And eight years later:
Saturday, October 25, 2008
Friday, October 24, 2008
Below is the complete text of the lecture I presented at The Conversation in Berkeley on October 18th.
Why Apple is About To Get Its Ass Kicked
by Ross L. Pruden
I’m a filmmaker myself, and I’ve spent a long time studying movie distribution so I’m excited to share my predictions here at The Conversation. By the way, I should add that I’m a two decade Mac user so I share no joy at the prospect of Apple’s possible demise.
HOW WILL IT END?
I’m currently writing a business plan for my own film company, yet when I get to the Marketing & Sales section for my plan, all I see is a US-Letter Sized question mark. Movie piracy is more pervasive than ever before—not necessarily a bad thing—and newer distribution models are still competing for dominance. How is this all going to end?
On my blog, I discuss how digital content is being distributed, and a recent post called iTunes’ Death Knell describes how iTunes in its current incarnation faces some potentially fatal challenges from its competitors.
THE OLD MODEL
Our dominant model for digital content distribution of music, movies, and software has been historically rooted in physical ownership, i.e., movies are sold on DVDs, games come on CDs, and music comes on a CD or on MP3s. As broadband becomes more pervasive, we see that dominant model shift from a physical product-based ownership to a virtual license-based ownership.
Let’s say I buy a new movie at a store for $25. I buy it on DVD, take it home, and get ready to play it. Then my precocious daughter smears her cheese snack all over my new DVD. I’m out $25. Or maybe I buy a CD for $15. Or a new PC game or application for $50-$300. And then my house burns down. Once the physical product is destroyed, you have to repurchase it. In a digital age, where copies can be made instantly and without degradation, this is unacceptable.
THE NEW MODEL
And we already see a slow exodus to the online world. More people are using online applications like Google's Docs & Spreadsheets instead of Microsoft's Word & Excel. Netflix offers an online movie service called Watch Instantly. Users even create their own radio stations on Last.fm, Pandora. The trend is slowly moving towards constantly accessible streamed content.
Right now, iTunes lets me buy a complete season of 24, but at half a gigabyte per episode, I need 12 gigabytes to store an entire season. Storing three seasons on my laptop starts to become unmanageable. Or maybe I have my entire music library on my desktop, but my laptop only carries a fraction of that. As a user, I want to have access, anywhere, to all the content I’ve ever purchased—forever. The only way to accomplish that is to sell content licenses to stream content whenever users want it.
The Valve Corporation, responsible for the famous Half Life games on PC, maintains a gaming network called Steam. Steam is a license-based platform offering over 250 games and boasting 15 million users. If you visit someone’s house, all you have to do is log into your Steam account and you can download and play any game you own that you’ve purchased through Steam. If you need hard drive space, you can delete games from your hard drive and download them again later. If your house burns down, there's no scrambling with customer service to prove you bought your content—you only your Steam account username and password to have access to any of your games.
For the consumer, license-based distribution also makes upgrading very attractive: for example, if I bought a $20 DVD and later on I want to buy a $35 Blu-Ray DVD, I can “upgrade” my DVD license with that $15 difference and then download the newer hi-def version. Customers would never need to worry about being gouged for purchasing a newer version reissued every few years.
ITUNES, MEET DECE
Although iTunes is popular now, it only sells product, not product licenses. You buy MP3s and if your hard drive crashes, those MP3s are gone. Worse, each company's proprietary DRM means MP3s purchased on other platforms like Zune cannot be played on your iPod.
DECE—which stands for Digital Entertainment Content Ecosystem—is a new license-based platform for movie content. Its financial investors are Warner Bros., Fox Entertainment, NBC Universal, Sony, Paramount, Comcast, Best Buy, Microsoft, Hewlett-Packard, Cisco, Philips, Toshiba and Verisign. Disney and Apple are not on this list.
DECE will allow:
- a TV episode to be just as easily accessed on Microsoft's Zune as it would a Philips broadband-enabled TV set;
- an unlimited number of copies of a video to be created or burned onto a disc;
- the consumer does not even need to store a copy at all, but stream it from a server-based "rights locker" that can be tapped from any location.
