Max Keiser on Hackers and Pirates vs. Corporations and Copyright Lawyers

This is just an extra that I thought might be of interest to the class. Apropos of our readings on copyright, financial news commentator Max Keiser and his colleague Stacy Herbert discuss several legal battles between musical artists and their major labels over control of "product." Some artists are finding it useful to make their work available on BitTorrent to circumvent what they view as their labels' abuse of copyright law. The second part of the program is also interesting, though not especially relevant, except that it involves crowd-funded journalism (on a sex scandal among hedge fund managers in New Canaan, CT!).

The Beauty of Free.

When you hear the word free, a mountain of ideas, thoughts, images and memories come to mind. Is it going to be cheap? Is it really free? Is it really that good? Can this really be true? And the most important question of them all is what’s the catch? However regardless of what, every single person, in one way or another has participated or associated with the word and or action of using something free, doing something for free or obtaining something free. The very idea of free has business’s scared of losing profit, however there have been certain cases where having something free can contribute and maybe even highlight success and profit in whatever “product” your selling. Now I put the word product in quotation marks because this by product, I mean from music to movies to video games to many different forms of media. Yet to truly understand this, I believe revisiting the first form of free media could better help us understand why the idea of free is so profitable. Radio was the primer free media. During 1925 there wasn’t much use for radio, however that all changed with time, and more so because it was something free, that someone no matter status could listen too. At first there was a problem in having radio free, simply because nobody knew how or who would pay for it, nut the limitless potential it had (and still does) ended up in using an advertising style and became very profitable. After its first victory with radio, the Free Model was well on its way to conquer many other Medias, from music, literature, games (both video and board), and television. And just the man, animals and life, the concepts behind free evolved. The most significant evolution in the field of free was the internet. The content and supply of media has been and continues to be in an overflowed state. The beauty of the internet is that there is no end of supply and with accordance to the massive demand from the public, free just keeps getting better. The other side to this is that advertisement is in abundance, from ads on sites like face book to pop-ups, television commercials radio broadcasting, billboards and such, because a lot of these ads are presented in a free medium the product being advertised gets wider audience and can have the chance of making a lot more money. Free services are another strong point in the free model. Such examples are the Sony Playstation 3, is gives players the option of playing on the internet for free, the only thing you need to do is buy the game console and whatever game you want, however you don’t even need to buy a video game to use the online services that the Playstation 3 brings. The iPod, android and other smart phones offer applications for free download that help sell the phone and at the same time is full of advertisement which helps sell whatever is being advertised. Speaking of apps, thanks to some programs like Frostwire, Limewire and so on, music has become a luxury that anyone can afford and listen too, whether you’re ripping it off the internet of listening to it on YouTube. This incidentally has been the cause of another way to download music call youtubemp3, which allows you to download the music from the YouTube website for free, which has been a hinder on some musicians. In this age and day, is a generation of kids, people growing up and living on a free model. If you want something, I can almost guarantee they have it somewhere on the internet. The Free Model perpetually allowed itself to advertise itself. Some musicians have taken a positive spin on this and actually released music for free, as stated in Caramancia’s article, whether you get it for free or not there’s a way to still make money off of the free model. Publicity and advertisement (as well as some sales were the results of musicians like Mac Miller, Wale, J. Cole and drake allowing their music to be free.) Subscriptions is another way of making money as stated in Andersons reading, games like Club Penguin is free, yet if you want to hook up your fly igloo pad you need to poor cash into it. As a children’s game, parents will mostly not hesitate to spend money, now multiply that by the large fan and subscription base and in no time flat you’re in the millionaires club drinking rich champagne with Charlie Sheen. Another aspect that is touched upon in the Anderson article is the concept of freemium. Freemium is when you first get a few pages from a book, levels and content in games for free. After that it’s up to you if you’re going to continue buying, playing reading whatever product you have received for free.

Free is nice...or is it?

You can't deny every consumer loves to see the words "FREE" no matter what it's for, whether it's something we want or have never heard of, free doesn't cost a penny, so why not try it, right?

In most cases, sure, but not always.

This is a marketing technique known as "freemium," which, according Chris Anderson, editor-in-chief of Wired Magazine says is a brilliant marketing strategy for the gaming industry. I would have to agree, to a certain extent. Sure, this type of marketing may attract newer customers but generally speaking, with the way media is now available (via hacking, pirating), it's almost inevitable that the gaming industry will have to follow suit with the way the movie industry is going. Think Netflix.

We're good citizens, well at least most of us are. Truth is, we may hack or pirate for one fo two reasons: it's cheaper (free) and if we absolutely can't buy it. So in this case, game designers and console companies usually create limitations to games and more often than not, games come with some form of bug or fault. In this case, the people who would hack a game would not only be better off with a better copy of the game, but also a free copy. Now I'm not advocating for piracy but until the laws change or in this case, game designers can find a way to give the players what they want without any bugs, there will always be people searching for free.

