27 February 2008 >> The Economist has a fascinating article on how the Internet is changing Hollywood. Indoctrinate U gets a brief mention.

10 February 2008 >> Update: The review program has now ended. The offer below is no longer valid. If you’re interested in seeing the film, you can now download a copy from the Indoctrinate U online store.

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Within a matter of days, we will be ready to launch the Indoctrinate U online store, where we will be offering the film for download as MPEG-4 files and ISO DVD files. MPEG-4 files are playable on Windows, Mac and Linux, and ISO files can also be used to create your own DVD copies of the film playable on virtually all home DVD equipment. All you need is a computer with a DVD burner, software capable of burning ISO files, and a blank DVD.

But before we open the store to the public, we will be offering free downloads of review copies to a limited number of bloggers who plan on publishing reviews of the film. If you’re interested in reviewing Indoctrinate U, please send your name (or online pseudonym), the name of your site, the site’s URL, and the e-mail address where you’d prefer to be contacted to this e-mail address:

reviews (at) indoctrinate-u (dot) com

When our online store launches, this offer will expire, so if you’re interested, e-mail us soon!

Oh yeah, non-blogger media folks are welcome, too.

2 January 2008 @ 8:57AM >> Two of my favorite creative minds in music—Thom Yorke and David Byrne—recently sat down to discuss the future of the music business. Last October, Yorke’s band Radiohead released its latest album, In Rainbows. But rather than releasing it through a traditional music label, Radiohead let fans download the music directly from its website. And rather than charging a fixed amount for the album, users were given the option of naming their own price—down to and including zero.

The sinking fortunes of the music industry establishment may have been instigated by technological change, but they are worsened by the industry’s unwillingness to let consumers buy music that isn’t locked to specific formats or media. It’s like peering into the future of the movie industry.

In both cases, you have industries whose fortunes have been protected for decades by the commingling of content and medium. Record albums weren’t just vinyl, they were vinyl with embedded music: the music couldn’t exist without the physical medium. As tapes replaced records and CDs replaced tapes, higher fidelity and increased convenience of each new format gave consumers a reason to re-purchase content that they already paid for in lesser formats. But when songs are stored as data and can be moved around like any other computer file, consumers will only ever need to buy one copy. As long as open formats are used, people will be able to play their music on any device devised in the future. There goes the upgrade gravy train.

Like the music industry, the film industry is rightfully concerned with piracy, because once music and movies aren’t tied to a physical medium, they can be copied endlessly. But consumers don’t care if this inconveniences the industry; people have shown that they want the convenience of digital content, and they are willing to pay for it. So the more that record companies lock down digital content in order to fight piracy, the less incentive legitimate customers have to buy the product in the first place. What good is the “music as a file” model if it is artificially burdened with the same limitations as physical media?

The movie business hasn’t been hurt by the shift away from physical media yet. But that’s only because technology hasn’t advanced far enough. It takes a lot more data to store a high-definition movie than an album’s worth of high-fidelity music. When a typical consumer’s Internet connection becomes fast enough to download high-definition full-length movies in a matter of minutes, the home market for movies will be subject to same technological dynamics affecting the music business today. And that future is only years away.

But that isn’t the film industry’s biggest problem right now. After all, people won’t pirate content that they don’t want to watch in the first place.

The problem with the film business is that too many insiders forgot that the rest of America doesn’t necessarily share the same view of the world as their friends in Hollywood. Instead, Hollywood has become its own echo chamber, which is why distributors keep pushing out flop after flop of military-bashing films. In Hollywood and at film festivals, such fare is highly praised. But in theaters around the country, the audience for films like Redacted is comprised mostly of empty seats. It’s almost as if Hollywood is producing films only for itself.

My experience in trying to get distribution for Indoctrinate U only confirms this. People in the film business just don’t take seriously the possibility that there’s a market for documentaries outside Hollywood’s typical Michael Moore/Al Gore worldview. I don’t know to what extent that’s out of political bias or the result of a simple Catch-22: they don’t see a market for anything different, but that’s because they’ve never tried distributing anything different.

That leaves us in the position of having to self-distribute Indoctrinate U. And because the Internet will allow us to put the film in people’s hands in the fastest, most cost-effective way possible, we’ll be able to conduct a little experiment of our own. Indoctrinate U will not be available on DVD right away. Instead, we’re going to focus our efforts on seeing whether the Internet can be used to route around the gatekeepers in Hollywood—without the shackles of physical media. (Although unlike Radiohead, I’m afraid, we’re not in a position to give our goods away for free.)

Who knows? Maybe the market can be proven without Hollywood’s help. I think it can. And once the market is proven, we’ll finally know who in the film business wants to serve customer desires instead of the dogma of Hollywood groupthink.

4 December 2007 >> There’s a little scandal brewing within Wikipedia.

The free online encyclopedia editable by anyone prides itself on being a meritocracy. The site successfully harnessed the wisdom of crowds to build what’s probably the largest, most quickly-constructed body of knowledge ever assembled in human history. Not bad for something that didn’t even exist when the decade began.

