The screwing game: Cable companies vs Fred Wilson
Perenially on the cusp
Fred Wilson on AVC recently wrote a blog post about how he ended up 'illegally' streaming a New York Knicks match because there was no 'legal' way for him to pay for it without actually going to the match. In that situation he had been willing to pay even $25 for the priviledge. The post is aptly titled #screwcable!
In and amongst the support for what Fred did were some well argued contrarian views. The quote below is not one of them though it raises an important issue.
The players, owners, league spend money to enter into contracts with cable companies and specialized networks, who in turn negotiate with advertisers to bring viewers an entertainment medium. They have real costs to all of this. But because someone doesn't like that there are fees or limitations or other obstacles within the creating group's model, it's okay to simply "hack" in and take what one likes?
I agree that a lot of planning and investment goes into making a profitable business out of a sports team or even any other entertainment performance like a music album or whatever. Those investors and operators are perfectly entitled to charge what they want and how they want in order to recoup their costs.
For me the big caveat in all the above that turns someone like Fred into a 'pirate' is the fact that during business planning a conscious decision has been made to have this sports package not appeal to him. That is through a combination of pricing, segmentation rights, down to stadium capacity, match day scheduling and location. When all is said and done the rights holders have put together a package which they believe will earn them the most revenue possible in order to recoup costs that they have deemed as appropriate for this enterprise.
In simple terms; when selling their package rightsholders are consciously saying #screwyou to a certain percentage of interested parties. Nothing wrong with that. It's their prerogative and a balance HAS to be found.
What I find interesting is that there seems to be a belief that it's okay to then go after these people who have already been told to screw themselves as if they actually mattered to the business model. They don't really; and any plan should not have taken into account revenue from someone who has been told where to go or revenue lost by that person consuming that service in a way that does not deprive other willing buyers. The fact is no business can sell all their products to everybody all of the time. Someone has to be out of the loop even though digital products make that scenario theoretically possible.
Naturally there are people who infringe copyright and would have been perfectly able to legally consume it. It is wrong of course, but I believe that every business model has to try to have low enough barriers to allow people to take up the product. In a previous post I referred to the concept of a consumption threshold. This is something that is generally not a feature of high quality digital content, though Louis C.K seems to have found a balance between price and protection and he is succeeding despite those who are saying #screwyou to him. It's probably because he only tried to 'screw' relatively few people in the first place!
Related articles
- #screwcable (avc.com)
The Occupiers need to play the system at it’s own game #OWS
A question needs to be asked to all the people who have recently taken it upon themselves to occupy public places in vague protests which judging by their locations we have to guess is dismay at the conduct of banks.
That question was asked by a commenter on a post on AVC.com:
Why do you protest against the thousands of individuals and organizations that are legally taking advantage of the system, rather than protesting (at) the SOURCE which is the system itself?
I took it that the commenter meant that the best way to protest the system is to join the democratic queue like everyone else including the racists have done. Lord knows democracy is not perfect, but there is no denying that it does afford a platform and a voice to people with a cause. You have to applaud what organisations like the Green Party in the UK have done in turning themselves from a community initiative into a political party with an actual seat in Parliament. Maybe it is because that struggle is long and hard that our modern day slackers do not turn to democracy, but more likely it is the fact that however well meaning their wishes are, there just aren't enough people who identify with whatever it is they are protesting.
Yo man, I'm actually a revolutionary. I made my money selling placard paper in the great protests of 2011. I had to put on a small margin to enable expansion and accidentally became stinking rich.
I don't know but I'd guess that most people do not think that things are so broken that wholesale changes are required. I believe the cost of living has been rising faster than income and with the lack of job creation opportunities to make a decent living are less than they were five years ago. If most people are honest we'd realise that opportunities are less than five years ago rather than actually being non-existent. And that dip in opportunities is something that most would also agree is a short-term blip in an otherwise longer-term improvement in the life chances of all people on Earth.
