Tag Archives: profit

The Problem with Investing in Imaginary Goods

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Today, Zynga’s stock kind of went into a tailspin downwards. Zynga, in case you’re not aware, is famous for building software that used to consist of games you could play specifically on Facebook. Then they went public, making lots of money and continued to try to make games (sometimes in Facebook and sometimes outside of it). At the time of their IPO, all I could think to myself was “this is a company that doesn’t really make anything that’s profitable.” Their profit comes from trying to get people to pay for virtual goods IN A FREE ONLINE GAME. While pay for play works in some venues, like MMO’s like City of Heroes and Lord of the Rings Online, people didn’t go to Zynga because they were interested in playing a specific game. Zynga, on the other hand, tries to interest people in their site and THEN trying to get them to play some of their games. And then if that works, they try to get them to pay money for the game they’re already getting for free.

Does anyone see a problem here?

Well, their stock is continuing to go down, mainly because their “hits” are very old, and they’ve never really done anything to convince potential customers that they have something just as good. Farmville was their famous property, and even though I played it at the time, I never invested a dime in the game, and after I grew bored with it, I stopped playing it and anything else Zynga had to offer.

Facebook, however, has been interlinked with Zynga since the beginning. Facebook gets a bit of profit from anything that Zynga makes from its transactions.

Which means I should probably talk about Facebook, too. This is another online company that has absolutely no value whatseover. Basically, it’s value is to get people to sign on and then tell other people who are signed on what they’re doing. Facebook offers nothing other than being the park bench where people are sitting.

When Facebook went public, it was already feared that there was no real revenue stream available from the company. All it really did was advertise, and it doesn’t do it very well. In its early days, I paid for an ad to sell one of my books on their site, and the results were horribly bad. I never paid for the service again. Instead, I got much better returns from places like Goodreads.com. Facebook, as people have started to realize, has a customer base that shows up, looks at traffic and then goes away. Some stay online forever, but they NEVER press any of the buttons that take them to the ads. In other words, Facebook has absolutely no revenue stream whatsoever when it comes to advertisements. The only way they could make money is to charge people for using the service, but once they did that, their service would become a graveyard.

This is the problem with companies that sell imaginary goods. Some, like Lord of the Rings Online, which actually offers something tangible (a lot of fun and a strong customer base that has remained with them for years, first as paying customers), Facebook and Zynga offer nothing really tangible. Zynga doesn’t even offer very good games. They’re casual games, which means that they’re meant to be played as you’re doing something else. Think of their games as almost an afterthought. Whereas, Lord of the Rings Online is a game meant to be played with your full attention.

Facebook, as well, offers nothing but a place for people to report their happenings. If you’re not a celebrity, chances are pretty good that not a lot of people (aside from really close friends and maybe family) really care. Even Google Plus, which does appeal mainly to following celebrities, isn’t all that popular, no matter how much Google wishes that weren’t so.

Facebook has a few days until its reckoning emerges. You see, they have to reveal to stockholders just how well they’re doing. I suspect they’re not doing well. With Zynga’s loss reported today, it’s only a matter of time before we hear that Facebook isn’t doing any better. And then their stock is going to go down really fast.

It’s unfortunate, but then we’re dealing with companies that have no actual value, other than perceived value and fantasies of being more than they really are. I like to think that their value is comparable to my ability to date Jessica Alba. Sure, it’s very possible it might happen, but she’s really an imaginary good (a really, really GOOD good), but the reality of my dating her is pretty dismal. That’s how I see Facebook and Zynga. Slowly, I’m noticing more and more people are starting to feel the same way.

Why Don’t People Trust Facebook?

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There’s an article today on MSNBC, indicating that according to a poll, people generally don’t trust Facebook. The reasons the article comes up with are interesting, but it left me wondering if there’s not something a bit simpler going on in the minds of people who are focusing on the social networking site. Let me put it into my theory:

1. People don’t trust a company that continues to chip away at something it claims it’s not trying to do, and by that, I’m referring to compromising privacy. Since day one, Facebook has been trying to gain more and more information about people and then use that information for its own personal profit. When called on it, they back down, a bit, and then turn around and try another attempt at circumventing their own rules, while pretending that’s not what they’re doing. It’s like a romantic partner who claims never to cheat, and you keep finding him/her with someone from the opposite sex, and once confronted, he/she claims it will never happen again. And then next week, it does. That’s the main problem with trusting Facebook. It’s almost as if they feel they’re too big to be held responsible for their actions. And when confronted, they really don’t care.