For much of its content, the Wikipedia model seems to work pretty well. Easily-verifiable facts like names, places and dates tend to be rendered accurately. And when they’re not, they’re easy to fix. With millions of eyeballs scanning everything, errors can be caught quickly.

But when the topic is a subject of debate or controversy, the natural human tendency to want to convince others of one’s rightness can lead to some nasty behavior. And when that happens in Wikiland, not only is the quality of the product degraded, so is the trust people place in the collaborative editing process.

A spat between contributors that recently became public demonstrated this weakness in the Wikipedia model, The Register reports (in a somewhat sensationalist tone):

Controversy has erupted among the encyclopedia’s core contributors, after a rogue editor revealed that the site’s top administrators are using a secret insider mailing list to crackdown on perceived threats to their power.

Many suspected that such a list was in use, as the Wikipedia “ruling clique” grew increasingly concerned with banning editors for the most petty of reasons. But now that the list’s existence is confirmed, the rank and file are on the verge of revolt.

Revealed after an uber-admin called “Durova” used it in an attempt to enforce the quixotic ban of a longtime contributor, this secret mailing list seems to undermine the site’s famously egalitarian ethos. At the very least, the list allows the ruling clique to push its agenda without scrutiny from the community at large. But clearly, it has also been used to silence the voice of at least one person who was merely trying to improve the encyclopedia’s content.

“I’ve never seen the Wikipedia community as angry as they are with this one,” says Charles Ainsworth, a Japan-based editor who’s contributed more feature articles to the site than all but six other writers. “I think there was more hidden anger and frustration with the ‘ruling clique’ than I thought and Durova’s heavy-handed action and arrogant refusal to take sufficient accountability for it has released all of it into the open.”

Kelly Martin, a former member of Wikipedia’s Arbitration Committee, leaves no doubt that this sort of surreptitious communication has gone on for ages. “This particular list is new, but the strategy is old,” Martin told us via phone, from outside Chicago. “It’s certainly not consistent with the public principles of the site. But in reality, it’s standard practice.”

[...]

If you take Wikipedia as seriously as it takes itself, this is a huge problem. The site is ostensibly devoted to democratic consensus and the free exchange of ideas. But whether or not you believe in the holy law of Web 2.0, Wikipedia is tearing at the seams. Many of its core contributors are extremely unhappy about Durova’s ill-advised ban and the exposure of the secret mailing list, and some feel that the site’s well-being is seriously threatened.

In a post to Wikipedia, Jimbo Wales says that this whole incident was blown out of proportion. “I advise the world to relax a notch or two. A bad block was made for 75 minutes,” he says. “It was reversed and an apology given. There are things to be studied here about what went wrong and what could be done in the future, but wow, could we please do so with a lot less drama? A 75 minute block, even if made badly, is hardly worth all this drama. Let’s please love each other, love the project, and remember what we are here for.”

But he’s not admitting how deep this controversy goes. Wales and the Wikimedia Foundation came down hard on the editor who leaked Durova’s email. After it was posted to the public forum, the email was promptly “oversighted” - i.e. permanently removed. Then this rogue editor posted it to his personal talk page, and a Wikimedia Foundation member not only oversighted the email again, but temporarily banned the editor.

Then Jimbo swooped in with a personal rebuke. “You have caused too much harm to justify us putting up with this kind of behavior much longer,” he told the editor.

If there’s a flaw in the Wikipedia model, it isn’t that the site relies on the wisdom of crowds too much, it’s that the site’s highest-volume contributors and editors—the people who effectively run the place—could succumb to the gravitational pull of groupthink.

The problem is that it’s difficult to engineer a way to allow for group-driven creation of content while dispersing certain responsibilities and decision-making tasks among the masses. It’s impossible to create a system that’s completely open to everyone without getting overrun by malicious vandals, so it’s hard to see how the site could avoid issuing bans or using some other form of group-imposed censorship.

But, to whatever extent is possible, Wikipedia would be wise to avoid greater centralization of power. Otherwise, it could lead to problems that could cause Wikipedia’s well-earned goodwill is going to melt away just as quickly as it was built.

14 May 2007 >> From Ann Althouse:

I keep reading about how hybrid cars and compact fluorescent lightbulbs can reduce the production of greenhouse gases, but I have yet to see an article about the savings that could be achieved if we were to stop delivery of newspapers and magazines and do all of our news reading on line.

13 December 2006 >> Some thoughts on the future of newspapers from The Atlantic Monthly:

[T]op reporters and columnists at major newspapers are realizing (or will realize soon) that their fates are not necessarily tied to those of their employers. As portals and search engines and blogs increasingly allow readers to consume media without context or much branding, writers like Thomas Friedman will increasingly wonder what is the benefit of working for a newspaper—especially when the newspaper is burying his article behind a subscriber wall. It will require only a slight shift in the economic model for the Friedmans of the world to realize that they don’t need the newspapers they work for; that they can go off and blog on their own, or form United Artists-like cooperatives to financially support their independent efforts.

