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TV’s bloody disruptions

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Last night, Zeitgeist eagerly devoured the first episode of the new season of Netflix‘s House of Cards, a series that has received lavish praise  – not least from us – both for its content and its position as vanguard of a new wave of television distribution, production and consumption. The series lead, Frank Underwood, takes on his competition with a ruthless lack of morality that is unlikely to jar with those in the cutthroat television industry. The New York Times recently featured an excellent piece on the series, focusing on the showrunner Beau Willimon, the unique nature of doing such a show with Netflix, which among other things guaranteed 26 shows upfront, and the new mood of “post-hope” politics. Is traditional linear TV entering its own post-hope state?

Such talk of impending doom makes for nice editorial (which Zeitgeist is not averse to), but how true is it? To some extent, such new forms of consumption are being hampered by externalities as the platforms make the switch from early adopters to the everyday consumer. Indeed, Netflix’s sheer popularity is proving to be a thorn in its side. In November last year, Sandvine reported that the content Netflix provides now accounts for almost a third of internet traffic in the US. This staggering figure no doubt accounts for at least part of why internet speeds take such a distinct hit during primetime viewing hours (see chart below). As Quartz has the insight to point out, such issues are less to do with intentional throttling and more to do with peering agreements between ISPs and content providers.

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Download speeds happen to take a significant hit right around the time people are looking to kick back with some Netflix

Such issues are likely to be ever more prevalent as the notion of net neutrality continues to come under attack. At the end of last month, a federal appeals court overturned the Federal Communication Commission’s Open Internet Order, which had stipulated that ISPs could not prejudice one type of internet traffic over another. The fear of any such policy being overturned has always been one of the creation of a two-tier internet, where people who can afford faster internet get preferential access, and companies are free to charge distributors differing amounts based on the type or amount of content they are delivering. Such consternation was also felt in government, where five US senators called on the FCC chairman to “act with expediency” to preserve the open internet. The news immediately caused concern for Netflix, as shareholders fretted that ISPs might start to charge the company for the traffic it takes up. CEO Reed Hastings responded categorically,

“Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.”

Consolidation and the narrowing of choice took a further hit on Wednesday this week when Comcast announced it would buy all of Time Warner Cable for $44.2bn. The choice on cable landscape is already limited for the US, so it will be interesting to see what regulators make the deal. Chad Gutstein, former COO of Ovation, an independent arts-focused cable channel, penned an article in Variety saying that any concerns over the deal should be restricted to the possibility of abuse of a dominant position, rather than simply market share.Columbia Law School professor Tim Wu, writing in The New Yorker, rightly points out that the FCC should be approving such mergers only if they serve the public interest. He sees no such possibility in this instance, where the most pressing need for cable customers is lower prices. Last year, he writes, Comcast collected about $156 a month on average, per customer. For cable. Professor Wu contends that the merger would put Comcast in a position that would make it easier to raise prices further. This, despite the fact that conditions created via the merger would technically put the company in a position where it could create savings, both through economies of scale and more advantageous negotiating positions with programmers like ESPN and Viacom. Of course, Comcast is probably keen on preserving if not extending margins as it faces increasing competition from players like Netflix and Amazon. Cord cutting may be in vogue now, but Comcast will try to combat this by creating what is called ‘lock-in’. Craig Aaron, president of Free Press, a consumer advocacy group, is quoted in the New York Times; “Comcast and the new, giant Comcast are going to do as much as they can to stop you from unbundling. In order for you to get content you like, you’re going to be pushed to pay the cable bill, too”. Such tactics will test the limits of customer inertia, but only if they have somewhere else to go as a viable alternative.

The switch to online viewing is also raising issues of policy change in the UK. Public service broadcaster the BBC has long left it unclear as to at what point requiring a TV licence is mandatory, leaving citizens to infer that simply owning a television set is reason enough. Recently though, the broadcaster finally clarified that owners can use their TV, with no fee, to play games, watch DVDs, basically do anything that doesn’t involve watching live television. For the moment, this also includes their IPTV offering, iPlayer. In an article earlier this month, The Economist said the fee was “becoming ever harder to justify”. Antonella Mei-Pochtler of the Boston Consulting Group, quoted in the article, believes the increasing trend of young people to timeshift their viewing is likely to become ingrained. Coupled with the growth of internet-connected TVs, this is bound to accelerate a shift away from traditional linear consumption. The BBC is soon to begin developing premium content for its iPlayer service in order to seek additional revenue streams that may offset a decline in fees paid. But as The Economist points out,

“[T]hat would suggest, dangerously, that the BBC is like any other optional subscription service. Folding on-demand services into the licence fee could also amplify calls for the BBC to share its cash with other broadcasters, not least because such consumption may be precisely measured.”

When we look at the market for television sets and set top boxes, the news isn’t that superb either. The curved TVs debuted at CES in January are surely little more than a distraction. Last week, Business Insider reported that Sony is to finally spin off its TV operations into a separate unit, amongst news of $1.1bn in losses and 5,000 job cuts. But while we’ve talked of consolidation and narrowing choice, we also need to recognise this is also a period of unprecedented choice for consumers. As a recent article on GigaOm points out, there are millions of channels on YouTube alone. There are growing pains. As consumption of such content moves “to the living room”, the article details various sub rosa negotiations by retailers like Walmart with their own video market, or players like Netflix willing to pay top dollar to put branded buttons on remote controls. What is clear, with all the issues described in this post, is that consumer choice needs to be preserved in an open market with plenty of competition. Such an environment will always foster innovation. This may breed disruption, but that doesn’t have to mean devastation. The age of linear TV viewing may be at the beginning of its end, but that doesn’t mean there’s still a lot to fight for, even if it’s a scrap. Frank Underwood wouldn’t have it any other way.

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Netflix has similar revenues but lower earnings than HBO, for now.

UPDATE (22/02/14): The New York Times published an interesting article comparing Netflix and HBO recently, showing how the two companies are faring financially (see image above), as well as their approaches to developing content, which started off as opposing ideologies but are slowly starting to meet in the middle as they borrow from each other’s playbook. The article quotes Ted Sarandos, Netflix’s chief content officer: “The goal is to become HBO faster than HBO can become us.”

