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Apple’s $1 billion patent infringement victory against Samsung raises a number of increasingly pressing issues about innovation in the consumer technology space. There is no doubt that Apple has done more than any other single company to shape the smartphone marketplace. It is also clear that the average smartphone form-factor and feature set look dramatically different post-iPhone than they did pre-iPhone. And there is an argument to be had that those same form factors and feature sets bear more than passing resemblance to the iPhone. But this raises the issue of where the ‘a high tide raises all boats’ market evolution argument stops and the patent infringement one starts.
Samsung is the Buffer State in Apple’s Proxy War with Google
Apple’s case against Samsung was in effect a proxy war against Android. Samsung became the target because it was doing a better job of making Android compete against Apple than anyone else. While competitors like Nokia and HTC have laundry lists of product names and numbers, Apple’s elegantly simple iPhone brand cuts through the smartphone name clutter like the proverbial knife through warm butter. Among numerous other factors Samsung recognized the supreme value of establishing such clear brands (such as the Galaxy) and pivoting their portfolio around them. Samsung became competitor #1, the Android success story, racking up a 50% share of the smartphone market in Q2012 according to IDC, which compares to just 17% for Apple.
The final impact of the ruling is yet to be seen, with countless potential challenges and subsequent actions likely to come. There are also interesting geopolitical issues at stake, not least of which is the degree to which a Californian jury and judge will be perceived on the international stage as having the requisite impartiality to rule upon competition between a South Korean and a Californian based company. But leaving aside the legal permutations for a moment, let’s instead take a look at the known unknowns and their likely impact on the marketplace:
- Competitive patent strategy. Over the last couple of years we have seen an acceleration of the use of patents in the consumer technology and Internet arenas. Patents have quickly become established as an extra part of competition strategy among big technology firms. Now, instead of just relying on product development, marketing, pricing and positioning technology, companies can use patent claims to help strengthen their position at the direct expense of the competition.
- Patent arms race. With the rise of patent trolls (companies’ whose sole objective is to acquire patents and then try to sue established companies for patent infringement) the big established companies themselves have started to acquire patent arsenals. For example, earlier this year Microsoft paid AOL $1.1bn for 925 patents, 650 of which it promptly sold to Facebook for $550m. Before that, in 2011, Microsoft teamed up with long-time rival Apple as well as with just about anyone whose anyone in the smartphone business who isn’t Android (RIM, Sony, Ericsson et) to spend $4.5 bn on 6,000+ patents from bankrupt Canadian teleco equipment maker Nortel. Google had been on the other side of the bidding war and lost out with what was seen by some as a whimsical bidding strategy. Google promptly went onto to buy fading handset manufacturer Motorola for $12.5bn, a company that just happened to have c.17,000 patents in its archives. There are uncanny echoes of the Cold War with both sides stockpiling nuclear weapons. The difference here is that the arsenals are being thrown straight into battle rather than being held back for fear of Mutually Assured Destruction.
- Patents no longer fit for purpose? Patents raise as many questions as they provide answers for in the software and technology spaces. Not only are they subject to legal challenge, the language used in them is often inadequate. What gives a piece of technology competitive edge is not having rounded corners, but the digital mechanics underneath the hood. It is the code inside a piece of software that gives it edge, not the broad user behaviour it supports. That’s why we have market leaders in software and product categories that are crowded with lesser competitors that support the same basic user behaviour. And yet patents focus on the exact opposite of this equation. Patents are typically vaguely worded affairs that talk about broad behaviours such as “a system for controlled distribution of user profiles over a network” (taken directly from a patent which forms the basis of Yahoo’s case against Facebook). Even the more detailed patents – such as Apple’s recent Haptics filing – have a procedural focus. And of course they have to. Patent applications are exactly that: applications. There is no guarantee they will be granted and so a filing company is going to be as secretive as they possibly can rather than give its competition edge. But even if there was a guarantee there is no way in which a technology company is going to publish its source code on a publically accessible document.
And therein lies the problem, if a company is not ever going to include the secret sauce which gives its product the real edge, then what is a technology patent really going to be able to definitively cover? If it inherently comes down to a discussion about supporting usage behaviours then we end up with an unusual and potentially restrictive lens placed upon innovation and invention. The history of innovation and invention is that when something comes along that is good enough, it permeates through the entire market. Sometimes this involves licensing of patents, more often than not it happens through creating similar but different inventions. Think about any consumer electronics purchase, whether that be a digital camera, a laptop or a TV: the products all have pretty much the same mix of features and form factor in their respective price tiers. This is what has happened to date with smartphones.