So what should newspapers do? They could stop printing. It may happen eventually, or perhaps newsprint will find a financially sustainable market among the elite and elderly (or perhaps it will have a nostalgic vogue not unlike that of, say, heirloom tomatoes), but that’s not what I’m getting at. The current Web-publishing model that newspapers are using isn’t likely to become financially viable anytime soon. With few exceptions, the media businesses thriving on the Web either are low-cost blog-like efforts or follow a many-to-many model, in which communities create, share, and consume content. Publishing an article on the Web gets you one click; getting your users to write the article for you gets you a thousand clicks, and costs less to boot. In other words, turning your users into contributors increases their engagement with your site—each click is, after all, also an “ad impression”—while simultaneously generating more content that you in turn can sell to advertisers.

That, I’d venture, is how you start rethinking the newspaper business. Not only do you allow your reporters to blog; you make them the hubs of their own social networks, the maestros of their own wikis, the masters of their own many-to-many realms. To take but one example, Kelefa Sanneh is the pop-music critic for The New York Times. He is very likely the best music critic in the country, and certainly the best new Times music writer in years. Let’s say that Sanneh creates his own community around the music he likes. Or The Washington Post’s Dana Priest creates an interactive online universe around her intelligence reportage. With editorial oversight only for libel and factual accuracy, Sanneh or Priest are allowed to do whatever they want on their sites (while their mother ships pour their resources into marketing them). In Sanneh’s case, allow other people to write music reviews under the Times/Sanneh “brand.” In Priest’s case, turn the site into a clearinghouse for global intelligence information, rumors, conspiracy theories, and so forth (obligatory disclaimer: “The views of posters do not necessarily represent those of the Washington Post Company”). Go even further: incentivize the critics and reporters by allowing them to profit based on the popularity of their sites; make it worth their while to stick around.

[...]

Playing this logic out, the next task would be uniting the Sanneh or Priest site to the Times or Post whole. You could essentially self-syndicate, sending your regular Times or Post headlines to Sanneh’s and Priest’s sites, luring readers back to the mother ship while increasing the number of times each story is read. Indeed, the logic could be (and in some circles already is being) played out even further. What if you essentially exploded the central function of the newspaper and “microchunked” (to borrow a current term) the content, syndicating all of it to bloggers or other news sites in return for a share of any advertising revenue each site generates? The Associated Press has made this the centerpiece of its digital-age strategy: it recently signed a potentially breakthrough deal with Google, in which Google will pay the AP for access to its stories; and the AP has launched a broadband player that Web sites can use to access AP video content. Its content goes where the readers are, and the AP gets paid, no matter what. Remarkably, this most old-school of services is a lone bright spot in the MSM landscape. The AP’s revenues have increased from more than $593 million in 2003 to more than $654 million in 2005; its digital revenue grew at a rate of 66 percent from 2004 to 2006. Of course, the AP has always been a syndicator, so no conceptual leap of faith (indeed no leap whatsoever) was required to move the business from analog to digital.

25 October 2006 @ 9:13AM >> David Zucker, the writer and director of Airplane! and a number of other comedies, has recently been releasing humorous political ads online. Political involvement among Hollywood insiders is nothing new, but what makes Zucker’s recent work a man-bites-dog story is that he’s been doing ads for those evil Republicans, something which is sure to make him an anathema in his industry.

One of his recent ads, a send-up of the Clinton Administration’s foreign policy—complete with a Madeleine Albright stand-in who looks a little too accurate to be flattering—was deemed too hot for establishment Republicans, who declined to air it. No matter; these days, you can reach audiences online without expensive media buys.

Zucker’s latest piece looks at what life might be like if Democrats captured Congress and dictated the nation’s tax policy.

Has David Zucker stumbled onto a new model in political advertising? I think so.

19 October 2006 @ 5:25PM >> Even fictional currencies in virtual words are within the reach of the taxman:

Users of online worlds such as Second Life and World of Warcraft transact millions of dollars worth of virtual goods and services every day, and these virtual economies are beginning to draw the attention of real-world authorities.

“Right now we’re at the preliminary stages of looking at the issue and what kind of public policy questions virtual economies raise — taxes, barter exchanges, property and wealth,” said Dan Miller, senior economist for the Joint Economic Committee of the U.S. Congress.

“You could argue that to a certain degree the law has fallen (behind) because you can have a virtual asset and virtual capital gains, but there’s no mechanism by which you’re taxed on this stuff,” he told Reuters in a telephone interview.

The increasing size and public profile of virtual economies, the largest of which have millions of users and gross domestic products that rival those of small countries, have made them increasingly difficult for lawmakers and regulators to ignore.

...in much the same way that a weekend invitation to the Kennedy compound is hard for alcoholic philanderers to ignore.

16 October 2006 @ 12:13PM >> When readers of this site hear that an old media company is embracing virtual reality, it might conjure up memories of Dan Rather and some not-quite-real documents. But in this case, one of the oldest media companies in the world is breaking new ground by dedicating a full-time reporter to covering the economic happenings within a virtual universe called Second Life:

In preparing to open a Reuters bureau on a bustling island, Adam Pasick has been introducing himself to residents and interviewing entrepreneurs. After finishing such interviews, Mr. Pasick often levitates for a moment, then flies over buildings.

