Category: Digital Economy

What’s An Artist To Do?

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Below is a recent op-ed printed in the Washington Post regarding the state of affairs for streaming music content. Mr. Fakir makes many legitimate points, as there’s no valid reason for streaming services not to have to pay royalties on music recorded before 1972. However, while copyright law is important for aging or retired artists who rely on performance royalties, the long-term problem for creative digital content is far more intractable.

The true problem for professional artists is that the supply of content has exploded while the price has collapsed. This is basic economics: when supply increases faster than demand, prices must fall. The explosion of supply is due to digital technology, which has caused production and distribution costs to plunge almost to zero. Now everybody and anybody can release music on Apple or publish books on Amazon or take thousands of digital photos on their phones.

So the real problem is too much content, reducing the market price while increasing the search costs for consumers. Plunging revenues have also hollowed out the promotion and marketing industries that serve creative content. So now artists not only create, they have to promote and distribute, paying with precious time or money for vendor services upfront. This is a Catch-22 for struggling artists – they have no money unless they sell product and yet can’t sell product unless they spend first on promotion. Meanwhile, digital distribution is monopolized by the big tech companies like Google, Apple, Facebook, and Amazon (GAFA).

Solutions?

  • First, technology offers the next disruption. Creative industries need on online clearinghouse for content that is curated by the network of creators, curators, and consumers. Think Facebook for content only.
  • Second, GAFA does not make the bulk of their revenues from content sales, but rather from the monetization of the data that flows through their networks. A network of creators, curators, and consumers need technology tools to build, manage, and monetize their personal peer networks. Blockchain technology offers the possibility of constructing such a distributed network for sharing content. Essentially, this is what the big tech servers do with our information data.

In sum, what we face is a globalized niche market where the main problem is less about price and getting paid and more about connecting creators with consumers to build new sources of value. (Note: even sharing free content creates data network value, like on Facebook.)  New developments in technology can help us recapture and reinvigorate “the culture industry,” where we take back control of our creative content so we can reap the value we create and sustain a thriving creative ecosystem together.

We’re ripping off some of the best musicians of the last century. It needs to stop.

By Duke Fakir December 28, 2017

Duke Fakir is a founding member of the Four Tops and a member of the Rock and Roll Hall of Fame.

I’m a lucky man. I’ve been a performer and recording artist for most of my life. As a founding member of the Four Tops, I’ve been blessed to travel the world making music with my dearest friends, and we’ve seen our records hit the top of the charts. It’s a privilege I’ve never taken for granted, and I’m proud to say that our music has stood the test of time.

I’m also an activist who has spent years fighting to change laws that exploit artists. Our copyright system does not always provide fair compensation for performers and musicians, and I know that not everyone has been as fortunate as I have.

My fellow artists and I have argued for economic justice and fairness for so long, it can feel like the same empty answers keep coming around, and you never really get to anywhere new. And “the same old song” just isn’t good enough anymore.

That makes this moment critical. After years of “hurry up and wait” in Washington, powerful forces in Congress are attempting to fix one of the worst abuses faced by older artists: the “digital rip-off” of all recordings made before 1972.

Right now, digital radio stations such as SiriusXM and iHeartRadio pay royalties to artists for most of the music they play. It’s real money: Digital streams make up half of all music business revenue, pushing $4 billion a year. A lot of that money goes to independent artists, backup singers, session players, and sidemen — including a generation of lost greats who may have played a lot but didn’t get paid a lot. It’s money these folks count on to pay rent, buy groceries, cover medical bills and support their families.

But there’s a catch: Those same stations don’t pay royalties on music recorded before 1972 — not because it’s right or fair or the music is any less valuable. After all, we’re talking about some of the most iconic music ever recorded. But because federal copyright law doesn’t cover recorded music before 1972, some of the huge services that play music from the ’40s, ’50s, ’60s and early ’70s have managed to get away with this inequity, daring anyone who disagrees to sue. Songwriters and music publishers may be getting paid — as well they should! — but the artists and the owners of the sound recordings are not.

