Fanning the Flames of Change with my Kindle

January 22nd, 2010 by dewprocess.

Following on from my assertion earlier this month that e-reading will become ubiquitous, and for the better, I offer this video excerpt as clear supporting evidence of the attractive potential that is currently crossing the threshold of traditional print publication houses (fiction, news, or otherwise).

In 4 days, it is rumored that Apple will reveal their hand in this market sector – a move which would do much to erase, once and for all, any doubt that eBooks are to print media what mobile devices have been to the landline. How swiftly and enthusiastically publishers and, perhaps more crucially, readers react to these still emerging opportunities will determine more than just the rate of development of the hardware and software surrounding these devices and platforms. It will heavily influence a diverse array of  communities: from the literary to the artistic; from advertisers to consumer product marketing agencies; from students and teachers to parents and pundits.

Presently, the cost of an e-book device is still too high for the average citizen, until you calculate the ROI. Consumers were willing to pay $600 for the iPhone, when it was released. The current iteration – considerably improved from the iPhone model of less than 2 years ago – is only $99. Meanwhile, over 3 BILLION iPhone apps have been downloaded, and the device has revolutionized the mobile device industry, as well as consumer behavior habits. Apple has recouped its investment handsomely, and the smartphone (in its many incarnations) is now almost a necessity to a whole generation of users across the world (indeed, in the developing nations it has transformed lives).

Currently e-book devices cost far less than the early iPhone, and there is no doubt that the price will drop further. Add to this the dramatically lower cost to publish digitally, as well as the positive Green considerations (no ink, no paper, no hard distribution costs, etc), and the value proposition to the purveyor (technology hardware provider, service provider, publisher, writer, et al) is clear. Meanwhile, assuming (perhaps somewhat naively?) that publishers will soon lower the price for eBooks and eMags, in order to make them more digestible to mass market consumers, the value to the reader will be explosive.

As readership grows, so new demographics evolve. As eyeballs become identified, qualified, and quantified, so advertisers begin to salivate. From a commercial perspective, the bonus of e-readership is that metrics are more controllable, and thus businesses are able to connect with and – more importantly – STAY CONNECTED TO the interested consumer. This is where the fun starts:

Today’s magazine advertiser has no way of accurately qualifying the value of their placement, and magazines have to publish thick volumes (see Vanity Fair) just to stay afloat. These tomes are 70% advertising, and 30% editorial, at best. Readers have become inured to this dynamic, and breeze past the mag ads in much the same way as they zip past TV commercials, thanks to the DVR. Now, imagine if – thanks to the eMag – an ad was clickable, promising instant conversion. Imagine if, thanks to the eMag, a product offering could be placed strategically in relation to an article, enhancing the value of that product offering in the mind of the reader, by association (a new type of product placement). The discreet advertising opportunities are vast, and promise untold opportunities to magazine publishers and product manufacturers, and the agencies that creatively connect the two worlds. Then again, if the reader prefers an ad-free experience, why not grant it to them, at a premium? Those publications with higher ad-free readerships can offer lower ad rates, and vice versa. All very measurable, to everyone’s satisfaction.

In the e-Lit universe (the environment wherein electronic literature is ubiquitous), publishers can release a new book and have it in the hands of pre-identified “interested” readers within seconds. The temporal investment required, from a marketing perspective, is greatly reduced; freeing publishers to take more creative risks which will inevitably produce surprisingly powerful “accidents” of literary genius. The greatest works of historical fiction were rarely foreseen as commercially viable products. This emerging dynamic will allow a lot of literature to become a user-driven proposition, virally marketed by the readers themselves. It won’t exclude traditionally vetted works of literature, which can continue to receive the type of robust “upfront” marketing support that publishing houses often manifest. Nor will it erode the support for “hidden gems” of challenging yet worthy literature, which might otherwise not be deemed viable by the publishers, nor initially digestible by the public. Statistics are showing that the field of literary criticism is already evolving to function less as a pre-release prognosticator, but as a post-release adjudicator, still very capable of identifying and championing tomorrow’s Ezra Pound or Thomas Pynchon. e-Literature widens the field of offerings. It does not pretend to, nor can it, expand the readership, in and of itself. It does, however, create a new landscape onto which a wider and more diverse readership now has the opportunity to travel. To those who claim this might dilute the quality of literature, I counter that dilution is only experienced and identified upon imbibing. Consider the following scenario:

10 bottles of wine are put on a table. 2 bottles are of the highest quality ($10 per glass), 2 are of strong  but slightly lesser quality ($6), 2 are of middling quality but eminently drinkable ($5), 2 are of poor quality ($2), and 2 are of varied quality but watered down ($3).

