TechFold - Bold tech & web commentary

Unintended Consequences: The commoditization of music

One thing that I can’t help but think as I see the sudden rush to sell unprotected MP3’s is that music will become commoditized: that is to say, competition between stores can only be on price at any given quality level (given the digitally identical product offered at all).

When there’s no opportunity to differentiate a product offering, differentiation has to come from elsewhere - price being the first, easiest, and most natural source thereof.

There are some other factors - like the iTunes/iPod easy synchronization value-add - but fundamentally, a 256k/bit encoded song is a 256k/bit encoded song, wherever its downloaded from.

So - is the industry doomed to go to the retailer with the best cost structure, or the retailer willing to tolerate the lowest margins? Maybe. Expect to see some frantic “relationship building” taking place as drm-free retailers attempt to secure exclusive access to higher bitrate recordings, or specific artists or albums.

amazon, apple, drm, itunes music

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

Amazon to Go DRM Free… the Myth of the Information Wants to be Free Wonderland

By cosmic coincidence, while I was writing about terminally sketchy MPFree.com this AM, Amazon went and announced the forthcoming opening of their own DRM-free music store.

1. Amazon claims 12,000 labels have signed up to sell MP3’s, including EMI - interesting that APPL didn’t lock EMI to an exclusive.
2. Bezos summed up the value proposition: Amazon customers will know that their music will play anywhere without any difficulty.
3. The EMI CEO suggests that DRM-free will still be a “premium” offering - expecting slight price bump and higher quality, as per iTunes.

Analysis

Amazon lends credibility to the charge begun by Steve Jobs. The proof will be in the profits, however: regardless of how many names are behind the DRM-free agenda, the labels will need to see increased sales volume, increased margins, and increased profit to make it stick; anything less than the volume/margin/profit trinity will send them scurrying away again to try and come up with another way to make it happen.

Whether there is another way is debateable, of course, but that doesn’t matter to the industry execs - its the ability to put out shareholder-pleasing press releases about new bound-to-be-profitable technologies & business models that keep them motivated.

One unfortunate thing is that “DRM-free” has been elevated to a near-mythical ideal where gleeful customers shovel cash voluntarily at labels in a magical “information wants to be free but I respect artists” wonderland - will such a place exist? Only time will tell. The pessimist in me says no; how many people out there downloaded MP3’s from P2P services and then went to buy the CD out of respect to the artist? Zero. Respect for artists is balanced out against the ridiculuous wealth flaunted by upper echelon musicians - would the average consumer feel too bad keeping a few cents out of U2 or Madonna’s pockets? No. Do many people have artistic “respect” for Britney Spears? The “struggling-to-break-through” artists will be the most marginalized financially, but will enjoy the promotional boost of unfettered distribution….

…of course, struggling artists have other, better means of self promotion these days than signing with labels anyway.

amazon, drm, itunes, labels, music RIAA

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

Bricks and Mortar 2.0: Amazon Fulfillment is a RW Platform and API

Amazon, reports the NYT, is blurring a lot of boundaries. With the “Fulfillment By Amazon” Business Solution, Amazon is creating a real-world platform with a physical set of API’s - taking the strategy of developing, surfacing, sharing, and selling back-end services that has worked so well online, and porting into the physical world. Fulfillment lets any merchant selling anything online anywhere tap Amazon’s warehouse infrastructure for storage, packing, and shipping.

Fulfillment by Amazon (FBA) is a new program that makes delivering your Pro Merchant Program and WebStore orders a snap. You send your new and used products to us, and we’ll store them. As orders are placed, we’ll pick, pack and ship them to your customers from our network of fulfillment centers. [from FBA]

And why not? Amazon recognized long ago that the systems and processes they use to make their online store work could be extended beyond the store via API users to drive business back to Amazon, create brand equity, create a revenue stream, reduce per transaction costs, and make everyone’s lives easier. The offline world is no different - except that the packets are in brown cardboard boxes instead of TCP/IP, and flow through warehouses and post-offices, not routers and gateways.

“We have this beautiful, elegant, high-I.Q. part of our business that we have been working hard on for many years,” he said. “We’ve gotten good at it. Why not make money off it another way?” [from NYT]

Amazon Fulfillment works in four steps:

1. Send your inventory to Amazon
2. Amazon warehouses it
3. Amazon fulfills it - finding it, packing it, combining it with other items, and shipping it
4. Amazon manages customer service (returns)

…and that is just spectacular. Its like the equivalent of Ning for bricks and mortar commerce. It makes it easy for merchants, creates a new monetization stream for Amazon, keeps Amazon’s resource utilization and per transaction costs down, and largely is built on sunk investment. Of course, fulfillment is not new to Amazon, as they’ve done it for Target, Borders, Toys R Us, and others. But extending it out to anyone in Web 2.0 style is.

At the end of the day, Amazon is leading the way in what I consider to be “3.0″ processes and technologies - things that consolidate the physical and online worlds and make moving between the two seamless. There will no doubt be bumps along the road (as the NYT article notes), but ultimately Amazon has seen the future and positioned itself to be the platform on which its built.

amazon, api, ebay fulfillment

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

Stranger and Stranger

Just a quick one on Amazon vs. Statsaholic. Extortion, criminal recods, litigation, pay-offs. Zoli and TechCrunch sum it up.

