Tag Archives: Business model

Tribute Bands And Your Business

Over the weekend I saw the Dark Star Orchestra. For those of you unfamiliar with the band, they’re one of the leading tribute bands out there and they play the music of The Grateful Dead. I’ve seen them several times and oddly enough each time I do it reminds me of a few business thoughts.

I played in several bands as I was growing up. We always felt we were a cover band. We were playing someone else’s songs but doing so in our own way. Most tribute bands go beyond that and attempt to recreate the sounds and often the appearance of the original artists. If you’re any sort of fan of The Dead you know that their performances were very hit or miss. The DSO is way more consistent and they sound just like The Dead on a great night each and every time. So what does this have to do with business?

I think imitation is more than just the sincerest form of flattery. I think in many ways it’s better than innovation despite the fact that we often hear of the “first mover advantage.” Innovation is great, but by not being first the flaws in the original product or service become way more clear. The fact that you’re building later lets you correct for those flaws and get beyond the original. That usually is something you can do much more cost-effectively too.

What do I mean? The iPod was not the first music player, just the most successful. Anyone who looks at Instagram knows both that they weren’t the first of their kind and that most of their “new” features these days come right from Snapchat. You could video chat someone long before Skype came around and Amazon was not the first retailer on the web. Each of those companies, and other such as Spotify and eBay, were not first movers. They were imitators – tribute bands if you will, who took the best of the pioneers and made it better.

Is it easier to get funding for a copycat? Probably – the business model has been proven and, therefore, investor risk is reduced. Japan, and now China, built economies on imitating successful products and making them better and/or cheaper. A tribute band has a pre-built fan base. If you’re a Beatles fan or an Oasis fan or a fan of The Band, you have no chance to see the original but you can spend a night with their music. If you’re a business, you don’t have to be the original if you can make the original better and capitalize on their fan base. The DSO do it brilliantly. Can you?

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Filed under Consulting, Music, Thinking Aloud

Zuckerberg Unbound

Philip Roth wrote a series of books in the late 1970’s and early 1980’s. The middle one is called Zuckerman Unbound and deals with the relationship between an author (Roth’s alter-ego Zuckerman) and his creations. It’s not a great relationship although it is a pretty good book. Roth’s character seems to express regret for the books his younger self brought into the world, and at one point he finds out that a book he wrote has caused his mother a great deal of pain and suffering.

English: Mark Zuckerberg, Founder & CEO of Fac...

(Photo credit: Wikipedia)

I thought about Zuckerman as I watched (and am watching as I write this) another Zuck – Mark Zuckerberg of Facebook – testify before Congress about how his creation, designed to bring people together, has morphed into something that has blown many people and institutions apart. I doubt any of you reading today’s screed touch billions of people every day the way Facebook does, but I think there are some lessons to be learned here.

One thing that rings hollow for me is the apology offered to the committees. I and many others have been writing about Facebook’s lack of privacy and transparency for years. This isn’t something new nor is it something about which Facebook was unaware. One might suppose that they, like so many others in business, were of the mindset that it’s better to beg for forgiveness than to ask for permission. Bad call, and they’ll be doing a lot of begging as the inevitable new regulations on the use of data are put into place. That’s lesson one.

My favorite moment of yesterday’s hearing came when one senator informed Mr. Zuckerberg that Facebook’s “user agreement sucks.” It does, but it’s far from alone. I’d also argue that any “simple” agreement that links out to a dozen other pages for further explanations of things not explained in the initial policy is far from simple. I doubt I could pass a quiz on what Facebook can and can’t do with my information and I’ve been on the platform since 2006. Anyone that generates data that you’ll use to benefit your business should understand what they’re giving you and why. Lesson two.

I do know that Facebook gives the user a lot of control over who sees what although it really doesn’t do so by default. I’m less clear as to what they gather although I’ve downloaded my data and gone through it. Some of what is in there comes from activities off of Facebook, probably either through my use of a Facebook ID to log in or via the Facebook Beacon. How many users understand that they might be tracked EVERYWHERE by Facebook and not just when they’re using the service? Facebook would argue that you’re using the service when you use your Facebook ID to log in elsewhere but I think that’s specious. Yet another lack of transparency, and lesson three.

I wonder where Facebook goes from here. As far back as 2010, it’s been under attack for its privacy failures. It’s a business founded by a man who called users “dumb f^&ks” for giving him their information. Maybe like Zuckerman, he’ll come to realize that he needs to be unbound, cut loose from everything that made him what he was and fix the problems in a way that fulfills the promise of connecting the world that he espouses. At the moment, it appears that others may step in and take steps that alter his world forever.

