In December, shopping transactions saw a 187% increase, year-on-year. This sounds like good news for the economy, and surely the high street. Unfortunately, this increase was purely for mobile shopping, as reported by IBM. Brand Republic, which picked up the story, noted “mobile traffic on retailers’ websites rocketed by 169%, meaning 15% of all traffic came from mobile devices during December”. The principal attractions of mobile commerce are easy to identify: it allows you to purchase items from anywhere with a phone signal rather than travelling into a store. It also allows the customer to shop around far more easily than would be possible on a high street for the best deal.

The drift toward mobile commerce, however beneficial and efficient for the customer, is part of myriad factors that are having a pejorative effect on the high street. Another, recently noted in a fantastic editorial in The Financial Times, detailed the onus shoppers must face up to, as a nation obsessed with the material quest for the very best deal possible. “We are all going to hell in a shopping basket”, read the headline.

“Through the internet we can now get relevant information instantaneously, compare deals and move our money at the speed of electronic impulses. Consumers and investors have never been so empowered. Yet these great deals come at the expense of our jobs and wages, and widening inequality.”

183 retailers fell into administration last year. The internet must shoulder a large part of the blame for this, as customers shift to the relaxation of shopping at home. Experian Hitwise reported that Boxing Day 2011 was the biggest ever day for online retail in the UK, an incredible stat (one of many covered by eConsultancy), especially while circumstances for bricks-and-mortar stores seem so dire.

However, while digital technology is keeping people from shopping on the high street, it is also helping it evolve. Recently, CNBC reported from New York on the National Retail Federation’s annual convention. Technology was the heart of the matter. Technology companies like Intel and IBM were front and centre, and willing to engage ever more deeply with brands. 73% of consumers were willing to share their demographic information with retailers in order to improve targeted communications. In the store itself, Macy’s has unveiled Beauty Spot, a digital mirror that lets you try on what you want, what is suggested to you by the mirror, and share your looks with your friends, according to TIME magazine. Also at the conference, Kraft featured a vending machine that featured face-recognition technology, registering your ethnographic details and dispensing samples based on that data.

The possibilities for clothing are significant, too. At the recent Consumer Electronics Show, Microsoft unveiled a prototype digital mirror for retailers. PSFK noted it “relies on the Kinect gaming system and basically allows people to try on clothes before taking their final selection to the dressing room”. Moreover, last month, the e-tailer Gilt Groupe teamed up with GQ magazine to create a men’s high-fashion retail experience in the so-fashionable-it’ll-soon-be-uncool Meatpacking District of New York. The FT has more.

Such movements are part of a burgeoning trend toward blurring the boundaries between digital and bricks-and-mortar retail. But for the latter way of shopping, the problems are immediate. An article in this week’s The Economist referenced a report commissioned by the government in December that claimed “one in three of the nation’s high streets is failing“. Places like Argos, Mothercare and Thorntons plan to close up to one third of their shops. Conversely, the magazine references a survey conducted by Saatchi & Saatchi which detailed 16-29 year olds’ feelings on retail. Apart from enjoying a good shop, “42% said that, if they were to start a small business, it would be on the high street”. This puts a desire to see an epicentre of retail / beating heart of a town against an indolence born of the luxury of being able to shop while in the bathroom. To combat this dilemma of desires, Anne Robinson-lookalike Mary Portas has made several suggestions as shopping czar to the government, including requirements for a “quota of affordable shops”. This idea is pure lunacy. State intervention in market commerce is not a road we want to go down.

While the article offers some hope, detailing the importance of improvements to infrastructure, and making space above retailers into shops again rather than flats, the major threat is from online retailers. Last week, the Financial Times reported solemnly,

“Tesco [will] call a halt on new hypermarkets, believing the internet offers the most profitable future for non-food sales. Retail analysts believe Tesco’s admission marks a watershed moment for high street retail chains. Many have already seen their business models trampled over by the big supermarkets, but now they must follow the leader’s structural shift towards online sales, or face extinction.”

These are dire times for retailers, but things will not improve until they fully embrace the inevitable march of technology, both in their stores, and in people’s homes. With another recession looming, now is not the time to bury one’s head in the sand and hope for the best.

Around this time of year, many companies, journalists and soothsayers become prone to taking educated guesses at trends in the coming year(s). Zeitgeist itself is guilty of such crystal ball gazing, writing on retail trends for Design Week at the beginning of this year.

