Operation Successful, Patient Dying

In June the RIAA started to sue people for sharing illegal music files in order to spread fear and suppress filesharing. Now there is an interesting article in Macworld UK about the effects of this action (via Dana Blankenhorn): According to Phil Leigh, vice president of Raymond James and Associates, there was a 22 per cent drop in peer-to-peer file trading activity between mid-June and late August. That's certainly something the RIAA loves to hear. But their new medicine comes with some rather unpleasant side effects:
"From June 15 to August 3, CD sales dropped by 9.4 per cent. However, on June 15, CD sales were down only 6.1 per cent year-to-date. The increase in the rate of decline (from 6.1 to 9.4 per cent) translates to acceleration in the rate of decline," he claims. Leigh admits that a seven-week measurement cannot be seen as conclusive, as other factors, such as holidays, quantity and quality of releases, can affect such figures. But the analyst isn't optimistic: "The initial data is not encouraging for the labels as it suggests that the fundamental premise underlying their deterrence strategy is flawed. Specifically, curtailing file trading may not improve CD sales, but instead may accelerate their decline."
This just confirms the obvious: fear is not a very efficient marketing tool ! You can scare people away from Kazaa et al., but you cannot scare someone to become your customer and buy your products - okay, the mafia might, but not the music industry... so there still are some differences between these two... ;-) Anyway, this will most certainly not keep the media companies from digging their own graves and that's actually a good thing ! When established players in a free market economy refuse to adapt to a changing market this creates great opportunities for new entrants. Take for example the iTunes Music Store. Right now they are just a new distribution channel for the big music companies and this draws a lot of criticism. But I think that is unfair: Apple has to cooperate with them if they want to be able to sell the music people want to hear - at least initially. But as soon as they have acquired a strong customer base, they can slowly start to cut out the then obsolete middle man and sell the music directly from the artist to the audience. If everything works well, more artists will get more money, while the fans will have to pay less. Everyone will be happy except you know who ! Okay, that sounds like pure theory and it probably won't be that easy. But I am confident that in the end, the market will teach the RIAA that "Creative Destruction" isn't just an academic expression and that will be good for all of us...
Read More

Golfsburg - Ambient Marketing extreme: A whole City gets a new Name

Today Volkswagen presented the fifth generation of their most successful model: the VW Golf. The Mayor of Wolfsburg, the city where the VW headquarters are located, wanted to support this event. So he decided to change the name of his city from Wolfsburg to Golfsburg for a five week period - starting today ! During this time, things like the city limit signs or the official city stationary will sport the new name and logo. As one would expect, the press loves the idea and every major media outlet is reporting about it. An interesting case of ambient marketing. It helps Volkswagen to get additional PR for their product launch. But at the same time, Wolfsburg - sorry Golfsburg - also profits from this, because it promotes the city nationwide. And as someone who grew up in the region, I can ensure everyone that this dull city really needs every little bit of promotion it can get... ;-) P.S.: While I am writing this, the official event is long over, but the Volkswagen Homepage still doesn't mention it with a single word and the Golf section of the website starts with: "The new Golf will celebrate its world premiere in autumn 2003 (...)" !? Sorry, Mr. Pischetsrieder, but this is really worst practice !!!
Read More

HAEFTLING - A new Fashion Label is born

Since 1898 inmates of the Berlin State Prison are making clothes and accessories for their own needs. But recently a marketing agency had the idea to market these products professionally to the outside world. They created a new brand - HAEFTLING (inmate) - and set up a website - www.haeftling.de. It all looked very sophisticated and well designed. Then the spin-machine was started and many German newspapers, like Der Spiegel or Stern, carried the story a few weeks ago (Article in English on DW World). The idea became an instant success and in less than a month the website was flooded with over 3600 orders from all over the world !! There was just one hitch: only 50 inmates were working for the HAEFTLING label and they couldn't keep up with all the orders coming in. So the e-commerce system had to be shut down for the time being and 30 additional inmates were hired. The interesting thing is that according to an article in the FTD, nearly every German penitentiary is selling products made by inmates. But Herr Ledesi, the agency behind all this, did something totally different: they didn't just start selling shirts from yet another prison tailor shop. Instead they came up with a very elaborate concept: the brand, the website, the story - everything feels very authentic and makes you want to buy this stuff. In fact, they did their homework so well that nobody seems to ask an obvious question: How good is the quality ? None of the articles mentioned above says anything about this ! Perhaps everybody assumes that the products are as perfect as the branding !? Which is of course a classical function of a brand - but this kind of trust-building usually takes a bit longer than just a few weeks !! There are still quite a few loose ends to tie up, tough: besides the quality issue, for example, it won't be possible to boost output in that one single prison after a certain level is reached. If they move the production outside, the products would loose a lot of their authenticity. But perhaps they can establish some kind of prison network, where many small groups are all working for the HAEFTLING label. This would create much needed jobs for a lot of inmates. Anyway, if they solve these problems, it is pretty easy to predict that very soon HAEFTLING will reach cult status at internet speed - perhaps even worldwide !! And it has the potential to become a real best practice for "How to build a great international brand in today's world - with nothing but extraordinary products, a decent website and a little bit PR to start the buzz..." ...but however this plays out, it is already an excellent example for how to create a Purple Cow !
Read More

