People who write or talk about revenue assurance often make sweeping generalizations. So who am I to be any different? ;) But instead of generalizing about the causes of revenue loss or what is the likeliest cause of leakages, I want to generalize about something different. Here is my Chaucer-esque index of personalities: the people you find working in revenue assurance!

The Pioneer. First to identify the need for revenue assurance, he has defined the subject area for his business. Used to standing on his own and far from the madding crowd, he forgot how to relate to normal folk after a while. If he says that something is a problem, it is. If he does not, it is not. If he is happy with a solution, it is a good one, if not, it is not. Better not argue with this guy, because he knows you are wrong! He walks a lonely path, wondering why more people do not follow in his footsteps….

The Hamster. The hamster loves to scamper around in his cage. He finds things, then fixes them. Then he finds more things, that look just like the things he found before, then fixes him. He runs around and around on his metaphorical wheel – a database in real life – for hours, blissfully happy. There is nothing better for the hamster than to feel like he is getting somewhere when he is really not going anywhere at all. Let him out of the cage, though, and he soon gets scared and asks to be put back in.

The Policeman. This guy is like a rule-bending cop from a 1970’s TV show. He knows the word on the street and what is going down. His snitches keep him informed of everything that is happening, unlike those pampered execs and the fools who work all around him. He is happy to rough people up and cut corners to put the world to rights, and has no time for people who think he is opinionated. Better not point out his mistakes, as he can get very angry!

The Secret Policeman. Like the policeman, except more secret. So secret that nobody knows how important his work is. Even the bosses cannot be trusted to understand, so he consistently manages communication into bite-size chunks that people can handle. Much of this communication is... well... not exactly true, but it has to be that way. Nobody else can handle the truth. The Secret Policeman thinks everything will fall to pieces without him, which is why he keeps such a close eye on everyone else, without letting anyone keep a close eye on him.

The Journeyman. Wondering why his telecoms career is stagnating, the journeyman is looking around for a job he can hold on to in the face of constant downsizing. Low and behold he hears of revenue assurance and decides this is his opportunity to give his career a jump start, without needing to really go to a lot of trouble like learn new skills or get a qualification or any bother like that. Repeating the babble he hears other people say, he has found a career that will keep him feeling important and satisfied for the rest of his life, as everybody tells him he should really be reporting direct to the CEO and he would increase profits by 20% if only people did as he said. As he is a true believer in the religion of revenue assurance, there are always new things he is uniquely equipped to handle that cannot be trusted to anyone else, like SOX or business assurance or whatever else somebody says is the next big challenge…

The Guru. Talks a lot about revenue assurance, writes a lot about revenue assurance, and is great at generating theories about revenue assurance. The only problem with the guru is that he has not done any actual proper revenue assurance work in the last five years….

The Travelling Salesman. The salesman sells it, but is not foolish enough to buy it. Talks great talk when in the room, but after he makes a sale, you will never see him again. He keeps moving from place to place, worried in case someone catches up with him and wants their money back! Hamsters love salesmen that offer to supply big wheels for hamsters to run around in. Journeymen love salesmen because they think if the company spends a few million dollars on his stuff, it makes the journeyman's job secure. Gurus hate salesmen unless the salesmen give them work, money or free travel, in which case they love them again.

The Dead Man Walking. He writes a blog where he makes fun of what he finds in revenue assurance. The idea is that if he makes fun of everyone and everything, then it will be impossible to accuse of him of picking on anyone in particular. This would be a great idea except that some people have no sense of humour! ;)

Posted by Eric on January 31, 2008 12:05 PM | Permalink | Comments (2) | TrackBacks (0)

Voice over Internet Protocol (VoIP) should be a great way to cut costs. Carrying voice over flexible multi-purpose IP networks reduces costs for operators, who can pass on the benefits to customers. The problem is, not everybody wants to cut costs. Governments, for example, are not always on the side of consumers. Some governments would rather exploit the competitive barriers inherent with traditional voice infrastructure. They do so to increase the government's income, as is the case in Bangladesh. The Bangladeshi government generates revenues from the state-owned BTTB network. Bangladeshi law requires private operators to use the state-owned BTTB network for international voice calls. By having a monopoly, the state can not only generate revenues but also keep prices higher than they would be if competition were allowed. The problem with using legal barriers to obstruct the free flow of telecommunications traffic is that they enhance the economic advantages of circumventing the rules. One telco breaking the rules on a restrictive market can make more money than three telcos competing freely against each other. Some telcos may find the temptation too great. Bangladeshi GSM operator Grameenphone stands accused of illegally terminating VoIP traffic, and their government looks determined to take robust action to enforce the law. Grameenphone's headquarters were raided in December. Now the Bangladeshi regulator has charged ten current and former Grameenphone executives with conspiring to break the law. See here for another write-up of the story which explains the principles in simple terms.

