Posts from August 2012

Lockups and Insider Selling

There is a lot of sturm und drang out there in the worlds of social media, finacial media, and just plain media about all the lockups coming off and all the insider selling going on in some big internet stocks. As someone who has played this game a few times, I tought I'd post some thoughts about this.

First and foremost, this post has nothing to do with what USV has done, might do, or is thinking about doing with specific stocks we might own or not. That's a disclaimer for those who aren't familiar with one.

When a venture backed company goes public and is worth billions (or even hundreds of millions), the investors who provided the early capital to that company are going to be sitting on a lot of stock. They can easily own 15-20% or more of these companies. But even if they own less than 10% (as Accel Partners does in Facebook), they can be looking at billions of dollars of value.

It is an investors job to return capital. I will say that again. It is an investors job to return capital. That is how we are measured. Paper gains are fine. But at the end of the day, an investor will be measured by the amount of cash or liquid stock they return divided by the amount of cash that was invested in their fund. A multiple of three is good for a venture capital fund. A multiple of five is great. A multiple of ten is once a decade.

When an investor is looking at a single holding being worth three, five, or possibly ten times their entire fund, you can be sure they are looking to lock in that gain. That's a recipe for fantastic performance and the downside of not locking that in is a lot bigger than the upside of another one or two times their fund size.

And then there's the question of whether venture capital firms are good public market investors and whether they should be managing/holding public stocks. I don't have any hard data here, but my anecdotal data says that we are terrible public market investors. That is why many VC firms have a policy of moving the public stocks out of their portfolios as quickly as they can.

I think that is a good policy. Venture capital is about capturing the value between the startup phase and the public company phase. Others should be focused on capturing the value post the public offering.

So let's go back to the expiration of lockups and the waves of insider selling that result. This is to be expected and in fact is expected by the public markets. Look at all of the short positions that get built up in the locked up newly minted public companies in the weeks before the lockups come off. Investors know that a ton of stock is going to hit the markets and they make bets that it will impact the stock price and in most cases it does impact the stock price. As JLM likes to say "this generation did not invent sex." This has been going on since I got into the venture capital business in the mid 80s and I expect its been going on for a lot longer than that.

So to all the folks out there who are shocked and outraged at all the insider selling going on, I would suggest they park their outrage at the door of capitalism. Those who took the risk of losing all the capital they bet on 20 year old Mark Zuckerberg are entitled to their return. And they will get it. And anyone who thinks otherwise has their head in the sand.

#VC & Technology

MBA Mondays: Guest Post From Dr. Dana Ardi

Dr. Dana Ardi is a friend, former colleague, and an expert in the fields of talent management, organizational design, assessment, leadership, coaching, and recruiting. Dana has taught me a ton about these areas and was a partner at Flatiron Partners where we made a big investment in the talent side of the business. I asked Dana to "bat cleanup" on this series on People and she's done that in fine form with snippets from her coming book on Betas, the new archetype of organizational leader.

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“When someone asks you, A penny for your thoughts, and you put your two cents in, what happens to the other penny?” It’s a really great question, as well as being one of my favorite among many George Carlin quotes. And it came to mind when Fred asked me to contribute a guest blog post.
 
Having just put the finishing touches on a book about organizations that’ll be out next year, I’m happy to toss that second penny into the ring.
 
I consider myself a corporate anthropologist. I’ve spent most of my life studying the cultures of organizations, how they evolve and intersect with what’s happening right this second, and how the people in them influence and shape their communities. My consulting mission isn’t to transform established, successful companies – they’re doing fantastically well the way they are. It’s to assist them and other entrepreneurial ventures with the positioning to succeed with today’s workers, in today’s new business environment, and to help them evolve.
 
In the Information Age, workers in today’s organizations are accustomed to being sold, not told. Robert Louis Stevenson once wrote, “Marriage is a long conversation,” but so today is business – which is why companies have to change or else risk going under.
 