2. People don’t trust a company created by young people who galavant around as rich, privileged asses. Since Zuckerberg became the new billionaire on the block, people generally don’t like him. The corporate world doesn’t like him because he shows up at fancy meetings in a hoodie. The common people don’t like him because he’s that geek kid that screwed you over in secret and then tried to pretend it was someone else. Girls don’t like him because he’s a womanizing prick who wouldn’t ever get a girl if he didn’t also happen to be a billionaire. Face it. Every social situation that appears around him displays him as an ass. Sure, he could be the greatest, nicest guy around, but the movie about him makes him look like a backstabbing smart kid who even screwed over his own best friend for money. It’s hard to trust someone like that, even if the movie was completely false and it turns out he’s nicer than Mother Teresa.

3. Facebook doesn’t actually do anything to generate an actual profit. You see, that’s the thing that’s been bothering me since day one. It’s a social networking site where THE MEMBERS are the ones actually doing all of the socializing. Facebook is like the road you drive on to get somewhere. It isn’t cool. It doesn’t make your trip more enjoyable. It’s just there to get you from one place to the next. Yet, it’s like the road then sending you a message indicating that it’s now going to take all of your vital information and sell it to all of your friends (and then charge you for it) because you decided to actually drive on the road to get to work once. The analogy is a bit strained, but I’m sure you get the idea.

I have a few friends of mine who gave up Facebook when it first started to become big. They haven’t looked back since. Sure, it’s harder to keep in touch with them, but I don’t get the impression that they’re hurting for their decision. They didn’t trust Facebook since day one, and as a result they gave it up. To be honest, I may end up doing the same thing myself because it hasn’t proved to be all that useful to me over the long haul. My writing business hasn’t improved, and when I go onto Facebook, all I see is the same kind of messages I used to see before, except now it seems like Facebook has changed its algorithms again so that not everything is showing up as it should. And recently they announced that they want to charge people in order to make their updates appear. To me, that’s bordering on final straw territory. So, I may disappear soon, but not because of anger or anything, but because like the majority of the people in that poll: I don’t trust Facebook.

But worse, rather than just not trust Facebook, I’m starting to realize I may not even want Facebook. It doesn’t really serve much of a purpose for me if it wants to monetize me rather than monetize stuff I do and give me a cut of the profits. I work for a company that monetizes me as part of its agreement to pay me a salary. Facebook doesn’t do that. It expects the activity for free and then wants to profit even more off of it.

Which brings me to the soon to come public release of Facebook on Nasdaq. The owners of Facebook are trying to push that phantom value even higher and profit even more. But secretly, I suspect that there’s really no value in a paper tiger that doesn’t actually do anything other than rely on its constituents to fill in the active feeds. Without the people, Facebook is just another web site, like Myspace and someone useless like a Netscape browser. Talk about bubbles. This seems like the most ridiculous helium bubble we’ve ever manufactured, and when it bursts, I hate to be covered with the Myspace residue that is going to explode over everyone.

How Legacy Publishers Are Killing the Future of an E-reader Market

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When the Kindle first came out, I thought it was the greatest thing ever. Actually, that’s not completely true. I was apprehensive because I was a believer in having a hard-copy of the book with me while reading it, but eventually I started to see that this could be a good thing. I went out and bought an Amazon Kindle, and shortly after that I gave up my newspaper subscription and subscribed to an online version of the newspaper (delivered over the Kindle). Then I ended up with an Ipad 2, and with the Amazon Kindle app, I have been able to read the Washington Post every morning by paying for it with that subscription.

But for books, it hasn’t been as wonderful an experience. As a matter of fact, the e-reader experience has gone from “hopeful” to “dismal” and the fault of this situation rest solely on the backs of the publishing industry itself. You see, in the very beginning, Amazon was offering books at the rate of $9.99, which was probably the perfect point for paying for a brand new book on an e-reader. The publisher wasn’t losing out because the manufacturing costs were practically nil, and their books were getting to their readers almost instantaeously. But publishers didn’t like not having complete control over their market, so they forced Amazon to allow the publishers to set the price for books. Now, an entry price is anywhere from $14.99 to $25.00 on an e-reader. As expected, owners of e-readers have practically discontinued buying books as e-books.

So, you’d get the impression that publishers won. Not really. What actually has happened is that two markets have opened up, and this was an occurrence that a smart publisher probably should have seen coming, but like the music industry before, this is an industry populated by egos who are convinced that they are infallible, and that their product is so great that it cannot be replaced or done without. Well, they were wrong.

