China Past or Present?

Is China the future or the past? It’s holding a distorting mirror up to the West but nobody has worked out yet what the distortion factor is – does it make us fatter or thinner? Visiting the country only deepens the sense of uncertainty.

In the subway station for the Science and Technology Museum in Shanghai is one of the city’s largest Fake Markets. The stalls, some quite glossy, sprawl in a maze all around the exits at the top of the escalators in an underground mall. Frequent police raids and prison sentences are helping to create an atmosphere of nervousness and somewhat sleazy secretiveness in the markets.

No question that policy in China is being seen to create an official stigma in the fake markets. Signs taped up at the entrance make it clear that fake products are illegal and not sanctioned by the state.  One effect of all this is to reduce the impact of the brand. It becomes commonplace. Stripped of all the marketing sheen and context the brand makers create for it, consumers end up considering the aesthetics on their own terms.

In a very high quality store with brightly lit displays and shiny chrome and glass fittings, a man sells us a Gucci belt that is very high quality, indistinguishable from an original; quite possibly a “night shift” product. These are often products off the same production line as the genuine item. He explains proudly that the police raid the market all the time. They send people to jail for ninety days for selling fakes – unless you pay them off with big money – equivalent to £35k he tells us. He reveals he is a graduate of Beijing University, Business Studies. He has a maimed left hand which he keep deftly hidden. Disfigurement, disability and amputees are more commonplace in China.

I ask one vendor to see some watches and immediately we’re ushered inside the store while the husband furtively closes the door and stands guard outside. The wife lifts the lid on hidden boxes – literally under her counter. Later, she digs deep into piles of clothes that are stacked around the edge of the little store,  to pull out more bags of fakes – Bulgari, Tag Heuer, Breitling, Rolex, Patek Phillipe all the big brands are here in varying qualities of fake – none of these quite good enough to impress.  The replication is not convincing. In fact, these poorer quality fakes end up strengthening the brands.

In a bag store in one corner of the mall, three heavy-set tall Chinese men enter the stall as we are looking at a suitcase full of Louis Vuitton fakes – not very good ones. The women storekeepers gather round, nervously chatting to the men. It is clear that they are uncomfortable,  these guys may be police. Although as long as we are around, as Westerners, it is clear that nothing is going to happen. The young girl who is serving us is trying to encourage us to buy Gucci wallets. The moment we express interest, she ushers us out of the store and, wheeling another fake-stuffed suitcase behind her,  leads us down a side alley through some big service doors out of the public areas of the mall, into a seedy stairwell to show us the Gucci fakes. The quality is higher and she sells eagerly. The sketchiness is intense.

On the walls at the entrance to the fake market, those official posters warning of the illegality of fakes highlight specific brands. One wonders if these are the brands which lobbied loudest.  Official policy is demonstrably being put into practice. And you can see why. At the same time, in downtown Shanghai and Beijing – some of Europe’s and the US’s glossiest brands are the first to populate new high end malls which are currently as impressive for their lack of people as they are for the expense of their flagship brand stores.  They’re there to capture the growth in this burgeoning middle-class market.  Sebastian Huber, the manager of the Montblanc store in Beijing explains that it is the largest of their boutique stores and is performing well for them. The store is decorated by elaborate, state of the art interactive displays featuring prestigious idealised users of the company’s products. John Lennon may never have actually used a Montblanc pen, but he clearly represents the creativity and fame to which  their customers aspire.   At times incongruities occur to Western eyes that don’t seem to trouble the Chinese or indeed  the brand owners. Cartier and Gap are adjacent in downtown Shanghai in a way that would be unthinkable in Bond Street.

The cultural requirement to haggle in markets and even in more formal shops is born of years of private selling and a nation built on trade. But the surreal dislodging of fixed price points throws the genuine economic value of any consumer product into question. In China the seller is closer than anywhere else in the world to the means of production. The high gloss value-add of marketing and positioning achieved by high end brands in the West is stripped away by the circumstances of sale and effectively removed from the equation here.

