1 Man, 8 Starbucks and 6 Conversations about Race

My friend, Ron Gross, is an expert on conversation. He knows how to start them and guide them. He is the founder and director of a group called Conversations New York.

So it is not surprising that he visited a few Starbucks to see if he could find a conversation or two about race. He wrote about his experience in an email to many of his friends. With his permission I quote him now.

“A barista at the Spring Street Starbucks in lower Manhattan yesterday afternoon slapped a sticker on my cup that read: RACE TOGETHER.

He was following the suggestion of Starbucks president Howard Shultz, who had announced the nation-wide campaign earlier in the week.  Starbucks wants staff and customers at its 7,000 shops across the U.S. to invite in-store conversations about “issues of race, prejudice, and lack of economic opportunity.”

As I settled into a corner sofa, I asked the woman next to me: “What do you think about talking about these issues in Starbucks?”

“Not my cup of tea, frankly,” she replied with lower Manhattan coolness.   “I come here to calm down, or to take out.   Wrong time, wrong place.”

But the couple that sat down on the other side of me was interested.  “It’s naive, sure — but it’s a start,” said Larry, a software developer.   And his co-worker, Russell, added: “We’ve talked about this at our shop, but it’s actually easier with people with whom you don’t have a lot of baggage.  We’ve had some good talks with other customers, and with one of the baristas.”

The three of us talked for 15 minutes.  It was the longest conversation I’d had with any African American in over a month.

I spent the rest of the afternoon and evening stopping into 7 more Starbucks stores in a variety of neighborhoods in Manhattan, getting as far uptown as the one on 168th Street and Broadway.   (That’s 6 more stores than were visited by Times reporter Sydney Ember.)

Total results: 6 illuminating conversations, 2 brush-offs.

This Starbucks campaign is taking its lumps in the blogosphere, where it’s being accused of everything from grandiosity and condescension, to manipulation and hypocrisy; some of the points — about Starbucks sourcing, corporate staffing, and HR policies — are telling.

But from my totally unscientific sampling of 0.1 percent of Starbucks stores nationwide, I’m giving two cheers for this experiment in civic discourse.

Time was when coffee houses were hotbeds of citizen-to-citizen conversations about issues that mattered — such as in 18th century Britain and America, where they made governments quake.   It’s heartening to get even this slight whiff of that amidst the white foam. “

If I were Rachel Maddow or Chris Hayes, I would invite Ron on to my show.

If I were Howard Schultz, I would hire Ron right away.

He gets conversation.

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What Fred Wilson Thinks Today

Fred Wilson writes on his blog, AVC, every day. He has done so for over ten years. Some might consider this activity a full time occupation. Not Fred.

He really spends his time searching for the next company in which to invest. Just like he and his partners invested in Twitter, Kickstarter and Tumblr. He then works to help each company find its way to success—always a perilous journey and not always a successful one.

See why he blogs and other thoughts he has regarding the world of tech in this interview with Jason Calacanis. It is well worth your time if you want to understand where the Internet has been and where it might go in the future.

After you watch the interview, it is highly likely that you will read his blog—every day.

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Gradually, Then Suddenly: The Pay TV Bundle Erodes

“How did you go bankrupt?”
Two ways. Gradually, then suddenly.”
—-Ernest Hemingway, The Sun Also Rises

The Internet does one thing very well (among others).

It destroys business models, particularly those long held by legacy media companies.

Two years I ago, I speculated that HBO had spent at least five years dreaming about an Internet service that would replicate what they sold through the cable companies. They were still not able to take the plunge. Yesterday, after 7 years of delay, they announced that service, called HBO NOW.

Starting in mid April you will be able to get HBO without owning a Pay TV subscription.

HBO knows that people are abandoning Pay TV. To keep growing, they must reach people directly through the Internet.

They sat back and watched as Netflix created a new Internet business model that delivers original series, movies and TV shows completely outside the Pay TV business model. HBO realized they had no choice—either jump into the Internet—or slowly wither away while tied to the Pay TV bundle.

Today, it was announced that Verizon FIOS TV dropped The Weather Channel from its lineup. They replaced it with Accuweather, an application that rides on all screens over the Internet.

