Last year David Weston and I wrote a teaching case on how in 2000, NTP sued Research in Motion (makers of the popular BlackBerry device) for infringing its patents that cover the wireless delivery of email (free download from WIPO). Well, NTP is at it again, and has just sued a number of firms including Apple, Google, LG, Motorola, HTC and Microsoft that make smartphones. The Washington Post has a brief description of the patents. The earlier case ended with a $600+ million settlement, but that large amount was partly the result of (a) RIM was found to have willfully infringed NTP’s patents and attempted to deceive the court when presenting evidence of “prior art” in 2002, and (b) as the case escalated, RIM faced the very real threat of having its US operations closed down in 2005. A number of the original patent claims were subsequently revoked, but I imagine that NTP is hoping that the larger base of email users these days will give it enough licensing revenue from each of the mobile operators. If you haven’t heard of NTP, that is because the company is sometimes thought of as a patent troll and is not well-loved. In my opinion, the lawsuit also highlights a more subtle problem with the patent system. When successful firms like RIM and Nokia choose to settle with companies like NTP, it gives NTP an incentive and the financial resources to then attack a broader group of other firms. A precedence is also set. It would be better if such firms fought back, e.g., by establishing prior art that invalidates such patents or by pushing back on the claims.
I just watched the TED talk by Evan Williams about how Twitter is giving rise to interesting and unexpected applications (link). It really speaks to the benefit of having a flexible interface that other people can use to build innovative applications upon. It’s early days yet, and I can’t help but wonder if Twitter will survive as a separate entity. Who does it really appeal to? Despite reports of becoming more mainstream, Twitter only has a few million users, a small fraction of online users. After tinkering around with it a little, I think the underlying technology is quite easily replicable by other firms. The IP doesn’t seem easy to protect, and network lock-in doesn’t seem as strong as for other applications like email and facebook. I suspect that as a user, I could easily switch to another provider with a single ‘tweet’ to all my followers to find me at the new provider. And, where will their revenue come from? My prediction is that if it proves succesful, we’ll see tweeter-like status updates built into everything ranging from your google desktop to your mobile phone. Even now, Joshua thinks his facebook status update is more useful.
Google is well known for its capabilities in advertising, search technology and web-based software. However it is weak at developing desktop-based software (its successes on the desktop, like picasa, are acquisitions). It’s interesting that sometimes, its weakness in one area affects its strength in another area. Here’s an example: google video. While trying to upload to google video, I learnt that the “uploader” software doesn’t work. It fails to login, and even when it does, it ends up spending a long time uploading, after which those files do not actually appear online. Lots of people have had problems with it. Now it may surprise you that a multi-billion dollar company cannot write software to do this simple task, and hasn’t been able to fix it despite user complaints over the past 2 years, but again this is desktop software that Google isn’t good at developing. You might ask why I wouldn’t just use a browser-based uploader? The reason: Google’s browser-based uploader is limited to small files, while its youtube service imposes a 10-minute limit, not enough for an academic lecture, in this case last week’s IPRIA Conference. Google has now decided to give up, and will soon stop offering uploads of videos altogether. It is therefore ceasing to compete in the market for longer videos, which include higher-resolution HD videos, as well as video-hosting of lecture-length. So, Google’s weakness on the desktop in this case is contributing to the failure of its strategy on the web. Me? I’m handing my money over to vimeo.
This is one of those posts that is a speculative thought written as fact. That said, it may actually be true. It starts with a conjecture: no one has ever sold information. Well then, how does one explain the payments people make for (physical) newspapers, books, and all manner of other stuff? I am going to contend that what people are paying for and have only ever paid for is delivery (or more broadly, something other than information).
[DDET Read on]
I am writing this in the context of the recent debate regarding micro-payments for newspaper articles. This is something I previously commented on, was a lead story in Time, objected to by others, and discussed here and here. That debate notes that (a) people value information and (b) it is costly to produce that information and so that means people can and surely will fork out to cover information costs. Fair enough except that it doesn’t appear to happen when it should and maybe, as I will argue here, ever.