“You’ve got to haggle” says the storekeeper in the surreal manifesto the Life Of Brian, and this indeed may be the mode throughout Asia, the Middle East and South America. In fact it may only be in Europe and the US that haggling is not the norm. But you do find yourself wondering what is the index of value? What does the price equate to?  As Westerners we’re forced to build down from our inexact sense of a European High Street price. The Chinese seller is by definition, even if they’re selling an original, likely to start from a position way upstream in the value chain, very close to the factory door. By definition it’s wholesale, minus distribution, minus marketing costs – and minus tax!  This is likely to be at most 15% of UK High Street pricing. As for a fake – there the price is completely arbitrary – not unlike the way that value has been eroded from music in the West. When something has virtually only intrinsic cultural value – the price you can ask depends on the culture created for it. So is this legacy of the heavy-handed, unsophisticated Cultural Revolution or the harbinger of the future.   There’s nothing unsophisticated about it. The gloss and roar of Ferrari’s, Porsche’s and Range Rovers is just as common in Pudong as it is in Sloane Square. But sixty kilometres to the south of Shanghai, in Hang Zhou, the students at the highly selective, elite School of Art and Design develop open software artworks, new products that cross platforms, incorporating games, music, animation, graphics. They all co-create, work on each other projects, contribute their different skills. The work is made to be shared. The professor explains, “it’s all open yes, only open”.

In the Chinese language, there is no past or present – only an eternal present to be carefully amended by qualifiers.

Co-creation of a modern bodice-ripper and the rise of mommy porn

Connected devices, user generated content and cultural shifts all coincided this week to prove once again that our most sophisticated developments drive our most basic desires. A senior placed figure at Nielsen Book explained to me that e-books are driving a massive commercial return in popularity for bodice ripper fiction (what we used to call simply “Mills and Boon”) and a significant upsurge of the interest is in female oriented erotic fiction.

The reason is quite plain to see – or perhaps not to see. The anonymous, book-jacket-less convenience of reading a Kindle (or other digital reader device) allows women to avoid any public embarrassment of being seen to be reading something less than entirely “Richard and Judy” or “Oprah”-like book club material. This might be old news to some who are already fully aware of how porn drove the early adoption of the most successful internet business models – subscriptions and micro-payments, but we did also see that as a predictable reflection of  boys with their toys.  A female version of a similar phenomenon is something new – and possibly almost post-feminist. Unfortunately, the male heroes of these works of fiction seem to represent the most classic characters of gothic anti-hero; distant, unimaginably wealthy, faintly malevolent, and oh so utterly emotionally illiterate in the intensity of their passion. So progress has moved us along but not necessarily forward.

Coinciding with this curious but entirely plausible phenomenon is another curious incident of literary evolution in the same genre. Paidcontent this week focussed on a new work of erotic fiction entitled 50 Shades of Grey which sold over 250,000 units through its Australian publisher – mostly in ebook format – and has been republished by Vintage and is currently number one at the top of the New York Times bestseller list (Number two is Fifty Shades Darker the second title in the 50 Shades Trilogy).  The book is a rewriting of a title that had previously been called Master of the Universe and published for free on a fan fiction site under the authorship of Snowsqueen Icedragon (according to IMDB).  Fan fiction blog, Dear Author carried out numerous comparison tests. They found the book,  according to the plagiarism detection app TurnItIn, to be  89% identical to the previous title.  Now there doesn’t seem to be a matter of plagiarism here at all  since the published author and the fan fiction author are assumed to be the same E L James.  James herself, according to Dear Author, turns out to be a pseudonym for a London-based ex-television producer, Erika Leonard who lives in Brentford. According to the International Business Times, having expressed her delight at such good fortune to the New York Times, Erika Leonard is now resisting the publicity and refused to give an interview to the London Evening Standard.  But, despite her blushing pseudonymity,  the thing that is key here is that Erika Leonard’s  original fan fiction titles were based on the massively successful Twilight series.