I don't know for sure but I am willing to bet that a poor kid born in 2015 will be better off than a poor kid born in 2000.
Another commenter points out quite rightly that the real problem is..
... the default position for NOT working hard is very different for the rich than the poor. A poor kid who doesn't work hard, is fucked. A rich kid who doesn't work hard, not so much.
(But) Yes, if you work hard, you can succeed.
The same commenter goes on to say that what we should strive for is that all people start from a level playing field. In other words equality. I don't buy that. People can never be equal. It's a fact of life.
Even as an ardent supporter of capitalism I admire the thinking behind Socialism and Communism. However I just don't think it would work on any macro-level better than capitalism.
In the end too many people get bogged down in worrying about the state of things without looking at it in perspective. Most times if we look at the recent trends you'll actually discover that things are getting better. That's the only thing I personally worry about. Things are fucked up right now, but are they getting better?
If you have a great idea someone has already thought of it
Now that's a bright idea!
I'm always coming up with business ideas based on my own experiences and needs. One of the best I've had recently was a phone application to document the things that my kids say and do. Actually it's third best idea I've had recently.
The idea is to be able to compile a document or repository of the funny, weird and wonderful things that my (our ) children say, because they do say a lot of funny stuff. I already take a lot of pictures and video of them but sometimes I just want to note down a quote that I found funny. My solution was to build an application that allows you to store little things like that; notes, pictures etc. and you would be able at a future date to have it all published into a book. Perhaps even an annual about your kids.
I think it's a great idea, and one that I don't even need to ask what your opinion is because frankly anything to do with kids is going to sell. The hard bit would be the marketing but that's the case in any business. However, women are probably the best demography to market because they talk so much. If one gets to like something, best believe that the whole world is going to hear about. Plus most women don't really shop around. I've always said that if I sold cars I'd sell only pink hatchbacks! Anyway, the idea is also great because lets face it, which parent doesn't think that their kids are the funniest and cutest, despite us constantly observing at first hand other seemingly deluded parents?
So I got round to checking the idea, as I normally do with all my ideas. No matter how good your idea is always check that no one has yet done it. I've said before on this blog that a good idea either solves a problem, or copies another good idea well, or exploits lack of market knowledge or serves a neglected market.
All those factors mean that if you have had a good idea then someone has already done it; if it's a great idea then ten people are already doing it. If no one is doing it you have to ask yourself why.
So after Googling my idea, I found that someone has already done it. Not only that, but they have done it in almost exactly the way I envisioned it. I'm not really upset though, but just impressed with the other guys execution. My fan-boy brother is away so I don't have an iPhone to test their app, but it looks good. And one thing I believe is that if I can't do something better than the other guys then there's no point doing it. Take a bow Kid's Quip Journal.
*Okay I have to admit I could have come up with a better name than that, but touché!
Women leaders
So new research shows that women prefer to compete in teams and tend to compete better when they do. The researchers claim that this is evidence that as human beings we should alter our criteria for selecting leaders in order to give women a better chance. I find that very funny to be honest. Am I the only one taking from this that this research effectively reinforces why less women should be leaders?
The point of being a leader is that the buck should stop with them and they must shoulder responsibility for achieving the goals of their subjects. I believe that a leader should never have anyone to pass the buck to or else when the shit hits the fan they will simply pass the buck.
If women only want to lead as part of a team then they shouldn't be anywhere near the top. Let the ball-breaking women who aren't afraid to say "fuck you right back" to Gordon Ramsay lead; and let those who want to hide behind others stay at home where they'll probably do better calling their husband every evening to ask him what he wants for dinner.
Plenty of companies were founded by two or more people, but I can't recall any that had more than one person in the top job.
"Okay, all those in favour of delegating decision-making please shrug your shoulders."
HP’s margin envy will be the death of them
The first ever phone with a lip.
