Web 2.0 2005 Day 2, Afternoon Session

p. "Afternoon session Web 2.0 2005":http://web2con.com/pub/w/40/program.html#thursday h2. Discussion: Will Gaming Transform the Web? p. Mark Stevens , Greg Ballard, Mike Cassidy, Raph Koster * Entered late, missed intros * small game development shops have advantage over large shops, more releases, updates in a given period, fewer parties to satisfy to release game. * MMO(r)Gs ~ USD$21MM, many play for up to six months, others will play for years * what's coming? user generated content (surprise). more aggregation, bypassing of retailers, more microtransactions * dominant model in Korea. So predominant is that there is a professional gaming TV channel * retail channel will not necessarily go away but will change, morph. * MMOGs ...in china there are games where 1MM people are online playing at a time. Online community, inside game h3. network capabilities of newer consoles * connectivity is required. consoles becoming home media center, easy interface * network connectivity a core assumption h2. Discussion: The Future of Entertainment p. Mark Cuban (hdnet, dallas mavericks) , Reed Hastings (netflix) , Michael Powell (ex-FCC, provident investors), Evan Williams (ex-blogger, now odeo) * JB: when are we getting itunes for video * ?: sooner rather than later, but there is an epic battle between the forces of control (traditional media) over forces of freedom (internet). existing companies will defend existing models with exclusive deals. Note that the traditional systems *work*, they are always on, always there. Points to Movielink which is owened and run by the studios only has 600 titles because _they_ can't get the content. * ?: difference between iTunes for video and iPod for video. Could do iTunes for video today. That shipping video by media (hardrive, dvd) is still more efficient that delivering over the Internet. * JB: that good content would route around forces of control * EW: there is an itunes for video called fireant(sp?). That the content is there and the mechanisms are getting better. * MC: That IP transport won't replace current delivery. Assumption that quality levels won't change. That expectations will change, problem is the delivery mechanisms aren't going to change. Infrastructure (cable, satellite) is expensive. We don't have the delivery mechanisms to keep up. * JB: Why is Korea ahead of us, Michael [Powell]? * MP: because 80% of the population lives in high rises. That broadband policy not informed by people as innovation. That its viewed as utility regulation. Need for enlightened innovation policy. That expectations change but so do what consumers are willing to accept. Case in point: people are willing to accept degraded quality on a cell phone after 99.999% quality on landline. That his son won't by $0.99 itunes online but will pay $2.99 for ringtones because that's what seems rational to him. * JB: What you think of and is there a rational that makes sense for why we have the organizations which represent the content industries suing their customers? * MC: Number one job of the media moguls is to keep their job. That you've got to have a bogeyman to go after to justify your (the moguls) jobs. * MP: hiring lawyers and suing is a hell of a lot easier for the corporations than solving the problem. That the industries are missing the power of the new tools and toys is that consumers expect to be attended to or a Shawn Fanning will come up with another solution. * RH: The content just sits there. The physical good (DVD) gives you an easy licensing basis. For netflix their current goal is 24hours. HD video if people could accept batch, overnight downloads, would work, but are people willing to wait for the video to download. Average consumers are spending thousands of dollars for high performance systems at home and expect the content to match. Willing to accept degraded quality in voice, and audio. * MP: the entire regulatory state of the US telecommunications is premised and predicated on the natural monopoly of the public switched phone company. When the government is talking about competition it's talking about competition with this framework. That depending on what you use (twisted pair vs cable vs OTA) you get into different regulatory buckets. Could dramatically accelerate transition if we accept that it's all just bits. * JB: so why didn't that happen while you were in office? * MP: That they started to tear at this but that it falls to Congress. * JB: That you could unleash a lot of talent by letting people play with this stuff. * RH: I think we'll find out... most of those things are only illegal in the U.S. * JB: where is the content going to come from for Odeo? * EW: i take a broader view of what media is. most compelling experience is hearing a story from a friend, a family member, the production quality doesn't matter as much. That people will take lower quality stuff if there's a personal connection. * MC: depends on the expectation of the content generator as well. * JB: what do you make of Barry Diller and Terry Semel making content for the web? * RH: it's new and exciting, what we're seeing now is the coupling of blogs and video, we're seeing tremendous creativity. it'll extend existing media, not replace it. * JB: something about BD and TS, two icons of Hollywood, declaring their intent of this space * MC: First I'm going to start a soap opera called "The Spot" (much laughing). It's not about the content, it's about the advertisers willing to pay higher CPMs and the need to create content to place these advertisements in * MP: Still bullish on the power of technology, a proliferation of new types of distribution systems, lower cost of entry. There are more people now in the competitive content development business. Increasing competition is good policy. Look at VOIP, you can't replicate the VZ network but if you can create an alternate means of delivering the content you can create a disruptive technology. * Audience: