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The Tory and Labour parties colluded in forcing through a piece of draft legislation today – the Digital Economy Bill – which is one of the most barefaced examples of Olde Media trying to protect it’s position via legislative muscle.

No-one (rational) was ever suggesting that there should not be a Digital Economy Bill and a debate – everyone was welcoming it – but most people wanted to debate it fully and get all views sorted, as well as iron out its inconsistencies, errors and incomplete areas.

The fact that these two major UK political parties forced it through (despite its incompleteness, erroneous areas, clear public resistance, and strong arguments by those in the parties who know something about this area) implies both are in effect in thrall to these vested interests – and, one therefore wonders, who else’s vested interest are they (jointly and severally) in thrall to?

In general this is an apolitical Tech Strategy blog, but one of the things we predicted in our work on Web TV is that the Olde Media would use legislative means to curb the growth of the New, and that the role of a government is to balance these interests to the greater good of the country’s best interest.

They failed, miserably. But they failed in full possession of their faculties. And both failed, ie whoever is in government next time will fail to uphold the interests of the future in deference to the past.

We did this in the past, in 1865 Britain passed laws that meant that New Technology (powered vehicles) had to have a man walk in front of them with a Red Flag:

The Locomotive Acts (including the The Locomotives on Highways Act 1861, The Locomotive Act 1865 or Red Flag Act and the Highways and Locomotives (Amendment) Act 1878) were a series of onerous measures introduced by the British parliament to control the use of mechanically propelled vehicles on British public highways during the latter part of the 19th century.

…..

These new Locomotives, some up to 9 feet (2.7 m) wide and 14 tons, could also allegedly damage the highway while they were being propelled at “high speeds” of up to 10 miles per hour (16 km/h).[1] However, there is evidence that the steam carriages’ better brakes (which did not lock and drag), their wide tyres, and the absence of horses’ hooves striking the road allowed them to cause less damage to the roads than horse-drawn carriages.

It was a scam then to protect the incumbents, its a scam now, and a pox on both houses that passed it.

Update – I wrote this last night, and already this morning one of the major UK ISPs is publically looking at ignoring the bill. Let the Digital Defiance begin!

Update to my update – it appears they are bravely defying it until the next Parliament comes in after the election to enforce it. Heroic resistance, what!

Techmeme has launched a new vertical, the fascinatingly recursive* Mediagazer:

Today we’re launching our first new news vertical in almost four years: Mediagazer, which will focus on the content production and distribution business, organizing topics as wide as journalism, blogging, video production, e-books, and digital distribution technologies.

Meedja types given a mirror to look at themselves with…hmm, I recall a Greek Myth on the subject – ended in tears of course . Anyway, the venture will still have the Human Editing function:

Mediagazer incoporates all these lessons. We’ve taken great care in its construction, have outfitted the site with the latest iteration of our automation engine, and have launched it from the outset with a dedicated human editor.

That editor will be Megan McCarthy. While Megan’s career in media has focused more on the technology space (both at Gawker and at Techmeme), she’s long developed an interest in media industry buzz and should feel very much at home at Mediagazer.

It was perhaps inevitable that such a thing aimed at The Meedja would happen, its is an interesting gambit, and I wonder if it will need more human editing than Tech. The sheer number of Media news magazines suggests it will work (I’ve always seen Techmeme etc as the equivalent of magazines rather than newspapers per se), with this most self-absorbed of sectors. What fascinates me is which other verticals will be launched – and survive.

*look it up

Worrying message for the Future of Web Porn – Apple is pulling the Adult apps out (theough a rumour surfaced that they may let some back in) back in, while Walmart is pulling them out of Vudu:

An email is currently being sent out by Vudu letting its After Dark (the adult portion of its service run with adult publication AVN) partners that the section will be discontinued in the “coming days.” Find the full email at the bottom of this post.

Vudu has the distinction of being the only major streaming service with an adult section which includes hundreds of titles (including many in HD) from the leading porn studios.