Valuable as some of these insights are, we must never forget about externalities that inevitably push certain trends off-course, (look what the recession did for the popularity and importance of organic food). Though it is written in an annoying manner, Black Swan and its ideas are not to be ignored. Few would have suspected that this year would have seen the demise of Gaddafi, Bin Laden and Kim Jong-Il, but so it happened. In the 1932 film Shanghai Express, the American traveller Sam asks a question, at once revealing a prideful lack of foresight, and an ephemeral resolution. Traits of a nation, perhaps. But it demonstrates the dangers of making judgements on the future based on current trends, and presuming the status quo will remain just that.

“What future is there being a Chinaman? You’re born, you eat your way through a handful of rice, and you die. What a country. Let’s have a drink!”

While the rest of the world quickly comes to grips with the passing of Kim Jong-Il, master of North Korea, Zeitgeist is still pausing for thought over the death of Christopher Hitchens, master of the painfully incisive, devastating epithet. Zeitgeist has had the pleasure of reading several of Hitchens’ essays over the years, mostly from Vanity Fair. Christopher Buckley, writing in The New Yorker, delivered an excellent obituary on the man. As well as managing to anger pretty much anyone, no matter what their political or religious creed, Hitchens also had some thoughts on his own oeuvre. Writing more than ten years ago in his book No one left to lie to, Hitchens wrote of Drudge,

“Drudge… openly says that he’ll print anything and let the customers decide if it’s kosher. This form of pretend ‘consumer sovereignty’ is fraudulent in the same way its analogues are. (It means, for one thing, you have no right to claim you were correct, or truthful, or brave. All you did was pass it on, like a leaker or some other kind of conduit. The death of any intelligent or principled journalism is foreshadowed by such promiscuity).”

Something for anyone who writes a blog to bear in mind. It certainly points to a larger trend, which, ten years on, is still a problem for those writing online, that of a lack of regulation. Not that any such regulation has prevented widespread abuse of power in ‘legitimate’ journalism, either. The problem with tougher rules and sanctions – ex ante or ex post – is the worry that such pressure will negatively impact on the quality of stories journalists deliver. It was the press, after all, who broke the story of the phone-hacking scandals. The dilemma will not be an easy one to solve, especially at a time when most newspapers continue to experience financial losses and a resultant brain drain of staff to more stable and lucrative lines of work. The loss of luminaries like Christopher Hitchens will not help matters.

Speaking in the webinar were Tom Rebbeck and Helen Kapapandzic. One of the key messages in the webinar was the distinction between customer retention and true loyalty campaigns. Retention can be achieved through short-term measures (e.g. discounts), loyalty is about longer-term investment. Keeping a customer loyal can benefit both the business and also the end user. According to a recent article in the Wall Street Journal referenced by the consultancy, there are myriad benefits to longevity at work, in marriage and by staying with the same providers and businesses. Loyalty it was noted, however, can only support other elements of a service that must already be in place.

For telcos, the key is in reconciling operator wants with customer needs. In the telecoms market in the Western world, where seemingly everyone has a mobile handset of one sort or another, the strategy has moved from winning new customers to keeping current ones. The market is saturated with a flat if not slightly falling rate of growth.

Churn is likely to increase this year over last year in the UK, but not in France. When Zeitgeist asked the reason for this disparity, he was told the reason was that telcos in the French market had focused a significant amount of marketing specifically on decreasing churn. In the UK, the increase is due to the beginning of the expiration of 24-month contracts (such as those affiliated with iPhones), which conversely made churn decline in 2010.

The webinar continued with a roundup of some selected case studies currently being employed by telcos around the world. These took the form of either financial or social-based schemes, and sometimes both. Aircel, for example, was an invitation-only service, offering special invitations to events, exclusive offers, and worked on a points-based system. Proximus seemed to be the most fun offer mentioned, focused as it was on younger customers, who would always be incentivised as there was always a prize guaranteed.

Vodafone’s loyalty scheme, with sponsorship of Formula 1 racing and the London Fashion Weekend, is deservedly well-known. With a simple thank you, and no requirements to join, it serves as an attractive loyalty tool. The loyalty scheme from Starhub seemed to be one of the most innovative and well-developed, a Quintessentially-esque programme, replete with triple play offers.

While it is tempting to think of customer loyalty schemes for telcos as similar in construction to those of supermarkets, the reality is in fact very different, as the consultancy pointed out. Tesco’s enormously popular Clubcard, as recently written about in The Economist, is there for the business to get as much information as possible on customer buying habits, to the extent that it could effect your insurance policy. Telcos already have a significant amount of data that illustrates user behaviour based on a much smaller range of products (SMS, data).

