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FCC Proceeding 08-82: Selectable Output Control

Nov 11

Posted by Brad in Bad Business Ideas, Consumer Electronics, Television and Movies | 3 Comments

Here’s a copy of a letter I recently sent to the FCC. Since they said it was part of public record, I felt like posting it here, too:

I am writing to express my concern about Selectable Output Control. SOC represents a struggling industry’s attempt to block consumer choice and limit the usefulness of products already purchased. Disabling the ability to use analog outputs is an absurd leap, for the sake of “protecting content”.

And let’s be honest: this will do next to nothing to stop piracy. One copy is all it takes, typically leaked from within the studios themselves, or by one of the many content partners. A federal involvement will only devalue the hardware and software already purchased and in use by consumers, harming innovation and damaging consumer confidence at a time when our country needs it most.

Imagine a parallel: what if the highway billboard industry claimed that in order to offer full video billboards (with sound!), highway speeds must be limited to 20mph or less, so that users could receive the full benefit of the new ads. In such a situation, the governing body would be severely harming a large number of consumers to protect the interests of a private industry.

I strongly urge the FCC not to agree to the MPAA’s request for SOC. SOC would represent an industry artificially limiting customer choice, and negatively impacting a much larger industry (consumer electronics) for their own favor. It does absolutely nothing to benefit the consumer in any way, increase the value of new and existing technologies, or grow the industry in a meaningful way.

And now, a little backstory, if anyone’s curious:

Selectable Output Control is a technology that the movie industry developed to cripple your TV. Basically, the idea was that while watching Pay Per View (or anything else) on your TV, the MPAA should be allowed to, at their discression, disable any and all of the analog outputs from your television (audio and video). The idea was that this would “limit piracy”, by making it harder to record something and later distribute it. Since digital connections (DVI, HDMI, DisplayLink) all conform to a High-bandwidth Digital Content Protection (HDCP) standard, the recording device can’t actually record “protected” content. That means that if you plug your HD cable box into your BluRay burner, it won’t let you record anything. Sounds just fine right?

But what happens when I have a legitimate reason for wanting to do this? Suppose I buy a PPV event and want to record it onto my computer so I can watch it on my laptop on my next flight. With HDCP, this is impossible (and even trying is a felony). I used to be able to use the component outputs and plug it into one of these or these. These products could happily collect data, record it, and let me do with it what I please (you know, the exact reason people BUY products like this).

SOC is bad for consumers and bad for the electronics industry. Pretty much the only people it benefits is the MPAA, who wants to do everything in its power to stop users from recording TV, since it means you can skip commercials, share with friends, etc. Trouble is, all it’ll do is push more and more users to the illegitimate services, since they won’t have any of these restrictions.

I think that’s something the MPAA forgets: they’re not fighting piracy, they’re competing with it. Right now, pirated movies offer a better experience to the user: they’re cheaper, I can do whatever I want with them, I can re-format them to put on a mobile device (iPod, phone, etc), and they never expire. I’d be perfectly happy to buy such things if I could, because I’d be guaranteed quality and a virus-free file. Since the MPAA insists on trying to fight piracy, it ends up exhibiting all manner of destructive behavior, and SOC is just the latest.

Limiting consumer choice has never been good for the consumer, and in a world where there are more and more options, locking down my TV’s outputs will probably never directly affect me. I’ll just hop to a technology that isn’t restricted, and one that the MPAA gets no money at all from. What it will do is create a headache for legitimate users (like those that still get HD cable over component video), an expense for the FCC, and a burden on consumer electronics companies, especially their support departments.

It sure as hell won’t stop piracy though!

Why Should Youtube pay Musicians for Showing their Commercials?

Mar 13

Posted by Brad in Bad Business Ideas, Internet Technology, Music, Web 2.x | No Comments

There have been quite a number of complaints over the last few weeks that Youtube isn’t paying artists enough for showing their content. The argument from the music industry is that Youtube owes much of its success to the music industry. This seems like a far-fetched idea at best, but it is something that Google/Youtube have tacitly admitted in agreeing to pay ANYTHING for allowing music videos to be put on Youtube.