It seems that Amazon now has two lists of bestsellers, and they are becoming completely exclusive of each other. In the old days, bookselling lists usually listed the highest selling books (physical copies) but because the legacy publishers refused to budge, Amazon has discovered that its bestsellers are actually e-books that have never been published as hard copy books. As a matter of fact, in 2011, only 3 of the top sellers actually were originally published as “normal” books. The rest were dedicated e-books only. What this means is that more and more books are being sold without ever crossing the desk of publishers at all.

Let’s unpack that. What that really means is that more and more publishers are losing out on their own marketplace because they decided they were too elite to participate in it. Instead of working with Amazon and other such e-book companies, they acted with hostility and marginalized their own market. Readers have gone out and started buying books that other readers recommend, and quite often those recommendations have no affiliations with legacy publishers whatsoever.

What this means, or could mean, is that the future for publishers is even worse than if they had participated with e-readers in the first place. Like the music industry, major publishing companies are being seen as in the way and as leeches rather than as particpants and designers of the industry. An example is the simple mathematics of a publishing contract that attempts to give a writer about 2% of the sales for a book, whereas a deal with Amazon gives the writer either 35% or 70% of the sales (depending upon which publishing deal the writer chooses for charging for books). The selling point of using an established publisher was that you got their name behind your book and their marketing team, but with most publishing contracts these days, a writer is usually left to fend for himself/herself after publication because a publisher will spend most of its resources on already established names rather than someone who is up and coming. So, essentially, you end up with a crappy contract, and you end up with a publisher that doesn’t actually do anything for you other than potentially get books into bookstores (which, in my experience, doesn’t always happen). A further example is the publishing company that handled one of my earlier books. It keeps “offering” to make my book into an e-book, and then offers me that same crappy publishing rate royalty as if it was a hard copy book. What they don’t want to reveal to me is that our contract with each other indicates that they don’t own the e-publishing rights, meaning they’re trying to get me to sign with them for e-publishing when in fact I can actually do that myself and get a 70% royalty without ever asking for their help in the first place. The dishonesty factor is the reason I’m mostly pissed at them, because they’re doing everything possible to make it seem like they’re on “my” side, even though they KNOW they can’t publish the book as an e-book without me signing over MORE of my rights that they don’t physically have right now. Again, another publisher doing everything possible to piss off a client in hopes of gaining short term gains in profit.

So, how can publishers regain the upper hand? Well, first they have to realize they lost it in the first place. If they don’t, we’re going to start to see more and more publishers go under in the next few years because they won’t have the money to keep operating. Right now, all they have is their reputations, but they’re being beaten badly by unknown writers who are making names for themselves without actual publishing companies. Once publishers become irrelevant, they’ll disappear.

But publishing companies are probably not going to go down without kicking and screaming. Realizing that they’re not going to do the smart thing, like announce that they’ll adopt the $9.99 model that Amazon first put forth (which would have probably ushered a new age in publishing), they’ll probably respond with legal action, using whatever clout they have left to hire attorneys who will submit confusing lawsuits that will bog down the system for years, further eroding their success in the industry. I wouldn’t be surprised to see a direct legal assault on both Amazon and Barnes & Noble by the publishing companies, as those are the two entities making the largest impact against them. I also wouldn’t be surprised to see it fall into some kind of patent war over technology, where some publishing company gets smart and buys up a patent that allows them to claim ownership over a certain “idea” of e-readers, even though patents were originally designed to NOT be used for that purpose. We’re seeing a lot of this kind of action on the behalf of software companies and the social networking sites, so it would not surprise me to see some enterprising legal maneuver like this.

Because they’re not going to win by going after the hearts and minds of writers and readers. They’ve already demonstrated they don’t have our interets at heart. It’s all about profit and maintaining a dinosaur of a publishing model. Therefore, expect trench warfare and years of interesting battles that lead to an industry that collapses on itself.

Monopolies, Greed and Treating Your Customers Like Crap

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This morning, I was about to leave my apartment building to head to work when I noticed an 8 1/2 by 11 piece of paper taped to the exit door for everyone to read. It was a message from the apartment complex managers, indicating that anyone who was currently using the video services of U-Verse by AT&T must discontinue using it immediately because they are in violation of the apartment’s “contract” with some cable service called Suite Solutions. Not being a user of U-verse, I didn’t give it much concern, but then it had me thinking. What if I was a user of U-Verse and decided to get my television programming that way? What if I decided I didn’t like Suite Solutions (which I don’t) and chose to get my television programming through my phone line? What right does some housing complex or some cable operator have to choose how you get your television programming?