It didn't come as a surprise when HP decided to kill off all it's WebOS related projects. From the time they paid $1.2 billion dollars for Palm in order to get their hands on the by all accounts 'great' operating software they have consistently made the wrong moves.
With the company making most of their money from selling hardware to other companies it was always a dumb move in my opinion to get rid of the Palm brand once the acquisition had gone through. Palm had pedigree in the high-end consumer market that formerly crossed over into the business user market way before RIM ever got there. It didn't stop HP from renaming all the Palm devices with the HP prefix which I think never had the same brand cache to compete with Apple. HP definitely skipped a beat there as they could have had their own 'Lexus' of the mobile world. A brand with which they could package the best part of their low-end stuff in a shiny slightly different case and still have users falling over themselves to buy it in the mis-guided belief that it was somehow more exclusive because it was pricier. Works every time in these days were even us poor people can buy a Mercedes or an iPhone without paying a penny upfront.
In addition I think that Palm had only lost the battle with Apple simply because their pockets were not as deep. The only thing they probably needed from HP was their money. Can you imagine where Palm would be now if HP had poured in another billion, given the Palm access to their manufacturing base and stayed well clear? The initial Palm Pre wasn't good hardware, but I think there was enough to work on and if they'd simply been given the money to match Apple's annual release cycle and copy HTC's lineup of all-touch and qwerty keyboard handsets, they might have made an impact.
Only 18 months after the right move was stunted by the wrong strategy we now hear that HP are throwing the towel in following the dismal sales of the WebOS tablet. Not only that, but they are also looking to spin off the whole PC and hardware business and acquire the UK software house Autonomy. Leo Apotheker the CEO who has only been in the job less than a year has called the moves and it seems that just like Mr Elop at Nokia he already had pre-conceived ideas about what direction he wanted to go before he joined.
I can see where he's going with this. He wants HP to be making high margins. Well higher than they are right now and higher than you can get flogging hardware to corporates. It's admirable but sometime you just have to stick to making money the best way you know how. There's isn't much evidence that HP know the services and software business or that they can stake out a claim against, Microsoft, Apple and whilst fighting away the millions of small start-ups with new and innovative ways to do the same things cheaper and faster.
How to blag a football club and other lessons
I'm a great believer in the theory that football clubs are not a business in the true sense of the word. They are not set up to maximise profits which is sort of the point in all other businesses. Having said that, there are many business models open to them to survive and not just the one endorsed by UEFA, the European governing body.
The most well-known model is of course the benefactor model, in which one person buys a club for his own personal enjoyment using money made from business elsewhere. Benefactors are not just common in football but in pretty much every aspect of life. It's true that most people have much more money than they could spend, and in general it's good clean fun for the rich. Or if you're in Colombia, it's a good way to clean dirty money.
It does end in disaster now and again, but most times you can see the signs well before the proverbial hits the fan. But like a geriatric who has suddenly caught the eye of a hot young thing, it can be hard for us fans to distinguish between a Katherine Hepburn or a Katie Price.
Case in point the story of Craig Whyte a Scottish 'billionaire' who is trying to take over Glasgow Rangers. In fact he has been working so hard at it that it's been 6 months since it was made public that he's trying, and guess what...he's still trying. I'm all for due diligence, but taking over a public company really shouldn't take that long, unless of course this guy doesn't have the money.
When I heard about Mr Whyte's interest in buying Rangers, my initial reaction was...'Who?' Then I heard he was a British billionaire and thought that something wasn't adding up. Britain doesn't have many billionaires and it'd be hard never to have heard of the name of one of them.
My only guess is that he must be one of those people who buys football clubs as an investment or a blagger who wants to buy the club, load it with debt and pay himself a handsome wage. Either way it's not very clever and will probably end up in disaster. A quick Google search can confirm this.
Here are a few extracts...
…….Craig Whyte Founder of Vital UK Ltd . In voluntary liquidation.