What’s the purpose of a music video? Is it to be an artistic expression in-and-of itself? I can’t honestly think that it is. No, a music video (much like a radio spot) is an advertisement – for the band, the song, and the album. It is quite frankly absurd to me that artists believe that they should be paid – beyond the amount they already get through the ads they place on their own pages – because Google is providing them a platform to transmit their commercials to millions of people around the world – FREE.

So when the Performance Rights Society (PRS – UK’s RIAA) could not reach an agreement, Youtube pulled all the music videos down in the UK, signaling that, in fact, it doesn’t need them nearly as much as they need Youtube. The best part? Numerous artists, even ones who had been complaining about how Google was “stealing their money” and “not paying for music” suddenly found that their own, personal websites didn’t work. The videos on their own sites had been embedded versions of Youtube videos. That’s right, in addition to providing free advertising and free distribution, they were also shouldering the largest, most expensive part of a band’s website – the streaming media content – FREE. The cost to artists to host and stream their own videos, thousands or millions of times, would be far higher than anything they could hope to re-coupe from licensing fees.

It appears that the PRS is doing everything it can to actively torpedo its artists’ futures online. Their actions have already driven Myspace Music and Pandora to simply cut off UK service. Does it appear to be hurting either of them? Not in the slightest. You know who it is hurting though? I made a list:

  • The Fans
    • No longer able to find their favorite band’s music online
    • Can’t introduce friends to the music in an engaging way
  • The Musicians
    • Less exposure means fewer ticket sales
    • Fewer new fans because of lack of sharing
  • Music Video Makers
    • If a music video can ONLY be played on MTV, it has less value
    • Less value means people pay less to make music videos
    • Fewer bands (especially UK bands) will even bother making music videos

I hope this is helpful to the people at the PRS, and that they carefully consider who they are ultimately trying to serve. Clearly, artists and fans are both hurt by their actions, and value is generated for no one. It is yet another example of an outdated, monolithic group trying desperately to stay relevant.

So here’s my proposal: If artists want Google to pay them for every view, they can pay Google for every single embedded version of the video. Every time someone embeds it anywhere and Google isn’t getting any advertising revenue, the band can go ahead and get billed for that bandwidth. Then, at the end of the month, they can get together and see which bill is bigger – bandwidth or licensing.

Here’s a Radiohead (one of the bands that complained) video. Just for you to enjoy on Radiohead’s theoretical dime.

The RIAA and Universities

Dec 17

Posted by Brad in Bad Business Ideas, Music | 2 Comments

Hey there, college students. There’s a new fee on next semester’s tuition. No, it’s not to cover upgrades in the library or repaving the bike paths. It’s to cover the music you’re stealing. And you’ve got no say in the matter.

Warner Music Group recently approached a number of Universities throughout the US with a problem, and a wonderfully elegant solution. The problem? College students “steal” music. Now, we’re not talking about walking out of Target with it tucked under your jacket, when they say “steal” they mean “copyright infringement”, the big DL, swappin’ bits, or whatever you kids are calling it these days. Downloading music.

Warner proposed a truly graceful solution, one that I’m sure any 14th century monarch would be proud of: just fine EVERYONE! It is much too time consuming and expensive to actually bring everyone to court, especially for the relatively small number of people actually committing a crime. Rather than just take the shotgun-to-a-swarm-of-bees-in-front-of-a-small-child approach they have been, where an occasional target actually settles out of court, though hundreds of innocent people get accused and dragged through lengthy, expensive legal proceedings, Warner would like to simply place an arbitrary “tax” on all university students. A few dollars, maybe $5 or $10/mo, from every student, in every university in the country! This would all go into (their words, not mine) “a pot of money”. Then they would, on their honor, dole out money to content creators (it will be too hard to find out who) and license holders (themselves and their friends) in a “fair, not profit-motivated manner”.

And what do you get in exchange for this wonderful, per-student tax? The RIAA agrees to not sue the University. Note, this doesn’t say students, it says University. There are roughly 20.5 million undergraduate and graduate students in the US, according to the 2006 census . This means this pot-o-gold they’re hoping to gather could easily be in the hundreds of millions of dollars a MONTH, and billions per year.

Think about that. They’re trying to set up a scheme by which they get billions of dollars a year from students who’ve done nothing wrong, simply by virtue of belonging to a group in which SOME members break the law, and offer no protection in return.

