You Are Your Service

Some times an article comes along that crystalises certain views.

This is one such article.

Topic? "Entertainment as a Service".

DING!

It's not a product. Something to mass produce and have consumed.

It's a service - something you do for your (pro/con)sumer.

What really struck me was the following point -

Pirates are ahead not just on price, but on service

Pirates offer the best service. Cost isn't an issue, it's the fact you can download it at your pleasure, without ads and without waiting for it to come to your doorstep.

Pirates provide the ultimate service - content.

Strip away payment, ads, dealing with Harvey Norman, annoying sales staff, and you simply have the product.

At the end of the day it comes down to service is a tool for value creation.

Time to look at the sales of Team Fortress 2 to see the impact of the updates on revenue. Holy s#!%. The sales spike by huge amounts everytime there's a sale or major update. Steam sales went up 106% after a free update. Player minutes went up by 105%. Gifting has thrown a 71% sales increase. Surprisingly, sales from retail stores also went up by 28%. Finally, it saw 75% increase in new users. Knock knock. Who's there? Steam. Steam who? Steam is so successful it hurts.

Bam.

Current Media Forecast

Tucker Max writes in regards to companies falling in the future -

You are going to see a MAJOR shakeout in the media sector over the next year to 18 months. Every part of it:

-At least one major publisher, and probably a dozen smaller, will go under or be absorbed
-At least one major distributor (Weinstein Co is my best guess), and many indies, will go under.
-At least ten mid-major newspapers will go stop publishing this year, and probably one big one.
-At least 500 smaller magazines, 25 mid-major magazines, and maybe up to 5 large titles will shutter this year. My guess on the biggest: US News and World Report. This prediction wasn't hard--It's already started.
-Not really news, but you are going to see a major US city without a conventional daily newspaper by mid-2010. My outside prediction for which one: Los Angeles. The site is in the black (and pretty good), the paper is in the red, and they are one of the only papers preparing for the future. They might make the leap (which I think would be a good thing).
-The music companies have been going under and/or being absorbed for the past two years, so predicting that is nothing new. What will be new is the fallout from the Ticketmaster-LiveNation merger. Not good for the music business--those two companies are evil.
-You are going to see a TON of smaller studio/production companies flounder. It's already started--Lionsgate is in serious trouble right now. This is a studio that, five years ago, was considered the model for how to be. Quite the fall.
-A BUNCH of internet type companies are going to get hit hard, esp. the ones positioned for the old media model of success. Best example is Yahoo--it's a dead man walking already--sell your stock now before it goes any lower.
-No idea how many radio stations will shit the bed. A lot, including the satellite ones. They have so much debt its incredible.

It's not even that all these companies will go cash flow negative. Some of them will even be mildly profitable on the balance sheets when they go under. No, its much more complicated than that.

The problem is that over the last five years a lot of these companies took on a shit load of debt to finance any number of stupid projects, loans that were based on projections that were WAY to optimistic. What happens when they aren't making 20% margins? They can't service that debt. So what happens when a media company with assets can't pay its exorbitant interest costs? It's sold for its parts. The next two years are going to see this scenario played out over and over:

Media company can't pay it's debt, either goes into bankruptcy or defaults to creditors, and is sold off in pieces to other media companies. EXCEPT because of the credit crunch, there are hardly no private equity companies available to finance this, so the valuations are going to be INCREDIBLY low, lower than anyone is guessing right now. This is going to result in a huge re-adjustment on all media company evaluations, which has a ton of unintended consequences. Fast forward past all the complicated steps, what this is going to result is in the collapse of the media universe as we know it, creating a huge vacuum in conventional content production. And that's not even assuming it's a public company. If it's public, you have awful stock and investor issues to deal with that SUCK. It makes it about 10x times harder to deal with short term problems.

Bad news short term, good news long term. This is because it is going to create a HUGE space for innovators come in and provide content under whole new models that are designed to work under the new technological and social assumptions of the 21st century.

It's going to be rough for awhile, but only for the established media. It'll be a gold rush for the smart entrepreneur and the hustler artist.