The main characters in question are Edward and Bella transposed from their Twilight origins to a present-day setting in downtown Seattle.  So it’s an interesting question as to what the copyright issues are in regard to the work of Twilight author – Stephanie Meyer. Paidcontent’s Laura Hazard Owen  (can that really be her middle name?) doesn’t seem to think there is a problem ”unless Twilight contains a major bondage and sadomasochism element that I missed”, she writes.  So even though the characters are recognisable and the overall context might be clearly based on a context established by Twilight, what Erika Leonard has produced is sufficiently unique not to be an infringement of Meyer’s copyright. That at least is what Vintage Random House would no doubt wish to argue on this occasion.

Fan fiction is a growing phenomenon which challenges conventional notions of authorship and exclusivity of creation – rather as mashups  do. And it is of course very cool. Apparently Stephanie Meyer showed up at some public fan fiction forum to encourage her fans and awarded some prizes to the top ranking works. Based on that behaviour, it seems unlikely that she would wish to pursue Ms Leonard – but then of course that was before the fan fiction became best selling fiction.

Now that one of those pieces has found its way into the commercial domain – albeit with some cosmetic changes, will Meyer’s publishers step in and try to take a cut? Will fan fiction be reduced to canon fodder for the major writers whose works spawn it?  Or more likely perhaps, will it simply be acknowledged as a new manifestation of  one work being inspired by another or what the post-structuralists used to call intertextuality?

This delicious nexus of sophisticated devices, anonymous reading,  anonymous writing, and secret pleasures points to all the dangerous delights and questions around what, with good reason, we have sometimes come to call co-creation. Even as you read this,  some major film studio is busily convincing the stars of the Twilight movies, to star in the forthcoming film versions of the 50 Shades Trilogy and then release them for exclusive private viewing on new high definition iPads… Watch this space… and of course, for those of you that might wish to try this at home, you can buy your grey ties here.

Investment ready companies or oven-ready chips, anybody?

One of the phrases that policy-makers and start-ups seem to have picked up in recent months is “investment ready”. In learned gatherings all over the globe, beard-stroking wonks and earnest advisers assure us that if companies don’t get financed it’s because they’re not “investment ready”.  Experts from highly reputed corporate finance houses tell keen and shiny start-up entrepreneurs that the one thing a company has to be sure of, even before it has any revenues , is that they are “investment ready.”

Investment ready is like oven-ready chips. Why do we have oven-ready chips? It’s so that hard-pressed housewives and home-husbands don’t have to do spud-bashing in the kitchen for hours on end, but can simply empty a sack of chips onto a hotplate and stick it in to a preheated oven. They don’t have to do the frying themselves.

But however much deep frying has been done in advance and so however “investment ready” a company has become, no investment house will simply stick it in its preheated investment oven and say “Bob’s your uncle, come back in seven years for your tasty evening meal”!

The reality is that investors want to get comfortable with what a business is, how it works, how the team works together, how the sales marketing works, how the development works, how the whole thing will scale…

That doesn’t come packaged in a luridly illustrated plastic bag out of the freezer. It comes from careful and thoughtful enquiry and due diligence. Unfortunately in the UK,  companies still seem to have to prove much more than similar companies in the US. Today, an early stage US business is three or four times more likely to receive investment than an equivalent UK business. UK businesses have to go much further to market than their US counterparts, gain multiple concept proof points, win meaningful early contracts, show huge user uptake, point to the beginnings of recurrent revenues, be building a stronger pipeline – and of course prove that all of this can scale massively, globally.

And therein lies the rub. The need to scale globally is understandable and a must. The size of the US domestic market represents such a significant opportunity right on the doorstep of US businesses and Europe is simply not equivalent. That basic market reality dictates investor appetites and so maybe we should never expect it to get any easier in the UK, however oven ready the chips are. Discuss!

DCMS downgrades value of Creative Industries?

If you were a beady-eyed Treasury wonk in the first week of December last year, then the Creative Industries might just have become 30% less important to you than they were a couple of months previously.