This digital rip-off has been a disaster for many older artists, diverting the fruits of their labors — funds that should be their lifeline — to the balance sheets of some of the wealthiest companies in the world. Digital radio earns millions every year from the exploitation of pre-’72 music, from big band to Motown to the British Invasion. Yet artists who recorded those classics — many of whom are no longer able to tour — struggle for basic food, shelter, and medical care. It’s ridiculous, it’s unfair, and it’s about time we make it illegal.

Change is long overdue, but a chance to right this wrong is at hand. A bipartisan new bill called the Classics Act is moving quickly through Congress. The bill would require digital radio to treat all music the same, regardless of when it was recorded, ensuring that the same royalties are paid for older songs as for new material. It would open a world-changing lifeline for musicians from back in the day — bringing basic economic fairness to this key corner of the music world.

Don’t get me wrong — like most artists, I love radio, in all its forms. We’re proud that listeners want to hear our music, and we’re always happy to work with our colleagues to support their platforms, to help promote what they do and to connect with them and their music-loving customers. All we want is to be paid fairly.

We’ve been stuck for a long time in the fight for fairness for music creators. And the Classics Act isn’t the end of the road. We need to finally ensure the payment of a fair performance royalty for terrestrial radio and close the loopholes that allow big tech companies to collect huge profits while paying next to nothing for music.

A great piece of music should earn its fair share, whether it was recorded in 2002 or 1962. And right now, this is a problem that Congress has a chance to fix. In the meantime, I’ll keep singing. And I’ll keep fighting for what’s right. “I can’t help myself!”

Link to article…

 

The Death of Culture?

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Designing a Sustainable Creative Ecosystem

Too Much information = The Death of Culture?

The major creative industries of music, photography, print, and video have all been disrupted by digital technology. We know this. As Chris Anderson has argued in his book Free, the cost of digital content has been driven towards zero. How could this be a bad thing? Well, TMI (Too Much Information — in this case, Too Much Content) is the curse of the Digital Age. It means creators make no money and audiences can’t find quality content amidst all the noise.

The end result will be a staleness of content and stagnant creative markets, i.e., the slow death of culture. So, how did this happen and what do we do about it?

View the rest of the story on Medium.

Big Tech Gains at Our Expense?

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Top5

Reprinted in part from The Financial Times:

Big Tech makes vast gains at our expense

Data-driven companies have a licence to print money, with few restrictions

SEPTEMBER 17, 2017 by Rana Foroohar

Pressure has been growing in the past few weeks for politicians and regulators to clamp down on the monopoly power of Big Tech. In a speech given in Washington DC on September 12, Maureen Ohlhausen, the acting chair of the Federal Trade Commission in the US, tried to pour cold water on the idea. “Given the clear consumer benefits of technology-driven innovation,” she said. “I am concerned about the push to adopt an approach that will disregard consumer benefits in the pursuit of other, perhaps even conflicting, goals.”

Her words echo US antitrust policy of the past 40 years: if companies bring down prices for consumers, they can be as big and as powerful, economically and politically, as they want to be. This hugely favours companies such as Google, Facebook and Amazon, which offer up services and products, from search results to self-publishing platforms, that are not just cheap, but free.

Yet Ms Ohlhausen is overlooking a key point: free is not free when you consider that we are not paying for these services in dollars, but in data, including everything from our credit card numbers to shopping records, to political choices and medical histories. How valuable is that personal data?

It is a question of growing interest to everyone from economists to artists. For example, at Datenmarkt, an art installation cum grocery store set up in Hamburg in 2014, a can of fruit sold for five Facebook photos; a pack of toast for eight “likes” and so on.

The bottom line is that it is almost impossible to put an exact price on personal data, in part because people have widely varying behaviours and ideas about how likely they are to part with it, depending on how offers are posed. In one recent study, when consumers were asked straight out whether they would consent to being tracked by a brand name digital media firm in exchange for being targeted with more “useful” advertising, four-fifths said no. Yet another study published this year by researchers from Massachusetts Institute of Technology and Stanford University shows how pathetically little incentive is required to convince people to give up their entire email contact list. Students in the study were far more likely to do it if offered a free pizza.

One might argue that this is simply the market working as it should. Consumers were given a choice, and they made it. And whether or not it was a bad one is not for us to judge.