It’s pretty clear to me that the Information Age requires a new approach to organizing groups of people, as well as to successfully function within those same organizations. This approach I call Beta, to distinguish it from the old Alpha paradigm, and it trickles down to corporate culture, recruitment, and most of all, leadership.
 
What do all the most successful leaders, companies and workers have in common? In a nugget, it’s the trait we call self-awareness. In Heart, Smarts, Guts and Luck, a recent business title published by Harvard Business Review Press, co-author Anthony Tjan argues that all successful business leaders are skilled at just that. Of the four core qualities that he has observed make up most successful entrepreneurs and business-building, they know when to dial up…or dial town. They know when to emphasize passion, lower the pitch on assertion and bypass analytical smarts in favor of creative thinking or relational skills. In short, they’re as fluid and adaptable as the businesses they run.
 
What if you want to be there, but you’re not there yet? Here are a few things to to bear in mind about today’s and tomorrow’s winning-est organizations.
 
The Most Successful workplaces of the Future…
 
    •    Do away with archaic command-and-control models. Winning workplaces are horizontal, not hierarchical.Everyone who works there feels they’re part of something, and moreover, that it’s the next big thing. They want to be on the cutting-edge of all the people, places and things that technology is going to propel next.
 
    •    Instead of knives-out competition, these workplaces put a premium on collaboration and teamwork, and on building a successful community with shared values.
 
    •    Oh, and I’m not saying workplaces should become democracies – that would never work – simply thatpeople are empowered and encouraged to express themselves.
 
    •    Winning contemporary workplaces stress innovation. They believe that employees need to be given an opportunity to make a difference – to give input into key decisions and to communicate their findings and learnings to one another.
 
Corporate Culture matters more than you think
 
    •    The best teams are hired with collaboration in mind. People who remain in the culture are those who are dedicated to the ideal that that the whole is more than the sum of the parts.  
 
    •    In the most winning corporate cultures, everyone has something to contribute. Leadership is fluid and bend-able. Integrity and character matter a lot. Everyone knows about the culture. Everyone feels the culture. Everyone subscribes to the culture. Everyone recognizes both its passion and its nuance.

    •    In winning corporate cultures, roles, identities and responsibilities mutate weekly, daily, sometimes even hourly. There’s a focus on social, global and environmental responsibility. No, these initiatives aren’t just good ideas, they really matter.
 
Today’s Most Successful Organizations…
 
    •    …look less like an advancing army and more like a symphony orchestra. They are divided up into sections rather than functions. Each section has a leader and every player is a member of a team that works in synchrony. The orchestra conductor may direct what the orchestra does, but he knows he’s not completely in charge. His sole mission: To impel the other orchestra members to play to the very best of their ability, while integrating those efforts into a concerted group effort.
 
    •    In life as in business, most people are not generals, they’re lieutenants. Nor do they necessarily want to be generals – they want to be impact players. Frankly, most of us are happy to have the opportunity to accomplish what we’re good at, and what we enjoy, so long as we receive adequate recognition and reward.
 
    •    The most successful contemporary cultures convey the message that it’s okay to be yourself, and to do your best. You don’t always have to move up; you can also move across. More important is that you are happy, fulfilled, contributing to the community and feeling productive and rewarded.
 
The Leaders of Today have to be self-aware –  and top-down mandates no longer work
 
    •    There will always be the need for decisive leadership, particularly in crisis times (and there’s a touch of the autocrat and control freak inside every successful entrepreneur). But today’s world is all about collaboration –and launching and maintaining that “long conversation” that Stevenson talked about.
 
    •    The leaders of tomorrow need to practice ego management. They should be aware of their own biases, and focus as much on the present as on the future. They need to manage the egos of employees by rewarding collaborative behavior and teamwork.
 
    •    Leaders should strive to become what Michael Maccoby dubbed “Productive Narcissists,” tempering high self-esteem and confidence with empathy and compassion. Mindfulness, of self and others, by boards,executives and employees, may very well be the single most important trait of a successful company. Companies have to define the culture; the culture can’t define them. So pre-define it!
 
