Monday, June 28, 2010

Copyright Infringement?

Can we get some consistency please?

This past week, a Federal Judge in New York granted Google's request for a summary judgment against Viacom based on the "Safe Harbor" act. Viacom had filed suit (and does plan to appeal this ruling) stating that YouTube is a "den of thieves" since many copyrighted works are uploaded every day to the site.

Since some of these legal thingumyjigs may be foreign to you, I'll break it down a bit.

First, a summary judgment is requested at the outset of the case by one of the sides. Essentially, either the plaintiff or the defendant are telling the presiding judge, "look, your honor, this is a huge waste of time; the other side has no chance in hell of winning this case so can we please cut to the chase? Judge Judy comes on in 15 minutes." While this is requested in a relatively frequent manner, it is rarely granted because judges are generally predisposed to give everyone their day in court. The fact that this was granted in such a huge case where there are undoubtedly layers upon layers of intricacies is quite surprising.

Second, the Safe Harbor provision of the Digital Millenium Copyright Act (DMCA, passed in 1996) states that Internet Service Providers (ISPs) are not liable for the actions of their users even though it is not unusual, even expected to some degree, that said users will engage in some nefarious activity (like MP3 file sharing).

One could argue that a site as popular as YouTube has ability to screen every video to see if it is copyrighted material. First, videos are uploaded at a ridiculously fast pace: in May 2009, 33 minutes of video were uploaded every second to the site. Secondly, the set of copyrighted works is so vast that there is no possible way to check the videos against the entire body of works.

The counter argument, of course, is that if they can't do it then the site shouldn't be allowed to operate in the first place. But I digress...

The reason I yearn for some consistency is that, just last month, another Federal Judge agreed with the Recording Industry Association of America (RIAA) when they filed suit against Limewire stating that they continue to operate even though the service is frequently used (probably more often than not) to peddle copyrighted material around the Internet.

What's the difference between the two cases? I don't know. Both YouTube and Limewire are services provided as a convenience to the Internet community. Both are used for sharing content.

The only possible difference I can see is that material is actually uploaded to YouTube, meaning that a copyright claim submitted to Google will result in the offending video being pulled from the site. Limewire does not accept uploads - it merely acts as a broker between two people's computers - so therefore it is powerless to remove the content. It could try to prevent the advertisement of copyrighted material for sharing purposes, but what's to prevent me from taking an original work that I wrote and giving it a name that is identical to a work in the same genre from another artist?

I'm not one to advocate the intentional scoffing of the law, but it seems to me that these two cases are identical in spirit and yet they have far different outcomes. On top of this, the RIAA has garnered a reputation for bullying other entities because they have their heads so far up their asses that they refuse to admit that their business model is extremely outdated. But, again, I digress...

In any case, it will be very interesting to see if Limewire appeals this ruling now that the Google ruling has been rendered. In the end, we're all affected because the direction that either case takes (don't forget that Viacom has stated its intention to appeal) will have an impact on the way we currently use the Internet. After all, you upload content to Facebook, MySpace, etc. and there isn't a single person on the planet that subscribes to none of these ubiquitous services.

Monday, June 14, 2010

Adaptability

This may seem obvious, but business isn't about who can do the neatest thing - it's about expectations and delivery. In other words, your customer has an expectation that you'll meet their needs; and you have to deliver on your statement that you can meet that need. This doesn't have to be a retail business. In fact, any business transaction falls under that statement.

But sometimes business professionals just don't get this aspect of their jobs, careers, or their business (if they own one). As a result, they get mired in the past while their peers leap ahead of them because they are willing to embrace the future or at least the present. Consider, as an example, the publishing business. With the ever growing (and I'll claim that it still is growing) use of the Internet as a source of information, publications find themselves in an interesting position: do they continue the part of their business that is the printed publication?

I asked Gary Paris, publisher of Contemporary Bride magazine, about this. He and I had an interesting discussion some days before where I made the statement that the business of printed publications is a dead one, and he countered that there was still a place for it. Having thought about it, I realized that he had a good point so I asked him to elaborate.

