Through the MCDM

July 28, 2008

Good Ol’ Media Economics

Filed under: Reflection — captainchunk @ 9:37 pm

Media Economics is much more economic theory based than say The Long Tail, but I did find chapter 7 to relate directly to The Long Tail. The distinction between the market structures was new to me because I had never heard of it in those terms before. I was really only familiar with Monopoly by name and Oligopoly, Monopolistic Competition, and Perfect Competition through experience.

Media that once was clearly monopolistic is now being challenged by content out of the Long Tail. On page 148 of Media Economics, it states, “creative industries such as film, television, book, magazine, newspapers, and audio recording thrive on differentiation.” What is the Long Tail if not differentiation? Infinite choices sounds like differentiation to me.

Newspapers were once very much monopolistic… but now having fight it out with many other forms of media with nearly the same product. With more and more media falling from monopolistic status… it seems to me that the monopolies that are left stand very tall and obvious. Cable television is an obvious one and it doesn’t seem as though that will change anytime soon unless our government changes things. The Long Tail is changing the market structure of traditional media towards Perfect Competition and Monopolistic Competition due to the almost non-existent barrier of entry.

July 23, 2008

Looking back to Monday…

Filed under: Reflection — captainchunk @ 8:55 pm

Oh how time has flown since Monday night.

I enjoyed the talk on Mechanical Turk since I had never really looked at it before. It is an interesting concept that seems to work on a small scale, but I see a number of potential issues crop up if it were to be a higher profile service. I can easily see there being concerns about the level of pay for people who choose to do the HITs for income in developing countries opposed to the people who do it for fun. It really is just distributed computing with humans. Each taking a very small amount of work and contributing to the overall project.

The class discussion was lively and interesting since it seemed like a good portion of it centered around the little word “should”. I do think the fact that the saying, “information should be free” needs to be considered in relation to the time it was said. Does “information” change over time? One of the topics I am struggling to wrap my head around is what is really meant by “free?” Is it referring to money? Maybe, but I don’t think that is the main focus. Maybe “free” is really referring to the ability to share information among people?

I thought the copyright video was fantastic. Very clever and it made its point well. Copyright law, as it is now, is restrictive to innovation and unfortunately I don’t see it changing anytime soon. Benkler seems to have quite a bit to say about copyright law and hopefully as I finish more of the book it will be elaborated upon. What is a decent length of time before a work goes into the public domain?  I don’t know. 14? 150? Probably somewhere in between that.

July 20, 2008

DRM: Desirable, inevitable, and almost irrelevant article

Filed under: Abstract — captainchunk @ 11:35 pm

Reading the DRM article by Andrew Odlyzko got me to thinking about some DRM issues that I had not previously spent much time contemplating.

The basic concept that Odlyzko outlines is the fact that DRM “gets in the way of maximizing the value of intellectual property by conflicting with some powerful human drives” and as such will not play a significant role in the actual consumption of digital media. I think he realizes that DRM works great as a superficial veil of security that large companies will employ on high value digital content. DRM will continue to be used by large media companies for the foreseeable future, but lower value digital content will not use DRM.

Odlyzko wrote a little about DRM in relation to individuals and not companies. The traditional idea of DRM has applied to the media companies because they were the ones producing the content, but with armatures producing content, will DRM play any role in that media? If it was possible, would you place DRM on videos you uploaded to Youtube? Embed DRM into images you upload to Flickr? I think the most likely answer would be no… but I think there may be more to think about.

Looking at DRM through Benkler, you could say that DRM is limiting to innovation. Benkler attacks copyright quite a lot and DRM is something similar in the fact that it is protecting digital goods. I don’t think that DRM really does anything it is suppose to do in any way other than to soothe the minds of the big media owners.

July 17, 2008

I wish I had a name that started with T.A.

Filed under: Reflection — captainchunk @ 3:20 am

Monday’s class was great and made me mad that I had to miss the previous class.

I thought T.A. was a really good guest speaker. He spoke with purpose, had an opinion, and has the experience to back it up.

I agreed with this assessment that The Long Tail is definitely on to something, but that it is amplified more in the book than what the reality is. If you are making a point like Chris Anderson is doing, you are going to skew it towards your cause. It is completely understandable, but I think it is important to acknowledge that fact.

His graph of personal to peer to and indirect to direct was interesting way to look at that concept. I really hadn’t considered The Long Tail against those metrics.

I was impressed by his Minebox company as well. I can see where people may be skeptical as to why people would pay for a service in which you could, if you wanted to, get all of the data with some Google searching, but the revenue generation comes from time. Which is one of the reasons that T.A. said he was interested in the project… one of the things he is selling is time. Time is incredibly valuable, especially to top level business people. Assuming the marketing is correct… I can see Minebox gaining a devout group of followers.