Those schemes that didn’t work, which the team at Analsys Mason came across, were ones involving points-based schemes that were extremely complicated, and might involve getting out an Excel spreadsheet. This kind of thing can be too time-consuming, and ultimately appeal to customers who are already loyal. As a trend, some operators were discontinuing points in preference of social, or simply overlaying it to create social engagement. Of course, as well all know, the key to a successful B2C campaign is often about personalisation. The difficulty though lies in the fact that it is usually easier to measure top-up schemes than emotional ones. This, however, does not alter the importance of personalisation. Rewards to drive tenure, celebrate anniversary of contracts or personal birthdays are all small touches which could be much more widely employed, said those at Analysys Mason.

In all it was an engrossing and stimulating lecture on consumer preferences, technological development and trends in communication. Zeitgeist looks forward to the next one.

In 1894, one Doctor M Price referred at a gathering to “the proverbial kinds of falsehoods, ‘lies, damned lies, and statistics’”. Zeitgeist was enrolled on a stats course back at uni. Zeitgeist grudgingly took said stats course. Zeitgeist does not like dealing with arbitrary integers. Numbers become imbued with meaning once they are put in the context of reality, not when they are being discussed in a lecture hall. Statistical analysis can help shed light on many things. Sometimes, however, they not only fail to tell the whole truth, they mask a reality.

Prima facie, this graph, shown this past Sunday on NBC’s “Meet the Press”, looks like good news for President Obama; the country’s unemployment rate dropped below 9% for the first time since April of 2009. So employment is dropping. How can this be anything but a good thing? Unfortunately, as an editorial this past weekend in The New York Times points out, “the new figures reveal more about the depth of distress in the job market than about real improvement in job prospects”. The editorial continues, stating that “most of the decline” in last month’s figures were because 315,000 people dropped out of the work force, “a reflection of extraordinarily weak demand by employers for new workers”. So what looks initially like cheerful news is in fact worrying and hopeless. It’s enough to make you reach for a stats textbook.

“Old-media guys are always asking, ‘When will revenues rise to meet our cost structure?’ The answer, I say, is when hell freezes over.”

 - Clay Shirky, author, Here Comes Everybody: The Power of Organizing Without Organizations

This quotation appeared in an article by Michael Wolff published last year in Vanity Fair. The article, on internet predictions, touched on how advertising rates are often 10% of what you might get from TV or print. Studio executives are waiting nervously for the time when Blu-ray and digital sales will make up for the increasingly lean profits from DVDs. But perhaps this just won’t happen. What then for the sector?

Last week, Zeitgeist was privileged to hear from Marc Ventresca, lecturer in Strategic Management at Oxford University’s MBA program at Saïd Business School. Where supply meets demand, price emerges, hence the market dictates the price. The economist Schumpeter, though, posited the issue of “disequilibrium”. The key question then being not “how capitalism administers exisiting structures, … [but] how it creates and destroys them.”

What does creative destruction – of which Alan Greenspan was a key exponent – mean then for the media and entertainment sector? No one seems to be daring to look this far into the future currently and guess how we re-combine, re-purpose and reposition the sector. Is the answer to be found in Sony’s new Blue Violet format, or is something more radical needed? Also in the works from the same company is “Ultraviolet”, an aggregate service that “will help identify content, devices and services from a spectrum of familiar entities – including studios, retailers, consumer electronics manufacturers, cable companies, ISPs and other service providers – that will work together”. Something of this nature might reduce regulatory arbitrage, as well as consumer confusion. As Mr. Ventresca pointed out last week after the lecture, it is the platform that is now of paramount importance for consumers, even over the content itself.

Last week, Zeitgeist ambled down to Kensington Olympia again for yet another conference, this time the annual MediaPro Expo. Among the many speakers presenting over the course of two days, our main interest was captivated by prognosticators on the the media and entertainment industries.

First up was Matt Rhodes, client services director of FreshNetworks. FreshNetwork’s clients, among others, include Telefonica (parent company of UK telco O2) and luxury shoe brand Jimmy Choo. Matt spoke of the challenges of measuring success across multiple markets. Aside from logistical difficulty, one prominent problem remains in that different sectors / regions / countries will need different approaches, therefore will have different ways of quantifying success.

Mr. Rhodes was speaking with regard to social media strategy, but the thinking applies broadly to other strategic planning as well. KPIs and ROI can both be meted out from a centralised hub (whereas in a distributed mode, ROI will vary). The possible problems with this stem from an ignorance of the particularities of a market. Suggesting that every market needs a Twitter and Facebook account for the brand might seem like sound thinking prima facie. Both platforms have huge audiences and many companies have now had notable success with presences thereon. Matt contended that such a presence was simply not necessary in all markets. Some countries may not have Facebook, but, like Russia, have a popular alternative that, with a high amount of pirated content, would be unlikely to be suitable for branded communications. As with the Soviet state, a centralised option is probably less effective. Furthermore, in some markets you might in be in acquisition mode – vis a vis customers – but in others you might be experiencing trouble retaining them, requiring very separate strategies. “Having a global strategy often doesn’t make sense”, Mr. Rhodes stated.