A group of wine aficionados is invited in to the room, and each given a $10 bill. They are given a quick taste of each wine, and then asked to “spend the money”. How they choose to “invest” their funds, and subsequently advance their experience of wine, is – in my opinion – a worthwhile allegory for the opportunity facing the reading public. The e-Lit universe will expand the selection of available content, and the quality spectrum will widen and deepen, by extension. The more extensive and more diversified availability of phraseological grapes promises a richer and more rewarding vendange.

I could write a book on the multifarious revenue generation opportunities available via e-publication, but this article must remain within the 1,000 word realm. I look forward eagerly to the imminent delivery of my Kindle DX (delayed due to demand, apparently), fully accepting the likelihood that upon delivery I will be in possession of an already usurped iteration. But if I were to think that way, how sorrowful would be my lot. Imagine living in the latter 16th century and, purely based upon your suspicion that “better plays may come out soon”, you turned down tickets to Titus Adronicus (which, by all accounts, received “mixed reviews” back in the early 1590s). Sure, you might be around when Winter’s Tale came out, and you might get tickets, and from the selective logic point of view, you will have arguably made a better investment. However, what if the tickets you were first offered were to Thomas Kyd’s first play, “The Spanish Tragedy”, and you declined on the same principle. What was then seen, and is argued by many today, as “arguably the most popular play of the “Age of Shakespeare” and set new standards in effective plot construction and character development”*, was Kyd’s greatest work. It was all downhill from there.

I intend to enjoy my Kindle, and upon it I shall read with pleasure many plays, books, articles, magazines, newspapers, and more. When something indubitably superior comes out (and when I have a salary that will permit me the indulgence!), I will replace my lovingly used Kindle with whatever relatively new-fangled gewgaw convinces me of its unquestionable worth.

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Liberal/Conservative

January 20th, 2010 by dewprocess.

Following hot on the heels of the recent Massachusetts special election, well-known Chicago author and political humorist Jeremy McGuire has contributed the following:

Open Letter to Both my Liberal and Conservative Friends.

Chill.

To my Conservative friends, You may be feeling right plucky over Scott Brown’s victory in the Massachusetts special election to fill Edward Kennedy’s Senate seat. Don’t. In the long run, it changes nothing. The conservative function is and always has been one of restraint, of keeping the status quo, of caution. You are what Joseph Campbell calls “the holdfasts.” That said, you must understand that you have chosen to be on the wrong side of history most of the time. You will not win. I know this because you never have. It is not your destiny. There are few progressive social leaps that we as a species have made that were not initially opposed by conservatives, but embraced and defended by them within one or two generations. The arc of history leans toward change, toward progress, toward tolerance, and understanding, decidedly away from the status quo.

It was the influential clergyman and educator Endicott Peabody who said “Things in life will not always run smoothly. Sometimes we will be rising toward the heights – then all will seem to reverse itself and start downward. The great fact to remember is that the trend of civilization itself is forever upward, that a line drawn through the middle of the peaks and the valleys of the centuries always has an upward trend.”

The most obvious examples of your being left behind by history are the abolition of slavery, votes for women, and the dissolution of Jim Crow and the passage of the Civil Rights act of 1964.

What was acceptable, and even embraced a little more than a hundred years ago, colonialism and wars of conquest, are now no longer acceptable. Oh, and there was this little thing called the War for American Independence from England. Yep. Conservatives opposed that one, too. They were called Tories then. Yet now conservatives celebrate Washington, Jefferson, Adams and Franklin as if they were kindred spirits, when in actuality, they would have had them hanged. (Note: All of these gentlemen considered themselves Liberals. Maddening, ain’t it?)