In the dying days of 2011, the UK government apparently reduced its view of the value of the Creative Industries. DCMS published a new statistical estimate of the economic contribution and size of the UK’s Creative Industries for 2009,  lowering it from 5.6% of GVA to 2.9% or from £59.1bn to £36.3bn.

Maybe creative industries workers and policy makers were too eagerly focussed on end of year festivities, but this significant change seems to have passed without notice.

Have bit torrent and unauthorised file-sharing finally taken things over a cliff? Has the the complexity of music licensing and the level of commercial friction become so intense as to kill off  more than a third of the value? Did TV advertising suffer a massive subliminal relapse? Did eBooks decimate publishing values? Did social media revenues evaporate in a bubble? Did all this happen without our noticing?

Not really. It’s more a revenge of the statistics nerds type scenario. Apparently, the reasoning for this massive downgrading,  is that in previous years, the “sub-sectors” of  software programming and consulting have been included in the estimates and these have been removed in the interests of accuracy. It’s certainly true that including companies who produce applications for business software products within Creative Industries seemed a bit of a stretch. Equally,  it has been noted for at least ten years that web-companies and social media companies are part of the Creative Industries and still do not figure in the statistics at all. Presumably they get claimed by ICT or Telecommunications. Maybe the statistical nerds are too afraid of an industry lobby group more alert to the value of metrics than the less numerate Creative Industries lobbyists.

Another statistical quirk has contributed to degrading the numbers. A weighting had previously been applied to Office of National Statistics Annual Business Survey information to take into account its lack of full coverage. Allegedly that coverage has now been extended to all parts of the economy. So the weighting has simply been removed. Kerdunk – the economic contribution plumets 30%. But the Annual Business Survey is quite capable of not noticing thousands of micro-businesses and sole operators who make up the warp and weft of Creative Industries. In fact the DCMS report notes (p26 as in previous years) that the majority of crafts business are too small to be picked up by the Inter-Departmental Business Register and so the category is ignored.

Elsewhere in the DCMS report there are a couple of other  contradictory comments. On the one hand, the report observes that last year, analysis methods were changed and therefore tagged “experimental” although the results didn’t differ dramatically from the previous year. This year it has been deemed unnecessary to term these numbers “experimental” and so the term is dropped, suggesting an apparent commitment to this formulation – even though its make up has been radically transformed.  On the other hand, the report also observes that Digital and Creative Industries are increasingly converging on one another and that if the numbers were combined then the figures would be considerably upgraded.

All of this leaves more than a little room for confusion and ambiguity in what should be the “authoritative”, “official” statistics that public spending and policy decisions are based on.

The term Creative Industries is an unwieldy phrase, to which hardly anyone feels much loyalty. It is a flag of convenience that has heritage and continuity on its side, but needs better definition fast.  If we took into account the warp and weft of micro-companies and the convergence with Digital Industries – it would  not be surprising if the numbers leapt back up and then exceeded previous estimates of the UK’s Creative Industries economic contribution.

Ten Predictions for 2012 – what are yours?

1. Startup companies focussed on smart content and technology integration will grow faster and display mind-blowing results. They will look at grownups and say “well of course we’re geeks, writers and designers all working together from the beginning, why on earth would you do it any other way?”

2. Big content companies will continue to campaign against “online piracy” but as their pain increases and even their most somnambulant shareholders start to wake up and notice the approaching precipice, they will experiment more with licensing in more open ways and collaborate with new, more savvy start-ups.

3. Our heads will come out of the cloud and our we’ll plant our feet more firmly on the ground. What we once referred to in shock and awe as “the cloud” will become a much more sophisticated set of services – some of which will offer ubiquity like the Apple iCloud for consumers but others of which will offer much more robust, secure and limited commercial solutions.

4. Search, discovery and recommendation of content of all kinds will grow. We will need meta-discovery engines to filter the range of discovery offerings. Combinations of algorithmic and human selection remain the key. Tastemakers will rule!

