Atari complains about having to compete with itself

GameIndustry.biz reports that Atari is complaining about second hand sales at it’s event Atari Live in London. Their proposed solution? Add features that make it more useful to the users that rely on one sort of online social features that players would need to pay for.

It is a great idea, but the tone of the complaining seems rather childish, since it is Atari’s own fault for not keeping up with the pace of the industry. Competing with the sale of second hand items is just the cost of doing business for any type of product that has a resale value. If they don’t want customers to resell games, it is only going to force the companies like Atari to make more compelling games. Atari is perhaps one of the oldest game companies still around. It got to where it is by selling packaged goods. Upstarts have outmaneuvered by creating more innovative, compelling, and profitable games like World of Warcraft, Guitar Hero, or Rock Band.

In a way, Atari is complaining about second hand game reselling the same way it might complain about piracy. It admits that it can’t deal with it’s own externalities. At least they are not trying to outlaw game reselling which is clearly legal in the US under the First Sales Doctrine.

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The Uncanny Parallels Between Israeli Archeology and Innovation Challenges

I recently caught three interesting episodes of Simcha Jacobovici’s Naked Archaeologist on History International:

  • Episodes #5: “Real or Fake?”
  • Episode #6: “Fame & Forgery”
  • Episode #7: “Accidental Archeology”

Israeli ArcheologyEpisodes 5 and 6 are about the Israeli Antiquities markets where each player strives for the right to participate in a free market of goods within the context that the goods are authentic and that the sale was legal, or allowed by the authorities. Archaeologists are shackled by protocol and the need for proper financing. Targeted claims about forgeries can make or break a collector, archaeologists, or exhibit. Episode 7 covers the construction projects that discover ancient ruins and the chilling effects that jealous archaeologists cause when they discredit discoveries are made accidentally by non-archaeologists.

These topics are interesting because there are many parallels to the challenges facing business; in particular, the ones that rely on intellectual monopoly in the age of digital abundance and the success that can be had by amateurs. Producers of text, music, film, business methods, systems, and apparatuses are still at odds with where they want the market to be, and where it is today.

Bureaucracy Slows Progress, Maybe on Purpose
Archaeological excavations on new sites sponsored by the state or by western universities need to do everything by the book, and in accordance with the Israel Antiquities Authority (IAA). As a result, the excavations never find anything worthwhile. There must be funding, and it must come from the right sources. Permission must be granted, official documentation must be made, and so on. The cynical may believe that the excavations that are permitted will be fruitless, planned so there are fewer pieces in the marketplace.

Keeping the Marketplace Artificially Small
There is a perceived right by some to stifle the market. Dealers and private collectors such as Oded Golan, owner of the controversial James Ossuary. His collections rival the IAA’s own collection. The IAA, in its position as the authority, does not want such rivals. So, it goes after the best private collectors and their collections by claiming that some artifacts are either forgeries, or artifacts were purchased from tomb raiders who’s digs were not authorized by IAA. The IAA website goes at great lengths to document their victory in catching and apprehending unauthorized excavations like this man found using a metal detector in the middle of the desert. Such publications seems like a simple scare tactic. In any case, the IAA is taking moral authority over their competition in the name of propping up monopolies.

Unauthorized and Accidental Discoveries
If a tomb raider (particularly Palestinians) are caught on the streets in Israel, they can be punished. However, there is some sort of strange exemption they receive if they make into a dealer’s shop without getting caught by the authorities. Perhaps the Israeli dealers are covering for the tomb raiders who my be bringing them valuable items the dealer can resell. The Dead Sea Scrolls were discovered by accidentally by a goat herder, and for this reason, we ignored by the larger archaeological community at first. Similar things are happening with companies that innovate in digital distribution who are at first blown off by incumbent content industries, and then sued instead of creating alliances, and then insist on doing it themselves.Siebenberg house

Jealous archaeologists discredited the discovery that are not made by one of their own, such as the 2nd Century BC mansion found under a home in Jerusalem known as the Siebenberg House. Without much interest from the archaeological community since it was not discovered by one of their own, the Siebenbergs conducted the excavation themselves over an 18 year period. Now their home rivals some museums.

