The most dangerous of all KPIs?

Indexes (or indices, for the bourgeoise humanists among us) are a like botox. You can use them to heal, cover up, or kill.

In case of the botulinum toxin: heal obnoxious conditions like fissura ani, cover up your probably well earned wrinkles, or use some grams of this hyper toxin to kill half a million people by poisoning their milk supply.

Measure this and here and there!

Same goes with KPIs. You can use them to tweak your business processes by creating accountability for set goals. Because, If you can’t measure it, you can’t manage it. You can use them to cover up what’s already going wrong (Hello, Enron).
And they can have some rather impressive, probably unintended, real world consequences. And this is what the new format Berlin Debates was taking on in their first round of Cambridge Union Society style exchanges: »GDP has failed. It’s time to switch to a new measure of progress.«

Matthew Taylor, Chief Executive of the Royal Society of the Arts, debated Prof. Dr. Karl-Heinz Paqué, a politically well connected German (neo-)liberal professor of macroeconomics. Taylor preemptively summed up the two hours nicely in his blog. Not measuring the GDP, the gross domestic product, is bad. But using GDP as one of the three major yardstick to evaluate governement performance: unemployment, inflation, and economic growth.

In a nutshell, GDP is a nice tool to compare different national economies. But it doesn’t say much about the economic state of the state. As Taylor nicely explained: it’s nice to knvoting with their feet (ow that there have been five goals shot at the football game. But if you do not know who scored for which club, the information lacks a certain quality. But quantity over quality is not GDP’s only defect. GDP does not include externalities. Long term costs like pollution (which would be quality of living problems as well) are not reflected.

This does not mean GDP is bad. It’s very well defined, definitely stable (a big plus), and works on an international level. It’s just that using GDP as the main KPI to manage a national economy tends to set the wrong incentives. Says Taylor. And that’s what the audience agreed upon by voting with their feet (by choosing an exit you voted either yay, nay or whatever).

Where’s the pulse?

So say good-bye to yer olde GDP? Most likely, not. Popular indices have a tremendous staying power. Even if they might have overlived their time for quite some time. Case in point: the Dow Jones Industrial Average. Published since the 1880ies, the Dow is still “among the most closely watched U.S. benchmark indices tracking targeted stock market activity”.

It’s not watched, because it’s so spectacularly well designed. Measuring stock market tendencies with the Dow is a bit like an MD measuring the pulse of a patient, who’s wearing a space suit. You might see something. But taking 30 industrial stocks as an indicator for the sanity of the US markets leads to a VERY blocky image. Still, it affects investment decisions on a global scale.

Here's the pulse.
Here’s the pulse.

Of course, the GDP’s problem is not granularity. But it skews governing decisions by omissions. So as a policy decision making toolset, it seems a bit out of whack. Because, honestly: as a citizen, you shouldn’t be interested in beating your neighbor in GDP growth. You’re interested in your own economic well being, the well being of your community.

Of course, now the hard work starts. What do we want to measure and for what reasons? What is sustainably measurable anyway? It’s a reconciliation process with a lot of stakeholders.

Don’t Pass Go (go directly to PRISM)?

The genie is out of the bottle, Obama is checking your email, and you can’t push toothpaste back into its blablabla. Welcome to our present defeatist state of surveillance.

The NSA is reading your email? Well, so do Mark Zuckerberg and the Google Bros. And, look at your inbox stats: most likely, they are putting in more effort into this task than you do. OK. Game over, don’t pass go, we all go directly to Prism.

Not so fast. This online world of ours is still in its very early stages. I’m dabbling around there since 1992 or such. As online years count like dog years, I should be about 170 years old (just like Ray Kurzweil, when his supply of dietary enhancements finally runs out). But what are a couple of centuries, if we put things into perspective. Between the invention of democracy (Athens, 500 BCE) and it’s fairly widespread adoption in the late 20th century you can count more than two millenia of feudalism, absolutism, and other -isms. Widespread alphabetism took even longer, took a hit with the invention of tv to finally resurge with the Internet.

Massive societal changes do not happen over night. If not induced by a catastrophy like an asteroid wiping out the dinosaurs (welcome, mammal), a massive war clearing the path for independence day, or 9/11 (good bye nail clippers on air planes, hello total surveillance for safety).