But as the latter study also showed, companies can nudge users to part with data more freely by telling them it will be protected by technology designed to “keep the prying eyes of everyone from governments to internet service providers . . . from seeing the content of messages”. In fact, the encryption technology in question could not guarantee this.

The bottom line is that big data tilts the playing field decisively in favour of the largest digital players themselves. They can extract information and plant suggestions there that will lead us to entirely different decisions, which results in ever more profit for them.

Not only is that too much power for any one company to have, it is anti-competitive and market-distorting in the sense that the basic rules of capitalism as we know it are being overturned. There is no equal access to market information in this scenario. There is certainly no price transparency.

The personal data we give away so freely are being lavishly monetized by the richest companies on the planet (Facebook’s second-quarter operating margin, for example, was 47.2 per cent). They get their raw material (our data) more or less for free, then charge retailers and advertisers for it, who then pass those costs on to us in one form or another — a dollar more for that glass of wine at the bistro you found via a search, say. They have a licence to print money, without many of the restrictions, in terms of all sorts of corporate liability, that other industries have to grapple with.

These companies are not so much innovators as “attention merchants”

These companies are not so much innovators as “attention merchants”, to borrow a phrase from Columbia University law school professor Tim Wu. Economists have yet to put good figures on their net effect on productivity and gross domestic product growth. Surely it is high. Yet any tally would also have to include the competition costs as these firms devour competitors and reshape the 21st-century economy to suit themselves.

Whatever the FTC might say now, there are a growing number of legal cases that could change the ground rules for Big Tech. While American antitrust law has been based on very literal interpretations of the 1890 Sherman Act, lawmakers in Europe take a broader approach. They are trying to gauge how multiple players in the economic ecosystem are being affected by the digital giants.

I am beginning to wonder if we should not all have a more explicit right not only to control how our data are used, but to any economic value created from them.

When wealth lives mainly in intellectual property, it is hard to imagine how else the maths will work. We are living in a brave new world, with an entirely new currency. It will require creative thinking — economically, legally and politically — to ensure it does not become a winner-takes-all society.

Blogger Comment:
Data has become one of the primary economic resources of the Information Age. Data is analogous to land during the feudal age; energy, labor and natural resources in the industrial age, and human and financial capital in the post-industrial age. Giving away one’s data is akin to share-cropping and indentured servitude, when instead we should be homesteading and receiving the full value of our personal participation in the network. 

 

Streaming Content and Trickling $$$

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How Much Does YouTube Pay? We Asked Nicki Jaine of Revue Noir.

Nicki Jaine of Revue Noir

My Song Got 1.254 Million Views on YouTube. I Got Paid $42.56  [Link]

How much does YouTube really pay?  A top executive at the company claims a $3 CPM.  But most of the royalty payments shared with Digital Music News are a tiny fraction of that.

We want to believe YouTube executive Lyor Cohen when he says YouTube pays a $3 CPM to artists.  The only problem is that there’s zero evidence to support his claims.

And lots of evidence that artists are earning an infinitesimal fraction of that amount.

The latest proof comes from Nicki Jaine, one half of the duo Revue Noir.  That group is signed to Projekt, who shared the royalty breakdown with Digital Music News.

(Quick aside: in online advertising land, ‘CPM’ stands for ‘cost per thousand’.  It’s a calculation of how much gets paid for every 1,000 views.  So, a ‘$3 CPM’ means you get paid $3 every 1,000 plays.  That is, assuming those 1,000 plays had ads on them, which is another story entirely.)

Here’s a quick snapshot of those royalty payments from various streaming services.  Keep in mind that these copyrights are 100% controlled, meaning that all publishing and all recording royalties are reflected in this breakdown.

As you can see, a lion’s share of Revue Noir’s payments are coming from free, ad-supported YouTube plays.

Despite 1,254,626 streams on the free platform, Revue Noir only earned $42.56.

Other streaming platforms are clearly paying better, but this group’s largest audience is on YouTube.  Strangely, YouTube Red’s payments are far higher, but barely anyone is paying for Red.  (The premium service was initially called ‘Music Key,’ and apparently not updated in this royalty statement).

Other platforms like Rhapsody, Tidal, and Spotify pay far better.  But the group hasn’t been able to secure favorable playlist inclusion or amass a serious audience on those platforms.  At least not yet.  So it basically sucks to be them right now.