With the rapid commercial development, there is a cat-and-mouse game between archaeologists and contractors. Contractors are sometimes quick to secretly destroy ancient ruins so that projects are done on time. Discoveries that do get reported usually hold up new construction projects indefinitely, such as a the construction of new walkway for the Temple Mount which uncovered remains of the first temple.

Pirates” Push the Boundaries
As with the artifacts that are sold by tomb raiders, forgeries also compete for prestige, sales dollars and attention in the Israeli antiquities scene. Corrupt officials could deem an artifact as a forgery in order to simply take it away from or to discredit a dealer. The irony is that some older forgeries themselves are now artifacts. In the 1880’s, Moses Shapira, an entrepreneurial antiquities dealer, knew that there was a great demand in antiques for Holy Land tourists but not enough authentic pieces to go around. He and his associate, Salim al-Kari manufactured thousands of fake antiques, selling hundreds of pieces to German museums. He was eventually caught by investigative journalists and outed in London newspapers when he tried and failed to forge a piece of parchment with Bible passages. In shame, he killed himself soon after. However, this is not a cautionary tale, since today’s pirates that push the boundaries are not claiming to pass originals. The irony is that this rich history now accounts for a demand in original Shapira forgeries, as they are shown at his one-time historic home, the Ticho House in downtown Jerusalem.

Conclusion
The market for antiques is abundant. The ability to discover them and fill voids is natural. Authority and protocols keep the rights to discover and sell antiques scarce, thus creating even greater scarcity of antiques themselves. The more abundant new discoveries become, the lower the value for pieces currently owned by museums and dealers.

Anyone can think up ideas and digital technology makes it easier to execute on ideas. Unnatural limits emerge to keep incumbents in control of the marketplace, and this is a danger to us all because it limits our liberty and ability to innovate. It is not the privileged that innovate. It is the “pirates,” early adopters, and amateurs who break the rules and forge ahead by breaking barriers disguised as rules.

(top photo by heatkernel)

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AP proves: Lawyers are not long-term business strategists

Associated Press (AP) has send DMCA notices to The Drudge Retort for quoting too much from one if it’s articles and then linking to one of it’s paying customer’s website (more at Techdirt). This, of course, interferes with the APs business model. They think The Drudge Retort should have to pay just like other AP syndicating news organizations.

I see many parallels to the recorded music business. Some people might download music for free while others are willing to pay. Today we have the luxury of trying music before we buy it. If we download from p2p and we don’t like it, we never were a lost sale. But if you like the music enough, you want to buy special physical items (like vinyl) , go to shows, and become an evangelizing fan.

Most news organizations that are paying to syndicate AP’s content are probably advertising based. They depend on traffic for their business model. If people are willing to give traffic to the AP’s customers, the AP should be willing to ignore a “copyright violation” in order to help it’s customer reach it’s goal of receiving traffic.

There are companies who’s business strategy encourage would-be offense, such as the dreaded deep linker, or the free and open source software hacker, or the Creative Commons music sharer. But if your lawyers are not crying foul, ruining your business model for heir own short term gain, for you, you carry on as you wish. Threatening potential customers is no a sustainable business model. Laws are made by people, and the spirit of laws can be rationalized by people. The way to behave on the web (which came from the way the web was designed) existed before the arrival of traditional news organizations, and they need to play by these rules.

If the AP really want bloggers to buy a license in order to quote them, they need to do two things. First, They really need to improve their offerings, giving something more than just permission to quote them. Sites like Reddit and Digg encourage linking as part of their business plan and they give blogger tools that help them accomplish their own goals rather than fight against them (granted they are not sources, but they leverage exiting behavior). AP does not do this. Second, they need to understand the the resources to police the use of their quotes is going to cost for more than it is worth, and they are better off not doing it at all. People will link and/or take entire articles wholesale. This is not your target customer. Google will eventually figure out that a site is spam and ban it, and then the motives for scraping are gone.