Which leads us back to our current sadly defeatist state of the webs. Let’s put one thing clear: the massive collection of individual data is not a recent bug. It’s a feature of every digital system, where processing power is constantly on the rise and the cost of storing data falling on an hourly base.

The core question is: who owns this data? Who’s allowed to toy around with it? If my baker or corner super market knows about my eating habits, it’s quite OK and helpful. If some secret entity concludes, that because I prefer Halal Döner, my travel patterns should be monitored, we’re entering a very troublesome area.

For quite some time, we mostly did choose to ignore those ramifications of our digital lifes. Or, to put it like that: some proposed a happy hippie hippo lala-land, a united nations of onliners, where the evil forces of meatspace can be safely ignored. Others preferred an Ayn Randian powerplay to achieve the status of robber baron of the virtuality. And, to be sure, military and governement didn’t fall asleep at the wheel. Let’s not forget: the early stages of the Internet was funded by the department of defense. And the global rollout of the Internet steamrolled all national online plays, like France’s Minitel or the German Btx.

In a recent blog post, Emin Gün Sirer, associate professor at Cornell, did something quite overdue: he named the three main stakeholders of our online world.
His three force vectors are Military/Political, Commerce, and the Public. And he tries to calculate a “back of th envelope” vector sum. His rough guesstimate: “the forces are aligned in the ratio 1:1:3, with an alliance of the public and commercial interests that overpowers the M/P establishment in favor of transparency and online privacy guarantees.”

So all’s wrapped up and fine? Most likely, not. Civil rights and liberties are not a product of absolute vecorizable powers, but something you have to work hard for, you have to stand up to (or sit down, as Rosa Parks and Ghandi did).
And, in this case, it’s a very complicated reconcilatory process.
– Government, law enforcement and intelligence services are national entities (except the black UN helicopters, of course, which are after tin foil hat wearing free Americans roaming through Wyoming). There are some very good reasons, why those agencies sometimes should be allowed to wiretap certain individuals or entities. As there are very good reasons why a total surveillance state, a big data GDR on digital stereoids is definitely a thing to avoid. And, let’s not forget: the western democratic idea of government and checks and balances means mostly, that the citizens of a given country are the ones form which all power derives (and that he sometimes has to check, if the balance is still OK).
– Commerce is mostly global. But still bound to national or supranational regulations. If those regulations enforce companies to share their big consumer data with national government agencies (which share their data with some partners in the international intelligence community, because, you know, sharing is caring and NSA and BND do take care for you), they should, in their very own interest, work against this pressure. Because loosing trust means, sooner or later, loosing market share.
– And, finally: we, the people, we are everywhere. We are the one, who have to take care of our governments and our corporations. It took some millenia to gain some liberties. And it’s fairly easy to loose them all. Either against rogue (united) states, or by ceasing to much ground to nicely colored companies.

from the TV Hackday

Had quite some fun at the TV Hackday in Munich. Together with @rjung, we built this litte app here. We called it Pinkelpause, or TV Leaks: a crowdsourced tv ad blocker. Which of course is not blocking any ads, but telling you when the commercials are done and you can safely come back and sit down in front of your linear tv set.

You choose your network, the current show gets displayed. If the ads start, you can click the red commercial warning-button. Some stochastic wizardry later, everybody who checked into the show will have his app set to “commercial break”. During the commercials, the display shows the approximate remaining time of the ad block. When the show comes back, you press the big green button, everybody get’s an alert. Stir in some gamifiction, and that’s it.

What device should this be on?
Mobile, of course. A smart tv app would be kind of self defeating. As watching the app count down would be even more annoying than watching some commercials.

Will we ever take it live?
Most likely, not. The smart phone wielding crowd tends to be alittle bit younger than the typical tv target. And well off tv aficionados do not have an ad problem. They fastforward with their digital video recorder. So we’re maybe ten years late.

Would there be a business model?
Sure. And no, I do not think an ad supported ad blocker is a valid proposition. So …

Jurassic Print

Vor vielen, vielen hundert Jahren, als das Internet sich grade selbst erfunden hatte, plante ein sehr grosses, sehr gelbes Unternehmen unsere damals noch sehr getrennt-deutsche elektronische Medienzukunft. Dicke Fernsehkabel würden Datenströme in Bildtelefonfernsehgeräte pumpen, unter Aufsicht wackerer Beamter. Dann kam alles ein wenig anders. Die elektronische Hälfte des grossen Gelbes bekam ein magentafarbenes Börsenmäntelchen, dem die EU dann die dicken Fernsehkabel wegnehmen wollte. Das komische Interdings rock’n’rollte über die putzige Bildtelefonfernsehgerätiedee und von der DDR blieben nur noch Rotkäppchensekt, ein paar schlecht konservierte Mauerreste und entindustrialisierte Unkulturlandschaften übrig (von schwäbisch besetzten Zonen wie dem Prenzlauerberg natürlich mal abgesehen).