As a result, the group earned about $130 in total from nearly 1.3 million streaming plays.

In terms of the YouTube CPM calculation, that boils down to a 3.34 cent CPM.  Which is about 1/88th the $3 CPM claimed by executives like Lyor Cohen.

Projekt CEO Sam Rosenthal is obviously disappointed with this result.  “Spotify has 1.3% of the plays of YouTube, and yet it generates 40% more money,” Rosenthal told DMN.

“Well — that’s shitty!”

Rosenthal was also careful to clarify that this is a 100% copyright-owned composition.  Meaning, all the revenues are reflected in this statement.

“And because somebody will say, ‘Oh, that’s because the label is screwing the artist out of their fair share’:

(1) I am the label
(2) The numbers above are the raw data from my digital distributor, before anyone takes their cut!”

The sad payout is even worse than a detailed breakdown we received in August.  That YouTube statement showed an artist making 1/50th the rate claimed by YouTube and Cohen.

All of which is seriously eroding the credibility of executives like Cohen, and YouTube more broadly.

Unsurprisingly, the music industry is strategizing ways to minimize YouTube’s power over artists.

Just recently, Republic Records-signed rapper Post Malone decided to withhold his latest single from the video platform.  Instead, Malone uploaded a looping chorus of his track ‘rockstar,’ while directing fans to check out the full song on other platforms.

Malone’s little idea worked.  So far, the song has more than 50 million plays on YouTube — and more than 150 million on Spotify.  Other platforms like Apple Music were also prominently featured as redirect options, leading to millions in diverted royalties.

Post Malone is easily one of the biggest rappers in the world right now.  That makes this a noteworthy experiment, and one that could start a trend among other artists eager to divert fans to better-paying platforms.

Separately, a number of companies are also assisting artists to realize revenues elsewhere.  That includes upstarts like Flattr, Songtradr, and Patreon, all of whom are focusing on dramatically improving artist incomes.

[Blogger’s Note: The exact same thing is happening with Kindle authors on Amazon who enroll their ebooks in the Kindle Online Lending Library. Subscriptions accumulate to Amazon, royalties trickle to authors.]

Breaking Up Big Tech

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An interesting piece reprinted from this week’s Barron’s. I think what we discover in reviewing the history of technology is that old technology gets disrupted by newer, better technology. I suspect this is what will disrupt the tech oligarchies built up over the past two decades. Not too long ago, the sector was dominated by IBM, HP, and AOL.

Breaking Up Tech

Regulators increasingly are challenging Facebook, Amazon, and Google on how they’re managing their dominant market positions.

October 21, 2017
Facebook, Amazon.com, and Alphabet deserve a lot of the credit for last week’s record stock market highs. The three tech titans are among the biggest overall contributors, kicking in two percentage points of the Standard & Poor’s 500 index’s 16% gain in 2017 and nearly five points of its 44% gain over the past three years. As they go, so goes the market: It’s estimated that the S&P moves a half a point for every $10 move in Amazon’s $1,000 share price.

Whether the three can continue to have such a positive effect on the stock market will depend on how they respond to U.S. and European regulators, who are starting to swing a heavier hammer to challenge their dominance. Alphabet’s (ticker: GOOGL) Google, for instance, holds 90% of Europe’s search and mobile operating systems markets, which has drawn the scrutiny of the European Commission. This and inquiries from the U.S.’s Federal Trade Commission have prompted speculation about the breakup of these companies. Former Google Ventures CEO Bill Maris, who now runs venture-capital firm Section 32, told a Wall Street Journal tech conference last week: “It wouldn’t surprise me if the sun is setting on the golden age of Silicon Valley.” He added that he also wouldn’t be shocked if regulators tried to break up companies like Google or Facebook because they have more command of their markets than AT&T (T) did in its heyday.

More than antitrust issues are in play. The huge amounts of personal data that Google, Facebook (FB), and Amazon (AMZN) are amassing is just as troubling to some. Facebook, for one, has been sued in Europe over its transfer of information about users from Europe to the U.S. A case heading for the U.S. Supreme Court could also have significant ramifications. Microsoft (MSFT) is being sued by the U.S. government for refusing to honor a warrant served to it to reveal a customer’s emails. At issue is whether a U.S. company must turn over data even when that data, as in Microsoft’s case, are stored on servers abroad.