5. Talking to yourself is one of the first signs of madness. Voice, movement and facial recognition systems will drive entertainment devices and in car solutions. But people will neither  walk down the street talking to Siri nor talk to her on public transport.

6.  The influence of TV as a platform will only be slowed by TV executives’ unwillingness to embrace technology. Internet connected TVs, set-top box solutions and simplifed home remote control systems will improve. Apple and Google with various new consumer electronics partners will try to do battle for the living room with continued varying results.

7. Security, privacy, hacking and scandals will reach new heights with more of us being exposed to greater invasions of personal privacy than ever. Anonymous will publish some massive quantity of personal private information online which we will all scour for great prurient interest before declaring it scandalous and to be condemned!

8. Closed proprietary solutions vs big open platforms will be the Apple v Google macro-battle writ large across every area of tech innovation… Sony, Nokia and Microsoft will be the big losers of old school proprietary solutions…

9. DIY musicians, artists, writers, film-makers, animators, games creators will be doing it more and more for themselves. The big global superstars of the studio system will look more and more rarified, less and less in touch with the real world. Our cultural snobbishness about self-publishing will diminish, but we will need more and more help to find the good stuff (see 4 above).

10. A small, inexpensive, lo-tech gadget that takes us all back to the very childish basics of human pleasure,  fun and obsessive addictive behaviour will sweep the world and will help a little to relieve us all from the tedium  and anxiety of economic and social uncertainty.

Website blocking – the debate

Website blocking proposals are currently with UK Ministers in the latest phase of the online “anti-piracy” efforts of rights holders and content companies. There is a simple belief that if you prevent consumers from gaining access to illegal content by blocking the sites that display it, they will increase their purchasing habits.

While no one would argue against genuine proactive efforts to get consumers to pay for creative work, there is growing concern that this must be done in ways that do not create a greater danger.  Protestors argue that website blocking will not succeed because the ability of ISPs to shut access down is only exceeded by the speed with which they can pop up again at different addresses. Blocking websites, the argument goes,  will also inhibit those that wish to promote and distribute their work for free.

Based on the norms of web behaviour, it is hard not to conclude that website blocking efforts would be like embarking on a highly dangerous game of  “whackamole” – the old video game where you have a mallet and every time you see a mole you whack it back into its hole, only to be presented with another.  (About 15 years ago, at Virgin Records as Spice Girls frenzy gripped the world, the web team created a game of “WhackaSpice” – different Spice Girls popped up out of the ground and you got to splat them down with a mallet. Management refrained from allowing the game on the Virgin website, but the team  had good fun making it.)   The key thing about the game of Whackamole is that you can’t win it, you compete for a high score, but the moles keep on coming – for ever  – faster and faster.  Many predict that this is what will happen with website blocking efforts.

Another real danger of whackamole antipiracy is a threat to free speech in the process. The process for blocking websites would be in whose hands precisely? On what evidence would they make their decisions? How would they be confident that they were always right?  Justin Bieber and Lady Gaga were both victims of a scam this week, that had their videos falsely taken down by YouTube and Vevo. The video sites run relatively automated systems which respond to “cease and desist” notices with immediate “content take down”.  Someone sent them notices of infringement concerning Bieber and Gaga,  that were convincing enough to take their work offline for a significant period of time. The point about this jokey and fraudulent action is it demonstrates that if you take a “guilty before proven innocent” approach to the web and do that at scale, unexpected and undesired outcomes become more frequent.

How would companies make sure that web sites that had creative work on them that was being shared completely legitimately at the request of artists who wanted to distribute their work for free, were not being closed down too? Or would they just be the small price to pay to preserve value elsewhere? Short term benefit for long term loss… sound familiar at all?

Much debate about filesharing has swung back and forth about its respective qualities as being both sales substitutional and artist promotional. Different creative work at different levels of maturity and awareness experiences these qualities in different ways. Major artists, movie releases, TV series and games  experience sales losses – no one can say how much.  The means to measure it is there, but the published statistics suggest more research is required in this area to understand it. Recent research by MusicMetric suggests that file-sharing on bit torrent declines after release dates much more rapidly than sales do.