UPDATE (22/02/14): Of course, commercial network television in general is also going through a period of consternation, slowly building since the day TiVo started shipping. At the end of last year, the Financial Times reported that share of advertising spend on television is set to end after three decades. This is partly due to a proliferation of new devices and platforms – not least of which is Netflix – but also partly due to the amount of people time-shifting their viewing and skipping through the ads along the way. Thinkbox, a lobbying arm for the television industry, recently published a blog article with accompanying chart. It illustrated how many people time-shifted a particular programme depending on the genre. For example, fewer people time-shifted the news than drama shows. But one of the key points made in the article is “that there is no significant difference in the amount of commercial TV which is recorded and played back compared with BBC equivalents. To put it another way: TV is not time-shifted in an attempt to avoid ads”. This is specious reasoning at best. While it may be true that, yes, people do not discriminate between whether they time-shift a BBC show or an ITV show, it would be totally wrong to infer that those viewers are not avoiding ads when they do appear. The article’s author is guilty of confirmation bias, not to mention grasping at straws.

“Lots and lots of files” – Privacy, data and a new currency

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One of the seminal television shows of the 1990s, The X-Files played on myths, legends and government paranoia to worldwide critical and popular acclaim. One of the key episodes of the series found the lead characters, FBI agents Mulder and Scully, happening upon an abandoned mining facility. Contained inside were row upon row of filing cabinets. Inside, thousands of names spilled forth. The sheer number of file drawers is a visual feast for the viewer. But there is more; one of the agent’s names is in those files. Personal data on her (in the form of a tissue sample) has been taken without consent. Down the rabbit hole we go…

We have always operated under the assumption that governments must surveil in order to protect its citizens. The difference today, as Edward Snowden has so plainly shown, is firstly that you are the one being watched, and secondly that the sheer extent of the surveillance and the pervasive nature of its collection is staggering. The pervasiveness of all this is a key point. Not much in the way of policy has changed really in the past fifty years, it’s just that spying on swathes of the world’s population has become increasingly easier and cheaper. Back in 2006, the UK’s Information Commissioner’s Office warned that the country was moving “towards pervasive surveillance”. Such a prophecy seems to have turned into reality. It creates an uncomfortable feeling that those in charge do not have our best interests at heart, or at least that the ends do not justify the means.

Some of the finest publications in the world have been struggling to make sense of what all this means; Zeitgeist is using this post to highlight some of those key thoughts and issues covered. Back in September, The New York Times reported, paradoxically,

“Even agency programs ostensibly intended to guard American communications are sometimes used to weaken protections. The N.S.A.’s Commercial Solutions Center, for instance, invites the makers of encryption technologies to present their products to the agency with the goal of improving American cybersecurity. But a top-secret N.S.A. document suggests that the agency’s hacking division uses that same program to develop and ‘leverage sensitive, cooperative relationships with specific industry partners’ to insert vulnerabilities into Internet security products.”

Zeitgeist remembers dining alone in New York in September poring over the news. The NSA tried to ask for permission to legally insert a ‘backdoor’ into all digital encryption, but were denied. So they went ahead and did it anyway. They influenced government policy that led to fundamental weaknesses in encryption software. Last week, a federal judge considered the constitutionality of the US’s surveillance programmes. He called the technology used by the NSA “almost Orwellian” and ordered it to stop collecting the telephone records of two plaintiffs. It is one of several cases currently underway.

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Click to see The New Yorker’s infographic on what personal data is made available to social networks and their advertisers

Of course, such spying would have not have been possible without the consent – tacit or otherwise – of companies in the private sector. There is clamor in the US, UK, Brazil and other countries for more restrictive regulation that makes it harder to collect consumer data. Such policy could make data analysis and collection onerous and might have a significant impact for those businesses that make a living out of using such data. As The Economist puts it,

“Should all this make it harder and costlier for companies to gather information, that would hurt the likes of Facebook and Google, which depend on knowing enough about their customers to ping them with ads that match their tastes.”

The New Yorker recently featured a fascinating article complete with unnerving infographic (excerpted image above) showing just how much information we display on our various social networks is then shared with the platform and its advertisers. This month, a new film, Her, arrives in cinemas, from the director of Being John Malkovich. The heroine is a disembodied voice – acted by Scarlett Johansson – who serves as operating system. The line between her servitude and rapid consumption of all her user’s data quickly becomes blurred. As the reviewer Anthony Lane puts it, also for The New Yorker,

“Who would have guessed, after a year of headlines about the N.S.A. and about the porousness of life online, that our worries on that score—not so much the political unease as a basic ontological fear that our inmost self is possibly up for grabs—would be best enshrined in a weird little [film]?”

Unsurprisingly, the results of a recent YouGov poll in the UK showed consumers were now far less willing to part with their own data. Almost half would be less willing to share their personal data with companies in the next five years. A mere 2% said they would be more willing to do so. Part of the problem lies in a lack of transparency: who is using my data, which piece of information exactly, and how does it benefit them? More importantly, what am I getting in return for surrendering my data? Steve Wilkinson of Ernst & Young offered little in the way of cheering news, “Many customers have recognised that businesses are using their personal information to help increase revenues, and are starting to withdraw access to their private data… In spite of this, there is a reluctance to adopt incentives that encourage consumers to part with personal data”.

Writing in the FT yesterday, Evgeny Morozov penned an excellent article claiming the media was spending far too much time on the intricacies of government involvement rather than how the whole cocktail mixes together. The overreach, according to the author, is being treated as an aberration, that will disappear in the face of tighter controls and the harsh light of day. It should instead, Morozov argues, be treated as part of a worrying trend in which “personal information – rather than money – becomes the chief way in which we pay for services – and soon, perhaps, everyday objects”. The article continues,