HOW IT WILL END
Okay, so how will it end? What might license-based distribution actually look like in the real world? It would probably interact seamlessly with the internet and use corporate sponsorship for those unwilling to pay a monthly subscription. One such scenario could go like this:
You're over at a friend's house and you're talking about a movie you just rented online through a web site. You want your friend to watch it, too, so you sign on to that web site and the film starts to download immediately.
While you're online, another friend—in a different location—sees you're about to watch a movie and sends you a text or video message, via the web site: do you want to all watch it at the same time? You send him a virtual invite or "guest pass"—which would be limited to only 5 or 6 per movie—and now your remote friend has joined your virtual “audience”.
After the film is over, one of your friends is so impressed with the film (which he’s essentially seen for free) that he decides to buy it himself. Another of your friends recommends the movie to his friends. The remote friend might be by himself and perhaps he likes to surf the web while watching films, and so he clicks on some of the sponsored links related to the film's topic matter, e.g., clothing choices, charities the movie's actors have started, other movies the director or producers have made, other movies you're recently watched and rated, etc. Or, if the remote friend is watching your rented movie, he could pay—at any time—to watch the rental himself so as to remove all the embedded advertising links and overlays.
We’ve only spoken about music, movies, and software, but how about books? Wouldn’t it useful to remotely access the contents of any book you've ever bought? No reason why children need to lug around heavy book bags if they can instantly view or print any chapter they want to read.
Two things are clear about the current state of digital content distribution for movies:
- iTunes has the dominant model for physical product-based distribution—you buy a movie or TV show through iTunes and you can be watching it within minutes.
- iTunes no longer has the competitive edge on providing the distribution model consumers will ulimately want and if iTunes doesn’t work out an arrangement soon with the founders of DECE to sell movies through iTunes with DECE’s “rights locker” features... well, Apple is about to get their ass kicked.
Thank you very much. Please come find me on Facebook or visit my blog!
UPDATE: Since the writing of this lecture, news has been reported of a new music streaming web site Lala.com. Lala.com lets users listen to any song without limitation, for free, in the hope that some users decide to buy the songs. Much like Steam has done for games, Lala.com allows iTunes users to upload their library and listen to their music from any location.
MORE UPDATES: Apple acquires Lala.com. Just keeps getting better, doesn't it?
Thursday, October 23, 2008
I once worked for a political advertising company doing campaigns for Democrats across the nation. We had this one East Coast Senator running on a platform promoting The Ten Commandments being posted in public schools within their state. I have pretty strong feelings about the separation of Church and State and was quite relieved nobody asked me to do any graphic design on her campaign because it might have gotten me fired. We all have lines in the sand and that's mine.
Advertising is about using images to evoke feelings, and those feelings can sway elections. If you crop a photo with enough space around a person's portrait, that person appears friendly, but if you crop the photo with no space at all, that same photo appears claustrophobic and makes the person appear threatening.
Given how powerful a single image can be, you can even cram a political mailer with dummy text and know that even a single unflattering image of your opponent can be enough to leave a lasting impression on undecided voters. Consider this last RNC mailer doing the rounds. Here's the front cover:
The use of the large word "TERRORISTS" in collage cut-out letters subconsciously paints a picture of kidnappers ransoming our children, and the image of planes in the background reminds us of 9/11. But who is this mailer for or against? Here's the inside:
Ah, well this mailer isn't calling Obama a terrorist, not really. But if you looked at this mailer across the room, you can't help but see a connection between Obama's picture and the word "TERRORIST". To understand the full context of the mailer, you have to read the mailer's finer print (the truth and accuracy of its statements are fodder for someone else's blog, I'm sure), but its tacit intent is self-evident: Obama is a terrorist. Governor Palin's speeches of late call Obama "palling around with terrorists". Her statements also do not explicitly claim Obama is a terrorist, but if you say "Obama" and "terrorist" enough times in the same sentence, the two ideas merge into an informal epithet: Obama the terrorist. Does that phrase sound like any other terrorist you know?