Um den Übergang von “so stellen wir uns das vor” zu “so war das aber nicht geplant” gut zu kaschieren, gab es damals eine Handvoll begleitender Massnahmen. Als Solidarprojekt für notleidende Baukonzerne (West) wurden die entvölkerten Innenstädte des Ostens in Referenzprojekte für die innerstädtische Sanierung entvölkerter ostdeutscher Mittelstädte verwandelt. In Sachen Gelb war gestern, die Zukunft ist Magenta, raste der ehemals volks- ähm staatseigenen Betrieb an die Börse, um zukünftiglich Eigentum von Volksaktionären und dem Staat zu sein.
Um die Werthaltigkeit dieses neugefärbten Riesen nachhaltig zu befördern, wurde er vorübergehend vor der bösen EU-Regel geschützt, als ehemaliger Staatsmonopolist entweder die TV- oder die Telefondrähte abgeben zu müssen.

Lange Rede, kurz gefasst: gut zehn Jahre lang lassen die Magenta-Manager ihr ungeliebtes Kabel am ausgestreckten Arm verhungern (wer investiert schon in die künftige Konkurrenz?). Die Aktienkursentwicklung seit Start ist trotzdem nachhaltig magentafarben.
Als Kollateralschaden bleibt uns eine Breitbandinfrastruktur mit dem Status “quasi-albanisch, ausbaufähig”.

Acta est fabula, wie der Asterix-Humanist weiss. Vorbei ist vorbei. Kann uns so heute nicht mehr passieren. Oder? Fast Forward 2013. Die deutsche Medienindustrie singt der Politik ihr Retro-Requiem. Das verwurstelte Urheberrecht, dass sich ein wenig um die Rechte der Urheber und ganz viel um die Rechte von Lizenzauswertern dreht, hat einen kleinen Bruder bekommen. Das Leistungswurstrecht (oder so ähnlich) dient als Arbeitsbeschaffungsmassnahme für Medienrechtler und Existenzberechtigungsbescheinigung für die Wirksamkeit von koordinierter Lobbyarbeit und der Wirksamkeit klassischer PR in klassischen Medien. Kann sein, dass nebenbei ein wenig Porzellan zerbrochen wird. Aber das sehen wir dann in 20 Jahren.

Tatsächlich mag es sich bei diesem Kuriosgesetz um eine Art Testballon halten. Denn weil die grosse, böse Welt auch nicht vor deutschen Medienmillio- und -milliardären halt macht, muss nun der Regulator ran. Auf dem DLM Symposium, einer höchst ehrbaren Veranstaltung, überkommt den Beobachter das Zittern. Wird der Plan von Pro Sieben-Sat.1 in ihren linearen Programmen regionalisierte Werbung schalten zu wollen wirklich das deutsche lokale Mediengefüge wie ein Kartenhaus zum Einsturz bringen? Gottseidank wurde die Technologie schon zwei Dekaden lang in US-Kabelnetzen geprüft, bevor man sie hier wegregulieren kann.
Noch mitreissender allerdings die Idee, notleidende Druckwerkserzeuger in eine Art Hartz-Print-Hospiz zu überführen. Freilich nicht mit der Gieskanne soll die Staatsknete staatsfern verteilt werden, sondern zielgerichtet. So anderthalb Milliarden per Anno, nach Beispiel Frankreich, wären schon ganz ordentlich.

Zwangsernährung nur für bleischwere Medienriesen? Das geht natürlich nicht. Man vergesse bitte nicht den lokalen Rundfunk. Auch Guten-Morgen-Ronny will subventioniert sein, und erst recht der brave Lokal-TV-Mann. Der ist gerade in Deutschland ganz besonders internetmedienhausaffin: auch ihm fehlt das funktionierende Geschäftsmodell, und das schon mindestens so lange, wie manch ein selbstausbeutender Blogger alt ist, was fatalerweise dazu führt, das zur Selbstausbeutung neigende Nachwuchsmedienmenschen heute lieber cool bloggen, als uncool in unbezahlten Überstunden Sende- oder Seitenstrecken zu füllen.