One of the particularly upsetting points is on Slide 4, Point 1, Subpoint 2. “All Students or None”. This means that despite never having downloaded an album illegally, copied a friend’s CD or even listened to music played in an unlicensed venue, students will be forking over $5-10/mo in protection money. Now think about this: $15/mo gets you unlimited music from Microsoft, Rhapsody, or eMusic, legally. But they want $10 simply because SOME students at SOME universities are downloading music, and better to drown them all.

I hope, with every capitalist bone in my body, that no University would sell out its own students for this. I really genuinely do. But I have seen the music industry do some monumentally cruel things to its best customers, and the fact that this proposition is on the table means that somewhere, someone is considering it (Update: Columbia, Stanford, University of Chicago, University of Washington, MIT, University of Colorado, University of Michigan, Cornell, Penn State, University of California at Berkeley and University of Virginia are in active talks, “considering” it). And it only takes one before “precedent” is set and more fall in line. How long before this just gets rolled into our monthly Internet connection bill?

If you find yourself on the receiving end of such a fee, I strongly encourage you not to pay it. Pay your University fees, short the exact amount of the RIAA protection money. Refuse to pay, write a polite but firm letter to your bursar that you don’t download illegal music and feel that being treated as though you were a criminal by your own University is both wrong and unlawful. If the RIAA wishes to bring charges, then bring them in a court of law, not behind closed doors where the accused can’t even hear the charges against them or face their accuser.

One final gem: “Our approach is supported by the EFF, Public Knowledge and many organizations dedicated to network freedom.” Representatives of both the EFF and Public Knowledge have spoken out against this. They were never contacted for comment, input, feedback, or approval. It was just put in the bottom.

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So Long, and Thanks for All the Drugs

Nov 11

Posted by Brad in Bad Business Ideas, Finance | 2 Comments

So here I am, thinking about the Starbucks business model, and how they could see a 97% fall in gross profit. Let’s take a look:

Starbucks doesn’t sell that much coffee, really. They sell milkshakes and cream and other high-sugar, high-fat substitutes. Like all drug-dealers, they eventually weaned their customers onto the hard stuff. Except that black(crack) coffee doesn’t require the glitz and glamor of going to Starbucks. Most offices give it away for free. Hell, pretend you’re going to buy a Prius and they’ll give you a cup of coffee at the dealership for free.

Starbucks was a part of the golden days of of the Coffee-Rush. People were excited that what was once a bitter, uncomfortable drink could be made delicious with just a few dozen grams of fat and sugar. So an entire generation on the verge of giving up coffee for energy drinks and caffeine pills came swarming back.

But then they went black, and you know what they say. “Once you go black, you never go back.” True enough, people could get their fix anywhere, and suddenly the Starbucks empire crumbled around the bleach-tipped heads of its Baristas. Why go to Starbucks for long lines and bad music when you can get your coffee (even your iced vanilla late) at McDonalds or Jack-in-the-Box for half as much? And sure, throw on an egg and a muffin, too.

Starbucks was a victim of its own success. Coffee became so popular that you could get it anywhere. Technology (paid for, in many cases, by Starbucks) improved to the point where a strung out monkey with no thumbs could brew you a perfect double-soy, half-caff latte with sugar-free caramel and non-fat foam. Even low-end delis became “coffee bars”, and in doing so people sought alternatives.

As consumer choice multiplied, flaws (real or imagined) in Starbucks began to emerge. Everyone became coffee snobs, and Starbucks, once a healthy margin above Folgers Crystals was now dropped to the level of the 4pm re-heated pot at Denny’s. People discussed how the region didn’t have a good rainy season this year, or how they roasted it a little to warm, or not long enough, or too long, or ground it too finely, or any number of other minutia to justify going someplace besides Starbucks. Anyplace, really.

And that, my friends, is how Starbucks was lost. The built a market, and rather than growing with it, acted like they were still wooing customers away from boiling water at home and mixing in a sand-colored powder to get a “cuppichino”, and failing to realize that once you can get a “Starbucks-quality” cup of coffee everywhere, it becomes a commodity. Smug satisfaction is gone, as is the sense that it’s somehow “worth” $3.75.

