Monday, March 30, 2009

Music Needs a Business Model
by Gerald Trites, FCA

Since the early years of the Internet, the music industry has been a focus of the kind of business model problem faced by many online businesses. They have had great difficulty finding a viable business model. In the very early days, Napster rocked the industry with its free music sharing service, essentially robbing the industry of the music. Over the years, numerous court cases have found against Napster and they were forced to go "legitimate". Then iTunes came along and has experienced a great deal of popularity. It had the closest to a viable business model of most of the other online music sites. They sell single tracks for 99 cents, and take in some advertising revenue as well. Now, however, they are raising their prices for single tracks to $1.29, perhaps launching a trend that could be its undoing. Other services, like Ruckus and SpiralFrog have had to close down.

Many other music sites have gotten themselves into the bind of offering music for free and having to pay the music labels for their music - a business model with no future. One of the basic principles of business that seems to have been lost with some cyber entrepreneurs is that a retail business must buy goods and then sell them at a higher price in order to generate a profit. Advertising can augment the revenues and lead to a bigger profit, but is not necessarily going to be enough to lead to a profit in the long term by itself.

Consumers are both naive and short-sighted to think that they can get good music for free. It costs a great deal to produce modern music and someone has to pay for those costs and provide some kind of return on investment to the providers of the music - the musicians, producers, labels, etc. That is simple economics.

The music industry has been going through a restructuring since the Web took hold. After more than ten years, it is still struggling to come to terms with it. Hopefully there will be some progress to be made in the next couple of years. See this article for a good summary of the current changes going on in the industry.

Monday, March 23, 2009

INTERVIEW: IT Skills Shortage A Chance for Unemployed Workers > Human Resources Issues > IT Workplace

For several years, there has been a shortage of people with IT skills. This means that there are jobs available. In the article cited below, the estimate for the US is 200,000 to 300,000. Much of the shortage started when the high tech bubble burst in the early 2000's and many people concluded that there were no more jobs available in the IT area. An illogical conclusion because the high tech sector is not the same thing as IT jobs, which are common in all kinds of industry, indeed most industries these days.

Now the problem is even more bizarre, snce there are a lot of people without jobs because of the down economy, but there are still a lot of IT jobs that have gone unfilled. This is an opportunity for people displaced from their jobs in the economy who might be able to round out their IT skills. Also, it is an opportunity for young people starting out, who with the right skills can get a very good high paying job right from the get-go. INTERVIEW: IT Skills Shortage A Chance for Unemployed Workers > Human Resources Issues > IT Workplace

Sunday, March 22, 2009

The Conficker Cabal
by Gerald Trites, FCA

An underground struggle is going on with potentially high stakes worthy of a thriller novel. A group of computer experts - state of the art experts - known as the Conficker Cabal, along with Microsoft, is attempting to fight a deadly worm spreading through the world's computer systems that is known to have malicious intentions. It's authors are unlknown. The FBI , other law enforcement officials and a host of security experts are battling quitely in the background to determine the identify of the Conficker authors and to minimize or forestall the impact of the virus, which they think is intended to take effect on April 1. So far, every step the law has taken has been countered by the authors in a high tech cat and mouse game. Time is getting short, and the stakes are high.

It appears to some of the experts that the Conficker worm was built to take advantage of the cloud computing initiative, spearheaded by Sun and Microsoft, in which companies have their applications and data reside in internet based servers run by the service providers. It has been clear from the start that security is of the utmost importance in such a scenario, but the basis of going forward has been that the state of security capability for internet based applications has advanced to the point where cloud computing should not be hindered by security concerns. The Conficker worm could challenge this premise. For more on the Conficker Cabal see this article in the New York Times.

Sunday, March 15, 2009

Newspapers Struggle to find a New Business Model
by Gerald Trites, FCA

Ever since the world wide web got rolling twenty years ago, people have been predicting the end of print media. The predictions were that the end of the Gutenberg Age had come, that newspapers, books of all kinds and any other paper media were destined for the dustheap.

Now after all that time, we still have books. A recent poll revealed that a majority of people still felt that paperbacks would survive, even over competition like the Kindle. There are still newspapers around the world, although the evidence suggests that they are not read as much as they used to be and subscriptions have been declining. What happened?

There has been an evolution going on. In the case of books, basic information based books like those on business have declined dramatically. It is simply easier and faster for one to get information from the web than it is by wading through printed books. On the other hand, novels continue to be written, and people can be seen in public places, like airlanes and subways, reading paperbacks. Sure there is competition from iPods and laptops, but the paperbacks are still there.

Newspapers are a different deal. You don't often see them being read in public places any more. Any trip on a commuter train will show the newspapers to be in a minority. So, where do people get their news?

It seems they get a lot of it from television and the web. With regard to the web, they get a lot of it from the online versions of - yes - newspapers. Some make use of blogs and some have their favourite bloggers. The big difference between newspapers and blogs, though, is that newspapers are written and run by journalists in a newsroom - people with comprehensive training on how to obtain, verify, source and present stories in a reliable and accurate way. Blogs are often produced by people with little such training. Therefore, newspapers should be a more reliable source of information than blogs. Also, blogs tend to have a relatively narrow focus, while newspapers tend to cover a wide variety of areas of interest - news, weather, sports, community affairs, politics, comics, classified ads, crossword puzzles, you name it. Blogs don't do that. Some people think that blogs can substitute for newspapers, but that's a kneejerk reaction that simply does not stand up to scrutiny.