Mr. Pasick, a Reuters technology reporter who was formerly earthbound with the news agency, is heading up Reuters’ first virtual news bureau inside the online role-playing game Second Life. While many independent journalists and bloggers have published inside such virtual worlds, Reuters is the first established news agency to dispatch a full-time reporter to do so.

[...]

“The fact that it’s in a virtual world doesn’t change things as much as you’d think,” said Mr. Pasick, 30, a Michigan native based in London. “It’s not any different than when Reuters opens up a bureau in a part of the world that has a fast-growing economy that we weren’t in before. The laws of supply and demand hold true, it has a currency exchange, people open businesses and get paid for goods and services.”

Scientific American has more:

Created by Linden Lab in San Francisco, Second Life is the closest thing to a parallel universe existing on the Internet. Akin to the original city-building game SimCity, Second Life is a virtual, three-dimensional world where users create and dress up characters, buy property and interact with other players.

More than 900,000 users have signed up to build homes, form neighborhoods and live out alternative versions of their lives in the 3D, computer-generated world. Players spend around US$350,000 a day on average, or a rate of $13 million a year. Usage is growing in rapid double-digit terms each month.

Players buy and sell goods and services using a virtual currency, known as Linden Dollars. An online marketplace allows users to convert the currency into real U.S. dollars, enabling users to earn real money from their activities.

Adam Pasick, a Reuters’ media correspondent based in London, will serve as the news organization’s first virtual bureau chief, using a personal avatar, or animated character, called “Adam Reuters,” in keeping with the game’s naming system.

“As strange as it might seem, it’s not that different from being a reporter in the real world,” Pasick said. “Once you get used to it — it becomes very much like the job I have been doing for years.”

Over the last month, I’ve been helping Reuters launch their presence in Second Life; I was brought in as an outside consultant and was responsible for much of the programming work. It’s been a fun gig, and has helped me fill the downtime while we work out distribution kinks with the upcoming film Indoctrinate U.

But what I found most intriguing is that an old-school company like Reuters would even consider embracing virtual reality, much less with this level of commitment. Ten years ago, such a move would likely have been met with derision by other establishment media companies. But covering online communities like Second Life makes sense: there’s real economic activity, and there are important issues to cover—such as how real-world laws will be applied to environments like Second Life.

It’s a sign of a changing world...both real and virtual.

21 August 2006 @ 3:43PM >> The Washington Post profiles left-wing documentarian Robert Greenwald and his innovative approach to film financing and distribution:

Greenwald’s documentaries generate more heat than coin. Their take at the box office is tiny (mostly they’re seen on DVD). “We weren’t raising anything,” says Greenwald, sitting on a recent afternoon in his office, located in what appears to be a converted motel behind the Sony Pictures lot, as his team rushed to complete the project for its debut next month.

The usual bankers of political documentaries — left-leaning organizations and high-roller liberal donors — weren’t rushing to write Greenwald any checks. Greenwald doesn’t know why. “Maybe I’m a lousy fundraiser,” he says.

Then Gilliam had his idea. Robert, why not go on the Internet and just ask for the money? “I thought he was crazy,” Greenwald says. “I thought this would never work.”

On April 25, Gilliam — weak at home in Newport Beach, his lungs scarred and ruined because of earlier cancer treatments, but still able to type — sent out a mass e-mail to thousands of people who had purchased DVDs or expressed interest in Greenwald’s movies or causes through the company’s various Web sites.

The e-mail alerted potential supporters that Greenwald was committed to making “Iraq for Sale: The War Profiteers,” and though they had not shot a single frame, Gilliam promised “it will have an enormous impact when it comes out shortly before the elections this November.”

The pitch? Gilliam wrote: “To start shooting, we need money. Overall, the film will cost $750,000. We can expect about $450,000 to be offset by DVD sales, selling foreign rights, and an advance from our retail store distributor, but we still need $300,000. A generous donor just stepped up and will contribute $100,000 if we can match it with $200,000 from someone else. That someone else is you! 4000 people giving $50 each. We’ll put everyone’s name in the credits.”

They got $267,892 in 10 days.

[...]

Small-scale independent filmmakers, the kind who bring their documentaries to the Sundance Film Festival, put together funding however they can — with art grants, money from educational or journalism foundations or from relatives and friends — and in many cases by racking up hefty balances on their credit cards.

Gilliam and Greenwald say they know of no one who has ever raised hundreds of thousands of dollars on the Internet to make a movie. (Though this year at Cannes, a do-it-yourself director named Melissa Balin attempted to auction her finished movie — “FreezerBurn” — on eBay. It sold in one market: Lithuania.)

“For all practical purposes, this is the first time I’ve heard of raising money for a film this way. I’ve got to hand it to them. I’m very impressed. It’s clever,” says Lawrence Turman, a veteran Hollywood producer of over 40 films (from “The Graduate” to “American History X”) and author of the how-to book “So You Want to Be a Producer.”

Turman says the Internet funding seems well suited for “political and in your face films” like Greenwald’s documentaries. “You’re not going to raise $40 million, but you might raise $1 million,” he says.