Regarding Jimmy Choo, people who want to purchase products from the brand in Japan differ greatly from those same people in a market like New York. In Japan there is heightened desire for accumulating a lot of accessory purchases as well as perfume, whereas in New York the emphasis will be on fewer, more substantial purchases. The Catch a Choo experience in London had different parameters for success than did the one in New York. The reasoning behind a social media presence is often never thought of, increasingly seen just as a mandatory practice. Mr. Rhodes confined activity to set parameters, suggesting that social media was best put to use for launching new products, customer care, working with advocates, brand messaging and answering critics.

Next up, Darren Gregory, Insight and Innovation Director at Howard Hunt Group and Russell Morris of LoveFilm spoke in detail about the latter company. With cinema box office receipts making a small profit year-on-year (and with negative growth adjusting for ticket price increases), and 3D failing to make much of an impact on audiences anymore (see chart below), the film industry is looking to the likes of Hulu, Netflix, iTunes and LoveFilm for its salvation. Currently, digital streaming has failed to make up for the precipitous decline in DVDs, though we are still in relatively early days. Getting a consumer to switch from DVD to streaming / digital formats is harder than previous medium transitions, which involved moving from physically-owned, tangible product (VHS) to physically-owned tangible product (DVD). You bought your films from a physical, tangible store. Now there is a lack of a sense of ownership, as Zeitgeist has written about before. Now companies like Apple, who make beautiful, tangible products, are increasingly talking about hosting your content in a cloud. There is an inherent difference here then that means take-up of digital formats will be a harder case to make psychologically to consumers than previous media upgrades. It’s importance may increase as recently written about in The New Yorker, with traditional platform release windows – the time between a film’s release from cinema to VOD, to DVD, etc. – increasingly narrowing.

LoveFilm has been around for seven years now. It is the leading European subscription service, with 70,000 DVDs available, including games by post, streaming to laptop, PS3, X-box, internet TV and iPads. It runs Tesco’s DVD rental business as well as partnering with Odeon and other companies. It has Europe’s largest addressable film community, and 50% of users access the site at least once a week. The addition of platforms like the iPad and X-box “fundamentally changed [the] business in the last six months”. The availability of games has increased their demographic reach, and in a year they have gone from 100k to 1m stream views per month.

Recently the company was bought by Amazon, and LoveFilm, like its new parent, is similarly obsessed with customer data in order to improve its service and by extension its bottom line. For example, they know that friends who recommend the service to others tend to have similar tastes, so the metrics they already have with the original customer can initially be applied to the new one. Mr. Morris next spoke about the changing nature of consuming content, with specific regard to watching film. Mr. Morris said that using their customer insight, they have divined that the way in which the customer watches a film dictates the kind of experience they are looking for. DVD rental, he said, is, for the customer, about getting that specific film in the cheapest way possible. Streaming, on the other hand, is a more spontaneous desire; “I want to be entertained”, he said. Said customer has just returned from a long day at work, etc., finds nothing on his television’s EPG, instead goes to LoveFilm. It is LoveFilm’s responsibility then to show the customer something they would be interested in. Mr. Morris elaborated further, using the recent film Tinker, Tailor, Soldier, Spy as an example. The film has performed exceptionally well both at the box office and in the critics’ pages. He predicted that while the film would be a success for DVD rental, it would be a total failure for streaming.

This is of course a fascinating discovery. What, however is the insight? What does this mean, long-term for the film industry? Well, it does suggest a shift in filmmaking, long-term. For, if, as the film industry hopes, digital streaming eventually becomes on of the principal means of consumption for audiences, especially as the platform release windows continue to narrow, then surely studios must increasingly pay attention and cater to the types of films people are watching via streaming platforms. In essence, the question is whether streaming take-up will become entrenched enough that it influences the very types of films that are being made. When Zeitgeist posed this question to Mr. Morris, he seemed ambivalent on the subject. When Zeitgeist asked about the plethora of competition LoveFilm was facing, which is beginning to slowly affect their bottom line, Mr. Morris was dismissive of such talk, confident in the strength of both their breadth of films available and the deep customer analysis (which includes looking at weather patterns). Asked specifically about the arrival of Netflix into the EU market, Mr. Morris predicted he would soon be seeing the “whites of their eyes”.