    •    Finally, companies need to understand that every individual in the organization is a contributor; and the closer everyone in the organization comes to achieving his or her singular potential, the more successful the business will be. Successful cultures encourage their employees to keep refreshing their toolkits, keep flexible, keep their stakes in the stream.

Rethink Recruiting

    •    Diversity is key – and by diversity I mean of thought, style, approach and background. You’re building a team, not filling a position. Cherry-picking candidates from name-brand universities will do nothing to further an organization and may even work against it.
 
    •    Don't buy resume or credentials. Buy competence, track record, character and culture fit.
 
    •    Avoid hiring only superstars. It’s about company teams, not just the individual. Sure, it’s totally tempting to create an All-Star team, but in case you hadn’t noticed, those people don’t pass the ball, they just shoot it.
 
    •    Hire competencies but remember: hire with your heart. Make sure new workers fit into the preexisting culture, while also importing their expertise. Become their sponsor – onboarding is essential. Spend time listening. Give them what they need to succeed.
 
    •    Sometimes you need to hire aliens – folks outside of the culture who bring new ideas and best practices from other places. These people become culture-influencer and agents of change.
 
    •    New hires are more than just the college or university they attended. In short, don’t hire credentials, hire people.
 
    •    Character matters. Most people don’t succeed in teams not because they are unqualified or incompetent, but simply because they are not a good cultural fit.
 
    •    Act now. One of the big mistakes entrepreneurs make is they don’t act quickly enough. Put aside perfectionism, don’t wait for the perfect person – he or she may not exist. Hire track record and potential.
 
    •    If, looking back, you realize someone is not a good cultural fit, or is not getting it done, don’t wait to make the change. Sometimes it is just as simple as readjusting their position or redefining their role. If they really don’t get it done, then it’s time to make the tough call.

Be on the lookout for signs of a lack of emotional commitment from employees:
 
    •    People complain about the hours they’re putting in;
    •    Turnover is high, particularly among young top achievers;
    •    Recruitment is difficult; there’s little innovation or creative thinking; and
    •    There’s more politicking that there is actual dialogue.
 
Take note of those employees who have an emotional commitment to the organization:
 
    •    People give extra effort voluntarily;
    •    They become your best ambassadors
    •    Employees make personal and professional sacrifices to stay rather than leave;
    •    People feel free to think outside the box; and
    •    Meetings often result in lively debates and team action.

The employees of tomorrow plays to their strengths

    •    Rather than aspiring to omnipotence, and acting as though they’re the masters of all they survey, Betas focus on what I call “motivated skills,” e.g., the things they know they do exceptionally well. And instead of exploiting their peers’ weaknesses in order to attain and hold onto power, they encourage their fellow team-members to play to their own strengths so that the entire team and organization can succeed.

Self-Awareness is all (but don’t think for a moment it means you’re soft)

    •    What is self-awareness but bringing an intellectual and emotional understanding of your strengths and their weaknesses, your goals and their motivations to a given situation?
 
    •    Ensure that you hire self-aware people. Give them the proper tools, techniques and feedback, as well as the proper levers of success and sponsorship. Onboard people with the belief that they’ll be successful. Then make sure it happens.
 
    •    That said, organizations cannot be whole-heartedly responsible for their employees’ development; employees have to play their roles, too. Beta leaders are skilled at assembling employees, encouraging them to think new thoughts in different ways and challenging them to do new things.

 If there’s a single takeaway from years of consulting, recruiting and observing both old and new organizations it’s this: People really truly matter. They are your strategy. They need to be encouraged and coached to pursue what they do best; to keep doing what they enjoy, and to participate in the success of your company.
 
To survive and thrive today and into the future, business leaders need to grow and develop their own self-awareness. Self-awareness means that you are willing and able to collaborate with employees, directors, customers and yes, even your competitors. It means that you understand that every individual in your organization is a contributor with varying degrees of potential – and that the closer everyone comes to attaining a high level of self-awareness, the closer the organization comes to achieving its potential. It means that your self-awareness feeds into your employees’ own self-awareness, which in turn ignites the overall success of the venture.
 