For the longest time, I’ve been receiving flyers in the mail from AT&T, promoting U-Verse as the answer to bad cable companies, and I just ignored the stuff because, to be honest, I don’t think television is all that worth subscribing to in the first place. While some people remained glued to their television screens every night they get home, I don’t think I’ve turned mine on to television programming in over 8 or 9 months, so to be honest, I’m not even sure I even have a television signal these days. And honestly, I don’t really care.

But what started to bother me was this anti-business message that was being pushed on potential customers by the people who manage the place where I live. It’s one thing if Suite Solutions was a good company, but let me tell you about my experience with that company. When I first moved into my apartment over two years ago, I chose that company to get my television and Internet service. At one point, I remember counting on a calendar to see whether or not it my service was down more often than it was actually up. I paid for the highest speed service, and when it worked, my download speeds were atrociously slow. I remember beating a download with my cell phone once (which ironically never actually succeeded with Suite Solutions because the Internet crashed during the download and didn’t come back up for another three days).

This was the company that my housing complex thinks that I should be emboldened to because they signed a contract with them somewhere in the past. Now, I don’t mind this being an option, but if they eliminate all of my other options, so that Suite Solutions is my ONLY choice, I think we have a horrible problem that really needs to be solved by the SEC, the FCC or maybe Elmo and the other characters of Sesame Street (they are notorious for advocating for consumer rights in the fantasies I have about Elmo and the gang).

Of course, no story about monopolies should be complete without a little bit of irony. I mean, we are talking about some unknown cable company using its monopoly to cut out the little guy, specifically a little guy named AT&T, who happens to be going through a little bit of monopoly trouble of its own these days. Now that the government has stepped in and told AT&T that it is creating an unfair monopoly by trying to buy T-Mobile, does anyone see the ridiculousness of some small cable provider shutting out AT&T through its contracted monopolies? I’m sure there are some people who are thinking this is a good thing because they just hate AT&T, but when AT&T becomes your alternative source to a crappy choice, something’s seriously wrong with this picture. I mean, I’m not exactly the poster child, greatest fan of all things AT&T. Just last week, AT&T refused to transfer my Internet service (not U-Verse) to my new apartment because of some flag that showed up with an old bill for $189 that HAD BEEN paid over two years ago; unfortunately, because it was so long ago, they couldn’t find a record of the situation, nor could they offer any way of alleviating the problem because the situation occurred too far back in the past to be solved by any simple transaction (like me just giving them $189 to make the problem go away). That’s the kind of problem you get from a monopolistic company that is so big that it can’t handle its own financial problems that emerge from its own lack of correct record keeping (you can always spot this problem when some customer service person tells you: “There’s nothing I can do about it. The problem seems to be coming from another area of the company that doesn’t exist anymore.”).

So, I ask, are monopolies good or bad for consumers? So far, my experience with them has been nothing but negative. You constantly hear economic pundits talking about how monopolies are good and how they drive innovation (or some other big proclaimed statement that has no basis in reality), but how do they really help us? Okay, there is one area, and that’s price, in that a company with a monopoly has the ability to lower the prices by handling all of the means of production and distribution, but how many times has that monopoly also gone the other direction, to where the only source of a product decides to raise its price because it realizes that no one else can fulfill the need? We’re kind of seeing that right now with Netflix, that erroneously thought that it was a solitary producer of content services so that it could pretty much do whatever it wanted to do by raising prices and splitting its company into two so it could eventually raise prices at its own leisure (possibly by raising it twice as much, as both companies can now raise prices as the same time, and thus, increase profits twice as fast). But what really happened was that Netflix realized too late that its customers WERE its product, not just the users of their product, and without customers, they have no income. I expect to see Netflix become the next Myspace in an era of Facebook.

For me, I have no real solution other than to boycott all of the products of companies that are hostile towards customers, which is why I gave up on Suite Solutions shortly after feeling like I was being cheated month after month. Fortunately, I am not a consumer of U-Verse, so I don’t have to worry about this proclamation from the emperor, but at the same time it also keeps me from ever wanting to do business with Suite Solutions again because instead of trying to compete with AT&T by providing a great customer experience and a good product, they decided to go the punitive route instead.