If the AP wants to play with bloggers on the internet, it needs to play by the bloggers’ and Googles’ rules. We link to sources, and we quote as much as we see necessary. Where we come form, respect is earned, regardless of the interpretation of copyright law or fair use. Help us kick ass, and we’ll be your biggest fans. Figure out how to monetize that, and your golden.

Sean‘s opinion.
Profy takes AP’s side and choose to site the part of fair use that cannot interfere with “potential market value.”
Arrington says: AP is banned.

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Using Social Media to Market Music

My colleague at Heavybag Media, Jackie Peters has a post about the great opportunities record labels have in using social media as a marketing strategy. The challenges they are facing: they must switch from selling music in physical packages to selling musical experiences, allow fans to interact with the music in meaningful ways, and allow music to be an experience to share with friends. The convergence of downladable, infinitely available music along with the ability to learn about new music via word of mouth/social media in the form of music blogs, podcasts, recommendation (both algorithms and friend) is the perfect fit.

But for now, the transition is rough for music industry veterans. Almost every week for the past two years the music industry manages to make one puzzling move after another, while independent artists are free to make decisions who’s only stockholders are themselves along with their artistic and commercial aspirations. Increasingly, independent artists commercial strategy is not in selling CDs, but in the more scarce goods such as early access to new releases, performances, and limited edition vinyl or DVDs, reliable discovery and immediate access to files on iTune or Amazon MP3 . They now they need to sell their fans something they cannot get for free.

People love to talk about the music they love. Allowing them to share it easily and legally, and talk about it online, and put it in new contexts is the new path to commercial success.

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When the cost of making ideas can be zero, the fee to use an ideas should be zero

As AgainstMonopoly and Techdirt like to say: when the marginal cost of producing a product, service or experience drops to zero, the price the market is willing to pay will drop to zero. For those that can craft ideas in their heads or on a napkin, the cost of this production is zero. However, what makes an idea valuable is the idea crafter’s ability to execute on the idea successfully. This requires scarce resources such as time, skills and maybe materials. Coming up with ideas and executing them successfully should be allowed to be mutually exclusive activities.

However, regimes such as patents put an artificial price on ideas and slow down innovation. One great example is the push-back on copyright by artists who license their works under Creative Commons. They are aware that someone else might be able to execute on their ideas better than themselves, and the license grants these permissions. Open APIs (application programming interfaces) allow 3rd party developers to use applications in ways the original application developers did not yet imagine. Execution is the natural and scarce barrier that differentiates competitors. It should not be an artificial price on ideas, methods, abstract processes, or the discovery of naturally occurring mathematics, physics, or biologies. The patents that are most dangerous to innovation are software patents. When patents first came on the scene in the US, it was intended for mechanical processes or methods, not necessarily for abstract ideas. Patents on software methods and business process are more akin to abstract ideas.

All of the money spent on patents and the barriers they creates for others is useless in “promoting the useful arts and sciences” unless you can successfully execute on them. And failure for one party to successfully execute holds everyone back, thus prohibiting the promotion of the useful arts and sciences. Your R&D resources are also a waste if you fail to execute. But this is the risk business must take. Even if you have a patent or a copyright, you can fail in the execution.

One might argue that there is a cost to making ideas, since you need to pay for R&D. This may be a leftover thinking from the industrial area. Sure, even for the development of abstract systems such as software applications and business methods, the time resource of engineers and the scarcity of their skills are necessary. But in a situation where one party has spent resources to come up with the same ideas that someone else might develop with fewer resources, and without any influence for the first party, it is as if the act of spending any resources whatsoever means that the idea deserves exclusive rights to execute. The context for protection comes from the belief that party A can “steal” ideas or the fruits of research from party B. These protectionist schemes make no room for the fact the two parties can come up with similar solutions independently, nor do that allow for the ability for some to ideate at no cost, and there is an automatic assumption that they are “anti-market”. It is as if the shareholder value for a couple individuals or firms is more important than the health and well-being of the world over. Or, the appearance that if the executioner is following protocol is going to covers some of their liability for failing and the false stigma of failure.