“Now that every piece of data, no matter how trivial, is also an asset in disguise, they just need to find the right buyer. Or the buyer might find them, offering to create a convenient service paid for by their data – which seems to be Google’s model with Gmail, its email service… [W]e might be living through a transformation in how capitalism works, with personal data emerging as an alternative payment regime. The benefits to consumers are already obvious; the potential costs to citizens are not. As markets in personal information proliferate, so do the externalities – with democracy the main victim. This ongoing transition from money to data is unlikely to weaken the clout of the NSA; on the contrary, it might create more and stronger intermediaries that can indulge its data obsession.”
Morozov also questions the meaning behind such data, as Zeitgeist has done in a previous article. Such information risks becoming seen as an objective answer without providing a solution or insight.
“Should we not be more critical of the rationale, advanced by the NSA and other agencies, that they need this data to engage in pre-emptive problem-solving? We should not allow the falling costs of pre-emption to crowd out more systemic attempts to pinpoint the origins of the problems that we are trying to solve. Just because US intelligence agencies hope to one day rank all Yemeni kids based on their propensity to blow up aircraft does not obviate the need to address the sources of their discontent – one of which might be the excessive use of drones to target their fathers. Unfortunately, these issues are not on today’s agenda, in part because many of us have bought into the simplistic narrative – convenient to both Washington and Silicon Valley – that we just need more laws, more tools, more transparency.”
Touching on similar points and themes, the most enjoyable recent article on the subject was written by famed author Margaret Atwood for The New York Times earlier this month. It had recently emerged that intelligence agencies had been using MMO games like World of Warcraft in an attempt to discover terrorists and other less enjoyable parts of the internet. Atwood has predicted just such a thing in her books, written some twelve years ago. Atwood struggles to make sense of her thoughts coming to life, wondering whether to treat it as comedy or tragedy. She elaborates, crystallising all our fears about the empty truth behind data,

“I hope for the comedy… I suspect the horror. Possibly in the future you’ll no longer be permitted to be who you think you are, or even who you’re pretending to be: You will be who they say you are, based on your data-mined, snooped-upon online presence. You’ll be stuck with that definition of yourself. You won’t be able to take off the mask.”

Such disconcerting thoughts on having your own personality dictated to you might once have been the stuff of science-fiction, apt for an episode of The X-Files. Besides adages of truth being stranger than fiction, the clarion call of these publications appears to be that people should be sitting up and taking notice of what has been going on over the last ten years with extensive policy / data / consumerism creep. It is not just the NSA, but the way society intertwines information for monetisation that must be scrutinised if we are to avoid having to worry about trivial things like playing videogames in peace.

The Sharing Economy meets the Internet of Things

September 29, 2013 Leave a comment

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This post has been reblogged by IBM and is reproduced on their Tumblr sites. The original is available below in its entirety.

Noise over what has been called Collaborative Consumption – and elsewhere The Sharing Economy – has been increasing in volume for some months now. Kickstarter, a crowdfunding business that exists to let people from anywhere in the world donate to singular projects, is a great example of this new philosophy. The company has played roles in funding films, games consoles and civic projects like the construction of bridges. Zeitgeist has made use of sites likes AirBnB and Housetrip to stay in lovely, very affordable apartments in places like Paris and New York. These diverse businesses aren’t necessarily united in a single cause to drive the sharing economy, but they are all trying to make use of what some economies, particularly in the West, excel at producing: surplus.

It’s an acknowledgment that there are physical items we own that we don’t actually need, which are eminently transferable – for a certain period of time – to others, with the market more or less dictating price (it’s this last point that removes any assertions or complaints of the idea being some sort of socialist utopia). At its root, the idea has been seen in media consumption for several years now; we’ve written often about the new customer mantra of ‘access trumps ownership’, where people prefer to stream their content rather than have it on a shelf. This is a bit of a sea-change in how we view ourselves. As a very astute article in The New Yorker pointed out earlier this month, we have often defined ourselves by what we own,

“For most of the past century, Americans have been the world’s greatest consumers. And usually consumption has meant ownership: just before the Great Recession, the average American household owned 2.28 cars, and had more television sets than people. But these days a host of new companies are trying to disrupt the paradigm… beneath all the hype is a sensible idea: there are a lot of slack resources in the economy. Assets sit idle—the average car is driven just an hour a day—and workers have time and skills that go unused. If you can connect the people who have the assets to people who are willing to pay to rent them, you reduce waste and end up with a more efficient system.

Zeitgeist believes that the increasing popularity of another evolution in business – that of connected devices – will dovetail nicely with the sharing economy. The widespread use of connected devices, known as the Internet of Things, is broadly based on the idea of having products that are intelligent enough to know what they are being used for, when they are being used, and how to make sure the user gets the most productivity out them. Connecting said product to the Internet is usually a pretty good way of doing this. At its simplest, it is the much-ballyhooed Smart Fridge, that knows when it’s running out of milk and orders more for you online without having to bother asking you. In reality, it is things like the Nest device, a (very) smart and (very) beautiful thermostat device.

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Zeitgeist was at London’s Bloomberg HQ earlier this week for Social Media Week, a series of events usually dominated by a great deal of hot air. Fortunately this was not the case with the Internet of Things event. It quickly became clear that without the Internet of Things, collaborative consumption would plateau very quickly. There were fascinating projects like Pachube, which relied on crowdsourcing data in real-time via Twitter from an aggregation of sensors, allowing them to communicate with one another and at the same time. This information is not only not proprietary, it is meant to be built upon. It was used during Japan’s Fukushima disaster for crowdsourcing radiation data. 2000 feeds were set up after 10 days; Android apps, SMS alerts were built, all by different people, a great example of product and information being shared and being improved by being open to collaboration. On a more humorous level, Zeitgeist was also privy to hearing about Addicted Toasters, where the toaster is not just connected to the owner’s smartphone, or to the Internet, but also to other toaster’s in the network. If it sees that others are toasting more bread, it gets ‘jealous’. By which we mean of course that if it decides it is being under-utilised, it will decide it is time to go to the next person on the waiting list who wants to use a toaster. It does this by dialling into the FedEx API and getting itself shipped to that next person in line. The speakers, Usman Haque, said this was not just about “remote monitoring or control, but participation with others in how people make sense of local environments and how products are shared”. While the Addicted Toaster may be smart, and ostensibly aware of a network of other toasters, many aren’t holistically connected with a wider infrastructure. The driverless car, which companies like Tesla and Google are road-testing as I type, is set to bring about this next evolution, as described last week in an excellent article in the Financial Times. If we do come to a time when – as was suggested at the Bloomberg event – every product has its own IP address, then it means that every product is a lot more easy to track, and necessarily a lot more easy to lend to others. For, if a device is unique and ‘intelligent’, it should hypothetically recognise your own needs when you need it, and another’s when someone else has need of it. A world with fewer items can be pretty cool, too, if pretty small, as entrepreneur Graham Hill demonstrates with his New York apartment that is one room, or eight, depending on how you look at it.