Thanks to the way the internet presents digital media, everything is more likely than not, to be available online, for free or a freemium. According to Douglas MacMillan's The Music Industry's New Internet Problem, sites such as Pandora, Imeem, Last.fm, have led way as a substitution for music and how they are available to listeners. Because services such as Pandora offer a free alternative to "owning" a disc or album which would otherwise put profits into the artists pocket. This in turn does affect both the consumer and the artists, because if we don't fund the artists, then they wouldn't be able to produce music.

So what is the solution to this? Honestly, I wish it was as simple as black and white. Truthfully, the way technology is advancing and how people want things fast and easy, I don't think buying tangibles is the way for companies in any field to survive. They will have to adopt some form of streaming, and/or utilize the power of the internet. Hey, if you can't beat them, join them.

Teenage Dreams vs. Code Monkey

You've probably heard of Katy Perry. She's a big pop star, signed to EMI, with a bunch of No. 1 hits last year. In 2010, she made $44 million. You probably haven't heard of Jonathan Coulton. He's an indie sing-songwriter, self publishes all his music, and doesn't get any radio play. In 2010, he made almost $500,000. That's a huge difference, but twenty years ago the Jonathan Coulton model was impossible, while the Katy Perry model was thriving.

How the Free Model has Taken Over

Radio was the first free media. Now anything from music, video games, online games and books can in some way be obtained free, or at least at first. In Chris Anderson's chapter "The New Media Models" he explains how the Free Model won over radio, and how it has began to win over every other medium.

Why has the end of paid media come to be?
1. With a lot of help from the internet, supply of media has flooded the senses, but demand has not. We can only process so much.
2. Free online media is not tangible. There is a mental difference when we think of stealing something physical, like a CD, as opposed to a digital song.
3. Online makes free media easier to get! Really, the web just makes everything easier.
4. Advertising has allowed many mediums to be free, so we expect a lot of things to be free now. Anderson says a habit on the web can transform into a habit in real life.
5. The computer industry wants content to be free. As Anderson puts it, companies like Apple don't make money off of what is put on an iPod, but rather just selling the physical iPod. The draw to get the device is to put all the free things on it.
6. If you're my age, you're someone that knows that you can find just about anything for free online, and so we expect things to be free. The less we have to spend, the better.

The Free Model allows for the media to advertise itself. Like Caramanica describes in his article, when music is released free it has great potential to become lucrative. In the world of games, the free model has been slowly gaining speed and he believes it will eventually take over. Companies have found many clever ways to make money on games, either purchased or not.

One way is subscribing. If you subscribe to a game, you pay for access until you no longer want to play. Simple as that. Part of subscribing could also be a freemium. A freemium is when you get the first couple of chapters, in the case of books, or levels, in the case of games, free and then it is up to you whether or not to by the rest of the product.
The next, very obvious and in almost any free media now, is advertising. Anderson writes how Obama even paid a game to advertise for him while he was campaigning for presidency.
Another is the sale of merchandise that allows access to games or correlates to that game. He gives the example of Webkinz (stuffed animals that come with codes to access the game), but as someone who frequently watches kids I know how merchandising has helped the success of games like Angry Birds and Club Penguin.

I'm sure a lot of this information could cause a coronary for many music producers and gaming industries, but it's good news to me. 

The Future of Digital Media

Free media can't work for all media content. To a certain extent paid content will continue to exist. Yes, it can be said that paid content is diminishing as many physical products have been converted into digital such as music, movies, games, books and advertisement. But my opinion is that digital media is only convenient for certain products and not all, such as music and movies but not games.

Why? Well music and movies are downloadable files but games tend to be large files that either a. take to long to download or b. take up too much space on your drive. Therefore, most people are still more likely to go out and buy the game  because it's more convenient and fast for them to get access to the game. Some consumers enjoy purchasing it on the release date for the thrill of being one of the first to play the game and beat it. They are probably even more inclined to purchase it if it comes with an incentive for buyers on the release date, which usually consist of free game additives or merchandise. It has been rumored that Xbox will come out with a new console that won't have an optical drive meaning that all the games will have to be downloaded from the Xbox Marketplace. But when I interviewed 5 guy friends they all seemed to be unhappy about this. Only two had said to ever purchase a game through marketplace and claimed that it wasn't the same amount of satisfaction and excitement as purchasing it on opening day. Only one seemed to like the concept because he said it would help him consume less physical space to store his games while the other 4 disagreed by saying that this was the reason they enjoyed purchasing games. They liked showcasing all the games they had to friends and family that would come over to play and basically showing off their collection of games.