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Great Design Spoils Us and That’s A Good Thing

Great design along with great user feedback and iteration makes me intolerant of bad design, even when there is no alternative.

In the web app space, new entrants continue to appear, competing with each other and incumbents, each tweaking their strategy slightly. One thing that will separate each app is the quality of the user experience and user interface. Thus, users of these apps are increasingly spoiled. The best-in-class app emerges in a Darwinian competition. The web app space has to be the most fast-paced example of this paradigm, but it could be true of other products, services, or experiences who’s design can be constantly re-iterated.

I know I am spoiled. I have Google apps (search included) at my fingertips. I can use 37Signal apps to communicate complex ideas around my projects. I can communicate back and forth with web power users in an instant from almost any location without e-mail by using services like Twitter.

However, as I look at other apps I have no choice to use such as the web interface for my bank, government websites, or the CRM software at my last job, I am very intolerant of old, bad software. I expect that this software should not make me think. I only want to think about how to solve hard problems once, and then have have a software solve the problem when it comes up. In other words, I think software should do the repetitive mental heavy lifting.

When a great design ecosystem along with a great feedback channel to the designers and developers is available, we become even more spoiled. But I don’t think the spoilage is a bad thing. It creates an awareness for good design. It creates an awareness for the need for UI and UX designers. It creates awareness of the advantages of user feedback channels. It creates an awareness that rapidly releasing new code helps designers make better choices.

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How Open Source and Social Media are going to Eat SEOs’ Lunches

(Sphinn this)
Search engines react to behavior of its users and site owners. Search engines measures these behaviors to deliver value to each, but ultimately to serve the search engines’ best interests. At first, search engines used what they could by implying relevance and rank by link behavior. But as the web evolves to the social web, social media connections are going to have an increasing weight on search result relevance. Let’s face it: social media strategy is going to cannibalize black hat and some current white hat SEO strategy. Social media strategy is the new way to do SEO (figure out how to give value to your client’s web strategy). It is Matt Cutt’s job to figure out how to measure this relevance, and he is seeing that it is social media.

Right now, there are a bunch of SEOs listening to what Danny Sullivan has to say about social media strategy because they trust him. But some SEOs refuse to re-evaluate what brings value to their clients, (note: this Sphinn user was not in attendance) even saying that Jason should not be allowed at conferences. These sentiments just prove to him that what he is doing is right. It is innovators dilemma. SEOs got where they are today by being great at SEO strategies. Asking them to adopt social media as a new strategy is new and foreign. As Danny tries to lead his followers to new territory, some think he is betraying them and the strategies that made them the stars they are today. Some might be too afraid to go back to their clients to tell them they are going to try some new strategies to help their clients succeeded. They should remember that this does not mean the work they did in the past did not allow for successes or was a bad idea. SEO definitely has been one of the main ways to help clients succeed on the web for the past 10 years. But, there is no need to defend past actions with future ignorance. They need to redefine their metrics. The longer they wait, the more likely they will get their lunch eaten.

Thus, the knee-jerk reaction to Jason Calicanis’s rhetoric that SEO is a dying or bad strategy. Yes, let’s admit that Jason loves to agitate people by rubbing strategy decay into SEO’s faces, bad Jason ;). No one is going to tell an SEO that they are not giving value to their clients using SEO techniques. It just that the tactics they are using need to evolve.