Trendwatching.com's September Newsletter is out...

Trendwatching.com released this month's edition of their newsletter today:
NATIONS*LITE* Millions of global citizens will want to -- and be able to afford to -- live in communities stripped of crime, bad weather and bad housing. NATIONS*LITE* like the United Arab Emirates and the Freedom Ship are rolling out the red carpet. COUNTER-GOOGLING You can find anything on anyone online these days: so why not 'Google' your first-time customers and offer them personalized services from day one of your '1:1 relationship'? HOME TROTTING Trend update -- London is now the official HOME TROTTING capital of the world, beating New York and Los Angeles when it comes to immigration and diversity. GRAVANITY Trend update -- More personalized stamps (our own), and LOGOVANITY meets kitchen apron. SEE-HEAR-BUY Trend update -- Shazam is expanding outside the UK: soon you'll be able to 'name that tune' in German, Italian or Chinese. BRANDED BRANDS Trend update -- Breitling dates a Bentley, and Puma powers a Mini Cooper.
Read More

Flying as the Upper Class...

If you have never heard of Ryan Air or EasyJet, because you don't have to, you might want to check out the new premium service from Virgin Atlantic. It is called, quite appropriately, the "Upper Class Suite". In a time when most of the world's airlines are pursuing more or less the same strategy to overcome the current crisis, Virgin is trying something different. The Upper Class Suite is not the usual "a little better food & a little more space for a lot more money" approach. Instead Virgin has reinvented premium air travel with great attention to detail: e.g. they completely changed the configuration of the cabin, so that all seats have direct access to an aisle – even the window seats. The design of the seat itself looks also pretty extraordinary. It's no longer just a seat but - well - a whole suite... Hey, and they even got an on board bar and a massage service... A really sleek concept !!
Read More

Quiet please...

Is this just a joke or an authentic internal memo from eBay ?
Sent: Thursday, June 19, 2003 10:30 AM To: DL-eBaySJC-all-R Subject: eBay internal communication - Talking at desks- Please read It has come to my attention that several employees are talking at their desks during scheduled work hours. I must convey the importance of NOT talking at your desk, or to your desk partner. Talking greatly decreases work productivity, and company morale. If you need to talk to someone, please schedule a meeting room where you can talk, or use the break rooms. If you are caught talking at your desk, you will be escorted into a meeting room and questioned as to why you are talking, and if it is relevant to your job. If not, you may be subjected to disciplinary actions. We want you to work hard at eBay, and enjoy your work. Please contact management if you have any questions. Thank you, Jody Rivers Safeharbor Manager.
Read More

Blogs in the Workplace

An article in today's New York Times talks about how companies are using weblogs to simplify everyday tasks and internal processes:
Mr. Tang has also used blogs to coordinate group projects, like the recent process of interviewing job candidates for a programming position. The various people at the company who spoke to each candidate posted their comments on a password-protected Web log. "One person wrote that a candidate was `quiet,' " Mr. Tang recalled. "There was a whole discussion about this. `What does that mean? Is it a bad thing? Does it mean he's antisocial?' There was more back and forth with the interview process. It helped everyone to get on the same page more quickly." (...) "People are starting to use Web logs to archive data that would have otherwise been lost," Mr. Tang said. He noted that much of the company's internal communications had been via instant messaging — and was lost as soon as the correspondents closed their chat windows. Now, though, employees are starting to post transcripts of relevant discussions on the Weblogs, he said."
I really like the straight-forward way these companies are using weblogs. No big steering-committees or insane upfront investments: Just do it - with an out-of-the box solution, small, focused groups and lot's of flexibility to adapt to new ideas and experiences...
Read More

Providing Hotspots for free, while still being profitable !?

