Monday, November 20, 2006

A Web 2.0 reality check...

Umair has been in a tizzy over online advertising figures recently, proclaiming all sorts of value shifts.

I wonder if he has seen this interesting set of comparisons from Telefonica O2?

Maybe some of those webbies are just a little itty bit ahead of themselves?

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Sunday, November 19, 2006

BBC ignores Umair Haque's advice.

Look what the BBC has decided to do.

They are willing to start paying for that edge-generated Web 2.0 type content, solving a problem that has long been the issue with the altruisitic blogging community - getting paid for what they create. Even Umair has been moaning about his inability to make his blogging pay.

But the kicker is that only some of it is worth paying for; editors will select what gets published. And in doing so they are providing an extension to their usual trusty A1 service - cutting the time it takes you to find the good stuff, i.e., reducing your search costs.

Umair must be having some sleepless nights when his own country's national broadcaster bucks his hyperadvice and starts to filter all that edge-generated content, looking for the nuggets of gold that people will tune in to watch.

And with more than the magic number of contributors required to ensure they will find gold in them thar' edge-generated contributions, the BBC is in the catbird seat when it comes to finding what they call "particularly editorially important or unique" content, i.e., the good stuff.

Applause from the aisles.

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Universal vs. Rupert. Another Umair Haque play-of-the-week gets owned by the copyright holder.

Oh my God, Universal Music must be laughing in their socks at News Corp's refusal to continue negotiations on MySpace copyright infringements.

It used to be asset light startups like Kazaa and puny little sole-users. Now they have Rupert Murdoch -the man who set the entire model for locking up content when he went after the world's major football leagues and then used that content as the basis for the growth of his satellite empire - firmly in their gunsights.

Those lonesome Kazaa founders settled for $115M, but MySpace is way out there in terms of users (over the magic number, hence the key reason it is popular) and has a rich sugardaddy just sitting there waiting to be taken to the cleaners.

I asked Umair some weeks ago how he would demonstrate that YouTube could survive without access to copyrighted content owned by someone else, and the exact same question pops for MySpace. YouTube sensibly settled for a chunk of equity. News Corp will settle too, but I'm betting the sums are going to be a hunky chunk of change that will put the valuation of MySpace into severe context...

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Murdoch's $2B bet on content; more bad news for Umair.

Now why would James Murdoch buck the Web 2.0 fashion started in earnest by his father Rupert by splashing almost $2B on a stodgy old TV broadcaster?

As one banker put it, "'BSkyB is obviously rattled by the idea of an NTL take-over of ITV that could compete with them in a world that is increasingly moving in the direction of broadband and cable, not satellite. Probably they were afraid, too, of a situation developing where ITV's back catalogue would only be available on NTL".

Just look at that last sentence. BSkyB just spent a large chunk of $2B protecting their access to unique resources, the juicy content they stuff down their channels, ensuring it is available for their use in the future, and not locked up by someone else.

It doesn't matter what the network is, how the content is disseminated - that audience-pleasing content is the key to ensuring you get the bums on seats, and hence the big bucks.

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Saturday, November 18, 2006

David Beckham and Tom Cruise vs. Umair Haque : Can you pick the winner?

Umair Haque thinks that attention is a scarce resource.

Oh dear. No.

Some pretty basic analysis will tell you that the scarce resource is actually the talent that creates the content for which media companies are forced to pay exorbitant sums to attract large audiences.

Consider:

Would you rather be the one selling the rights to Tom Cruise's services, or the one with the obligation to acquire them in order to compete for attention in a packed media market?

Would you rather be the one selling the services of David Beckham, or the football club paying through the nose to get top goalscorers to keep winning the league cup?


It's obvious who has the real power in those relationships, and that is exactly why Sumner Redstone fired Tom - Viacom lost money, Tom made a fortune. Owning Manchester United or Viacom is not the same as owning talent; Katie Holmes has realized this, as have the Scientologists.

David Ricardo was right: the unique resources attract the rents. Does Umair have the smarts of a numpty like L. Ron Hubbard?

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Thursday, November 16, 2006

Trolling Poor Umair

Knowing Umair is desperate for any unique resource / content he can find at the moment, I posted this nonsensical monologue to his election comments:-

Boston Upper Bellingham: bloggers log entry: going east/north; exit: running all through into Orient North. Sorted under clearing "K" scheme - usually many additions in realtime, including some additions counted only/cast knocking.
// Anonymous // 6:42 PM


Keen students of trolling will enjoy the message made up from the first letters of each word.