Last week Sen. John McCain (R., Ariz.) joined two Democratic senators to co-sponsor a bill that would force Facebook, Google, and other internet providers to disclose who’s buying political ads on their sites, following the recent disclosures that Russians had purchased ads to influence the 2016 presidential election.

Of course, Facebook, Amazon, and Google owe most of their stock-market leadership to their ability to create and supply digital gadgets and services—everything from Amazon’s Alexa virtual assistant to Google’s Android software, the top choice in mobile phones. But the shifts in political and government sentiment have stirred memories of not just AT&T, but IBM (IBM) and Microsoft. Both went through years of antitrust lawsuits that dragged down their stock prices and distracted management. Neither the companies nor their shares recovered quickly, as the nearby charts suggest.

All this has started to catch Wall Street’s attention. The European Commission, under competition watchdog Margrethe Vestager, fined Google 2.4 billion euros ($2.8 billion) on allegations that it gives more prominent placement in search results to its own “comparison shopping” listings versus listings from rival services. The commission alleged Google was manipulating the algorithms used to construct search results. More worrying was an EC case brought against Google in 2015, with formal charges lodged against it in spring 2016. The EC asserted that the company has abused its near-monopoly in both search and mobile operating systems by requiring gadget makers who license Android to install Google’s search bar as their default search mechanism on their devices.

“Of all the cases being brought, this is the one that most stands out as a concern, and it has made us less constructive on Alphabet” as a stock, says RBC Capital internet analyst Mark Mahaney, using Wall Street’s euphemism for being worried.

TAKEN TOGETHER, THESE challenges threaten the stock valuations of the group. To get an idea of the worst-case scenario, take a look at two of tech’s dominant players from previous eras: IBM and Microsoft.

The Department of Justice sued IBM in 1969 under the Sherman Antitrust Act, accusing the company of trying to monopolize the computer business, specifically by abusing its control of disk drives for mainframes. That action ended with the DoJ withdrawing its claims, but it tied up IBM and its management for years. From the time of the suit in January 1969, when the company boasted the largest market value in the S&P 500, till the day it announced it was backing off in January 1982, IBM stock declined 9.3%, versus a 14% gain in the S&P 500. Worse, IBM emerged from the suit in a weakened state to try to lead the personal computer revolution. Ultimately, it lost its dominant tech position to Microsoft, Compaq, and Apple (AAPL). A winning government case isn’t necessary to affect a stock’s price.

Microsoft’s collision with the government occurred in 1998, when the DOJ sued it on antitrust grounds, accusing Microsoft of abusing its monopoly in PC operating systems by “tying” its Internet Explorer browser to Windows. Massachusetts Institute of Technology professor Franklin Fisher, the chief economic witness for the government, showed that Microsoft was giving away its Web browser to destroy a competitor, Netscape, which threatened Windows’ dominance. In Microsoft CEO Bill Gates’ famous phrase, the software giant was “cutting off [Netscape’s] oxygen.”

The judge, Thomas Penfield Jackson, ordered a breakup of Microsoft, but that was rejected by an appeals court, in part because it decided Jackson had violated ethics rules by meeting with reporters to discuss the case. The FTC settled with Microsoft in November 2001. Even though the company avoided the worst fate—a breakup—in the subsequent nearly 13 years, until the appointment of Satya Nadella as CEO, the stock rose a meager 18%, versus 62% for the S&P 500. Microsoft competitors Oracle (ORCL) and SAP (SAP) saw their shares nearly triple in the same period.

Like IBM, Microsoft emerged from the government suit just as the tech world was changing. Google was founded the year of the suit, and its Gmail and Android would, along with Apple’s iPhone—which debuted six years after the settlement—demolish the importance of the PC and the Windows operating system.

Amazon, Facebook, and Google all benefit from the same sort of network effects that snagged Microsoft. The more people use Facebook, the more others feel they must use it, in a self-perpetuating fashion. Ditto for advertising on Google or selling goods on Amazon. Wall Street and investors may love this virtuous cycle, or, as it’s commonly known, the “flywheel” that keeps expanding their businesses.