The movie theater industry is also another form that proves that people still enjoy paying for their content. Most people (like myself) tend to line up on opening day and pay $13 per person and even more if it's for IMAX or some even go out and watch the same movie twice just to watch it in IMAX the second time around ( I did this when The Dark Knight was release in theaters).  Although it is true that majority of the revenues that the movie industry is receiving comes from online content there is still a little over 1/3 of it that comes from box-office revenues. The demand for physical content still exist which then results in paying for what you want. Take collectibles for instance. If you are a Star Wars fan you will want all the original episodes on DVD, the original movies and if they play the move in theater for every anniversary you'll go out and watch it and even more so if they come out with a version that has been digitally enhanced and played on IMAX. This shows that there still exist a level of loyalty with fans.

The same concepts apply to the music industry. If you are a true Jay-Z fan you will want to own every album he's ever made. Possibly because you admire the covers and the graphic work that goes into it or just because you want to hold a collection either way you are willing to pay for it for those reasons. Also some fans purchase CDs and stand in long lines to have the artist sign it for them and own a signed copy as well as get the opportunity to meet the artist.

Although free content has made our lives easier as well as portable and many will continue to use and obtain free digital media, paid content and physical products still hold an emotional and loyal connection to consumers. Therefore it is unlikely for paid content to cease to exist completely.

“First Hit is Free, next time you pay”

The idea of giving away free stuff in any medium or in this case free media to promote and to increase sale of goods and services is definitely not a new gimmick.   It is good marketing strategy giving out free samples to prospective consumers to sample.  If they like it they can come back for more but next time they pay.  If the consumers don’t like it, you can ask them why and improve on it or discarded it.  Although today’s consumers’ behavior is different from the ones back in the 1920’s or even in the 1990’s because there are so many varieties and competition out there.  But there’s one thing we do have in common, we like free stuff, whether we needed or not, as long as it is FREE!  But how free is free, and is the free stuff worth the hassle?

Depending on the demographic many boomers still prefer the physical form vs. the Yuppies and the “Hipsters” when it comes to buying video games, software, music and DVD.   Personally, I prefer to pay a little more to buy the software on disk format where as my daughter would rather purchase the programs, apps, or the books via download. Some people are hard to part with the brick and mortar mentality.  There are people out there still prefer to listen to analog music and buy their vinyl records online versus the majority who prefer to download most if not all their music and stream their movies online.  In the long run I feel all these free and questionable borderline pirate download sites will eventually put many artists out to pastures.  Contrary to the idea thinking free enterprise can be a good thing in today’s economy and  social climate needs to take a good look in the trenches, because the greedy, the needy and definitely the seedy people out weights “the truth, justice and the American ways.”

I see the effect of what Anderson had said in the chapter about software and video games’ that “over the next decade, this $10 billion industry will shift from primarily a traditional packaged goods business to an online business built on entry prices of zero.” For decades since the first PC was on sale at J&R Music World at their downtown store, they dedicated almost two large floors for software, programs, and video game cartridges. Today J&R had converted that entire software department and floor space for another goods and services leaving only a small section for portable games cartridges and two small window displays for Microsoft products.  Oddly their music and movies section is still intact and doing well despite of the black marketers selling knock off in Chinatown less than miles away from the store. It appears that Best Buy is also experiencing the same problem because most of the software is now sold via online account for instant download rather than to have to wait for the disk in the mail. The remaining bricks and mortar computer stores are seeing there software sales going down, and they have decided not to stock the products and use the storage for more marketable goods. 

Even for the printed material and their related website like the New York Times where you the reader can read up to 20 articles for free, but once you exceed the 20^th article, the site put up a banner preventing the reader to access anymore article. There are ways to get around it like by creating more than one account, but come on, how cheap can we get? Don’t ask.  At this current economic climate, I see Wall Streeter in their Brooks Brother dumpster diving for a free copy of the Wall Street Journal.  I’m not kidding the rich and wealthy folks can be thrifty and stingy as hell.

Then we have the online stores like Barnes & Nobles, eBay, Amazon that will give regular and loyal customers freebies like free shipping, discount points, special sales to keep you from leaving to other online stores.  As a typical Manhattan-nite and an Old School Boomer, I not a regular online shopper because I still like to touchy feely my goods before buying.  I do shop online only if it is absolutely positively necessary that I can’t buy at a store. Another reason why I hate shopping online is I live in a tenement building in Manhattan and the delivery services might it Fed-Sux, UP-Sucks or US gone Postal Service, they’re all lousy when it comes to delivery.  But that’s another topic to blog about on internet kill the snail-mail.  I used to have a Border account because it was “Free.” vs. B&N with a $35 annual membership fee.  You have to really love to read or love to buy retail to pay for a membership for B&N. Why would anyone pay $29.99 for a DVD if you can same one online for half the price at Amazon or better yet, download it for free from one those questionable share sites. 

