Can't Stop the Music: File Sharing and the Music Industry
By Olayinka Arowolo MBA
Piracy has been an economic issue for the music business for decades costing the industry millions in lost revenue annually. The internet has compounded industry woes via evolving file sharing applications and online piracy. Online consumers have access to millions of music files and can essentially download catalogs as fast as they can blink without paying a single dime. The industry decided against technology integration and decided to go to war against the top file sharing companies in the game and their consumers.
Napster, Kazaa, Gnutella and Winmx were the top file sharing applications on the web. They allowed consumers to share, rip, burn, swap and send music files over the internet. With basic non-intrusive user interfaces, consumers adopted the applications and quickly learned the various nuances. While membership was free to users they raked in millions on the backend through advertising and marketing partnerships. The music industry’s position was clear; go after all offenders, and access providers and sue the top file swapping consumers.
The recording industry and film companies tried to urge congress to widen the scope of anti-terror laws to give them access to people's e-mail and phone records. What the industry failed to realize was the potential business model that the technology created. They spent millions on lawsuits and lobbying congress for stricter piracy laws. They sued colleges, students, internet companies and any entity considered an element of the piracy puzzle.
The I-tunes effort is an overwhelmingly successful example of where the industry missed the boat. The industry missed out on the millions of revenue it could have realized had that been an industry wide application as opposed to an Apple Inc initiative. Instead the industry decided its resources and money were better spent on efforts to repress the technology as opposed to enhancement and integration.
The best course of action clearly should have been integration and conversion. Apple has sold 23 million IPODS to date and sold over 100 million dollars in .99 cent music sales over the web. The industry should have invested in the Kazaa’s and Winmx applications and converted the applications to successful download models like I-tunes. Taking it a step further the industry should have integrated the model with its music publishing business making more of its catalogs available for downloads.
Music publishing is the commercial exploitation of songs through the issuance of mechanical licenses, synchronization licenses, performing rights licenses, print licenses as well as other licenses authorizing various uses of the songs. Integration would have meant the authorization of file swapping and sharing while retaining control and profits of all downloaded songs. Strategic partnerships with mp3 hardware providers could have generated additional revenue as well reduce the IPOD’s dominance and market share.
The industry is now sharing publishing control with I-tunes. The IPOD could have been an industry initiative but it was not. Instead the industry was forced to comply with technology and adopt the model. The music industry cannot remain in its archaic model in its business. It must invest in ways to protect and enhance its offerings by adapting to elements that evolve in commercial culture. The piracy battle should have been anticipated and technological contingencies should have been conceived as a result instead of forcible compliance. Any business must be consumer driven and all logistical elements that drive the complexity of the business should be enhanced on a global scale.
Olayinka Arowolo is president of Atlanta-based Aroviz Online and Associates, LLC. Aroviz is a provider of video mail and audition automation software platforms.
TIVO Technology Turns Product Integration into a Billion Dollar Business
By Olayinka Arowolo MBA
Advertising on TV has been the most profitable business model in TV media over the past 50 years. With the rising popularity of the TIVO technology, consumers are able to skip the very commercials that make TV programming possible. Advertisers have had turned to a more aggressive tactics in getting their products noticed during prime time. Product integration and placement into movies and network TV shows is a 5 billion dollar a year business and growing. There are two main avenues of implementing this business model:
1. Trade-off of integration or placement for a supply of product,
2. Financial compensation for placement or integration, the latter is the more popular of the two.
Before product placement really saw a surge in the mid 90s, it was pretty much a relaxed effort. Today with an increasing number of TIVO units in more households, there are precise corporate positions and entire agencies dedicated to the placement business model. Some larger corporations will set aside personnel to scout out opportunities for product integration or placement within films, television shows and even games and music.
Not all is rosy and peachy in LA-LA land. The Writers Guild has decided to get in the act by threatening tougher federal regulation for TV product-placement deals if studios/networks do not bargain with the union on the issue of weaving commercial brands into story lines. Along with being asked to create memorable stories and characters, writers are being told to perform the function of ad copywriter, but to disguise this as storytelling and this is a potential violation of FCC regulations.
Currently only the studios and the TV networks reap the profits and writers/actors do not see a penny. With the support of the Screen Actors Guild, the WGA is calling for a code of conduct governing product integration on television and talks on compensation for writers for the additional work necessary to merge product brands into content. With most actors also failing to receive compensation for product integration deals, SAG is joining ranks with the WGA for this effort.