What’s your take?

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An Expensive Trip To The Bar But A Much Better Picture

I had a what turned out to be a very expensive trip to a bar a few weeks ago. No, I wasn’t overserved nor did I need to cab it home from a remote location. It became expensive because I watched TV there. The picture was noticeably better than what I was used to and it turned out that I was watching a 4K TV with full High dynamic range, or HDR. Even though the program (a basketball game) wasn’t in native 4K, it was noticeably better. Once I figured out that DirecTV, my TV provider, has a few 4K channels and that some sports, including the upcoming Masters, are shown in 4K,  I was hooked. I did some research and found that one of the top-rated sets was on sale (almost half price!) and two days later, and hundreds of dollars for the TV and a new DirecTV box that handles 4K, my viewing experience was upgraded.

Photo by Tim Mossholder

One thing that I got along with the upgraded picture (even standard HD looks better) was a built-in Roku device. I’ve had a Chromecast for years and I also have my Xbox hooked into the TV. I have been using both for “over the top” viewing of streaming services like Netflix, Hulu, and Amazon. What has changed with the Roku is that all of these services and many others are available as channels on the TV. There’s no need to switch inputs or fire up another device as I have been doing. Which reminded me of a couple of things.

First, the lines between “TV” and “video” have vanished forever. One can argue that once consumers had remotes and DVR‘s they morphed into active programmers but with what is now the almost full integration of TV and OTT, making an unlimited amount of content available in high-quality video, it’s now all just TV.  The second point, one which might apply to your non-media business, is that consumers don’t care about the tools or the labels. They do care about control since they now have complete control in many areas of their consuming lives, or at least a lot more than they used to. You can fight this (broadcasters did for years) or you can facilitate this, but hanging on to an antiquated business model is the wrong choice.

Disney will launch an ESPN-branded streaming service in a couple of weeks. Since to me and many others there is no difference between traditional TV and streaming video, it will be just another channel on my TV (hopefully in 4K). For many cord-cutters, it will be a nice addition to their programming options. Disney has learned that the tools (or channels) are immaterial and the business model needs to continue to evolve as do consumers’ habits. Have you?

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Filed under Thinking Aloud, digital media, sports business

Today We Say I Told You So

I was at a startup event last evening and of course, the topic of Facebook‘s data problem came up. I’m sure you’ve heard something about it but what you’ve heard might not be accurate since many of the reports I’ve watched on TV are pretty off the mark. Since I’ve written a lot of not nice things

Facebook logo Español: Logotipo de Facebook Fr...

(Photo credit: Wikipedia)

about Facebook here on the screed, let me add my two cents here. I also want to taunt you, politely, by reminding you that not of this should be a surprise. I won’t retell the story of what’s been going on but you can read it here if you’re not familiar.

First, the inaccuracies. This wasn’t a data breach nor a data hack. It isn’t a bug – it’s a feature. The whole point of Facebook’s business is to collect a lot of data from and about its users and sell that data along with ads to marketers. They’re not alone in this. If you use Google, they pretty much know what Facebook knows and a lot more. Like Louis in Casablanca, you might profess to be shocked by this but you knew about it all along, didn’t you? After all, you agreed to let it happen when you clicked through the app install or joined the service some other way. You didn’t realize that using a Facebook or Google sign in on other sites meant they could track you? Hmm…

What’s inaccurate is that many reports say Facebook was collecting voice calls and texts from Android phones. First, it’s not the actual calls or texts, it’s the metadata – who you called or texted. Second, that was a feature of some versions of Android that allowed that to happen and Facebook just scarfed up was available and THEN, only because YOU said ok when you installed Messenger. Please don’t be mad at them for doing what they said they were going to do and don’t be shocked the data is in your file.

I downloaded my Facebook data, Other than seeing a few photos I don’t ever recall uploading to the service (which makes me wonder if they’re just grabbing stuff off my camera roll), I wasn’t surprised. No metadata from my phone because I never granted the permission for them to have it. No weird ad stuff because I go through my Facebook settings fairly regularly to clean out things I don’t want them to store. You should too. In fact, you should do that with ALL your digital stuff – check your Google activity, your ad profile, etc. Go through every app on your phone and check the permissions you’ve granted. Why would a game need access to your camera? Why does a barcode scanner need your location? You can probably revoke the permissions individually and if it breaks something in the app, turn it back on. Better safe than sorry. You want Facebook to know less? Delete the app and only use it from a desktop.

