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Archive for September, 2007

Finding ghosts in the machine: Three happy accidents that became hugely profitable

Ghost in the machine

From open source software to personalized sneakers, the idea of the remix has become ubiquitous in the marketplace. One of the major benefits of the remix is its ability to eke out the “ghosts in the machine.”

In music, ghosts in the machine are the name given to the happy accidents that occur when sampling an old sound. Some of the best bits of samples are the white noise that is recorded unintentionally – hidden information in the audio that distorts and makes itself heard when the sample is changed in some way. Remixing allows us to find the ghosts in all kinds of machines, not just the ones that create music. We can find these same original elements of innovation inside business models, and pull out and amplify the weird and interesting noises nobody thought to look for in the first place. Here are three of the best…

This sh*t is bananas

In 1972, the owners of The Hungry Monk pub in East Sussex, England were messing about in the kitchen. They threw some bananas, pastry, caramel and toffee together, just to see, and accidentally created Banoffee cake, now one of the world’s favorite desserts.

Despite their knack for sampling, the owners of the Hungry Monk learned a harsh lesson about intellectual property. When they didn’t patent the idea, it was stolen by British supermarket chains who marketed it as an American dish, even though Banoffee Pie is only just catching on in the US, 30 years later. Some supermarkets later apologized to the owners of The Hungry Monk, who to this day are offering £10,000 to anyone who can prove Banoffee Pie wasn’t invented there. Nobody has ever come forward.

Game recognize game

Back in 1889, a guy named Fusajiro Yamauchi founded a playing card manufacturing company in Kyoto, Japan. Over the years the company tried to eke out what it thought were ghosts in the machine, trying its hand at running taxi cabs, a TV network, and a food company. It even got into the ‘love hotel’ business (short-stay hotels were courting couples go to “rest” for one to three hours) for a while. None of these did too well, but the Yamauchis were committed ghost hunters.

In 1970 the third president of the company, Hiroshi Yamauchi, came across a guy named Gunpei Yokoi, who was working on one of the company factories, and had made a mechanical arm for his own amusement. Yamauchi commissioned Yokoi to mass-produce the arm, and that Christmas they sold 1.2 million units. Yokoi was a ghost in the machine, Yamauchi recognized that and amplified his influence in the company, moving him from maintenance to product development. Yokoi was instrumental in moving the company from producing playing cards to electronic games. The company is still known today by the same name it was back in 1889; Nintendo.

I can hear you callin’

The Carphone Warehouse is a company whose name lets you know exactly what their business model looked like back in the 1980s when they launched. At the time, mobile phones were the ghosts – carphones were thought to be the money-making machines. The company listened to its customers instead of making the mistake of sticking to its original plan. These days they don’t sell too many carphones, but The Carphone Warehouse is now Europe’s leading independent retailer of mobile phones and services, with over 2,000 stores in 10 countries.

Free stuff on the free stuff freeway

New York Times logo

A great deal of high quality free content has been spilling onto the Web recently. As of yesterday, The New York Times made all of its archives from 1987 to the present available for free. After keeping it all locked away for the last two years to everyone but subscribers, the gray lady is opening up to the masses. Is it a coincidence this was also the first day The Pirate’s Dilemma was mentioned in the New York Times on the Freakonomics blog? Probably.

Spiralfrog Logo

Spiralfrog, the ad-supported free music site supported by Universal Music Group, finally launched Monday after several false starts, with 800,000 songs free to download, not to mention high resolution music videos. The music is DRM protected, it won’t play on Apple devices and you have to log into the site every 30 days, or they disable your account. By all accounts, Spiralfrog is not quite a prince yet, and it won’t put The Pirate Bay out of business anytime soon. But given time, (not to mention iPod compatibility and DRM free music…) it may grow into a great resource.

Open Office logo

OpenOffice 2.3.0 also launched today, with a host of new features and improvements, beefed up security and a ton of new extensions. According to OpenOffice, “It’s a major release and all users should download it.” I’ve been using Open Office for sometime for presentations, it’ a great free alternative to Microsoft Office.

Hipster Olympics

Business of Software 2007

Business of Software 2007

I’ll be speaking in Silicon Valley next month at Business of Software 2007. They’ve got a really cool line-up, including the legendary Guy Kawasaki, and Eric Sink, one of the original architects of Internet Explorer. I’ll be talking about the pirate’s dilemma in the context of the software business, and what can be done about it. It takes place on the 29th and 30th of October, and there are still some tickets available here.

