Archive

Posts Tagged ‘LA Times’

TMT Trends 2015 – Star Wars, Tech Wars & Talent Wars

A MATTER OF LIFE AND DEATH

Our most popular article this year by far was a piece we wrote on trends in the media and entertainment industry for the coming twelve months. That nothing has been written since January that has proved as popular as that is a little disappointing, but it is a good indication of what users come to this blog for.

It’s been an interesting past month or so in the Technology, Media and Telecoms sector. We’re going to attempt to recap some of the more consequential things here, as well as the impact they may have into next year.

Star Wars – And the blockbuster dilemma

Friday saw the release of the first trailer for Star Wars Episode VII, due for release December 2015. CNBC covered the release at the coda of European Closing Bell, around the point of a segment a story might be done about a cat caught up a tree (“On a lighter note…”). They discussed the trailer and the franchise on a frivolous note at first, mostly joking about the length of time since the original film’s release. One of the anchors then went on to claim that Disney’s purchase of “Lucasfilms” [sic] and the release of this trilogy of films, given the muted reaction to Episodes I-III, constituted a huge bet on Disney’s part. This showed a profound lack of understanding. Collectively, Episodes I-III, disappointing artistically as they may have been, made a cool $1.2bn. And this is just at the box office. Homevideo revenues would probably have been the same again, almost certainly more. Most importantly (whether we like it or not), are revenue streams like toy sales, theme park rides and the like (see below graphic, from StatisticBrain). So we are talking about a product that, despite many not being impressed with, managed to generate several billion dollars for Fox, Lucasfilm, et al. With a more reliable pair of hands at the helm in the form of J.J. Abrams, to say Episodes VII-IX are a huge bet is questionable thinking at best.

star-wars-sales

It can be easy for pundits to forget those ancillary streams, but in contemporary Hollywood it is such areas that are key, and fundamentally influence what films get made. Kenneth Turan, writing in mid-September for the LA Times, echoed such thinking. As with our Star Wars example; so “with the Harry Potter films, and it is happening again with ‘Frozen’, with Disney announcing just last week that it would construct a ‘Frozen’ attraction at Orlando’s Disney World”. It is why studios have scheduled, as of August this year, some 30 movies based on comicbooks to be released over the coming years. Of course, supply follows demand. Such generic shlock wouldn’t be made again and again (and again) if consumers didn’t exercise their capitalist right to choose it and consume it. We have been given  Transformers 4 because the market said it wanted it.

But is this desire driven by a faute de mieux – a lack of anything better – in said market? David Fincher may not have been far off the mark back in September when he mentioned in an interview with Playboy that “studios treat audiences like lemmings, like cattle in a stockyard“. But a shift from such a narrow mindset may prove difficult in a consolidated environment – Variety’s editor-in-chief Peter Bart pointed out recently that “six companies control 90% of the media consumed by Americans, compared with 50 companies some 30 years ago”. Some players of course are trying to change the way the business this works. The most provocative statement of this was in September when Netflix announced a sequel to “Crouching Tiger, Hidden Dragon”, to be released day-and-date across Netflix and in IMAX cinemas. Kudos. It’s the kind of thing this blog has been advocating since its inception. Though not in accordance with a capitalist model, the market is certainly showing a desire for more day-and-date releases. Netflix isn’t a lone outlier as on OTT provider trying to develop exclusive content that goes beyond comicbooks (that in itself should give Netflix pause; about a fifth of its market value has eroded since mid-October). Hulu’s efforts with J.J. Abrams and Stephen King, as well as Amazon’s universally acclaimed Transparent series (full disclosure, a good friend works on the show; Zeitgeist was privileged to take a look around the sets on the Paramount lot while in Los Angeles this summer). And that’s not to say innovative content can’t be developed around blockbuster fare; we really liked 20th Century Fox’s partnership with Vice for ‘Dawn of the Planet of the Apes’, creating short films that filled the gaps between the film and its predecessor. Undoubtedly the model needs to change; unlike last summer, there were no outright bombs this year at the box office, but receipts fell 15% all the same. The first eight months of 2014 were more than $400m behind the same period in 2013. Interviewed in the FT, Robert Fishman, an analyst with MoffettNathanson put it wisely, “It always comes down to the product on the screen. And the product on the screen just hasn’t delivered.” An editorial in The Economist earlier this month praised Hollywood’s business model, suggesting other businesses should emulate it. But beyond some good marketing tactics there seems little that should be copied by others. Indeed, lots more work is needed. Perhaps the first step is merely rising that not all blockbusters need to be released in the summer. Next year, James Bond, Star Wars and The Avengers will all arrive on screens… spread throughout the year. Expect 2015 to feature more innovation on the part of exhibitors too, beyond having their customers be rained on.