Product integration is a growing business model and there is enough profit in the market space for all. The consumer cannot escape the exposure to products in one way shape or form. Aroviz is exploring the possibilities of buying media advertising on commercially produced hip hop CDs for corporate clients. Product placement advertising will be produced in the form of skit interludes on the records but invisible integration that accommodates artistic integrity will be a priority. In the near future your favorite artist will be endorsing a product via a 10 -30 second skit on their CDs.
The most interesting observation in this market space is the means and innovative approaches marketers will conceive to combat advances in technology that present challenges in advertising. Product integration has gained prominence based on TIVO technology but sooner or later there will be some option available to consumers that will allow radio ads to be blocked. As radio advertising is in the billions, we wait to see what the marketers will come up with and which conflicts of interest develop as a result.
Olayinka Arowolo is president of Atlanta-based Aroviz Online and Associates, LLC. Aroviz is a provider of video mail and audition automation software platforms.
From Fortune.com
The Man Who Saved Richard Scrushy
Monday, July 11, 2005
By John Helyar
Richard Scrushy's $2.7 billion accounting-fraud trial looked like a slam-dunk for the prosecution. All five CFOs who had ever reported to the former HealthSouth CEO copped guilty pleas and agreed to testify against him. Ten lesser company officials also pleaded guilty and agreed to testify. Yet the prosecutors threw up 36 airballs, failing to score with a Birmingham, Ala., jury on any of the three dozen counts.
What happened? Scrushy's lead attorney, Donald Watkins, would be glad to explain—and to continue the hoops metaphor. "They never expected a hard, full-court press throughout the trial, and that's what they got. It was unrelenting," says Watkins, who put together an unlikely defense team and unleashed it on what he calls the "overconfident" feds. Art Leach was the Designated Objector, contesting prosecutors' questions frequently and knocking them off stride. Jim Parkman was the cross-examiner whose down-home demeanor won over the jury even as he destroyed witnesses' credibility.
Watkins, of course, was the coach—and, it turns out, the perfect person for the role. His worldview was shaped by his youth in civil-rights-era Montgomery. Though the son of a university president, he knew the indignities of drinking from separate water fountains and the stresses of integration. Now 56, he was one of the first blacks to attend the University of Alabama law school in the 1960s. Even decades later, the emotions and fissures of that era's upheaval profoundly influence Alabama's dynamics—and, as necessary, Watkins's tactics.
And so he deployed a brilliant, if controversial, racial strategy in a city where blacks and whites still, according to Watkins, view certain things very differently. "Black people are more open to receiving their information in the courtroom," he says. "Whites will buy into the media hype put out by the U.S. Attorney and Justice Department for two years...." Watkins tried to maximize the number of black jurors—seven of 12 would be African American. He seemed to be speaking directly to those jurors in his closing argument, comparing the legal travails of Richard Scrushy (who—need it be noted?—is a wealthy white man) to the struggles of blacks in the 1950s and 1960s. Outside the court, the black community was wooed by Scrushy himself, who joined a black church, and preached or donated to other black congregations. Some of them sat behind the defense table at trial in what became known as his "amen corner." Critics saw that as an effort to influence jurors; Watkins asserts it was an unbidden show of support.
Maybe. But Donald Watkins's genius is to play his cases as multidimensional chess. He made his name in Birmingham in the early 1990s by representing Mayor Richard Arrington, then under investigation for corruption. Watkins didn't just defend the city's first black mayor; he went on the offensive, leveling charges of racism. Arrington, who was never charged, put Scrushy together with Watkins even though his old attorney hadn't practiced law since 1998. In recent years Watkins has founded a bank and invested in energy deals. He was bidding (unsuccessfully) for the Anaheim Angels baseball team in 2003 when Arrington urged him to represent Scrushy.
Watkins admits he was greatly aided by two government gaffes. First, it tried the case in Birmingham rather than New York or Washington, D.C. He had many more moves to make on the home court. Two, it assembled an awkward coalition of prosecutors—some from Washington, some from Birmingham—who meandered through eye-glazing accounting and compensation technicalities. Doug Jones, a former U.S. Attorney in Birmingham, believes prosecutors had a "fundamental misunderstanding" of the case. "What the defense understood is that this was a street brawl," he says. (U.S. Attorney Alice Martin counters that hers was a well-presented case and the venue was proper, since the HealthSouth pleas were entered in Birmingham. "You can't run to New York for everything," she says.)
Scrushy still faces a wave of civil litigation, including an SEC suit. Watkins will put a lot less time into this phase of Scrushy's defense—he wants to get back to his business interests—but vows to be no less aggressive: "The government will have to work for every inch of ground."