This is remarkable—an application has replaced a cable network within a Pay TV bundle. Cable networks believe they can continue to charge the MSOs (FIOS, Comcast, etc.) a lot of money to be included in the Pay TV bundle.   Apparently they did not anticipate that they would be replaced by an app. But that just happened.

As I wrote yesterday, Suddenlink Communications decided that the Viacom channels have become too expensive and dropped them from its lineup. And Suddenlink’s net income went up.

We have three seemingly disconnected events. Yet, they are all connected.

  1. A profitable TV subscription channel launches a replication of its TV service on the Internet.
  2. A major Pay TV provider drops a major cable network and replaces it with an Internet application.
  3. A small MSO eliminates a large suite of channels from its basic cable offering and does not miss a beat, because people stick with them to get broadband Internet access, (a business with very large profit margins).

The Pay TV bundle grew over decades as cable channels were created and legacy media companies like Viacom were built into juggernauts. In order to be current, to be informed, and to be entertained, you had to buy cable. In order to get HBO, you had to get cable. No more.

Between the end around of HBO, the pull of You Tube, the attractions of Netflix and the proliferation of applications that feed my phone or my TV, the Pay TV bundle steadily loses its value.

Cable networks must learn that they either go directly onto the Internet or risk being dropped and replaced within the once magical bundle.

The Internet unravels these channels much as it destroys all existing business models,

“Gradually, then suddenly.”

Posted in Broadband, Cable, Distribution, Innovation, Internet, Old Media, Television | Tagged , , , , , , , , , | 1 Comment

The Achilles Heel of the Cable Networks

In Betting Against the Cable Bundle, Emily Steel captures some of the fault lines that exist in today’s mass media ecosystem.

A cable TV provider, Suddenlink Communications, is in a dispute with Viacom, the media conglomerate that owns several cable networks, including MTV, Nickelodeon and Comedy Central. Viacom wants more money for its channels. Suddenlink has said no and for six months its subscribers have had no access to all of Viacom’s myriad channels.

Of course, each side has publicly argued that they have been wronged.

While the details of the dispute are interesting, what is most fascinating is the real world impact of the dispute. As pointed out by Steel,

“Viacom networks were removed from Suddenlink’s offerings on Oct. 1. During the following three-month period, the cable company lost a total of 32,600 video customers — about four times the 8,600 video customers it lost during the same period a year earlier.”

At first glance, this doesn’t look good for Suddenlink, the seventh-largest cable operator in the United States with about 1.4 million customers.

Yet, if you look more closely, the picture improves.

“But most customers who dropped the video service because of the dispute with Viacom continued to pay for Internet and other services, with Suddenlink retaining 99.7 percent of its customer relationships, the company said. Net income for the quarter was $7.1 million, up 65 percent from the same period the previous year.”

While some people stopped paying for the pay TV (or video) side of their bill, they continued to pay for broadband Internet access.

The broadband side of the cable business is much more profitable than the pay TV side. Here, the cable company does not have to pay for any content. All it has to do is provide a fast, dumb pipe through which content flows. And

“Unlike the video business, where customers can switch to satellite and other offerings, cable companies can have an advantage in the broadband arena, because there is less competition for selling Internet service in the markets where they operate…”

Most cable companies are the only company in your town or city that provides broadband. Nothing better than monopoly status combined with low cost. You add the two together and you get high profit margins.

Some smaller cable companies are beginning to realize that they do not have to pay whatever the cable networks demand from them. They can refuse to pony up and still maintain a loyal customer base—for their broadband service.

And by doing so, have an even more profitable business.

The only question is, when will the larger cable companies follow suit?

Will the Achilles Heel of the cable networks be finally revealed?

Posted in Broadband, Cable, Distribution, Internet, Television | Tagged , , , , , | 1 Comment

Media and a Strong Culture of Experimentation

Sometimes you read something that says it all. A group of sentences that you wish you had come up with (but sadly did not).   Yesterday I came across one of those gems while reading an interview with Amy O’Leary, recently with the New York Times and now with Upworthy. Here is the link to the whole piece, but read this first.

No one has really figured out the secret to mastering what it means to be a media organization in the digital age. So the critical thing is that places like The New York Times dive head first into a strong culture of experimentation. And by that I don’t mean throwing everything to the wall and seeing what sticks. I mean rigorous, studied experimentation, where new ideas are tried with excitement and with ease and are studied to learn what works and what doesn’t. I mean that taking risks and trying new things are celebrated even when they may seem, at the outset, like a failure. And that the definition of success for a new idea should be whether or not we learned anything from it, not whether or not it became the future of media.”