“I think this is the future,” Gilliam says. Not for standard Hollywood fare, he admits. But for niche product, for indie stuff. “It is my dream to pull this off,” Gilliam says. “To figure out how to fund movies out of the control of corporations. Our goal is to fund and distribute any movie we want to make completely outside of the system.”

8 August 2006 @ 2:49PM >> Giant Robot Imprisons Parked Cars

19 June 2006 @ 4:08PM >> A number of readers have been sending links to coverage of proposed “net neutrality” regulations being considered by Congress. If you haven’t been following the debate, net neutrality is one of two things—depending on which argument you find more convincing:

1. A way to prevent Internet bandwidth providers—typically cable companies, telephone companies, or ISPs like Earthlink—from providing improved or degraded service between you and websites like Google. Some bandwidth providers are essentially trying to extort companies like Google into paying to prevent the site’s traffic from being routed through slower Internet lanes. But Google is already paying for all the data it sends to you, and you are already paying for all the data you receive. So why should Google have to pay again for what two parties are already paying for, just to prevent its site from being demoted to the slow lane?
2. A regulation that prevents Internet bandwidth providers from managing capacity effectively and according to market demands. Some traffic needs to go through the networks faster—video, for instance—and throwing all the traffic together can create bottlenecks. So, if you want to be able to watch high-quality video without dropouts, you’re going to need special “lanes” set aside for the traffic that needs to be delivered within a certain time. People already pay premiums for faster delivery with FedEx, so why can’t bandwidth providers offer similar services?

You can tell you’re in propaganda-land when neither argument really addresses the other.

It is true that special applications like high-quality video-on-demand require prioritized delivery of data. This requires a certain amount of bandwidth to be set aside for delivery of that data. This really only becomes an issue when a certain part of the network gets saturated. In order to guarantee delivery of high-priority data, there will be times when delivery of lower-priority data must be delayed. Only so much data can be pushed through Internet pipes at any given time. Other limited resources tend to go to the highest bidder. Why should data networks be immune to the basic laws of capitalism?

On the other hand, it is also true that the Googles of the world are essentially being told by bandwidth providers, “Pay up, or it might take a while for people to get to your website through our pipes.” Fearful of jacking up prices on end-users, bandwidth providers are going to the deep pockets and playing the Yahoos of the world off the Googles. So instead of high-priority service being a voluntary choice made by consumers, bandwidth providers sound like they’re trying to start a data protection racket.

In The Weekly Standard, Andy Kessler declares that there’s “no one to root for in the net neutrality debate”:

Telcos and cable companies have no choice but to lobby for legislation that bars neutrality. Because without the ability to extract money from the webbies for the use of their not-so-fast Alexander Graham Bell-era wires (forget that you and I already overpay for this), AT&T or Verizon might not have any business model going forward. With no real competition, they’d rather keep U.S. telecommunications in the Flintstone era and overcharge for calls to Grandma than upgrade their networks. Since 1998, telecommunications companies have outspent computer and Internet firms on politicians $231 million to $71 million, just to keep the status quo.

Hate to break the news, but your “fast” DSL Internet access is no longer considered high speed. In parts of the world, cell phones are faster. Have you wondered why Internet video doesn’t fill your computer monitor and look like a DVD, but instead is pixelated dreck in a tiny one or two inch square? Well, Comcast is dragging its heels, too. With better video over the Internet, who would want E!, let alone the Style Network? [...]

But the answer is not regulations imposing net neutrality. You can already smell the mandates and the loopholes once Congress gets involved. Think special, high-speed priority for campaign commercials or educational videos about global warming. Or roadblocks—like requiring emergency 911 service—to try to kill off free Internet telephone services such as Skype. [...]

A truly competitive, non-neutral network could work, but only if we know its real economic value. If telcos or cable charge too much, someone should be in a position to steal the customer. Maybe then we’d see useful services and a better Internet. Sounds like capitalism.

What new things? It’s not just more bandwidth and better Internet video—how about no more phone numbers, just a name and the service finds you? How about subscribing to a channel and being able to watch it when and where you want, on your TV, iPod, or laptop? How about a baby monitor you can view through your cell phone? Something worth paying for. And that’s just the easy stuff.

The problem isn’t lack of regulation of the Internet, it’s too much regulation in the telephone and cable industries.

All regulations are written according to a set of business assumptions that existed at a specific time. But business and technology are dynamic, ever-changing environments. Government regulations lock in one set of assumptions, so once the environment changes and those assumptions no longer apply, the regulations stifle innovation and keep the old ways in place.

Businesses that fear change—such as companies that have billions of dollars invested in old technology like copper wires and coax cables—then use those regulations to block competition, which leads to the stagnation. Why aren’t we seeing more Internet delivery innovation? My connection at home is the same speed it was five years ago. But everything else from my laptop to my iPod are twice as fast and hold ten times as much. Why is that? Maybe part of the reason is that the government doesn’t micromanage the computer industry the way it does the telecom industry.

The current system may be broken, or at least imperfect. But I don’t know if the solution is to write into law more lofty ideas that will be soon be based on outdated variables. Let’s get rid of the obsolete laws first. Open up the cable and phone companies to real competition. Then, we all might have so much bandwidth for such a cheap price that we won’t need to worry about net neutrality. If the high-priority lanes are 100x faster, are we really going to complain if everything else is only 50x faster?