Tech wars – Hacking, piracy and monopolies

Sony Pictures faced some embarrassment this week when hackers claimed to have penetrated the company’s systems, getting away with large volumes of data that included detailed information on talent (such as passport details for the likes of Angelina Jolie and Cameron Diaz). The full story is still unfolding. We’ve written a couple of times recently about cybersecurity; it was disappointing but unsurprising to see the spectre of digital warfare raise its head again twice in the past week. The first instance was with Regin, an impressive bit of malware, which seems to be the successor to Stuxnet, a spying program developed by Israeli and American intelligence forces to undermine Iranian efforts to develop nuclear materials. Symantec said Regin had probably taken years to develop, with “a degree of technical competence rarely seen”. Regin was focused on Saudia Arabia, Russia, but also Ireland and India, which muddies the waters of authorship. However, in these post-Snowden days it is well known that friendly countries go to significant lengths to spy on each other, and The Economist posited at least part of the malware was created by those in the UK. Deloitte, ranked number one globally in security consulting by Gartner, is on the case.

The news in other parts of the world is troubling too. In the US, the net neutrality debate rages. It’s too big an issue to be covered here, but the Financial Times and Harvard Business Review cover the topic intelligently, here and here. In China, regulators are cracking down on online TV, a classic case of a long-gestating occurence that at some arbitrary point grows too big to ignore, suddenly becoming problematic. But, if a recent article on the affair in The Economist is anything to go by, such deeds are likely to merely spur piracy. And in the EU this past week it was disconcerting to see what looked like a mix of jealousy, misunderstanding and outright protectionism when the European Parliament voted for Google to be broken up. No one likes or wants a monopoly; monopolies are bad because they can reduce consumer choice. This is one of the key arguments against the Comcast / Time Warner Cable merger. But Google’s share of advertising revenue is being eaten into by Facebook; its mobile platform Android is popular but is being re-skinned by OEMs looking to put their own branding onto the OS. And Google is not reducing choice in the same way as an offline equivalent, with higher barriers to entry, might. The Economist points out this week:

“[A]lthough switching from Google and other online giants is not costless, their products do not lock customers in as Windows, Microsoft’s operating system, did. And although network effects may persist for a while, they do not confer a lasting advantage… its behaviour is not in the same class as Microsoft’s systematic campaign against the Netscape browser in the late 1990s: there are no e-mails talking about “cutting off” competitors’ ‘air supply'”