Was fehlt bei der Diskussion um das Notopfer Print, diesen demokratienotwendigen Erhalt von Formatradio und Zeitungsausträgern? Nichts. In Perfektion braucht das hier angelegte System weder Urheber (Kostenfaktor) noch Publikum (es sei denn zur Rechtfertigung). Das Ziel ist Jurassic Print: ältliche Mediendinos vor der grossen, bösen Welt der digitalen Säugetiere beschützen.

Publishing is Social Media

After having had a talk with one of our German homegrown publishing tycoons, my friend Ibo posted a comment on his Facebook, which lead to a lively discussion: the publisher did complain a bit about Google, sounding quite awestruck at the same time. How they delievered all those world-changing innovations, and how the publishers lost their grip.

Then, Ibo asked the guy about his Social Media budget for 2013. The publisher says: north of 300k€.
Which would be a lot of money to spend on, let’s say a toddler’s birthday bash. But maybe not as the Social Media budget for a publishing powerhouse. Or maybe it’s just fine. Or maybe Social Media is overrated anyway. So the online discussion goes back and forth.

But seriously, the scary thing is: as a news and magazine publisher, he should be already heavily invested in Social Media. His core business is to enable social communications. Only his technology stack seems a bit outdated: it scales nicely up, but not really down to the individual level.

See, publishers are not an editorial office with a print shop attached. Mostly, they feel other way round: a printing business, with extra value added by employing some pricey editors.
For both perspectives, the outlook is rather grim. If all you can contribute to society is either a pile of printed matter (the latter) or a dedicated staff of n producing a pile of paper on a regular basis (the former), you are already off track.

Publishing is the business of sounding off and shaping a public’s opinion. Sounds an awful lot like what you can accomplish with the online tools of the trade.
And the sad truth is: publishing houses are technologically challenged Social Media providers with an identity problem.

Community Organizer vs Top Down CEO

How does a business work? In the pre-election days, Romneyites blasted Obama for having no business experience at all. Here’s the former community organizer from Chicago, in the other corner watch the earth shaking CEO. So who’s got business experience? Who can save the economy?

As strong as this narrative sounds, it has a major shortcoming: it’s based upon a perception of business coming straight from the era of the “Mad Men”. Monolithic entities competing in well defined markets. Strong hierachies, wth strong men on top. Who are on top, because they not only are stronger than their underlings, but because they know better (because being on top of the hierarchy, all communications are channeled towards them).

Be it a local grocer or a global behemoth: top down decision making ruled OK. And once upon a time, this might have been a working paradigm. Like any well standing 60 ton cold blooded quasi-reptile had every right to scoff at those pesky mammals, which couldn’t even lay a decent egg.

Top down businesses mimick the dinosaur model: a large body commanded by a tiny head. It’s ruling principle is the vulgar confucianism of the stereotypical kung fu flick: the higher the rank of the guy you have to fight, the better his kung fu. It’s preferred development model is the waterfall process. First define all details, then execute.

The more unstable the environment, the riskier this process model becomes. As daddy already knows best, feedback loops are perceived as a hindrance. Which leads us to the the community organizer model.

Coming from the realm of software development, agile methods are gaining traction in other areas as well. Instead of central planning, those methods are based upon constant iteration based upon the feedback of different stakeholders. It’s somewhat related to community organizing, at least in my understanding.

To be sure, I have not the faintest idea what Obama really did his community organizing days. But let’s first get rid of one misunderstanding. The counter position to Top Down is NOT Bottom Up, at least not in my textbook. Bottom up would be a nicely humming worker’s collective. And just like with top down (AAPL!), there are examples of bottom up entities doing really good (sic). But bottom up and top down share the same problem: both structure are highly inflexible.

Agile methods think in stakeholders. Business owner and customers, marketing and development, production and legal: all those units are made of people, who have to give their constant inputs. It’s all fast iterations, everything’s broken down into easily digestible pieces. It’a a cooperative process with some kind of a community organizer, well, organizing it.