…….Director of LM Logistics Group . . . in administrationWas accused of failing to pay his employees' wages and multi-million pound debts owed by a string of companies, all of which he is directly linked to
Has a defunct website for one of the companies he claimed as one of his premier businesses
….Cairnwell Investments Ltd based at Aldermary House lists Craig Thomas Whyte as Director. In October, Cairnwell successfully applied to cancel an official move to have the firm struck off the companies register and dissolved.
…also based at Aldermary House is Merchant Corporate Recovery PLC, which is facing an “Active Proposal to Strike Off”. The firm’s accounts are said to be “overdue”. Its company secretary is Craig Whyte, while Craig Thomas Whyte is listed as a director.
The UEFA and Arsenal love-in is doomed to fail
Sometimes you really wonder how people make into positions of power given their lack of reasoning.
There are many things that our leaders can do without but rationale is not one of them. The folks clowns at UEFA (and FIFA too) have form for coming out with ridiculous statements, but they never seem to amaze in their quest to out-clown Krusty.
The latest one is in relation to the new regulations requiring football clubs to break-even over a rolling three-year period or risk a possible ban from UEFA competitions. It's designed to stop clubs running themselves into debt and financial ruin.
UEFA general secretary Gianni Infantino has now come out and said that clubs need to adopt the Arsenal model because "Ten years ago Arsenal reported less income than Chelsea, Liverpool and Newcastle," Infantino added. "Now it is more than those clubs and in 2009 more than double Newcastle's."
This is pure misguided BS. If Infantino would only take a moment to think of all the big transfer fees that Arsenal generates he'd realise that the clubs that UEFA and Wenger criticize for financial doping are the same clubs who have paid out those huge fees directly to Arsenal therefore increasing their revenues. The question is, where would Arsenal's profits be without the sugar daddy money from Manchester City, AC Milan and Juventus? Or the debt money from Barcelona?
The 'Arsenal model' circa 2020.
p.s. The regulations themselves are also bollocks because sport is not a business in the traditional sense. Never has been never will be. But that's for another rant.
Economics 101 – Your currency must work for us!
A few rules apply in the world of currency exchange rates. And if the current furore over China's currency (the Renminbi) is anything to go by, no rule is more important than the one outlined below.
When the western world wants to buy loads of cheap commodities (and goods) from your country to satisfy demand fuelled by (toxic) credit; then your currency is probably over-valued.
If the western world no longer wants your country's cheap goods competing against their expensively produced alternatives; then your currency is probably under-valued!
It's a very simple concept which China and the Yuan have found themselves on both ends of in the space of a few years. Well as much as any wannabe super-power, intent on pushing it's weight around can be in the wrong end of something!
Labour’s dismal housing record highlights their failures
The British Labour party has been in power for 13 years now during which they've done some good things, a lot of bad things and some terrible things. In my mind housing is where they really screwed up because it ensured that the Labour's economic, social and immigration records are arguably poorer than they would have been. In this context when I say housing I'm talking about housing their citizens and giving those who need a lift the ability to house themselves. That last bit relates to the housing market.
For those who don't know I'm not a Labour supporter but I'll try to be as objective as possible. In fact I started this blog because I more anti-media than anything else. I feel that balanced reporting is important and at Stunted By Reality I try to discuss my interests in a balanced way. But, that's for another post.
The housing issue has been going through my mind for some weeks now and the news today that house prices have risen 10.5% in the last year is what finally prompted me to write this. Personally I feel that the housing market is linked to many things and has effects outside of its sector one of which is the economy as a whole. As far as I can see the credit crunch really came about because of the rate at which people where borrowing money to buy houses. In the US it seems that an artificial boom was created on the back of money being made available to people who were riskier than normal. Sub-prime borrowers. In short there was too much money chasing too few customers. In the UK it was because of the fact that UK house prices had risen way too much over the time that Labour had been in power to the extent that a lot of people borrowing money had a higher risk profile than before.