All this sharing undoubtedly has positive implications for sustainability; a lot less produced means a lot less waste. There are potentially huge lifestyle impacts as well, which may not be as comforting. The New Yorker, again:

“It isn’t just companies and regulators who will have to be flexible, though. Workers will, too, since the sharing economy requires people to function as micro-entrepreneurs… They are all independent contractors, working for themselves and giving the companies a cut of the action. This has certain attractions: no boss, the ability to set your own hours, control over working conditions. It also means no benefits, no steady paycheck, and the need to always be hustling; in that sense, it fits all too well with the free-agent nation we’re increasingly becoming. Sharing, it turns out, is often a hell of a lot of work.”

On Mobile Trends – 2013 so far…

April 15, 2013 1 comment

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While it’s difficult nowadays to write about telecoms or the mobile sector without drifting off into other areas of the TMT industry, Zeitgeist spent an evening last month as a guest of Accenture in Cambridge, discussing the successes and failures of the recent Mobile World Congress in Barcelona. It came in the middle of a year so far that has already some significant shifts from mobile companies, in terms of branding, operations and revenue streams.

2013 has seen some interesting news in mobile. The week before last marked, incredibly, the 40th anniversary of the first phone call made from a mobile phone. This year also saw Research in Motion renaming itself to BlackBerry, with shares sliding 8% by the end of the product launch announcement for its eponymous 10 device. It saw Sky acquire Telefonica’s broadband operations, while responding to major complaints about the speed of its own broadband service. It has seen Huawei, which in Q4 of 2012 sold more smartphones than either Nokia, HTC or BlackBerry, come under scrutiny particularly in the US for its lack of transparency. Moreover, after much editorial ink spilled on Facebook’s lack of initiative and innovation in mobile, the release of the ‘super-app’ Chat Heads has piqued interest as it looks to compete with Whatsapp, Viber, iMessage et al., which Ovum reckons cost MNOs $23bn in lost revenue every year. This news mostly pertained to developed markets; JWT Intelligence’s interview with Jana CEO Nathan Eagle features some interesting insights on mobile trends in emerging markets.

Interestingly, 2013 thus far has also been witness to the beginning of more flexible contracts and payments. At the end of March, T-Mobile USA announced it would offer the iPhone to customers for cheaper than its rivals, and customers would not have to sign a contract. It effectively ends handset subsidies – something which Vodafone pledged to do last year and was punished by the stock market when it failed to do so – spreading the full cost of the phone over two years “as a separate line item on the monthly bill”, which may strike many as still quite a commitment. Customers must pay the bill for the phone in full in order to be able to end their tenure with the network. The New York Times elaborates, “Despite T-Mobile’s promise to be more straightforward than other carriers, some consumers might still find it confusing that they have to pay an extra device fee after paying $100 up front for an iPhone.” In the UK, O2 is going a similar route. At the end of last week the company announced similar plans to T-Mobile. While still keeping contracts as an option, the FT explained the company was looking to a plan, dubbed O2 Refresh, “that decoupled the cost of the phone from the cost of calls, texts and data. Customers will be able to buy a phone outright, or pay in instalments over time, and then sign up to a separate service contract that can be cancelled or changed at any time.” Although O2 said in the article that they expected customers to pay the same as they would on a standard contract, the new plans by both network providers will surely add to customer churn. Brands will have to work harder to develop true loyalty rather than relying on the lock-in feeling that adds to switching costs for many customers. Conversely, this added flexibility may make the providers feel less like utilities, creating more choice and differentiation.

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At the aforementioned conference Zeitgeist attended last month, Accenture hosted an evening they dubbed “MWC: Fiesta or Siesta?”. It soon became apparent that many of the speakers invited were less than enthused with the conference this year. This was partly because there were no extraordinary leaps in technology or hardware on offer. It was also because of, as one speaker lamented, “the proliferation of suits”. Another speaker complained it was like listening to The Archers: long storylines “that ended up having no conclusion”. The very essence of the conference though is not about trendsetting, or cool new consumer devices. Mobile operators are utilities, the excitement around such an event is not going to be as visceral as that of SXSW or Embedded World. It led some to wonder whether the “real innovation was being developed in such ‘niche’ events, away from the “glitz”. Moreover, perhaps Samsung’s decision not to launch their new S4 handset at the Congress alluded to this lack of excitement, or at least a wish not to be drowned out by other announcements.

Among exciting trends on display at MWC, M2M – something Zeitgeist has written about before – was front and centre at the conference, particularly with regard to cars. Phablets continued to make their foray into the consumer’s view, with bigger screens meaning more data transfer. Zeitgeist wondered whether such a transition would put even more pressure on networks already struggling with large data handling. And although Firefox’s new OS gave some – including those at GigaOm – hope that it could provide more innovation through diversified competition in the marketplace, others, including Tony Milbourn, Executive Chairman of Intelligent Wireless, speaking at the event, thought it “underwhelming” after “lots of hype”. Bendable screens were also to be found at MWC, but those speaking at the Accenture conference like Richard Windsor of Radio Free Mobile said it was early days and much was still to be seen from this new type of phone. Its potential though, he readily conceded, was formidable. Wearable technology was a huge issue at the conference and one that Zeitgeist is particularly interested to see develop, especially as companies like Apple, Sony and Google enter the fray.

It seemed then that the Mobile World Congress failed to reflect what is turning out to be a tumultuous year in telecoms. Not only is there an increasing desire to address consumer needs – in the case of more flexible contracts and more consumer-facing company names – but as economies sputter their way toward ostensible recovery we are also starting to see M&A activity return to the sector. Time will tell whether new technologies, such as M2M or bendable screens can breathe new life into the sector.

Up in smoke: Trends in buying movies and content ownership

Like the main protagonist in The Artist, film audiences are increasingly falling out of love with physical film. A recent IHS Screen Digest webinar presented some interesting notes on home entertainment trends around the world. Most of it was far from good news for media companies.