Who is right? Soverign governments have the legal right to raise money as they see fit. Charging telecoms consumers is one way they can do so. If the Grameenphone execs broke the law, knowingly or otherwise, they are responsible and should expect the relevant punishment. However, obstructing competition to keep prices high may be considered to be contrary to the nation's best interests. Communication is a fundamental pillar for economic growth, as is appreciated in many developing countries. Barriers to talk are an indirect barrier to trade. Whatever the outcome of this case, I have some sympathy for the Grameenphone execs implicated. If they were guilty of wrongdoing, and their shareholders profited, you could argue that Bangladeshi consumers and businesses profited as well.

Posted by Eric on January 28, 2008 02:54 PM | Permalink | Comments (0) | TrackBacks (0)

Apologies, faithful readers. This is one of my most common rants being recast into yet another guise. However, I felt the need to do it because I think the idea is sound, but I have no convenient label for it. That means I have to explain the idea every time I want to discuss it. Forgive me, but if I write the idea down, and give it a name, at least I can use the name in future and point to this blog as an explanation of what the idea is. So what is the idea? Well, for want of a better name, let us call it the theory of symmetrical error...

My experience suggests that the likelihood of errors in complicated systems, be they human error, system error, errors in data or however you want to categorize errors, is not well correlated to the consequences of those errors. Errors that are easy to commit may have significant consequences. Errors that are highly unorthodox and unlikely to be repeated may have negligible consequences, though be errors all the same. If leakage is the product of a mistake, and not caused deliberately - so I will exclude the impact of fraudulent activity from this analysis - then I believe those mistakes are no more likely to reduce profits than they are to increase them. This symmetry of consequences, and the equal likelihood of consequences on either side, is what I mean by symmetrical error.

Of course, an external party may be vigilantly looking for errors that negatively impact them, in order to protect their own interests. However, the likelihood of discovering the error is not related to the likelihood of committing the error, so this is irrelevant to the point. All the theory concerns is the likelihood of committing an error, not the likelihood of it being found or how hard people look. The probability of committing an error in one direction, and the distribution of the magnitudes of the errors in that direction, is approximately equal to the probability and distribution of magnitudes for errors in the opposite direction. It is approximate because I concede there must be some limits to the symmetry. For example, if a bill should really be stated to be for $x, it is easier to imagine an error where it is instead stated as 2x, 3x, 4x and so forth, and hence x, 2x, 3x over the correct amount, than it is to imagine it is stated as 0, -x, and -2x and hence x, 2x and 3x under the correct amount. Similarly, data may be "lost" at many stages, but may be wrongly created or added to (duplication aside) less often, so there may be some kind of one-sided errors that skew the overall results.

If the theory of symmetrical error is approximately correct, then it has some important conclusions for revenue assurance. First and foremost, if error is symmetrical then revenue assurance, if conducted in an unbiased way, is not an activity that can promise to regularly generate a positive return for the business. It is as likely to reduce business profits as to increase them. The only way to consistently increase profits would be to selectively detect, investigate or resolve errors in one direction, and ignore errors in the other direction. One could assume that external parties will protect their own interests, but in this era where corporate governance is on the lips of so many executives, it might be considered foolish to protect your own interests and play fast and loose with everyone else's. Secondly, promising skewed results leads to skewed expectations, skewed collection of data, skewed interpretation of that data, and skewed remedial action. In other words, the prophesy of generating financial benefits from revenue assurance is self-fulfilling. If you want to generate positive results, only acknowledge errors that will generate a positive return when resolved; ignore all other errors. This is unhealthy if the interests of customers and partners deserve to be given more than lip service. Third, protecting the interests of the company and protecting the interests of external parties is not fundamentally different. They are both addressed by the same kinds of controls, monitoring and preventative activities, because the errors themselves are essentially alike. The only reason for separating responsibility for executing controls to protect the business from controls to protect external parties is the difficulty, or undesirability, of motivating staff to do both at the same time. Finally, estimates of error fall between two extremes postulated by revenue assurance practitioners. At one extreme, when estimating errors that reduce profits, the average level of error is grossly exaggerated. At the other extreme, when estimating errors that increase profits, because they wrongly overcharge customers, the average level of error is understated by the numbers in the public domain.

