Monday, November 25, 2019

Tim Berners-Lee's "Contract for the Web" Forgets One Thing!

Tim Berners-Lee's "Contract for the Web" (today in his NY Times op-ed) is a worthy effort -- but it seems to ignore the key contract element that he called on us to fight for a year and a half ago.

The new Contract lists Principle 4, "Make the internet affordable and accessible to everyone" -- but the sub-points for that principle gloss over the fundamental problem he raised in his message on the 29th birthday of the Web (3/12/18, emphasis added):
Today’s powerful digital economy calls for strong standards that balance the interests of both companies and online citizens. This means thinking about how we align the incentives of the tech sector with those of users and society at large
Two myths currently limit our collective imagination: the myth that advertising is the only possible business model for online companies, and the myth that it’s too late to change the way platforms operate. On both points, we need to be a little more creative.
Create a new set of incentives and changes in the code will follow. We can design a web that creates a constructive and supportive environment."
The Contract for the Web should include a new Financial Contract to align incentives to benefit not only Web platforms, but their users.
  • The contract should require that user pay at a level that corresponds to the value they get with consideration to their ability to pay. 
  • It should shift from the zero-sum game of "artificial scarcity" to a win-win game of fairly sharing our digital abundance to benefit both service providers and each consumer. 
  • It should also shift from the opaque extraction of attention and data in exchange for supposedly "free" services, to transparently negotiating with each consumer how (and at what price) advertising and commerce should serve all three parties involved:  the service provider, the advertiser, and that consumer. 
I have written on this blog and elsewhere about why that is essential, and how it can be done. Two of the simplest statements of those proposals were published in Techonomy:
Details of how that can be accomplished using the FairPay framework have been published in Harvard Business Review, and in journals on pricing and on marketing. Specific comments on Berners-Lee's 2018 message are in these several blog posts.

[Update 12/13:]  It has been pointed out to me that the Contract does address the topic of business models (with regard to privacy and data rights) in Principle 5, Clause 3(b): "Promoting innovative business models that strengthen data rights, respect privacy, and minimize data collection practices." I am pleased to note that, and look forward to seeing progress. At the same time, this underlines an important point that may not have been clear in my original post.

This question of business models -- while very important to privacy and data rights -- is of even greater importance and urgency with regard to deeper issues of how the Web benefits or harms society.
  • As we see in the growing concerns about past and upcoming elections, the harm is not just to personal privacy and data, but to how the advertising-based business models of dominant Web services are inflaming polarization and radicalization of users (with clear effects on politics, elections, and society), rather than enlightening us.
  • The reason is that inflaming users increases their engagement and thus the number of ad impressions to be sold, while enlightening users does not advance that business incentive. 
  • Social media and search engines could be world-changing forces to not only "bring the world closer together" but to augment human intellect and enlightenment -- instead they are driving us apart and making us stupid.
  • That threatens not only our privacy and data, but the foundation of our democracy and freedom.
The articles and blog posts I have linked to above address privacy and data rights as just one aspect of this broader theme. Two additional post that dig deeper into these broad issues are:

Saturday, November 9, 2019

The Streaming War to End All-You-Can-Eat Streaming Wars

(Image: Wall Street Journal)
Do you hear the giant sucking sound of tens of billions of dollars of content production cost and corporate debt going down the drain? ...of tens of millions of consumers missing out on content they want to watch?

Much like World War I, great powers are massing armies and entrenching content libraries for a Great War that may have no real winners. And once again those great powers (and other contenders) are relying on inflexible strategies that will drain resources, and get mired in a long and costly war of attrition. This time the inflexible trenches that will suck up armies of content dollars are not in the ground, but in the deadweight loss of all-you-can-eat (AYCE) subscription models.

News of this streaming war is everywhere. The Wall Street Journal provided a good summary of the order of battle, and of the collateral damage that consumers will face. Axios notes the huge debt being incurred to create these arsenals of content.

The nimbleness of the German Blitzkrieg ("lightning warfare") demonstrated how WWI strategies of trench warfare could be overcome quickly, and with far less carnage. The players in this streaming war should be looking for a similar Blitzkrieg business model. But I predict it will be the smaller players, less able to throw money at this, who will be driven to experiment with less familiar, but more agile, strategies.

We wanted a "Celestial Jukebox" -- instead we got "subscription hell" and "subscription fatigue." This is the era of "peak content," but only a fraction of it is within any one person's reach -- its costs and its price are unsustainable. Can't we find an ecosystem business model that can sustain a celestial jukebox for the video industry?

Earlier this year I suggested how more agile strategies might operate, in "Risk-Free" Subscriptions to The Celestial Jukebox. The essence of the risk-free subscription is to be flexible, in order to be value-based -- cheap or free at low or zero usage, and rising at a reasonable rate as usage and other aspects of value received increase in that month, up to a set monthly cap. Think of it as a pay-ramp instead of a pay-wall. This kind of flexibly affordable model that is based on the value that each individual viewer actually receives (and that ramps up less prohibitively than pay-per-view) will get more viewers to buy more subscriptions. That will generate more profit from more viewers for every provider who has content that viewers want.

Such a pricing model also offers sensible economics across a mix of providers and aggregators. Disney could leave most of its content on Netflix for those who are only occasional viewers, while attracting its more regular fans to direct relationships on Disney+ with added features (such as its newest and hottest shows, and extra perks).

Instead of the all-or-nothing battle for AYCE subscriptions, providers can build relationships with all or most of their potential viewers. Think of this as agile pricing for a good customer value experience (CVX) -- and for a fair revenue share to platforms, content providers, and creators.

Disney is apparently ignoring such options, presumably thinking its Magic Kingdom will enthrall enough users to take the risk that they will not view (and enjoy) $7 worth every month. All of the great powers may similarly be too entrenched in their thinking to want to experiment.

But less dominant providers -- and entrepreneurial upstart aggregators of many providers -- may come to embrace agility and Blitzkrieg asymmetry, seeing that the biggest risk for them is not to take the risk that a risk-free model will empower them to fight a win-win battle -- one based on desirability of their content, not just overwhelming scale.

More on this theme:
More about FairPay

A brief introduction is in Techonomy"Information Wants to be Free; Consumers May Want to Pay"
(FairPay is an open architecture, in the public domain. My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)