What with all the free sites like YouPorn, its hard to see where a moneymaking model for Web Mass – Videoporn is.

In theory – in theory – if there is no money in the market then eventually new content will disappear and the market collapse. Will this happen for Porn – probably not, because this seems to be the one area of user generated content where the cult of the amateur still has a large part (as it were).

Gave a talk last night at the Online News Association session “Who cares about the page views, show me the money!”, along with William Higham, writer and trend forecaster, Next Big Thing (@williamhigham) and Katie King, Creative and Development Editor, MSN UK (@ktking).

This post details shows the slides (above) and the commentary (below).

The Communication Value Chains of Yesteryear

Castles on the Rhine and Fleet Street office blocks are frequented by tourists today, but in days gone by were the headquarters of powerful barons of communications businesses, made powerful by their control of a par of the distribution system. They remain as witness that in communications and media value chains, things do change.

The Value Chains of Yesterday

TV, Print Media, Radio, Music and Film empires all existed as aggregators because they had control of their supply chains – either licence granted, or owned a very expensive to reproduce distribution network. That these would end was predicted at least in the mid 90’s – in excruciating detail, to my personal knowledge – so the only real surprise is that these behemoths have sat on their a*ses for so long.

The Value Chains of Today

Cometh the ‘Net, cometh the disintermediation of the distribution networks, and new aggregators interposed themselves on the new distribution channels. The first generation of these were the “Portals” – Yahoo etc – but the winning game at present is Google, a search function serving low rent classified Ads (but maximising their value via auction) at very low cost.

Bear in mind that Yahoo et al ruled the roost for about 7 years, Google is in its year 6, so its quite likely that by 2015 it will be something other than Google in this space – we are already seeing attacks on their aggregation model by competing search engines and new aggregators suc as social networks.

Media Value Chains – Future Scenarios

In our work for the Telco 2.0 Initiative, we identified 3 sets of players going forward:

- Old Media – they will suffer a collapse in their existing revenues, mainly because….

- …Pirate World is giving away things for free today, by playing fast and loose with other people’s IP and being funded by VC’s and Other People’s capital, and…

- …some New Media Players (eg Google, Apple) are making money at one point in the value chain and using it to subsidise and disrupt others (eg Google funding YouTube)

The issue the New Media Playesr face is that in the early days they don’t make a lot of money, event though they disrupt the Old Media (especially if they indulge in pirate tactics). The risk they face is that after the “Freeconomic giveaway” stage, if there is not a viable cashflow positive business there then they die when VC etc funding stops (or in the case of something like a YouTube, if they grow too large to subsidise).

Media Value Chains – Predicted Actions

The Old Order will use its muscle to maintain control of its stream of value:

- Re-establish content rights
- Maintain control on sources of funding (Ads, Subscription)

The Pirate World will attempt to push its advantages to teh Max

- Argue for No control of rights, Free wins
- Obtain as much Offset-based funding as possible

The New Order will try and reset the game in its favour by lobbtying hard for things like:

- New copyright model allows pricing control by new aggregators / creators
- Migrating control on sources of funding (Ads, Subscription)

FreeConomics must #Fail

“Free” is a great way to grab market share and disrupt incumbents, but its a lousy way to keep a sustainable business going. Those that rely on FreeConomics but are then unable to wean themselves off it must fail when they get too large to support, as noted above

The Apple Play….

Apple, with the iPod and now iPhone, uses control of the customer distribution device to control the upstream players and dictate its terms. Planet Mobile did this but was cr*p at giving its customers what they wanted, allowing Apple to enter. Planet Internet cannot do this as the CPE devices are relatively open by comparison. Not only that, but people are used to paying for Planet Mobile content but not for Planet Internet content.

….and the Bandwagon

Of course, every media and technology company on the planet saw this and now we have devices in profusion, from Kindles to iPads, all praying that they can be the next iPhone and persuade the punter that they are really mobiles and that said punter should pay again for the content and services.