Emerging markets are where a lot of industries are currently looking to for growth, from WPP to the Catholic church. The film industry is seeing growth here, too. China, which last year relaxed its quota on the number of foreign films it allows into the market every year, has seen record box office takings of late, with the release of Titanic being a major highlight. Russia, too, is seeing a new audience for film. On a macro level, countries like India and Brazil are seeing a significant growth in the middle classes. In other words, a group of consumers that has a larger amount of discretionary spending. Some of this spending will be allocated to home entertainment, in the form of video players, be they DVD or Blu-ray. However, this jars with the global decline in physical media spend, as viewers switch in droves to streaming platforms like Netflix and Amazon’s Lovefilm. Data from the IHS webinar revealed that the global growth in video players will not serve to offset the decline of spend on physical media.

As well as shifting from hard copy to soft copy products, consumers are also beginning to show a marked preference for renting over owning. This trend extends far beyond the film industry of course. Companies like Spotify spearheaded the idea in the music industry, the phrase “access trumps ownership” has long been a mantra there. The philosophy is affecting many lifestyle aspects, as demonstrated by The Economist’s recent front cover article. In Western Europe, rental is now the transactional consumption choice for digital movies. IHS data reported that the average US citizen rented 5.3 films last year. The company predicted that revenue from rentals will go up, returning to where they were in 2009, but in large part only because rental prices will go up. Dovetailing with the increasing consumer reluctance to buy physical discs is that the medium also appears “less and less attractive” for retailers. Blu-ray, which was supposed to revive the disc format, has not taken off in the way that was hoped; IHS data showed most Blu-ray owners still purchase a lot of movies on DVD rather than paying a premium for the HD version.

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The move from physical to digital formats is troubling to media companies because, IHS report, “transactional online movie spending will not reach levels of physical spend” anytime soon. Indeed, theatrical is predicted to take up an ever larger slice of the pie (see above). This is without considering relative externalities, such as piracy, which remains a huge problem in Asia. And while consumer spending on online movies will almost double in AsPac, the share in wider consumer spending on movies in the region will not move beyond the current share before 2016.

One solace could be found in cinemas, a special haven for a medium without distractions, providing ample opportunity to leverage some of the more irrational desires and behaviours of consumers. We wrote briefly about various opportunities recently, and it’s reassuring to see the news earlier this month that Digital Cinema Media in the UK, an advertising sales house jointly owned by Odeon and Cineworld, will “in the coming months” launch a mobile app that will attempt to track cinema visits in order to feed data back to advertisers. In return, audiences will get exclusive content, vouchers or free ice cream. Given that the cinema is surely one of the few areas where you can pretty much guarantee a captive audience, this sounds like a great idea. How much it will offset lost revenues from home entertainment though remains an open question.

UPDATE (30/4/13): Data gathered can sometimes be misleading of course because it fails to report things that are not being measured. Such is the case with the current trend, recently reported by The New York Times, of sharing multi-platform viewing accounts for products like HBO Go among friends and even strangers. This trend represents a threat to revenue, but also an opportunity to create further loyalty, if used wisely. Forbes questioned the legality of such activity in a follow-up article.

Beyond the Linear – New ways of entertaining

January 20, 2013 1 comment

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The days of P.T. Barnum, and the sense of spectacle an audience received from seeing a live performance have long passed; codified, commodotised, sanitised and made instantly available. Or have they? The way we entertain ourselves nowadays has changed greatly, and keeps changing. But are our tastes evolving or revolving? Is there hope for such seeming anachronisms as the TV, the live performance and even the book?

Two years ago, Zeitgeist wrote a brief article on the nature of contemporary consumption of media. It began with the headline that 8-18 year olds in the US spend a quarter of their media time with multiple devices. Furthermore, almost a quarter of that age group use one other device most of the time while watching television. In 2013, this preference for multiple stimuli has only accelerated. 80% of UK smartphone owners (making up over half the phone-owning population) use their phones while watching the TV. Similar figures were reported in the US, and similar figures were also reported for tablet owners.  Such figures give marketers pause for thought as they begin to approach these complementary devices as ways to extend their brand from the television onto the second screen. JWT Intelligence has a great report on this.

However, it is easy to overstate the arrival of shiny, new devices, and the apparent death of television. The blame for this misconception lies partly with the media itself; journalism is less engaging when it merely reports on the maintenance of the status quo (i.e. ‘people are still watching TV’). Far more interesting to hear about what new objects are showing a bit of ankle at CES, and that us mere mortals might one day dare to dream of owning ourselves, at which point all other material objects become unnecessary. All the more so when the journalistic integrity is compromised by corporate meddling, as was the case with CNET’s reporting this year. It was refreshing then to read TechCrunch’s recent article with the headline, ‘TV still King in Media Consumption’. The article, quoting a recent report by Nielsen, was particularly interesting in noting the prevalence of TV when it referenced that almost half the homes with TVs in the US owned four or more sets. Startling. More startling, the average household spends six days a month watching television, far ahead of other media consumption (using the Internet on a computer, at a little over 28 hours a month, came a distant second). The FT writes,

Over the past decade, despite the proliferation of video content on the web, TV consumption in the UK has remained steady with the average person watching about four hours a day. Almost 80 per cent of this viewing is on the top five channels, virtually unchanged from 10 years ago.

Creative destruction is something Zeitgeist takes an active interest in and has written about several times before on this blog. It takes hold in some industries (and households in this case) more quickly than in others. The same Nielsen study found that over 55% of US homes still had working VCRs. Moreover, despite much editorial to the contrary over recent years, the PC has not yet been wiped out by creative destruction and remains a staple for several reasons in both Western and emerging economies. According to Deloitte’s recent publication, “Technology, Media and Telecoms Predictions 2013″, although the attraction of tablets – and now ‘phablets’ – mean powerful computing and a cheaper cost, allowing the potential for leapfrogging of PCs in emerging markets, qualitative research shows a small but significant demand remains for PC ownership. Moreover, many businesses in the West, currently struggling with the implications of BYO devices, are not about to jettison the PC either. Switching costs, Zeitgeist suspects, are at play here, as with those stubborn VCR owners. Click here for more of our thoughts on switching costs.