But others, citing Fisher’s work, see exploitation and unfair leverage. They can argue that Amazon sells its Echo home speaker at roughly break-even prices to bring in more shoppers. It’s conceivable such leverage could be interpreted by regulators as predatory. Another example is Amazon’s bundling of its Amazon Prime membership, which offers free shipping and streaming videos, below Amazon’s cost to provide it. Google’s use of Android to maintain its search engine as pre-eminent on mobile devices has been likened to the kind of “tying” that Microsoft tried with Internet Explorer.

FOR NOW, THE BIGGEST TECH companies don’t face an immediate threat of being broken up. But just the possibility creates a risk factor in the stocks. “We expect increased regulatory scrutiny in the U.S. and EU, which could create an overhang which hinders prospects for further multiple expansion for these companies,” wrote Michael Nathanson, an analyst at MoffettNathanson who covers Alphabet and Facebook.

A regulatory quagmire lasting several years would not just hold back the stocks’ multiple expansion but could substantially contract them, as previous challenges did to Microsoft and IBM. Microsoft’s forward price/earnings multiple declined from 27 to 14 times between late 2001 and 2014, while IBM’s trailing P/E declined from 53 to 10 times from 1969 to 1982.

The current tech giants already sport expensive prices. At 124 times next year’s projected earnings, Amazon’s stock has plenty of room for multiple compression, as they say. But even Alphabet and Facebook, trading at 25 and 27 times, respectively, are up slightly from their year-ago multiples of 20 times and 26 times.

Like IBM and Microsoft, the latest titans run the risk of missing the next big thing. Tim O’Reilly, chief executive of O’Reilly Media, an influential publisher and futurist who has had many conversations with Amazon CEO Jeff Bezos and Google founders Larry Page and Sergey Brin, thinks that will be the symbiosis of human and machine. Human abilities will be amplified by machines as society comes to better understand how data affect the real world. From browsers, it’s already progressed to ride-sharing services from Uber Technologies and Lyft, which in the future will pilot people anywhere without a driver. Likewise, agribusiness giant Monsanto (MON) is looking at how weather data can be used to control robotic farm equipment, putting it on a collision course with its traditional partner, Deere (DE). Will Facebook, Amazon, and Google, possibly preoccupied by government inquiries, miss the boat?

Given tech’s enormous clout in the markets, even a relatively small decline would affect millions of investors. The stocks dominate both active portfolios and passive ones like exchange-traded funds Techology Select Sector SPDR (XLK), which includes Facebook and Google, or Consumer Discretionary Select Sector SPDR (XLY), which includes Amazon. Howard Silverblatt of S&P Dow Jones Indices notes that Apple, which hasn’t been a focus of the government inquiries, is the biggest component of the market-weighted S&P 500, at 7.8%. Facebook is No. 2, at 4.7%, Amazon is fourth at 3.4%, and Alphabet’s A and C classes of stock combined rank as fifth and sixth, with a combined 4%.

CAN FACEBOOK, GOOGLE, and Amazon avoid much tighter regulation or a breakup? Yes, but they’re going to need to change their ways. For every mea culpa from Facebook Chief Operating Officer Sheryl Sandberg about Russian advertising in the 2016 presidential election, there seems to be at least one utterly tone-deaf incident. That would include her boss Mark Zuckerberg’s recent demonstration of his firm’s new virtual-reality gadget by pretending to tour the devastation of Puerto Rico, a move that seemed especially insensitive. Other public-relations low points include Uber founder Travis Kalanick’s parties in Las Vegas and sexist emails circulating at Google about female engineers.

The companies, instead, could be helping the public understand the complexity of their businesses and why things like leveraging a logistics business to lure third-party sellers is justifiable.

“We are at this moment in time, this Facebook moment, when everybody’s talking about these things, and it could be a teachable moment,” says O’Reilly. He thinks the companies need to communicate the economic inputs and outputs of the internet business model, things such as stock options that are a super-currency with which they have financial leverage, but also how many ancillary jobs they create by enabling commerce. [Blogger’s note: I seriously doubt they are going to successfully PR their way to public acceptance of monopoly economic power.]

