The problem is that the enforcement approach starts from a very bad premise: criminalising your potential customer base. If you want people to buy your stuff (which includes, by the way, your PR) then I’d suggest threatening is not a very effective of communication. Even if wholly justified you are going to become the bad guy when you sue a dead grandmother, a homeless man or a 10 year old girl with a disabled mother.  Most companies seem to hold the idea that they should be good guys with something valuable to offer to a consumer and would shy away from such confrontations – especially when the net benefit is, at best, a pyrrhic victory.

Once again, this is a failure to understand the nature of the market and its consumers. People take stuff because they can – and the legal options just aren’t as appealing in terms of price (yes, obviously), format, ease of search / discovery etc., i.e. ‘demand’. Reducing the demand for illegal content is not just about stopping the illegal stuff – it’s about increasing the demand for legal content. And if Apple can do it, why can’t these other companies? That’s right: because they’re idiots.

In the book Freakonomics, Levitt and Dubner (who seem to enjoy nothing more than poking economists’ bee hives with big pointy sticks and, frankly, good for them) tell the story of Paul, the Bagel man. He spent years selling bagels by dropping off a load at office parks around Washington, relying on the honours system for payment (i.e. you take a bagel, you drop your money in a collection tin). Crazy, right? Actually, no. It worked damned well. And better still, because he did it for so many offices over 20+ years, and kept meticulous records, he performed a huge economic experiment. 20+ years of empirical data about honesty. How cool is that?

In fact, he found that honesty rates never really varied much (there were some small local variations related to things like local unemployment etc) – the overriding statistical conclusion is that between 87% and 89% of people are honest. Eleven per cent of people are always going to screw you over and there’s nothing much that changes that. I can’t recommend reading the article highly enough.

So tell me – why concentrate all those resources on trying to identify and punish the 11%, taking down a significant proportion of sympathetic defendants from the other 89%? Why not use those resources to improve the service and supply to the 89%? For most entertainment sectors, i can’t see how it’s in any way a a controversial suggestion to say that if they serviced demand properly they would make more money from the honest majority.

In the UK, it’s difficult to estimate how much is spent on copyright enforcement every year but there are some expensive-looking offices and lawyers dedicated to it. There’s also talk of ISPs being asked to fund 25% of such costs – and that’s estimated at up to £500m in costs to the consumer (when the ISPs pass on the costs, which they will). That’s a lot of enforcement going on.

Sounds a bit like The War On Drugs to me. And that’s an unqualified success, right?

Enforcement doesn’t stop criminality in copyright any more than it stops criminality in the real world. It competes with demand, which will always be strong – people love music and don’t want to be kept apart from it. Fear of punishment isn’t as strong a method as convincing people of why you should buy legal. You can carp on about supporting artists, but when these messages come from companies with as much of a record of ruination and interference with artists as success, well, it just doesn’t ring true. These captains of industry, when at a different dinner engagement, will tell people that it’s the market which has the greatest effect on consumer behaviour – so why do they maintain the myth that enforcement can work?

That’s right: they’re idiots.

This is only the tip of the iceberg. But the pattern is clear – actions are based on prejudices and presuppositions rather than evidence or simple market economics – in some cases undue influence on market forces is preventing innovation that may yet become profitable. People who are not qualified to do their jobs often use other people’s opinions to guide their decision-making process, but that isn’t working for large swathes of the entertainment industry because the same personnel have now been institutionalised to believe myths about piracy instead of engendering good business practice.

Instead of digital heralding the golden age for the entertainment industry, it’s become a golden age for entertainment industry lawyers.

In other words, there’s too many people that work in the entertainment industry that are wrong about everything.

To be continued.

 

Next in the series: how they’re messing up sport on telly.

 

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The Nonsense of The Personal Brand

I get a lot of gip about my Twitter account. I swear, make bad and often off-colour jokes, troll major brands and social media consultants for kicks and generally refuse to play the “game.” Considering a history of working in marketing and dealing with brand and PR, am I just killing my personal brand?

AKA "I am a massive bell-end."

I certainly hope so.

Consider what personal branding is all about – the idea that you need to maintain a professional demeanour in the face of present or potential clients or networking colleagues. Sadly, there are plenty of examples of employees losing jobs over their social network postings and employers who “vet” potential employees using companies that perform online vetting.