what's going on with the Tivo Netflix deal? don't see a technical problem. * RH: fundamental issue is not technical, it's licensing. It's the traditional media companies with exclusive licenses over content. Problem is consumer expectations are extremely high based on experiences with itunes. Entirely due to people protecting existing business models. * Audience: What do you think 802.16 starts appearing on cellphone towers along the freeways and you have 400Mbs available? * RH: the U.S. is incredibly lucky about multiple paths to the house (powerline, cable, phone, etc) That we are seeing a lot of competition between these providers. * Audience: lowering barriers to entry to produce content without spending millions of dollars and instead take advantage of technological advances. How do people produce professional content without access to the hollywood technology. * MC: the problem isn't the technology, it's distribution. That they had to have two tv networks and buy a theatre chain to improve distribution. * To what extent does the success of Netflix and the Long Tail enable people to create the next Blair Witch Project * RH: the cost to make a film is coming down, but the cost to promote it and create awareness. Cost of distribution on DVD is tiny, it's not where the studios spend their revenue, it's on actors, promotion. How do you do demand creation? Cost of production has dropped. Netflix is about demand creation. We're good at it but not great at it. * MC: don't talk about Enron, talk about the War Withing which is premering tomorrow * JB: isn't it about gettin gthe content into search engines? * RH: Why is it that entertainment is so hard? It's because it's one-off content. You get this sort of thing with serial content but that's not being created. * Jeff Jarvis: that we're still thinking of the block buster economy. the definiton of good enough has changed. Word of mouth marketing increasing. It's not content, it's converation, it's sharing. That the volume is going to go from the blockbuster economy to just good enough, just big enough. * JD Lasica: to MP: love everything you've said today, are you willing to participate in organizations that are about open source media, open source software, are you willing to not embrace Hollywood? * MP: I don't think I'm doing penance, I disagree that we ebraced one industry to the disadvantage of other industries. The media rules are only about broadcasting, and not media. That what we (FCC) failed to do is to engage a more complex converstation that took into account all of the various forms of media, not the way a broadcaster does with its 1950 view. p. (mark cuban and michael powell embrace) h2. A Conversation with Jonathan Miller (JM) , CEO AOL * JB: Is there anyone who hasn't called you yet? [i think a reference to MSFT/MSN dinner] * JM: the discussion has turned from whatever you want to term it before to there is significant value here that can be recognized * JB: let me push this a bit more, Are you talking to Microsoft? * JM: I'll try to say something but avoid the question. AOL is a company in transition from a proprietary view of the world to what you're tlaking about here at web 2.0. it's a mindset, it's a business model transition. Anything that accelerates that discussion, and there are a couple of ways to do that and that's what we're discussing * JB: AOL has been extremely important in building other platform players. It seems that Microsoft has a new ad network they need to power, might they come to a partner like AOL and offer a better deal than Google? * JM: we're the largest swing voter...doesn't guarantee anything, could go different ways, yes we're aware of that * JB: what do you make of the discussions swirling around about content and media? Head end content vs user content? * JM: most important thing is a succession plan for me is Jason Calcanis. Important thing is that the playing field gets leveled. Copyrighted content plays on the same playing field as user generated content. That spectrum exists, let 100, 1000, a million flowers bloom. As a consumer can come to and enjoy whatever they want and there's a role for that in the world. Our issue is to make these content forms coexist. * JB: are you putting more investment in content? Where are we going to see AOL in a year or two? * JM: we are doing more with web logs, music, content partnerships with hollywood, a home for user genreated content. A cusp for video consumption on the web. That AOL is in a good position for this on the web. * JB: Tell me about AOL and video * JM: There are two networks on the web today that are on a path to be out in front of other folks, us and Yahoo! * JM: I think today we do more than anybody else, we're principal in video search, more video assets and programs * JM: we're just farther down that line today and dedicated to at multiple levels * JB: AOL was the ultimate walled garden, safe harbor, how easy is it to shed that DNA, how is the open thing going? * JM: I find one of the hardest parts of the job is changing the mentality of the company but I feel that that change has occurred. Number one goal was to get in sync with the market. A walled garden is not in sync with the market. It's hard when your economics and history tell you something else. * JB: so you're not abandoning the ISP business * JM: no we're not , we're not doing the web thing because we're losing subscribers * JM: Do you want your entire business to be defined by a specific set of subscribers or do you want to take and embrace the world wide web on a world wide basis. You have to have a world wide view, not just a [traditional] subscriber base point of view. * JM: Think about the brands on the web, define great brands as 100MM+ users, only one has been created in the last ten yeasr, Google. Yahoo, Microsoft, Amazon are all older. The worst thing you can do is limit that brand down to something like a dialup subscriber brand. You can't just create a brand out of thing