The internet giants could help in shaping enlightened reforms, suggests O’Reilly. New financial statements could be formulated with the help of the Financial Accounting Standards Board, he says, and stock compensation, one of the worst aspects of Silicon Valley, could be reformed. “They’re aware, but they just don’t get” the need for dialogue with the public, O’Reilly says. “It’s like someone who knows they should quit smoking, but they just don’t.”

The stakes are large, says O’Reilly. “I think there’s huge risk in America that we are going to create a regulatory burden that is going to mean that our companies are less competitive in many markets,” he says.

IF THESE GIANTS GET SIDESWIPED, it could be because of the fatal flaw in large tech companies that’s often drawn social ire and regulation—the will to exploit their dominance. “The biggest thing they’re vulnerable to is that they work too hard to protect their existing businesses,” says O’Reilly. [It’s the capitalist survival instinct, and no company willingly falls on their sword for principles of fairness.]

“That’s always where companies get it wrong—Microsoft got it wrong, IBM before them got it wrong—they basically did things to extract money from customers rather than benefit customers,” he says. How the current tech titans meet this challenge likely will determine how shareholders fare as well. [That would be the far-sighted strategy. Web 3.0 will probably force it upon them. The Golden Rule stated: “Technology disrupts technology.”]

Reining in Technology

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From Simon Jenkins in The Guardian:

I assume that nations will one day revolt against the commercial banditry of the internet companies. Governments will find the guts to expel, jam or fine them when they misbehave. I assume that the curse of online anonymity will end, and users of the internet will have to register their identities. Search engines still pretend to be “platforms not publishers” – or, as others put it, sewers not sewage.

But just as the idea of Uber and Airbnb not being “real” service providers is crumbling, so is the idea of Google and Facebook as not “real” publishers, and thus not responsible for any damage done by their content. We await the first class action suit for a Facebook-induced suicide.

The worms are turning. Schools in Silicon Valley have taken to banning digital devices from their premises. Hi-tech parents know what harm too much screen time can do to their children. In addition, David Sax’s Revenge of Analog declares that the revolt of “real” is at hand. As we pass “peak stuff”, the post-digital economy will be about “play”, not objects.

 

This is the trend tuka anticipates and hopes to serve. Technology is a tool to serve human needs, not the other way around. Create-Share-Connect!

Facebook in da Nile.

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One should see this as the general problem with Facebook (and Twitter) as an information/news medium – it’s generated by subjective opinions rather than verifiable facts with verifiable sources. Verifiable identity (non-anonymity) has the virtue of incentivizing reputational capital and building trust across information exchanges. But Facebook then has to make a Sophie’s Choice: lose the traffic that raw emotionalism feeds or lose the trust of its user base. Facebook’s day of reckoning is coming.

From The Wall Street Journal:

Facebook Is Still In Denial About Its Biggest Problem
In a world where social media is the pre-eminent news conduit, ‘If it’s outrageous, it’s contagious’ is the new ‘If it bleeds, it leads’
It’s a good time to re-examine our relationship with Facebook Inc.
In the past month, it has been revealed that Facebook hosted a Russian influence operation which may have reached between 3 million and 20 million people on the social network, and that Facebook could be used to micro-target users with hate speech. It took the company more than two weeks to agree to share what it knows with Congress.
Increased scrutiny of Facebook is healthy. What went mainstream as a friendly place for loved ones to swap baby pictures and cat videos has morphed into an opaque and poorly understood metropolis rife with influence peddlers determined to manipulate what we know and how we think. We have barely begun to understand how the massive social network shapes our world.
Unfortunately, Facebook itself seems just as mystified, providing a response to all of this that has left many unsatisfied.
What the company’s leaders seem unable to reckon with is that its troubles are inherent in the design of its flagship social network, which prioritizes thrilling posts and ads over dull ones, and rewards cunning provocateurs over hapless users. No tweak to algorithms or processes can hope to fix a problem that seems enmeshed in the very fabric of Facebook.
Outrageous ads
On a network where article and video posts can be sponsored and distributed like ads, and ads themselves can go as viral as a wedding-fail video, there is hardly a difference between the two. And we now know that if an ad from one of Facebook’s more than five million advertisers goes viral—by making us feel something, not just joy but also fear or outrage—it will cost less per impression to spread across Facebook.
In one example, described in a recent Wall Street Journal article, a “controversial” ad went viral, leading to a 30% drop in the cost to reach each user. Joe Yakuel, founder and chief executive of Agency Within, which manages $100 million in digital ad purchases, told our reporter, “Even inadvertent controversy can cause a lot of engagement.”
Keeping people sharing and clicking is essential to Facebook’s all-important metric, engagement, which is closely linked to how many ads the network can show us and how many of them we will interact with. Left unchecked, algorithms like Facebook’s News Feed tend toward content that is intended to arouse our passions, regardless of source—or even veracity.
An old newspaper catchphrase was, “If it bleeds, it leads”—that is, if someone got hurt or killed, that’s the top story. In the age when Facebook supplies us with a disproportionate amount of our daily news, a more-appropriate catchphrase would be, “If it’s outrageous, it’s contagious.”
Will Facebook solve this problem on its own? The company has no immediate economic incentive to do so, says Yochai Benkler, a professor at Harvard Law School and co-director of the Berkman Klein Center for Internet and Society.
“Facebook has become so central to how people communicate, and it has so much market power, that it’s essentially immune to market signals,” Dr. Benkler says. The only thing that will force the company to change, he adds, is the brewing threat to its reputation.
Facebook’s next steps
Facebook Chief Executive Mark Zuckerberg recently said his company will do more to combat illegal and abusive misuse of the Facebook platform. The primary mechanism for vetting political and other ads will be “an even higher standard of transparency,” he said, achieved by, among other things, making all ads on the site viewable by everyone, where in the past they could be seen only by their target audience.
“Beyond pushing back against threats, we will also create more services to protect our community while engaging in political discourse,” Mr. Zuckerberg wrote.
This move is a good start, but it excuses Facebook from its responsibility to be the primary reviewer of all advertising it is paid to run. Why are we, the users, responsible for vetting ads on Facebook?
By default, most media firms vet the ads they run and refuse ones that might be offensive or illegal, says Scott Galloway, entrepreneur, professor of marketing at NYU Stern School of Business and author of “The Four,” a book criticizing the outsize growth and influence of Amazon, Apple, Facebook and Google.
Mr. Zuckerberg acknowledged in a recent Facebook post that the majority of advertising purchased on Facebook will continue to be bought “without the advertiser ever speaking to anyone at Facebook.” His argument for this policy: “We don’t check what people say before they say it, and frankly, I don’t think our society should want us to.”
This is false equivalence. Society may not want Facebook to read over everything typed by our friends and family before they share it. But many people would feel it’s reasonable for Facebook to review all of the content it gets paid (tens of billions of dollars) to publish and promote.
“Facebook has embraced the healthy gross margins and influence of a media firm but is allergic to the responsibilities of a media firm,” Mr. Galloway says.
More is needed
Mr. Zuckerberg has said it will hire 250 more humans to review ads and content posted to Facebook. For Facebook, a company with more than $14 billion in free cash flow in the past year, to say it is adding 250 people to its safety and security efforts is “pissing in the ocean,” Mr. Galloway says. “They could add 25,000 people, spend $1 billion on AI technologies to help those 25,000 employees sort, filter and ID questionable content and advertisers, and their cash flow would decline 10% to 20%.”
Of course, mobilizing a massive team of ad monitors could subject Facebook to exponentially more accusations of bias from all sides. For every blatant instance of abuse, there are hundreds of cases that fall into gray areas.
The whole situation has Facebook between a rock and a hard place. But it needs to do more, or else risk further damaging its brand and reputation, two things of paramount importance to a service that depends on the trust of its users.

Can’t We All Just Be Friends?

tukaglobal649 Comments

This is the nefarious side of social media. A NY Times article on how Russian hackers used Facebook to try to influence the US and French elections.

“Will Mark Zuckerberg ‘Like’ This Column?”

tuka offers a bit of an alternative to uncontrolled social media. First, there is no anonymity. Second, the user feed is content only, not status or opinion or any other distracting things like cat and food photos. This means we know who is posting and what they post is tangible creative content. These two criteria ensure that the connections people make on tuka are meaningful and real.

The final caveat here is to remind ourselves not to be so easily manipulated by emotional triggers.