Less attention is going to be paid to traditional SEO because (especially in the creation of static pages) now it is so much easier and valuable to create site with an open source blog, CMS, wiki or other application platform that may or may not rely on search engine traffic. Sure, even with these there are some ways to tweak them from an SEO perspective, but not as much as you might have needed to do 10 years ago. This is disruptive technology, bad news for the traditional SEOs that build sites from scratch, sprinkling in their elusive, magical SEO code. But, the developers of these open source CMS apps have figured out how to do the complicated SEO work for you (why else would Matt Cutts speak, attend, and endorse Wordcamp?). Here (along with social media application designers) is where good SEO needs to happen, and smart web strategists will realize that this is where it should continue to happen, because it scales and eliminates redundant work. You just need to wait for the search engines to spider your site. Now, traditional SEOs (which should now be called web strategists) should have more time available to add additional types of value for their clients by either engaging in social media on their behalf, or teaching them how to engaging with their prospects in a way that will help them efficiently meet their goals over the web. This is done by creating “meaningful relationships” (for lack of a better term) with people. At this point, SEO is just one of many tactics used by a web strategist. So calling a person an SEOs or SEM will soon be a way to show how outdated or limited that person’s strategy toolbox is. SEO competes with other value-adding strategies if all you do is SEO. Thus, SEO people see social media strategy as a threat. Being a web strategist is where it’s at.

Update 4/25/08: Oh yeah, add semantic web to the list in the title.

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What is better: SEO or SMO?

You can spend engineering resources on fighting spam like Matt Cutts and team, or you could spend talent resources on writing and curtaining content like Jason Calacanis, Jimmy Wales, and passionate bloggers.

Likewise, you can spend engineering resources to make sure you rank well in search engines with SEO, or you can create value for your users/customers by allowing them to poll you presence with a social media strategy like blogging, Twitter, curated bookmarks, teaching them like Brian Clark at Copyblogger, or helping them kick ass like Kathy Sierra, until they are compelled to become a paying customer.

Is one better than the other? Those that made their name with one may downplay the other, but that is human nature. It is better to be a good sales person than a strategy picker.

The odd thing is that SEOs see SMO as an SEO strategy, and SMOs see SEO as a dying strategy. Let’s just call it all evolving web strategy.

If you are in town for SMX Social Media, we can discuss this further. Look for me at the bar at the Westin. Add me on Twitter if you can’t find me.

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Ignorance to Competitive Business Models Costs Incumbents $60 Billion by Refusing to Pay Strategy Taxes

There is a really dumb press release (and I say dumb because of its FUDy tone) at Marketwire suggesting that open source is a threat to the software business. This is may be true, but I think my post title says it all. Plus, the Standish Group wants to charge you $1,000 to prove this to you. Smart companies are succeeding with open source, such as MySQL and RedHat. From their inceptions, their business models were designed to give away or use free software, an infinite good that can be copied at zero cost, to sell services such as time and expertises, a finite good. Incumbent market leaders are not willing to pay what Dave Winer calls The Strategy Tax. It seems like the same idea as Clayton Christensen’s The Innovators Dilemma. Companies are not willing to change so drastically that they cannibalize their current value proposition, turn off their currently paying customers, and find new ones, so they whine when someone comes to eat their lunch. These companies must die off or they will create poisonous incongruencies inside of an industry, just like in the recording industry.

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Blockbuster + Circuit City May Mean More DRM

Today, Blockbuster Inc. announced its offer to acquire Circuit City. This is not good for consumers.

Big box electronic retailers control the consumer electronics industry more that you might think. In the US (and maybe elsewhere), Circuit City and Best Buy can pretty much tell consumer electronics manufacturers what to make buy telling them what they will buy in their buyers meetings.

Blockbuster can be influenced very easily by their primary vendors, the big Hollywood studios. If and when the acquisition occurs, Blockbuster could be a proxy from which big content content owners can exert control over consumer’s fair use and free speech rights. Hollywood studios could possibly push further anti-consumer efforts such as HDCP (high definition copyright protection), which is designed to stop piracy at a higher priority of satisfying paying customers. The false positives of anti-piracy mechanisms have a chilling effect, whether the content was fair use or if it was used to censor dissent at just the right time.

For this reason, this deal should not take place. Anti-trust watchdogs should take note. This is not “synergy.” It could be more infringements of free speech using consumer electronics. If the anti-consumer moves TiVo has recently made concern you, it is possible you ain’t seen nothing yet.

Update: Some think the merger is a joke because both companies are such weak players in their own marketplaces. I must admit that current with each companies financial positions until I read this post on CNet.

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