Monday, February 27, 2006
The Piracy Paradox
Tyler Cowen at Marginal Revolution has a take on the fashion industry’s knock-off-based innovation economy, based on Scott Cunningham’s new paper, The Piracy Paradox:
The authors argue that the fashion sector has more innovation because of its near-absence of copyright protection. Here is some brief background on the issue.
Fashion is a status good. You wear a new design if some other people do (it must be focal as an object of status), but not if too many other people do. You want some degree of exclusivity to your wardrobe. So let’s say a new design comes out. There will be some early adopters, but then a rapid series of rip-offs from other companies. Once the rip-offs come, companies invest in making further designs. Fashion is ephemeral and the rip-offs spur the next round of innovation.
I think it’s important to make a distinction here between design and innovation. Innovation, in my book, implies additional functionality, a permanent leap forward, even if slight. Not all design is innovative. Fashion design is mostly non-innovative design. Nor are clothes quite classifiable as art objects, the way poems or paintings are--garments need to be worn to exist, which makes them more like theatre than anything else.
In terms of an economic model, I’m not sure piracy in the fashion industry is comparable to piracy in the music industry. A pirated copy of Lawrence of Arabia offers the same user experience as the paid version. But a pirated Prada bag is not a Prada bag, nor, for the most part, do the real thing and the copy share the same customer base. As I mentioned, fashion is fundamentally an interactive, "live performance"--and to that extent, it cannot be pirated quite the way entertainment can.
There still may be lessons for entertainment here: I think one of the reasons fashion tolerates piracy so well is that fashion houses are far more focused on brand-building than on product. And piracy actually helps build a brand.
Maybe entertainment companies focus more on brand than product. Why do musicians release an album a year? Why shouldn’t they release a song a week, and distribute them to subscribers via podcast? Since iTunes started selling TV shows, I’ve spent around $100 on Battlestar Gallactica and Lost episodes--and it would be double that if I could get 24. And I’m guessing a lot of customers like me are too lazy or busy to mess with tracking down bootleg bit-torrent files. So the lesson from the fashion industry isn’t so much about innovation in product design--it’s about old-school innovation in marketing. Increase revenues by increasing the stream of product--make the freshness of the product a selling point.
Overstock.com CEO plays dirty - allegedly
Patrick Byrne, CEO of embattled Overstock.com, looks like a younger, more innocent version of Tim Russert. According to Consumerist.com, looks are deceiving, and Byrne’s business tactics are anything but engaging - unless by ‘engaging’ you mean ‘engag[ing] in a systematic campaign of intimidation targeting dissenting journalists’. Allegedly!
EA Podcast No 2: Perez Hilton
When I think of emergent branding, I think of Perez Hilton. Born Mario Lavandeira, the Miami native decided that, after a spell as an actor, he’d try to make some money doing something he was really nuts about: taking to the web with a one man show named in quasi-homage to Paris Hilton. If she could be famous for being famous, surely he, Perez Hilton, could be famous for doling out online scoops about the escapades of her and her fellow celebrities.
Lo and behold, Perez has gone and done it, building his one man online show into a brand of his own - it emerged from everything he did, no overpaid Madison Avenue ‘brand strategists’ necessary.
How strong is his brand? Strong enough to bring in even more readers than the weekly celebrity magazines. Strong enough to pay his rent in New York and LA. Strong enough to get him showered with free clothes from the likes of Ben Sherman, VIP trips to Sundance, Amsterdam, Hollywood awards parties, and all the hottest hangouts on both coasts. Strong enough that, as well as counting Paris and contemporaries like Lindsay Lohan as readers, Perez is now hanging out with them in ‘real life’. Strong enough to be regarded as a threat by PR flacks and other celeb bloggers who don’t like to be beaten at their own game by a shameless upstart. (Gawker threw the term ‘scum’ Perez’s way recently; surely nothing to do with the consistently higher traffic he is able to pull with far less investment and resource behind him than the Nick Denton-backed operation.)
The offline extension of the one man show has been something spectacular to behold; Perez may not like the word ‘blog’, but the network effect of the blogosphere has pushed the life of this self-proclaimed media whore and entrepreneur into lucrative overdrive.
I called Perez in LA yesterday, from my home in London, to ask him about his new reality TV show; the real reason he’s so harsh on Nicole Richie; the legal threats from Colin Ferrell, Britney Spears, and Rupert Murdoch’s New York Post, and the utter explosion of his self-made career as figurehead of “Hollywood’s most hated website”. To quote the man himself, “I’m glad I didn’t say anything I’ll regret!” You be the judge of that.
Engagement Alliance Podcast No 2: Perez Hilton - Download this podcast (size: 23MB, run time: 28:20)
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"EA Podcast No 2: Perez Hilton" continued...
"Your call should be important to us, but it's not"
That’s the title of a New York Times story on the weakness of customer service via telephone. The piece links to Get Human, a website which sets out principles for the right ways for companies to interact with customers, encourages visitors to rate their experiences (the site is to issue a monthly best-and-worst list), and publishes many more secret codes unearthed by members of the movement. As of last week, the ever-expanding cheat sheet offered cut-through-the-automation tips for nearly 400 companies.
As the article says of the often maddening, unproductive telephone systems:
It would be funny if it weren’t so depressing — and such bad business. Countless chief executives pledge to improve their company’s products and services by listening to the “voice of the customer.” Memo to the corner office: Answer the phone! How can companies listen to their customers if those customers have such a hard time reaching a human being when they call?
Sunday, February 26, 2006
Engagement Alliance Podcast No 1: Ristretto Roasters
Ristretto Roasters is a café and artisanal coffee roasting company that sells small-batch, super-premium coffee hand roasted by Din Johnson. It’s a great example of a small business that was founded on passion and is thriving, all while offering excellent value - amazing coffee, superb baked goods, free wifi, and a comfortable place to conduct business or bring the kids. (Check out the Ristretto Roasters fan blog for a small sample of the reviews their customers are putting online.)
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From my home in London, England, I called Johnson’s wife and co-captain at Ristretto, Nancy Rommelmann, last night in Portland, Oregon to talk about Ristretto: how it started, how Din roasts the coffee, where he sources the beans, and how great it is for him to be channelling his passion for roasting the perfect batch of coffee into a living. (Din was actually roasting the beans, which means no interruptions, not even for podcasts.) We talked for just over thirty minutes; for the coffee buffs interested in listening, all of the hardcore java-related content - including Nancy’s outrage over a Starbuck’s employee’s contention that “Ethiopian coffee is just bitter” - comes at the beginning of the conversation.
Engagement Alliance Podcast No 1: Nancy Explains It All - Download this podcast
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"Engagement Alliance Podcast No 1: Ristretto Roasters" continued...