This problem is easily solved by abundance. We just need to create an economic environment that encourages it.

28 March 2006 >> My very first post to Brain Terminal, on August 22nd, 2001, covered Microsoft and its effects on the software industry. As a software developer who witnessed the rise of Microsoft from within the industry, I saw how the company’s dominance stifled innovation in virtually every market the company touched. Microsoft could simply announce a product—even if the company never actually intended to ship that product—and “freeze” the market as risk-averse technology purchasers held off on buying existing third-party products while waiting for Microsoft’s vaporware.

Now it appears that Microsoft’s size is stifling innovation within the company itself. And that is prompting some employees to start calling publicly (but anonymously) for the firing of Microsoft’s top management.

Beyond a certain size, it seems that all institutions become increasingly inefficient. Businesses at least face an incentive to be efficient: if they’re not, they risk diminished market status, the wrath of shareholders, and possibly even extinction. Perhaps these incentives will save Microsoft from its downward slide. Too bad no such incentives exist for government institutions, where inefficiency can always be papered over by handing taxpayers a bigger bill.

25 February 2006 @ 11:38AM >> Reader Matt Walliser writes:

Evan,

Recent news about iTunes hitting their billionth download made me think a little more about your post a while back about the recording industry not adapting to new mediums. If they’re not careful, they’ll obsolete themselves to Apple’s iTunes. Apple has made it so convenient to get music onto your iPod, that people don’t seem to mind paying a buck for a song. The lawsuits brought forth by the RIAA agianst people who download music can only serve to push people towards iTunes. If Apple creates their own label and plays their cards right, they could have channel dominance from top to bottom. The best part is, it’s being handed to them by the very channel they’re about displace!

While I’d hate for any one company to completely control music distribution, the massive success of iTunes is a wake-up call to an industry that has been hitting the snooze button on every previous wake-up call since the dawn of the Internet era. Maybe this time, the industry will pay attention.

21 February 2006 >> Jacob Grier is a libertarian who loves coffee. So how does he feel about Starbucks?

Let’s begin with the easy issue: Starbucks is driving independent coffee shops out of business. Anecdotally, this may seem obviously true. Many people can name a favorite coffee shop that went out of business soon after a Starbucks moved into the neighborhood. The fact is, though, that Starbucks is creating a market, not destroying it. Growth in both independent and corporate coffee shops has been huge over the past fifteen years, thanks in large part to consumers being introduced to specialty coffee drinks in the safe confines of their local Starbucks.

The Specialty Coffee Association of America, a leading trade group, tracks American retail sales. In 1989, the SCAA estimates there were 585 coffee houses operating in the U.S. By 1995 that number had risen to 5,000. By 2003, there were 17,400 shops in operation.

Starbucks growth is notable, but it’s far from the sole factor driving these new shop openings. The SCAA reports that 57% of the shops open in 2003 were independent, having only one to three locations. Microchains (4-9 units) made up another 3% of the market. All the large chains combined make up the remaining 40%. [Source .pdf]

A 2004 article in the Willamette Weekly finds a similar pattern at work in Portland. In 2003, a misguided miscreant attempted to blow up a new Starbucks in a neighborhood where residents claimed to not want the imperial corporate giant. But a survey of the local yellow pages reveals that indie shops were doing just fine in Portland:

According to the Portland Yellow Pages, before Starbucks came to Portland in 1989, there were 28 coffee shops in the city. Today, there are 91 non-Starbucks coffeehouses in Portland proper, compared with the chain’s 48 stores within city limits.

Grier also identifies a coming “third wave” to revolutionize the merchandizing of coffee, much in the same way that Starbucks precipitated the “second wave”:

In the third wave, the goal is to complete the evolution of coffee from commodity to connoisseur beverage. In essence, specialty coffee needs to become more like wine. You wouldn’t buy a bottle of wine labeled solely by country of origin and with no vintage date, yet people buy coffee like this all the time. Changing this means using detailed labeling, not just by country but by the specific grower or even the individual lot of beans. It means putting the roast date on every bag, ensuring freshness. And it means investing in the equipment and the training necessary to make sure that the best qualities of each coffee are brought out when it is finally served to the customer, or else the rest is all for naught.

Starbucks is clearly not a part of this third wave, but so what? For there is no third wave without a second to precede it. Even now, while Starbucks can’t deliver the quality I’d like on the scale on which it operates, I’m glad to see one of its kiosks when I walk into an airport lobby for an early morning flight. I can get better coffee in the airport now than I could a decade ago. The same could be said for almost any other spot in America, thanks either directly to Starbucks or to the smaller shops filling in the market it helped create.

I’ve written about my own Starbucks experience before, although it didn’t have much to do with the quality of the coffee.

2 September 2005 @ 10:35AM >> In a posting aptly entitled “Recording industry announces plans to screw up remaining business model,” John Paczkowski at Good Morning Silicon Valley notes that some in the music industry are upset about Apple’s success with its online music store. Apparently, the store isn’t sufficiently bleeding customers dry, which may have something to do with its success:

The New York Times reports that some record labels, jealous of the profits Apple is making on sales of the iPod, are pushing the company to abandon the $.99 uniform pricing approach that has made iTunes so successful and instead adopt a multitiered model that would price songs by their popularity. New songs, they say, should be priced at up to $1.49; older, less popular songs at $.99 or less.