VCR owners though will one day cease to be in the majority. New avenues of distribution and consumption are opening up, though not as quickly as first thought in some cases, particularly in that of live, streaming TV, which has faced many regulatory hurdles. Variety elaborates, “Loudly trumpeted efforts have fallen short, victims of poor design decisions, overpriced services and/or confusion about the target audience”. Yet alternatives are there. One of the more interesting streaming TV options in the US currently is that of Dyle, with 90 stations in 35 markets. It is run by a partnership that includes Fox, NBC, Hearst Television and others. The really interesting thing about the service is that it neutralises the problem many smartphone users will have of returning data caps by streaming off a separate network spectrum, which doesn’t impact on data allowances. Nice thinking.

Is the increasing popularity of streaming, and the content they prefer to watch over such a channel, already beginning to effect the types of films being produced?

Is the increasing popularity of streaming, and the content viewers prefer to watch over such a channel, already beginning to effect the types of films being produced?

Though new technology has not created new tastes in content or viewing habits, it has undeniably acted as a catalyst to desires already present. Zeitgeist remembers hearing a LoveFilm representative speak last year at AdTech in London about the increasing share streaming films took in the marketplace. Nothing too extraordinary in that statement, especially from a purveyor of streaming content. The rub came when he went on to elaborate that people tend to stream films when they are in the mood for instant gratification, in the form usually of an action film or romantic comedy. The increasing popularity of streaming, and therefore the increasing popularity of these particular genres, means the way the medium is distributed may very likely have a very significant influence on the type of content in the future that is commissioned. It was no surprise then to see, on a recent cinema trip, trailers for three films that neatly fit into that category for instant gratification (see above). Zeitgeist wrote at length on the need for film studios to address arbitrary platform release windows at the end of last year. Our article was mentioned in the lead editorial of entertainment trade paper Variety. Part of our argument is beginning to be addressed already. The FT recently published news that studios had managed to stem the six year decline in home viewing figures for films last year. The article elaborates that this is in part due to the strength of digital downloads, with films sometimes being available for digital distribution before they were available on DVD. Taken 2, a superb candidate for streaming given the previous statement by LoveFilm, was released Christmas Day in the US on digital platforms, “weeks before its release on DVD”. Such thinking goes hand-in-hand with the new UltraViolet format, to which several studios are subscribing. This allows those purchasing a movie on DVD – such as the recent Dark Knight Rises – to watch it with ease on multiple platforms. Mashable carried an article last week stating that several electronics firms have now also signed up to the UltraViolet partnership. Consumers will receive ten free movies when they sign up to the service, as incentive.

The example of Netflix is an interesting one in trying to understand the balance between consumers’ desire for multiple media and instantly-accessible content, and content owners desires to drive maximum revenue from their product. The company has been making a bigger push into providing TV shows of late, and is being rewarded for it, particularly with regard to older shows. A cultural trend many a pundit has put their finger on since the credit crunch began to bite back in 2008, nostalgia has manifested itself in consumers’ desire for old shows, including Midsomer Murders and Rising Damp, reports the FT. This long tail effect is turning a tidy profit for Netflix, as well as the original broadcaster, ITV. As a complement to this, the company is also fostering new partnerships, first with Disney in December, giving it “exclusive rights from 2016 to movies from Disney, Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios, and Disneynature”. Then, at the beginning of this year, it inked a deal with Warner Brothers, to show new and old TV shows from the studio. It should be noted however, as with all these new deals and technological developments and marches into previously uncharted territory, regulatory wranglings have ensued, in this case with sister company Time Warner Cable. The problem in this situation is not perhaps so much that Netflix is trying hard to push its availability into lateral markets, but that it is not trying hard enough to create a cohesive platform that is available across all complementary platforms and devices.

AccentureDevicesReport2013

Research from Accenture illustrates a declining demand for single-use devices

One thing which Netflix will want desperately to escape being accused of – and it has done so with much success thus far – is being a niche provider of content. Sadly, the days of the point-and-shoot camera, the dedicated games console, etc., are numbered, according to a recent report by Accenture. It is evidently with such a strategic outlook in mind that Disney have recently announced their Infinity gaming platform. Variety describes it as an “online treasure chest”, featuring a plethora of Disney characters from over the years that can be interacted with over multiple platforms, whether on mobile or on videogame consoles. Importantly, the concept is designed to be an iterative, one that will grow and add characters over time, presumably as new IP is created. It certainly pays heed to the second screen phenomenon by recognising the need for multiple device access. It also plays off the trend started by the game ‘Skylanders’, which involves both physical toys and digital interaction. The same principle will apply with new toys developed for Infinity, which can then be used to create unique stories and drive narratives. The idea of having disparate characters from different Disney franchises is potentially a frightening one for those in charge of the individual brand essences of said titles, but the potential for success can be found by looking no further than the Toy Story films, which feature an assortment of different genre toys that mix well in situ.

We’ve discussed the changing models of consumption for most of the article, but it is worth noting briefly how our cultural tastes are also changing, brought on by technology (again), but also globalisation. Pundits are often quick to point out nowadays that there is a substantial demand for the live experience. Yet if we look at music, one of the most profound things to experience live, recent figures showed attendance to concerts had dipped. At the end of last year, in an insightful roundtable, The New York Times interviewed several talking heads, asking them to round up their thoughts on 2012 in the music industry. One of the more interesting points repeatedly made was that of the abundant opportunity that the Internet now provides for musical talent. Moreover, the Internet at large has become just as viable – if not a more viable – starting place for an emerging artist than signing with a record label:

“Now this year something’s been proven: Pop performers can become truly famous by building their careers themselves online, maybe more efficiently and faster than a major company can help them to do.

… you look at the first-week sales numbers of someone like Kendrick Lamar, who had an independent album that was digital only and is now on [the major-label] Interscope, but basically has no major radio hits, even if he is well-liked by mainstream hip-hop. He comes out and sells about 240,000 in his first week. A couple weeks later Rihanna comes out — not her first album and at the height of her pop fame — and sells a few thousand less than Kendrick did.”