Top down large organization usually do not listen for input. Which sometimes leads to quite fascinating results. In a multinational I once stumbeld into the following situation: as an external consultant I was hired to manage a project. Turns out, there were three different parallel process flows to be aware of. Flow one was the official process as required by headquarter. The second process flow was completely unrelated, not to be mixed up with process flow one, somewhat unofficial, but nevertheless mandatory, as it was the process this formerly separate unit has been following for decades. Process number three was finally the process how the department was handling things, as the other two processes were somewhat decoupled from reality.

Now, back to Obama vs Romney, the community organizer vs the Top Down CEO. Let’s keep in mind: the presidential elections in the US are big business. It’s a $6 billion business, a major stimulus program for local tv stations. And it’s about getting a really large workforce on the ground.

Now, some parts of those makeshift corporations a.k.a. know the campaigns are a fairly well known affair. Buying air time in local tv is a fairly straightforward task, with just two unknowns: will the (outsourced) creative be really compelling? And how to allocate the budget, which is even with the richest of campaigns an important constraint.

But how do you work with the workforce on the ground? Team Obama is a supporter of open source software, the former community organizer defined in 2008 the basics of digital campaigning. So how has the top down CEO been approaching things? Let me give you this purely anecdotal answer: read this example of a worst case, waterfall-like top down process, with no working feedback loops, which might even had some real impact on the outcome of the election.

In a nutshell, the story goes like this: to support volunteers at election day, Team Romney planned a digital tool, which would replace some fairly cumbersome paper processes. @JohnEkdahl, the clearly disgruntled volunteer, gives a good overview on what went wrong. Mostly, it leads back to the problem of not iterating, not listening, of not having working feedback loops. It’s the CEO with the top down business experience at work.

No room to iterate is risk management at its worst: it’s either win or fail. Which looks like an 50:50 bet. But of course not even this is true: you have only one chance to win. But a gazillion odds are against you. It’s betting everything on zero on a roulette wheel with infinite numbers.

On Service Design

Back in the day, probably round about 1999, I held a talk about “interactive Branding” at one of the Internet World conferences. The gist: forget about fancy graphics and the likes. Branding on the Internets is foremost about service and a service culture. Usability beats flashy designs. And treating your customers well is more important than any splash page. Because the emotion delivered via craftsy colors and incredible images pales against the raw fury of disgruntled customers, amplified over the nets.

Back then, our ad industry partners (and investors) were not too pleased, found the proposition rather questionable, and the possible outcome wholeheartedly undesirable (you would not hire an ad agency for business process design, wouldn’t you?).
Now you’ll find a whole conference on Service Design, which tells you how wrong they have been (and yes, there’s quite some place for agencies and designers to better their client’s brands, and not just the perception of).


The medium is the package

I like ebooks. Sometimes. For certain occasions or reads. This summer, for instance, I didn’t schlep a ton of paper bricks to the Greek island where we spent our family vacation. Instead, I loaded a lot of fine books onto my iPad. As I neither waterproofed the iPad nor found a working cooling solution for the beach, I still had to bring some paperbacks.

Sometimes, I choose the ebook over print for other reasons. Let’s take Debt: The First 5.000 Years, the unlikely pageturner by anthropologist/anarchist David Graeber. As Amazon Germany told me, I would have to wait for 4-6 weeks until it was ready to ship. The ebook was an easy choice. Zap – instant gratification.

But I still might get myself the print edition.
Why would I do that: duplicating content, if content is really king and all that matters?

The easy answer goes like this: I grew up with printed books. Case closed. True, socialization makes a difference. But having been math-socialized with a LED pocket calculator by Texas Instrumentsdidn’t prevent me from preferring Excel or nowadays Google spreadsheets for my calculations. I’m not a pure-bred Luddite. My music is not on vinyl or MCs, I treat CDs as a MP3 backup.

Book wannabe.

So what’s the thing with books and reading? As we haven’t reached the age of fully billable telepathy yet, any aspiring author will have to write down his thoughts and constructs. That’s a good start. But to reach any readers, he now has to replicate his opus magnum. A cloisterful of monks can accomplish this job quite nicely, a printing press will speed up the whole thing, and the Interwebs brought me Graeber’s Debt in light speed.