However if the Apple ruling survives all challenges and is then extended it could have the effect of a forced and artificial split in innovation evolution. Instead of the touchscreen smartphone becoming another step on the innovation path it could become the sole domain of Apple and force the competition to pursue entirely different evolution paths. Now there are obviously both positive and negative connotations of that. But whatever your view point, it will be dramatically different from how other consumer electronics product categories have evolved.
With its origins in early 18th century England, there is an increasingly strong case for a major review of the global patent system and whether it is the right tool to strike an appropriate balance between protecting intellectual property and fostering innovation in the 21st century consumer technology marketplace.
Who’s Competing with Who?
An interesting post-script to the Apple-Samsung case is looking at who else will potentially benefit other than Apple. Right now there will be a host of handset manufacturers who will be hurriedly looking for a Mobile OS Plan B. An uncertain Android future doesn’t leave them many places to turn to other than Microsoft’s Windows 8. Historically no friend of Apple but these days of course part of Apple’s Patent Pact. How long that alliance will remain intact remains to be seen, though a cynic might argue that Apple would leave it in place just long enough for Microsoft to get enough of a foothold to fragment the OS marketplace before it renews hostilities between Cupertino and Redmond. By which stage Apple could have billions worth of patent settlement dollars to wage war with…
Back in January 2011 in my Midem address I posited that YouTube was digital music’s Killer App with about 25% monthly user penetration across all European adults in 2010, up a few percent from 2009. I also explained that penetration for the under 25s was about double that. The most important point though wasn’t the scale of adoption, but adoption relative to other digital music activities: the next most popular digital music activity was P-to-P (with about half the adoption rate of YouTube) and paid downloads were fourth with a paltry 11%. The key takeaway was that YouTube is succeeding with digital music adoption where other services were not, that YouTube had got something right from a user experience perspective that others hadn’t, and that the industry should do a better job of understanding YouTube’s popularity.
19 months on and the latest Nielsen stats reveal it is still the same story. In some quarters it’s being viewed as a dramatic sea change in the balance of digital power. It isn’t of course, instead it is the successful consolidation of a market leading position by YouTube. Some of this has happened organically but much is down to sheer hard work by YouTube.
Since my 2011 Midem speech, YouTube have upped their game strategically, adding functionality and investing heavily in content channels. They’ve done so largely because of the V word…Vevo. Vevo may have its challenges but strategically it was a master stroke by Universal Music: start pull the best music video out of YouTube, put it into an interface that is so deeply integrated into YouTube that it just feels like another YouTube channel to users, and all the while have YouTube deliver the audience. Unsurprisingly YouTube got nervous, particularly when Vevo started ruminating on taking the service out of YouTube entirely and into Facebook.
YouTube is No MySpace
Music matters massively to YouTube: they kick started the online video revolution with short-form video clips, but the momentum firmly shifted to mid-form video providers like Hulu and iPlayer. If you scraped music video away YouTube was left with skateboarding dogs and ‘Charlie Bit My Finger’. Hence YouTube’s investment in features like playlist functionality and $200 million in original content channels. Back when MySpace was beginning to lose ground to Facebook I suggested that MySpace should stop pretending it was a social network anymore and start focusing instead on being a platform for bands and their fans. They didn’t and they ended up losing out on both counts. YouTube, to their credit, have recognized what their strengths are and are playing to them.
Why YouTube is Still Music’s Killer Digital App
YouTube is still digital music’s killer app because:
- It’s free. Of course so are Spotify and Pandora et al but YouTube is free and fully on-demand everywhere. If you want Spotify on your iPhone you have to pay £/$/€9.99 to do so, but you can listen to unlimited on demand YouTube music for free on the iPhone, it’s even integrated into iOS (for now at least). In fact nearly two thirds of iPhone users use the iOS YouTube app.