The power of lock-in, or substitute products, should not be underestimated. For Apple, this has meant the acquisition of Beats, which they are now planning to bundle in to future iPhones. For Jeff Bezos, this means bundling in Washington Post into future Amazon Fire products. For media and entertainment providers, it means getting customers to extend their relationship with the business into triple- and quad-play services. But it has been telling this month to hear from two CEOs who are questioning the pursuit of quad-play. For the most part, research shows that it can increase customer retention, although not without lowering the cost of the overall product. Sky’s CEO Jeremy Darroch said “If I look at the existing quadplays in the market, not just in the UK, but pretty much everywhere, I think they’re very much driven by the providers who want to extend their offering, rather than, I think, any significant demand from customers”. Vodafone’s CEO Vittorio Colao joined in, “If someone starts bidding for content then you [might] have to yourself… Personally I have doubts that in the long run that this [exclusive content] will really create a lot of value for the platform. It tends to create lots of value for the owner”. Sony meanwhile are pursuing just such a tack of converged services in the form of a new ad campaign. But the benefits of convergence are usually around the customer being able to have multiple touchpoints, not the business being able to streamline assets and services in-house. Sony is in the midst of its own tech war, in consoles, where it is firmly ahead of Microsoft, who were seeking a similar path to that of Sky and Vodafone to dominate the living room. But externalities are impeding – mobile gaming revenues will surpass those of the traditional console next year to become the largest gaming segment; no surprise when by 2020, 90% of the world’s population over 6 years old will have a mobile phone, according to Ericsson. So undoubtedly look for more cyberattacks next year, on a wider range of industries, from film, to telco (lots of customer data there), to politics and economics.

Talent wars – Cui bono?

Our last section is the lightest on content, but perhaps the most important. It is the relation between artist and patron. This relationship took a turn for the worse this year. On a larger, corporate side, this issue played itself out as Amazon and publisher Hachette rowed over fees. Hachette, rather than Amazon, appears to have won the battle; it will set he prices on its books, starting from early 2015. It is unlikely to be the last battle between the ecommerce giant and a publisher, and it may well now give the DoJ the go-ahead to examine the company’s alleged anti-competitive misdeeds.

Elsewhere, artist Taylor Swift’s move to exorcise her catalogue from music streaming service Spotify is a shrewd move on her part. Though an extremely popular platform, driving a large share of revenues to the artists, the problem remains that there is little revenue to start with as much of what there is to do on Spotify can be done for free. The Financial Times writes that it is thanks to artists like Swift that “an era of protectionism is dawning” again (think walled gardens and Compuserve) for content. The danger for the music industry is that other artists take note of what Swift has done and follow suit. This would be of benefit to the individual artists but detrimental to the industry itself. And clearly such an issue doesn’t have to be restricted to the music industry. It’s not hard to anticipate a similar issue affecting film in 2015.

*

There’s a plethora of activity going on in TMT as the year draws to a close – much of it will impact how businesses behave and customers interact with said media next year. The secret will be in drawing a long-term strategic course that can be agile enough to adapt to disruptive technologies. However what we’ve hopefully shown here in this article is that there are matters to attend to in multiple sectors that need immediate attention over any amorphous future trends.

The state of retail

January 6, 2013 7 comments
CNBCBlackFriday

The love of the bargain is what drives them… Click for CNBC’s coverage

It’s a common fallacy to think of a time before a change in status quo as somehow being magically problem-free. A Panglossian world where all was well and nothing needed to change, and wasn’t it a shame that it had to. Similarly, we cannot blithely consign the retail industry of the past to some glorious era when everything was perfect; far from it. The industry has been under continual evolution, with no absence of controversy on the way. It was therefore a timely reminder, as well as being a fascinating article in its own right, when the New York Times provided readers recently with a potted history and a gaze into the future of Manhattan department store stalwart, Barneys. Not only is their past one in which the original proprietor sought to undercut his own suit suppliers, creating a bootlegging economy by literally ripping out their labels and replacing them with his own, but it was also one where department stores served a very different purpose to what they do today. They had less direct competition, not least unforeseen competition in the form of shops without a physical presence. Moreover, today they are run in an extremely different way, with an arguably much healthier emphasis on revenue (though some might say this comes at the expense of a feeling of luxury, in a lobby now brimming with handbags and little breathing room). The problems and opportunities for Barneys could serve as an analogy for the industry of which it is a part.

