Another face of media concentration?

I am not sure if many of the readers know, but my Masters’ thesis was on media industries dynamics. One of my original motivations to start looking at media industries was vast literature on media economics, particularly media concentration/conglomeration, i was exposed to during my undergraduate and graduate studies. In a super-simplistic way and in a nutshell, the common concern regarding the dynamics of media industries is that as time goes on there are fewer hands controlling the growing number of media outlets. Of course the actual picture is more complex and i should probably blog about it (and my thesis?) at some point.

However, the point of this post is different. Yesterday I read a Washington Post article about the shrinking membership of the Entertainment Software Association - an association of video/computer games producers. The fact of intra-industrial battles was not as interesting as the mention of merger discussions between Activision (Guitar Hero) and Vivendy (WoW). This news comes in a span of just a few months from EA’s (The Sims) attempts to take over Take-Two Interactive (Grand Theft Auto). Are we moving towards

I find it really interesting and tied to the debate over mass media ownership at large. Ironically, being a huge and rather fast growing industry, video games industries are gaining less attention compared to the mainstream media. At the same time, i think the cultural function of video games can be legitimately compared to that of the popular culture. As video games become a more prominent outlet for leisure time we can start asking similar questions about this industry as we were asking about other culture-related industries.

I think the link above will become even more obvious as the two industries continue moving towards each other. For example, not too long ago I read about an attempt to create an interactive movie based on the popular WoW. The idea is that it would combine elements of the game and users’ input with cinematography and it is a clear step towards merging the two domains.

Probably the combination of the two developments - conglomeration of the video-games industries and amalgamation of cultural outlets - prompted me to think about the WP article in terms of another expression of media concentration. What do you think?

Quickly glancing at OLPC

Quite a while ago i read this post about the rise of cheap computing solutions. In light of the growing critique of the OLPC project, it got me thinking that perhaps, by focusing on the details of this specific project we are overlooking some of its most important contributions.

Just three or four years ago OLPC was the only project explicitly targeting the developing world and the market for low cost, simple computers. Today, we have over 7 competing models targeting this very market (potentially more). As long as this competition continues we can expect better machines and lower prices in this segment. Perhaps that is good, since industry is probably better in taking care of the technical aspects (even if sometimes it needs a push, such as the OLPC project), leaving space for the educators and activists focusing on developing a decent educational infrastructure to utilize this technology.

The main critique of OLPC from the very beginning was that it should be an educational and not a technological project. And I agree that the technological solution alone is meaningless and the true potential for change lies in appropriate adoption framework, particularly when we talk about education. At the same time, I think that its contribution to the technological push should not be underestimated. Does it make any sense?

On an unrelated note, now you can also use Skype on XO computers. I think this is really cool, even though Skype has been recently loosing its quality.

(Images taken from laptop.org, licensed under the Creative Commons Attribution 2.5.)

More on Facebook

Here is a post that has been sitting in my drafts for a while (I am even embarrassed to say how long).  Even though, re-reading it now, I think it is still relevant.

Since Microsoft bought a minority share in Facebook (FB), the later refuses to leave the news pages. Actually, i personally was surprised by the 15 billion evaluation of a network that has a rather fuzzy product. Unfortunately i was (and still am) stuck with school tasks, so i didn’t have the time to play with the numbers myself. Fortunately there are people out there with more time, who did the excercize.

As i suspected, the 15 billion figure is indeed appears blown out of proportion. Jesse Chan of FisTrain has a detailed explanation that leads him to estimate FB’s annual earnings in 2007 at US $47.7 million, which in turn gives Facebook a price-to-earnings (P/E) ratio of 316. In other words, Microsoft paid US $316 for each US $1 of earnings of Facebook. For comparison, General Electric’s P/E in the last 12 month was about 18.5, General Motors’ 11.23, Google’s (which i think is still high) was 58.21, and Amazon’s (even higher) 102.21.

Of course, we can assume that the company is going to grow tremendously in the future. For example, at the end of 2007 FB launched “FB Pages” that will allow local businesses and brands to have their own pages. Users will be supposed to interact with those pages, contributing to viral marketing and sharing their demographics. In other words it moves towards the mainstream, marketing-oriented media activity (an further away from its potential educational promises), which suggests better profitability. However, according to Chan, even if FB will generate US $200 million in net income in 2008 (four times more compared to 2007) , its P/E ratio will still be at 75, which in my view is very high.

My point is that FB is an example that has too much resemblance with the spirits of late 1990’s when we worked with multipliers of 400 and 600. Of course some lessons have been learned and the advertising models online are more sophisticated compared to what we saw in the year 2000. However, the remaining question is if the advertising industry capable of supporting an entire other industry that is producing nothing but detailed demographics while being expected to grow 3 and 4 times a year.

More on online product placement

In the past i blogged about online product placement. Here is another interesting video linked from the Washington Post and telling the story of growing phenomenon of product placement in online, supposedly grassroots, content. (Sorry, but i still didn’t figure out how to embed video other than YouTube and Google in WordPress).

So much for 2.0-ish innovation?

To cheer you up, here is another one on the subject, but less serious:

My Yiddishe Mama post, or “I told you so”

A couple of years ago I participated in a conference titled “Telecoms in Transition”. It was a gathering of (primarily European) telecom industry leaders who were discussing the question of the future of their industry. My talk focused on the “digital divide” and the main point was that the next big wave of users is going to come from the developing world. It seems like this idea is catching up and here is a post on “Information Policy” blog with a link to an article analyzing where the next billion of internet users will come from based on the last Internet Governance Forum.