I will make two observations to support the theory of symmetrical error.

1. When settling charges between telcos, whether interconnect, roaming or whatever, any errors in the final settlement must be symmetrical. Whoever "loses", the other party "wins" by the same amount. It is worth noting that many commentaries on revenue assurance discuss the risk of leakage from inter-telco transactions and treat it as comparable to other kinds of risk of revenue leakage, but fail to highlight the unequivocal zero-sum nature of any errors in these transactions.
2. Estimates of errors for retail transactions show the greatest divergence depending on the direction. Estimates of revenue loss due to failure to charge customers for transactions, or undercharging of transactions, are high, whilst estimates of the overcharging of customers are low. This result suggests that errors are highly asymmetrical. However, examination of the specific basis used to calculate errors in each direction highlights severe inconsistencies in approach, each selective of what data is used and how it is interpreted. Skewed mechanisms to calculate error in each direction suggests underlying error rates are more similar than the unreconciled headline error rates.

The symmetry of error is not a trivial problem for revenue assurance. If the conclusions are correct, and the revenue assurance profession needs to put its house into order, and admit that it has an equal job to do in both protecting the business and its customers. If the business is at risk, then customers are at risk. If the customers are not at risk, then the business is not at risk. If the conclusions are incorrect, then there is still a job of work to do, in explaining why error is so asymmetrical. Asymmetry should not be assumed, it needs to be shown using consistent data and consistent interpretations and calculations based upon that data. And if asymmetry can be shown, there is still a responsibility to explain why risk is so significantly skewed in one direction. The need for an explanation is made all the more pertinent by the fact that asymmetric error rates would be remarkably convenient for practitioners of revenue assurance. Asymmetric errors reduce the burden for protecting customers and guarantee overall financial returns for the business. Any good scientist should be wary of theories that give results that also coincide perfectly with their own interests. Because asymmetry would be so very convenient, revenue assurance needs to apply a higher standard if it is to conclude that errors tend to be asymmetric.

This is the theory of symmetrical error, if you will. I know it is not a very scientific exposition, but then revenue assurance is not a very scientific discipline. Sciences need to start somewhere. This would be a good place if revenue assurance is going move on from making promises to explaining how they are kept.

Posted by Eric on January 26, 2008 10:14 AM | Permalink | Comments (0) | TrackBacks (0)

Often it feels like we are living in the Unformation Age, not the Information Age. Unformation is what you get when you throw a lot of data into a lot of computers and keep stirring it around, but do not take time and trouble to ensure that you can trust the data or, worse still, that you understand what it means. In the last blog, I discussed the problems at Carphone Warehouse, and how their regime must have been especially slack to be noticed by the UK's toothless data protection watchdog. Today the story is about Virgin Media. It exemplifies how corporates usually get away with processing unformation without anyone being able to do anything about it. It also shows the difference between a government agency stipulating what should be done and being able to enforce it.

Just before Christmas, the UK telecoms regulator, Ofcom opened an urgent investigation into Virgin Media. The topic of the investigation: whether Virgin had failed to meet its responsibility to provide the emergency services with the location of callers. Let us be clear about the importance of this. This obligation relates to cases where somebody uses a phone to get the emergency services - Police, Fire or Ambulance - but are unable to tell the operator where they are. They may be unable to complete the call, or the person who places the call may not know the location. Speed is of the essence, as lives may be in danger. A week after the investigation began, Ofcom decided that

"there are reasonable grounds to believe that Virgin Media has failed to make Caller Location Information for all 999 calls available to the Emergency Organisations handling those calls."

