At the Digital Britian Summit last week, both content owners and telco network operators complained that consumer behaviour is killing their business and making it more and more difficult to make money. “We’re right and the consumers are wrong”, they say. What’s wrong with this picture? Willing seller, willing buyer is a concept used in law, as far as I understand it (which may not be far), to try and ensure notions of fairness in trading and in contracts. What seems to be happening today is that the buyers are willing because the service looks great – content in the clear that you can move around and do loads of things with, bandwidth that costs a fixed fee but I can use as much or as little as I like. Seems like a good offer – only one problem – the companies involved seem less and less willing to offer their products and services that way because they can’t make money. Well that would be their problem then wouldn’t it?
So everyone wants new models – and there are no silver bullets.
Since the dawn of the web back in 1993, we have been experimenting. We have all been trying to figure out new models. And our learning has been evolving quite slowly. It’s not that surprising perhaps because plenty of those who appear to be leading the charge to help innovation are actually just busy turning the investment risks of others into revenue streams for themselves. Since new models for music have been largely dependent upon unlocking the coffers of major content holders, it’s hardly surprising that the price of a key has remained high. It’s a great model for them. Appear to encourage innovation and experimentation, drain the resources of those who try and make minimal investments of your own but only into things that you think you can control. The old command and control mentality of music moguls is live and well and making money from the internet – just in a hurry up and slow down kind of a way.
We have all struggled to get our heads around business models, ideas or solutions that go beyond mere per unit transactions or advertising revenues. And as the recession has taken hold and ad spend has declined, the solution for some has been to throw up their hands and say: “blanket license, flat rate charging for access to music set against pro-rata payments to rights owners” – is the only solution. Others have been quick to query the nominal levels of revenue that would flow from this kind of solution and therefore how small the music industry would become and how little would be left to “invest” in artists. The flat rate or Access to Music folk respond by saying, ah but the flat rate is only the beginning, on top of that there are lots of value added services to be created that would make up more than the difference and return the industry to a new and golden age – made glorious by my old mate Pete Jenner. He is the lion at the heart of this argument and has been vociferous in promoting in a style that only he can get away with. Which is basically tell everyone they’re up the creek without a paddle and that his solution is the only that will work. And tell everyone the same thing whether they care to listen or not.
I’m only partly in agreement with Pete. I do think that the idea of a flat rate is compelling and could be made to work within walled gardens of networks, but I don’t think it’s the only solution and I think it may be problematic because of the kind of comprehensive coverage it requires. But the key thing about it is that no one has seen it in action. Pete was trying to make it happen on the Isle of Man – obscure but possible. Now these folk appear a little tainted by their unfashionable tax-haven status. Away on the campuses of American universities, another old friend, the indominatable Mr Jim Griffin is hammering away with his Warner Music Group sponsored effort called Choruss which is an effort to bring the flat rate idea to reality in various forms in the ivy-clad self-contained networks of US colleges.
Experimentation around these kinds of idea is crucially important and we need it now. But there are two gating items: one is the availability of the content itself and the other is a level of transparency and intelligence in the networks themselves. If we could envisage an internet in which the free movement of content aorund networks was encouraged because the more it moved and the more it was consumed the more value it created, we could abandon expensive and fruitless anti-piracy efforts, encourage new and interactive modes of music consumption and stop sueing people who have proved themselves to be the best distributors in the world. Instead of worrying about how to compete with free, we could start to derive value from the patterns of sharing, the clustering of content, the relationships between different groups of content, the geographic spread of content, the different platforms upon which it was most consumed, etc. In other words, a whole a battery of new and so far invisible ways in which value could be created from content which are hard to envisage today and even more difficult to place a value on.
And they need to be prepared to remove some of the barriers that their current models require in order to discover what the future might look like. It’s not reasonable to expect start up companies or the (un)venture community to subsidise that effort when the power is in the hands of the incumbents.The only way to find out is to try some experiments at real scale with real consumers and real content. We need to create the conditions in which the content could be made available for pilot projects that would benefit both the content owners and the network operators. Over in the world of teleco’s, the network operators and wholesalers are trying to figure out how to build next generation networks. The Digital Britain report and debate has been full of the breathless excitement at the benefits that higher speed access will create.
My view is that we need smarter pipes not just faster ones. We need to be thinking about the software environments that will be at play on next generation networks that can be much more intimately bound up with the behaviour of content on the networks.
I believe that it’s time for the major record and film companies to participate in some real field trials with some real technology partners, declare a Royalties Amnesty for these trials and explore some radical new ways to create revenues and profits in conjunction with the network operators. And from their side, for the purposes of these trials, the network operators need to be allowed by law to give up their “mere conduit” exoneration of liability over knowledge of the content on their networks – and take the opposite approach and become actively involved in sharing ways of monetising that knowledge. Of course, we have to be very careful of Phorm-like invasions of privacy. The protection of personal privacy is paramount as we move forward with these kinds of ideas and the levels of permission that consumers must be offered needs to become more sophisticated.
Around the UK right now, there are a nine or ten “next generation access trials” taking place for high speed networks – perfect places for pilot schemes of this kind to be run – safely self-contained, but large enough to produce meaningful results.