I love to sit in a cafe and sip a cappuccino, while writing something for my weblog. It really gets my creative juices flowing. But I don't like to be ripped off at the same time !! So I probably wouldn't enjoy staying at one of the places The Economist wrote about recently:
"Perhaps the best-known network of hotspots is that operated by T-Mobile, a wireless operator, in over 2,000 Starbucks coffee shops in America. Around 25,000 people access the hotspots each week, which works out at an average of less than two users per day per hotspot. But the cost of connecting each hotspot to the internet is several hundred dollars a month. The Wi-Fi hotspot at Amsterdam's Schiphol airport is used by only a dozen people each day. (...) Users may be deterred by high prices. Even after a recent round of price cuts, using T-Mobile's network of hotspots costs $6 per hour, $40 per month, or $360 per year. Other operators in America charge $40-70 per month. Prices in Europe are as high as euro 130 ($150) per month. (...)"
Excuse me ? 130 euro per month ?? That's about three times what I pay for my DSL-line at home... No wonder that they are desperate for customers. Looks a little bit like the problem with GPRS I wrote about a couple of weeks ago. So why does it cost "several hundred dollars a month" to connect a small hotspot, like a Starbucks, to the Internet ? After the initial investment for the router, the running costs shouldn't be much higher than the price for a normal DSL-Line. Here in Hamburg, for example, we have a service called Hotspot-Hamburg, which is free to use for everyone. Every owner of a cafe or restaurant can get there a hotspot installed for just 50 Euro per month - which means 1,6 Euro per day. So he breaks even, if he sells 1 additional cappuccino every other day. At these rates, the Internet access becomes part of the normal infrastructure of a cafe, which you use, while you are there - just like a chair or a table (Ever got asked if you want a chair with your latte ?). And providing the service for free, also saves the costs for things like billing or customer service. So if there is a business model for Wi-Fi services in public places, like cafes, that's probably it: keep the running costs as low as possible, provide the service for free, tell everyone about it and recoup the investment with additional sales. Jupiter's Joseph Laszlo talked about a very good example for this on his weblog yesterday. But there is still one problem left: who will pay for the large overhead of something like T-Mobile ? Well, I definitely won't...
Read More

RIAA gets into Search & Destroy Mode

Looks like the RIAA is getting ready to try a new approach to suppress file-sharing (from news.com):
"In its most serious crackdown yet on file swapping, the Recording Industry Association of America said it will gather evidence against individuals who trade songs online and slap thousands of them with copyright-infringement lawsuits. Bolstered by recent court rulings that make it easier to unmask individual file swappers, the music industry trade group said it will launch a massive campaign Thursday to target individuals who offer "substantial amounts" of music through peer-to-peer networks. "Once we begin our evidence-gathering process, any individual computer user who continues to offer music illegally to millions of others will run the very real risk of facing legal action in the form of civil lawsuits that will cost violators thousands of dollars and potentially subject them to criminal prosecution," RIAA President Cary Sherman said in a statement. (...)" see also: RIAA - Press release
The online community is reacting to this with the usual mixture of outrage and resistance-is-futile. But this time, I am not sure if this approach really is so futile. As Jane Black writes in her commentary for Business Week: "Spreading fear may not be good PR, but it gets the job done far more efficiently than suing faceless software companies." If the RIAA really sues hundreds of "normal" Kazaa & Co. users this certainly will have a significant effect. There still will be lots of people who want to download songs via these services, but many of them will stop sharing their own music. This will amplify the problem of free-riding and could very well dry up the whole file-sharing world. At least until reliable IP-masking software is integrated into the clients. But successful or not, the whole story clearly shows that the media industry still doesn't get it: putting a lawyer next to every pc is probably a way to kill file-sharing once and for all, but hardly an efficient one. Services like the Apple MusicStore or eMusic have shown that there is a different way: just make it more easy to buy music than to steal it and don't treat your customers as thieves. It's as simple as that... If the big record companies would fully embrace this concept, the whole industry could thrive again. So instead of feeling sorry for themselves, they should read this book and start adapting to the fact that things have changed... By the way: in a funny coincidence, the German newsmagazine DER SPIEGEL reports today that the European launch of the Apple MusicStore will be delayed at least until the beginning of 2004 (article in German). Looks like the European music companies are not able to figure out the necessary legal stuff. Their lawyers are probably to busy finding ways to sue evil file-sharers on this side of the Atlantic, too !?
Read More