That companies never realize this strategy is a blueprint for failure is a footprint that forever haunts me. There’s a reason that message was tacked on our door like Luther’s 95 Theses. The company is failing to attract and keep customers, so it needed to crack down on anyone who decided to use alternative choices. Unfortunately, that strategy rarely brings in new customers or business. Instead, it leads you closer and closer to becoming obsolete. That this is 2011 and a company still doesn’t understand that is ridiculous. But why innovate when you can demand business? Need I say more?

Netflix is starting to realize you can’t be a people business & piss off your customers

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Netflix is in a bit of a bind, but you wouldn’t know that from paying attention to anything the company is saying. Earlier in the year, they came up with the brilliant idea of raising their prices by cutting their services in half and charging customers for both (where they used to get both for the same price). Customers got angry. Netflix acted like the knowing parent, coddling children who are upset that they weren’t chosen for the football team (or to be cheerleaders). Customers got pissed because they really don’t like being treated like children when they’re actually customers.

I kind of got pissed, too. The patronizing remarks from Netflix’s leadership surprised the crap out of me to the point where I decided that if it benefited me in the long run, I’d jump ship at the first opportunity. I, too, hate being treated like a little kid, even when I might act like one.

To see it from the viewpoint of all of the analysts, the same point keeps being made: If there’s no viable alternative to Netflix, then Netflix can pretty much crap on its customers, and it’s still going to be all right. The more you read of this kind of stuff, the more you start to wonder if the reviewers are in the same world as the rest of the people who happen to be customers of Netflix.

What no one has addressed, and I find this probably the most significant factor, is that Netflix offers a service that is a luxury, not a necessity. As most Americans are seriously aware of economic constraints in a recession era, the idea that streaming video and mailed dvds are an added luxury might just be enough to cause a potential customer to think that perhaps the money might be better spent on other pursuits. After all, no one really needs movies and television shows. They’re nice and fun, but they are entertainment, not food staples or part of one’s housing needs. On the whole Maslow heirarchy needs thing, Netflix comes long after most of the other needs and desires have been met.

And that’s what I’ve started to realize recently. As I watch through the fifth season of Star Trek Voyager, a series I’ve seen a long time ago when it actually aired on television, I realize that I don’t really need to watch it. It’s an interesting way to occupy time, but I have computer games, writing, my health club membership, an untapped drug habit I could start at any moment, and all sorts of other activities that have been available a long time before television ever emerged. I could even watch network television (or whatever is on the free cable I receive). The need for Netflix is pretty low on the overall scheme of necessities.

So, I’ve been thinking that once Voyager’s run is finished (there were 7 seasons), I’m dumping Netflix completely. You see, Netflix has this belief that people will “respond” by switching to either mailed disks or streaming only (what they wanted in the first place), but there are 12 million people who may choose my option: Cancel completely and never come back. I was charged my first increased charge this month, and while I can afford it, I’m still angry at Netflix for the way it treated me as a customer. Because of that, I, like I’m sure many others like me, will dump Netflix and wish them well. They’ve already indicated in all of their press releases that they could care less whether or not I stay with them (because they expect to make bank based on the rest of the people who will be unwilling to jump ship). Well, fine. I just suspect that they haven’t read the tea leaves well enough to understand that when you cut out your bread and butter, you sometimes go without food.

But what do I know? I’m just a stupid sheep guy who Netflix doesn’t take seriously anyway.

Trying to Get Established with the E-book Markets

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I’ve been spending a great deal of time lately exploring the whole e-reader market. My reasons for doing so are probably obvious, as I’ve pretty much given up on ever getting sustainable establishment from the main publishing markets, as everyone seems to be a writer these days and trying to get an agent to even read a manuscript is like trying to get Charlie Sheen to act responsibly.

Anyway, so some months ago, I put up one of my previously published books onto Amazon for the Kindle, and it has had a few sales, but mostly, it’s a lot like standing on a corner and trying to get people to read printout copies of a manuscript. People just don’t seem interested. And I don’t think it’s that their not interested in me or my writing; they’re just not interested in purchasing books from someone they’ve never heard of. It’s the same dilemma writers have always had, except there’s a lot more of us these days, and practically the only way to establish a career as a writer is to be famous for doing something else. So, if you can cook and have a cooking show, you might make it as a writer. If you’re a reality show star and have gratuitous sex with people who live in your reality show house, you might have a career as a writer. If you were a famous baseball star who took performance enhancing steroids, football star who beat up your girlfriend, musician girlfriend who got beat up your musician boyfriend, washed up movie star who seems to get arrested for practically everything written on police blotters, or some older guy who lived through abuse by your evil stepmom, well, you might have a career as a writer. But if you’re actually a writer who writes novels, and that’s all you really have to share with the rest of the world, your chances of making it as a writer are about as good as you making it as a millionaire by winning the lottery. Okay, maybe a little less.