The problem with this is it dilutes value to the customer – if I have to have a Netbook, Kindle, iPhone, iPod, Whatever to get bits of content then that is a lousy value proposition. That is the flaw in teh Planet Mobile argument for example – because there are so many incompatible platforms, content production is costly, ergo there is little delightful content.

Winners will thus be the ones who can aggregate and integrate across a number of these channels (did someone say Apple?)

Endgame, This Game

The Print Media is now attempting to re-establishing control by erecting gateways to its content. Some will success, some will not, depending on the content and what value can be added

So what about Print Media?

This is the standard 2×2 of our view on media future – essentially value is created in media in 2 ways – either content is inherently valuable (read: unique) or the organisation can add value to the data in some other way (archives, speed, metadata etc). So, the 2×2 says that:

- Generic, No value add – the data the only real choice is to grab a large audience (typically by aggregating a smorgasbord of stuff, as Newspapers and Portals do) and try and make money by a combination of Ads, Datamining and attracting offset funding.

- Generic, but value can be added – in this scenario some benefit can be gleaned from the added value and its probably here that Freemium models will work (ie a small % pay a prtemium for teh added value content). Typical of this is a social network giving higer levels of access or permissions to paying users (FriendFinder and other dating sites do this), or a newspaper giving access to archives.

- Unique, but No Value Ad – I would class teh WSJ and Financial Times basic reporting here – it is unique, its worth something, so some sort of paywall for some of the content will exist but it can’t be too high as the stuff is not that valuable. One could argue its the same as a Freemium model but I think in this case the proportion of free-payers is much smaller (eg FT only gives 10 articles a month for free)

- Unique, with Value Add – this is the world of subscription economics. The Lancet is in here, as is Bloomberg etc – but these are few and far between.

The real skill going forward will be to create valuable services from less rareified data. Thanks also to Skillset for hostiing it.

eBook eConomics

eBooks should cost the same as paper books, says MacMillan CEO John Sargent – SAI:

John Sargent, CEO of publisher Macmillan, has taken out a full-page ad to explain why he is insisting that Amazon raise prices on its ebooks to $15 in some cases.

……………………………….

First, to clarify what is happening here, you are already getting your money: You are selling ebooks to Amazon at whatever price you set ($10-$15), and Amazon is turning around and selling them at a loss, sometimes for $9.99. We’re not against your charging what you want to for your books. We’re against your telling Amazon what it has to charge for them.

Also, we don’t want to pay $15 for ebooks, and we don’t think we should have to. The marginal cost of an incremental ebook is pretty much zero. So why on earth should we pay $15 for it?

Its not quite so one sided as portrayed here – Amazon threatened at one stage to remove all MacMillan books, electronic and paper, from its listings. Amazon will now acquiesce, however – as the NYT notes. One wonders what it will do to the volumes sold?

Sigh – The Blodgett’s views on economics always have to be handled with care (as many found out in dotcom days to their cost), but one does expect better of a physical media CEO who has observed this argument fail in music, journalism and now video. A little lesson in production microeconomics then. Consider the diagram above – a simplifies media value chain. There are 4 main cost buckets in producing a book:

(1) Content Creation – thats what it costs the creator (the author etc) to create he work
(2) Aggregation – the costs of agents, editors, advertising. legal fees etc etc
(3) Production – the cost of making the product, whether its digital or physical. However, physical production costs are significantly higher than
(4) Distribution – the costs of moving the product from producer to consumer – again, digits over the internet cost a fraction of the trucks, sheds and shops needed for books

Now, on to the cost of production.

(1) Cost of creation is the same, irrespective of the media
(2) Cost of aggregation is similar

So, assuming the market volume is the same. The costs are roughly the same, so the cost per unit will be similar. These are the costs in blue, above.

(3) Cost of Production – orders of magnitude lower
(4) Cost of Distribution – ditto

These are the red sections, and represent the difference in cost of production between a book and e-Book. I’ve drawn the 4 elements as roughly equal in size – in fact the cost of creation is fairly small, aggregation fairly large – but production and distribution are very material – at least 30% in nearly every case. That is a non trivial saving.