Now, I’m not being critical, those are just the facts, a pattern that is readily discernible to anyone who can step back far enough from the immediate issues and events to see it.
Oh, you may gain ascendancy for short periods, and by that I mean 20 or thirty years, particularly if the people are persuaded that there is much to be afraid of, but it is never lasting. Fear is so fleeting that it cannot sustain your power. Do not allow those ephemeral victories to lull you into a sense of entitlement. You saw what that got you in the last election, right?

So, let’s just accept the fact that you have chosen a role in politics that will never be ultimately victorious. Look around at the social issues that are most prominent now. I mean universal health care, full civil rights for all gays, equality of pay and the like. You won’t win those either. The world moves forward; it does not stay still nor does it move backward. Frustrating? You betcha. But there it is.

So, should you just fold your tent and go hide in the woods somewhere? Absolutely not! Remember, your position is the “hold-back” one. What are you holding back? Why, the Liberals, of course.

Okay, my Liberal friends, now it’s your turn.

Do not gloat. Were it not for the Conservatives, you would run hell-bent-for-leather toward the edge of any number of cliffs, secure in the belief that you could fly! We have seen time and again the good-hearted but wrong-headed policies that have had unintended consequences.
Step back and consider what the term liberal means. Webster says it means “tolerant, open-minded and generous.” That’s as good a definition as I can find. That means you must be tolerant of opposing opinions. You have not often been so. I speak, of course of the late “Political Correctness” which was the very opposite of what a liberal stands for.

In the Seventies, many radical groups began calling themselves liberals. They were not, but true Liberals did not call them on it and so the terms “radical” and “liberal” got confused, by everybody, not just the right.

The most egregious example is the matter of the state’s attitude toward religion. We do not and never have wanted the state to mandate any one religion and so we erect an “impenetrable wall” between the state and religion. However, that was never meant to imply intolerance toward all religion, which in its finest moments enlightens and ennobles us, transporting us from the mundane and profane world into the realms of the sublime (I said in its finest moments!).

The first part of the First Amendment reads, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” What does that mean? It means I have the right to pray and display religious items wherever I want. Anywhere. Any time. The Government can’t say squat. Get real. Nowhere does it say that religious expression can be or should be banned. It states exactly the opposite. A Supreme Court ruling that prohibited schools from mandating the prayer of one religion over all others was intended to foster tolerance but has had the exact opposite effect.

If you are indeed liberal, you should not object to nativity scenes on public land; public land belongs to all of the public, even the religious.

However, Conservatives, don’t start preening! Those who wish to express their freedom of religion on public land should note that Wiccans have an equal right to put up display celebrating the Winter Solstice! Are you ready for that?

Okay, that’s an extreme example of unintended consequences. There are others. In any case, you Liberals should be grateful for the Conservatives. If it is true that they have pretty consistently grown to embrace programs they initially opposed, it is also true that without their opposition, you would accomplish very little of any import. Creativity requires obstacles to get over, under, around and through. Without those obstacles, your ideas would never be shaped, sharpened and honed. Conservatives force you to prove your points and in so doing help you make your points.

Lets face it. Both Liberals and Conservatives have been in the past rather intolerant and disrespectful of each others positions. That cannot last. It is an untenable stance and the Republic suffers from it. Both Liberals and Conservatives need to embrace their root principles and expel those who use those terms to practice intolerance, bullheadedness, and downright hatred. Hatefulness, intolerance and disrespect have never accomplished anything except reinforcing those negative qualities to no purpose. A destructive cycle. Don’t allow extremists to assume the names of Conservative or Liberal.

To my Conservative and Liberal friends: Get rid of your nut-jobs.

Jeremy Mcguire is an author/illustrator, humorist and social commentator. His weekly articles appear in a variety of publications, and are archived on the blog, Baloney & Blarney.

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Mitigation ‘Round About Midnight? (The_NBC/Leno/O'Brien "thing")

January 16th, 2010 by dewprocess.

