Napster to YouTube:
The beleaguered music
industry in a digital age

YouTube Piracy smaller

I have written before about the “arms race” between banks and hackers. But there are other arms races between other industries and, instead of hackers, everyday consumers.

The current squabble between YouTube and the music industry provides a good example. A Rolling Stone article reports that YouTube has

… become a source of frustration for artists including Taylor Swift, Paul McCartney, Beck, Kings of Leon and others, who recently signed an open letter to Congress calling for reform on the law that allows YouTube to host millions of unauthorized videos. “The artist has no choice—their music is on YouTube even if they don’t want it there,” says Irving Azoff, manager of acts such as the Eagles and Van Halen. Azoff has published a separate letter to YouTube, calling for action on two issues: its relatively small royalty payments to artists, and its inability to efficiently remove content from the site.

Realize it or not, every time you hear a tune over the radio or piped into a store or other venue by companies like Mood Media (formerly Muzak), royalties are doled out. Organizations like BMI (Broadcast Music Inc.) and ASCAP (American Society of Composers, Authors, and Publishers) monitor song use and collect and distribute royalties to member artists.

YouTube poses a trickier problem. With over a billion users, any of whom can upload favorite artists’ work, it’s a gargantuan task for an outside organization to monitor song use in order to collect royalties per play. Yet YouTube has shown that it isn’t powerless when it comes to monitoring its own content. As Azoff argues in the above-referenced article, if YouTube can control porn access as well as access to its original content, certainly it can control access to copyrighted music.

The squabble isn’t new. Bootleg recordings have been around as long as the recording industry itself, but the problem grew to greater proportions in the 1970s. That was when cassette tapes (remember those?) burst upon the recording industry. Cassettes provided an easy way to copy and distribute music from other cassettes and LPs (remember those?). Bootleg organizations popped up almost immediately. As for consumers, most pirated innocently, unaware or unconvinced that they were committing heft. The music industry responded with advertising and PR campaigns blustering about legal penalties, but the threats were largely empty. Tracking down individual consumers was costlier than leaving them to their devices, so to speak.

Fortunately, piracy by cassette was somewhat self-limiting thanks to its poor quality—cassette tapes used analog technology and played at slower speeds than reel-to-reel machines used in studios. But with digital technology, quality loss from an original to a copy is all but indistinguishable to the untrained ear. Not only did underground operations selling bootleg CDs flourish, now consumers also posed a sizable threat in the aggregate. With recordable CDs, they could duplicate their favorite music with good fidelity and distribute it to as many friends as they pleased.

Troublesome as recordable CDs were for the music industry, they proved trivial compared with Napster. For all its bellowing and legal actions against Napster, the music industry was powerless to stop it. Not even a court order shutting down Napster did much good. As an earlier Rolling Stone article put it,

By late 2002, the file-sharing service that had peaked with 80 million users was no longer in business. The Recording Industry Association of America had sued the company successfully for copyright infringement, and the courts forced Napster to shut down. But the power of Napster would live on for years afterward, as more sophisticated, harder-to-kill copycats, from Kazaa to LimeWire to BitTorrent, began to take its place.

It took Steve Jobs to survey the situation and figure out a way to turn Napster-esque technology from foe to friend. Napster, Jobs saw, revealed a market that wanted inexpensive music by the song. The insight led directly to the creation of iTunes, a means by which consumers could have easy access to only the songs they wanted at an eminently reasonable 99 cents apiece. Though iTunes and online music stores that followed didn’t eliminate piracy by file-sharing, they put a serious dent in it. At the same time, they gave the music industry a new way to market its products. Here’s how Nathan Ingraham put it writing for The Verge:

Apple drastically simplified the entire music experience, defying the odds to build a music-retailing dynasty even as file sharing skyrocketed. A decade ago, Apple started to answer what would become an all-important question: how do you get consumers to pay for content again?

With YouTube, the music industry once again finds itself up against consumers who exploit digital technology while leaving copyright holders without a means of collecting for use of their work. Again, the exploitation may in many cases be unwitting, as many consumers may be unaware that music and musical performances are property, the use of which legally and morally entitles artists to compensation. Odds are some sort of legal compromise will be struck. What I’m curious to see is if there’s another Steve Jobs out there who will devise a way to turn the YouTube problem into a profitable industry.