Now that Fred has made me the cleanup hitter, I’ll leave with this parting shot: Hire smart and hire the very best people you can. Don’t just onboard someone to fill a slot. Instead, build a community. Keep asking yourself not just what you want and need, but what’s best for the organization to grow and evolve.  And remember what George Carlin said: “If you haven’t gotten where you’re going, you’re probably not there yet.”

#MBA Mondays

Turning 17 For The Third Time

Tomorrow I turn 51. I like to think of it as turning 17 for the third time.

The first 17 years of my life was my childhood. I'd like to thank my parents for everything they did for me, taught me, and provided for me in those years.

The next 17 years of my life was figuring out how to be an adult. The Gotham Gal, whom I met when I was 19, helped me to figure that out.

The next 17 years were about figuring out how to be a good husband, parent, and venture capitalist. The skills for all three are largely the same. Being there, caring, supporting, listening, constructively criticising, and above all being present in the relationship. I'm still working on those skills and I suppose I will for the rest of my life.

Now I'm on to the next 17 years. I'm not sure what they will bring. But I am sure that it will be fun, interesting, rewarding, thrilling and challenging. I'm looking forward to them.

#Random Posts

A Word From Your Sponsor

This is a Best Buy commercial. There is also a 30 second version. But I like this longer version for a bunch of reasons; it captures the big vision behind Foursquare, it showcases a father/son relationship, it includes a great piece of advice (avoid the haters), and Dennis is rocking a Galaxy S3 in the commercial.

#mobile

Feature Friday: Camera Access On The Lock Screen

Our policy at USV is that all of our devices need to have lock screens. So I have one on all my phones, tablets, laptops, and desktops. I don't mind it very much. Except when I want to take a quick picture or video of something that is happening in real-time. In that situation, seconds can make the difference.

The folks I know who use iPhones can put their camera in front of the lock screen. I am not sure how they do that, but I know they do. For the life of me, I cannot figure out how to do this on Android.

This is a cool feature. I'd like to call it out as something every mobile OS should have. If anyone knows how to make an Android device do this, please leave it in the comments. If it is not possible, then this post is a feature request to the Android team to make it happen in the next build.

#mobile

It Is Hard To Hide From The Web

Back in the early days of comScore, the founders thought that the data they were collecting from their megapanel would be useful to Wall Street. They built a product and developed some sales channels, including one called Majestic Research which was co-founded by my friend Seth Goldstein. Seth and his partner Tony built Majestic into a significant business and sold it a year or two ago. comScore had less success selling to Wall Street. I think they were too early.

A week or so ago, a top Internet analyst from Wall Street was in our office. He mentioned that the AppData numbers on Zynga foretold a difficult second quarter and the Yipit report on Groupon predicted trouble in that name as well. Both turned out to be fairly accurate and investable.

I have always told the companies that we invest in that you can't hide from analysts. If you do business on the web or mobile, your data is out there in the public whether you like it or not. Don't try to hide the bad news, because it isn't hidden.

But this is true for way more than Internet businesses and Wall Street.

Let's take the selection of Paul Ryan as Romney's VP. I read this (originally from here) on the web a couple weeks ago and reblogged it on Tumblr.

Sarah Palin's Wikipedia page was updated at least 68 times the day before John McCain announced her selection, with another 54 changes made in the five previous days previous. Tim Pawlenty, another leading contender for McCain's favor, had 54 edits on Aug. 28, with just 12 in the five previous days. By contrast, the other likely picks — Romney, Kay Bailey Hutchison — saw far fewer changes. The same burst of last-minute editing appeared on Joe Biden's Wikipedia page, Terry Gudaitis of Cyveillance, told The Washington Post.