But if you’re a soccer mom or a member of the suburban lazy-boy armchair warrior living out in the boondocks far away from a Wal-mat, online shopping would be perfect.  The same situation for ordering movies and video online from sites like Netflix from the comfort of your couch is perfect.  Of course these services will eventually replaced more brick and mortar store and affect other sector of the workforce when certain product is no longer produce.  Soon the DVD and the CD disk will be sent to retirement along with the floppy disk, cassettes, VHS and Beta max tapes?  If this continues, every family would have massive storage drives and multi-media players. 

The online gaming sector is also trying to cash in on this so call free media bandwagon allowing gamers or novices to sample games for free or releasing “Beta” version of a game for gamers to test drive these games to get the bugs out.  What a great idea to have the gamers test drive and debug the games for free and the company can save millions of dollar on human resources like paying OT to their own high price programmers and software engineers. It’s a win-win situation. Of course for the hardcore gamers who contribute to these games by playing, testing and debugging it for free, the company can give these gamers free account or game keys.  The company will eventually charge these gamers once they’re “cracked” out on the game.  The company will charge what Anderson called “real estate,” things like skins for the gamers’ characters, “life”, swords, weapons or whatever the games calls for. 

The first time I heard about MMO was from my daughter and I only know RPG stands for Rocket Propel Grenade, but my daughter told me it’s Role Play Games, D’uh!  I guess this is the part of the virtual world and gaming where most people are hooked and trapped inside once they start playing. Other than certain console games like Wii or Nintendo, I never play any online games, but my 21yo daughter, that’s another story. I must have spent thousands on Pokémon cards, toys, games cartridges, DVD and who knows what else.  She played WOW and many other MMORPG and she is now Beta testing TERA, another MMORPG.  When I made the statement about playing these games is like a “Crack” addiction and the companies’ that produces these games are like the neighborhood drug pushers. I meant it.  In fact I think these MMORPG are more addicting than Crack cocaine because the entire game and every player in it are enablers pushing each other harder and harder to win and to destroy things.  I guess if I have a son, he would be playing all the military SOG games.  Ironically, theses are the very same programs the military written to train our soldiers to become lean mean fighting machines.  These game companies found other ways to generate revenue with these programs by using their generative method to change the format from the military to civilian applications. 

Another one of those media who is banking on the power of FREE are the long-distance telephone and wireless carrier.  The carrier company is willing to give you a FREE cellular telephone, a Smartphone at that, providing you are willing to sign an agreement with that carrier that you will stay with them for a specific amount of time, usually two years.  All I wanted was a basic wireless telephone to do one thing and one thing only, make calls, but the damn thing will cost me $150.00, but Verizon had a special that day, a FREE UTC Smartphone that comes with shitload of apps, Android, robots, cyborgs, light saber and whatever the hell that was preloaded into this thin wafer of a phone, FOR FREEE!  Oh hell yeah I am going to get one. OH YEAH, you get the second one for $49.99. YES, YES, YES.  So now my daughter and I each have the UTC Android Smartphone with Google, wooohoooo!  Verizon figured out that once I start using the phone and playing with the apps, I would buy and download more apps or even download music and ringtone for the phone. Sorry, but this is one old guy that’s going back to lo-tech-ville.

Some things never changes, buy $20 worth of groceries and we’ll give you one volume per week of a 20 volume set of the World Book Encyclopedia, buy this 45rpm single and you get the flipside free, buy the 12” 45rpm and you get a free tee-shirt, and if you’re the first 100 people on line, Ms. Summers will sign you album cover, your tee-shirts and a Polaroid shot with Ms. Summer. Buy the TV and we will send the signal to your unit via cable and radio signal, FREE. 

"Money for Nothing"

“Now look at them yo-yo's that's the way you do it
You play the guitar on the MTV
That ain't workin' that's the way you do it
Money for nothin' and chicks for free
Now that ain't workin' that's the way you do it
Lemme tell ya them guys ain't dumb
Maybe get a blister on your little finger
Maybe get a blister on your thumb” – Dire Straits

“Video Killed the Radio Star”

I heard you on the wireless back in Fifty Two
Lying awake intent at tuning in on you.
If I was young it didn't stop you coming through.

They took the credit for your second symphony.
Rewritten by machine and new technology,
and now I understand the problems you can see.  – The Buggles

The Internet Killed…

One of these days, I'ma gonna git this bloggin' down pack...