Christy started a great discussion of DRM and its implications. DRM is something I feel strongly about which is why I spoke up in class. I know it was talked about in the discussions, but I am not totally sure it was emphasized as much as it should have been, but the average person doesn’t even know what DRM is. DRM is a battle between earlier adopters and companies. The fact of the matter is that DRM favors corporations and not consumers.

July 14, 2008

Long Tail review

Filed under: Review — captainchunk @ 11:23 am

The Long Tail. Chris Anderson. New York: Hyperion, 2006. 226 pp.

The internet has already, and will continue to change traditional economics due to its ability to democratize content creation and distribution. Lowering the barriers to create content allows amateurs to make content that can be seen by as many people as some of the largest television networks in the world. This concept is central to Chris Anderson’s The Long Tail. His book argues that the internet is majorly contributing to the transition from a hit-based economic society to one that celebrates niches and diversity. An extremely large number of people spend money on hit songs, products, or services… but another large number of people are willing to spend money on songs, products or services that are not “popular” in the traditional sense. It is these “unpopular” niches that have been overlooked by traditional economics, but are studied in-depth by Anderson.

Without variety there would be no Long Tail and currently there are two methods driving variety in the Tail. First is an abundance of fresh content. Where content did not exist before, it exists there now. With the barriers to become a content producer lowered so drastically due to advances in technology and cost reductions to that technology, anybody and everybody now can create video, audio, and text media for consumption by the masses. Anderson embraces the fact that everybody can now be a media producer, writing that “the distinction between ‘professional’ and ‘amateurs’ is blurring and may, in fact, ultimately become irrelevant.”(78) There are far more “amateurs” than content creation “professionals” so inevitably there will be more content created by the “amateurs.”

The second way variety sneaks into the Tail is via smaller units. Anderson loves using iTunes and Rhapsody as examples for the Long Tail because of their amazing selection of music. Rhapsody has 1.5 million songs and its catalog is growing every day.(19) With the advent of these services, the ability to download single songs has become more than common place… it has become the standard. Breaking the mold of the album is a great thing to Anderson, who said that being able to download just single songs lets you avoid the less desirable songs on an album.(22) Only download the best of the best— those that will become the hits of the album. Anderson takes note of this phenomena with iTunes on page 111 saying, “…iTunes, which, for all of it accomplishments, shows a pop-music bias that undermines its usefulness for other kinds of music.” The division of products or services to their smallest unit might not be the best idea for the sake of the art. Seminal British rock band, Radiohead, held out for a number of years on the basis that their albums were works of art that should be experienced as a whole and that single song downloads were not good for their art. Not to long ago, Radiohead, chose to allow single song downloads via iTunes and their songs appeared on the service. From an economic standpoint, having single song downloads is a great deal as it allows the most flexibility in purchasing options, but there are downsides to having small units in the Tail.

With all of this variety in the Tail, Anderson is completely correct in assessing the need to have filters in place to sort through all of the content that makes up the Tail. Having post-filters in place is critical in creating value in the Tail. As I see it there are two goals of post-filters for Tail content. 1) To make it easier and quicker to find the things I am specifically looking for, and 2) to allow me to find things that I might not have been looking for.

Both of those goals require my time. Anderson addresses time somewhat in The Long Tail, but his treatment of time is lacking. Time has a significant impact on the value of the Tail, and I believe that this concept was deserving of more of Anderson’s attention. Right now it is still difficult to find the time necessary to navigate what the Long Tail has to offer, but post-filtering does help with the time barrier of entry. I am concerned that post-filtering will not be able to keep pace with the amount offered by the Long Tail. Right now, post-filtering does help people find what they are looking for and I think with time it will only improve. One of the most common forms of post-filtering are recommendations. Anderson realizes that recommendations tend to run out of steam the further down the Tail you go, but even with algorithmic or user created recommendations, it still takes time to go through those recommendations… you are required to spend time devoted to discovering the long end of the Tail. This time barrier of entry to the Long Tail is very important to the success niche economics.

Looking at the purpose of The Long Tail, it is clear that Chris Anderson realizes the power that the internet has on economics. Even though internet sales amount to less than 10% of US retail sales, it is the methodology that will have a huge impact on traditional brick and mortar retailers.(147) By using large companies like Amazon, Apple, Rhapsody and eBay as examples of Long Tail success, it is obvious that large aggregators can take advantage of the niche markets, but can small business take advantage of the small units that make up the Long Tail? Even though The Long Tail answered economic questions it raised many more in this reader… and that is a good thing.