None of Wikipedia entries for the current candidates being bandied about by Romney-watchers — Rob Portman, Marco Rubio, Paul Ryan, Bobby Jindal, Chris Christie, Kelly Ayotte or Pawlenty — are currently showing anything like the spike in edits that Cyveillance spotted on Palin and Biden's pages in 2008. But most of those came in the 24 hours prior to the official announcement. That said, if Wikipedia changes offer any hint of what's coming, then today might be a good day to bet on Ryan.

A few days later my friend Rich asked me who I thought the VP pick was going to be. I confidently responded Ryan. He was surprised. I wasn't.

Everything is out there on the web. You just need to know where to look to find it. And if you think you are hiding something, you are wrong. So don't hide anything.

#mobile#Web/Tech

Android Fragmentation

Android is fragmented and geting more so. This is a challenge for those that develop on it for sure and has been often cited as a big negative for the Android ecosystem. But it also a big plus.

I have a Kindle Fire on my bedstand. I use it primarily to read on in bed having moved to a Nexus 7 as my primary tablet device. The Kindle Fire uses Android as its OS and then puts a Kindle shell on top which makes it look and feel like something other than an Android. But almost every app that I have on my Nexus 7 is also on my Kindle Fire. The reality is that if you build for Android, you are also building for Kindle Fire.

When Amazon launches a phone, it would be my expectation that the experience will be a lot like Kindle Fire. Meaning it will be running Android with a Amazon designed shell on top.

And then there is Facebook. I have to believe that Facebook will build a phone in the same way. Start with Android and then put its own wrapper and apps on top. If that happens, I would imagine I would be able to run all my favorite Android apps on the Facebook phone.

So imagine a world in which three of the top four consumer tech companies have phones running Android. Does that sound like a fragmented world for Android? Yes. Does that sound like a recipe for having a massive number of Android devices out there to build to? Yes.

In my view, we are in a two OS world for mobile and I think we are going to stay there. I think Apple will own the high end with the best and most integrated experience. And I think Android and its many variants will own the rest of the market. I think everyone else is playing for crumbs in terms of market share and would be better off joining the Android variant parade.

What does this mean for developers? It means build for iOS and Android and ignore everything else. And I think it increasingly means you have to be on both iOS and Android as soon as you can. I have advocated for building for Android first and iOS second. I think that strategy will start making more and more sense for apps that aren't looking to be paid.

Fragmentation cuts both ways. It's bad and it's good. Long term, I think it is a big plus for Android.

#mobile

Open Protocols

My partner Albert wrote a great post yesterday that I'd like to highlight. His going in assertion is:

It would a huge benefit to society if we can get with social networking to where we are with email today: it is fundamentally decentralized with nobody controlling who can email whom about what, anyone can use email essentially for free, there are opensource and commercial implementations available and third parties are offering value added services.  All of that is made possible by the existence of standards such as SMTP and IMAP.

Albert goes on to suggest what some of the key open protocols might be; webfinger, pubsubhubbub, and salmon, and then asks for comments and suggestions, which he got on his own blog and also on Hacker News.

A comment on Hacker News says that App.net (which I backed along with many others) is using the Activitystream.es, Webfinger, RSS, pubSubHubbub protocols. So that's a good thing. Dave Winer, the father of RSS, also has been posting up a storm on this stuff.

I believe in open protocols and open APIs. That is what the web was built on and that is how we can best take it forward in the spirit it was given to us. All of this is geeky and only interesting to a tiny minority of web users. It is not a threat to Facebook, Twitter, Tumblr, and the other social platforms who serve a mass audience any time soon. But it is important stuff nonetheless and I am happy that folks are talking about it and building stuff.

#Web/Tech

MBA Mondays: Guest Post From Scott Kurnit

 When I announced the MBA Mondays series on People and mentioned I would end with a number of guest posts, I got an email from my friend Scott Kurnit, founder of About.com and Keep Holdings. Scott said, "Culture that is something I have thought a ton about. I'd love to contribute a guest post."

So what follows are Scott's thoughts and experiences on building culture in an organization.

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Culture

Every company has a culture. The issue is – do you let it happen by accident or do you shape it?