Despite brief reprieves such as Black Friday (click on headline image for CNBC’s coverage), as well as the expected post-Christmas shopping frenzy, can one of the main problems affecting retail at the moment simply be that it is undergoing an industry-wide bout of creative destruction? Zeitgeist has written about the nature of creative destruction before, and whether or not that is to blame for retail’s woes, the sector is certainly in the doldrums. In the UK, retailers are expecting a “challenging” year ahead. Recent research from Deloitte shows 194 retailers fell into administration in 2012, compared with 183 in 2011 and 165 in 2010. So, unlike the general economy, which broadly can be said to be enjoying a sclerotic recovery of sorts, the state of retail is one of continuing decline. How did this happen, and what steps can be taken to address this?

Zeitgeist would argue that bricks and mortar stores are suffering in essence due to a greater amount of competition. By which, we do not just mean more retailers, on different platforms. Whether it be from other activities (e.g. gaming, whether MMOs like World of Warcraft or simpler social gaming like Angry Birds), or other avenues of shopping (i.e. e-commerce, which Morgan Stanley recently predicted would be a $1 trillion dollar market by 2016), there is less time to shop and more ways to do it. The idea of going to shop in a mall now – once a staple of American past-time – is a much rarer thing today. It would be naive to ignore global pressures from other suppliers and brands around the world as putting a competitive strain on domestic retailers too. Critically, and mostly due to social media, there are now so many more ways and places to reach a consumer that it is difficult for the actual sell to reach the consumer’s ears. This is in part because companies have had to extend their brand activity to such peripheries that the lifestyle angle (e.g. Nike Plus) supercedes the call-to-action, i.e. the ‘BUY ME’. The above video from McKinsey nicely illustrates all the ways that CMOs have to think about winning consumers over, which now extend far beyond the store.

If we look at the in-store experience for a moment without considering externalities, there is certainly opportunity that exists for the innovative retailer. Near the end of last year, the Financial Times published a very interesting case study on polo supplier La Martina. The company’s origins are in making quality polo equipment, from mallets to helmets and everything in between, for professional players. As they expanded – a couple of years ago becoming the principle sponsor of that melange of chic and chav, the Cartier tournament at Guards Polo Club – there came a point where the company had to decide whether it was going to be a mass-fashion brand, or remain something more select and exclusive. As the article in the FT quite rightly points out, “Moving further towards the fashion mainstream risked diluting the brand and exposing it to volatile consumer tastes.” The decision was made to seek what was known as ‘quality volume’. The company has ensured the number of distributors remains low. Zeitgeist would venture to say this doesn’t stop the clothing design itself straying from its somewhat more refined roots, with large logos and status-seeking colours and insignia. Financially though, sales are “growing more than 20% a year in Europe and Latin America”, which is perhaps what counts most currently.

LVwritingParis

Louis Vuitton’s ‘L’ecriture est un voyage‘ is a good example of experimental thinking and missed opportunities

In the higher world of luxury retail, Louis Vuitton is often at the forefront (not least because of its sustained and engaging digital work). While we’re focusing purely on retail environments though, it was interesting to note that the company recently set up shop (literally) on the left bank of Paris; a pop-up literary salon, to be precise. Such strokes of inspiration and innovation are not uncommon at Vuitton. They help show the brand in a new light, and, crucially, help leverage its provenance and differentiate it from its competition. Sadly, when Zeitgeist went to visit, there was a distinct feeling of disappointment that much more could have been done with the space, which, while nicely curated (see above), did little to sell the brand, particularly as literally nothing was for sale. The stand-out piece, an illustrated edition of Kerouac’s On the Road, by Ed Ruscha, Zeitgeist had seen around two years ago when it was on show at the Gagosian in London. Not every new idea works, but it is important that Louis Vuitton is always there at the forefront, trying and mostly succeeding.