The idea that your personal life now belongs to your employer is unbelievably offensive in what is supposed to be a “free” country. Sure, if you attend a Klan rally wearing your McDonalds uniform people are bound to get upset – you can’t blame the Klan for excluding you.* If you’re wearing a uniform then it’s not such a stretch to think that you represent your employer somehow, but if you’re in civvies on your own time? Would you expect your employer to see you dancing badly on a Saturday night and give you a written warning about your conduct? What if you worked for Amnesty but liked to secretly read the Mail On Sunday? Or you worked at T-Mobile but had a BT landline? What business is it of anyone’s?

The answer to all of this is pretty simple. If you’re worried your employer may be social network-sensitive, don’t allow them to connect to you and sort out your privacy settings. For some people, this is sadly a reality – but they are a slightly different issue to those with “personal brands.”

The person as a brand is not a new concept. And, if you’re famous like Donald Trump then I suppose I can see the sense in it – your income is related directly to people’s perception of you. So, even if it makes you a total douche, fair enough. But that isn’t most people. Most people who go down this route are creating a

"Hi. I'm a self-perpetuating media node."

professional façade for their personality – this is what your CV or LinkedIn are for, a professional interpretation of who you are. But your presence in social networks is social by definition – why are you pretending to be someone you aren’t?

The process of branding is often about making products seem more human or human-friendly – so why is that process being applied to, erm, humans? Would you ever want to meet a personal brand? How does that go? “Hi, I’m Tom. Have you read this week’s iPhone news? If you’ve enjoyed this conversation you can find me at the bar across the street later where I’ll be discussing the Wall Street protests…”

“Uh-huh….  Check please.”

I don’t subscribe to this kind of stuff because I’d rather people knew what a jerk I am before they employ me. What’s the point of pretending to be someone I’m not? They’ll find out eventually. I wouldn’t lie on my CV and say I can operate a crane, only later to destroy a building with one and sheepishly ask if I’ll be getting paid for the hours I’d done before those unfortunate deaths. The same goes for clients. If clients are sensitive, ensure they are not connected. It’s the work account that needs to be careful not the personal ones. If you’re a massively offensive and profane person, your company is unlikely to place you in a room with sensitive clients so why would you connect  with them on social networks?

Most client organisations are made up of human beings just like you. And they don’t care about what you do in your personal life. They are more likely to be offended if you pretend to be someone you aren’t and then they discover the real you. If you spend your whole life with a permagrin, soray tan, fake Rolex or Gucci handbag slapped on your person, good luck to you. But you can buy your own drinks.

Branding? It’s for companies and cattle. You aren’t a brand, you’re a person. Maybe try actually being one.

It's the mark that says "Hi, I'm Chad, let's talk about articles I read on Mashable."

*Zzzzzzing.

 
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Posted by on October 16, 2011 in Branding, Marketing, Social Media

 

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Social CRM : A Guide by Business Cat

In my life of PowerPoint hell, I made the following to explain it to a client who I knew also likes memes.

(And if you haven’t caught this particular bug, as it were, try this definition and also a chart of popular memes here which attempts to explain them).

More Business Cat.

There is a lot being written about social CRM at the moment and most of it seems designed to sell software. It’s a lot simpler than that:

 
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Posted by on October 10, 2011 in Digital, Marketing, Social Media, Stupid

 

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Social Media Consultants: A Cautionary Tale From History

Are you sitting comfortably? Then I’ll begin… Once upon a time a man called Alexander Graham Bell invented the telephone. It was 1876 and blah blah blah yadda yadda yadda. That’s not the interesting bit. What’s interesting is that Bell himself, despite predicting the immense social consequences, never owned one at home.

The reason was generational: having grown up with nothing more than telegraphs and morse code to communicate further afield than the next town, the need for these new forms of communications had not really touched his own life. He just didn’t feel the need.

In 1878, the first switchboard opened in Connecticut. It was staffed – as were many of the first exchanges by young men (average age 17, apparently). This was because they had the stereotypically “male” trait of being able to look at these complex devices and be able to work them without lengthy training. By 1880, there was one phone for every thousand American households. By the mid-1890s, that number had dropped to one in 70.

Most interesting to me was that, at this point in history, these expensive machines were not for fun – they were treated like a telegraph machine with a little more functionality. You didn’t chit chat, you didn’t top and tail your conversation with pleasantries, you just verbally expressed what you would have sent by telegraph. People would pick up the phone and say “Need 17 cases STOP Delivery by Wednesday STOP Price as previous order STOP.” And put the phone down.