The other trend, globalisation, has meant that voices increasingly other than those that are Western, are more easily heard. The irrepressible Psy had the honour of being the performer in the first YouTube video to cross one billion views. Conversely, in his home country of South Korea, ‘Gangnam Style’ has accrued a pitiful “$50,000 from CD sales and $61,000 from 3.6m downloads”. The point remains, however, that the fallacy of the West as the cradle of pop culture is being exposed. Christopher Caldwell illustrates this masterfully, writing for the FT in December.

Boston Consulting Group digital services 2015

Zeitgeist has written before about the upheaval new trends and preferences for media consumption – impacted significantly by the arrival of the Internet – have wrought on financial growth in the media and entertainment sector. Digital, in the form of Napster and its myrmidons in particular, has a lot to answer for. There was some relief then that at the beginning of the year when UK digital sales topped GBP1 billion for the first time (though still failing to off-set the physical media decline). Moreover, Boston Consulting Group predicted last month – in an excellent report entitled Changing Engines in Midflight: The 2012 TMT Value Creators Report – that by 2015 the digital services ecosystem will reach $1 trillion by 2015 (see above).

It is interesting to see where the ownership of content starts and ends across layers, and how content owners are trying to monetise these platforms and grab as much market share as possible from their competitors. Amazon recently began offering digital downloads of any CD you have purchased from them since 1998. It would be a great surprise to see if they do the same for books anytime soon. Fortunately, reading still constitutes an avenue of entertainment, for those of all ages. A recent piece by The New York Times reported that digital reading was on the rise for children. The article notes the numbers give some room for discrepancy, but states “about one-fourth of the boys who had read an e-book said they were reading more books for fun”, which is a desperately important emotional connection to maintain. While e-reading is a commendable past-time, is there any merit in pushing further, and advocating for interacting with a medium that does not involve a digital display? Such a turn of events, perhaps aided by the trend for nostalgia mentioned earlier, is presenting itself in the luxury hotel market, with physical libraries returning to shelves. It has been termed ‘rematerialism’.

So what does this all mean for consumer entertainment? There are evidently lots of new technologies being released, from smart TVs to new gaming devices, that will attempt to capture eyeballs. These devices, far from having to think of their natural competitors, still have the common television – and, as we have seen, even VCRs – to compete with and overthrow first. TV commands such a huge slice of viewing time, but it is under threat from distracted viewers who are now very comfortable – and more importantly socially accepting – of using a tablet, laptop or phone during a show. There are also regulatory implications t consider, which will most likely be shaped, ex-post, along the way. Taking consumers on a journey across multiple platforms and media in a seamless way will be key. Disney’s Infinity platform, when it is released, will hopefully serve as an excellent example to others of how to combine physical and digital entertainment.

On the contemporary art market – Expertise, Marketing and Money

December 18, 2012 1 comment
“If all signs are autonomous and refer only to one another, it must seem to follow that no image is truer or deeper than the next, and that the artist is absolved from his or her struggle for authenticity.”
- Robert Hughes, 1989

Tom Wolfe, one of America’s greatest living writers, recently had his latest work, Back to Blood, excerpted in Vanity Fair. In it, the author excoriates the miasma of power, money, influence and ignorance that surrounds the contemporary art market. Wolfe describes the billionaires descending on Art Basel Miami as a “raveling, wrestling swarm of maggots”. What has become of art, its pursuit and its collection?

The pursuit of excellence can sometimes can be a quixotic quest, all the more so when dealing with something as ephemeral as art, and particularly with the contemporary art market today. But how does excellence, or authenticity, in art cope with a nexus of questionable experts and highly liquid but bifurcating market, in a world where promotion is all?

Part of this problem resides in the question of expertise, its influence and its value. If one thinks of artists in the period of the Italian Renaissance, the quality of the fresco or sculpture is mostly self-evident in the verisimilitude of the work. Moreover, the media worked with often necessarily involved painstaking, long-term commitment and toil. What artists like Marcel Duchamp began and Andy Warhol perfected was the thought that works of art should be valued by their conceptualism. In other words, not necessarily how much time or effort was put into making an object, or whether it was any “good”, aesthetically speaking, but with more emphasis on the power of the underlying idea – representation – behind the work. “Art can be expressed purely as a thought or action”, wrote the FT recently. This postmodern concept has not evolved since the time of Warhol. Without being able to critique the amount of expertise in the manufacturing of an object, it becomes harder to address the worth of an object, unless you are in the presence of a designated ‘expert’. The situation risks creating an echo chamber of unedifying art that speaks to no-one and is so self-reflexive it loses all meaning. It also allows for an artificial inflation of prices, creating a false market that shuts out all but the ultra-rich, whose tiny but influential numbers can significantly skew the market. One need only look at how much the Chinese taste for wine is influencing global production to see such an instance in action.

Such points were neatly summed up recently by the prestigious art critic and lecturer Dave Hickey, when he announced he was leaving the art world:

Writers, dealers, curators, advisers have become “a courtier class – intellectual headwaiters to very rich people”. For this 0.01%, “art is cheaper than it’s ever been” but “nobody cares if it’s any good, and everybody hates it when something’s really great”

The ‘experts’ who assign value to contemporary art objects have come full circle. Rightly recognising that there is art worth shouting about beyond an arbitrary, Westernised canon, it has now gone too far in the other direction. As a brilliant FT article on the subject recently pointed out, “The market loves theory because it spares the need for discrimination.” Making matters worse, the article quotes gallerist David Zwirner lamenting, “connoisseurship is really not valued, sometimes it is even looked down upon”. All of which leads to a highly fragile concentration of expertise and financial capital sitting with a select few. If we look again at the wine industry, American wine critic Robert Parker was at one time so influential that growers in France began changing their product purely to suit his taste so as to earn a higher rating on his guide. Zeitgeist asked art critic Brian Sewell at a debate earlier this year whether influential patrons such as Charles Saatchi and Francois-Henri Pinault were playing a similar role in the contemporary art world; shifting value perceptions of art and artists according to their personal whim. It helps little when major collectors like Frank Cohen admit publicly that they have “bought a load of bullshit”. The quotation may sound flippant, but it underscores the massive influence the bullshit they have bought has on the broader prices in the art market.

artmarketgraphs

Auction turnover returns to pre-recession highs… just in time for slowing growth in BRIC regions?