July 12, 2008

Long Questions

Filed under: Questions — captainchunk @ 3:17 pm

How small is too small? The iTunes example is used a lot in The Long Tail due to its methodology of selling single songs. The Tail is about variety and the smaller the unit the more things you can have. I kept wondering if at some point, having super small units is really a good thing?

Filtering is crucial for making the Tail useful. Filtering is OK now, but I am curious if will be able to keep pace with the thickness of the Tail. If the amount of content far exceeds the ability of filters, then the Tail risks becoming unwieldy. Will filtering be able to keep up?

Moving down the Tail takes time and time is the one thing that can’t be changed. In to find value in the Tail, the time it takes to navigate through the Tail must be close to zero. I don’t think navigating the Tail will ever be instantaneous, but what can be done to minimize the time barrier of the Tail?

July 9, 2008

The Long Tail – Week 1

Filed under: Reflection — captainchunk @ 4:23 am

As I was unable to attend class this week, my comments on the class discussion would be lacking… so I just figured I would comment a little bit on the Free! article by Anderson.

Anderson is absolutely correct in his assessment that the web is trending towards zero. The cost of the hardware to run internet services is currently super cheap and is only going to get cheaper and the only cost companies will incur is the development costs.

Anderson broke the free economy of the web into six categories. One of his categories is “Freemium”. This is used by so many web 2.0 companies, including my company Konnects, that I was really interested in what he had to say about it. While this model seems to make sense now because the small number of people who subscribe to the premium service subsidize the cost of the free loaders, I am not totally sure if it will be a viable model for web 3.0 whenever that hits. It is a good way to do things now because people will pay for a service that is relatively new, but as soon as a company gives the milk away for free… the cat is out of the bag.

Reading the article lead me to another thought. While the costs keep driving to zero for internet services… companies can still charge a lot for the best. The best gets more expensive as everything else gets free. So while the trend is towards free… the best services will get more expensive. This is really just the freemium idea on the larger scale and not in a single company. Out of similar web services, the best will be able to charge and make money while all the others will be free.

Free is the future… but I don’t think it will be quite so simple as seeing free stickers tacked to every index page on the web.

July 3, 2008

Goals for my first class in 3 years

Filed under: Reflection — Tags: — captainchunk @ 2:57 am

Going into this class, my main goal is to get a sense of some of the economic principles that shape digital media. It’s consumption, it’s distribution, it’s pricing. Part of this new information age is figuring out how to make money from things that are free. It is one thing to guess on how pricing may or may not affect the bottom line in a digital business, but having the knowledge and ability to synthesize data and ideas with respect to economics will be valuable to my career.

I really want to be able to look at these emerging technologies and trends and be able to see them from an economic point of view. I don’t necessarily want to crunch numbers to figure out the utility of a product, but rather have the ability to look at pricing and competition and say, “if we move our pricing this direction, we may see this result.” I really want to move in a business direction in my career and having a good basic understanding of how economics can apply to digital media and digital communication is important to me.

Technological trends change so quickly that without a good understanding of the larger economic principles at work, I feel as though I would be walking over a gap with no bridge underneath. Being able to make educated decisions in my career is critical to me and I think this class will be a start to that end.

Thoughts on my frist reading assignment in 3 years

Filed under: Reflection — Tags: — captainchunk @ 2:56 am

Page one of Media Economics was my first introduction to economics… in the academic sense. I didn’t quite know what to expect from the book and how it would tie into the digital media aspect of our class. It was helpful to me to flesh out the everyday economics I hear on the 6:00 news. Supply and demand, economies of scale, etc.

During the reading, I was continually questioning how virtual, non-physical products were affected by these economic principles. Many of the examples used were either physical media that require a cost to produce or more traditional forms of communication like long distance telephone calls. I was curious as to how a service such as a social networking website, which once the development has been completed, with the only cost to run the website is servers and bandwidth, can be applicable to the economic principles of traditional media.

Varian’s thoughts and ideas seemed to be more current in terms of the concepts I see while working for a web 2.0 company. His discussion of First-degree price discrimination was fantastic. One of our big pushes is relevance, which is really “owning the consumer.” We are always tossing out the phrase “data, data, data,” and “owning the consumer” is all about data.

The economic principle of lock-in is interesting to me since there is a trend towards data portability on the internet. Is lock-in a concern in the digital world? I think that the network effect is lock-in for web 2.0. I enjoyed Varian’s article more as I felt he cemented my initial introduction to economics better than Media Economics did… but maybe that was because I read Varian after Media Economics?

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