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Splitcoin

bitcoin-2233747_1280

IN A DEVELOPMENT reminiscent of New Coke and Coca-Cola Classic (or, if you prefer, of a bisected hydra), Bitcoin split in two on August 1. As the industry puts it, Bitcoin reached a “hard fork,” dividing itself into “classic” (my word, not theirs) Bitcoin and Bitcoin Cash.

No one was surprised. The metaphorical fork had loomed in the metaphorical road for some time. Underlying the split is the fact that classic Bitcoin can process only one megabyte of transactions at a time, making transactions painfully slow. With Bitcoin’s meteoric rise in popularity and value—on Monday both Fortune and CoinDesk valued it at just under $3500—frustrations have risen, too.

As CNBC reported, Bitcoin Cash boasts a whopping eight-megabyte transaction limit. That certainly should speed things up. But then, the value of Bitcoin Cash will be inversely low. According to NextBlock Global Chief Investment Officer Charlie Morris, Business Insider reports,

… as soon as the split takes place most people will see their bitcoin holdings double. But that doesn’t mean the value of investors’ holdings will double.

Morris told Business Insider that bitcoin cash (BCC) has been trading in the futures market for about $200 to $400. Thus, if a split were to occur BCC would trade somewhere in that range while the value of bitcoin would witness a decline equal to the value of the new bitcoin.

Reactions to Bitcoin Cash have been for the most part tepid.

BitMEX, Bitstamp and Coinbase will not support or allow trading of Bitcoin Cash. According to The Verge:

A spokeswoman for CoinBase says, “If this decision were to change in the future and Coinbase was to access Bitcoin Cash, we would distribute Bitcoin Cash to customers associated with Bitcoin balances at the time of the fork. Coinbase would not keep the Bitcoin Cash associated with customer Bitcoin balances.” The exchange allowed a brief window of time before August 1st for users who wished to access Bitcoin Cash to withdraw their funds from Coinbase.

But, then, that’s as of this writing. Things change fast in the cryptocurrency world.

Things looked rosy at first, when Bitcoin Cash enjoyed an initial blip in value. But a fast decline followed on its heels, which caused enthusiasm to wane. Or perhaps it was the other way around, that is, waning enthusiasm caused value to decline. Or, perhaps not-so-natural market forces are at play: Bitcoin.com has suggested that interested parties may be artificially attempting to slow down Bitcoin Cash.

Not every sky over Bitcoin Cash is gray.

The new step-sibling seems to have had a positive effect on the original Bitcoin. According to Fortune,

“On a market cap basis, the price rise in bitcoin very closely mirrors the decline in Bitcoin Cash, indicating that investors are selling their Bitcoin Cash for Bitcoin,” said Matthew Newton, market analyst at trading platform eToro. “Additionally, investors that preferred to wait out the hard fork last week are now moving back in.”

Meanwhile, pending stakeholder approval, Bitcoin’s transaction limit is slated to increase to two megabytes in November. And it may be that the Bitcoin split has strengthened the cryptocurrency concept overall. According to The New York Times,

The divisions have, if anything, increased the excitement and the value of all the virtual currencies in the world—and banks and governments have announced their own projects to harness the technology.

In short, don’t give up on cryptocurrency. Given the rapidity of change in the field, it’s a good idea to check up on developments at least daily.

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Here’s something that
China, Mexico, and Egypt
have in common

China-Mex-Egy-digits“Get ready,” Forbes advises China, Egypt, and Mexico. Contributor Madhvi Mavadiya writes that it won’t be long before “… access to financial services will be simplified and made more available to the unbanked and underbanked in these three regions.”

This important development is thanks largely to the efforts of the World Bank Group, the Bill and Melinda Gates Foundation, the International Telecommunication Union (ITU), and the Committee on Payments and Market Infrastructures (CPMI).

In a press release issued a few days ago, the World Bank announced:

A new global program to advance research in digital finance and accelerate digital financial inclusion in developing countries, the Financial Inclusion Global Initiative, has been launched … The three-year program focuses on three different “model” developing countries—China, Egypt and Mexico—and consists of two complementary operational and knowledge work streams.

This raises two questions. The first question is, Why bring digital banking services to developing countries? The Gates Foundation provides a compelling answer:

A growing body of evidence suggests that access to the right financial tools … can determine whether a poor household is able to capture an opportunity to move out of poverty … In fact, research has shown that the most effective way to significantly expand poor people’s access to formal financial services is through digital means.