air. * JB: I'm curious about, you talked about Europe, China. What about AOL and China? What about America Online and China? * JM: We are changing the name of the company, today from America Online Inc, to AOL Inc. AOL is a brand and name that can travel on a worldwide basis. * JM: we had plans to enter china as an access business, which when I joined made no sense whatsoever. Consistent with our plans we're now actively looking at moves into China as a web business * JB: I want you to respond to this idea of platform companies * JB: google * JM: money * JB: yahoo * JM: I think they're smart * JB: ebay * JM: platform. i think of ebay as a platform * JB: barry diller * JM: barry is the hardest to sound bite. Barry pays attention. I've never seen anyone go into detail as he does. An incredible ability to understand something. * JB: Newscorp * JM: Directed. When Rupert decides to do something he just does it. * JB: Changing topics to Time Warner. I understand you had something to do with the name change from AOL Time Warner to Time Warner * JM: I felt we had to move on. There was a lot of heat in the room. JM suggested that the name of the company be changed. It's fair to say that they (Time warner folks) were angry. * JM: I have a story... I went to different divisons, my colleague CEO said I had a really bad experience with other people from your group (AOL) before, I just want you to know. Have you ever had your car towed? It's a miserable experience. At the car pound they have a sign that says "The person here did not tow your car. If you cooperate you'll get your car faster" * JB: Has time warner gotten over this? * JM: I think so...the market values AOLs at 4-5 times its earnings trajectory. Essentially a terminal value, if you believe it has value it should hit 9-10, that's the biggest delta is getting back to that value * JB: so why not spin out AOL? * JM: we have to make a transition, there are many ways to get the value. The exact mechanism you determine as you go but we'll get the value. * Esther Dyson: Reference to ad campaign as AOL as safe. Did you find that to be an effective approach? * JM: short answer is yes. We had a tremendous amount of trust with consumers which was squandered. In side by side comparison of search results people picked google over AOl even if they were the same results, indicating a branding problem. We are making progress on improving trust in the brand. * JB: didn't the spamming of CDs contribute to the branding problem? * JM: guess how many CDs we sent out? 660 million. But now everyone is online. * Audience: why did you guys let Diller get ahold of ASK? You could have approached microsoft's market share * JM: we thought about it, i think it's a good company and they'll do great. I couldn't make the math work from where we are. I didn't see from where we sat. The second piece is that I don't know that we want to fight out with folks on web search. I think video search is a place we can go and we're a principal. But the math didn't make sense. * audience: on buying weblogsinc. Perhaps AOL doesn't get the conversation that's going on with blogs and maybe just was buying the content. How is the acquistion of WebLogsInc going to look in a few months when the blogosphere has doubled. * It's a big tent, yes we can repurpose the content on our other assets and places, but it's a piece of the puzzle. h2. A Conversation With Jeff Mallett and Mickey Hart p. interviewer: ? * Snocap: in the business of trying to turn pirates into shipping merchants * enable transactions on the P2P platforms for people to buy/sell/trade assets * we have an open platform, we make sure people get paid * to mickey: you (grateful dead) have had a different attitude to music and the question of sharing of its property * MH: they wanted it real bad, the tapers and we sat down one day and had the option of letting them in and taping or arresting them. We decided that wouldn't be a good option. So let them come and tape. And they had the grateful dead free tape exchange. We gave it away willingly. They had equity in the improvisation of the music at the concert. It's a complex issue but the idea is that you're taking someone's property and doing what you will with it it's just not right. So we thought giving some of it away and doing business with it would make some sense, and as a result our audience grew. Each performance is different, it's like jazz. * To Jeff: what's the online music marketplace snocap wants to build? * JM: what shawn is where music is is discovery and content. the world does ont need another top 200 download site. The big idea is how you harness the power of the web. Remember the "my" moniker? Consumers took that seriously. How do you put some balance between the consumer and the business? Trying to shift from ignorance to innovation. How do you bring a market together that allows discovery and innovation and yet allows the old guard to be comfortable. * ?: What's the reaction been by the labels? * JM: they like Snocap, they've licensed a lot of content into the catalog. Their goal is to get it out there, get it viral, get money back to the artists. Goal is 25MM tracks shared on the networks? * ?: Mickey you were a member of the greatest cult band, most successful touring band, is that a model that all acts can follow [of giving the content away] * MH: We used to think music should be free and that we should be subsidized by the government. We always played better for free. It's a good thing to share and give people something, maybe whet their appetite, you charge people to come into the shows you want them to leave with something more than a memory. I think that people should loosen up and give it away a little bit. Music isn't a luxury or thrill it's a necessity of life, people who make it are coming up with something from nothing. It borders on the sacred, and yes it is business, but these songs these musical adventures are like your children. It's important, it's a