I have avoided outing this for several days to allow it to permeate the common record. And I have some nice screenshots of it should it magically disappear, if you know what I mean, eh Umair?

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Tuesday, November 14, 2006

Goodbye royalty, hello equity: there's nothing "advisory" about this capital.

This deal between YouTube and 4 of the major content owners is really, really interesting.

What we are seeing here is the worm turning - the content owners are grabbing a slice of the new media networks.

When Doug Morris calls YouTube a copyright infringer and then signs an equity deal with those self same infringers, you are seeing the owner of the unique resource firing a warning shot and then strongly asserting their rights to a big upside in the success their content helps create.

Why would YouTube/Google give up serious equity to some guy with no rights, and not give any to advisory capitalists? Simple: the content owners actually bring something unique to the party, something YouTube really cannot live without. Take it away and you have the burnt out shells that are Kazaa, Napster etc. Take away advisory capitalists and you might have a business model worth a bean....

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Friday, November 10, 2006

Jeff Jarvis nails it. Weep, Umair, weep.

Jeff Jarvis, www.buzzmachine.com:

"The editor of a magazine finds the good stuff and the people who make it. That attracts the rest of us, who like the same good stuff they like. That has always been the essence of the magazine value and brand."

As it always was, so shall it ever be.

Without quality content, audiences fade away. There is no attention shortage for content that doesn't suck.

Hence, the First Law of Entertainment Economics:-

Everybody loves the good stuff.

Of course, what "good" means is the crux of the matter. All content can be in some way unique; defining quality - or understanding the magic numbers - is critical to ensuring you actually have control of the good stuff.

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Thursday, November 09, 2006

Dear Umair, please pay me a royalty.

Why would Microsoft pay per unit Zune royalties to Universal Music?

For the same reasons that 70c of every dollar spent at ITunes goes to the record company - they own the unique resource, and if you want to use those resources (legally), you have to pay the monopoly rent they demand.

Keen students will note that the margin for ITunes is a mere 30c per download; projecting that competition, primarily based on end-user price, will arrive from Napster, Zune etc. who are the only parties in this collaboration likely to be long term winners?

That's right: those pesky copyright holders, the record companies.

Margins for the reseller will be eroded over time, as the dumbest player on the block tries to capture share by dumping their margin. Do you think it is likely the record companies will drop their prices? Not at all; in fact, they are already trying the opposite.

If you analyse this carefully, the real money for MSFT in digital music is in the sale of the device, not the music.

Without a device to drive real profits to them, resellers like Napster are going to get squeezed, just like Intel squeezed their entire value chain more than 10 years ago with Intel Inside. They will be squeezed by end user price cuts and squeezed by supply side input price hikes. Napster have been good enough to mention these risks in their most recent 10K SEC filing:

"We rely on content provided by third parties, which may not be available to us on commercially reasonable terms or at all. "

"If we lower our prices [to compete with lower priced competition], our gross margins and operating results will be adversely affected. If we do not lower our prices, we may be unable to compete with discount services."

Ouch.

MSFT may just have hit on a smart way to avoid at least one end of that squeeze.

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Wednesday, November 08, 2006

Poor old Umair Haque.

After spending months denying the cold, hard logic of David Ricardo - logic that he should have picked up at London Business School, but apparently failed to grasp - he's desperately looking for ways to spin his flawed "insights" onto the latest content-related mini-deal between Tier 1 VCs Accel Partners and the Mind Candy team who run Perplex City.

This miniscule $7M investment in the unique resource i.e., content, seems to be driving Umair crazy. He is in paroxysms trying to justify why this deal is different.

But it isn't. It's simply an investment to buy the things that cannot be easily replicated - creative minds producing unique content. Thank God Accel hire people like Bruce Golden, who seems to have attended the Stanford MBA classes where fundamental analysis of industry stucture was being taught, unlike certain other hyperstupid ├╝beridiots.

Bets are now being taken on how long it takes Umair to do a complete 180┬░ volte face and tell the world he has always been part of Content 2.0, it's just that we didn't understand him...

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