You know what they could do to fix it? Re-brand. Turn 1 in 10 Starbucks into a “Starbucks Experience”. Lower the light levels. Put in all-leather furniture. Kill the pop music, and stick with low volume ambinet jazz. Carpet everything, and make the machines quieter. Make Starbucks what it used to be, a destination, not merely a vendor. Charge 20% more for the coffee, but use “higher end” beans, for every drink. Use organic milk. Use syrups that aren’t just Tornai’s, or if you do, hide it by putting them in curved pitchers. Limit the crowd size, limit seating. Use soft, overhead lighting above each table and chair. Only let natural light in through diffused curtains, and use double-pane windows to block street noise. Serve coffee at the tables. Allow people to run a tab (even if it’s done thorugh a Starbucks credit-card). Create the impression that this is somehow “above” merely Starbucks, this is a Starbucks Experience. This is a place to be away from crowds, better than the common man. Somewhere that only a certain “class” of customer comes. A sanctuary. Over time, convert all your stores. Enjoy another 10-15 years of astronomic profits, then call me again.

Or just watch your stock price fall until you’re bought out by Proctor & Gamble. Whichever.

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Bad Business Idea: Your Ads and Google Searches

Aug 12

Posted by Brad in Bad Business Ideas, Internet Technology | No Comments

So I seem to have a terrible problem with eaves-dropping. It isn’t so much that I particularly care about what other people are saying as I have an incredibly low bullshit threshold. So we’re sitting at this restaurant attached to a golf course, and the table next to us contains the three archetypal members of any .COM startup:

  1. Young, enthusiastic technology guy
  2. Mid-thirties manager / finance guy
  3. Older “dreamer” (I think sometimes called a Grey Hair) – lends legitimacy

So these three guys sit down after we do, so I’m privy to this intro: The young guy (probably 21 or 22) walks up and says “Check it out” and proceeds to whip out his new iPhone.

Anyone who starts a conversation with an iPhone should not be trusted to make decisions, recommendations, or give advice of any kind on technology. Note this is not all iPhone owners, but simply those that begin conversations with a device they purchased. They are clearly a “style over substance” user, which is fine unless they’re recommending what YOU do with YOUR time / money, or explaining why they know the direction things are going. These people are followers, not leaders.

So they proceed to discuss their business venture. Here it is: They’re going to release a search engine that pays you. Well, not really pays you, but uses the money they would have paid you to make donations to a charity. And keeps some themselves. Anyhow, they’re going to take Google search results (probably by doing the Google API licensing thing the way Yahoo and others do), and “wrap” them in their own ads, and offer premium placement to their partners. Problem 1: Entering any market with the assumption “If we can even get 1%, that’s billions!”. They then begin to discuss implementation, because clearly this idea is so solid it bears no furhter discussion.

Their basic strategy is to offer advertisers a “tiered” structure. You want bold lettering? That’s extra. You want a green background? That’s extra. Think eBay listings. But cluttering up a search engine. All in the name of “donating to charity”.

They talk about user accounts. Apparently in order to use their search engine, you’ll have to log in. Then they can track your payments and donations and stuff. They’ll also sell your information.

So these guys seem to have completely missed the whole “user experience” angle. They’ve designed their product with their corporate goals in mind first, followed by the needs of their advertisers. No one stopped to think what logging in to a page full of ads and a Google search result would do to a user.

They’d be gone. I predict they’ll be lucky to break a thousand users. Most of those will be gaming the system in one way or another, or will be the advertisers.

So I want to call this a complete failure of an idea. If you want to break into the search market, you need to do one of three things.

  1. Deliver “addative content” in a way that has never been done before. Ask.com is trying with their whole “enhanced search” – even Google is letting me pick products, services, maps, local businesses, etc as my possible search results. I don’t know what it is, but eBay listing-style ads where the more they pay the more annoying they get? That’s sure not it.
  2. Define a positive user experience. Make sure that when I’m hitting your site I know exacty what I’m going to get. Don’t trick me into clicking ads. Don’t make some half-hearted appeal to “charity”, and don’t pepper me with ads. I’m just going to block them anyways.
  3. Deliver better / more accurate results. I put this one last because it actually matters the least. If you can best Google at search results (hell, I have to say I find what I’m looking for faster on live.com than google.com sometimes), you’ll have a leg up. But almost no one will care.

So there you have it. All the ways in which this idea will fail, and the few things they could do to keep that from happening.

That’s all for now. I’ll update you when I hear another terrible, poorly thought-out idea.

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