"The lesson that was learned by many people in business is that is very important to embrace new ideas and technology to survive in any business climate. The same lesson can be applied to the publishing industry. While many publishers do not embrace new ideas and business models, the publishers of niche magazines like Contemporary Bride do. It is a matter of survival, plain and simple. We feel that by placing a high quality magazine with great content, such as featured articles and real wedding stories, it will always keep the attention of the reader regardless of the age."

Gary stated that the medium doesn't matter as long as the need is met. And, for the publishing industry, sometimes the need is to have something in their hands, to examine closely, hold, touch, etc. However, he recognized that people like to have options available, and so he adapted his business to account for the Internet. Of greatest interest is his statement that it is a matter of survival to be able and willing to adapt. Without a willingness to adapt to stay on par with current trends, your credibility suffers. And when that happens, a customer's ability to envision you delivering on your promise to meet their needs lapses as well.

Just today I read a great article in Wired Magazine (online, no doubt) about a company that is aiming to kick out the heavyweights in server manufacturing by replacing the high power consuming CPUs (Xeon, Itanium, or Opteron chips) with a collection of much lower power consuming Intel Atom. I mention this here because it demonstrates how this business realized that by changing the means of attack that the traditional hardware companies have used they could develop a compelling reason for businesses to look at them as a viable alternative. It remains to be seen, of course, how successful they will be with this particular venture, but the outlook is promising.

Wednesday, June 9, 2010

Building a Brand

Ah, the Holy Grail of marketing: a brand that is so well established that the sales team has no purpose other than to print out contracts and collect commission checks. This is a win-win because the salespeople would rather stay at home sipping a glass of Chianti (with fava beans no doubt, eh Sir. Hopkins?); the business has a greater degree of confidence that the product(s) associated with the brand will make money; and the marketing people / advertising agency gets to come to work for another week.

Take for example one of the most vile things ever to be consumed by the American public: The Jersey Shore. Personally, I think that the glamorization of the cast with their obvious lack of social mores (see this article); no sense of etiquette; and monstrous egos is a crime against America. (Note to BP: when you figure out how to contain the Gulf Oil spill, can you apply the same technique to The Situation? Thanks.) In spite of my misgivings and no lack of desire to vilify them, I have to admit that they are the hottest thing on TV right now (Real Housewives of New Jersey be damned). In fact, it seems that you almost can't turn on the television right now without seeing Snooki or The Situation in front of the lens. And, in the world of marketing, this couldn't be counted as a bigger success.

Building a successful brand does not, then, matter about the quality of the product. In fact, I've written in past entries how Microsoft trounced Apple in the desktop wars because Apple didn't learn from IBM's mistakes about trying to build elitism into the brand. Microsoft, instead, realized that the Johnny Appleseed approach made more sense and continues to dominate to this day as a result.

I'm not marketing expert to be honest. But, to me, building a successful brand is possible when the following things are accomplished:

You understand your target audience. People are going to fall into one of two camps: the "want to believe" and the "want to disbelieve." There is no middle ground. Understanding how to reach both of those groups is critical because they will have different levers that may be used to sway their opinion.

You develop the right message. Snake Oil Salesmen back at the turn of the last century were so successful partly because they took advantage of the public's predisposition to being gullible. Undoubtedly, you've heard the prank "did you know that 'gullible' is not in the dictionary?" If you were unlucky enough to be the "prankee" then you know how easy it is to want to run to the nearest dictionary to see if it's true. (And, if you were like me and misspelled the word, you looked positively simian when you came back to them and said, "Oh my! You're right!") This doesn't mean that you have to resort to shenanigans by any means, but you should realize how precious your 30-seconds of undivided attention is and pitch your message appropriately.

You ensure that your message is heard repeatedly. As I've mentioned before, a former boss wisely pointed out that the reason why you see a Ford F150 commercial every 5 minutes during the Super Bowl is that Ford wants to make sure that their message is embedded in your subconscious, since you'll forget what you saw as soon as the game starts up again.