This sounds like the kind of thing that needs to be sorted out quickly. Ofcom stipulated that Virgin needed to rectify any issues and must make representations by January 11. Unfortunately, over a week has passed since that deadline but no further update has been issued. There are a lot of people whose lives may be put at risk during the course of a week, so a delay of a few days is bad though understandable. It is much harder to accept how the news of Virgin's lapses came into the public domain in the first place. An anonymous whistle blower sold the story of Virgin's problems to a national newspaper. The story printed in The Mail On Sunday asserts that Virgin's shortcomings were identified in an internal review completed at the beginning of 2007. Instead of informing the regulator about their failings, Virgin decided to keep quiet. Perhaps the difficulties were resolved soon after the review was completed, or perhaps they still have not been resolved. We will have to wait on Ofcom's next update to their investigation.

Regulators depend heavily on telcos to be open and honest about their problems. If Virgin does not audit their own response time when handling emergency services queries, nobody else will. Nobody else is checking the completeness of their location data either. So telcos can get away with hiding skeletons in the closet... up to a point. That point occurs when the story does somehow find its way into the public domain one way or another. When it does, the damage to public confidence is amplified. Keeping bad news secret even from regulators only begs the question of how many other unformation disasters have been kept secret. That undermines confidence in general. It also makes the reputation damage much worse. If Virgin identified a problem in early 2007, told Ofcom about it and fixed it straight away, chances are you and I would never know. Perhaps they have fixed the problem, but we know about it because they decided to keep it secret, even from the body responsible for enforcement.

When telcos put insufficient control around information, they risk more than turning it into unformation. Unformation makes for bad business decisions, lost revenues, wasteful expenditure and unhappy customers. The consequences can hurt customers, and may even put their lives at risk. Unfortunately, as was seen with the phone voting scandal in 2007, many will prefer to cover up their failings instead of fixing them. When that happens, the damage is much worse than if the failing was identified and resolved straight away. Governments can often be assumed to be behind the times. They are better at legislating with hindsight then with foresight. There will be a few more disasters before governments fully appreciate how to tackle risks around data integrity and the vast amounts of information processed by modern businesses like telcos. Having the foresight to set expectations, like the data protection legislation or regulatory stipulations about calls to emergency services, does not imply foresight on how to enforce those obligations. Enforcement is the weak link in the Unformation Age.

Some will do the right thing just because it is the right thing to do. Others will help, and help themselves, by providing products to deliver compliance. US vendor TCS has just won an award for its real-time address validation engine. The product, called RAVE911, gives location validation, which helps ensure telcos give accurate location data to the emergency services. It is also useful for other purposes like billing integrity, so the financial benefits of good data may compensate for the costs of compliance. However, it is a sad truth that, in the absence of a mechanism to police compliance, some will fail to comply. Compliance has a cost and some will avoid the cost. Not only will they fail, but they will keep it secret too. A recent report by Deloitte on security in the TMT sector stated that only 54% of firms would tell customers if their data privacy had been breached. The problems of Virgin and Carphone Warehouse may have been identified much sooner if the Information Commissioner had powers to audit businesses without warning. At the very least, the possibility of spot checks will encourage businesses to fix their problems sooner, and to admit to them instead of keeping them secret. The UK's Information Commissioner is pushing hard for the power to make unannounced audits of UK companies in the wake of the UK Government's loss of benefits data relating to 25m people. This has already resulted in a new power to spot check government departments. You can be sure the Information Commissioner sees spot checks of business as the natural way to enforce a law that applies equally to business and government.

The worst thing businesses can do is hope their unformation problems go away. Do that, and there is a risk they come back multiplied. Government intervention is most likely to occur following public scandals. Companies that are secretive, but not proactive, about data integrity issues risk turning a manageable issue into a full-blown scandal. In the UK especially, now is not a good time for two telcos to have serious problems with their data. Governments do not much like it when voters think they are incompetent, and the UK Government is under pressure to show it is competent to manage data. The pressure on the UK Government is doubly acute because it shows no sign of abandoning its unpopular plans for a national ID card, and the national ID database which that entails. A good way to redirect pressure would be for the Government to get tough on failing businesses, especially if there are a few scandals to help with justification. Telcos had better beware. A few more unformation goofs like those at Carphone Warehouse and Virgin Media and telcos may get a lot more unwanted scrutiny than they currently endure. And if that happens, the public may find out about a lot more unformation disasters that have been kept secret so far...