“I just think the music companies are now at a point where there’s too much money on the table not to insist [Apple accept variable prices],” Paul Vidich, a special adviser to America Online and former executive vice president of the Warner Music Group, told the Times. “The question is what do they want the profile of the business to look like going forward?”

Indeed. And beyond that, is the market for paid downloads established enough to sustain such a pricing adjustment in its dominant service? A sudden shift away from the $.99 sweet spot could send consumers fleeing back to the file-sharing networks.

Ironic, isn’t it, that the recording industry, which two years ago had no digital music strategy to speak of, is today trying to muscle the company that gave it a digital music revenue stream. “As I recall, three years ago these guys were wandering around with their hands out looking for someone to save them,” said Mike McGuire, an analyst at Gartner G2. “It’d be rather silly to try to destabilize [Apple], because iTunes is one of the few bright spots in the industry right now. [It’s] got something that’s working.”

For years, the recording industry has resisted the notion that its current business model is obsolete in the era of music-as-files. Even though the iPod and other MP3 players have effectively separated music from its physical medium, the industry itself has done little to embrace the mechanism that more and more people prefer for their music enjoyment. Instead, they’ve been busy suing teenagers who download music illegally and trying to prop up an outmoded distribution model. Music no longer needs to be trapped in circles of plastic, but the music business is so paralyzed by panic that they’re ignoring what customers want.

Is the industry so short-sighted that it would take the risk of knifing the most successful legal online music system? Probably. But disrupting the iTunes Music Store may just send many currently paying customers back to the illegal downloading.

If individual songs cost $1.49 each, many CDs would cost more if you bought them online than in a store. This doesn’t make any sense; the incremental cost of each album sold online is basically zero, whereas each CD obviously has the cost of materials embedded in the price. Many people will feel ripped off to pay a premium that provides them with nothing, so they probably won’t go back to legal online music buying. But it’s even less likely that they’ll go back to buying CDs, and that’s precisely the danger for the music industry.

2 August 2005 @ 1:43PM >> Judge Richard Posner has a lengthy, thought-provoking article in The New York Times on the changes brought on by an ever-increasing choice in media consumption.

Among the topics Posner addresses is the adversarial-yet-symbiotic relationship between online citizen-journalists and their professional counterparts in the establishment press:

What really sticks in the craw of conventional journalists is that although individual blogs have no warrant of accuracy, the blogosphere as a whole has a better error-correction machinery than the conventional media do. The rapidity with which vast masses of information are pooled and sifted leaves the conventional media in the dust. Not only are there millions of blogs, and thousands of bloggers who specialize, but, what is more, readers post comments that augment the blogs, and the information in those comments, as in the blogs themselves, zips around blogland at the speed of electronic transmission.

This means that corrections in blogs are also disseminated virtually instantaneously, whereas when a member of the mainstream media catches a mistake, it may take weeks to communicate a retraction to the public. This is true not only of newspaper retractions - usually printed inconspicuously and in any event rarely read, because readers have forgotten the article being corrected - but also of network television news. It took CBS so long to acknowledge Dan Rather’s mistake because there are so many people involved in the production and supervision of a program like ‘’60 Minutes II'’ who have to be consulted.

The charge by mainstream journalists that blogging lacks checks and balances is obtuse. The blogosphere has more checks and balances than the conventional media; only they are different. The model is Friedrich Hayek’s classic analysis of how the economic market pools enormous quantities of information efficiently despite its decentralized character, its lack of a master coordinator or regulator, and the very limited knowledge possessed by each of its participants.

In effect, the blogosphere is a collective enterprise - not 12 million separate enterprises, but one enterprise with 12 million reporters, feature writers and editorialists, yet with almost no costs. It’s as if The Associated Press or Reuters had millions of reporters, many of them experts, all working with no salary for free newspapers that carried no advertising.

How can the conventional news media hope to compete? Especially when the competition is not entirely fair. The bloggers are parasitical on the conventional media. They copy the news and opinion generated by the conventional media, often at considerable expense, without picking up any of the tab. The degree of parasitism is striking in the case of those blogs that provide their readers with links to newspaper articles. The links enable the audience to read the articles without buying the newspaper. The legitimate gripe of the conventional media is not that bloggers undermine the overall accuracy of news reporting, but that they are free riders who may in the long run undermine the ability of the conventional media to finance the very reporting on which bloggers depend.

This is an interesting point, but I think Posner is conflating two separate issues. Bloggers are undoubtedly dependent on the establishment press. A significant portion of what bloggers comment on happens to be the end-product of the news industry, and that end-product would not exist without the news-gathering apparatus of the establishment press.

However, bloggers are not any more “free riders” than people who write letters to the editor. The only difference is, if I write a letter to the editor of The New York Times, the odds are very small that it would be run, and if it is, I’d be lucky to get more than a hundred words printed. But with a website such as this, I effectively bypass the gatekeeper who decides what to print, and I can find an audience for my thoughts.