The last talk Zeitgeist attended was one given by Tess Alps of Thinkbox, the marketing body for commercial TV in the UK. With TV ratings at their highest since ratings began, and ROI up 22% over the past 5 years for advertisers, things are looking quite rosy for television at the moment. It is, however, like much of the media sector, dealing with volatile technological change. Ms. Alps acknowledged this with a “convergence sandwich” slide; the technology that delivers the medium, the device that you consume it on and then content sitting in the middle as the filler. Yummy, not to mention well-illustrated.

Ms. Alps went on to describe some of the main trends in the TV sector currently; enhanced quality (HD, 3D); all devices becoming a TV; connected / smart TVs; integrated communication between devices across home networks. The presentation continued with a sharing of quantitative findings; interviews with people who had been given prototype technology, using various devices for consuming a broad range of content. Thinkbox found a consolidation of viewing; using online viewing as a backup, only if the ‘live’ show on TV had been missed. Catch-up technology, whether through PVRs on the television or via the computer, was seen as essential. The TV, though, remained the go-to destination for consuming content, suggesting a hierarchy of platforms. There were complementary elements to this though; young people increasingly watch television with their laptops sitting by them, Facebook, Skype or some other program open. Zeitgeist wrote about this consumption conundrum last year. Realising this complementary trend, many companies are now creating campaigns that encourage use of television, laptop, iPhone, etc., for a truly immersive experience. Product placement is aiding this trend, with advertiser-funded programming such as that done by New Look for a recent television show, which encouraged contestants to design clothes online during the show, with the opportunity to be on screen by the end of the programme.

What the entertainment industry has been facing for a while is a fragmentation of viewers, easily distracted by multiple platforms, all enticing in their own way. What remains to be seen is whether efforts such as the ones mentioned by Ms. Alps can effectively remedy the situation by collating all devices to be used to enjoy the same piece of holistic content. Social media will surely play an essential role. With Disney up almost 8% today, entertainment analyst for Standard & Poor’s Tuna Amobi spoke to CNBC this afternoon, stating that he expected revenue from consumption of films via digital streaming to “ramp up significantly from here”. It will be interesting to see just how much our differing attitudes towards platforms influence the content that is produced for them.

If you’ve been living in or aware of any of the news coming out of the Middle East of late, you’re probably cognisant of the fact that the status quo as we have, for generations, known it, is coming to an end. If you’re living in a major city somewhere in parts of the world governed by more democratically representative institutions, you’re probably aware that similar tremors of discontent our rocking the foundations there, too. Just as important, however, is the state of disarray the internet finds itself in currently.

What began in New York with the Occupy Wall Street movement has since spread, across the US and across the world, including the streets of London, where squatting protesters have led to St. Paul’s closing for the first time since World War II. Social media, as with the protests in Tunisia, Egypt and other regions, has played a significant part. The protests in the West, while photogenically and aesthetically pleasing (the artwork Banksy donated to the London protest being one such example), not to mention emotionally charged and influential, have thus far produced little in the way of results. Perhaps this is due in part to the incoherence of the messages being broadcast from the panoply of protesters.

There are, realistically and practically speaking, for better or worse, few immediately attractive alternatives to capitalism. What matters, however, is the way the capitalism is operated and governed. For though the protest in New York focused on the epicentre of the financial district in Manhattan, the focus is a misnomer. According to a poll shown recently on Meet the Press, more people apportion blame to the government than on financial corporations. So is the problem one of governance then?

While such debates rock the material world, discussions just as important are flaring up surrounding the digital world. Who should be in charge of regulating content in the virtual sphere? Moreover, should some content or users or providers be prioritised over others?

The net neutrality debate has been under discussion for years. Its concerns revolve around the notion that anyone, anywhere should be able to access any content they choose at at the highest speed possible. It favours no particular user or website. The risk is that your access is arbitrarily regulated, both in terms of just what you can see, and also how easy it is to get to it. Some major players, be they countries like China – which recently banned the search term “occupy” – or large media corporations like Comcast, are already breaking this unspoken rule advocated by the founders of the Internet. Last month, the FCC announced new net neutrality rules, which didn’t please either side of the issue very much. Mashable writes that “while new rules do prevent fixed broadband providers from blocking access… they are different for wireless providers”. This latter exception dovetails nicely with Amazon’s release of its latest product, the Kindle Fire, which debuted recently. An article published in Politico last week quotes various pundits who accuse the device – which uses Amazon’s cloud-based servers – of optimising Amazon content over others, essentially making it more attractive and easier to access. Proponents of net neutrality should be wary, but what is there to do without a centralised, independent governing body with teeth to reach out to?