The World Bank agrees. According to its website,

Around 2 billion people don’t use formal financial services and more than 50% of adults in the poorest households are unbanked. Financial inclusion is a key enabler to reducing poverty and boosting prosperity.

The second question is, Why China, Egypt, and Mexico? In the above-referenced press release, the World Bank reports that

… Egypt has the potential to bring a large number of people into the formal financial sector (more than 44 million adults). These analyses found that Egypt has adequate laws, regulations and financial and ICT infrastructure, but a lack of funding to cover related reforms.

… China has an increasingly well-developed legal and regulatory environment and financial infrastructure, as well as a supportive ICT infrastructure …

… Mexico has shown a strong commitment to financial inclusion with its new National Financial Inclusion Strategy … as well as a draft fintech law … [and] has the potential to become a regional and global model … despite relatively low levels of financial inclusion.

In large measure, it is thanks to the advent and subsequent ubiquity of mobile technology that has made this altruistically motivated effort possible. In a speech at the Asia-Pacific Digital Societies Policy Forum 2017, ITU Deputy Secretary-General Malcolm Johnson said that an estimated two billion adults worldwide have no in-person bank account access, yet of those a surprising 75 percent have access to a mobile phone.

The World Bank, which spearheads the Initiative, began life in 1944 as the International Bank for Reconstruction and Development. Its original goal was to help war-torn countries get back on their feet in the wake of World War II. Over time, that mission expanded to that of providing funding and knowledge for developing countries in general. Today, the World Bank has two stated goals, both to be achieved by 2030: To end extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3 percent; and to promote shared prosperity by fostering the income growth of the bottom 40 percent for every country.

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Dawn of the artificially intelligent banker

hand-1571842__480With every Siri, Alexa, Google Assistant, and Cortana upgrade, conversations about AI—artificial intelligence—inevitably arise. Also inevitably, out roll the usual questions from definitions to ethics, usually set against the backdrop of a dystopian future. But in the here and now, the growth and status of AI-like applications portend no small developments for the financial services industry.

The above-referenced ethical questions often have to do with whether a machine with humanlike sentience should be accorded human rights. These sometimes sprout from fanciful views such as those held by computer scientist, inventor, author—and would-be futurist—Ray Kurzweil. His bona fides as an inventor and computer scientist are well established, but Kurzweil-as-futurist waxes a bit over the top. In a 2005 TED talk, Kurzweil predicted that in 2029 nano bots will …

… go inside our brain, interact with our biological neurons … shut down the signals coming from your real senses, replace them with the signals that your brain would be receiving if you were in the virtual environment … a tremendous expansion of human intelligence through this direct merger with our technology …

I kinda doubt it.

Some equate AI with a machine’s ability to pass the Turing Test. The 2014 movie The Imitation Game made the late mathematician Alan Turing a household name. Turing famously proposed a test wherein an unseen machine would exchange notes with a human. If the machine could convince the subject that it was a human, it would be reasonable to say that it was capable of imitating human thought.

There’s an important distinction to be made: Imitating human thought isn’t thinkingBut there are many who argue that AI needn’t necessarily invoke an Isaac Asimov-esque threat from cyborgs or even pass the Turing Test. For that matter, AI needn’t be good at all things. It can be good at just one thing.

Take apps like the above-referenced SiriAlexaGoogle Assistant, and Cortana. They are by no means sentient, nor are they capable of reasoning, but they are great at recognizing human speech across multiple languages (according to MacRumors, Apple leads the pack with “21 languages, localized for 36 countries”) and, to a point, learning how better to interact with users. Considering regional accents and the many ways we humans can express the same thought, that’s no small feat. But then, last year Siri alone had 2 billion users requests—per week—at its disposal for analysis.

Self-driving cars are also an arguable foray into AI. They must make decisions that look like thinking—the programming this requires is beyond me—but there will likely be no self-driving car apocalypse when a Smart car suddenly lives up to its name and organizes its fellow vehicles to take over the world.

Most important for our purposes, today you can order
Alexa 
to help with basic banking transactions …

… which Extractable’s Chief Analytics Officer Mark Ryan happens to see as the beginning of a trend. He wrote in an article for The Financial Brand,

In the next 5 to 10 years, we will most likely see Web traffic to banking sites and mobile applications drop by over 50%. We know that an average of over 50% of the traffic to online banking through browsers and mobile applications is there to perform the simple task of checking a balance and then leaving.