Obama's image in this mailer is also strikingly similar to another infamous black man hailed as a terrorist. And he was muslim. What a coincidence.
* The two are completely unrelated.
Wednesday, October 22, 2008
Too bad I didn't post my lecture I gave at The Conversation this weekend about license-based distribution, because the article below about Lala.com only reinforces it.
Lala.com is now offering licence-based ownership of music... a model that directly competes with the iTunes. In fact, if you own an Mp3 on iTunes, you can upload your library to Lala.com and stream it from their site if you log into Lala from any computer. That model blows iTunes out of the water where you own Mp3s locally and can't stream anything. Hell, even I'm tempted to use Lala.
This is probably related in some way to the new DECE (Digital Entertainment Content Ecosystem) that the big movie studios recently rolled out, but Lala.com distributes music, not movies. Apple's dominant iTunes model is severely in jeopardy if they don't act fast to sell all their MP3s without any DRM, and offer users the option to stream their music from anywhere. Unfortunately, Apple is only a content distributor and not a content producer like Sony, so Apple still needs permission from content producers to offer non-DRM Mp3s (Apple used to offer non-DRM Mp3s for $1.29, but caved in April 2007 when they realized consumers would rather purchase a CDs to snag those non-DRM Mp3s. Now Lala.com is offering non-DRM Mp3s, too.)... and the producers have realized they can cut the distributor out of the equation and sell straight to the consumer.
Lala.com Gives Digital Music Another Try
By RYAN NAKASHIMA
Tuesday, Oct. 21, 2008
(LOS ANGELES) — First a CD-trading site, then a free Web-based music browser, lala.com is being born again. The site is relaunching Tuesday as a hybrid, offering the digital download functionality of iTunes and the free music streaming of MySpace Music without the ads.
The Palo Alto, Calif.-based private company, backed by $35 million in venture capital from Bain Capital LLC, Ignition Partners and Warner Music Group Corp., first launched in July 2006.
Its first version lacked scale and the second was met by numerous me-too players from MySpace and iMeem to Last.FM, said co-founder Bill Nguyen.
This time around, listening to any of the 6 million tracks at lala.com will be free. It will cost 10 cents to put a song in a Web locker for unending access on any computer where the user logs in.
Another 79 or 89 cents allows the user to download an MP3 track, with no digital rights management coding.
Because the site is ad-free, the business relies on selling Web tracks and MP3s.
"Where we get into trouble is if we do a lot of streaming and we don't sell music," Nguyen said.
Users of lala.com's test site — who number nearly 300,000 — are buying enough music to put the site on the path to profitability.
In the testing period, for every 1,000 free streams, the site sold about 60 Web songs and 60 MP3s. It needs to sell 15 to 20 of each per thousand free streams to be profitable, said spokesman John Kuch.
Users can upload their own music from CDs and iTunes into their digital locker for free. This gives lala.com enough knowledge of an individual's tastes to be able to market similar songs to him or her, a technique that boosts the sell-through rate about fivefold, Nguyen said.
The site has the participation of all four major record labels — Universal, Sony, Warner and EMI — and 170,000 independents.
Thomas Hesse, president of global digital business for Sony Music Entertainment Inc., said a key reason for licensing music to lala.com and other sites like it was the ability to sell music downloads.
"We do streaming deals that also have an upsell opportunity," Hesse said. "To us, that is an important side-by-side concept."
Sony's digital music sales represent more than a third of its U.S. revenue and are on pace to exceed revenue from physical CDs "fairly soon," Hesse said.
Monday, October 20, 2008
Thanks to Ken Eklund, whom I met at The Conversation, for telling me about this. Ken's a fascinating guy to talk to, and the inventor of the popular Alternative Reality Game, A World Without Oil.
Unicloq is a Japanese clothing company that wanted more brand recognition. So they got some creatives to design a brilliant viral marketing campaign: a clock with four Japanese girls (wearing Uniqlo's clothing, presumably) dancing in an unknown location for 5 seconds, and then pausing to return to the clock. With catchy music. Oh, at midnight Japanese time, the four girls sleep for an hour.