A recent article in The Economist noted that the internet is “shambolically governed”. This is due in no small part to the fact that at its inception, those who founded the world wide web could never have dreamed it would grow to become the network of networks it is today. However that is no excuse for action not to be taken now. One drastic notion was recently mentioned in an article appearing The Financial Times. Ori Eisen of 41st Parameter, a security company that defends banks against online crime, believes that efforts to create a wholly secure environment online are “in the long run… essentially hopeless”. Vint Cerf, described in the article as “one of the fathers of the internet”, has voiced his own concerns about the lack of security online, saying that more should have been done at the outset. He concedes that he is “actually quite interested in the clean-slate ideas”. Mr. Eisen has set out plans for Project Phoenix that revolve around creating an Internet 2.

“Included in his blueprint are biometric identification, encryption of all keystrokes and virtual machines created for every transaction.”

Such a radical overhaul has piqued the interest of Michael Barrett, head of security at PayPal, and the Pentagon’s DARPA – whom Zeigeist have written about before – are also passing around ideas for a redesign. Any such redesigns though would “be doomed without a government mandate or a consortium of banks or telecommunications companies stepping in”. This leads us on to our investigation of governance.

While the regulation of the internet may be chaotic, it has also helped foster a great deal of innovation in the absence of restrictive regulation. In keeping with this freedom of expression, the 2,000 people from 100 countries who met in Nairobi this week for the Internet Governance Forum “all had the same right to take the floor… decisions are made by ‘rough consensus’”. While the American-baked ICANN currently regulates the internet address system, other countries such as China and Russia are pushing for alternative bodies to be created, the upshot being that national governments have more of a say in how the internet is run. This kind of thinking is dangerous, but it does remind us that currently the system is almost entirely under the purview of the US government.

For the world outside the internet, the opportunities for change and development in democracy are not encouraging. The protesters at St. Paul’s cathedral in London have been allowed now to stay until New Year. Then what? What will it take to happen for the inchoate protesters to consider their work done? Any such practical remedies to be taken will surely involve government investment and expenditure. Yet this is precisely what the government is in short supply of. In the US, the judicial system is becoming underfunded to the extent that the process and execution of the law is becoming weakened. Emergency loans are having to be made by courts, so that processes that currently take twice as long as they should, do not end up taking three times as long. This lack of government is effecting lives now. The situation is similar in China, where suddenly workers in the private and public sector are finding themselves without pay;

“Work has all but ground to a halt on thousands of kilometres of railway track, and many of the network’s six million construction workers have been complaining about not being paid for weeks or sometimes months.”

One bright light might be suggested, of all places for a democratic wellspring, in Russia. Wikivote allows users, with particular priority given to heavy users and invited experts, the chance to reshape, comment and question draft laws and vote on the suggestions.

What the internet needs, suggests The Economist, is “a proper constitution, complete with a bill of rights for stakeholders and a separate board of review”. The difficulty will be in first creating such a document and body that functions efficiently without drowning in compromise. More importantly, it will have to ensure that the rules it enforces do not hamper the very innovation that has made the internet one of the most creative, inventive and revolutionary mediums ever.

The terribly dry yet fascinating Harper’s Magazine recently featured in its ‘Readings’ section an excerpted essay taken from a book, out this month, entitled Stealth of Nations: The Global Rise of the Informal Economy. The following is a summary and rebuttal of some of the key points made.

The excerpt begins in China, where intellectual property theft is, as most of us know, already rampant, and has been for several years. There are contributing factors for this. One is a market that allows around only 20 Hollywood films to be released every year. Another is the premium placed on legitimate DVDs sold in emerging economies like China. As The Economist reported in August, DVDs of The Dark Knight sell for $663 a copy in India. In China, the LA Times reports, counterfeit DVDs may have more special features than the genuine article. This last point taps into what most advocates of piracy usually tubthump; piracy gives people what they want. Not necessarily just regarding price – Zeitgeist would be hard pushed to fork out $663 for The Dark Knight – but also with regard to access and to functionality of the product. At The Future Laboratory‘s Spring/Summer trends briefing earlier this year, the emphasis was on loosening control over proprietary technology, collaborating with others in order to enhance innovation and ultimately help make the product better.

The product in question in this bazaar, however, is not DVDs; “There’s essentially just one product sold here: mobile phones.” The handsets are all knock-off, counterfeit items, playing on and abusing the brand equity of established companies with names like “Sansung”, “Motorloa” and “Sany Erickson”. It brings to mind the episode of the The Simpsons when Homer is duped by brands like “Panaphonics” and “Sorny”.