Newspapers have been trying over the past twenty years to find a business model that accomodates the web. Some of them charge for content. Some charged for content and then changed their minds. Most simply offered up their content for free. But with subscriptions to their print versions declining, the recession has been the tipping point for some papers.

The question is, what are they to do? There are options but not very many. Here are a few:

1. Continue to offer online content free and hope to increase online advertising revenue,
2. Offer online content on a subscription basis,
3. Offer online content on a pay-as-you-read basis,
4. Discontinue the print version, then refer back to 1, 2 or 3.

Their challenge is to come up with a business model that produces enough revenue to support their newsroom and the kind of standards that have made them an important part of our society, indeed, as the Globe and Mail puts it in a recent article, an important element of our democracy.

The problem is all of these options have shortcomings. Offering content free does not generate revenue. Advertising revenue has not been sufficient to cover costs. To require subscriptions for online content just turns people away to content that they do not have to pay for. Charging subscriptions would require unprecedented collaboration among all newspapers to work. And even then there would be other sources. Pay-as-you-go might have potential. Some have tried it, but again, the competition would need to do the same. Discontinuing the print version loses revenue, caves in and would leave parts of the populace without the news, because not everyone has and uses a computer on the internet.

The bigger risk appears to be with newspapers for smaller cities and communities. Newspapers that have national and international reach seem able to survive. But there is a growing list of cities that have lost or may lose newspapers - Seattle, Denver, Minneapolis and others, maybe San Francisco are some mentioned in the Globe article. Is this just a reflection of tough economic times on a struggling industry? Or is it part of something bigger? Is it part of the continuing decline of community in our society?

The role of families (along with communities) has also declined drastically over the past twenty years or so. We have attempted to maintain the services they provided by outsourcing, particularly the outsourcing of child rearing to day care, sports teams and schools.

For communities, newspapers have played an important role in maintaining public awareness of the community environment, the activities of their politicians, keeping them accountable and providing a forum of discussion among its members. To whom do we outsource those activities? Who will step in and take up the challenge? There are no obvious contenders.

But the newspapers are not dead yet. They do need to adapt with bold and new initiatives that recognize the role that the web plays in society - that it is more than a medium for conveying information, but rather itself a forum for interaction. The newspapers that capitalize on this aspect of the web will have the better chance. That means going beyond the provision of reader comments on stories, although that is useful. It means having people join rather than subscribe. It means making the newspapers truly interactive, social networking sites - not copies of Facebook type sites, but not totally unlike them either.

The Web has transformed society. It has made us much more interactive and engaged with each other in new and diferent ways. That is what people want. They don't want just to be told, they want to discuss. They want to hear and be heard. They truly want to be part of something - a community of some kind. Newspapers have recognized some of these trends and tried to respond to them. They just haven't gone far enough.

Friday, March 13, 2009

eBay Focuses on a Strategy Shift
By Gerald Trites

For some years, eBay has recognized a need to change its strategy to accomodate the rapidly changing world of eCommerce. Initially, the stunning success of eBay could be attributed to the undeveloped state of eCommerce on the web at the time. Few people were buying on the web and even fewer companies offered their wares on the web. So eBay offered a unique means of buying and selling goods. In the early days, much of the ebay activity took place between individuals. In a quest for growth some years ago, eBay shifted its focus to bring in more commercial businesses, by establishing Marketplaces for different indistries and classes of goods. At the time, some observers recognized that such a move might turn off the more free spiritied, venturesome and generally younger users. However, they made an effort to prevent this from happening and moved ahead with a strong vendor oriented commercial strategy.

But eCommerce began to take hold among many companies, and the numbers of corporate websites that offered consumers the opportunity to buy over their websites grew dramatically. This meant competition for eBay's new commercial strategy, and indeed they have had some difficulty wth their strategy. In addition, Amazon got into the online auctioning business and sites like Kjijii and a variety of others offered real competition to eBay's traditional business. Moreover, eBay management over recent years has been subject to some criticism for alleged inaction on the key issues facing eBay.

Now, eBay is facing a new strategy change, with an intention to focus on Paypal for its growth. Interestingly, Paypa was originally acquired as an enhancement to eBay's core business by providing an easy method of mayment for the goods sold over the site. Now it could conceivably end up being the core business of eBay. See this article for an additional perpective.

Saturday, March 07, 2009

Tweeting and Twittering
by Gerald Trites

When Twitter first came out, many people thought - yes, another silly fad. And a ridiculous one. Who wants to know every little thing anyone is doing all day? And sure enough, a lot of people started to use it that way, reporting over the World Wide Web that they are going out for a coffee and will be back in 15 minutes. And so on.

But others saw something else in it and started using it to get out short simple messages about an event, conditions, policy - a host of things.

Twitter started to gain some attention.

And then along came Barack Obama, and the world of Twits changed forever, not to mention the world of politics. Of course, Obama's use of technology in his campaign extended beyond Twitter, but it became firmly established as a smart political tool, useful not only for getting a message out, but for fundraising as well. Now just about every politician you can name has a Twitter account, with periodic updates, including Steven Harper, and numerous provincial and municipal leaders.

Corporations have also taken notice and there are some beginning to use Twitter as part of their corporate reporting tools. A good example is Dell Computers, which uses Twitter as well as a corporate blog for these purposes.

Facebook has taken notice as well. One of the core concepts that started it was the idea of "What are you doing now?" But of course Facebook went well beyond short tweets. Now they are modifying the Facebook functionality to include Tweet-like messages to ulimited friends. A direct response to the impact of Twitter. See more at this article.