Art adviser Lisa Schiff spoke openly about this recently to Forbes magazine, saying she was “worried that there are a lot of young artists that could really take a nosedive”.This influence is being felt keenly right now with small but highly influential – and influenced – groups of buyers in Russia, Brazil and China. But as the BRIC regions continue to stall, what will happen to arbitrarily in-demand art and artists if these markets suffer further losses or even a sudden shock? Such problems are further compounded by the massive rise and fear of litigation, as previous, bona fide experts able to certify works as being genuine are being scared away by the threat of legal action.

So there’s an expertise fallacy here, one which is not restricted to the world of art. Elsewhere, marketing, something that admittedly has always been part of the selling of art to an extent, is becoming increasingly essential for a successful artist or studio. The Montoya exhibition currently on at The Halcyon Gallery in London represents the epitome of this new trend. Full-page ads in The Economist and 30-second spots on CNBC (see beginning of article) are being taken out for the exhibition, placed seemingly without irony at the feet of the very audience the art seems to be mocking, or at least parodying. It is the increasing lack of ironic awareness that creates an emptiness in the purchase and reputation of some of today’s bigger artists, including Jeff Koons, Richard Prince and Takashi Murakami. Interestingly, the latter two have both seen stratospheric success that goes beyond the confines of the art world, helped in part by collaborations with luxury goods company Louis Vuitton.

Richard Prince's oft-repeated Nurse motif was used for the Spring/Summer '08 Vuitton show

Richard Prince’s famous Nurse motif was used for the Spring/Summer ’08 Vuitton show

The marketing of art is at its most visible at contemporary art fairs – of which there are now more than 200 annually around the world – mentioned earlier as a subject of Tom Wolfe’s new work. Frieze, which takes place annually in London, is one of the most well-known. It was intriguing to see that this year saw the debut of Frieze Masters, which some saw as an attempt to breathe new life into an event that had begun to lose its ability to surprise. It was also seen as a deliberate attempt to focus attention on more established names in order to avoid some of the volatility the market has seen with newer, less-known artists. So the market isn’t so insular that it doesn’t recognise the need for significant change.

Collecting art is something that few of us can turn into a committed past-time. Moreover, the vagaries of art over the past ten years-plus have been such that only a select few would be able to decipher the worth of a current artist’s produce. The value of their art has been dulled by demographic shifts and concentrations, by overly-excessive marketing tactics and by a reduction and muddling of the nature of what it means to be an expert. Regulation of the sector seems overdue, as conflicts of interest and an oligopolistic marketplace seem to cry out for legal oversight. Some of these problems are not restricted to the art world and it will be interesting to see if a paradigm shift sits on the horizon. The Internet is providing some antidote to this. Recent online-only auctions by Christies – one of ArtInfo’s top ten stories that moved the art market in 2012 – have made the process of bidding for items extremely popular, and small art-sellers like Exhibition A are illustrating there is room for innovation in the industry. Is the art market in an aesthetic and financial bubble, and will it burst? Time will tell.

Ai Weiwei Exhibition A

Hollywood and China

We have reported before on the quota China imposes on Hollywood films coming into the country.

Zeitgeist remembers being in a meeting while doing at stint at 20th Century Fox back in 2004, when presentations were optimistically suffixed with the potential for China to drop said limit. It was always an inevitability, and when last month DreamWorks Animation announced a pact with Shanghai Media Group and China Media Capital, it was clear something bigger was on the cards. This has been the case for a while though, as US production companies have sought to get into China’s goodbooks with relevant films (witness Kung Fu Panda and the most recent iteration of The Mummy franchise).

Good news finally came to studio heads and cinema exhibitors. While the quota hasn’t been dropped, it has been dramatically extended to allow another 14 films into the market each year (from the current 20). This can only be good news for Hollywood, coming at a time when DVD and Blu-Ray revenue is slowing; Bloomberg recently reported that more films will be streamed than watched on disc this year. In China, however, views are mixed. Variety summarises,

“Theater owners are very upbeat, filmmakers are split — will this mean unnecessary competition, or a boost to moviegoing habits? — and Hong Kong industryites are watching things closely.”

The country already means big business for Hollywood, with the piece of rubbish that was Transformers 3taking in  $170mn, and Avatar making $210mn. Year on year, the number of screens in the country increased 33%. 803 cinemas opened in the past 12 months there. So the supply-demand ratio is currently extremely favourable (with Hong Kong hopefully not being a harbinger). One would have to be very naiive however not to consider the political landscape of China, which is inscrutable to say the least. Whether dealing with the electoral process in Hong Kong, or the media landscape – from TV to social media – it can be difficult to know where you sit at any time. Variety again,

“Filmmakers face… rigid – and opaque – standards of control and censorship [in China]… [I]f a filmmaker doesn’t meet those sometimes abstruse rules, it won’t be admitted.”

What the Chinese government will have some difficulty in regulating though is the black market, which should hopefully see film piracy diminish as a source of revenue. With an assumed lowering of cost per purchase of pirated film, it should mean even more Chinese get to see Hollywood product (though admittedly without compensating the studios for it, at least initially).

As well as receiving net net more money from China from its films, the deal made also allows Hollywood to receive 25% of the Chinese box office back on imported films, previously at 13%. What should be a lucrative influx of revenue for the film studios comes at a welcome time. Not only is the business shifting from discs to digital delivery – which currently is proving harder to monetise – it is also under increasing pressure to collapse its sacred windows – the time period between when a film is released in cinema, DVD, POV, TV, etc. A few weeks ago, Netflix, an increasingly powerful player in the mix as it broadens its availability to the UK, and becomes a content creator, called the windows structure “pretty archaic”.

While releasing films on multiple platforms simulataneously might produce a spike in opening weekend returns, it comes at the cost of angering a lot of cinema owners, who would not take kindly to the idea of their film being available to watch at home at the same time they are trying to charge you £12 to watch it in a big dark room with a bunch of strangers. Zeitgeist’s radical solution is to allow the windows to collapse, and then for the government to allow the film studios to vertically integrate with the exhibitors again, like in the old days. But that’s another article…

One big Hitch

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 (of Drudge Report infamy),

“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.

A Lack of (Virtual) Governance

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.

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