valuable asset. * ?: but giving it away was a big payday for you in whetting the appetites * MH: allowing recordings increased our audiences by millions * ?: Jeff you passed over iTunes...does iTunes have a future? Some labels seem upset with the .99 model, labels are talking of pulling out, will there be a marketplace or will itunes be the 900 pound gorilla * JM: we owe a debt of gratitude to Steve Jobs and Apple for making the ipod and simplifying the digital music market. There just isn't a viable alternative out there. It's going to evolve, they're doing a great job, but as you look at the multiplicity of devices you're going to see the next generation, compoetitors will come out on the device side and on the content side What we're trying to do is to make it cost efficient. Attaching media to the sponsored links. * ?: you made the point that itunes is like a label * ?: what do you think of itunes * MH: my daughter uses it all the time. she learns the value of the music. i tihnk it's a viable service right now but it's absolutely going to morph to transform into something more fluid. Would be nice if there was a body of work where you could get that and make and mix your own disks. There's a lot of ways to make this more interesting more powerful and more profitable. * ?: you're creating this amazing alternative distribution scene, do you think that if your vision of the marketplace comes to pass is that the end of the labels? or at least the end of A&R? * JM: I don't think the labels are going away, there's still a traditional market. But the list of labels gets smaller It'll be great for the Madonna's and big acts, but millions of artists around the world will have access to this market, and maybe they'll need a last kick to make it as a megaband, but you can make a reasonable earnings without the labels * MH: it's very important to allow people to have access to your music. Labels don't really nurture your music. The Grateful Dead could not be now, our records were duds for years. it took many years for us to make a profit. Only leased their music, not sold it. * ?: if you were starting a band today, would you look to this model and say we don't really need labels? * MH: You need to get the throw, people need to hear your music. This [Snocap] sounds like a wonderful model for anyone starting out. * ?: It must be profound irony that your business profited from the Grokster verdict? * JM: well, we were working on it prior to Grokster The vision that shawn had was that this was where the market was going. * ?: Is this a system that transfers easily to video? Do you make that move in the 3-5 year timeframe? * JM: Our vision is that we're cross-content, millions of pieces of information that can be fingerprinted, whether video, audio or other, that the fingerprint triggers the payment mechanisms. * ?: How are you making money? * JM: Making money on transaction volumes. we get a bit from retailers and from labels. Get out there, make sure it scales and take a few pennies on the side * ?: If you from the point of view of an artist can you imagin a siisytem of distrubtion and technology that would be the ideal, the nirvana for an artist. What does that system look like? * MH: the bottom line is to be published. You want it to get out and you want to make money but you have to get published. Record it and get it out. You don't want to wait six months for it to be packaged and distributed. You want to release when it's recorded. You make music in your dreams, you make music every day. * MH: has to be flexible, have to work with artists and ask what they need. To have a constant flow of art and feedback. If people don't get paid for their art they won't do art. * Audience: when you made the decision to allow people to record, it was more challenging due to equipment costs, it's cheaper today do you think you'd make the same decision today? * MH: It wasn't economically feasible to do what we did then but we did it anyway. * Audience: what seems to be difficult is for peple doing the technology to get the companies to think differently about price? * JM: It's still the bucket mentality, here's our wares and here's a set price. What I think will unfold is getting data back and shared. Create a airline like model where you look at activity and can change the price as necessary. That you can change the pricepoint as you see data from the marketplace. * Audience followup: if the pricepoint is too high people will just steal the music anyway * JM: you have to get the data an dhope the market balances itself. We're empowering a world on the label side where they used to put lawyers in front * ?: that Snocap will be monitoring the flow of data through the P2P networks and help determine the pricepoint * JM: we enabled control, which is why the labels are dealing with us. we are hoping the data is intelligently analyzed and absorbed. * audience: art is generally hard to value and keep the same value between people. have you ever considered a pricing model where the consumer sets the price? derive maximum utility from consumers and producers * JM: we don't set the prices. data is consumption patterns from consumers. the data is as individual as you can get * followup: but you're aggregating across people. Is there a priceline model for music. * MH: it's not as simple as the musician giving away the music, they're lyrical licenses, you can't just decide to give everything away. It might have worked. It would be an interesting experiemnt, i don't think anyone has done that. * audience: jeff you talked about the control artists would have, what are some of the buttons and knobs that distributors will get? * JM: control at the retail side, control at the artist side. Retailer sets the final price. At the end of the day we're talking proprietary rights. p. [implies to me that via Snocap you can't d/l directly from artists but only throuhg approved retailer sites]

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