Let’s start with books. Books represent a collection of information. But in pricing books publishers and booksellers take into account various factors including the quality of paper and binding as well as timeliness — charging more for books closer to the time of release in many cases. So the same information is sold for differing prices depending on how it is delivered. And we see this being expanded to electronic books too. And all this occurs when books can be easily borrowed from others. So what book sellers are competing with are those other modes of delivery. That is why, except in extremely rare cases, households only tend to buy one book.
Now, let’s move on to music. Previously, the issue in delivery was quality (albums to CDs) and portability (cassette tapes). Then came digitisation (actually that came with CDs) and supposedly every thing changed. Yet, iTunes is able to sell music despite the fact that you can get that very same music for free (albiet illegally but nonetheless). The obvious reason is that it allows for easier delivery. Pandora radio — something that I suspect could charge for a subscription — does delivery differently but allowing tailoring and experimentation. Indeed, it works like radio that way — the obvious delivery-based competition for music sales.
I could go on but let’s get to newspapers and the current apparent dilemma. The claim is that newspapers when they lost classifieds, moved to unprofitability. In reality what happened was that newspaper content and classifieds shared a delivery mechanism — timely and regular delivery to readers. But classifieds found a better mechanism and one that made search easier as well as involved lower costs. News content could also use that mechanism. The problem was that classifieds still had their traditional customers — advertisers — while news content was now much less about delivery and more about information. According to my hypothesis, that is the problem.
So the response has been, let’s work out how to get people to pay for information. One example of this is Chris Anderson’s notion of “freemium.” You give away 99 percent and charge for 1 percent. The idea there is to charge for some premium content. But my conjecture here is that is wrong. What you need to do is charge for better delivery. Ad-free is an example of this but customisation is another way.
Now I don’t have the ‘solution’ for newspapers but my guess is that once they start thinking about giving away content and charging for delivery, payment mechanisms will come (something that Jonathan Rosenberg was groping towards).
User generated reviews are one of the great innovations that came with the growth of the Internet. They are now pervasive, and cover everything from automobiles, to music, books, movies, and restaurants. I suspect the arrival of user reviews on interactive mobile platforms (such as urbanspoon and amazon) will bring upon us a new wave of interest in such content.
Yet, user-generated reviews suffer from informational problems. Firstly, why would you trust the product recommendations from an online stranger any more than you might somebody else? Secondly, user reviews are often tediously long, contain huge volumes of inconsistent information, and sometimes even degenerate into personal mudslinging matches. This imposes search costs upon the person trying to make sense of reviews. For example I was recently searching for a new lens for my SLR camera (a little hobby on the side), and it took a bit more time than I had expected to visit various photography forums to sort out which products were really good, versus other lenses that suffered quality control problems. Thirdly, there is a growing phenomenon of companies manipulating online information for their own benefit. For instance, last week Seagate was found to be deleting user postings from their website about high defect rates, while a Belkin official was caught out offering cash for good reviews.
Universal Music would like a slice of every iPod pie (click here).
Universal, the world’s largest music company, owned by French media giant Vivendi, was the first major record label to strike an agreement with Microsoft to receive a fee for every Zune digital media player sold.
“It would be a nice idea. We have a negotiation coming up not too far. I don’t see why we wouldn’t do that… but maybe not in the same way,” he told the Reuters Media Summit, when asked if Universal would negotiate a royalty fee for the iPod that would be similar to Microsoft’s Zune.
I would like that slice too. (Actually, come to think of that, I get it in the form of consumer surplus.) But why would Apple give Universal that? Continue reading “OK, so why would Apple agree?”
A while back I blogged about Fairtrade; the folks who try to secure growers in less developed countries better prices (click here). I worried that, while well-meaning, ultimately, any additional money consumers paid would flow away from growers (perhaps even to the very multinationals accused of paying growers ‘unfairly’). At the moment, I have a crack team of RAs working on whether the assumptions underlying my theorising are true or not and I will report on that in due course. It turns out to be quite hard to get information from the Fairtrade folks. Continue reading “How fair is Starbucks?”