Looking at two failures that caught my eye, Nick Jr.'s Fresh Beat Band was lambasted on the maternity discussion boards because the show emphasized dance (and music) but the critical eyes of the parents who controlled the TV remote (and many of whom spent more than a few years in dance classes themselves as kids) repeatedly harped on the fact that the dance skills or the four characters was positively lacking. The producers may have tailored the show for the kids who would ultimately watch it, but the true audience is the mothers who decide what shows get time on the small screen at home.

Similarly, this weekend's very disappointing opening of Jonah Hex seemed to (based on what I've read) attempt to convert yet another comic to the big screen but one without the ubiquitous presence like Batman or Superman. Granted, I'm not an avid comic book reader any longer, but I've never heard of the character. Couldn't the studio have chosen one that already had a well-established brand? Even if they couldn't do that, there could have been a better attempt to gain mindshare before the release. I can't recall seeing a similar commercial for this movie, and I unfortunately spend more time watching the TV this past year than I care to admit.

Ultimately, marketing is yet another function of sales, i.e. if you can convince the recipient that they need what you're hawking simply through information consumption then their is no need to take more overt measures to convert them to your way of thinking. Keep this in mind as you consider how best to approach your boss to influence their decision for the next manager; what to say to the hiring manager when you're trying to get a promotion; or even when you're writing something for public consumption.

Monday, June 7, 2010

Ceilings and Floors

This week will be a momentous week.

Thursday, the Dow Jones Industrial Average closed below 10,000, and it didn't close above that mark on Friday. Worse, it didn't break 10,000 even during intraday trading on Friday, and that's a bad sign.

I never really understood the true psychology behind ceilings and floors on the stock market. What I mean is that I understand the statement that investors cling to numbers that fall on nice, definable boundaries. Furthermore, I understand that once those boundaries are crossed, it's not easy to cross them again in the near future and in the opposite direction. Still, I don't know why this happens.

But that doesn't matter. What does matter is that the DJIA is in dangerous territory this week. Last week's jobs report (CNN Money had a nice write-up) had a very important detail buried in it: in spite of the fact that 431,000 jobs were added in May, 411,000 of those jobs were for US Census based work, which is very short term work indeed. Doing the math, we see that the private sector only added 41,000 jobs, which is a very small number.

(Edit: minor correction proving that my college degree doesn't mean I can "do the math." The government added 411,000 jobs but cut 21,000 jobs, which is how you arrive at a total of 431,000 jobs for the month. -Larry)

Add to this the economic worry in Europe and the oil sector worry due to the BP fiasco in the Gulf of Mexico and we see a nasty picture starting to form and that's without taking the housing market into consideration. Regarding that, the April new housing starts report indicated an increase in this important sector, but applications for new building permits declined. This means that any optimism will be short-lived. And when coupled by the already high inventories; job market woes (dissuading people from investing in real estate if their jobs are on shaky ground); and tighter lending requirements you can see that the housing market is still in for a rough ride.

Still, everything for the moment rides on this week.

If the DJIA can break through the 10,000 ceiling in a convincing fashion then we will have dodged the economic equivalent of cardiac arrest yet again. "Convincing" means, to me, that there must be good trading volume and (!) when 10,000 becomes a floor afterward, a test of that level should pass (i.e. we don't cross into the sub-10,000 territory just as easily). Otherwise, we may be in for a rough 6 months again as we start to define what may be the second dip in the W pattern that I have been warning about for months now.

Ironically, if you had been watching the DJIA graph you would have known to sell short against the index back on May 3. I typically use a two-line exponential moving average (EMA); MACD; and Relative Strength Index (RSI) as my trend analysis tools (above and beyond open, close and volume). The MACD already showed a negative outlook but on May 3 the RSI also showed a sell signal. Had you sold short before the end of the day you would have made 10% in one month - not a bad haul in my opinion. (Still, hindsight is 20-20 so who knows what I would have thought on May 4 had I looked at the graphs then...) With the EMA also showing sell on May 28, it makes a compelling case to at least consider selling short again.

Disclaimer: I am not a stock analyst; Certified Financial Planner; etc. My statements above are my opinion only and do not represent a solicitation to buy equities; sell equities; do the dishes; or take a vacation. Use at your own risk.

