Glyn Moody: Open for business

open for business
glyn moody

good news, bad news
good news
we are living through a transition that is not just ”once in a lifetime”, but *once in a civilisation*
bad news
we haven't done this before, so we don't know how to do it

blown to bits
”once in a civilisation” transition
from a world of atoms to a world of atoms + bits
from an analogue world to an analogue + digital one
analogue to digital media
vinyl LPs to CDs
video tapes to DVDs
books to ebooks

the rise of the digital
analogue has been with us since the beginning of consciousness
digital has been with us *longer* - since the beginning of life

digital DNA
DNA consists of very long strings of Adenine, Cytosine, Guanine, Thymine – A,C,G,T
this is a *digital* code:
A -> 00
C -> 01
G -> 10
T -> 11
CGGTATAAT -> 011010110011000011

life is digital
complex life would be impossible without digital information
only digital information can be repeatedly copied faithfully

the re-invention of digital
Nature got there first several billion years ago
humans only got there about 70 years ago
specifically, Alan Turing got there about 70 years ago with his description of a Turing machine

there is only one computer
one deep consequence of Turing's work is that it proved all (sufficiently powerful) computers are essentially the same
they can be made to emulate any other computer
they can run any software written for any computer

there is only one computer revolution
not possible to limit computer advances to one particular field
digital's 0s and 1s do not come in different flavours
increase in speed, increase in capacity, decrease in size, decrease in cost affects *every* application of computing, not just one corner of it

there is only one Internet revolution
what applies to computers, applies equally to the Internet
improvements in transmission speed and reductions in cost apply to *all* digital data that flows across it: there is no discrimination
this is the essence of Net Neutrality

the race to the bottom
computer and Internet progress is a scalar quantity – its magnitude may vary, but its direction is constant – so there is an inevitable race to the bottom
the cost of processing anything, storing anything and transmitting anything, tends ineluctably to zero

of CDs...
first CD appeared in 1982
without any kind of copy protection
because it was impossible to copy the CD's 700 Mbytes of data: the 1983 IBM PC XT had a 10 Mbytes hard disc – less than one song
similarly impossible to share it across the Internet: the Hayes Smartmodem, released in 1981, had a speed of 300 bits/s – about 400 hours to upload one song

...and MP3s
developed in early 1990s, just as Internet was taking off
used clever tricks to reduce music file size to 10% of original – reduced time to upload file by factor of 10
modem speed then 14.4 Kbit/s – less than one hour to upload/download one MP3 song: slow, but possible

today
Mbit/s broadband connection mean that entire films can now be shared
P2P networks like BitTorrent make it even easier to distribute those files and share them in the background
1 Terabyte hard disc (1000 Gbytes) costs € 50; stores 150,000 MP3s

tomorrow
a 1 Petabyte (1000 Terabytes) USB stick will cost € 50 and store every song ever recorded in CD quality (no compression)
a 1 Exabyte hard disc (1000 Petabytes) will cost € 50 and store every film ever recorded
the race to the bottom will be over

absolute zero
the race to the bottom means any digital content can be copied and shared and hence acquired for a trivial cost that is tending to zero very rapidly
what does this mean for business?

DRM: less than zero
DRM is not the solution
DRM only needs to be broken once for content to be uploaded, copied and shared everywhere
DRM will always be broken at least once
DRM makes digital content less valuable than freely-available versions without it
digital content with DRM is actually worth *less* than zero

the law is an ass
”stricter” enforcement of copyright infringement laws is also counterproductive because it's predicated on attacking your actual or potential customers
worse: many surveys show that unauthorised downloaders spend *more* on content - they are actually your *best* customers

what's left?
to stop sharing of digital goods there is nothing
the only option is to *embrace* it
not surprisingly, first to do so was the world of computing
free software/open source
GNU/Linux

what's GNU?
GNU born in 1983 at MIT
GNU is ”GNU's Not Unix” - a recursive acronym
one man's attempt to create a free version of the leading Unix operating system

a change of heart
by 1991, GNU was still unfinished: it lacked a ”kernel” - the heart of the operating system
in March 1991, 21-year-old student Linus Torvalds started writing one ”just for fun” – in his Helsinki bedroom
key inflection was August 1991, when he opened up his ”Linux” project using the Internet

opening up
decentralised
anyone, anywhere, could join in
bottom-up
people fed suggestions, problems and solutions to Linus
collaboration easy
Internet was more affordable
scalable
no formal training required – everything is out in the open