Now on Reddit, I see -

Directed by The Purchase Brothers, The Escape From City 17 is a short film series adapted from Valve's Half Life video games.

At first the team only wanted to test out a number of post production techniques (the special effects are impressive for such a small team), but the project ballooned into a multi-part series.

The project was filmed with very limited resources; the first two episodes were made on a budget of only $500.

The Video -



They came up with this on a budget of $500 (for the first 2 episodes).

Simply put this is amazing. The fracturization of the old media companies is going to come hard and fast if artists can create and distribute content like this.

It's Always Usually Someone Much Smarter...

Once again, Tucker Max says what i have been having difficulty saying in terms of my thoughts on business -

No wonder so many think anything "corporate" is a monstrosity. They're right - if the implosion of the investment banks tells us anything, it's this: when what we do is meaningless, it's neither economically valid, strategically viable, nor truly value-creating. The macro crisis tells us in no uncertain terms: without meaning, businesses devolve to the lowest common denominator: empty exercises in trivial gamesmanship - not next-generation institutions built to fuel another century of economic growth.

Value creation. Doing good, not evil. Work it yo.

Breaking News

This is why news on the web needs to be far more interactive -

STUART, Fla. -- A student at a Florida school has been arrested after authorities say he was "passing gas" and turned off his classmates' computers.According to a report released Friday by the Martin County Sheriff's Office, the 13-year-old boy "continually disrupted his classroom environment" by intentionally breaking wind. He then shut off some computers other students were using.The Spectrum Junior-Senior High School was arrested Nov. 4.

A school resource officer placed the boy under arrest after he confessed about his behavior, according to the report. He was charged with disruption of school function and released to his mother.

There is so much funny here, that it needs a multi-tiered comment system just to manage the lulz.

Transaction Cost & You

Transaction Cost has bottomed out. No longer do we have to purely associate with individuals due to their close proximity (social, cultural or genetic). We can now connect with people who think the same way.

How will these new idea tribes change the the predominate role of cultural and genetic heritage in modern society?

A Little Bit More On The Current Financial Crisis

An interview on the WSJ goes into the fundamental cause of the collapse...

This is not due to a lack of money available to lend, Ms. Schwartz says, but to a lack of faith in the ability of borrowers to repay their debts. "The Fed," she argues, "has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible."

So it appears that it is an issue with corporate transparency, which is indicative of the deeper failure of the financial markets - Broken DNA. But what can be done about it and where do we go from here? Umair says...

Tomorrow's sources of advantage aren't like yesterday's. They're not built on being able to exploit, dominate, or coerce more strongly than others -- they don't result from being harder, better, faster, stronger. They're about exactly the opposite: being softer, better able to fail, having the ability to be slower, gaining the capacity for tolerance and difference. Ultimately, they are about a true advantage -- one that accrues not just to the corporation, at the expense of people, society, or the environment; but one that accrues to all.

So what changes can be made to fix up the problems?

BAM! Wikinomics.

Openness, Peering, Sharing & Acting Globally.

But these are practical ideas that can be put into place.

Radical Transparency - where nearly all decision making is carried out publicly, as espoused through the business practice of Corporate Transparency. The framework and strategy exists, it now just needs to be fused with corporate DNA.

Specific. Local. Relevant.

Andrew McMillen has an good post about a music e-zine that has been dumbed down with a generic site redesign. I don't understand why companies move to generic, broad stroke, one size fits all models for it's consumers these days.

Sure, this would have been a good idea a few years ago when transaction costs were higher, where communities and like minded individuals were not as easily able to organise, and as such precluded people with specific interests from getting together to communicate, interact and create. A broad stroke system was needed to make sure you "caught" everyone in the net, as it was far harder to develop a popular base for your product.

But now you are able to get a popular by focusing on specific segments of the market.

Lowered transaction costs are allowing people with highly specific, and varied interests to communicate - the old model of appealing to everyone to reach critical mass is superfluous, slow and now lethargic. Time and time again we see companies with clear directions create tribes of their own, due to the simple fact the internet allows us to cheaply and easily find like minded people.

Small is the new Big. Be highly specific. Be highly local. Be highly relevant.