JD-About-Town Jonathan Handel shares here some very interesting insights into the NBC/Leno/O’Brien slap fight. For the international reader, Jay Leno and Conan O’Brien are two big talk show hosts here in the USA, ostensibly “trapped” in a web of intrigue (others may suggest a quagmire of confused corporate fumbling) surrounding their futures as talk show hosts on that particular network. NBC, one of the USA’s top television networks, brusquely replaced Mr. Leno, former host of the renowned “Tonight Show”, with Conan O’Brien, in an effort to appeal to the prized younger demographic. They secured the demographic, but lost overall viewership. Meanwhile, the consolation prize offered to Mr. Leno, in the form of a prime time talk show, also failed in the ratings (again, some may prefer “was not given enough of a chance”). The Network affiliates revolted, and NBC – just as brusquely – announced an odd reshuffle that led to the current (and apparently soon to be resolved) standoff. For more details, read on!:

That sweet walkaway payday for Conan O’Brien might not be as rich as it sounds. Media such as Variety are reporting that NBC is likely to pay Conan $30 to $40 million to settle out his contract, with a deal to be reached shortly. But what none of the media appear to be mentioning is the two magic words of employment contract settlements: mitigation and offset. Depending on how those terms are deployed, the hit to NBC could be much less than the numbers imply – particularly if Conan scores a deal with Fox for a new show to start in September, as many observers expect.

Here’s how it works. First, as background, the NBC payments are likely to be made over the period of time remaining in his contract – at least, that’s what customary. Conan’s attorneys, agents and manager would probably press for some acceleration though, unless the tax consequences of doing so would be adverse.

In any case, mitigation is the concept that the terminated employee, i.e., Conan, has an obligation to seek other employment. If he fails to do so, the payments from NBC could stop. To protect against this, Conan’s representatives will seek, and may get, a “no mitigation” clause. In that case, the payments would keep coming even if Conan decides to sit on the beach for the next 2-1/2 years (reportedly the remaining term of his contract), though he’s unlikely to want to damage his personal brand name by simply disappearing.

At the very least, though, Conan’s team will argue for no mitigation from now until a new Conan show could feasibly be launched, which is generally assumed to be September, i.e., the beginning of the fall TV season. They’d also probably seek a guarantee that there would be no mitigation if Conan is offered and refuses a show of lesser stature, or one at a lower salary than he was receiving at NBC, or one that reaches too small a percentage of households in the country. In other words, under such contract terms, Conan would be able to refuse a “demotion” without violating a duty to mitigate.

Now on to offset. This is the concept that whatever the employee earns at his or her new job, if any, would be offset against the settlement payments owed by the old employer. This would apply only for the remainder of the old contract. For instance, suppose the agreed NBC termination payment (“liquidated damages,” in legal terminology) is $40 million, and suppose Fox pays Conan $30 million over the next 2-1/2 years. In that case, the $30 million could be offset against the $40 million, and NBC would only have to pay $10 million.

Naturally, Conan’s representatives will seek a “no offset” clause. This would be a hard-fought point, however. NBC would argue that Conan would be getting a windfall and, even worse, that he’ll be cashing those checks while competing against NBC itself. That’s like biting the hand that feeds you, but knowing you’ll get fed regardless.

Here again, there’s a compromise available: Conan and NBC might agree that his salary from the new show would be only partially applicable (i.e., partially offsetable) against the NBC liquidated damages payments. For instance, if 50% of his Fox salary (if he does a Fox deal) were applicable, then $15 million (in the above example) would be applied against the $40 million, reducing NBC’s obligation to $25 million.

On a different note, it wouldn’t surprise me if NBC seeks a non-disparagement clause from Conan. Paying him liquidated damages while he’s getting paid by Fox to bash NBC in his monologue might be too much for the NBC suits to accept.

Of course, this is all speculation. No one’s seen the existing contract, let alone the settlement agreement, since there is no settlement yet (and it’s not clear to me whether NBC would be required to file a redacted copy with the SEC). But it’s easy to see how mitigation and offset amount to a win-win. Those provisions could allow Conan’s people to leak big impressive figures, yet reduce the bite for NBC.