For example in 1997 when Labour came to power the average person would need to borrow about 2.5 times their salary to be able to buy the average UK house. By 2008 when the housing bubble burst average UK income was £38,302 with the average house costing £197,000. That is 5.1 times the average person's salary; a huge increase by any measure. Effectively, even the average buyer was bordering on being a sub-prime borrower! This, as I recall is when people started taking out 40 year mortgages. 40 years to pay back the mortgage on your house! Imagine that. People buying in the early 2000s used to be able to take out 25 year mortgages. Within 5 years just to afford a mortgage you had to stretch it to 40 years, or else you couldn't afford it. That's sub-prime for you folks.
A lot of people (egged on by the government of course) blame the banks for the credit crunch, but I'm not one of them. I blame the people who bought houses they couldn't afford. Moreover I blame the government who didn't create the market conditions so that people could afford to buy a house. Of course the banks were implicit in that they then packaged these loans into bunches of hundreds of thousands and sold them onto each other knowing that there were now increased risks that people would default. However there came a time when no bank knew which other bank had the dirtiest mortgage customers; and because banks lend to each other more than they do to us, they became concerned amongst themselves. That concern resulted in banks NOT lending to each other and there was an impasse during which Northern Rock amongst others couldn't borrow money. They of course had to get it from somewhere so they asked the government. Correct me if I'm wrong but in laymen's terms that's what happened except of course they used complicated financial instruments to do all this.
From a UK perspective the main reason I blame the government in this is because they could have done a lot more before the housing bubble burst to avoid the sub-prime mess. They could have done things differently after the bubble burst too, but they didn't. Here's what they could have done;
1. Increase the threshold of stamp duty.
Stamp duty is a tax payable on all house purchases in the UK provided that they go above a certain value. That value is set by the government and it works on "slab" basis, so percentages apply to the whole of the purchase price in a defined band. For example, a house priced at £250,000 would attract a tax of £2,500, but one of £250,001 would be liable to tax of £7,500. The result is that duty has a hugely distorting effect on the market, because a house is very difficult to sell at prices just above each threshold, for example, £255,000. The UK government could have used this to control house prices more than they used it to line their pockets. In 2002 when house prices went up 25% in one year, it should have been abundantly clear to Labour that it was now necessary to do something about stamp duty. The threshold remained at £60,000 yet house prices were now well over a £110,000. Meaning that even first-time buyers would have to fork out stamp-duty in addition to a deposit. Setting the threshold higher (at just below the average price) would have actually resulted in some house prices being brought down to take advantage of the new level.
2. Build more houses
The market and by extension the government really just didn't build enough houses. At the time we knew that a lot was being done, but it just wasn't enough. I applaud John Prescott's efforts in Hull, Stoke and other places, but a lot more needed to be done. Beautiful though Britain may be there are huge areas of dereliction not just in Stoke and Hull. London, Manchester, Birmingham all have acres and roads of dereliction that would have been good for redevelopment. An increased supply of houses would have resulted in a decrease in prices. The old supply and demand thing. Ironically this is one of the reasons that US house prices fell thereby triggering the credit crunch. But I'm being selfish here and only discussing the UK market. If the American market screwed some buyers after supply increased, too bad. A house is an investment. Buyers MUST be told that prices can go up as well as down and the best thing to do is to be in it for the long run and make sure you can afford your repayments.
3. Sell council houses
This is a practise that for some reason Labour did not embrace even though you'd have thought it was mostly their constituents. Margaret Thatcher was a big proponent of this in the '80s and I have to say I'm with her. I just don't see the point in not encouraging people in social housing to buy the home they leave in. I know that house ownership is not the be all and end all of life. So long as you have an affordable place you can call home that you can raise a family from I should think that should be good for most people. Germany has lower ownership rates than most countries and they are doing ok.