Now the “nyah nyah” part. I wrote a post in 2010 about Facebook and their privacy practices (or lack thereof). I wrote another one in 2012 about how Facebook might go the path of AOL or MySpace. I wrote then:

Like AOL long ago, there are some other underlying factors that might portend bad things.

  • Just 13 percent say they trust Facebook completely or a lot to keep their personal information private.

  • A large majority (59 percent) say they have little or no faith in the company to protect their privacy.

I think what’s happened over the last 10 days has me convinced that I was right then. Facebook are no angels but you shouldn’t be surprised at any of this. Unless and until each of us takes control over our privacy, which means understanding that data is currency and you wouldn’t just throw your currency around, this will happen over and over again. Make sense?

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Filed under Helpful Hints, Huh?

What Has Happened?

Maybe it’s because the start of the year is also a time of reflection, but I continue to be appalled at the state of the online advertising business. It’s not so much about the fact that 2 players – Facebook and Google – gobble up the majority of money spent. In fact, in terms of ad revenue, Facebook by itself is twice as big as the newspaper business, according to eMarketer, and will be bigger than the entire print business shortly. Google is twice as big as Facebook. There’s a third player – Amazon – on the way to suck up a huge share of the ad pot as well.

While that isn’t the problem, it does mean that the rest of the industry is fighting over relative crumbs. When you’re desperate, you might do things that you know are wrong or foolish and that’s where I think we are. In fact, I think we’ve gone way over the line from foolish to criminal.

Some examples. Yesterday while I was reading an article via the web browser on my phone, up popped the screen you see on the right. Those of you who have an Android phone know that what you see looks very much like the Google Play store and it seems as if there is a critical app update I need to make. It is an ad, of course, trying to get me to install what I assume is malware. Had I not noticed that it was in a web browser and not in the native Play Store, I just might have clicked.

This is why the online ad business is doomed or at least the part that’s outside of the big 3. On the consumer side, people are forced to use ad blockers to prevent malware from infecting their devices as well as interrupting their tasks with annoying popups. On the business side, publishers keep pushing ads knowing that some percentage of them are scams or worse yet unable to do anything since in many cases they’re not the ones selling the ads. They’ve offloaded that to third parties and 74.5% of US digital display ad dollars transacted programmatically will go to private marketplaces and programmatic direct setups.

Speaking of those third parties, they might just be the worst thieves in the bunch. They claim to be there to help publishers increase revenues or marketers to buy efficiently yet they inject numerous fees, both known and hidden, into the process, siphoning off at significant (upwards of 25%) amount of the available money in the transaction. Those hidden fees, by the way, might just violate any number of local and federal laws.

So what has happened to the ad business in which I grew up? What has happened to agencies being honest brokers and nearly full transparency on all sides? Where is someone in the ad chain (looking at you, ad networks) saying “no” to scams, malware, and the other crap that serve no purpose other than to encourage adblocking or to harm someone? Anyone?

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Filed under digital media, Huh?

Most Read Foodie Friday Post Of 2017

It’s only fitting that we end the week of most read posts published in 2017 with the food-themed post that was most read. After all, we end each week with something of that sort and I kind of like ending not just this week but this year with one. This post was published last October and was originally called “They Don’t Make It  Like That Anymore.”  Have a healthy and happy New Year and we’ll see you on the other side. Enjoy!

This Foodie Friday I am going to run the risk of sounding like the grumpy old man I’m slowly becoming. Rather than admonishing you all to get off my lawn, I want to share the sentiment I had a week or so ago as I fired up my smoker. My smoker, or as it’s lovingly known, “The Beast”, was made by the New Braunfels Smoker Company at least 20 years ago, How do I know that? Well, that’s today’s food and business thought.

The Beast is made of heavy steel that’s quite thick and it weighs well over 100 pounds even without my usual load of meats inside. As I was cleaning up the old Rancho Deluxe to get ready for its sale, the smoker was one of the very few things that I was adamant about saving for the move. Why was that, especially when I also gave away or junked a Caja China and two other grills? In a sentence:

Because they don’t make them like that anymore.

The New Braunfels Smoker Company was sold to Char-Broil 20 years ago. Almost immediately, the quality of the products went downhill, and this was especially noticeable on the gauge of the steel. The steel was thinner and didn’t hold heat as well. When a rust spot developed, it was difficult to sand and paint it without almost going through the area that has rusted. The products were similar in design and name, but that was about all that was the same. The bbq forums, home to serious meat smoking aficionados like me, were deluged with negative comments and, more importantly to the business, better alternatives to what had been a superior line of smokers.