Posner’s real issue isn’t with bloggers, but with the current business model of the print media. It wasn’t hordes of drooling bloggers that forced The New York Times to publish their articles online for free; they—as did most of the establishment media—decided to do so voluntarily, long before there were such things as blogs. Inherent in putting up a web page is the ability for other people to link to it. That’s what blogs do; they link to other sources, many of which run ads on their pages.

So if I send a reader from this site to The New York Times, I am not diminishing the financial position of the Times unless they’ve structured their business in such a way to take a loss from web-based readers. But considering the prevalence of ads on the Times website, they are likely benefitting—not hurting—by my sending readers their way. Either way, it is not incumbent upon bloggers to devise a working business model for the establishment press. We bloggers haven’t even found a reliable business model in which we can make money, and I don’t see anyone in the old media shedding tears over that.

In the long-run, I think blogs help the establishment press by (1) forcing them to have a better product, and (2) putting more people in contact with that product. Whether people like or dislike what’s produced by the media is not determined by blogs. But blogs are great at shoving potential customers through the doors of sites like The New York Times, CNN.com, etc. If those potential customers feel like they’re being played for fools once they’re inside the gates of Big Media, that’s out of our control.

29 April 2005 @ 8:29AM >> This is the kind of innovative thinking I wish we saw more of in government (emphasis mine):

Construction of the first major expansion of the Capital Beltway in a generation could start as soon as next year, Virginia transportation officials said yesterday after signing a deal with two private firms to build toll lanes for a speedier ride on 14 miles of the chronically clogged highway.

The deal calls for adding two lanes in each direction of the Beltway, separated from other traffic, between Springfield and Georgetown Pike near the Maryland border. The high-occupancy toll — or HOT — lanes would be free for vehicles containing three or more people; other drivers would pay to use them. To keep the lanes from clogging, tolls would increase with the amount of traffic.

The state would not have to pay anything for the new lanes. The private companies would invest the entire $900 million cost of the project in exchange for all or part of the toll revenue.

“For drivers in Northern Virginia, it’ll mean new capacity, which is something that has not been offered in a long time,” said Transportation Commissioner Philip A. Shucet. “It means a new opportunity for HOV and transit, and it means a choice for drivers who want to pay for a faster commute.“

[...]

Critics once derided such lanes as “Lexus lanes” — arguing that they favor the wealthy and were a double tax on roads that motorists already pay for — but have changed their minds because studies have shown that they are used by people of all incomes and, in this case, because no state money is being used.

Not only that, but everyone benefits because the drivers who choose to pay for a ride in the “first class lanes” will alleviate traffic in the free lanes.

State officials said that Fluor Enterprises Inc. and Transurban Group will pay to build the lanes, which could open in 2010. They will also operate and maintain them. State and company officials said they haven’t worked out how the firms will recoup their investment, but a likely scenario is that they will receive revenue through 2065. State officials added that there would be a cap to prevent “obscene” profits.

Sounds like this part of the deal was necessary to placate the government bureaucrats who fear capitalism. Who defines obscene? The market can define obscene quite well: if the prices are too high, not people enough people will use the lanes for the companies to recoup their costs. And if enough people do use the lanes at a price point that leads to very high profits, isn’t that a sign the operating companies are doing something right, not something wrong?

Still, despite this little nugget of socialism thrown in, this sounds like an important step forward: citizens get served without it costing a dime in taxpayer money, commuters get a new transportation option that benefits them even if they choose not to use it, and businesses get a chance to thrive in a sector normally monopolized—and mismanaged—by government; a win-win-win situation.

20 April 2005 >> TechCentralStation has an article discussing an aspect of the “Wal-Mart effect” that gets little attention: namely, that by providing everyday commodities at drastically lower prices, people who live in Wal-Mart communities have more disposable income to spend on boutique items, locally-grown foods, etc. So, while it may be true that Wal-Mart has driven out some “Mom and Pop” stores that distributed commodity merchandise inefficiently (i.e. at higher-than-necessary prices), those stores are being replaced by other “Mom and Pop” shops selling specialty items that, by definition, will never be sold by mass-merchandizers like Wal-Mart. This creative destruction can lead to a renaissance of downtown areas in communities that are served by Wal-Marts on the outskirts of town.

13 December 2004 >> Any tech junkie who travels extensively is undoubtedly familiar with the pangs of withdrawal suffered when decent Internet access is nowhere to be found. There are many folks like me whose work depends on frequent, reliable access to e-mail and the web. Most of my business communication, in fact, is done by e-mail. Even the voicemail from my home phone gets sent to my e-mail inbox, freeing me from having to constantly call in and check for messages. More >>

21 May 2003 >> The success of Apple’s new online music venture shows that people are willing to pay for things that they could otherwise steal. The trick is relaxing the restrictions that competing systems have imposed on paying customers. Will the music industry take note and completely abandon intrusive “digital right management” schemes? Let’s hope so. If they need any more convincing, they should heed the lesson learned repeatedly by the software industry: pissing off paying customers isn’t good for business. More >>