Now just to deal with Mr Blodgett quickly – the “marginal cost” is indeed near-zero once the full costs of the creation and aggregation have been met – but only when they have been met. That is true of both paper and e-books. Until then, they cost!

There is actually another cost, that of the consumer equipment required to read the media, but that comes after the cost to produce it and is not directly germane to the price. However, it is germane to the total cost of ownership. And shelling out several hundred dollars for an e-Reader is another factor arguing against equal pricing of book and e-book.

(Update – just reading some of the other articles, I think they are missing the fundamental point this shows – in other words there is a disruptive economic arbitrage between books and ebooks that will restructure the industry, whether it is wanted, fair, right etc etc is moot)

One thing does concern me though, and that is the potential lock in and DRM lock out that all these various proprietary eBook readers get.

You know you always suspected this, but now you know (from Psychology Today0:

Last week, the Sunday Times published an article with the headline “Blonde women born to be warrior princesses.” The article reported that “Researchers claim that blondes are more likely to display a “warlike” streak because they attract more attention than other women and are used to getting their own way – the so-called “princess effect.”” The Times article quotes the evolutionary psychologist at the University of California – Santa Barbara, Aaron Sell, and his findings are purportedly published in his article in the Proceedings of the National Academy of Sciences, written with the two Deans of Modern Evolutionary Psychology, Leda Cosmides and John Tooby.

Except that….

As it turns out, however, none of this is true, as Sell explains in his angry letter to the Times. He and his coauthors do not mention blondes at all in their paper and they don’t even have hair color in their data. The supplementary analyses that Sell performed after the publication of the paper, as a personal favor to the Times reporter, show the exact opposite of what the Times article claims. After he presumably listened to Sell explain all of this on the phone, the Times reporter nonetheless made up the whole thing, and attributed it to Sell.

I remember reading this and thinking it was total bollocks, and that was from my reading of evolutionary biology and psychology, which is “intelligent layman” at best.

But this is part of the Meedja’s problem – by going for the quick hit of lightweight fame (the lure of the link economy is similar in the online world) I think they give away long term trust, and thus value. Little by little it seeps away.

And the problem is, just digitizing this sort of ersatz journalism doesn’t help – the Huffington Post and the Onion have the market covered

I read this earlier today

Five journalists plan to lock themselves away in a French farmhouse with access only to Facebook and Twitter to test the quality of news from the social networking and micro-blogging sites.

……

…how would the world look if viewed only through the prism of these sites, whose phenomenal growth has been fuelled by smartphones and, for Twitter, online bursts of 140 characters?

Are these social media — which between them have nearly 400 million users — really the serious threat to established media they are often said to be?

Those are the questions the five reporters hope to answer when they retire for five days from February 1 to a farmhouse in France’s southern Perigord region.

Journalists playing Big Brother style entertainment to test Social Media?. This is MSM meta-entertainment methinks. The daft thing is that they will only use Twitter and Facebook, thus they won’t be allowed to follow the links that people put up on Twitter or Facebook through to the Web pages they are pointing to (no other media exposure allowed), which shows that they totally miss the point – certainly of Twitter style news.

Matthew Ingram thinks it won’t help for another reason, in that its an experiment designed more to “prove” that they are no substitute for old media (thank heavens) – which is true as:

The reality is that no single source is ever enough, whether it’s Twitter or a phone call from a source at City Hall. Social media hasn’t changed that. And the most important aspect of new media is that it is (to use an overused word) an ecosystem. News can begin on Twitter, make its way through Facebook and other networks to blogs and then meet up and merge with reports from the traditional media.

For this to be work they need to be able to see the story where the links go (or maybe their real role is to prove that Twitter won’t work if Paywalls go up )

The other thought I had – untested – is that if you had good enough filtering systems Twitter just may give you all the news. Now that would be a scary thing for journalists trying to confirm Big Brother style media in a Big Brother House