– The CEO is the culture driver. It can’t be done by HR or anyone else. You either live it… or don’t bother.

– Many cultural imperatives are the same at every company. That doesn’t mean you shouldn’t write them down and socialize them, but come up with the 3 or 4 that make your company special, that make someone want to join your company… or not. Your people ARE your culture. The culture quickly takes on a life of its own.

– My favorite cultural imperatives are: Be Adaptive, Be Adoptive, Encourage Push Back, and Cherish Input, but NOT consensus. That said, these are ours – adopt what you like, but make your culture your own.

I think about company culture every day, but last week was especially poignant with About.com back in the news. We “pre-set” the About culture on day one and it’s one of the half dozen reasons the company is around 15 years later after six CEOs, four owners and almost no investment for the last decade.

As Fred noted in his May post kicking off the culture discussion, you can get away with an accidental culture for the first 20 or 30 hires – but then culture takes on a life of its own. I’d say that you’re better off doing what we did with About when from the outset Bill Day and I locked ourselves in a room and thought it through. What kind of people did we want to work with? What was going to make us strong all the way through to a thousand team members (yes, we banned the word employee). Were we going to trust our people or manage tightly? Were we willing to pay top dollar or save money and hire at the 50th percentile? Who was going to be most important – senior management, staff, Guides, advertisers or users – and in what order? What would our decision making process be? Would we come in early or stay late? Did we care if people were in the office or working remotely? Etc., etc.

Culture was extra important to the About model since our business needed to get big fast, but it also showed me that defining a culture sooner than later builds the best business foundation. It seems so obvious, but out of 150 start-up CEOs I’ve discussed this with I found only three who pre-determined their culture. That’s crazy!

It doesn’t matter what your culture is, but have one. The sooner everyone knows what makes the place tick, the sooner you’ll hire the right team members and then they’ll hire the right ones and then them and them and them.

While I list all 10 of the Keep Holdings culture imperatives below, I’ll pull out a few that are religion for me and likely the most controversial.

Be Adaptive: We’re working in an amazingly dynamic industry. Be prepared to change on a dime. If I hire you to do X but need you to do Y tomorrow, buck up and go with it… or don’t come in the first place. You sure get a different kind of person when they’re game to ride the waves. Don’t want to ride waves, go work at Big Slow Corp Inc. and good luck with that.

Be Adoptive: Hey, we work in the Internet – Invent like crazy, but don’t be afraid to adopt good ideas from everywhere. Don’t tread on someone’s patented business process, but if you like someone’s ideas, build on them. Yes, that’s legal – and it’s OK to admit you don’t have all the great ideas.

Pushback: Everyone should know why they’re doing something. I’ll never forget when I asked a colleague at Showtime for some quick data analysis. When I asked him the next day where it was and he told me he needed another day I realized *I* screwed up by not telling him I only wanted the info if he could do it in 10 minutes. Everyone should be encouraged to say, why, how long should I spend, what should I not do instead and are you sure it’s worth the effort? While this was about saving some time, this simple concept now makes our company more transparent and productive at every turn – whether for little tasks or big strategic issues.

Input, not consensus: This may be the biggest for me since it’s the major thing I can point to for why AOL crushed Prodigy in the pre-internet online world. I still have nightmares of 18 people sitting around a table trying to make a pricing decision. It took Prodigy over a year to adjust pricing to be more in line with – and trump AOL and it took Steve Case’s AOL one measly day to respond. One year… one day. I still get chills. Rather than have the indecision of 18 people, pick one to be the decider as the very first action. Trust me, that person feels the weight and authority when they own the decision. They’ll get a ton of input… rather than having endless discussions. Group decision-making makes people fearful of engaging with the concern that it will never end. When one person’s in charge… they want to hear it all. And fast. And get it right. And crisp. And done!

OK, here’s the whole list that drives Keep.com, TheSwizzle and AdKeeper. Feel free to Adopt as appropriate… but make sure you live it. These are not for everyone… but you should all have those that work for you.