Whether that would be enough to keep heads from rolling at NBC is another subject. If the Comcast deal goes through, under which the cable operator would acquire a majority stake in NBC Universal from corporate parent GE, then I’d expect some hasty departures. Someone might get the ax even if the deal isn’t consummated. (The antitrust division of the Justice Department recently announced they will be reviewing the deal.) Ironically, terminating the responsible executives would probably require NBC to make more contract settlement payments.

Moving Jay Leno to 10:00 p.m. was an understandable experiment. It seemingly kept both Leno and O’Brien in the family, and lower ratings were acceptable to the network, since production costs for five nights a week of a talk show are a lot less than for five nights of scripted dramas.

Unfortunately, it looks like the downside wasn’t evaluated as thoroughly: Leno’s lower ratings at 10:00 meant diminished ratings for 11:00 p.m. local station newscasts, an unacceptable price for network affiliates, for whom the newscasts are a cash cow. Moving Leno back to late night gave NBC one host too many: Leno, O’Brien, Jimmy Fallon and Carson Daly. That’s four hosts for three chairs, and when the music stopped, O’Brien was out. Now, for NBC, it appears time to pay the piper.

Jonathan Handel is Of Counsel at TroyGould and practices digital media, entertainment and technology law.  He is an adjunct professor at the UCLA School of Law, and his op-ed pieces have appeared in the Los Angeles Times, the Daily Journal, and the Los Angeles Business Journal. Visit his site at jhandel.com.

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Was Wall Street Deriving Under the Influence?

January 14th, 2010 by dewprocess.

Portfolio Manager Robert H. Heath will occasionally be contributing to this blog in the near future. Heath is a consultant, investment banker and corporate strategist who is currently self-unemployed.  When he’s not raising three kids and training a puppy, he occasionally remarks on current events, and recently had a little something to say about the underlying causes for our ongoing economic “situation”:

In the aftermath of the 2008 global financial crisis (at least I hope we’re in the aftermath) observers of the financial markets continue to debate its underlying causes. Some point to executive compensation, which supposedly encouraged excessive risk-taking. Others blame excessive leverage (the most basic form of risk-taking) and finger the Federal Reserve for maintaining artificially low interest rates from 2002 to 2005. Other critics believe that a surge in esoteric and poorly-modeled derivatives allowed banks to pretend that a substantial increase in risk and systemic co-dependence was safely hedged.

But an article in “Science Translational Medicine” offers a simpler hypothesis consistent with lowered inhibitions, excessive risk-taking and impaired judgment: Wall Street was three (spread)sheets to the wind.
Now I’m not suggesting that investment bankers were drinking at work… at least not more than usual. But 100-hour workweeks are not uncommon on Wall Street, and as Bloomberg quotes the study, “Staying awake for 24 hours straight equals having a blood alcohol concentration of 0.10 percent, beyond the 0.08 percent legal limit for driving in the U.S.”
You wouldn’t give your car keys to a sleep-deprived, cognitively-impaired twenty-two year old, but bet a billion dollars (levered 10:1) on the AAA-rated tranche of a 30-layer, collateralized debt security that he modeled at four in the morning? No problem.

To find more of Robert’s ruminations, visit his personal blog.

Golden Oldie – Charles Leadbeater on Amateur Innovation

January 13th, 2010 by dewprocess.

In support of my earlier assertion that innovation is – in its finest moments – a process-oriented and needs-respondent dynamic, I offer this talk by Charles Leadbeater, exploring and explaining the value of amateur consumer innovation. The presentation is a few years old, but still holds water. In fact, I would posit the truths laid out in this talk are even more evolved today, several years later: the consumer is no longer a passive creature. Sounds like a simple idea, and yet so many business STILL fail to grasp its implications…

In other news, I’m thrilled to announce that, less than 2 weeks into our Beta launch, and with only 3 postings made to date, we already have 20 subscribers and an average of 62 unique visitors daily! My thanks to those who have shared the blog with their friends, and please keep spreading the word.

Innovation and Globalization

January 11th, 2010 by dewprocess.

Indiana-based strategic consultant David Virag sent me the following commentary today, partly in response to my recent posting on the Nature of Innovation. Virag is well-placed to speak on issues relating to technology and innovation, with more than 20 years of experience in consumer electronics and high tech managing business and technology strategies.