So what ways are there that retailers should be innovating, perhaps beyond the store? One of the more infuriating things Zeitgeist hears constructed as a polemic is that of retail versus the smartphone. This is a very literal allusion, which NBC news were guilty of toward the end of last year. “Retail execs say they’re winning the battle versus smartphones”, the headline blared. What a more nuanced analysis of the situation would realise is that it is less a case of one versus the other, than one helping the other. The store and the phone are both trying to achieve the same things, namely, help the consumer and drive revenue for the company. Any retail strategy should avoid at all costs seeing these two as warring platforms, if only because it is mobile inevitably that will win. With much more sound thinking, eConsultancy recently published an article on the merits of providing in-store WiFi. At first this seems a risky proposition, especially if we are to follow NBC’s knee-jerk way of thinking, i.e. that mobile poses a distinct threat to a retailer’s revenue. The act of browsing in-store, then purchasing a product on a phone is known as showrooming, and, no doubt aided by the catchy name, its supposed threat has quickly made many a store manager nervous. However, as the eConsultancy article readily concedes, this trend is unavoidable, and it can either be ignored or embraced. Deloitte estimated in November that smartphones and tablets will yield almost $1bn in M-commerce revenues over the Christmas period in the UK, and influence in-store sales with a considerably larger value. That same month in the US, Bain & Co. estimated that “digital will influence more than 50% of all holiday retail sales, or about $400 billion”. Those retailers who are going to succeed are the ones who will embrace mobile, digital and their opportunities. eConsultancy offer,

“For example, they could prompt customers to visit web pages with reviews of the products they are considering in store. This could be a powerful driver of sales… WiFi in store also provides a way to capture customer details and target them with offers. In fact, many customers would be willing to receive some offers in return for the convenience of accessing a decent wi-fi network. Tesco recently introduced this in its larger stores… 74% of respondents would be happy for a retailer to send a text or email with promotions while they’re using in-store WiFi.”

These kind of features all speak more broadly to improving and simplifying the in-store experience. They also illustrate a trend in the blending between the virtual and physical retail spaces. Major retailers, not just in luxury, are leading the way in this. Walmart hopes to generate $9bn in digital sales by the end of its next fiscal year. CEO Mike Duke told Fast Company, “The way our customers shop in an increasingly interconnected world is changing”. This interconnectedness is not new, but it is accelerating, and the mainstream arrival of 4G will only help spur it on further. The company is soon to launch a food subscription service, pairing registrants with gourmet, organic, ethnic foods, spear-headed by @WalmartLabs, which is also launching a Facebook gifting service. At the same time, it must be said the company is hedging its bets, continuing with the questionable strategy of building more ‘Supercenters’, the first of which, at the time a revolutionary concept, they opened in 1988.

ebaycoventgardenlondon

One interesting development has been the arrival of stores previously restricted to being online into the high street, something which Zeitgeist noted last year. This trend has continued, with eBay recently opening a pop-up store in London’s Covent Garden. These examples are little more than gimmicks though, serving only to remind consumers of the brands’ online presence. Amazon are considering a much bolder move, that of creating permanent physical retail locations, if, as CEO Jeff Bezos says, they can come up with a “truly differentiated idea”. That idea and plan would be anathema to those at Walmart, Target et al., who see Amazon as enough of a competitor as it is, especially with their recent purchase of diapers.com and zappos.com. It serves to illustrate why Walmart’s digital strategies are being taken so seriously internally and invested in so heavily. Amazon though has its own reasons for concern. Earlier in the article we referenced the influence of global pressures on retailers. Amazon is by no means immune to this. Chinese online retailer Tmall will overtake Amazon in sales to become the world’s largest internet retailer by 2016, when Tmall’s sales are projected to hit $100 billion that year, compared to $94 billion for Amazon. The linked article illustrates a divide in the purpose of retail platforms. While Amazon is easy-to-use, engaging and aesthetically pleasing, a Chinese alternative like Taobao is much more bare-bones. As the person interviewed for the article says, “It’s more about pricing – it’s much cheaper. It’s not about how great the experience is. Amazon has a much better experience I guess – but the prices are better on Taobao.”