By the 1920s, the machines were more ubiquitous and the companies that sold them were trying to get people to use them as more social devices. AT&T’s legendary “Reach Out & Touch Someone” came from a realisation that the families and friendships that had been scattered by America’s still-recent migration could be reconnected using the phone. This marked a change in direction, although it was one that businesses had already realised, as they networked a series of offices across the country and even the world. Using the phones was big business, but people just hadn’t grown up with them so they needed help.

An industry grew to help these businesses. This is a film from 1927 (it has no sound, sound hadn’t been invented then and I believe people mostly mimed to each other in the street [CITATION NEEDED]).

Around this time, the switchboards were getting rid of those young boys who had ruled that particular roost. With competition raging between Bell Telephone, AT&T and Western Union (the latter merging under the same president, Theodore Vail, who was related to the one of the people who developed the first telegraph and was such a stickler for centralised power that Vailism became a byword for monopoly practices) there was a move towards service as a feature rather than mere functionality. Owners found that the boys were often rude, made short answers and were unhelpful – another stereotypically male trait, unfortunately. This is why, by the time cameras got around to capturing them, most of these switchboards were operated by women – they were simply more pleasant to talk to than their spotty teenaged male counterparts.

If you look closely there's a smug guy saying "Plug it in there and say "Hello, sir.""

There must also have been a change in the employees that were taken on. By the mid-20s, many would have had experience in using a telephone at home and would have been more comfortable with the conventions surrounding its use. And training would have become less of a specialty – these operations would have become focused over time less on how to talk on the telephone and more about how to monetise operations off the back of them. Think of terms used in callcentres today and it’s all cross-sell and up-sell. You would imagine that the training around saying “Hello, welcome to Acme, my name is Allan, how may I help you today?” would be a short side note. The real meat of training is how to sell, how to serve, how to make sure the customer leaves happy and with a lighter wallet.

And so it is – and will be – with social media. It seems odd to me that this is even something worth mentioning in 2012, but I was reminded of the need by an idiotic spat with a “social media consultant” over their use of hashtags to hijack news items and conversations. I’ll save the details for now, but it occurred to me that these snake-oil salesmen are still out there relieving businesses of budgets for nothing more than, effectively, learning how to speak to people in these channels.

This was social media strategy for most of us in about 2005. Since then, it’s become more about how to integrate this new channel into business operations. With the advent of “social CRM” (yes, I know, but it doesn’t have to be complicated, it can really be distilled into listening to what your customer wants and then working out how your company can service their demands and needs), there is an even greater push to get brands and organisations engaging, listening and responding operationally.

But this is not where the social media consultant lives. They still think that their ability to chat on the phone sets them apart as specially talented, that brands haven’t yet caught on, that the need to impart wisdom gleaned from sometimes as much as two years’ experience as a self-appointed consultant qualifies them as a business requirement. But every year that passes, another generation of young employees comes to a company and for them social media is not something special – it just “is.” They’ve grown up with these things, it’s natural to them, they don’t need training in how to use it; they need training in how businesses work so they can work out how social media becomes as much a part of everyday company life as it is for the next generation of consumers coming through. Communication skills are easy to teach; how to run a business is not.

Snake Oil - check out that ROI!

The social media consultant should be dead by now, but they aren’t. They use each other to bolster their follower accounts, content farming like crazy to set out nets to catch each other with, giving the impression of huge networks that are bolstered by pointlessly-inflated Klout scores, but despite dropping phrases like ROI into their copy they offer very little of real worth to anyone that has learned to use their new version of the telephone. In an age when social media should be moving people towards transparency, they are skilled at setting up false impressions that easily impress the last few clients on the block not savvy enough to see through it. In this respect, they have another historical counterpart – the snake oil salesman, the guy that used to ride into wild west towns, sell everyone a magic cure based on miraculous results witnessed by the crowd when some poor miscreant (who also happened to be a stooge) would suddenly be “cured.” Then they’d ride off to the next town before the last one discovered this stuff had done nothing at all or, worse, poisoned them. Often, the placebo effect would make people believe they had actually gained relief, so those salesmen knew which towns they could visit again and which ones would lynch them if they ever set foot in the place.

A couple of years ago, I saw the video below. It made me laugh so much that I immediately removed from any of my copy any kind of terminology that seemed to imply social media guru credentials. I (honestly!) wasn’t in the same game but I knew plenty who were and it seemed like a red flag, a warning not to be lumped in with this kind of behaviour. I watched it again. And what made me laugh more than anything was the thought that with 2012 just around the corner, it’s still relevant – unbelievably so.