With the current mortgage crisis and high unemployment rates, there is a general feeling of uneasiness among most people regarding the U.S. economy and future prospects.  Current efforts by the Federal government to kick-start the economy with subsidies and low-interest rates have yet to take hold.   With the unemployment rate sticking at 10%, many economists are predicting a jobless recovery.  However, without a strong labor force, it’s unclear how much recovery can ever take place.  An AP analysis published this week found very little job creation from public road construction programs.   Perhaps a jobless recovery is one where the economy merely stabilizes.

Government policy notwithstanding, one thing that does have the ability to recharge the economy is good old-fashioned innovation.  The US has been a global leader in innovation over the past century.   This innovation is one of the critical elements that propelled our standard of living to be the highest in the world.   Looking back through the past 50 years or so, the U.S. has been at the forefront of virtually every major technological change in the world.  We played key roles in the research and development, manufacturing, and sales of radio, television, automobiles, airplanes, computers, cellular phones, and the Internet.  Each of these technologies changed the way people live and businesses work and with it millions of jobs were created.   If one looks at just the last century, mankind has literally progressed from driving a horse and buggy to walking on the moon.  Only 95 years ago, we celebrated the first coast-to-coast telephone line.

Just as in the study of the stock market, past performance does not guarantee future results.  As technology has changed so has the global landscape.  Some of the very inventions created in the U.S. now enable global competition.   The Internet allows for nearly instantaneous access to data and information from anywhere around the world.  Low-cost computers and networks give everyone access to what was equivalent to a super computer only a decade or two ago.   Transportation allows for manufacturing of goods at the lowest cost location.  The U.S. university system is still the best in the world.  The best foreign students come to school in the United States; however, it is now easier (and perhaps more profitable) to return home and put new found skills to use in competition.

Statistics from the U.S. Patent office illuminate these trends.   In 1963, a total of just over 45,000 patents were granted to U.S. and non-U.S. inventors.  By 2008 this number jumped to over 157,000 patents, a change of nearly 250%.  The decade of the ‘90s represented a 56% increase over the 1980’s demonstrating the innovation linked to the emergence of computers, cell phones, and the internet.  The first 9 years of the new millennium provided over 1.45 million patents granted, or a 31% increase over the 1990’s.

While the past 9 years have been bountiful, it is worth highlighting a couple of things.  First, the number of grants to U.S. inventors peaked in 2006 with declines in both 2007 and 2008.   While two data points don’t make a trend and declines have prevailed in the past, it is highlighted by the second trend of note, the rise in patents issued to foreign inventors.  In fact, 2008 represents the first year in which a majority of the patents granted at the U.S. Patent Office were granted to foreign inventors (50.8%).   By comparison, patents granted of U.S. origin represented 81% of the total patents granted in 1963.  Since 2000, 51.7% of the patents granted are to U.S. inventors.  For the decade from 1970-79 this number was 66.7%.   The U.S. Patent Office determines origin by the residence of the first named inventor.

Globalization is here.  Competition is good.  Through innovation, competition, and collaboration, the surest way to return to prosperity is through invention.  We need the next Microsoft and Intel, the Qualcomm of the 21st century.  We need not just evolutionary thinking but a revolutionary mindset.  Tough times can make for outside the box thinking.  When that next leap in innovation does come, odds are it will be more of a global effort than in the past.

David E. Virag has extensive expertise in developing new technologies and applications, business valuation, leadership, and strategy.  He holds an MBA from the Booth School of Business at the University of Chicago, and is currently a Principal consultant with New Era Strategies.  To learn more about David, please go to www.techonomicstoday.com

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A consummation devoutly to be wished*

January 10th, 2010 by dewprocess.

As pundits across the Internet continue to post their predictions for 2010 (what’s the cut-off for this, by the way? It’s bad enough that Christmas starts in October now, but aren’t “predictions” supposed to take place BEFORE the year in question?), I am struck by two things: the struggle between our growing desire for less clutter and our impulse to acquire and hoard, and the continued admiration for truly innovative activity, regardless of its commercial or technological viability.