Who’s gaming who here? I find it hard to believe the Amazon, under media and shareholder scrutiny, with entire departments devoted to communication, litigation, and oversight, would try to blackmail Hornbaker into paying them an insignificant sum and handing over a domain. I just don’t believe such a decision could be made, especially when Amazon has legitimate legal avenues (in spades) to pursue in renegotiating their relationship with Statsaholic.

The alternative is that Hornbaker is playing Amazon in an elaborate PR game to get publicity for himself and Statsaholic. Everyone loves a david vs. goliath story, and Hornbaker is working hard to provide just that, deeping the depravity of Amazon’s behaviour on a regular basis and keeping everyone’s interest piqued. Is it anything more than base manipulation of public opinion?

Only time will tell.

Other posts here - the first calling out Amazon for being lame, the next starting to question the whole situation.

amazon, hornbaker, lawsuit, statsaholic techcrunch

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

What is the real story with Alexaholic/Statsaholic/Amazon?

The Alexa vs. Statsaholic story, in response to which I proposed a boycott of the Amazon eCommerce API, is getting complicated. Pete Cashmore has a petition on Mashable, calling on Amazon and Statsaholic to settle the dispute without litigation.

It emerged in comments however (see comments by James), that statsaholic was not using the Alexa API (which charges fees), but was instead scraping, or otherwise circumventing the API. James points readers to the Alexa Blog post on the topic in which Alexa takes issue with:

1. Trademark infringement via the “Alexa”holic name. Though Alexaholic has changed its name, Alexa points out that Statsaholic still redirects the Alexaholic domain to the new site - a remedy that is not satisfactory to Alexa. Personally, I think Alexa forfeited their rights to demand restitution from Statsaholic by allowing the use of the Alexaholic domain for years, and explicitly stating that they were aware of the Alexaholic, and supportive of it. Alexa should be content with the Statsaholic switch and call it a lesson learned on trademark protection.
2. Alexa also takes issue with Statsaholic’s use of graphs. The Alexa fee-based API (AWIS)does not include graphs - so statsaholic apparently (more-or-less) hotlinks them. This issue has the ring of legitimacy to it. The charts and the system to produce them consume resources, and the IP behind the charting system has value. If Statsaholic used paid AWIS data and their own charting engine, their wouldn’t be a problem. But it seems that Statsaholic is doing neither.

IN summary: (a) Statsaholic is entited to the Statsaholic name, and traffic from Alexaholic. (b) If Statsaholic is a viable business, it can afford to put out for its own chart rendering engine, and pay for use of AWIS data. To be honest, that sound preferable anyway - there’s a lot more opportunity to add value to data when you’re completely in control of presentation; and, that would give Statsaholic the opportunity to blend with data from other sources, creating a superior metric.

In any event, I don’t think Alexa needed to resort to litigation to get this ball rolling, but I don’t know both sides of the story. Pete C. suggests in response to James in comments that Alexa tried to up-charge Statsaholic, asking for more than the standard AWIS fees - is this substantiated?

alexa, alexaholic, amazon, awis, mashable statsaholic

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!

Boooo to Amazon - Suing Statsaholic: Amazon API/ECS Boycott time?

EDIT: HOW ABOUT MONDAY, APRIL 23rd FOR AN API ECS BOYCOTT? Post your thoughts in the comments. By “boycott” I mean if you use ECS to link to Amazon for affiliate sales, shut ‘er down and hit amazon in the wallet.

As a frequent user of the Amazon ECS API and follower of Amazon’s forays into platform-territory (S3, etc), I find it very disappointing to read about Amazon suing Statsaholic [Alexaholic] [via Mashable].

Mashable has the actual filing in their post, but the nub of it is that Statsaholic took Amazon’s open data and application platform and added value to it by offering an expanded feature set around Amazon’s offering, much like I did with the Flickr API and Google Maps on BlockRocker.com [flickr portion since removed], and much like many mashup artists have done thousands of times all over the net. I identified a gap in Flickr’s product offering and filled it, using their API. Flickr benefited, and so did I. When Flickr released their own geotagging product, I let the photo portion of BlockRocker die a slow death, eventually shuttered it, and that was that.

The same thing should have happened with Amazon and Statsaholic. Why Amazon feels the need to sue a niche business out of existence rather than thanking them for the adoption they’ve driven to this point and clobbering them with a superior product is anyone’s guess.

Perhaps the Amazon Mashup community should unite in solidarity against bullying of API-partners by having an Amazon shutdown day: I imagine if everyone using the Amazon API shuttered it for a day in protest, Amazon would feel some impact. I’ll Amazon links on UpcomingDiscs.com and HDDB.net - anyone else? What’s a good date?

alexa, alexaholic, amazon, blockrocker, boycott, flickr, mashable statsaholic

Share This

If you enjoyed this post, make sure you subscribe to my RSS feed!