Consumers always come first.
We operate as an “upside-down pyramid:” customers first, those who directly engage with customers second, management last.
We respect individual privacy and aim to give consumers greater control of their web experiences.
We embrace community, with users in control.

We maximize value to our partners.
We love brands, products and services!
We partner with brands to help them succeed on the web.
But user experience trumps money every time.

We operate with the highest integrity.
We are straight shooters and demand integrity in principle and practice.
We don’t tolerate politics.
We admit and confront our mistakes… and learn from them.

We are adaptive, flexible and nimble.
We race towards opportunity.  We spin on a dime.
We move at Internet speed – ahead of the crowd.
Jobs can change at any time.

We are adoptive, embracing good ideas from all sources.
We embrace diversity in perspective, viewpoint, thinking and actions.
All ideas are welcome and appreciated.

We encourage teamwork, risk-taking, creativity, and speed-to-market
Teamwork makes better products, but can slow things down.
So, we encourage single ownership, creativity, risk and speed.

We value input (& push-back), not consensus.
We value everyone’s opinions but recognize the power of crisp and quick decisions.
Decision-owners must solicit input, welcome push-back, and ultimately make the call and execute.

We are strategically focused.
Our work is market focused.
We build and evolve world-class products.
Our offerings will be powerful, relevant, scalable and low friction.

We only want to work with the best people, those who are prepared to work harder than the competition.
We are positive in our outlook and behavior.
We will compensate better.
We will have more fun.
We will sprint a marathon and win our races.
We will succeed together.

We exist to build long-term value for our investors.
Everyone who works here is an owner.

#MBA Mondays

Fast, Fair, and Frictionless Content Licensing On The Internet

Yesterday we talked about some industry self regulation that the tech/internet industry could put in place in respecting copyright on the Internet. Today I would like to talk about some industry self regulation that the content industry could do in support of the same issue.

If you think about what it would take for the "three engineers in a loft" to get the service they build from the greylist to the whitelist (you need to read the post I linked to above to understand this context), they would need to get fully licensed to distribute the content in their service. That requires getting deals done with all the content owners.

Today that is hard if not impossible. I have seen this first hand many times. The content owners don't make it easy for new services to get licensed and in many cases they simply refuse to provide the licenses. This does a number of things.

First and foremost it stifles innovation because the best user experiences and business models come from rapid fire iteration and hyper competitive market dynamics.

But it also means that users find it difficult to find the content they want to consume legally and so they head off to the black market.

And it also means that two way, highly interactive services where the users are curating, posting, and engaging with content are problematic because they are subject to copyright infringement claims that cannot be easily resolved with instantaneous real-time licensing of the content that users are posting.

A friend of mine who does a lot of business with the content industry sent me an complimentary email about yesterday's post. I replied with:

I like the term copyrespect that someone used in the thread

Two things we need on the net

1) a culture of copyrespect

2) a fast fair frictionless licensing system that isn't based on propagating artificial scarcity

I don't think you will get one without the other.

Let's take Game Of Thrones. If you want to watch it on your iPad, you basically have one choice. You get the HBO Go app, you authenticate with your cable provider, and then you can watch it to your heart's content. But what if you don't have a cable provider. Well then you are out of luck.

That's not ubiquity and that is not fast, free, frictionless licensing on the Internet. If HBO were to make Game Of Thrones available to Hulu, Netflix, and any application that "three engineers in a loft" build on a standard set of licensing terms with instant self serve licensing (like Soundexchange), then there would be no need to go to Google or Bit Torrent and look for a pirated copy of Game Of Thrones. It would be all over the Internet legally and at a fair price. I am certain that most users would respond positively to such progress.

As hard as it is going to be to get the tech/internet industry to self regulate by building in blacklists and whitelists into search, social media, and other web and mobile services, I think it will be even harder to get the content industry to build instantaneous real-time self service licensing systems for their content. But that is what is going to be needed to create a culture of copyrespect on the Internet and I encourage them to get on with it.

#Politics#Web/Tech