Sunday, January 13, 2013

emergency story

Read two books in last 2 days. "Durbar" by Tavleen singh and "Sanjay story" by Vinod Mehta. The first was story from imposition of emergency to death of Rajiv Gandhi and the second was story of Sanjay Gandhi. Following observations came to mind

a) A politician is as worse as the company as he keeps which is in itself a reflection of ones character and understanding. Sanjay was 12th pass, diffident and no good who came to fore during imposition of emergency and he used the same simplistic approach that he can fathom to complex problems making things worse rather than solving anything. Rajiv was a foreign educated refined person but with no understanding of India and no experience of politics. So his apolitical solution to problems in Kashmir, Punjab, Sri Lanka led to political problems being transformed into conflicts and human suffering.

b) Democracy is not a divine right for anyone. Things can change very easily,so always be on the lookout for providing enormous power to any specific individual or sets of individual.

Tuesday, October 2, 2012

losing scale in advertising: making of smaller brands

Why are there few winners and multiple losers in brand creation? There are three toothpaste brands or mobile phone brands etc? The reason is the advantages of scale in reducing cost. Reduced cost help create few winners and more losers as consolidation is the key. So if there is reduction in economies of scale, we would see smaller brands being created in future. One of the places where economies of scale work is branding cost. There are brands which are created on BTL but all bigger brands are created on TV. TV advertising has a reduction in cost on scale of revenue and has a big play for economies of scale. One development in field of advertising is distributed media in form of internet. Though online advertising is a small part of full advertising budget but media is going to certainly change from broadcast to peer to peer even for TV like what hulu is doing. In the one to one media, better targeting can be done by marketers with increase in CPC rate and more of a linear advertising cost. The linear rate would allow small brands to be created through TV. The economies of scale in production though remains. Economies of scale in supply chain would possibly also reduce due to ecommerce but that is for another post.

Sunday, September 30, 2012

Maps and iphone

Looking things ex-post, Apple ignoring map development for last 5 years and then launching a crappy map app seems to be a big strategic miss. Location based services will be a big piece for smartphone monetization. Search remains the gateway for internet in PC and the same will work for mobile internet/data services. And local search is the key be it ecommerce which includes product/service etc. Seems that Steve jobs missed this while thinking about what smartphone will be able to do when he thought about iphone otherwise Apple would have a better map solution like it has for media consumption like e-books, music etc, voice and utilities(App platform)..

Thursday, December 9, 2010

economics books and resourcers

Friday, November 19, 2010

Free Internet and totalitarianism

This whole internet revolution was lauded on the premise that the technology will reduce the transmission cost of information. Everyone will posses same access to information and there will be minimal arbitrage in access. One of the expectation was that there will be a single fact. You cant lie and get away with that. Internet is supposed to make totalitarian regime difficult to manage as people will have access to other sources of information. 1984 will be only a fiction. People will be able to cross-check statements and will not be hoodwinked by lying statesman.

But has that worked. When I see these groups of ill-informed media analysts, pundits who distort fact to prove their agenda and get away with that. When I see people believe those lies and persuaded to be led by them. Even though checking facts is a mouse click away, people believe outright lies.

That forces me to believe that facts are as good as source. We human do have a need of trusting someone and being led by them. Thats why anyone can distort facts and if he/she has an convincing argument to make or he/she can harness the infallibility present in human nature, that person will be able to carry his/her word. So 1984 is not a fiction, there can easily be another hitler.

"Opinion matters and not truth because we human minimize the usage of rational capacity"

Sunday, November 7, 2010

simple vs complex problems

"If you have a simple problem, you can offer a simple solution. But the economy is a hugely complex problem. So we either simplify the problem and offer a solution, or embrace the complexity and do nothing"

One can apply the same learnings to business. Businesses are very complicated problems not as complicated as economics but certainly more complicated than the pure sciences. One can build complex models which doesn't have any solution, or cant monitor the solution or dont know the inputs to the solution. So the problem has to be simplified and the limitations well understood. This makes the solution easy to use and dynamic so that the simple solution can change with situations.

Thursday, August 19, 2010

Media business - the elusive search for scale and customization

Any business search for scale and customization for growth. Scale provides cost advantage; it is less costly to serve more customers because of division of fixed cost among bigger customer base. Assembly line production was one of the main reasons of rapid progress of automobile industry. Customization is what allows business to capture a larger premium from customers and hence higher revenue. If people are able to get products/services based on their individual tastes, they will be willing to pay a premium. And since profit = revenue – cost and through scale and customization, business can increase revenue and reduce cost, bottom-line improves.

It is quite difficult to achieve scale and customization in the same breath. Scale needs uniformity of production while customization requires the opposite. There is a compromise to be made between those factors and in essence, businesses thrive on some linear scale between scale and customization. I remember that in OM, there was a case where the company “national Bicycle” has been successful in achieving these twin objectives.

Media business has also followed the same trend. The elusive combination of scale and customization has been the objective and with the advent of internet, it seems that media has found something spectacular where other business has been slightly successful –scale and customization.

For this we first need to define media. Media is an abstract concept here which subsumes all form of activities which are outside productive working hour. Books also are a type of entertainment on an abstract level. Reading books don't produce food to eat or clothes to wear or machines to manufacture clothes. It may aid in making us more productive but other form of leisure also do the same. Same goes for movies, music,plays, news etc. Lets retrace the steps of evolution of media business and we will find the trend towards this search.

