January 10, 2008

2008 is the year of The Blanket License

Filed under: DRM,Music,Video/Film,Virtual Goods — Administrator @ 12:36 pm

We’ve been mouthing off for a long time (okay, a couple years) that eventually the stars will align and content providers (music labels, studios, publishers) with wake up to the benefits (and inevitability) of blanket licensing (BL) for digital content over the Web – we believe 2008 is the year that you’ll see BL jet in from obscurity and become “mainstream” in the digital content (music, video, and text) space.

Below are three articles/industry guys calling for the same thing:

Subscription Question Goes 2.0, Theoretical Possibilities Abound is from Digital Music News (thanks to Eric for emailing this to me) where leading music attorney Kenneth Hertz notes that…

“…this is the year that labels will embrace blanket licensing.”

Music Lessons is Seth Godin’s post where he lists 14 rules to live by in the music business – note that it takes him about 12 rules before he finally concludes that blanket licensing is the now but he gets there, and thus makes our list. Seth writes,

“The music business has thousands of labels and tens of thousands of copyright holders. It’s a mess. The biggest opportunity for the music business is to combine permission with subscription. The possibilities are endless.”

Last Major Label Gives Up DRM Related Issues, posted on Electronic Frontier Foundation by Fred von Lohmann knocks the covers off the bed with his posting and states:

“Next step (and I hear that at least one major label is considering it) will be a blanket license for music fans — pay a small monthly fee, and download whatever you like, from wherever you like, in whatever format you like. This is the inevitable end-game in a world where file sharing remains hugely popular and the labels want to prevent new retailers (like iTunes) from controlling distribution.”

Look, there are hundreds of content sites in China offering very similar experiences and content, all driving for that same advertising dollars – and yes, one or two of the free sites will remain, but by and large the odd US$200 million that has been invested in China’s user-generated/file sharing start-ups over the past couple of years will be earn a very low return (if anything at all).

Indeed, the business that learns (and is capable) to fully integrate blanket licensing, and thus can roll-out a legal digital content subscription model (on the back of fighting for those advert dollars, as an added revenue stream) is going to dominate this industry as they will have a sustainable business model.

And what’s more, think of the blue sky business opportunities (i.e. think lightweight applications running on top of this infrastructure) that present themselves once a developer/user has unrestricted access to 100% legal digital content – we’re talking virtual goods meets physical goods meets a online/off-line experience. To wit, this is the sort of excitement blanket licensing brings to the mix – to a digital content platform.

2008 is going to be a significant year in the content space – we’re expecting this year will kick-off several years of significant consolidation and flame-outs across the start-up board – putting premiums on ventures, such as Feilio, that have fully integrated blanket licensing at the core of their business models, and thus are positioned to weather the coming storm.

November 26, 2007

Virtual China – “It will be faster, bigger, more like an explosion!”

Filed under: Gaming,Social Networks,Virtual Goods — Administrator @ 4:57 pm

For the past 12-months, the market’s been buzzing about Beijing’s partnership with MindArk (creators of Entropia Universe) to build a second dam on the Yangtze River…er…I mean they could possibly build a second dam assuming their joint Beijing Cyber Recreation District project (the world’s largest 3D virtual world capable of supporting 7 million concurrent users) throttles up and launches free and clear.

In fact, not only could the Chinese government build a second, third or even fourth dam, they just might figure out how to (competently and securely) connect western consumers and retailers directly to Chinese manufacturers (sidestepping our friends at Alibaba along the way).

As Vic Keegan reports in a recent Guardian article titled “Virtual China looks for real benefits” this is:

“…a bold attempt to repeat what China has done in manufacturing (i.e. conquering the world) in services. Be warned. It doesn’t stop there. This site, now under construction, will have all the infrastructure (server farms, communication links, electricity, banking links, logistics, etc) needed to make this the world’s one-stop shop for consumers and producers.”

Full stop — this “virtual world stuff” is for real and will no doubt have an immeasurable impact on real world commerce. Yup, it could take a number of years to get it right but given the amount of capital, breath and focus China (let alone the rest of the world) is directing at this space the time is yesterday to begin toying around in this field.

Already, virtual commerce is massive (just ask the Korean’s circa 1998) and hitting the bottomlines’ of major listed Internet properties – for example, 65% of Tencent’s revenue is generated from the sales of virtual crap. Furthermore, virtual commerce is already a sophisticated market economy striated into primary (site-to-user) and secondary (user-to-user) markets – the equivalent of a US$2.0 to US$2.5 billion market worldwide.

And, over the next couple of years this industry will only continue to grow and proliferate as bandwidth increases allowing more and more users (in developing countries like China, India, and Thailand) to join 3D virtual communities, such as Chinese start-ups Hipihi and Novoking.

Of course, there are a lot of people who aren’t drinking the 3D Kool-Aid, and by some measure, they’re right…but not entirely. My most excellent friend and brother Frank Yu writes that graphics and experience has less to do with a successful roll-out than understanding the local culture. Frank writes:

“…anecdotal evidence seems to indicate that Chinese MMORPGs and Casual Games can more easily be integrated into the markets of Vietnam, Indonesia, Russia and India easier than the more higher end Western games that most industry analyst are familiar with. If this is the case, there is a revolution in gaming based not on graphics, performance or even features but one based on distribution, cultural affinity and low barriers to entry…”

Recognize! If I’m a Western gaming or virtual community operating in Asia – sure, point well taken…but what if I’m local? What if we’re all local and operating on a level “cultural” playing field? What if Beijing tosses up a platform that support 150 million avatars and recommends (in a “velvet glove, iron fist” sort of way) leading manufacturers sign up? What will happen is you’ll be forced to compete – so rather than hang around – waiting – just get going because that virtual runway is pocked marked and difficult to navigate in the best of times.

I’ve been waiting to use this video titled “Are Virtual Goods the Next Big Business Model?” for a while, granted it is from this past June’s Virtual Goods Summit 2007 hosted at Standford University, but it is really quite good (assuming you like to listen to a group of entrepreneurs, VC’s and other tech industry people who got together to talk about the emerging market opportunities for virtual goods and economies).

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