Posted by Eric on January 23, 2008 07:13 AM | Permalink | Comments (0) | TrackBacks (0)

Unformation: it looks a lot like information but is not information. It is not information because it is wrong. There is a lot of it in the world. Some people dedicate their lives to spreading it. They may do so in ignorance, because it looks like information. Big companies run unformation systems without realizing it. Unformation is worth nothing, but may cost a lot.

I do not think you can do my kind of job unless you think information is a privilege. You have to work hard for information every day. That means you have to be sceptical. Do not assume what looks like information is information - it may be unformation. Which is why it is distressing to see big businesses failing over and over again to sort the one from the other. In recent weeks two UK telcos have come under the spotlight for running unformation systems.

On Wednesday, the Information Commissioner found Carphone Warehouse and its offshoot Talk Talk in breach of the Data Protection Act. The remarkable thing about this is that the Information Commissioner lacks proactive investigatory powers. That makes them dependent on information from other sources, like complaining customers, to find out about breaches. Given that compliance with most of the obligations in the Data Protection Act simply cannot be determined by any customer, you have to be very sloppy to do something so obviously wrong that the customer finds out about it. On top of that, the average customer is not going to pursue an issue if their supplier responds appropriately, promptly and politely to their complaint. So Carphone Warehouse must have been very sloppy indeed to make obvious mistakes and then do too little to pacify angry customers. If you take a look at the detail of what they did wrong, it reads like an unformation horror story:

• Subject access request: Failed to meet their legal obligations to provide information held about people on request, despite cashing the cheques that customers paid them as an admin fee.
• Accuracy and Fairness: Set up accounts using incorrect details (name, address and bank details), which in some instances had been obtained from old contract or purchase data.
• Security: Some customers saw confidential personal data of other customers when logging on to their online account. Some received emails containing data confidential to other customers.
• Accuracy: Held inaccurate data and disclosed it to credit reference agencies and debt collection agencies. Failed to amend inaccurate data until instructed to do so by the Commissioner.

Doubtless the corporate spin-meisters will say they are very sorry and this is an isolated problem which they are working hard to rectify blah blah... or they will say nothing at all and hope it will all blow over. Such is the nature of unformation in the unformation age. I could not find anything relevant on the Carphone Warehouse website, though it is full of upbeat "news" on how they are giving away laptops and have rising profits. If you want to see the detail yourself, the only place is to look is the enforcement notices for Carphone Warehouse and Talk Talk. But I can summarize what it says: they should spend more of those profits on treating customer data with respect.

If you do not believe that business unformation rarely gets turned into public information, just review the history of the other big unformation story in UK telcos: how Virgin Media was unable to give reliable data to the emergency services. More on that in the next blog.

Posted by Eric on January 19, 2008 05:40 PM | Permalink | Comments (0) | TrackBacks (0)

Recently, the TM Forum started canvassing telcos to participate in a unique revenue assurance benchmark program. What makes it unique is that the benchmarks will all be based on the standard revenue assurance KPI's already developed by the TM Forum's revenue assurance technical team, meaning that RA managers will recognize the measures as specific and relevant to their jobs. Other benchmarks to date have tended to be about billing, customer numbers, revenues... pretty much anything but measures specific to revenue assurance. One of the problems in the past has been that effective benchmarking was impossible because so few telcos had any useful objective data on their own revenue assurance performance. Fewer still were able to agree on the basis for calculating comparable statistics. However, as more and more telcos implement automated revenue assurance systems, it is far more common for revenue assurance managers to have access to useful statistics on a regular basis. If you want to benchmark something like the percentage of billable CDRs that are billed or the consistency of subscribers accessing the network with the subscribers as described in the billing platform, you need to be able to calculate the numbers on a regular basis without too much fuss or guesswork. In addition, several telcos have already agreed a common basis for calculating KPIs. Now might be the right time for a detailed benchmark to succeed where others failed by asking easier, but less relevant, questions.

Some big names have already signed up to the TMF's revenue assurance benchmark, including China Unicom and BT. The trick will be to get a large enough group of telcos fully committed in the first wave of the benchmark. If enough do the benchmark - and do it properly - then all will benefit. If too few do it, or some submit faulty and unreliable figures, it will undermine the value of the exercise. One positive step is that the TM Forum has agreed to relax its rules to encourage the widest possible industry involvement. It has just been announced that the TM Forum will allow non-members to participate in the revenue assurance benchmark. If that attracts a few big operators currently outside of the TMF, it will really help the benchmark as well as be good for the TMF's marketing drive. Then we might see a very interesting first for revenue assurance: reliable, consistent and detailed statistics on the performance of revenue assurance in several different telcos. I cannot wait!