Linus' Law
Eric Raymond: ”given enough eyeballs, all bugs are shallow”
different people approach a problem in different ways
adding more people increases the probability that someone’s approach will match the problem in such a way that the solution is obvious (”shallow”) to that person

power, economy, reliability
91% of top 500 supercomputers run Linux
1% run Microsoft Windows
Google runs its services on millions of servers running Linux
so does Facebook, Twitter etc.
Android mobile phone system runs on Linux
400,000 handsets activated daily
launched November 2007

billion-dollar business
Red Hat (1993)
annual revenue to February 2011 $909 million; profit $107 million
main products
Red Hat Enterprise Linux
Jboss Enterprise Middleware
services
consulting, customisation
technical support
training & certification

easy as nails
Nine Inch Nails: Ghosts I-IV
free – first 9 tracks
$5 download – all 36 tracks
$10 2xCD with 16-page PDF booklet
$75 Ghosts I-IV in a hardcover fabric slipcase containing: 2 audio CDs, 1 data DVD with all 36 tracks in multi-track format, and a Blu-ray disc with Ghosts I-IV in high-definition 96/24 stereo and accompanying slideshow
but that's not all...

$300 deluxe edition
4-LP set of Ghosts I-IV on 180-gram vinyl in fabric slipcase
separate, large, enhanced fabric slipcase containing 3 embossed, fabric-bound, hardcover books
Book 1: 2xCDs, DVD, Blu-ray slideshow disc, as for $75 option
Book 2: 48 pages of photographs
Book 3: two exclusive art prints

sold out
despite the high price-tag, the Deluxe Edition sold out in two days
limited to 2,500 copies
gross income $750,000

getting personal
Jill Sobule used a donation model
$10 – download; $25 - advance copy of CD; $100 – these plus T-shirt; $200 – free admission to her shows for a year
$500 – mentions customer's name in instrumental track; $1000 – song written personally for customer
$5000 – comes to your house and sings for you and friends; $10,000 - *you* get to sing on her CD

open opportunity
allowing digital content to be shared freely doesn't mean it's impossible to make money
make money in different ways
but sharing digital content also brings other big benefits that can save and make money

open innovation
open development brings past and future users in early
offer critiques of your ideas, plus their own
allows collaboration with companies on pre-competitive work

open marketing & sales
when you allow digital content to be freely shared, you turn the Internet into part of your marketing department
best kind of marketing: word-of-mouth recommendations to friends and family
allows ”try-before-you-buy”

open products
builds closer links with customers
openness allows greater customisation
greater need for post-sales input and consultancy
digital abundance makes new kinds of revenue streams based on scarcity possible
human-based services
analogue goods

open culture
going open has many other benefits
encourages other companies to do the same
encourages other open projects
open content, open access, open data, open science
increases the knowledge commons
encourages open government
generates new business opportunities

open society
society based on openness and sharing
more collaborative
more creative
more innovative
more efficient
more sustainable
more fair
more happy
more safe

openness is inevitable
the ”once in a civilisation” transition is unstoppable – you can't ”de-digitalise” the world
the choice is between exploiting the resulting digital abundance by opening up...
...or watching your competitors do it first – and maybe closing down

a binary choice
[email_address]
twitter.com/glynmoody
identi.ca/glynmoody
opendotdotdot.blogspot.com

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Glyn Moody: Open for business

by glynmoody on Jun 26, 2011

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