So how can we make for a more flexible shopping experience? One which perhaps recognises the need in some users to be demanding a sumptuous retail experience, and in others the need for a quick, frugal bargain? Some permutations are beginning to be analysed, and offered. Some of these permutations are being met with caution by media and shoppers. This month, the Wall Street Journal reported that retailer Staples has developed a complex pricing strategy online. Specifically, the WSJ found, it raises prices more than 86% of the time when it finds the online shopper has a physical Staples store nearby. Similar such permutations in other areas are now eminently possible, thanks in no small part to the rise of so-called Big Data. Though the Staples price fluctuations were treated with controversy at the WSJ, they do point to a more realistic supply-and-demand infrastructure, which could really fall under the umbrella of consumer ‘fairness’, that mythical goal for which retailers strive. Furthemore, being able to access CRM data and attune communications programmes to people in specific geographical areas might enable better and more efficient targeting. Digital also allows for a far more immersive experience on the consumer side. ASOS illustrate this particularly well with their click-to-buy videos.

Digitals_Disruption_Ex2_lg_tcm80-121684

As the Boston Consulting Group point out in a recent report, with the understated title ‘Digital’s Disruption of Consumer Goods and Retail’,  “the first few waves of the digital revolution have upended the retail industry. The coming changes promise even more turmoil”. This turmoil also presents problems and opportunities for the marketing of retail services, which must be subject to just as much change. If we look at the print industry,  also comparatively shaken by digital disruption, it is interesting to note the way in which the very nature of it has had to change, as well as the way its benefits are communicated. It is essential that retailers not see the havoc being waged on their businesses as an opportunity to ‘stick to what they do best’ and bury their head in the sand. This is the time for them to drive innovation, yes at the risk of an unambitious quarterly statement, and embrace digital and specifically M-commerce. What makes this easy for those companies that have so far resisted the call is that there is ample evidence of retailers big and small, value-oriented to luxury-minded, who have already embraced these new ideas and platforms. Their successes and failures serve as great templates for future executions. And who knows, the state of retail might not be such a bad one to live in after all. Until the next revolution…

On Piracy

October 18, 2011 5 comments

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.

Marketing “Tron”

January 4, 2011 6 comments

Form follows profit is the aesthetic principle of our times

- Richard Rogers

You know your movie is knocking on the door of the cultural zeitgeist when razor brands are piggybacking off your product. Disney’s ‘Tron: Legacy’, released around a month ago, has accrued a great deal of spilled ink in newspapers and online. The reporting has focussed not only on the film itself, but also its unique design aesthetics and marketing formula across multiple platforms.

Zeitgeist has mentioned the film’s marketing activities before in it’s blog, including it’s three and a half year journey as a promotional campaign to screen, (surely a record). It was a good eighteen months before the December 2010 release of the film that electronic music duo Daft Punk were revealed to be composing the soundtrack. On a brand level, this was a good fit; those who were inclined to see Tron would find this news very exciting; it would hopefully also pique fans of Daft Punk’s interest in the film. The collaboration naturally allows for figurines, bears and awesome headphones to be created, too.

The razor mentioned earlier – the Philips Norelco Senso Touch 3D – could have been an exploitative gimmick launched without much thought of the product itself and how it connects to the movie or their audience. To it’s credit, as reported by brandchannel,

The maker of the new Senso Touch 3D electric razor is offering tickets to an advance screening of Tron: Legacy via a special website that includes a rebate offer, the ability to “customize your photo into the world of Tron,” and a sweepstakes with a $10,000 prize.

The above tactics all help build a connection with the movie itself, ameliorating the product in the eyes of the film’s audience, as well as building anticipation for the film’s release. The week of the release was when footwear designer Edmundo Castillo announced the arrival of a pair of LED ‘Light Sandals’ that, according to Luxuo “pay homage” to ‘Tron: Legacy’. They will retail at $1,650 at Sak’s from February 1st. The article also mentions eyewear manufacturer Oakley is releasing special 3D glasses to tie-in with the film’s opening. Nokia have employed a similar effort with the release of a new handset. More collaborations can be found in a very comprehensive article by brandchannel, here.

