Delivering the (Digital) Goods or
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Transcript of Delivering the (Digital) Goods or
Delivering the (Digital) Goodsor
Jim NobleWarner Music Group
The Canary in the Coal Mine
C Warner Music Group
C Warner Music Group
C Warner Music Group
“There is nothing more powerful than an idea who’s
time has come”Victor Hugo
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“Being ahead of your time is as bad as being behind the times”
Guglielmo MarconiRadio - 1901
John Logie-BairdTV - 1925
Tim Berners-LeeWWW - 1992
Thomas EdisonElec Light - 1907
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Dot Coms and Making Money
“The wild fling between a young & promising technology and impetuous financial markets is ending in an acrimonious separation. The
only outstanding question: what can be salvaged from the break up?”
Financial Times, October 13, 2000
C Warner Music Group
$2.3B$6.1B
$18.9B
($0.8)B ($1.7)B
($9.9)B-15
-10
-5
0
5
10
15
20
December-1997 December-1998 December-1999
SalesNet Income
Source: Mercer Management Consulting
10 Leading Internet Companies’ Financial Results(excluding Cisco and AOL)
(36%) (28%) (52%)Losses as a% of sales:
($ billion)
Business on the Internet
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($7.4)
($3.5)
($0.6)
1.9
5.4
2.8
($10)
($8)
($6)
($4)
($2)
$0
$2
$4
$6
$8
1998 1999E 2000P
Ad RevenueAd Spend
Source: Mercer Management Consulting; Competitive Media Research; Internet Advertising Bureau; Advertising Age; Forrester
Advertising Balance of Trade($ Billion)
Business on the Internet
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However…….The rebound is coming soon
as the Internet matures from metadata to product
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0.1 0.2 0.30.9
3.2
5.0
8.0
13.0
1.7
0.00
2
4
6
8
10
12
14
1992 1994 1996 1997 1998 1999 2000E 2001E 2002E 2003E
Source: Cyber Atlas; IDC; Industry Standard
Pages on the World Wide Web(Billion)
Exponential curves are most interesting at the “knee”
MOORE’S LAW
C Warner Music GroupExponential curves are most interesting at the “knee”
MOORE’S LAW
1990 1995 2000 2005
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Technology Drivers
1) Compression
2) Broadband
3) Internet peer-to-peer file sharing
4) Wireless
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1) Compression
Sony ATRAC 1 ADPCM / FFT Motion Picture Experts Group 1, Layer 3 MP3 DTS Sony ATRAC 3 Dolby AAC Real Networks RealAudio Microsoft Windows Media Technology 4.0 MPEG 2, 4, 7 ..etc.
5:1
400:1
For audio / video:in real time
1984
2000
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0
0
0
0
0
1
1
1
14.4 28.8 56 128 384 1.54 4 10 44.7 100 1000
37 Min
19 Min
4 Min1 Min 20
sec8
sec3
sec1
sec<1sec
2) Broadband
Broadband
Kbps
10 Min
<1sec
Narrowband
Time for Typical MP3 File Transfer (~4 Mb)
300 - 1965; 14.4k - 1985; 56k - 1995
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0
0
0
0
0
1
1
1
14.4 28.8 56 128 384 1.54 4 10 44.7 100 1000
37 Min
19 Min
4 Min1 Min 20
sec8
sec3
sec1
sec<1sec
Broadband
Kbps Mbps
10 Min
<1sec
Narrowband
Time for Typical MP3 File Transfer (~4 Mb)2) Broadband
300 - 1965; 14.4k - 1985; 56k - 1995; DSL - 2000; T1 - 2000; Cable - 2001; OC - 2005
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0%
20%
40%
60%
80%
100%
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Goldman Sachs (11/15/1999)
Narrowband Households
Broadband Households
U.S. Broadband Adoption(% Total)
2) Broadband
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3) File SharingMP3.com: Centralized Model
User
User
User
User
User
User
Source: Deliotte & Touche
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Central Registry
3) File SharingNapster: Decentralized Model
User
User
User
User
User
User
Source: Deliotte & Touche
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3) File SharingGnutella: Peer-to-Peer Model
User
User
User
User
User
User
GGGG
GGGG
GGGG
GGGG
GGGG
GGGG
Source: Deliotte & Touche
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3) Emerging P2PAIMSTER3.3 million Packages delivered by Federal Express
224 million Bulk rate letters delivered by the USPS
280 million Phone calls on the AT&T network
851 million AOL instant messages
2.1 billion Personal e-mail messages sent in the U.S.(average daily rate in January 2000)
FLYCODEFrom the creators of Napster
Legal file sharing, with Rights & Payments
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4) Wireless (with XML)
Cellphones with microbrowsers PDAs (Omnisky, BlackBerry…) Airports Spaceway (GM Hughes)
Teledesic (Microsoft)
etc….
Internet in the Sky
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A) 1/2 million
B) 3 million
C) 7 million
D) 12 million
How many users will access the Internet worldwide via devices
other than a PC this year?
4) Wireless (with XML)
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551691
779 794951
234
549
910
333
87
22
7
0
200
400
600
800
1,000
1,200
1,400
1,600
2000 2001 2002 2003 2004 2005
Wireless Internet Subscribers
Non-Internet Wireless Subscribers
Source: Industry Standard (May 22, 2000)
Global Wireless Market(Millions)
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Digital SourceAvailable?
Easily Uploaded/Downloaded?
Easy forConsumer?
Music
Books
Television
Movies
The Canary in the Mine
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Delivering Digital Goods
PRODUCT
META DATA
RIGHTS
COMPRESS ENCRYPT CONTAINER
CONTROLS
TRANSMIT
UNWRAPDECRYPTDECOMPPAYMENT
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Music Channels to Market
Source: Goldman Sachs 11/15/1999; Forrester Research
0
2
4
6
8
10
12
14
16
18
91 92 93 94 95 96 97 98 99 00 01 02 03
U.S. Music Industry Sales($Billion)
Online Sales 41%
59%Retail Outlet
Sales
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Digital Downloads
0
2
4
6
8
10
12
14
16
18
91 92 93 94 95 96 97 98 99 00 01 02 03
Source: Goldman Sachs 11/15/1999; Forrester Research
Online Sales
Retail Outlet Sales
THE INTERNET IS NOT A ZERO SUM GAME
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Strategy to Compete
This has extraordinary implications for Information Systems
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Lessons Learned Internal I.T. must become expert on Internet
service providers (not just ISPs and ASPs, but DAM, DRM, DGM….)
If you don’t get it, the business will outsource I.T. by the back door
The CIO must be seamless with the CTO
Music has one year to get it right - how long do you have?