The digital economy is all about the content

Yesterday I and about 100 other people attended a seminar here in London, jointly arranged by Queen Mary Intellectual Property Research Institute (QMIPRI) and the Institute of Computer and Communications Law. The focus was the Digital Economy bill which is trying to address the ever-present issue of rights holders’ rights and possibilities for enforcement on internet.

However, the discussion yesterday circled much around if and how internet users could be cut off or suspended from their internet connection because they had been involved in illegal file sharing. The issue is an important one and I have trouble seeing the proportionality in restricting access to internet for what in many cases are small amounts of direct loss in sales revenue, which apparently is one of the suggestions in the bill. Jim Killock from the Open Rights Group, did also point out that downloading was more like trespassing than theft. This is true, but it is still illegal in the system that we have today. The discussion about changing the copyright system is partly a different and much bigger one.

I do however believe that the discussion we are having today about illegal file sharing and how to enforce it will pass over as a result of technical development and new ways of consuming content.

Carrot and stick
The industry representative, Richard Mollet of British Phonographic Industry (BPI), did go about quite hard on why enforcement was important. It was an expected point of view and he had a fair point in that enforcement is part of a system where that is the stick in one end and legal services, such as Spotify, are the carrot in the other end. Both sides need to exist.

Richard Mollet’s argument continued in the lines of that the rights holders were to scared to put out content in this uncertain environment without strong enforcement measures. This is where I do not agree.

Business model innovation
One of the first portable MP3 players was released some 12 years ago. Steve Jobs presented the first iPod in 2001. This is of course all known and the discussion about the rights holders not understanding the potential in the technology and that the old business model of selling content on physical carriers was and is outdated, that discussion is not new. What still surprises me however is the total lack of innovation in new business models and product offerings when it comes to rights intense industries such as publishing, film and music.

Intellectual property in the form of copyright is one of the most easily distributed forms of property. It lacks the need to be bundled with physical carriers, it can be packaged in various forms and the legal wrapping can be crafted in just any way.

To be fair, there are several services and platforms offering copyrighted material digitally and with consent from the rights holders. Spotify and Hulu are two examples of this.

I do however believe that there is much more that could be done, if just the interest was there. The technology is there, the consumers are there. The content is not nearly there.

The legal dimension
The issue has of course also a legal dimension, something the third speaker, Graham Smith of Bird & Bird, pointed out. It is far from certain from a legal perspective what is actually legal and what is not and how to enforce it. It is even harder from a consumer’s perspective to do this distinction. It is can be argued that this becomes the result if you let the development happen by itself and not being part of crafting the norms in the marketplace.

As I pointed out earlier, IP in general and copyright in particular are well suited to be developed in to new contractual models. The content can without any particular problem be packaged in just about any way. To look at the problem from the perspective of enforcement of content that has been distributed and copied by norms created by the users themselves, will probably almost always be messy. Especially when the behavior of consumers has been more or less accepted for over 10 years.

If the rights holders on the other hand are the directors on the distribution end and take advantage of the versatility of the content and distribution methods that could be used, I believe that the need for enforcement would be radically less and the revenues would be greater. It just takes someone to be brave enough to let go of the known models and revenue streams and focus on how to embrace the technology and meet the consumer need in a legal way.

Johan Orneblad
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When will Spotify’s regional restrictions be removed?

As you probably are aware of, Spotify announced last week that they were about to apply the regional restrictions which were part of the license agreements with the record companies. This is not such a surprising step though it might be annoying for us users.

Using the function to show unplayable tracks give me this image of one of my playlists. The red/brown tracks cannot be played. I am in the UK at the moment and since it is country specific restrictions they might very well vary. It might seem as a significant part, and I guess it is. But I also imagine that they will try to include them in the 10000 tracks added each day.

The discussion around regional restrictions should definitely be held but it must be around having them as a general phenomena and not whether or not Spotify should apply already agreed upon contractual regulations.

When it then comes to the record labels and they applying restrictions to music based on geographic territory I think it makes sense in the old economy thinking. When music mainly was (intended) to be sold on physical carriers such as CDs having regional limitations and using different distributors in different areas made perfectly sense.

But today, when music as easy could be downloaded in Gothenburg, London or Doha the restrictions makes less sense. The user will most certainly want to hear the same music independent of where in the world she is at the moment. As well as she would like to share the playlists or suggestions of interesting songs with friends around the globe.

When it comes to Spotify I am not sure if they will be the force that will change the thinking of the whole music industry. But they might at least change the customer behavior which eventually will change the labels, even if it probably will take some time.

Johan Örneblad

Monty Python goes YouTube, is it enough?

Monty Python have now entered YouTube with some sort of official aim to stop the unauthorized clips of the group on the site. But is it enough?

YouTube has had problems with copyrighted material for a long time. The model which they have chosen consists of an active identification tool where they search the content against a reference library with copyrighted material proved by the rights holders. You can also file a complaint on one of the videos stating that it is unauthorized material. The rights holders can then decide on either to block the content, track the content or monetize from the content.

Monty Python have chosen to start uploading their own content to YouTube, they have so far uploaded 24 videos in their channel. A rather small number if they are serious with wanting to give access to good quality content. But I believe that their aim is more related towards getting attention than anything else. At least since 24 clips won’t stop the flow of Monty Python content, as now there are around 30 000 videos relating to the group.

Interactive advertizing and privacy

An interesting follow-up on the digital fingerprinting technology used by YouTube, to identify copyrighted content, is to start using directed advertizing in relation to the content shown in other programs and other places than the original one.