Posted by Eric on January 17, 2008 09:51 AM | Permalink | Comments (0) | TrackBacks (0)

January must be a good month for branding exercises. Hot on the heels of Subex's brand awareness campaign, WeDo has also tinkered with their brand. WeDo's exercise is a little more modest though, as it involves changing name from WeDo Consulting to WeDo Technologies and not much else. That makes sense, because WeDo's positioning as a consulting business was at odds with the fact that they also sold software. However, the marketing bods could not resist the temptation to play with the corporate logos:

old logo	spot the difference

The obligatory press release contains the usual deep insight into the choice of colors and geometric shapes:

“the objective was to keep our brand corporate assets, the squares and colors, since both have a strong impact and awareness. The dark colors represent the technological component and the lighter colors the human side of the business. Together, they form the perfect mix and reflect WeDo’s identity as a company.”

I wonder how much WeDo paid to tweak the font and round the corners of the boxes. But perhaps it is time Rev Pro's logo had a refresh by making the edges softer... and it will not cost me a penny ;)

Posted by Eric on January 16, 2008 10:11 AM | Permalink | Comments (0) | TrackBacks (0)

Borrow a lot of money, spend a lot of money, make... not enough money. Bankruptcy may have enabled InPhonic, the USA's biggest web-based seller of wireless phones and services, to restructure and sell itself, but did anyone learn a lesson about why a business with booming revenues also suffered from crippling losses? There were no clues in the press release announcing court approval for the sale of InPhonic to Versa Capital Management. Take a look at this great article, which places the blame squarely on inadequate financial controls. A telecoms business that has great salesmen, unhappy customers and financial statements that cannot be trusted... does that sound familiar? Of course, there is ultimately only one solution to this kind of madness, which is that investors place as much emphasis on financial discipline as they do on headline returns. It is their money after all.

Posted by Eric on January 13, 2008 12:52 PM | Permalink | Comments (0) | TrackBacks (0)

Has the time finally arrived for revenue assurance bureau services? Managed services, where telcos outsource revenue assurance to a third party, are not new. However, they have not really caught on yet. Offering a bureau should help software vendors shift more of their product and give them more predictable long-run revenue streams. In turn, a bureau reduces the risk to the customer inherent when purchasing revenue assurance software. By outsourcing the running of revenue assurance systems, a bureau solution spares the provider having to manage recruitment, training, development and absence cover for a small dedicated team that may not fit elsewhere in the organization. Purchasing software and contracting a bureau service at the same time also raises the possibility of creative accounting, with opex costs being treated as capex costs, or vice versa. However, service providers have often been wary of losing control by outsourcing, though you could debate how many have revenue assurance under control to begin with. A more serious issue is defining who does what. Finding a problem is not the same as fixing it. Who finds what, who fixes what, and who chases who, is often poorly-defined for revenue assurance processes even in mature providers. Outsourcing revenue assurance tasks requires clear answers on what is done by the provider's staff, what is done by the bureau, and how they communicate. Sometimes the greatest benefit of engaging an external supplier is that it will force those questions to be answered. The news that BT Global has signed to use a revenue assurance bureau service from Subex may be a tipping point for the industry. If BT Global has resolved those questions, and both parties subsequently get a win-win from the deal, more telcos will be tempted to follow their lead.

Posted by Eric on January 10, 2008 04:35 PM | Permalink | Comments (0) | TrackBacks (0)

Imagine a television advert featuring kids from around the world. They climb trees, rip up books, jump into water and swing on... swings. Some words flash up to describe the different kids: careful, impatient, logical, creative. Is it public relations for Unicef? Is it a new video from Michael Jackson? Is it a fund-raising pitch for Save the Children? Is it a promo for the adoption agency used by Madonna and Angelina Jolie? Nope, it is brand awareness for a company that sells software to make telcos work, or at least to help telcos not screw up as often. Obvious, really. Take a look...

I am looking forward to the sequel, which will feature a cast of thousands performing an elaborate and colorful song and dance sequence filmed in a single take on the steps of Subex's new headquarters.