I cannot explain why—perhaps it is because these four girls inhabit an ethereal world untethered to anything specific in space or time—but this is positively riveting. It's like a real-life incarnation of Gibson's Pattern Recognition.
Thursday, October 16, 2008
This Saturday, I'll be giving a brief presentation between 1:30 & 3:00 at The Conversation's Open Forum in Berkley. The topic is Redefining Digital Content Distribution, or Why Apple is About to Get Its Ass Kicked.
Hope to see you there!
Wednesday, October 15, 2008
While watching the third and final presidential debates tonight, I had a premonition at 6:58PM—beyond any doubt—that Barack Obama would be voted the next President of the United States. Two minutes later, I felt I saw the future unfolding.
McCain said he'd like to hear what kind of "fine" that "Joe the Plumber" would get under Obama's health plan and Obama responded "Zero", explaining that small businesses get an exemption under his plan.
Now look at McCain's face:
For most of the presidential debates, McCain has smiled or he's had his mouth closed. Instead, here he looks at Obama, nearly incredulously, as Obama flatly rebukes him, and then explains—with the usual Obama eloquence—the details of his health plan. It's hard to see on this clip, but in the video, McCain's face looked ashen, almost angry. All I could picture in my mind was McCain's spin doctors pulling out their hair, screaming at their TV sets for McCain to "reset" back to his pleasant happy face. Small moments like that leave a small subconscious impression which gently tips undecided voters towards the more affable candidate.
I guess a month from now it'll be easy to say how sure everyone must have been that Obama had it all sewn up so early, especially when you look at this election map where Obama is close to clinching more than the magic 270 electoral votes (thanks to NPR's interactive map):
However, there are several things which make this race uniquely advantageous for Obama to convert my strong hunch to certainty. Firstly, the candidate himself: he exudes confidence, charm, vitality, eloquence, hope, and he's remarkably intelligent. Secondly, he's running his campaign with virtual tools like Facebook, Myspace, and Twitter, and even sponsoring ads in video games. Thirdly, he's built a massive pro-active grass roots campaign (through those aforementioned virtual tools) from which he's consistently asking for donations. Fourthly, he's using those donations to force McCain to hemorrhage money to retain states he'd once taken for granted, and Obama's fiercely stumping in tossup states like Florida and Ohio. As of this writing, Obama is ahead in the Florida polls by almost 5 points. Since the margin of victory in Florida was so slim in 2004, there's a strong possibility Obama's fevered drive to register 500,000 new voters will flip Florida from red to blue. And everyone knows Florida is iconic in tipping the election.
I now hear that Obama has purchased a national half hour TV spot right days before the election... Obama beat the "unbeatable" Clinton simply by staying in the race long enough to let the voters get to know him. Given Obama's track record of political victories, one has to wonder if McCain ever really stood a chance at all.
So I'll bet money on it now—come January 20th, we'll have a President Obama in the West Wing.
Yes we will!
Tuesday, October 14, 2008
I heard about The Conversation this summer and immediately bought a ticket:
[P]ioneers at the forefront of change in cinema, video, games, media and technology are coming together to share ideas, insights, and innovations. Our focus is on new tools, new distribution channels, and new rules.... The format of the gathering will be experimental: rather than a traditional conference, short talks and demos, "fireside chats," and roundtables will spark a dynamic series of overlapping conversations.
Their guest list is enough to make any independent filmmaker salivate—Peter Broderick, for instance. His recent article in Indiewire about the New World of Distribution for indie filmmakers is germane to how (I think) digital entertainment will be distributed. Hunter Weeks is another gem on the list—he's one of the co-creators of 10 MPH, a documentary about two guys crossing the United States on a segway. Week's movie home page is an exquisite example of how to use the internet to market your own movies. Other notable invitees hail from Netflix, Createspace, Filmbaby, JibJab, Lucasfilm, ILM, The Webby Awards, and YouTube. See the complete list of speakers at the bottom.