The entire world of media can learn a lot from this paragraph.

By this, I mean anyone who writes journalism, creates a TV show, produces a movie, posts on YouTube, creates on Instagram, produces a radio show, a podcast, writes a book or makes music.

That large group that includes everyone who creates media intended for any audience in our digital age.

As Amy points out, we all should engage in “rigorous, studied experimentation”.

Maybe easier said than done, but doable nonetheless.

Posted in Audience, Distribution, Innovation, Internet, Old Media, Television | Tagged , , , , , , , | 2 Comments

What Taylor Swift Gets Right

Taylor Swift’s new album opened big last week and everyone is talking about how she pulled her music off Spotify.

As usual most people are looking in the wrong direction.

Many argue that the web and streaming services don’t pay enough money or they hurt musical artists or how terrible things have gotten since the Internet arrived.  So we hear the same old story about how our lives were just better when we had CDs.

This is the direction that Ben Sisario initially takes in his New York Times piece.

Then something remarkable happens. He finally gets to the real story about why Taylor Swift is successful and many other musical artists are not.  Put simply—Taylor Swift gets the social web.  She understands the world we live in today and doesn’t waste time thinking about yesterday.  She acts boldly and aggressively to reach her fans where and how they live within today’s media environment.

Sisario and his editors made a classic journalistic error.  They buried the lede. The important stuff comes when Sisario wraps it up with,

“… the most effective piece of promotion may have been Ms. Swift’s own deft command of social media. On Twitter and Instagram, she excels as an authentic personality who establishes direct connections with her audience by doing things like reposting images of fans holding copies of her album, said Matt Britton, chief executive of MRY, a youth marketing agency that is part of the Publicis Groupe, the global advertising giant.

“She has been able to take one person and spread herself out into millions of itty-bitty pieces of Taylor Swift and touch as many people as possible,” Mr. Britton said. “When you do that, you generate a kind of advocacy and excitement that no level of advertising could.”

That kind of engagement may inspire just as much loyalty in her fans as her music does, a valuable lesson for the music industry at large.

Claire Thompson, a 30-year-old entertainment lawyer in Los Angeles, said that she pre-ordered “1989” from iTunes as soon as it was available, and that it was the first album she could remember buying since Beyoncé’s self-titled album last year. She also said that she follows Ms. Swift closely on Instagram and likes the way “she pops up like all my other friends do — Dana’s at the Giants game, Taylor’s at the Knicks game.”

“It makes you as a fan feel like you’re a part of her life,” she added. “We all feel that if we met her, we would be friends. You feel connected to her. It’s nice to feel that.”

So you want to be successful as a musical artist in today’s world?

Make fans a part of your life, become an authentic personality who establishes a direct connection to your audience and generate a kind of advocacy and excitement that no level of advertising can.

And quit pining for the good old days.

Posted in Innovation, Internet, Social Media | Tagged , , , , , , , , | 5 Comments

Film in the Future and Fan Uploaded Content

I recently did a radio interview with Spark, hosted by Nora Young, on CBC Radio One.

If you live in Canada you can hear it today at 1PM NT or you can hear it now on the Spark blog under Film in the Future.

She is a great interviewer and they did a splendid editing job (which made me sound smarter).

Nora also did a compelling interview with Lewis Ball of Broadband TV about how Hollywood is dealing with Fan Uploaded Content

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Will Hollywood learn from The Fault in Our Stars?

In June of 2012 I wrote Another Crack in the Mass Media Wall, a post that detailed how Lionsgate effectively used social media for the first time to get a huge opening weekend for The Hunger Games.

It is worth noting that two years later Hollywood decided to follow up on its own innovation with the release of The Fault in Our Stars.

As described in How “The Fault in Our Stars” Movie became a Social Media Supernova, Fox effectively reached its audience with a well planned social media campaign before the movie opened.

“Other movies have done [social media outreach] in places,” George Dewey, Fox’s senior vice-president for domestic digital marketing, tells Yahoo Movies. “We’re doing it across the board. I think the combination of the passion that pre-existed the movie with the decision to involve fans every single step of the way is why you see so much conversation about The Fault in Our Stars now.”