Yup, Subex are refusing to be ordinary. Just telling people that you hack code for telcos and work in a big office off the ring road round Bangalore, that would be ordinary. Luckily we have a press release to explain what the advert is telling us. It tells us to excel and lead by refusing to be safe and ordinary, and using situationally appropriate approaches to reach your goal. A bit like how a seven year old turns into a super hero by putting on his underpants outside his trousers. And what was the point again? Communicating the secret of Subex's success, of course. Everyone clear?

Posted by Eric on January 8, 2008 03:05 PM | Permalink | Comments (0) | TrackBacks (0)

Digital Rights Management (DRM) is dead, at least as far as music is concerned. The news is that the last of the four majors, Sony BMG now plans to sell DRM-free music downloads. This comes soon after Warner became the third of the four majors to offer downloads without DRM, in collaboration with Amazon.

The industry scoop seems to be that the major labels can make more money from selling DRM-free music then they can from fighting it. Apparently, DRM-free downloads are very useful for promoting smaller artists. I guess the idea is that you promote a smaller artist, they become a bigger artist, then you fleece fans for as much money as you can get. If this rationale helps record label execs sleep better at night after they consign their business models to the dustbin of history, that is fine with me. Put simply, the theory that record labels will be better off by selling music without DRM is rubbish. They will be worse off. People will copy songs instead of buying them. Revenues will fall. Big stars will not command premium prices for selling songs. If they sell expensive songs without DRM, people will copy them. If they sell expensive songs with DRM, people will just listen to other acts for free. It is supply and demand. If supply is plentiful and cheap, then manipulating demand is not going to make much difference. Some business execs think they can manipulate a few media and distribution channels, and that the masses will pay out because they are too lazy to look elsewhere for entertainment. Wrong! Sure, some customers will be lazy and will buy whatever product is most pushed at them, but they will be the pitiful minority. The majority will simply listen to whatever their "friends" recommend via Facebook or MySpace or (heaven forbid) when they have a traditional conversation (you know, the kind of interaction where two people are in the same room and they use their mouth and ears to talk and listen). Chances are people recommend things because they have time and inclination to try things and then time and inclination to recommend them. This means they also have time to muck around on the internet and search for freebie stuff.

Of course, there are some amazing people who will spend insane amounts because they simply love one or other music act. It was reported that 15 people chose to enter the maximum possible amount of UK£99.99 (US$200) for Radiohead's In Rainbows download. Another 50,000 or so may buy the CD this week (presumably at a more normal retail price, though I suppose there is nothing to stop them leaving a tip). However, lots and lots more people will have copies of the album for free, either having downloaded it for free, or because they copied it from a friend. However, the thing with an act like Radiohead is that they cultivate a loyal following. They are not interchangeable in the minds of the fan. A Radiohead fan is not going to spend 100 quid on a Coldplay album just because a music exec considers the two bands to fit into the same genre. Contrast that with pop music, which is by its nature transitory and interchangeable. Any four attractive young people bouncing around in a video whilst singing a cover of an old song will look and sound much like the next group of four attractive young people bouncing around and so on... Supply and demand says one act can easily substitute for another. They need to make money from selling songs because chances are they will struggle to make money from performing live. For a start, nobody can see their dance moves from the back of a football stadium. It also does not help if the music sounds identical every time it is performed because the act is only lip-synching. "Take That" I hear somebody shout. Fair play to Take That who many years on still seem able to able to garner a substantial audience, but then do actually sing live and everybody knows that Gary Barlow actually writes the songs, which helps a lot. In contrast, I am perplexed as to who is paying for Spice Girls tickets, though I trust the information given in the comments at the bottom of this story more than I trust the headline at the top. And anyway, those are bands that built their popularity in the past, and now I am talking about how bands will build their popularity in the future. The main thing is that musical acts that appeal to people who generally like to go listen to music, talk about music, share music with pals etc have little to fear from a world free of DRM and music labels. People will like their music, recommend their music to friends, and pay to see them perform live. In contrast, acts that rely upon the media and selling songs because their fans are people too young to go see them perform or have only a marginal interest in music are going to fall on hard times. Sob, boo hoo... I feel for a world with fewer Will Youngs...