The competitive advantage for these products over their authentic brethren is the price. With no need for an R&D budget, the price of a “pirated Nokia N73 [is] $85, a fifth the cost of a real N73″. The author predicts sellers get an “extraordinary” 100% return on the initial investment. This, then, is big business. Big in the terms of holistic number of customers, returning multiple times, and big in the sense of the amount of profit it turns, and the number of people employed in such activities.

“The International AntiCounterfeiting Coalition… predicts that, with hundreds of thousands of industrial workers still facing unemployment and dislocation from the global recession, China will allow more piracy in order to prop up employment and avoid potential civil unrest.”

The author contends that this kind of behaviour is entrenched in society, and owes its debt to Bernard Mandeville, who argued for liberalising the market to the extent that things like tax-dodging, piracy and overcharging were “good for society”. The pamphlet in which he extolled his virtues became extremely well-known because pirates quickly got a hold of his six penny publication and distributed it in half penny sheets. This obviously made Mandeville no profit, but it raised his profile no end and, according to the author, “gave him the opportunity to publish a new edition”. Keeping as many people employed as possible, no matter the scrupulousness of their work, he argued, would lead to a better society than one dominated with excessive rules and regulations. And it seems, prima facie, that selling pirated goods allows access to consumers who can’t afford to pay full price. The difficulty, however, lies in whether the consumer can’t afford to or whether they just don’t want to. Whether someone whom a company would initially attempt to covet and convert to a prominent customer at a later age is instead lost to a world of pirated goods, which, not being subject to the same standards as the genuine article, ultimately disappoints the buyer and pushes them away from the brand entirely.

In a tale similar to that of Mandeville, the author Neuwirth suggests similarly that were it not for piracy, Shakespeare himself would also be confined to the realms of anonymity. During production of his plays, piracy allowed for other productions to run different versions – “King Lear was remade with a happy ending”, for example. In 1709, publisher Jacob Tonson bought the rights to the complete works, publishing them at a premium every fourteen years,  “enough to secure his perpetual copyright”. When one upstart pamphleteer threatened to sell the plays in sets for a fraction of the price, the argument that ensued resulted finally in Tonson flooding the market with plays sold at a penny.

“Shakespeare’s plays were suddenly available all over London at rock-bottom prices – something that had never been true even in the playwright’s lifetime. A century after his death, piracy helped make William Shakespeare a household name across social classes.”

Without deep research it is hard to dispute this intriguing interpretation, except to say that some of the adaptations of the plays may well have fallen under today’s terms of ‘fair use’, and that perhaps what this example really demonstrates is the need for a regulatory environment, one that stipulates that culture be accessible to all, rather than leaving it to excessive price gouging. Similar stories occur in the present-day as Neuwirth moves on to illustrate the situation in Peru, where “more books are sold in pirated editions than official versions”. The price for a legitimate copy of a book is too steep for most people to afford; thus the piraters are the ones that undertake market research, attend book fairs, etc. This is a dramatic fault with the publishing industry in Peru, which clearly has missed business opportunities here by not aliging prices sufficiently with customer demand. This again, then, is an example where regulators should be stepping in to correct market deficiencies. It is not necessarily an excuse for piracy to be celebrated. An absence of morality is not an imprimatur for immorality.

The Business Software Alliance affirms that in 2008, piracy cost software companies $53bn. The author rightly challenges this, writing that the BSA “assumes that every pirated program represents a lost sale at full retail price”. With relatively high prices for products like Adobe InDesign and Photoshop, this thinking by the BSA is indeed questionable. In some cases, initial access to a pirated copy, much in the same way a legitimate trial version works, might well help incentivise the consumer to purchase the full, legal product. Interestingly, the author quotes a note, hidden away in the BSA’s results,

“‘Business, schools and government entities tend to use more pirated software on new computers than ordinary consumers do’. The government – the same entity that the industry calls upon to police piracy – is actually one of piracy’s largest patrons.”

This revelation is startling as it turns the notion that it is consumers who are the wrongdoers, consumers who need the educating, on its head.

The notion of piracy contributing positively to business turnover is a tough one though. The author contends that in the world of fashion, going from a world of ‘planned obsolescence’ (a term used for things like when BMW will decide to release their new version of the 7 series), to “induced obsolscence”, where piracy “spurs demand for new styles”. This may be so in some sort of roundabout way, but the presence of piracy can surely be said to do little for the customer trying to differentiate between the legal and the illegal product, and little for the brand. Louis Vuitton et al. have surely suffered considerable losses over recent years, and invested significant amounts of time and money on combatting piracy. Though an anonymous executive of a “major sneaker manufacturer” might concede piracy doesn’t really impact the bottom line, it is debatable as to whether this is the case for those in the high-fashion world.