To anyone that might consider employing one of these chumps, I beg you – ask why you need them. Again, this feels like a five year old issue, but it clearly needs restating. Ask why you need “social media” and be clear what exactly your company can use it for. Treat it like any other channel and apply some meaningful metrics. Your telephone is connected to – potentially – billions of people, but just because it has that potential connection doesn’t mean you are actually connected.

That connection depends on whether or not your business has anything they want. Without that, your Twitter follower count means precisely dick-all. If you have the kind of business that needs it, there are specialist call centre companies which can help with outsourcing. They work because they are well-trained, understand your business requirements and deliver against them. Outsourcing social media should mean nothing less, but it often does.

Whilst “social media strategy” used to mean “how to talk to customers through social media” it is now about the more complex relationships involved between organisations and their customers, including collaboration and co-creation and how to integrate what is created into business operations that run a profit. Social strategy is a part of digital strategy is a part of business and marketing strategy. It’s all inextricably linked. Stop being impressed by surface impressions and ask more questions about what this stuff does for you. Stop drinking the snake oil.

Like the boys who once ruled the switchboard roost, or the maker of the instructional film, the social media consultant will one day be consigned to a minor footnote in history, notable only as a passing interest that “huh, we once used to need people to tell us how to use this stuff.”

Huh. How about that?

 
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Posted by on October 10, 2011 in Digital, Marketing, Social Media, Society

 

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How To End Rioting With Targeted Advertising

The title of this piece disgusts me. Marketing people are always telling you how products will change lives for the better; usually such positive changes are evident in the swelling coffers of their and their clients’ bank accounts. The level of self-regard and rampant egotism in marketers is not something I try and subscribe to but bear with me, I think I’m onto something here.

Burning, man

Burning, man

Firstly, we all know London and parts of the UK “erupted” in riots in August 2011. This caught everyone by surprise except, say, people that actually lived in these areas who feel the boiling, feral emotions of everyday urban life day in day out and were waiting to see how and when the volcano would erupt. In the immediate aftermath, it was a race to apportion blame; facts, evidence and calm heads at this juncture become irrelevant – it’s a big ol’ game of point-scoring and the first to come up with a cosy-sounding theory that fits with people’s pre-existing prejudices is usually the winner.

Depending on which variety of politician or media outlet you personally subscribe to, you could take your pick from “pure criminality,” the breakdown of family or community values, poverty or gangs. Or something even more bizarre if you fancied – perhaps social networks  were to blame, just as, say, phone boxes were responsible for 1970s Irish Republican terrorism… weren’t they? In fact, so beautifully dogmatic was the government on this issue that an immediate “anti-gang task force” was announced as well as the hiring in of a US-based anti-gang specialist  at the expense of the local forces (much to their annoyance). Later, we would discover that over 80% of those arrested had nothing to do with gangs and that they weren’t really the blame but – hey! – at least we’ve satisfied ourselves that there’s an “answer” to a “problem” that we can repeat down the pub and that’s all nicely done with.

However, life, despite the attempts of those to categorise it as such, is not that simple. People are not simple. They are complex beings with multiple interwoven behaviours and desires. All of the above reasons have something to do with why riots erupt, but they are not everything. (And if you have a spare hour or so, Adam Curtis’ beautifully written / researched blog piece on “Goodies & Baddies” examines how classifying people as one thing or another is a dangerous game and illustrates the point with loads of great news archive footage. I can’t recommend it highly enough.) The truth is that there is a jigsaw puzzle of pieces that need to be fitted together before you can grasp the real picture of what makes human beings act so rubbishly in these kind of events.

Standard newspaper fare

One of these jigsaw pieces involves marketing and another involves consumerism. Yep, we’re getting to the point, people. Much of our economy’s strength is based on people buying shiny things. We don’t have much in the way of resource production or manufacturing any more so we sell goods and services. Marketing exists to convince us to buy stuff, we buy stuff and companies make money, that money is used to pay wages so we can go out and buy more stuff. And so forth.

But there is a problem. Marketing exists and pumps forth just about everywhere, even if its real target is only a small percentage of those watching or consuming it. Consumerism demands the constant addition of new products and markets to feed the economy. As a result, even a small child is convinced that their life is incomplete without those shoes, a princess dress, that toy, that brand. I was forced to watch a Barbie film with my 4 year old daughter the other week. It began in an era of princesses and dragons, castles and kings. Despite this medieval aura, the first scene involved the princesses leaping from the dinner table in excitement at – I kid you not – the arrival of the cobbler. Yes, he rode up in a carriage with horses and opened it up to reveal which shoes he had brought them. Even 4 year olds can learn the importance of shoes to happiness and well-being amongst one’s peers. And so it goes on.