The debate goes on

Over the last week, Prince and The Nine Inch Nails have both come out with some more strong opinions about the pirate’s dilemma the music industry is facing.

According to The Nine Inch Nails Hotline, The Nails were back in Australia over the weekend and lead singer Trent Reznor had this to say:

“Last time I was here, I was doing a lot of complaining about the ridiculous prices of CDs down here. And that story got picked up and got carried all around the world and now my record label all around the world hates me, because I yelled at them, I called them out for being greedy fucking assholes. I didn’t get a chance to check, has the price come down at all? I see a no, a no, a no… Has anyone seen the price come down? Okay, well, you know what that means – STEAL IT. Steal away. Steal and steal nad steal some more and give it to all your friends and keep on stealin’. Because one way or another these motherfuckers will get it through their head that they’re ripping people off and that that’s not right.”

Meanwhile Prince, who recently gave away his latest album, “Planet Earth”, in the UK free with The Mail on Sunday, came out fighting from the other corner this time, sicking his lawyers on YouTube and eBay.

“YouTube … are clearly able (to) filter porn and pedophile material but appear to choose not to filter out the unauthorized music and film content which is core to their business success,” said Prince’s lawyers. “Prince strongly believes artists as the creators and owners of their music need to reclaim their art.”

The Shock Doctrine

My brilliant editor at Penguin in London, Helen Conford, also edited Naomi Klien’s latest book The Shock Doctrine. I was lucky enough to see Naomi Klein speak in London last night about this, and it was fascinating. Almost as good as the idea behind the book is the short film made by Alfonso Cuaron (who directed Childeren of Men) to go with it, which you can view above. I haven’t had a chance to read the book yet, but it sounds like a really interesting, and refreshingly optimistic take on an otherwise very gloomy geopolitical situation. Make it a priority.

Fair use worth $4.5 trillion

According to a report out this week, fair use exceptions to copyright law are worth more than $4.5 trillion in the US alone. Which makes me wonder, how much will fair use be worth when ideas like Creative Commons really take hold?

Waving goodbye to Net Neutrality

Postman Pat

Postmen: Not network neutral.

Yesterday the fight for Net Neutrality took a turn for the worse, when the Department of Justice announced they were against the the idea that all Internet sites should be equally accessible by any user, which is the idea that makes the Internet such a great idea in the first place.

“The agency said providing different levels of service is common, efficient and could satisfy consumers” reported The Associated Press. “As an example, it cited that the U.S. Postal Service charges customers different guarantees and speeds for package delivery, ranging from bulk mail to overnight delivery.”

Does anyone really want the Internet to become more like our decrepid postal systems? I for one can live without the Web becoming artificially clogged up during the holidays because too many people are using it to send prioritized e-cards.

The DoJ didn’t mention that the Internet actually works much more like a telephone system, not a postal system, which is network neutral, and doesn’t charge customers different guarantees and speeds for package delivery. Craig Newmark, founder of Craigslist, summed up how the phone system might work if it wasn’t bult this way:

“Let’s say you call Joe’s Pizza and the first thing you hear is a message saying you’ll be connected in a minute or two, but if you want, you can be connected to Pizza Hut right away. That’s not fair, right? You called Joe’s and want some Joe’s pizza. Well, that’s how some telecommunications executives want the Internet to operate, with some Web sites easier to access than others.”

The end of Net Neutrality would create an artificial barrier to entry online which would stop small businesses from competing on a level playing field. It is protectionism of the worst kind, but the DoJ sees it differently. “Whether or not the same type of differentiated products and services will develop on the Internet should be determined by market forces, not regulatory intervention,” the agency said in its filing. But this isn’t really about market forces – which often work better on the Internet than they do in the real world. The end of Net Neutrality would also mean the telcos would have control of what you see and hear online, not you. But they wouldn’t abuse this kind of power, right?

Jackie Chan & Arnie vs. Pirates

Good Copy Bad Copy

Good Copy Bad Copy

I’ve been in London the last few days, been really busy and neglecting the blog. I just got a chance to catch up and was put on to this incredible Danish documentary Good Copy Bad Copy. If you haven’t seen it already, take an hour and watch it. This is the best doc I’ve seen yet on the copyright and culture wars currently raging, and the Pirate’s Dilemma the entertainment industries are facing. You can download it free, but if you like it and want to support the film makers who produced it, click here.

Thanks to Chris Byrne for recommending it.

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