As voice recognition and voice authentication mature, banks will be able to offer customers the ability to perform their most common banking tasks such as checking balances by simply talking to an Internet-connected device (i.e. car, television, watch). The integration of more voice devices (and WiFi connections) in automobiles may be one of the major tipping points.

If Ryan is right, then voice-activated banking might be the nearest thing to an AI apocalypse on the financial services horizon. But “apocalypse” is a bit melodramatic. After all, digital banking was no apocalypse. It was just one heck of an opportunity, and the banking industry is doing a good job of seizing it. I suspect we’ll do the same with voice-activated banking.

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Do you really want
We’re sneaky®
as part of your brand?
Thoughts on direct voicemail messaging

cat-1309710_960_720CERTAIN MARKETING tactics, legal though they may be, can be troublesome. Today’s ambivalence du jour concerns direct voicemail messaging. 

As its name implies, direct voicemail messaging sends a prerecorded message straight to voicemail. Since phones do not ring and charges for minutes do not rack up, Do Not Call laws don’t apply. 

Companies that provide the service for generating leads claim (what else would you expect?) that direct voicemail messaging is effective. 

Fine, but sometimes there are other considerations, e.g., it can come across as sneaky.  

For one thing, consumers cannot block direct voicemail messages. For another, just look at the names of selected service providers. Names like Voicecasting might sound innocuous enough, but the field also includes gems like Slydial, Slybroadcast, and Callfire

Direct voicemail messaging appears to enjoy some popularity among financial institutions: 

The most frequent users of Ringless Direct-To-Voicemail are Debt Collectors, Financial Institutions and Student Loan Servicers. 

That excerpt comes from the Do-Not-Call Protection website, whose motto is “We help business to business, business to consumer and single-agents to comply with the Do Not Call Laws and Telephone Consumer Protection Act.” They’re not a consumer advocacy group, so by “helping to comply” they more likely mean “avoiding legal hot water” than “avoiding being annoying to consumers.” 

As I write, Direct voicemail messaging is facing new legal challenges. The New York Times reports: 

Regulators are considering whether to ban these messages. They have been hearing from ringless voice mail providers and pro-business groups, which argue that these messages should not qualify as calls and, therefore, should be exempt from consumer protection laws that ban similar types of telephone marketing. 

But consumer advocates, technology experts, people who have been inundated with these calls and the lawyers representing them say such an exemption would open the floodgates. Consumers’ voice mail boxes would be clogged with automated messages, they say, making it challenging to unearth important calls, whether they are from an elderly mother’s nursing home or a child’s school. 

… The commission is collecting public comments on the issue after receiving a petition from a ringless voice mail provider that wants to avoid regulation under the Telephone Consumer Protection Act of 1991. That federal law among other things prohibits calling cellular phones with automated dialing and artificial or prerecorded voices without first obtaining consent—except in an emergency. 

The United States Congress appears divided on the matter. (Congress divided? I know, you’re shocked.) Ars Technica reports

In March, a marketing company called All About the Message petitioned the Federal Communications Commission for a ruling that would prevent anti-robocall rules from applying to ringless voicemails. But the company withdrew its petition without explanation in a letter to the FCC last week, even though the commission hadn’t yet ruled on the matter … 

The Republican National Committee supported All About the Message’s petition, claiming that it has a First Amendment right to use direct-to-voicemail technology without any TCPA restrictions. Senate Democrats opposed the petition, saying that it would allow “telemarketers, debt collectors, and other callers [to] bombard Americans with unwanted voicemails, leaving consumers with no way to block or stop these intrusive messages.” 

I won’t wax partisan here, but I will point out that legislated regulations often overshoot, piling on onerous requirements no one had counted on. If you don’t believe me, I’d suggest brushing up on Dodd-Frank.

I’ll also point out that self-regulation is one of the best ways to avoid onerous government regulations. That’s why organizations like the Data & Marketing Association (DMA) urge members to police themselves. “These guidelines,” reads the introduction to DMA Guidelines for Ethical Business Practice, “represent DMA’s general philosophy that self-regulatory measures are preferable to governmental mandates.” 

From a marketing standpoint, I return to my above assertion that direct voicemail messaging, especially for lead generating, can appear sneaky. Upon finding a directly deposited voice mail message, many consumers react with How did that get there? instead of I’d better pay attention to this message. 

Unless you’d like We’re sneaky to become part of your brand, you might think twice before using direct voicemail messaging.

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