We still see the rise of video content on the web being monetized in a good way as something which is to come. Google are watching YouTube closely to find out how and where to make money from the service. One way can be to continue with the watermarking and ad based revenue streams, both on and off the platform.

Privacy

I do however see problems in following the users too closely in their use of video content both on and off YouTube.com since it brings up privacy issues. I do especially see those issues arising when it comes to video since it is more disclosing of private issues than for instance music.

Although this can be somewhat solved with opt in or opt out alternatives for the users. It still is a problem since they are likely to get more and more used to the Big Brother like monitoring.

Where to go?

I think we are still in the emerging stage where the content providers are trying out different business models and different rights solutions to their content. Some, like Monty Python, are still in the setting where they think they will sell DVDs and use YouTube as an advertisement channel for the physical products.

My hope is however that the rights holders are going to see the potential in spreading the content, using the digital highways to expand their cake.

Some issues has to be solved, and they are in the emerging of being solved. The first one is to find good models to take in revenue. Ad based or subscription, or some other innovative way.

The second one is to go global on the rights. We live in a globalized world where it makes no or little sense to have diversified rights to digital content. There could be diversified rights to the revenues, but the access has to be global. More on that in a later post.

So, Monty Python might be funny. This is why 24 clips will not be anywhere near enough to stop the unauthorized content of them on the web.

When will I be able to watch “the dead parrot” with complements from Cleese and the boys?

Johan Örneblad

[Via DN]

Spotify premium service to promote user base

I am getting back to Spotify and their model (hopefully) changing the music industry.

It is not new with teasers or previews offered to specific audiences. Which is why it comes pretty natural when the new album with the Swedish artists Orup and Lena Philipsson, Dubbel, is offered to premium users in Sweden almost a week before the public release date. It is interesting to see how the music industry this way, sort of at least, show that they approve the new way of distributing music.

Still, I have not seen the agreements between Spotify and the record labels, it might be so that they share the different revenue streams in some interesting way. But it might also be so, which I think to be more likely, that the record company sees Spotify more as a way to promote other sources of revenues then to strengthen the Spotify model. The service is all too young to be a trusted way of income for the record labels.

It is however interesting to see that it is only the premium service which gets the early access to the preview. Could this be a sign of that it is not enough with the commercials every sixth song to differentiate the two levels of the service? It might. But I strongly doubt that it was not thought of as a way of separating the two in the planning of the business model. It will rather be a continuous process to offer good value for the around €9 the premium service cost each month. It will otherwise be easy to switch to the ad-based level.

Next interesting part in all this is of course as I wrote above, the models of revenue streams between Spotify and the rights owners. Perhaps is it more profitable for both parties to have lots of users using the ad-based one. A hint in this direction is that they only account for that between 2 and 15 percent of the users will use the subscribed versions of the service, according to Martin Lorentzon. Then, still the question is why to offer the early release to the premium costumers?

The same article in Dagens Nyheter suggest that they believe to have 20 million users in 2 to 3 years. A quite large customer base which they have pretty good user information about, due to their music preferencies. I reckon customized commercial spots can be made with quite good accuracy based on that information which makes the community pretty valuable for advertisers. Or perhaps third party use in some way.

For now I still think it is safe to assume that Spotify will continue to offer premiums to the subscription service, in one way or another. Mostly I base this on that you as customer are more eager to use a service which you have actively decided to use. You are also probably more interested in talking to and inviteing your friends to the service as long as it offer good value. This way creating a stable base of users subscribing and becomming part of the "Spotify tribe". The same tribe inviting their friends and promoting Spotify.

But the most important part is however the diversification of the offer towards the costumers. In order to fulfill the diversification needs, there has to be differnet values assigned to the different alternatives. Which is why we will see more early releases and designated content in the premium level of Spotify.

Johan Örneblad

Is Spotify the model?

Have we now seen a shift, or at least an approach to shift, in the music industry by some recent activity? From using their IP in a protective way to actually understand the preferences of the new economy and rise above the physical carriers of music.

Spotify opened up to the public about a month ago and has since then received excited reviews. The service builds on either an ad based model or a premium monthly subscription model. Both models have been around for quite some time but the music industry has not yet really embraced them in a good way.

Earlier attempts to stop piracy with lawsuits, drm and other protective measures have obviously not been fruitful since there is almost everything you want on for example the Pirate Bay. To offer downloadable tracks for $1 each is way too much for something which is, although illegal, readily available for free.

Providing full access to almost all songs and still make money on it is a good deal for both the users and the rights holders.

Two of the main obstacles for Spotify are that they do not provide “all” music and that you need internet access. Sure, this will probably be solved in the future. Adding more content to the service must be one of the top priorities for the company. The access problem might be harder to overcome; even though it runs on 3G connection you hardly have your computer with you when running… I do assume the service will be available on mobile devices as well in the future.

The mobile market is already starting to be explored by the large manufacturers offering different deals where the handsets are bundled with music. Nokia’s Comes With Music offer is one of them and Sony Ericsson have similar deals. The device to carry the service is for me of less importance. But the breadth in the offerings of similar services will probably establish an acceptance for the model, both on the consumer side and more important on the rights holder’s side.

We are getting more and more used to that access of information is offered to us, not one at a time but instead unlimited for a specified time. This will bring new revenue models to us, either they are ad based, prepaid or in some other innovative way. We are still in the start of the new economy of access, some have come further and some are just beginning. But the main point is that you cannot any longer stay in the model of providing goods one by one. We are used to choice and instant access and will find the best and most convenient way to get it.

Perhaps Spotify will be a good step on the way.

Johan Örneblad