We persist, as a society, to seek the newest and most disruptive opportunities, if only to engage in flights of fancy. Attendees at this past week’s CES show in Las Vegas will be the first to testify that much of what was touted there as “the next big thing” will never move beyond the prototypical. This is not necessarily due to the nature of the prototype itself, however, but rather the willingness (or lack thereof) of a business venture to invest in that emerging offering.

Before we start delving too deeply in to the obvious realms of technological invention, let me stress that innovation is a concept that permeates every industry and market sector. Whether you are semiconductor company seeking to maintain (and even best) Moore’s law, a TV or film producer hoping your property will have just the right “magic sauce”, or a car manufacturer investing in one alternative fuel research pipeline, as opposed to another:  innovation is an “agnostic religion” which has unfortunately become somewhat synonymous with instant viability, and not with process-oriented supportive infrastructures of creativity. In an incessantly bottom-line focused business world, truly supportive nurturing of bright ideas was replaced by desperate flash gambles: far better to throw small investments at multiple opportunities, hoping for speedy returns on one, than to put all one’s proverbial eggs in one basket, and wait patiently for nothing more than the possible…right?

So is there actually a timeline for innovation? Can we plot the building blocks for innovation or, by process of elimination achieve the same, by identifying the obstacles our business culture may have erected, in its past 3 decades of greed (and I do not use the word lightly)?

Businesses today have become too tightly focused on short term ROI, leaving little or no room for creativity or invention. The investment required to support an innovation pipeline is no longer being made by most traditional technology providers, product developers and R&D labs, now focused on saving themselves to prosperity by milking their IP portfolios as efficiently as possible.  Admittedly, a few companies, studios, and other enterprises have invested very small sums in “incubator” ventures, recognizing very cautiously the value in maintaining *some* sort of connection to long-term growth models. Others, such as Google and Facebook, hold a commitment at their very core to embed the pursuit of innovation as part of the daily task list of every employee. As a result, the consistent commitment to process and product improvement, regardless of sources or roles, leads to what I call “3M moments”: true innovations realized by everyday employees seeking to meet market needs, supported by companies fostering “permitted bootlegging” policies, rather than R&D investments made only on the basis of direct ROI.

I suggest that – with the exception of military imperatives (World Wars and the like) – the greatest business and social growth has occurred historically when the least pressure has been applied by the businesses “hosting” the research and development leading to that growth. We are now entered in to such a time, when an economic downturn of such harshness has released companies from the day-to-day “make me a buck” pressures imposed by day-trading shareholders of past. The next two to five years present a fantastic opportunity for businesses large and small to integrate innovation pipelines back in to their midterm and long term strategies. There is no distinct single formula for innovation, however, nor any marked timetable. Instead, invention occurs at the confluence of myriad flexible solution environments, be they fiscally, technologically, or socially driven.

People will always come up with brilliant ideas. It then falls to business or academia to incubate those ideas, until such time as the market is able to make best use of them. Take, for example, the seemingly never-ending saga of the e-book. This is not some newly emerging wonder toy. The e-book has existed for more than 20 years. Indeed, over 15 years ago, it was fully recognized as a tangible replacement for print journalism:

I believe that e-books and e-magazines will be mainstream in the very near future, rather than early adopter indulgences. Will print journalism disappear? I don’t know. I can’t see a reason why we should continue to invest in deforestation, unnecessary hard distribution costs, or ink, when the alternative permits us to invest in more sustainable environmental and business practices. E-journalism allows us to pay our reporters more, lets us deliver information under multiple revenue generation models (advertisement-based, subscription-based, single POP-based), and makes more sense in a world seeking less clutter and more time.

Whether we end up holding Kindles, Nooks, Ques, Skiffs, Apple Tablets, or Sony Readers in our hands, our physical relationship with information will continue to evolve, at a pace governed by the consumer, and the speed of adoption will sometimes be influenced by very un-business-like elements. Software elements such as Kurzweil’s Blio may accelerate or arrest this evolution, and if there’s one thing that trumps humanity’s drive for innovation, it is its nostalgia. eBay built an empire on the back of this certainty, and political parties feed off of our thirst for non-existent “good old days”.