In the digital world, it would be ironic if Disney had dropped the ball. Similar to other recent accounts like that for the film ‘Inception’, the film featured several region-specific accounts on Facebook that were regularly updated, informal and promoted reaction and engagement. One of the best things that Zeitgeist saw on the account was the brief chance to attend a free 20-minute preview of the film in several locations around the country. Zeitgeist attended and found himself surrounded by a very particular type of demographic, who doubtless were exceedingly excited to be there, as evinced by their cheering when anything vaguely exciting happened during the select scenes shown. The other digital platform to be wisely exploited was that of videogames. We’re not there yet, but we are fast approaching a time when movies open to support the release of a new videogame, rather than the other way around. There has been a significant fanfare around the release of the videogame based on the film. The game(s) make the bold, yet logical and laudatory move, of differing greatly between platforms, based on the typical owner of such consoles, reports Reuters. For example, the more family-friendly Nintendo Wii’s version lets you race around on a variety of the vehicles featured in the movie. For other platforms, where hard-core gamers make up a bigger portion of the audience, the game delves deeply into the mythology of the films, providing a back-story only hinted at in the new film.

The film itself also sees a number of product placements, including Coors, Apple (so to speak) and Ducati. The latter’s placement seemed rather glaring to Zeitgeist, but to those not on the lookout for such placement it might blend in more easily and authentically. The prominent placement of the motorcycle was spotted by many on Twitter however, with mostly positive reactions:

Associating one’s brand or product with such a cool film is a way of adding to your cachet, to be cool by proxy. Most surprising of all the collaborations then, is that of Apple, who need engage in no such ‘cool by association’ tactics. Yet here they are with a very, very cool app on the iPad. Between the film and the tablet, which is promoting the other in this case is hard to divine.

All this talk of marketing ploys ignores the film’s greatest asset, it’s aesthetic beauty. The film is indeed a wonder to look at, hence how it has inspired so many product collaborations, particularly in the world of fashion. While Zeitgeist realised he was supposed to be feeling somewhat tense and anxious near the end of the film as the goodies race for home, the climactic chase scene is one of a stunning light display that leaves one fairly awe-struck. The design of the film as a whole has been influential enough for the Los Angeles Times to produce a feature on it recently.

You may of course just be looking for a Tron: Legacy Coliseum Disc Battle Play Set, or one of the 37 other items related (vaguely) to the film that Disney has commissioned. In which case, best to head here.

Rewarding Advocacy and Retaining Customers

December 6, 2010 2 comments

How “24”, Louis Vuitton and a London restaurant attempt to make their brands worth engaging with.

Eye-catching advertising – like the one mentioned by Zeitgeist in the previous article posting – that succeeds in converting a person to being a new customer of a brand is one thing, but keeping them dedicated is quite another. As The New Yorker cartoon above demonstrates so humorously and effectively, engagement is what’s important. It’s about incentivising and rewarding your customer for their association (and, hopefully, evangelism) of the brand.

Zeitgeist has touched on location-based services several times in the past, and as the service continues its maturation process, we are able to judge better as to what kind of benefits it brings to marketers of brands. One is still left with the impression that network effects have yet to fully take hold for the myriad platforms – Foursquare, Gowalla, and more recently Facebook’s equivalent – that provide these services. Logically, greater and more plentiful benefits for those that sign up to these services would encourage those users to advocate others to sign up to them.

So what is the current state of affairs for rewarding users of such services? Well, first you can count out anyone who lives outside a major metropolitan city; the service has nothing to offer them other than who gets to be arbitrary mayor of which location. Sometimes, locations can be inaccurate enough that it looks like people are having a drink in a subaqua bar, as is the case above.