Dewey goes on to comment.

“In general, treating fans as part of the campaign as opposed to the audience for the campaign is the future of how movies will market.”

This view expressed by Dewey is still a minority one within the Hollywood marketing and distribution machine.  Most in Hollywood still believe that the audience is simply there to receive the campaign—not be part of it. This dominant point of view clings to the old mass media model of “we create, you simply consume”, where all control rests with the media company and gives no control or “emotional ownership” to the audience.  But we live in a new connected world. 

This past weekend showed that the marketing strategy employed by Fox and Mr. Dewey was “spot on”. 

The studio projected that the movie would hit $29 million at the North American box office.

But something bigger happened. As detailed in the New York Times,

The Fault in Our Stars took in a spectacular $48.2 million at North American theaters between Thursday night and Sunday, and it did so with nary a billboard in sight and no weeks long television ad barrage. In fact, 20th Century Fox spent less than $30 million on marketing, or half of what studios typically spend to introduce a summer film.”

It is important to mention that the movie was made for $12 million—paltry by Hollywood standards.

So Fox effectively cut their marketing spend in half  (thus saving $30 million), by not buying many ads (on that old fashioned one way mass media channel called TV) and instead reached out to fans directly on the Tumblrs, Pinterests, Facebooks and Twitters of the world (all built on that new fangled two way network called the Internet.)

They went directly to potential fans, invited them in and created an ongoing conversation.  They allowed them to converse with the “movie” and converse with each other about the movie.

And note that @realjohngreen, the book’s author and a social media force in his own right, was a big part of this conversation.

Will Hollywood bosses ignore the lessons from this success?  Will they insist that this is just a “one off” that cannot be repeated?   Will Mr. Dewey be praised for his work but also be told that this is really not the future of how movie marketing will work?

Very likely, if history is any guide.

Most industries would be thrilled to find a model that creates their product for less money, gets it into the market it at a reduced cost and still attracts a large number of consumers.  Most industries would work hard to see how they might replicate this model for future products.

They would have R&D units within their companies whose only purpose is to figure out the new connected world we live in.  They would experiment and innovate.

But this is the movie business we are talking about. Change is slow and not actively pursued. Instead of two years between innovations, it should be two months, two weeks or two days.

Can Hollywood learn a new trick that it can repeat, improve and execute consistently over time?

It should. After all, the new world is staring them in the face.  On at least two occasions it has also contributed massively to Hollywood’s bottom line.

But maybe it is just an old dog. 

And learning new tricks is just not its thing.

Update, June 23: A excellent piece today by Kathleen Toohill of Full Screen gives further detail on the social media campaign waged by Fox and John Green. Here it is: Getting Gen C to the Box Office [Infographic]. Read it!

Posted in Distribution, Hollywood, Innovation, Internet, Marketing | Tagged , , , , , , , , | 12 Comments

The Comcast Tax and Broadband Shell Game

Cable companies operate two distinct lines of business.

Traditionally they bundle and resell linear TV networks.  The cable company feeds these networks into our homes and provides the interface that lists the content for our selection.  The cable company pays each network a fee for each subscriber.  The consumer pays a monthly fee to the cable company.

The cable companies also provide high speed Internet access, known as broadband.  With this service, they do not pay any content providers for their channels nor do they provide a guide to the content that flows through the pipes.  They move the bits requested by the consumer as well as those bits she sends back out to the Internet.  And the consumer pays a monthly fee to the cable company.

One service allows you to navigate and view a predetermined, pre purchased bundle of linear channels. The other service gives you a pipe and access to an infinite array of content.

In its traditional business the cable company is the ultimate gatekeeper. It determines what you can see and what you will pay. 

With broadband, the gatekeeper role disappears.  Cable companies do not determine what you will watch nor do they charge you based on the content you watch.  

Some cable companies would like to change this.

Cable companies feel much more comfortable seeing the world through the lens of their traditional business.  They are working to reshape their broadband business so it looks more and more like their traditional business—a closed system, where they act as a gatekeeper and extract rent at every turn. 

See, for example, the comments made by Brian Roberts, the head of Comcast, at the recent Re/code conference.  As reported on GigaOm,

 “In a series of analogies, Roberts likened his company’s role to that of a postmaster, pointing out that Netflix pays hundreds of millions of dollars to mail DVDs to its customers but now expects to be able to deliver the same content over the Internet for free.”