Nautanki in villages where musicians, dancers would come and perform for a paltry sum of money was the most ancient form of media. The performers would be quite poor as it was difficult to monetize the activity. The reasons were many. First people were not productive enough and so leisure was very expensive. Second they didn't produce enough surpluses to afford paying for leisure. Third, these artists also had limitations of scale. In a year, they can produce a maximum of say 365 shows if they do it once a day. That will also be difficult to achieve since they have to move to different places. Villagers will not be willing to pay to see the same act. Variety in media will be inadequate as the artists will have limited songs to play and since this wasn't a very profitable profession, there will not be many different performing artists. But there will be variety of art developing in different pockets of world. Since there will be limitations of how much distance that artists can travel, entertainment tastes will be local. So we had quite a form of media which was local, limited in variety on a local scale and artists were poor. Whether poor artist led to poor or good quality is a matter of different discussion.

Going ahead, artists found a different source of sustenance. The productivity of people was low but there were few who had the control of means of production through use of sword, winning the ovarian lottery etc. These people were hence able to collect monopoly rent arising out of their control of means of production and hence the surpluses generated by the rest of the population were captured by them. These were the kings, nobles and ministers of ancient kingdom. So artists thought that making money would be easier if they cater to the taste of this minority of population like ministers, kings etc. This will provide them scale in monetization. The kings will capture the surplus of population and the artists will get some portion of it. This started the phase of what can be called the regal media. As you don't need to cater to popular taste, one can make "art" movies rather than mainstream "bollywood" movies and make good enough money for their living. This media will have lots of variety and "local" form will go away. There will be some powerful kings who needs to be pleased and artists will form music to their taste. So we saw all these famous gharanas "Mughal", "Carnatic" etc. They took the place of folk music.

Printing Press was the next set of innovation which revolutionized the form of media called books. The ability to make copies out of a form of art was a very powerful concept which can bring the required scale in media. The fixed cost increased while variable cost reduced. The scalability by its nature has few winners and many losers. So now there will be few books which will be widely read and many books which will never have audience because they will not be able to find enough profit to compensate for the fixed cost. But customization was not easy. Niche writers will not earn much as it is difficult to monetize readers in different geography without expending high cost of distribution and advertisement.

Movies, camera and theaters did to visual media what printing press for books. One can make multiple copies at very small cost and distribute it. Popular movies started taking the center-stage since the commercialization was much easier. But this visual media was lacking in convenience of watching it any time. One has to go at a designated place to watch movies. So variety in content was limited.

Television and radio solved those issues. One channel can broadcast content while customers can receive that content through installing television in their home. But the question was how to monetize such a business model. Cinema theater can charge subscription fee to enter the theater. Television was an open media. Putting restriction on what can be captured and viewed by a single customer was impossible from a technical perspective. This was quite spectacular also in the sense that there was now a divison between content creator and device producer. Device companies which produce TV and content creator needed to come up with a complex arrangement if they had tried to monetize this with the existing model. The advertisement model used in newspaper industry was applied here and we saw a revolutionary growth in television. The “idiot” box was able to play varieties of programs not possible with theatre due to convenience of watching. 24 hr media help to capture a wider audience. Advertising with its scale advantage was able to produce big winners. Now there were no regional stars but only national stars. Whoever wins the publicity race has to win the race on national level. Earlier it may be the cases that say local cricket players were able to monetize affection of their city and everyone earn decent money. Now with advent of television, we had national cricket player who capture surplus of all the regional players. The regional players become poorer and national players become much richer.

That’s one example of how scale can make few winners and large number of losers. This model though had enough flexibility to develop customization on some level. Regional television channels catering to peoples taste developed and grew. They profited from need for local companies to advertise in local areas and hence took away the scale advantage of national television channels.

Internet is a totally different paradigm which subsumes all the advantages of various media channels. The main advantages are

a) Visual, voice and text and much more: Internet had the ability to support one and all types of display.

b) Interactive: This was quite extraordinary where users can provide feedback, create and collaborate to form a different type of entertainment.

c) Scale: One can reach to people in any part of the world because the IP protocol is standard across different places. So one can use that protocol to access content from any place. The audience was larger and hence the winner was much bigger. Wikipedia,youtube became a worldwide phenomena rather than its equivalent CBS,NBC in the world of television.

d) Customization: It was easy to customize to personal tastes due to two reasons. One since the reach was worldwide, it was much easier to aggregate demand from different parts of world and monetize. And other reason was that fixed cost of production became much lower. Anyone can produce content and publish it on this medium.

e) Monetization: This has been not easy to achieve and the toughest cookie to crack as can be expected. Getting money out of customers pocket has never been easy. Advertisement model has worked on some level and this will grow as soon as more people are present on this media. Subscription model can be the key here. Ecommerce is on the upswing and as soon as people start trusting this, this will have accelerated growth. Internet due to its vastness has contributed to its difficulty to monetize. People always think that there are free things available in some corner, so why pay for it. This in my view is because of the newness of internet paradigm and as soon it will mature, people will be willing to pay for information. Paying is critical to keep the internet growing. Quality of content will improve only if there is able to monetize. Wikipedia may be the best possible encyclopedia on internet but there is much to desire in terms of quality. If youtube has to replace television, monetization is the key.

So internet is one of those innovation which has broken this compromise between scale and customization. If this has to be preserved, business models have to find a way to monetize the content. The contents are much richer, realtime and whatnot . So media business shall have the ability to take a higher time out of human productive time and convert into leisure. Facebook at work is one of the example for that. And the productivity growth will definitely aid the growth in media business as leisure will become affordable.