Tag Archive | marketing

Piracy or Marketing?

Linux is often mentioned in discussions on Intellectual Property (IP) and the protection thereof. The reason is two-fold. First, the Linux platform is often seen as the “Wild West” where there are no (enforceable) laws. The perception is that Linux makes it easier to pirate software, music, video and other digitized IP products. Unlike the analog piracy of the past, there is no (or imperceptibly little) degradation in the quality of the copy with respect to the original.

Second, Linux itself defies the very concept of IP protection due to the OpenSource philosophy held by its development community. Some believe that OpenSource advocates illicitly extend this philosophy to other, non-Open products – that they actually believe all products are intellectually-free – and therefore, that they do not and will never respect the true ownership of IP.

Now, I said all of that as a segway into this very non-Linux story. A British band out of Devon, England called Show of Hands admits in an interview that they depend “utterly” on piracy viral marketing to support ticket and album sales. I mulled this story over for a while and came to realize that this band is to the recording industry what a shareware developer is to the software industry.

A small band, Show of Hands probably does not enjoy nearly the amount of radio airtime as, say, Metallica. This means that album sales rely much more heavily on concert attendance and I’d venture to guess that concert ticket revenues constitute a much higher percentage of the band’s total revenues than for bigger names. Like shareware companies, tolerating some piracy actually earns them more money than preventing it outright.

Let’s look at the other side of the coin. A big-name band does receive a lot of airplay, which can translate into fewer tours (if they like). Concert venues, being oppressively spatial in nature, can hold a limited number of humans safely and the band usually has a minimum return in mind; thus the ticket price is adjusted to allow just the right number of real fans to enjoy the performance first-hand. Not everyone can see the show, but everyone can buy the band’s albums on CD. For many bands, CD sales far outweigh concert revenues, so piracy is a much bigger threat to the band’s monetary success, especially considering that sound quality is not sacrificed. Albums re-released on CD probably sold well on cassette and possibly in LP format as well. Some groups like to repackage old material into “Greatest Hits” albums and other compilations, sometimes adding one or two “new cuts” to keep old fans buying. Like big software shops, big bands like to lock you in and repeatedly resell to you.

Enter the RIAA and other IP groups who claim to have the protection of the artists at heart. Like legislators, these groups want to represent their constituents, but all too often the only folks they get to talk to are the lobbyists and the influential. The “best interests” of the recording industry and the artists themselves begin to look a lot like what the big guys want. Forget that the small bands may be able to use viral marketing to their advantage. I know, nothing is stopping them from “giving away” their IP if they choose to do so, right?

Wrong. So-called “digital media rights” must somehow be managed to protect IP (read: imposed, because legal punishment is obviously not an effective deterrent) and technological controls are increasingly replied upon to achieve this. If it becomes illegal or highly cost-prohibitive to own or operate equipment free of IP protection functionality, the small band will have no choice but to conform, eliminating one of its most effective marketing strategies. This constitutes a barrier to entry for competition, strengthening the resale potential of established big-name bands.

What does this mean for Linux? It seems that the creators of codecs and IP protection software are reluctant to share their algorithms with the Linux community, the most-likely reason being the fear of the “Wild West” described above. If you don’t want stuff stolen from your gym locker, don’t write the combination of your lock on the door, right? The IP folks probably won’t budge on this point unless the Linux community can be trusted (read: controlled).

One last thought – if music piracy is such a big problem and Windows+Mac still has 95% or more of market share, I really don’t see how Linux is the root of that problem (no pun intended).

-Brandon

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FUD Alert! Wal-Mart, Everex & Linux

Monday, the Associated Press released a story on Wal-Mart‘s decision to discontinue the line of Everex Green gPCs in their brick-and-mortar stores. It appears that the retail giant has discovered that the demand for low-cost ($199USD) computers is much higher online than in the stores, so they decided to make the offering a web-only one, freeing up valuable floor and shelf space for other products that do sell well in the stores.

I have several news readers on my iGoogle homepage, and watched yesterday as the headline made it through each. I was intrigued by the way the story mutated as the day progressed. For example, the first headline I saw was from Yahoo! News, ” Wal-Mart ends test of Linux in stores“. LinuxInsider didn’t alter the story much, but the title was different, “Wal-Mart Yanks Linux PCs From Store Shelves“. The tone of the new title is not as objective, but slightly more disparaging. It gets deeper. According to Linux Loop, though Wal-Mart hasn’t given up on Linux completely, they have failed to “really give Linux a fair chance“. Actually, a search for Everex on the Wal-Mart website shows that the gPC is making way for the gPC2 and the Cloudbook and gBook laptops, all of which offer gOS Linux.

The worst headline I crossed was from Wired, “Middle America Hates Linux, Wal-Mart Discovers“. Following the link, the article title actually read, “Middle America ‘Rejects’ Wal-Mart Linux Experiment“. The link was obviously a teaser. Regardless, the article had a sarcastic tone, quite a departure from the original story. The main theme shifted from Wal-Mart customers are not buying gPCs from brick-and-mortar stores to Middle-America hates Linux. Come on now, get serious!

Here’s a reality check. Love ‘em or hate ‘em, Wal-Mart knows a thing or two about inventory and logistics. The company has a grossly-adequate volume of sales data to assist in pricing decisions. With unprecedented buying power, there is little left to squeeze out of suppliers. The magnitude and capabilities of the company’s logistics network are nothing short of breathtaking. Honestly, when the company’s spokeswoman says that “this really wasn’t what our [brick-and mortar store] customers were looking for,” I tend to believe her.

I’m certainly glad that the article pointed out the difference in demand between the online shoppers and the rest of us (hence, the qualification added to the quote above). To state it explicitly, the Everex Green gPC is not what offline Wal-Mart customers demanded – this pairing of product to market segment is key to understanding the decision that Wal-Mart made. It does not mean that nobody wants the gPC. It only means that selling the gPC in Wal-Mart stores is suboptimal in the current market. There are many varied reasons why this is true, but without more specific data, any attempt on my part to explain them would be purely speculative. Besides, it appears that ThinkGOS is already providing some explanations, media damage control which will undoubtedly get less press than the original story.

Personally, when I go to Wal-Mart, I am usually picking up groceries, lawn or car maintenance products, Christmas decorations or parts to repair the plumbing in the bathroom. I do not buy music there as I do not support censorship, and I do not typically think of Wal-Mart when making major computer system purchase decisions. It doesn’t necessarily stem from their offerings (which are big name brands) or their price (which I do find just a tad bit higher for some electronics items) – Wal-Mart just doesn’t scream “computer store” to me. I doubt I am alone in this.

Finally, I’d like to add that while the bulk of this article concerns Wal-Mart and Everex, and to an extent Linux, the AP still felt it was necessary to give Microsoft billing in the very first line (not that Redmond minds the much-needed free advertising, of course)! The AP just wants to make sure that everyone knows that this was a Linux-only phenomenon and rest assured that sales of machines loaded with Microsoft Corp’s Windows operating system were in no way impacted. Thanks y’all! A link to www.linux.com or to Wikipedia would have been sufficient.

Cheers!
-Brandon