Our job as thinkers and business leaders is to balance our responsibilities to our shareholders with our younger dreams, born perhaps when we were bright-eyed undergraduate visionaries: imaginings wherein anything was possible. We were once able to construct whole worlds absent of patent trolls, stock valuations, or balance sheets. Perhaps the greatest innovation of the next 30 years will be the discovery of a formula that elegantly balances commerce and creativity once more, heralding a new and thrilling renaissance. Not so much the undeniably great advances of this past century, but the more balanced and measured movement that brings forth whole societies. Now that would be a great “Reset” to look forward to!

(*William Shakespeare; Hamlet; Act 3, Scene 1)

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Cat Fight in The Fox's Den

January 1st, 2010 by dewprocess.

Jonathan Handel is well-known as “the insider” when it comes to entertainment and media industry dealmaking. His latest posting examines the current struggles between and amidst the various content creators, providers, aggregators, and distributors:

Until moments ago (mid-day Jan. 1), when a deal was reached, Fox was threatening to black out its channels, most notably Fox broadcast, from Time Warner Cable (TWC) unless TWC anted up a subscriber fee of reportedly $1 per subscriber per month. Historically, cable networks such as HBO, Showtime, AMC, etc. got those fees, but broadcast networks didn’t. They need them now, with ad revenue shrinking, and customers departing networks in favor of cable channels — a multi-decade trend — and, more recently, video games, Internet TV sites such as Hulu, unauthorized (pirated) content, and user-generated content such as on YouTube.

Broadcast networks have started to get paid — CBS, for instance, reportedly gets up to $0.50. TWC apparently offered Fox only $0.30, but the terms of the deal they reached are undisclosed and most likely higher. Even though Fox ultimately didn’t pull the plug, it took the intervention of Senator John Kerry to keep football and “American Idol” from going dark on TWC. That’s not the sort of attention a media company wants. So why didn’t TWC just ante up the $1 and pass on the cost to consumers?

The answer is that MSO’s (cable cos. like TWC) are afraid that if they keep raising cable prices, they’ll drive more consumers to satellite or induce them to drop cable and just watch TV on the Internet. That is, instead of buying an Internet+cable bundle from Time Warner Cable, the customer might just drop the cable portion and buy Internet only.

Even worse for TWC: If customers opt for Internet only, some will be peeled away by telephone+Internet or cellular+Internet bundles from ATT or Verizon, causing TWC to lose the customer altogether. It’s called churn, and it’s especially likely because customer perception of cable company greed would dovetail with the belief that telcos offer better customer service anyway. Thus, raising cable prices could cost TWC dearly.

So, the battle between TWC and Fox is just another facet of an n-dimensional war between MSOs, satellite cos., landline telcos, cellular cos., cable networks, broadcast networks (ABC, CBS, CW, Fox, NBC), network affiliates (the local stations that actually broadcast the network signal), video game companies, Internet TV sites, unauthorized (pirated) content, user-generated content—and, of course, the consumer. And that’s not even to mention the companies that manufacture the hardware, such as handsets, TV’s, cable and satellite receivers, and other set top boxes. They’re always looking to play transmission companies off against each other and capture more of the consumer dollar.

To add to the confusion, there’s cross ownership between some of these companies but not all of them, meaning that ostensible competitors have very different profiles from each other, and also that they must often collaborate. For instance, when the ComcastNBC Universal deal closes (assuming, of course, that it does), Comcast will control a cable system, a broadcast network, and multiple cable channels, whereas Time Warner Cable is a cable system only (that’s because Time Warner Inc. spun off TWC) and Fox’s parent, News Corp., lacks a cable system. Speaking of News Corp., throw in the fight between newspapers and Internet sites, and it’s clear that the Internet sparked a revolution that’s got everybody up in everyone else’s business. It’s the media equivalent of string theory, except that MBA’s usually have better hair than Einstein did.

Jonathan Handel is Of Counsel at TroyGould and practices digital media, entertainment and technology law.  He is an adjunct professor at the UCLA School of Law, and his op-ed pieces have appeared in the Los Angeles Times, the Daily Journal, and the Los Angeles Business Journal. Visit his site at jhandel.com.

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