But in any case: to replicate, we need a carrier medium. And not all media are created equal. Production cost, durability, and usability may vary. Many 5.000 year old Sumerian clay tablets are still around and even pretty readable (if you happen to be fluent in cuneiform). They should get an A+ for durability. Maybe a  bit later, the neighboring Egyptians switched to papyrus as their medium of choice. Most likely not because they ran out of clay, but because of the superior usability if you want to write down more than some bookkeeping notes or an ancient tweet. As the Egyptians held on to their papyrus monopoly, the others were drawn to the parchment. Which, as it turned out, was not as lightweight and snazzy, but way more durable. Then the Chinese invented paper, Gutenberg the movable types, and so on and so on.

It took a while. But the modern printed book is a rather fascinating device. A dedicated handheld reader with a high resolution display, offering random access to its content. It’s easy to grab and hold. It’s rather sturdy (please do not drop your Kindle from a four storied building). It’s nice to look at and comes in manifold distinctive packagings, from cheap and colorful throwaway to leather-encased monolith.

Easily customizable spatial access to content.

Compared to this, the ebook is rather bland. Of course you can judge a printed book by its cover. Just compare this to that. Even a book spine says a lot. Pile up some books on your nightstand, and you have instant  access to your chosen bedtime stories. Pile them on your work desk, and chances are high, that you’re after business, not leisure. We’re talking spatially customizable 1click access to your readings.

Think about it: ebook usability really sucks. I’m not talking about the reading experience, which is constantly getting better and better (notable exception: iBooks with it’s kitschy when-I-grow-up-I-want-to-become-a-real-book page design). The real un-fun part is the time before you start with chapter one. Turn on, search, see results with tiny images and standardized typeface. And, come on, who in real life is so anal to sort his printed library by title, author AND/OR category?

List this: compulsive sorting disorder.

But it’s getting weirder. You have to know where you bought the book, or at least the file format. Buy some music, and any mp3-player will do the job. Buy Neal Stephenson’s highly recommendable Reamde on Amazon, and it will live in your Kindle or Kindle app and only there, not to forget. Buy Graeber’s Debt at the publisher’s store, and it will sit either in your iBooks or Stanza app or both or anywhere else, depending on which app you synced it in, but definitely not in the Kindle or the Kindle app.

Can we, at least. please get this sorted out?

How the iPod killed the music industry as we knew it

On Saturday, November 10 2001, Steve Jobs killed almost saved the music industry as we knew it: the first generation of the iPod reached the Apple Stores.

iPod 1st Generation
This machine ♥ CDs.

So let’s flash back to those prehistoric times. For about two decades, the music industry had made a killing by distributing billions and billions of digital masters. The CD, as conceived in the 1980, wrapped up the vinyl album into a shiny digital disc and propelled sales figure to an entirely new level.

But now, at the turn of the millennium, the CD monoculture found itself under attack. The PC (formerly known as a strange device for decidedly uncool nerds) and the Internet (formerly known as a service for decidedly strange scientists) had tainted the love affair of the industry with all things shiny and digital.

And a monoculture it was. Let’s have a look at the US-sales figures in 2001. The CD delivered roughly 94% of all revenues. As we know from the world of agriculture, monocultures have their advantages. You can waltz with hugely oversized machines through fields the size of the Central Park profiting from economies of scale. The drawbacks are equally known. “Monocultures can lead to the quicker spread of diseases”, as Wikipedia drily states.

The music industry fought the digital pest of copying their freely distributed masters like any Idaho potato megafarmer would do. After ignoring the first signs of disease, they started crop dusting. As with any pesticide, spreading DRM and later on even (involuntary) infecting PCs with root kits had some serious side effects. Their legal crop dusting may have killed Napster. But in 2001, after several years of digital infights, legally buying and downloading music was still virtually impossible. (Look at the charts, based upon RIAA revenue figures: downloads will not even appear before 2004.)

The CD monoculture
The CD monoculture: making a bundle with bundles.

But back to 2001. “iPod’s built-in FireWire® port lets you download an entire CD into iPod in under 10 seconds and 1,000 songs in less than 10 minutes,” boasted Apple in their press release. Yup. Basically, the iPod was CD player on steroids – sans discs and drive. You filled it by ripping your CDs on a Mac (no Windows yet). Strike your CDs. Any CD was fine. (Or you gathered some music files by strolling through the darknets of the times. But that’s a different story)

Now, let’s have a look at the CD. The recorded music industry, as any media industry, extracts value out of content by selling it via a medium. It’s a productification process, but it does no stop there.

Traditionally, the music industry bundled their content either into a single (buy one medium, get two pieces of content) or an album or compilation (buy one slightly more expensive medium, get at least eight pieces of content). Broken down, an album equals to a price incentive of something like buying 10 for the price of six.