Young and developing creative producers often make their material available for free download or for sharing on bit torrrent sites in order to become known, to build a fan base, to create a market for their live shows, etc.

Seeking to block websites that offer creative work shared for free may inhibit innovation and growth. It may do something to inhibit unauthorised downloading of major player content, but it may also seriously inhibit means by which new and developing work can be shared and promoted. It may also inhibit the kind of innovation in business models that is so seriously sought by governments.

It is inevitable that when sitting in global headquarters of major publishing or recording companies executive focus is on the value and ROI of each new major release. The level of investment in major titles is such that the pressure to extract every penny of revenue from those releases exceeds any interest in developing work or any other strategic benefits. The only thing that counts towards your quarterly numbers (and your personal bonus)  is how much money your big release of the month is bringing in. Anything you can do to stop that value being eroded takes all precedence over everything else, for now. And now is all that matters. The future will look after itself.

That may well be a perspective which major corporates feel obliged to pursue.  It is not a perspective that should be foisted on the community at large.

A tale of opacity – two great TED talks from TEDGobal2011

There were two TED talks this year that struck me as particularly interesting, not for what the speakers said but for who they were and what they didn’t say. The talks were from Yang Lan, the Chinese media mogul and Maajid Nawaz, an anti-extremism activist. In both cases, these extraordinary characters told us what to think about their circumstances, not how to explain the journey they had travelled to get there. Yang Lan explained a little bit about navigating a deeply sexist  Chinese broadcasting industry. Maajid Nawaz explained that at 17 years old, having grown up in Essex, an aspiring working class suburb of East London, he began recruiting extremist radicalised Muslims out of Cambridge University and then subsequently went to train himself in a camp in Pakistan and join the leadership of a fundamentalist group. Later, after having been arrested, imprisoned for four years and released, he  saw the light and now campaigns for moderation and is anti-extremist. While his tale is an extraordinary and heartening one, neither of these presenters talked once about the emotional journey which took them to their current roles.  Yang Lan told us nothing about how she negotiated the power structures of  the Communist Party state, despite the fact that with 250 million viewers, she is something considerably more than the Chinese Oprah; she is more likely the most powerful propagandist the Chinese leadership could wish for.  As I reflected on her presentation, it dawned on me that it was more like a market research presentation on behalf  of a media company looking to sell advertising space on its network, than a TED talk. The phrase  that was highlighted in Yang Lang’s presentation was “When it comes to brands, the Chinese are the most visually tuned-in consumers in the world.”      And Maajid Nawaz told us nothing of his emotional journey to move from being a young Essex lad, to becoming an extremist fundamentalist leader,  back to becoming an impassioned analyst and advocate of moderation. There is no question that we would all wish for more Islamic moderation as indeed we would across all the world’s religions and the struggle to understand what it takes to make that transformation is critical. But in the end, one has to believe that such a change is an emotional and psychological adjustment. I would really like Maajid Nawaz to use his compelling powers of rhetoric to reveal that about himself.  TED talks in the past have often enabled the speaker to span a classic narrative arc of story-telling,  allowing powerful  tales to be told and great messages to be conveyed. Here for the first time, in these two presentations, we have the sense that the message is hidden behind the statement. That TED, in commissioning these speakers, who are in one way or another on the edge of our comfort zones, were able to make presentations that did not offer the same kind of candour and transparency that very many “classic” TED talks have offered. By intention or by coincidence,  which we must leave to the curators of TED to tell us,  these two talks struck me as being fascinating for their opacity as much as for the honesty of their stories. As the world shifts ever faster and the socio-eonomic dynamics become increasingly complex, I would like to hope that TED continues to offer us a higher degree  of insight than mere pitching would allow. The sophistication of powerful players makes TED a target, given its great proven power to distribute “ideas worth spreading”. In the process it needs to be careful it doesn’t spread ideas that it might not be so comfortable to have spread. Watch that space and let’s see how this addictive cult of story telling evolves.