Friday, March 30, 2012

Orbis: It's the End of the World Again: Analysts are Shitheads Edition

I love this kind of story. Some anonymous source on a website told the world the next PlayStation will be called "Orbis" and that it will not play used games. As some random guy with a blog, I would expect me to write something about this - I did not - but why are all of these "professionals" weighing on speculation and being so very, very wrong in the speculation layered on top of speculation. While the only basis for validating the speculation is the memorialization of the thought in a series of letters comprising words on a page, the analysts feel the compulsion to comment. The very, very sad part is their commentary betrays them and shows why they are so often so very, very wrong. They see the wall, they see the train tracks, but the do not realize they are sitting on an airplane. Michael Pachter of Wedbush, David Cole of DFC Intelligence and Lewis Ward of IDC all focus on a recent announcement suggesting PS4 - they say it is called Orbis but if Sony caught on to Microsoft's game in the last round they are giving different code names and feature sets to everyone so they know who leaks details - will not allow the play of used games. Their grasp to this nugget like rats to the flotsam of a sinking ship points them to impact on Gamestop. This is a valid concern. One half of Gamestop's business is the resale of used games. The focus may be well placed, but the conclusion ignores even the speculative facts put out in the original post.
If you then decide to trade that disc in, the pre-owned customer picking it up will be limited in what they can do. While our sources were unclear on how exactly the pre-owned customer side of things would work, it's believed used games will be limited to a trial mode or some other form of content restriction, with consumers having to pay a fee to unlock/register the full game.
Used games are not blocked, they are limited. Fellas, this is not a whole lot different than what is going on today. There is a long list of the most popular games on the market that only allow full use to the first player. This article suggests the paywall - or repay wall - will simply be moved closer to the beginning of the game. Analyzing this point would also lead to a conclusion of potential benefit for Gamestop and the publishers. If the games are limited utility, the value, and therefore the price goes down. However, no one said they are useless. The games are still low cost demos and entry points for consumers. If there is enough value on this side of the repay wall, consumers may pay twenty dollars for the limited use disk. If they like the game, they pay another 20, or micro transactions, to the publisher, and everyone makes money.  Used revenue per disk will go down for Gamestop, but volume could increase significantly as it did when the price of home video was reduced from $99 to $59 to $20 and to $5. The only potential users are the console manufacturers who will not make the fee on the manufacture of the shiny disk, but this could be made up on transaction fees for the downloads.

The weird thing about the focus on the used games half of Gamestop's revenue is the failure to consider the much larger and much more significant threat. If these consoles go to direct downloads or cloud based gaming Gamestop will lose revenue from the sale of the shiny disks and lose the access to the inventory of used games. Seeing as Gamestop's entire business may in fact be built around consumer funding of their used game inventory, every download game is a double impact on Gamestop revenue. Gamestop's CEO, Paul Raines, is a very smart guy. He supports Gamestop's relevance by saying digital is further out than we think. Storage is simply not there to collect all of the games we want to play. Unfortunately, cloud computing and access may make storage irrelevant and console manufacturers would be short sighted to ignore the rest of the world and not take advantage of the technology - of course this would not be the first time. Paul knows this and is driving the company in the direction of digital. They do have a long, long way to go, but there is a world where a retailer offers stellar service, enhanced value and in exchange generates high revenue per square retail foot selling things that are all available on line and a transaction fee for downloads. Today we call it the Apple Store. Gamestop just has to figure out how to get there. The analysts have to figure out how to analyze.

Friday, March 23, 2012

Revenge of the EULA Reader: Meta Me in a Bubble Edition

This morning I read this great post from an artist who actually read the Pinterest EULA. I linked to her article in Scientific American because I want to make sure she gets credit for what she wrote by people reading from her page - or as she may say, the kind of thing she is afraid will not happen by virtue of the Pinterest EULA. I don't want to hold Pinterest as only the company in the world who sticks stuff like this in EULAs. In fact, I wrote about problems with other EULAs before my 23 and me post is by far the most popular post I ever wrote. I venture to say more people read my post about the 23 and me EULA then actually read the 23 and me EULA. EULAs, in the sense they are being used by the Pinterests, Facebooks, Googles and Linked ins of the world, are legal fiction granting the drafters the rights to use our data the way they want to use it today and how they may use it in the future. I saw legal fiction not just because there is not a single word in any of the multi thousand word agreements in the "signer's" favor, but because the companies providing the documents know no one reads them. Hence the beauty of the Scientific American post by an artist and not a lawyer. How the world will change if people start reading and perhaps even objecting to the agreements.

These sites and services argue our data is collected in consideration of services provided for free under the EULA. But does this argument really hold up? If the services are being provided in exchange for our data, the services are not free. The services cost our data. We are paying for services by providing our data. While we can be certain our data is appreciating in value with each click we make - Facebook has every single click I made since I signed up and keeps collecting them - and each advance in data mining, we cannot be certain of the services, or accountability for break down, in the services provided. Finally how do we know the value of the services is commensurate with the value of the data being provided? Time for the radical proposal. What would happen if I actually owned my data?

We are bordering on a sci fi concept here, but each one of us is creating value unique to us in the form of a "meta me" and we are not benefiting. There are things we do every single day that has value to ourselves, our community and even sponsors, and others are aggregating us into a pool and slicing and dicing us into the equivalent of securities derivatives for resale. We, the owners, the creators see no value. I should own not only my data, but the metadata that defines me. If I create a profile of myself - I am not saying virtual because the profile of my clicks and purchases is very real - that profile is no less mine than the compilation of the words in this post. The choices I make on line, coupled with my identity are a valuable creation. No stronger evidence exists than the payment Google receives by selling my data to sponsors. Even though my data is more valuable to certain sponsors than other people's data, we all get the same services. I appreciate Google telling me where I can find things on the web and Facebook letting me keep in touch with friends but when did I decide they should be able to keep all of the profits they make selling meta me? Wouldn't it be great if we could put a bubble around our data and make purchasing decisions on line the same way we make purchasing decisions in the real world.

When purchasing moved on line we disintermediated the middle men. Travel agents and insurance brokers fell. Next we ate the record executives and ad sales guys. The funny thing is the disintermediators like Google did such a good job of disintermediation that they grew into the intermediaries. Google's first argument to sponsors was TV and Radio are only thinking they are giving you and audience. We are accountable and can track clicks. Sure they try to stomp out click farms and other forms of fraud, but when I see the same ad for an elliptical coming up on every web page just because I clicked on a review page six months ago is it really an effective use of the advertisers' money? The advertiser would be much better off going directly to me, rather than buying my anonymized data as part of the derivative sold by Google. It is time for Google and Facebook to become the broker, rather than the owner.

If I put meta me in a bubble I would be able to determine the value of my data. Some opportunities are easy to imagine. I can opt into a network If I wanted to watch purchase a tv show in iTunes or watch a premium show on Hulu, a notification may pop up telling me to put away my wallet because Coke would like to buy my show for me. That would be nice. They would not even have to show me the commercial.
I would feel good about them already. Now to the tricky stuff. Why can't I opt into Facebook or Google services in exchange for a cut in the revenue? They have infrastructure costs to cover and there is value in the brokerage service of finding the best paying customer for may particular data, but what about the profit. They would not be in business if there was not a profit. I want some of that. I might not feel so bad about the use of my data I get a monthly statement, the same way an adsense or admob user does, indicating the value of my data to Google. I might also have the market information to know the value of my data and knowingly determine whether the services I receive, like gmail or google voice, are a valuable enough for me to let them leverage the value of meta me.