His analogy is wrong.  Netflix does not want to distribute its bits for free.  He obfuscates the truth about how bits are paid for and how bits travel across the Internet.  He sows confusion while claiming to be clear.  Watch carefully as the shell gets moved.

Netflix pays money (a lot) to third parties in order to transport its bits over the Internet. (Just as it pays the postal service for DVD transport.) These bits are delivered via the Internet directly to the cable companies and other ISPs known as the last mile providers.  They in turn deliver the bits to their subscribers.

Mr. Roberts neglects to mention that broadband subscribers (you and I) pay up front for access to these bits. (Remember that monthly fee!)

Comcast is not satisfied with what we pay for broadband. It would like a little more.

As Mike Masnik puts it,

“What Roberts really wants to do is to get Netflix to pay a second time for Comcast’s customers’ bandwidth, even though they’re already paying for it.”

I believe this is called double dipping.

Mr. Roberts can double dip if he so chooses—but he should call it what it is.

Guess what happens when extra rent is extracted?

The end user pays extra.

Perhaps we should call it the Comcast tax.

UPDATE: John Oliver just did a brilliant and funny piece on his HBO show about net neutrality—it is a must see—here it is. (thanks to Sheri Candler)

Posted in Broadband, Cable, Distribution, Internet | Tagged , , , , , | 2 Comments

Movie Piracy: Surprising Tips from a Hollywood Insider

My recent post, The Movie Studios: Blinded by Piracy, generated many public and private comments.  One very smart one came in an email from a highly placed executive within the movie and television business. He has allowed me to quote him as long as I do not reveal his identity.

He writes,

 “Unlike the vast majority of my colleagues, I believe that the anti-piracy crusade (irrespective of where you stand on the issue morally) is practically futile and akin to “the war on drugs” or stopping people from speeding.  Earlier in my career, like most lawyers brought up in pre-21st century media, I was all gung-ho about enforcement and the sanctity of private property.  Although I still believe that respect for intellectual property laws is foundational for our industry, I am also a pragmatist, and I have come to believe that our biggest problem is ourselves, not the pirates.”

“It is the lack of creative marketing, pricing and windowing schemes that service and entice the customer that give the mainstream entertainment industry its biggest problem.  This is a social phenomenon, not a legal one, and, therefore, needs social solutions.” 

 This is a point that needs to be repeated and restated over and over. 

 Hollywood is radically out of sync with its customers, who now live in a hyper connected world.  These are the people who love movies and TV programs. They want to watch them on every screen they own.

It is Hollywood’s refusal to change its business model and learn how to entice its customers that is the problem.  Not piracy.

A purely legal point of view on piracy prevents Hollywood from finding a solution that brings in these customers.  Another frame is needed.

This Hollywood executive proposes one.

 “I analogize to other social issues such as traffic law violations where researchers have discovered that the answer isn’t changing the law, stricter enforcement or better education but actually better design of roads, intersections, stoplights and street signs to entice people to actually drive more safely. 

 The decision to use pirated content is not made in a vacuum.  It is a complex social transaction like any other in which the user takes into account his or her options and the costs and benefits of each. 

If the industry offered more people more convenience and better pricing and availability schemes, they would not turn as often to illegal content (which is not always easy to find and not always “free” – viruses, hassle, time, bad quality, etc.).  No solution is perfect – a certain percentage will always “cheat” or game the system (just as retail understands that there will always be a certain base level of shoplifting), but such an approach would pave the way for new markets and innovation.

The single-minded focus to hold onto today’s market share and today’s pricing schemes is folly that will eventually lead to long term loss.”

 Hollywood believes that its obsession with piracy is good for business.

 In fact it is really bad for business.

 As this insider states so eloquently,

 “I have come to believe that our biggest problem is ourselves, not the pirates.”

Imagine how different Hollywood could be if a major studio head possessed the insight (even courage) to utter such a line.

Hollywood should heed the advice of one of its own insiders as it wrestles with its future.  Perhaps then it can “pave the way for new markets and innovation”.

But will it choose to?

 

Posted in Hollywood, Innovation | Tagged , , , , , , | 9 Comments