Tuesday, June 1, 2010

Wrong Side of the Dice

(Personal note: given that I'm a self-professed conservative, I would have never though that I would rely so much on the New York Times, since it is generally recognized as having liberal leanings. But one can't deny the quality of the writing nor the timeliness of the topics there.)

There are oodles of documented cases where, during the years when the housing market was flying off of the handle, many parties took advantage of the situation to assume more risk than they should have.

- Financial institutions created new and "interesting" (better than some words I could use) ways to loan money to people who could not understand how they were getting in over their heads.

- People who really shouldn't be allowed to borrow money used "no income verification" package to by a house using a mortgage they couldn't afford.

- People who thought they could make a quick buck flipping a house by slapping a fresh coat or paint on the interior and exterior.

I've purchased a few properties over the years. I always stuck to my guns and would only pull the trigger if I knew I could make the payments under the most conservative of circumstances. This meant that I got a 15-year, fixed rate mortgage, with a minimum down payment of 20% giving me a target to hit in terms of my income requirements.

That doesn't mean I wasn't offered some interesting ways of getting a mortgage. The best story in this regard occurred when I was doing some "homework" to determine monthly payments; interest rates; etc. and told the mortgage broker what my upper limit was in terms of a monthly payment. Since it was a specific property that triggered this investigation, I mentioned my concern about being able to put down 20% to avoid mortgage insurance. His response was that I could get a piggyback loan (basically a smaller loan based on the equity in the house that would be generated by my down payment) that would then be used to get me to the 20% mark.

"What would my monthly payment be in this instance?" I asked. He responded that it would be $300 over my limit.

Hello? It was 5 minutes ago that I told you it was a hard limit, and now you're suggesting that I ignore it blatantly?

I have similar stories from previous discussions and/or purchases. The point that I'm trying to make is that while I agree that it isn't solely the fault of the financial institutions that the housing market is in such a mess, they aren't even close to being the minority when it comes to assigning blame.

This morning, in the NY Times, there is an article about people that simply decided to stop making their mortgage payments. Their reasoning is that they can't afford to pay all of their bills due to the crappy economic conditions we have all experienced in the past 2 years, so they would rather pay the electric bill (which can get shut off rather quickly if they don't) and not pay the mortgage (which could take nearly 2 years to complete the foreclosure process).

It's a matter of survival, in other words.

In some instances, the people tried to work with the banks to modify the mortgages but the banks would have nothing to do with the concept. Now that the people are no longer paying the mortgage, however, the banks are crying foul.

"From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are 'milking the process,' said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry."

Oh please. How is anyone going to sell a house worth 50% of the mortgage, requiring the bank's approval, when the bank has already demonstrated an unwillingness to modify the mortgage for the people currently occupying it? This isn't "milking the process" by any means.

One thing my father taught me growing up is to take responsibility for my actions. As he would put it, "you made your bed; now you sleep in it." The banks need to own up for their actions since frequently they are the cause for the situations their borrowers now face. When discussing why their house is worth so much less now a couple pointed out that they refinanced at the height of the market.

"It was a stupid move by their lender, according to Mr. Pemberton. 'They went outside their own guidelines on debt to income,' he said. 'And when they did, they put themselves in jeopardy.'"

How is this "milking the process?" If the banks had not approved loans that were clearly at a high risk of default then they wouldn't be in this mess in the first place. Here's a hint to the financial institutions that lend money:

risk /rɪsk/ –noun

1. exposure to the chance of injury or loss; a hazard or dangerous chance: It's not worth the risk.

2. Insurance .
a. the hazard or chance of loss.
b. the degree of probability of such loss.
c. the amount that the insurance company may lose.
d. a person or thing with reference to the hazard involved in insuring him, her, or it.
e. the type of loss, as life, fire, marine disaster, or earthquake, against which an insurance policy is drawn.

"High risk" means you have a larger chance of losing your investment. So when you made these high risk loans and ended up on the wrong side of the dice you shouldn't start whining about it.

See you next week.