However, council houses though they are no longer built still make up a big part of the UK housing stock. Releasing some of that to the occupants and using the proceeds to build more would help increase the supply of houses for sale. This ties in with point 2 above. Councils have huge economies of scale and would be able to build and sell properties just as cheaply as house builders whilst still doing some good. They would be able to make money off properties. Crucially getting the social balance right so that yobs do not eventually take over new estates would be of utmost importance.
Overall these are all things that I think Labour failed to get right, which in my opinion led directly to the credit crunch affecting the UK the way it did. It's also ironic that one of the major issues of the upcoming election is immigration and as I heard one commentator say yesterday "Immigration is a proxy for Labour's failings in the economy, crime and housing. People love a scape-goat." You've got to admit that there's none better than the immigrant who takes someone's job, robs their kid and lives in a council home that they could have occupied. That this is not the case especially when it comes to the economy and housing is neither here nor there. The UK government would rather it was 'the immigrant wot did it' than the good man Mr Brown.
After the crisis began I felt that the government should have let the banks fail and only made sure that customers got their money back. I also believe that sub-prime borrowers should not have been rescued from their bad mortgage deals because if repossessions went up, houses prices would go down.
As it is we haven't had a proper correction in house prices and we're still sitting on a bubble. I believe the bubble didn't really burst. Some air was let out and now (horror of all horrors) we're starting to pump the bubble up again. No-one apart from the banks got burnt so borrowers are still looking to borrow more than they can afford. And now we hear that the politicians are planning to force the banks to lend. Well correct me if I'm wrong, but is that not what the banks were doing before the politicians let it all get out of control?
Patently mad. The absurdity of patents continues
The idea of patents is a good one. In theory. You invent something and apply to get it registered so that what you have made is exclusive to you for a period of time. During that period you can recoup the costs of coming up with your invention whilst copy-cats are barred from profiting at your expense. To qualify a patent has to be new, inventive or useful.
I say in theory because, it turns out you can apply for patents on ideas and also on software (which pretty much is a logical application and something of an art too). This is where things get muddy, because patents apply to everything in the modern world. From the medicine that the poor countries badly need to the cell-phones on which billions of people depend.
A couple of things in the last week have served to highlight the massive change needed to bring the system up to date if the technology world is to be prevented from going into a race to the bottom.
It started with Facebook being awarded a patent on the ‘newsfeed’, that page you see on logging into Facebook which tells you who poked who, and other ‘newsy’ stuff in your friends circles.
Then Apple sued HTC who make tons of phones for just about everyone in the industry apart from Apple and Nokia. Why, because HTC is said to be infringing on Apple’s patents including one for “Unlocking A Device By Performing Gestures On An Unlock Image.” Awarded on February 2 in 2010! You couldn’t make it up if you tried. In simple terms that means any phone company using that system where you unlock your phone by swiping it has to pay Apple for the right to use it. Absolutely ridiculous, especially when you consider that I have had a phone that does exactly that since before the iPhone was around. Step forward Neonode.
Is that an icon based menu? Quick let's patent it!
I bet Neonode didn’t apply for the patent because they thought it was too obvious to be granted! Anyway the whole thing has a lot of geeks shaking their heads whilst lawyers can’t stop salivating at the prospect of more long and drawn out litigation.
Ultimate blame however, has to lie not with those who are granted the patents, but with those who look at these applications and say “Yes, that is novel, it’s new, it’s inventive and it’s useful.”
For an illustration of the ridiculousness BusinessWeek featured this invention in their ‘Most ridiculous patents’ article.
Bear right dad! Double saddle coming on!
Dad Saddle
Patent awarded: 2002
Patent says: “A number of devices have been devised for carrying infants and young children. Such devices often are not appropriate or useful for carrying larger children. Nor are known conventional arrangements adapted to support a standing child.”
Business Week say: If your child is too big for a stroller, it’s probably time he or she learned to walk.