And no, i am not claiming the authorship, but I think it is important to stress this point once again. I believe that we are at the beginning of a trend in the rhetoric (and probably action) of the telecom industry and it is nice to say “I told you so” :)

Fun bubble 2.0 + some thoughts on FB

Thanks to Eszter for posting this:

On a different note, i keep on following the buzz about Facebook (FB) criticism due to deployment of Beacon platform.  For those who did not have a chance to follow, recently FB launched a platform that allows them to follow you to third-party websites (anybody said spyware?) and if you make a purchase there, news about it would go to your FB news feed (for your friends to see, follow your opinion leadership, and of course go and buy something from that company).  Of course they do not follow you to any website, but only to those who have an advertising agreement with FB, but nevertheless, this move raised a lot of antagonism and questions of privacy.  It also unleashed a wave of critique of FB and its founder, Mark Zuckerberg.

One of the things i noticed recently is people being surprised by FB non-responsiveness to the PR crisis it is going through.  The assumption is that to manage this wave of negativity, FB has to make substantive changes to the Beacon platform followed by a massive PR campaign.  Although i have my own critique of FB and more so questions about the nature of their business and its long-term sustainability, this later wave, particularly expectations for response, made me thinking.

I wonder if Zuckerberg’s strategy of ignoring the critique is actually the correct one.  I remember about over a year ago, FB introduced the news feed.  Back then it raised a lot of criticism from the privacy advocates and there was, not as strong, but still noticeable, negative buzz about FB.  I don’t remember the company investing as much in PR back then.  What it did was adding a couple of tweaks to make its users feel as if they were in charge of their privacy and in a matter of a couple of months the wave of negativity died and, as we can see today, people are happily using the feed.  In fact, can we imagine FB without the news feed these days?

Now, following the current criticism, FB also added some minor tweaks to the Beacon platform, and is now waiting for the wave of criticism to path.  The main threat to FB when its users would start massively leaving it.  Getting the users angry by exposing their Christmass surprises is indeed a step in that direction.  But in my (unsupported by any kind of evidence) opinion this is not enough.  Simply because most of FB users do not care or do not realize what is going on.  Talking to my friends, for example, i gain further support to an intuition that people don’t really view it as a big deal.  They continue logging into their FB account, poke each other, bite, send virtual gifts and drinks, etc.  and at the end of the day this is all FB needs.

So, from FB point of view,the business is as usual and all they need to do is wait until the critique in mass media and the blogosphere dies out.  After all how long can this be news/blog-worthy?  People will get bored and it will happen sooner than we can think.  Once the wave of negative publicity is no longer there, the advertisers will come back, and the next thing we know Beacon will be a recognized standard in the industry.  Doesn’t it sound as a logic scenario?

I still have a sense that the basic idea behind FB is bubblish (linking back to the video :), but maybe at the end of the day, FB is actually more strategic about how it is handling the current crisis than what it appears in the press and the blogosphere?

OPCPL

OLPC (One Laptop Per Child) seems to become OPCPL (One Potential Consumer Per Laptop).  I just read that EA are going to install a copy of SimCity on every laptop in OLPC project.  Since the original post didn’t have any references I re-checked and it looks like this is actually going to happen - EA are going to put the 1989 version of SimCity on OLPC machines.

The official rhetoric is that SimCity has educational aspect.  Frankly I tend to agree and, regardless, I think this was a good and fun game.  However I keep on wondering if this step is really motivated by educational aspirations, or this is “putting a foot in the door” in an attempt to capture potential future consumers at the very beginning?  Maybe both?

Maybe i was wrong

About a year and a half ago TheMarker, an Israeli economic journal, published a short article of mine reacting to Google’s entrance to the Israeli market. One of the claims i made there was about the online advertisement market being too small to suggest a significant impact on the overall advertisement industry in Israel. Back then, the online advertisement accounted for only 5-7% of the entire advertisement industry. I will have to check this number again in light of the recent announcement of NY Times that they are dropping their paid premium services based on a calculation that keeping the content open will generate more advertisement-based income (thanks Erik for pointing that out). Although Vivian Schiller, the Web site’s Vice President and General Manager, refused to expose the exact estimations, giving up US $10 million a year generated through the subscribed services is an interesting indicator. Of course I am still missing many numbers, and $10 million is not such a big figure in the advertising industry standards, but I can’t help but wondering, if i haven’t been too pessimistic about that in the first place.

Russian oil vs. Russian high-tech

One of the critical stream in developmental literature, namely dependency theory, suggests that one of the main reasons for the growing gaps between developing and the developed worlds are extractive institutions set up during the colonial times. Such institutions favor export of natural resources of a developing country to the developed world, while neglecting investment in local sustainable infrastructures needed for socioeconomic and political development. The idea is that those institutions are so deeply rooted and have entered a path that it will be very difficult to change.

Recently i read this article from Washington post about Russia neglecting development of high-tech industry in favor of natural resources industries. I couldn’t help myself but noticing a conflict. Russia is probably one of the largest developing countries today and has never actually been colonized. At the same time, here it is investing in the same extractive institutions, while it could invest in industries that would probably contribute to a more sustainable development in the long run, such as the MITs.

Why is it happening? Is it the global economic system that forces a country to sell it assets in order to survive? Or is it lack of vision of the leaders combined with personal ambition/greediness motivating instant gratifications?