The internet is ideal for getting rid of middlemen, or at least for reducing their margins and importance. Buy a book from a retail store with limited stock or get it online from a huge warehouse that posts it to your home? Arrange your insurance through a broker or buy direct? Book your holiday with a travel agent on the high street or check out the cheapest deals on the web? Some of the changes have taken place sooner, others later. But they are inevitable. Quick review of the music industry: fans at one end, artists at the other end, music labels in the middle. Can you see where I am going with this?

The good thing about proper artists is that they are just so bolshy. Once again, the best current example of the outspoken and sincere artist is Radiohead's Thom Yorke, who slagged off EMI because EMI implied Radiohead was greedy. It is hard to see how EMI expected to get good PR: adored music act gives away music for whatever fans feel like paying, former music label accuses music act of being greedy in recent negotiations, bands says that is nonsense. Well, who would you believe? No need to call in Sherlock Holmes to detect who is talking cobblers here. Artists want things their way, which is not the same way as the middlemen moneymen. The great thing about internet distribution of music, is that it means you can Do It Yourself, instead of relying on a music label. After all, chances are the musician has already had the wherewithal to learn to play or sing, to compose some songs, to play live in front of an audience, and to pull together a demo, before they get signed to a label. The label was needed for publicity and distribution, but the internet means the music act can now do that as well, without needing the label, and without needing lots of financial backing. DIY is the ultimate in creative control, which is why you can expect more and more bands and artists to turn to DIY as the way to sell themselves and their talents, and turn their back on the labels. In turn, that will depress the margins earned by labels, reducing their financial firepower, their control... and the value they can add. This should lead to a vicious downward circle, potentially only bouyed up on a temporary basis as the labels copy the cigratte manufacturers and refocus their efforts on the third world to compensate for the loss of first world earnings. But it will prove fatal to the label's core business model in the end, although the music labels will doubtless try to survive by shifting focus to the peripheral areas of their existing business model: merchandise, touring, and venues i.e. anything that cannot be copied electronically or sent over the internet. The future of music is DIY, not DRM. Which means music fans will get more and pay less, and the popularity of artists will depend more on whether their music is likable, and less on whether execs think their music is marketable. That sounds like a good deal to me. Win-win for fans and artists, lose for the labels. Sorry you middlemen and moneymen, nobody will be copying your business model in future...

Posted by Eric on January 4, 2008 04:39 PM | Permalink | Comments (0) | TrackBacks (0)

The exciting news over the holiday period was that Warner Music Group (WMG) became the third of the four major music groups to offer downloads without Digital Rights Management (DRM). Warner have signed a deal with Amazon that adds another half a million songs to Amazon's DRM-free MP3 service. Take a look at the press release on the Amazon and WMG sites. That leaves the mean folks at Sony BMG as the only major holding out against DRM-free music. It also puts Amazon comfortably ahead of the competition in terms of having the largest collection on offer. Warner have snubbed Apple, the company that originally forced the issue of DRM-free downloads, by only doing a deal with Amazon. Early in 2007, Apple's Steve Jobs called on the music industry to sell DRM-free tracks via iTunes. Soon after EMI did a deal with Apple and became the first major to sell DRM-free downloads. You can read my blog about that here. Doubtless the WMG Chairman and CEO Edgar Bronfman Jr. is still a bit embarrassed that he was dismissive of Jobs for proposing music be sold free of DRM. He may also be calculating that Apple is too influential and probably wants Amazon or some other service to become a significant competitor to iTunes in order to diminish Apple's bargaining power.

DRM is dead, or ded, if you spell like some rocking guys who call themselves Led Zeppelin. Led Zep are signed to a Warner subsidiary, Atlantic, so their music can now be bought DRM-free. Buying individual Led Zep tracks over the internet is ironic; the band started a trend in their own era by refusing to sell singles and intentionally composing for complete albums instead of individual songs. However, after the media frenzy caused by the recent Led Zep reunion gig, where people were buying tickets for thousands of dollars, I expect Led Zep downloads to be amongst the popular on Amazon's site. So here is a bit of gratuitous advertising for Led Zep, as my way of a thank you to Edgar Bronfmann for seeing sense and selling DRM-free music. This should also help fire up some of you struggling to get back to work after the holidays. Enjoy!

Posted by Eric on January 2, 2008 10:04 AM | Permalink | Comments (0) | TrackBacks (0)