From the business perspective, getting consumers to buy such a bundle makes perfect sense. Especially, if you are in an increasing returns business like software or media: the production of the content is a one time expenditure. Duplication and distribution add only marginal costs. Hence, the more you sell, the higher the returns.

Music in 2010: downloads = mostly unbundled content.

The value proposition seemed to have worked pretty well. Can you spot the CD-Single, containing mostly four titles? In 2001 it’s this tiny little orangeish sliver down there on the right, with a share 0.6% of all sales. Good for the industry. Because the cost of producing and distributing the single equals pretty much the cost of the whole album – which generates much more revenue.

As we saw, the original iPod was still somewhat of positioned as a CD aggregating device, somewhat legally filled by buying CDs and putting your music onto your device. Yes, overall sales were declining. But the industry was still selling bundled content to the consumer.

On April 28, 2003 this was going to change. Opening as the iTunes Music Store Apple, albums were still available. And still, the price for the bundle was lower than buying just a single piece of content. But how did the consumer react?

Killing the CD.

Have a look at the sales figures of 2010. The CD is shrinking fast, downloads are gaining just fine. But look at the product shares: 20% Download Singles vs 12.1% Download Albums. Essentially, more than two thirds of the formerly sold content bundles are replaced by single downloads.

iPod family
The iPod device family of 2011.

Coming back to the iPod. The device family still holds a market share of way over 75%. As pure software, it lives happily in every iPhone. The interface still honors the good old times of the album and the compilation. But buying music has massively changed. Be it the iTunes store, Amazon’s mp3 downloads, or any other digital music warehouse: single downloads rule.

Next time: what is really going on there? Is this sustainable? And can or should there be anything done?

Facebook goes LastFM, creates Über-Napster

At F8, Mark Zuckerberg showed off Timeline Facebook’s neatly displayed version of “I know what you did last Summer (and in case you forgot you can look your life up here)”.

Facebook's Timeline: diving deeply into your private data parts.

But the really big step happens in the background. The ubiquitous Like-button introduced an explicit way to write some information into Facebook’s Open Graph. You like a piece of content – press this button. That’s one way to fill your Timeline, and a fairly cumbersome one.

The new social apps expand this collection of user specific data. Instead of having to press a button, the social apps rely on implicit submissions. pioneered this approach with their audioscrobbler technology. As soon as you started listening to music, collected all relevant meta data, building up a data warehouse which could deliver recommendations based upon real usage. A powerful tool.

Facebook puts this sniffing technology onto a new level. Instead of filling a single container (dubbed: music), Facebook collects data from all over the place. Listening to music on Spotify or Mixcloud adds data as well as watching a movie via Netflix or reading some news on the Guardian app.

This massive data hoarding is combined with the most powerful recommendation mechanism in the world: endorsements by people you know. As Spotify’s Daniel Ek points out: this is like Napster. Not the still existing empty brand name of today, but the original  p2p powerhouse started by Sean Parker, and who had played an important role in the early days of Facebook as well.

The old Napster opened up the hard disks of fellow music fans, who happened to share a digital copy of a song you were looking for on their PCs. The real fun started by browsing what else was in the directory. Was it just a fluke, that this guy shared Miles Davis “Kind of Blue”? Or, maybe, some other strange music I never heard of might be something I like to hear download as well. Which was of course completely, utterly illegal, and the music industry preferred to commit collective suicide instead of working with this altered reality.

Facebook’s open graph enabled (music) partners are of course going the legal way (that’s why you won’t get Spotify or Netflix or … in this or that region or country). But, compared to the old Napster, they can combine the power of content neighborhoods with real life relationships. What happens with a social app looks more or less like this:

  • A friend listens to some music.
  • The apps share the titles automatically, and write it into the listeners open graph. That’s the “scrobbling”-part
  • But now, the app posts this information immediately into the Facebook tickers of the listeners Facebook friends.
  • If you happen to like (or maybe, you like him or trust his tastes), you just click, and you can listen as well.
  • Or have a look what else this person likes to hear … or read … or watch … or where they run … or what they cook … or …

But be careful: as long as you app is Facebook-enabled (be it on the web, your iPhone, an Android handset, a smart TV …), everything can will be shared. So you better keep Facebook’s privacy settings manual at hand.