One really appealing part of The Conversation—you can throw out your own ideas. I thought about it for awhile and this forum seems ideal to mention some of my own predictions on the future of digital entertainment. Frankly, in one form or another, I've been observing, discussing, and molling over the movie industry for three years and have a pretty well-informed opinion about it. So I decided to make a presentation of my own about license-based entertainment which will be a riff on a recent article I wrote about iTunes' Death Knell. My ardent hope is that my presentation isn't eclipsed by someone else's brilliant 90 minute lecture. I do hate redundancy.
The Conversation takes place all day this Friday and Saturday. Tickets are still on sale, but a little steep now at $150. But if you have nothing to do, come be my own peanut gallery!
COMPLETE LIST OF SPEAKERS
- Alex Afterman, Founder, Heretic Films
- Alex Lindsay, Founder, Pixel Corps
- Arin Crumley, Director, As the Dust Settles and Four Eyed Monsters
- Barbara Robertson, Journalist, CGSociety, Computer Graphics World, Digital Production
- Chris Thilk, Director of Marketing, Spout LLC
- Cliff Plumer, Chief Technology Officer, Digital Domain
- Dan Gregoire, Founder, Halon Entertainment
- Dana LoPiccolo-Giles, Co-founder, CreateSpace (formerly CustomFlix)
- Danae Ringelmann, Co-Founder, IndieGoGo
- Dean Valentine, CEO, Comedy.com and Founder, Symbolic Action; former CEO of UPN and President of Walt Disney Television
- Diana Barrett, Founder, The Fledgling Fund
- Evan Spiridellis, Head Art Guy, JibJab Media
- George Strompolos, Content Partnerships Manager, YouTube
- Graham Leggat, Executive Director, San Francisco Film Society (Moderator)
- Gregg Spiridellis, CEO Guy, JibJab Media
- Hunter Weeks, Director, 10 Yards and 10 MPH
- James LeBrecht, Berkeley Sound Artists
- Jason Harris, President, Mekanism
- Jeremiah Birnbaum, CEO, SF School of Digital Filmmaking
- Jesse Keane, Chief Technology Officer, CinemaNow
- Jim Sommers, Senior Vice President, ITVS
- John Batter, Co-President of Production, DreamWorks Animation SKG; former Group Studio General Manager, Electronic Arts
- John Gaeta, Visual Effects Designer, Speed Racer and the Matrix trilogy
- John Knoll, Visual Effects Supervisor, Industrial Light & Magic
- Jonathan Marlow, Executive Director, San Francisco Cinematheque; formerly at Vudu and GreenCine
- Josh Wiggins, Senior Director of Global Strategic Sales, Ascent Media
- KC Blake, Anywhere/Anytime Content Lab, Entertainment Technology Center@USC
- Ken Eklund, Writer & Creative Director, "World Without Oil"
- Ken Goldberg, Director, Berkeley Center for New Media
- Lance Weiler, Filmmaker & Editor, The Workbook Project
- Michael Ferris Gibson, Director, 24 Hours on Craigslist & Producer, Truth in Numbers: The Wikipedia Story
- Michealene Cristini Risley, Independent filmmaker, Tapestries of Hope
- Mike Curtis, HD for Indies
- Mike Shiley, Director, Inside Iraq: The Untold Stories & Dark Water Rising
- Nick Braccia, Creative Director, Deep Focus
- Peggy Weil, Artist & Game Developer, "Gone Gitmo" and "The Redistricting Game"
- Pete Ludé, SVP, Sony Electronics
- Peter Broderick, President, Paradigm Consulting
- Phil Tippett, Founder, Tippett Studio
- Reed Hastings, CEO & Founder, Netflix
- Rich Bradway, Associate Dir. of E-Commerce & New Media, Boston Symphony Orchestra
- Richard Kerris, Chief Technology Officer, Lucasfilm Ltd.
- Scilla Andreen, CEO, IndieFlix
- Scott Kirsner, Editor, CinemaTech
- Ted Hope, Co-Founder, This is That
- Tiffany Shlain, Filmmaker & Founder, The Webby Awards
- Tim Napoleon, Chief Strategist for Digital Media, Akamai
- Wendy Levy, Director of Creative Programming, Bay Area Video Coalition
- Woody Benson, Managing Partner, Prism VentureWorks