- It has all the catalogue in the world, and more. Because of the way YouTube entered music content licensing through the back door in the days before its acquisition by Google by selling stakes to the major labels, YouTube has ended up with effectively being given clearance for much much more content than every other licensed music service. Granted YouTube have since implemented a largely effective takedown process, but the fact that YouTube’s catalogue is music uploaded by users means it doesn’t have the same restrictions other services do, such as territory restrictions, music not yet being officially available digitally etc. If there’s a piece of music in the world then the odds are it is on YouTube. Which cannot yet be said of other music services.
- It just works. YouTube is available wherever you are in the world (in the main), on whatever device you own, and you don’t have to register or sign up. It also has effective discovery tools such as user votes, comments and collaborative filtering, and features like playlists.
- You can download to keep too. Streaming ripping might not be part of the official YouTube featureset, and recent action has been taken to block one such service, but there are dozens of stream ripping apps out there and they are actively used by a meaningful share of regular YouTube users.
- It’s an audio visual experience. And of course, YouTube is so much more than music. It’s an interactive, social, audio visual experience designed for the digital age. Whilst most other licensed music services have little or no video.
It would be pretty hard to compete against that combination of features if it had a 9.99 price tag on it, let alone when all of that is available for free, to all consumers in virtually every territory in the globe. Which brings us to the YouTube dilemma.
The YouTube Dilemma
YouTube is simultaneously the most important licensed digital music service on the planet and one of the biggest challenges to all the other licensed music services. It used to be that YouTube was clearly a discovery mechanism, and indeed it still is, but it is now also firmly a consumption vehicle. YouTube has become both the journey and the destination rolled into one.
Of course there are plenty of music fans who use YouTube as a complement to buying music or subscribing and as a means of finding and sampling new artists. But plenty more use it instead of those other options, particularly those young Digital Natives who value free, convenience and ubiquity over audio quality.
So the music industry has a difficult balance to maintain, between ensuring the most valuable digital discovery asset it has its disposal remains vibrant, but at the same time ensuring it doesn’t hinder the opportunity for services which generate much higher revenue per user.
YouTube and parent Google can do a lot to help. They can accelerate their focus on making YouTube’s content unique with further investment in live concerts, exclusive sessions etc. More importantly they can more deeply integrate with paid music services. (And if integrating deeply with Apple and Spotify might be a step too far then this should be the development path for Google’s music strategy.)
Meanwhile the music industry can help redress the balance too. YouTube has defined what the mass market digital consumer expects a music service to look and feel like: namely it needs to have video, work seamlessly on all devices (not just 1 extra device at a time), and have social features. YouTube has set the blueprint for the next generation music product, the industry now needs to pick up the baton and transform that prototype into a high quality, premium product.
On Friday Google announced that it would start to downgrade the search results of sites which have “high numbers” of copyright takedown notices. Make no mistake, this is a major step forward and is something record labels have been pushing for. Over the last year labels and their trade bodies including the RIAA, IFPI and BPI, have shifted some of the emphasis of their anti-piracy efforts from pursuing the symptoms of piracy (e.g. suing file sharers themselves) to tackling piracy at source (e.g. blocking domains and search results). Though there are ‘freedom-of-Internet-speech’ issues surrounding this approach, it makes sound strategic sense, with a much higher potential degree of effectiveness, and without the PR own-goal of taking your own consumers to court.
But just as domain blocking faces numerous technical challenges such as VPNs and proxy servers (see my previous post for more details) so Google’s search de-prioritization move has chink-filled armour:
- Google’s takedown process is imperfect. Google has made major strides in working with copyright owners during the last year, with many labels reporting marked improvements in the takedown process. But the process still has flaws, such as arbitrary limits on the number of claims. Also the process is resources intensive, both for Google and rights owners. So takedown efforts and the resulting list of key infringers is going to lean towards the short head rather than the long tail. Which means the most popular destinations will be hit most while the new up-and-comers will have an opportunity to become established before they feel the effects of downgrading.
- Downgrading will impact individual site audiences relatively slowly. Search result downgrading will also be slow to impact the popular piracy sites whose established user bases will typically go direct to sites via bookmarks or use alternative discovery methods such as torrent trackers. Downgrading will impact their new user acquisition but existing audiences will dwindle more slowly.