Ultimately, while the rise of pirated goods allows consumers more options, it also requires them to be increasingly savvy about the products they are purchasing. An over-regulated environment may stifle innovation; collaboration among multiple entities has been proven to sometimes enhance the development of a product. Quality of craftsmanship is necessarily going to be harder to discern when purchasing a pirated good, though. The trick is to create a legal framework that allows businesses to thrive, to provide their customers with a product at the right price, and to employ people who are protected under laws that they would otherwise not be granted under illegal outfits.

Earlier this week, Zeitgeist went along to the outskirts of Kensington to visit ad:tech, billing itself as the number 1 event for interactive marketing.

First up was Ed Elworthy, Brand Communications Director for Global Football at Nike. One of the more interesting points Mr. Elworthy made was in stating how little notice the company pays to consumer research, saying Nike never put anything in front of a research group. ‘Trust Your Gut’, the accompanying slide read. He paraphrased an oft-used epithet:

“A client uses research in the same way a drunk uses a lamppost; for support rather than illumination.”

Nike’s marketing needs no introduction; over the decades they have produced some of the most exhilarating and innovative adverts on television. Nike built its reputation on a brand built for runners, by runners. But there’s a disconnect between a brand that is all about people, and a brand that simply talks at you during ad breaks. The company certainly hasn’t rested on its laurels. During the 2010 World Cup, aside from producing the incredible Write the Future TV spot (below), the brand went further by setting up a football training centre in areas of less affluence to give people the opportunity to play and be taught who otherwise would never have the chance to kick around a ball in any organised way. This activation campaign says more about the brand than any of its glitzy commercials – beautiful and successful (in terms of awards) though they may be.

Moreover, this wasn’t the first time Nike had branched out from television and online. Its 10k runs in London, and North vs South attracted thousands of people and generated awares in the tens if not hundreds of thousands. Who can forget the brand’s incredibly successful venture with Apple to produce Nike+? It was this strategic alliance that also inspired Nike to go ahead with The Grid, which encouraged runners everywhere in London to compete by racing from public phonebox to phonebox, dialling an access code and measuring time taken versus themselves and others. Holistically numbers were low, but among those who did take part, engagement was extremely high. Lastly, who can forget Nike’s greatest brand activation, that of Livestrong. Who would have thought rubber bracelets would become, for an astounding length of time, the zeitgeist manifest?

Next up was Euro RSCG London‘s CEO Russ Lidstone, whose presentation was entitled ‘Failing Forwards’. He suggested that failure, as long as it didn’t hurt the company and was contained and controlled, was a good thing, that we do not better ourselves unless we push ourselves first to limits that may have a breaking point, or may have multiple answers, some of which are wrong. He noted with interest how audiences are not to be segmented merely in terms of demographics, but also in terms of cultural viewpoints. The agency’s recent campaign for Chivas Regal seeks to raise the standing of the true gentleman, the honourable hero, etc. One of the images used in the TV spot was used for a separate print campaign, that of the firemen pictured below. In China the difficulty was that the firemen used for one of the ads just weren’t aspirational enough (not wearing nearly enough Prada, probably). This sets off issues of cultural tensions that surface when you are trying to appeal to a particular consumers based globally, who may or not be interested in your product.

Returning to the subject of mere demographics, Mr. Lidstone also noted the importance of awareness of frame of reference when dealing with those covetable young audiences. He showed an interesting slide of frames of reference, with a major event listed per year. Someone in their 40s, with their earliest memories at around 5 or 6, would be likely to remember the release of ‘Star Wars‘. A 16-year old today would probably have 9/11 as one of his or her earliest memories, and the recent 10-year memorial service would not have meant as much to them. He went on to talk about “advertising to manage social momentum”, noting how easy it is for your brand to lose its equity due to a misguided tweet or a grumpy consumer, alluding to the recent Topman debacle, as well as the fraudulent – not to mention hilarious – BP Global PR Twitter feed that sprang up in the wake of the oil spill off the Gulf of Mexico last year. The feed at one point was being followed by 55,000 people, compared to BP’s official, paltry, 7,000. “Our brands lie naked in front of the consumer”, he emphatically summarised. They can find out anything about us; there is a greater need for brand humility. Hear, hear, says Zeitgeist, though we’re not sure if Tom Ford would agree.