"Today we are going to learn the Spanish for 'Buy all my shit,' amigo"

Your average Joe these days knows he is a social outsider if he doesn’t have the latest trainers, this month’s console  game selection or certain items of branded clothing. Every character to which one might aspire on TV or film has a swish smartphone, a nice laptop (both of which are likely to be higher spec than their real-life counterparts because of product placement) and will lead lifestyles of varying degrees of glamour. When you add up the sheer cost of leading such a lifestyle it’s astounding. To keep up means literally hundreds of pounds a month and that’s at the conservative end of the scale.

And then you consider the average wage in the UK is under £20K a year for most in the likely riot-y groups , and you realise that this is not an affordable lifestyle for a significant portion of society. I look at the kids from the estate near where I live and try and put myself in their shoes. They are living in a place where they are led to believe that  to be a functioning, successful member of society they need to wear a couple of hundred quids’ worth of clothes, drive BMWs or Mercedes, have £200 PlayStations and £44 games to go with it, play football in £100 boots… But their wage earning potential is likely to be somewhere around minimum wage or, perhaps, traveller site slave. Education in my borough is mainly piss-poor for ordinary folks who can’t afford school fees or housing within the catchment zone of the good schools. Jobs are thin on the ground outside of chicken-based takeaways. How are they ever supposed to “succeed” or even be “normal”?

And then, for a couple of days only, the shops were open and the tills weren‘t ringing. And so these disenfranchised under-funded aspirational consumers-to-be helped themselves to the lifestyle to which their imaginations had become accustomed. Remind me: how is that in any way surprising?

Marketing and consumerism play their part in forging these unrealistic expectations. Aspiration is seen as a normal thing even though social mobility in the UK is regularly highlighted as being the worst in the developed world outside of the USA. Kids born after 1970 have no realistic prospects en masse of social mobility. Those that do move are the exceptions not the rule. Meanwhile, everything from billboards to advertorial to TV ads to display advertising aims at maybe 10% of its potential audience but doesn’t care that it’s unrealistically raising expectations for the other 90%. And fuck what damage it does – we marketing types just want the 10% at any cost.

Targeted advertising, then, solves the problem. Truly targeted ads – ones that are fed by a knowledge of your search history, behaviour, preferences and propensities – really only exist online and on mobile at the moment and in relatively primitive form. Targeted advertising is better for marketers as it has far better response rates and you only pay for advertising to your targets rather than for the other 90% you don’t care about. If you think about a TV ad, it splatters a message at several million people at once, even though the product isn’t aimed at everyone. That whole Minority Report schtick with billboards that know who you are and talk directly to you is only round the corner, however.

And then imagine multi-view TV sets display, mobile and email plus whatever new tech is developed in the future for zapping marketing messages into our brains. (There’s a great moment in Futurama where Fry has a dream which is sponsored by Lightspeed Briefs but stupid copyright means I can’t embed it or link to somewhere you can see it in the UK. I may have to riot about this later).

For advertising to really work, it needs to show you something you can afford (or nearly afford if it’s something worth saving for). If ads become truly targeted, we’d end up only seeing stuff that was relevant to us personally. I would no longer see ads for cars or food I can’t afford; I would doubtless see a swathe of ads for second hand Toyotas, the joys of travelling by bus and coach, prescription drugs that dull the pain of existential angst, rented accommodation and affordable credit. Relieved of the aspirational desires that kill my appreciation of my current lifestyle, I would be able to be satisfied. And so would the missus – imagine that, folks: a world in which your partners’ desires were tempered by affordability and pragmatism: unbounded joy, in my eyes.

And so, as the youthful, disaffected mob are relieved of the need to aspire to unrealistic goals, they are instead fed with advertising that fails to do the ultra-consumerist damage we are currently inflicting on the nation’s yoot. Ads for Gola trainers, delicious Netto snacks and Morley’s Fried Chicken, socks 3 pairs for a pound from your local market stall: all achievable, satisfying consumerism.

And the economy continues to be healthy without the need for rioting or looting.

Problem solved, clearly.

 
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Posted by on September 14, 2011 in Advertising, Digital, Online marketing, Society

 

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British Summertime with Socially Awkward Penguin

I love the Socially Awkward Penguin meme. It appeals to my inner lolcat-loving simpleton. So, for all mildly to morbidly overweight types / general shut-ins, here’s my contribution.

 
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Posted by on July 29, 2011 in Social Media, Stupid

 

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