- Why downgrade when you can block? If Google genuinely believes that the target sites warrant downgrading because of copyright infringement, then why only go as far as downgrading? Why not just all out block? Just how effective will downgrading be? Will the results drop down the page? Disappear off the front page? Or disappear beyond page 20? (I do not think, though, that there is a case for Google to proactively increase the performance of licensed services as some are pushing for. Firstly these services should invest more heavily in SEO and SEM like everyone else has to. Secondly prioritizing results would fly in the face of Google’s entire search business proposition. And if music sites get a boost then why shouldn’t everyone else? There is strong precedent for Google downgrading – such as the recent link-farm downgrade – but not boosting).
- Some serial infringers are more equal than others. Veteran search guru Danny Sullivan, in typical fashion, managed to uncover a really interesting angle to the story: that Google-owned YouTube will not find itself on the downgrade ‘hitlist’ despite having more takedowns than probably any other site. Though this certainly smacks of double standards –and raises issues about separation of church and state – there is a pretty compelling case for ensuring YouTube remains readily accessible: namely that it is the #1 digital music app in the world. (Granted it may cannibalize many more valuable services, but that’s a separate issue that the industry and Google need to fix).
Of course, the entire takedown and downgrading strategy cannot be viewed in isolation. Google are a reluctant copyright enforcement force, as they make clear by ensuring that every DMCA-complaint blocked search result links through to http://www.chillingeffects.org/ (an Electronic Frontier Federation backed site that helps sites who have had DMCA takedown notices strike back at content owners.) Google are going down this path of ceding more ground to content owners not because of a strategic change of heart, but because they want something back. Whereas Apple has made paid content a success in the iTunes ecosystem, Google has thus far failed to achieve much in the Android ecosystem. (Or to put it more accurately, in the various Android ecosystems – which is of course one of the core problems for Google).
You Scratch My Back…
Google Play is Google’s big content play (no pun intended) and they want more in it from content owners, and they want to take it to more territories. Taking the action that they have done so is designed to make those prickly licensing conversations with rights owners that bit smoother. And Google may well get a lot of what they want. They’ve pretty much played hard ball so far, taking the position that they can bring more scale to the music industry than any other partner and so should be given preferential terms. And they back this position up with a pretty good poker face too, as illustrated by their refusal to meet label license fee demands for a point-and-play locker service and instead following Amazon’s lead in launching a DMCA compliant upload-and-play locker service. Now they can come back to the table with the ‘we’ve done what you asked us to do’ card in their hand.
Music industry, over to you, raise or fold?
Slowly but surely, the web audio API creeps toward being something that’s usable in more than one browser at a time. In the meantime, we get a glimpse of how generative music could be a part of what’s to come. It’s a long way from those horrid, looping audio files that plagued the Web in its heady 1990s adolescence.
Today on Create Digital Motion, I look at the aesthetics of crowd-sourcing in work by Aaron Koblin and Chris Milk – and how the view of the significance of the crowd has changed over time. Substitute “music” for “motion,” and you’ll get a similar argument about what crowds might do with sound.
But it’s worth noting the musical elements that form part of that experience. The tools are high-level, but thanks to the audio API and browser interactivity, it’s possible for users to shape the musical landscape that accompanies some of the animations. (You’ll only see the interface at top if you click an animation that has music; the others lack the tool.) In the behind-the-scenes videos, some of Google’s (and digital media’s) smartest discuss how the plumbing fit in with the art.
Also this week, our friend TheAlphaNerd has been building tools for generating your own keyboards in browser windows. Here, the applications are broad – you could build interactive learning tools for music theory and tuning, for instance, or a means for forum participants to communicate ideas through musical sketches and not just text. All the code is open source, so it’s a great place to start learning about how this stuff is done, trying some handy libraries that make your life easier, and perhaps experimenting with what online interfaces could be.
And good things are coming. (so, if you can dig in and help and make this happen…)
It’s getting to be about time to do a full review of how HTML5 and the Web are getting on with sound, but that will have to wait for another day. In the meantime, if you’ve seen compelling examples – or have questions from a development or user perspective – let us know.
Kanye West just released his music video for Mercy, with Big Sean, Pusha T, and 2 Chains. Nothing more needs to be said…
I like how they made it super super wide screen. Its like… they made it so its a premium. Only trule rich fools can enjoy that video as its ment to be seen, on some crazy super long screen tv. Which normal people dont have… so we are stuck with a very thin wide version.. which i still love. And i like the fact that true viewership is reserved, kindof funny.