This is something from which any business can learn. We’re always under pressure to improve our margins. Some folks look to cheaper materials, other to cheaper, less-skilled labor, and still others to cutting customer service. Sometimes we just skimp on quality control. While margins might improve, there is a strong chance that revenues will decline as the customer base figures out that “you’re not making it like that anymore.” As an Apple user, I recently switched to a Chromebook because my Mac OS isn’t as smooth and there are glitches that were never an issue before. For you cooks out there, Pyrex changed their formula and “new” Pyrex is not as good. Recent Craftsman tools, once the industry standard, are now made in China and aren’t nearly as good. I can go on and I’m sure you can as well.

If you’re successful, resist the temptation to cut corners. People notice (so does your staff). Don’t be part of a conversation that claims you don’t make it like that anymore.

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Filed under Consulting, food, Huh?

Most Read Post Of 2017

This post was far and away the most read thing I published this past year. It is a rumination on a business I’ve worked in and loved for decades – sports. It’s a lot longer than my typical screed and several prominent folks were kind enough to link to it and encourage people to read it. I guess they did since this had roughly triple the readership of the next most read post. Written last July 12, it asks the question “Is The End Near For Sports?” I hope not!

I know you might be thinking that my headline is just some outrageous form of click bait and that I can’t seriously think that big-time professional sports are heading down the same path as traditional big media. Let me throw a few recent articles at you and maybe you’ll come to a different conclusion (which I do hope you’ll post in the comments).

The sports business is based on a few large revenue streams. One is income from the games themselves: ticket sales, concessions, merchandise, etc. What makes many of those things possible is a nice facility – an arena or stadium. We’ve seen franchises move (and piss off their fans) over the stadium issue, sometimes even before the bonds on the last stadium built for the team are paid off. I urge you to watch the John Oliver piece on the relationship between teams and towns but here is why I suddenly think there is an issue. As reported by Mondaq:

bill has been introduced that would eliminate the availability of federal tax-exempt bonds for stadium financing… The bill would amend the Internal Revenue Code to treat bonds used to finance a “professional sports stadium” as automatically meeting the “private security or payment” test, thus rendering any such bonds taxable irrespective of the source of payment.

In other words, it will make public spending on a private facility way more difficult. That will lead to fewer new facilities and a much harder path to growing that revenue stream. Strike 1.

Then there is the largest revenue stream for most big leagues: TV. Kagen recently reported that the U.S.pay-TV industry will lose 10.8 million subscribers through 2021, according to their latest forecast. You might already know that ESPN has been losing subscribers – May 2017 estimates were 3.3% lower than the year before. For every million subs lost, ESPN takes in roughly $7.75 million less PER MONTH – or $93 million a year, and they have already lost multiple millions of subscribers. Yes, some are being replaced via the sale of OTT services, but that requires spending to sign customers, something ESPN hasn’t had to do before. The same subscriber loss issue is true of every other sports network albeit to a lesser degree since their monthly fees are less than ESPN’s. Smaller subscriber fees mean a diminished ability to pay those large rights fees. Sure, other channels (some would say suckers) will step up – Facebook, Twitter, YouTube, and others. But my guess is that the outrageous increases many entities have secured over the last few rights cycles are gone for good. Strike 2.

Finally, costs are not going to go down, at least not without major disruptions such as the two recent NHL lockouts. Players aren’t going to make less (the downside of the salary cap), team personnel probably won’t, at least not without a lot of turnover, and many of the other costs are either already low (minimum wages) or difficult to cut (food costs in the concessions, etc.).  In an effort to mitigate some of the lower revenue and growing costs, some of the entities involved in sports are beginning to do what the airlines have done and make what was once part of the deal (in-flight meals, free bag check) part of an a la carte menu to grow revenue. Specifically, look, for example, at what NBC has done with their Premier League package. They are doing away in part with their NBC Sports Live streaming coverage in favor of a new premium streaming service called “Premier League Pass” that will be in addition to the matches that are already broadcast on live TV. The stand-alone streaming service will cost $50 in addition to whatever you’re paying for your cable subscription. That will bring in more dough but it will also anger fans. Strike 3?

Don’t misunderstand me. I think interest in sports generally has never been higher, and I think any sports entity that doesn’t rely on a big TV contract and employs athletes as independent contractors (I’m looking at you, LPGA) will be in good shape. I just think there is a major disruption coming in the next few years as we’ve seen in the TV and music businesses. Watch out as the next cycle of TV deals begins and if this bill is passed. It’s going to be a bumpy ride, don’t you think?

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Filed under sports business, Thinking Aloud