In the past week, living in London, Zeitgeist has experienced two offers through Foursquare that have had real-world consequences. Tuesday before last, as one of the first people to unlock the “Louis Vuitton Insider” badge, Zeitgeist’s presence was requested at the Bond Street Maison for a drinks reception, attended by several Vuitton employees from the marketing and digital disciplines, from both London and Paris. The chance to get to talk to such people, while browsing the store’s significant art book collection while munching on macaroons and sipping various beverages, leaving with a small gift, all were clearly tangible benefits for those guests who attended the evening. What of the business though? What benefits does it reap from organising such an event at reasonable expense? Ideally it gets to know its customer base better, though in this case, some of those who unlocked the badge were not habitual customers of Vuitton. Still, for those that are, the event would no doubt have encouraged a greater affinity toward the brand.

Yesterday at lunch near Covent Garden, Zeitgeist was early meeting his friend and decided to check-in on Foursquare. The reward for having done so was a free glass of wine. The benefits of free alcohol need not be extolled or delved into greatly in this article. However, the execution was sorely lacking. The waitress, when presented with the notification of this offer, was totally caught by surprise, and was not aware of any such offer. When the glass was ultimately brought – Zeitgeist was presented with a choice of “red or white?” – it was of course some substandard plonk that wouldn’t have been fit for a university ball. On the face of it, of course, this was not surprising; but it led to the question of what is the point of rewarding the consumer / shopper / person with something that is pretty poor and leads to a less enjoyable experience?

Zeitgeist can think of few experiences less enjoyable than competing against others to stay awake. Yet this is exactly the idea that 20th Century Fox have had, on the eve of the release of an enormous, diss-it-and-you’ll-be-waterboarded, boxset of the entire series of the hit show 24. Starting last night in Los Angeles, several “lucky” winners of a competition run entirely on Facebook will be subjected to every single episode of the series, while they compete with other viewers in a glass cube to stay awake. The campaign is also supported by a Twitter feed and, as Fox would have hoped, has been picked up by “24” fan blogs as well as the mainstream media, appearing in the LA Times. The campaign will have relatively little long-term impact, as the series has now come to end – though rumours persist of a film being made – but the idea for the competition, one of endurance, is very on-brand for the series, and has clearly sparked much chatter online. It should be noted that endurance contests are not always on-brand, or safe. UPDATE: The winners.

Media shakes and quakes

A quick round-up of some interesting news in the media world in the past 24 hours or so…

The scope of the BBC is to be drastically reduced. The TelecomPaper writes that the plans are to “reign in its website, close down two radio stations, cut management costs and focus spending more on quality, local programming.” News organisations have been complaining for some time that the BBC News website is taking traffic away from dedicated news publication sites, and in general this news will be music to the ears of James Murdoch, whose Sky continues to see ebullient profits.

Viacom and the US TV streaming service Hulu are parting ways, meaning hilarity such as The Daily Show with Jon Stewart will no longer be available on the site. The WSJ reported that they reached a “financial impasse”. Meanwhile,  Hulu has launched its own show.

Apple is currently making the rounds of movie studios after paying a similar visit to the music labels in discussions to be able to provide users with their media in the cloud. The upshot is that users would be able to access their iTunes products from anywhere at anytime on their mobile devices. Zeitgeist looks forward to seeing this in action.

Lastly, if you’re planning to watch the Academy Awards this Sunday night at home on television, you’ll be in the same position as one of the producers whose film has been nominated for Best Picture and is seen as a front-runner. On the last day to send out one’s vote for the Oscar ballot, Nicolas Chartier wrote an email asking for his friends to vote for “Hurt Locker” rather than a certain “$500 million film”. The Academy have responded by banning Mr. Chartier from attending Sunday’s ceremony. The LA Times reports, “Should the film win best picture, Chartier would be given his Oscar at a later date”. The insight is that backstabbing isn’t kosher, even in Hollywood.

UPDATE: Very interesting post from TechCrunch on the Hulu / Viacom split; “The economic incentive is too great for media properties to centralize their videos on their own sites. But to consumers, this recentralization looks more like fragmentation”.

Follow

Get every new post delivered to your Inbox.

Join 68 other followers