So, what is a writer to do, if he’s not interested in starting a gunfight with the local police department in hopes that he might live long enough to write about it while in prison, well, the answer seems to be “write an e-book and get famous that way.”

The funny part of that solution is that making it as an e-book star is just as ludicrous as making it as a professonal blogger. Unless you have a gimmick, or you get seriously lucky, your chances aren’t that good. Even if you’re a great writer, it appears that everyone seems to be a great writer these days, so you really have to have something else working in your favor.

So, in actually trying to get established as an e-reader writer, I started with Kindle, and like I said, so far I’ve sold a few books and seem to be as popular as Pee Wee Herman at a stripper’s convention. Okay, I’m wrong on that one. He’d probably be a bit more popular than I am right now.

But what I have been doing is reading everything I can find on how others have actually made it. And what I’ve discovered is that everyone talks about how e-readers and e-books are the solution to the current glut in writers out there, and how it is the solution to getting past the impossible gatekeepers of publishing (even going around the publishing industry itself), but what no one really seems to do is point out exactly how that success is supposed to happen. I’m constantly reminded of the Southpark episode with the underwear gnomes, when the kids ask the underwear gnomes why they’re stealing underwear, and they point out their master plan, which reads a lot like:

1. Steal all of the underwear

2. ????

3. Profit

Yep, that seems to be the consensus of everyone who talks about success as a writer in the e-book market. Somehow, you are supposed to go the same way:

1. Write a novel and e-publish it.

2. ????

3. Profit!

Yeah, I don’t see any logic behind it either. What seems to be missing is how do you actually market yourself as an e-book writer? How do you get traffic to your blog so that people pay attention to you? Whenever I read a book on marketing your blog, it says to first create interesting content and then moves onto capitalizing on that traffic that will then come. Now, I’ve talked to a lot of people who do read my blog, and they tend to agree that I create interesting content, but at the same time, the masses aren’t showing up to read it. A few people do, and a shitload of spam also seems to be paying attention, but that’s about it. Somehow, I’m missing a step here, and I can’t seem to figure out what it is.

It is that same step I believe I’m missing that somehow makes it possible for e-books to actually be attractive to people and sell the mass load that everyone seems to think will happen “naturally”. Well, I’m still working on that one, and I haven’t come up with a solution yet.

So, if real people actually seem to be following this blog, PLEASE COMMENT ON THE BLOG at my actual blog, and I’d love to hear from you. But right now, I get nothing but spam comments (do keep in mind my blog gets imported to Facebook and Open Salon, so if you’re commenting that you actually read it, I’m not talking about those places; I’m talking about my actual blog…the one linked here). It’s really frustrating. I mean, REALLY frustrating.

Best Buy Profit Down 16%; My Theory on Why

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The Wall Street Journal reported today that Best Buy‘s net dropped 16% based on sales. I’d link to the story, but if you know anything about the Wall Street Journal, they let you read the first few lines and then want you to sign onto their site. So we’ll just take their word for it and go on from there.

The theory that people are throwing around is that Best Buy is losing market share to Wal Mart and online markets, which everyone knows really means Amazon for the most part. But I have another theory, based on my many years of actually shopping at Best Buy. Before I give my theory, I would like to just say that I have been a loyal shopper at Best Buy for about as many years as Best Buy has been around. I used to practically buy everything from that place. My reason was that it was always a good deal, and it was always good equipment and stuff. Well, something changed over the years. I still shop there, but just not as much, even though I’m a silver member of their rewards program because of the amount of money I spend there on a usual basis. However, while I still shop there, I rarely go there because it’s the best price. Nor do I go there because it has the best stuff. Generally, I go there because it’s the only kid on the block that actually has stuff I can go and put my fingers on before I buy it. That’s still kind of important to me.

What I did want to say is what’s wrong with Best Buy. First off, their prices are no longer the lowest you can find. Online is the best price you can get for most stuff. Wal Mart is not the answer, as it’s like going to Tijuana for Mexican food. Yeah, they have Mexican food there, but honestly, who wants to go to Tijuana when you don’t have to?

The prices at Best Buy have been creeping up a lot over the last few years. And don’t get me started on peripherals. If you need a USB cord, you are probably better off buying one directly from NASA as peripherals at Best Buy are ridiculously priced to compete with property prices  in Dubai. I often dread going to Best Buy to have to buy a component for a larger item, only because I know how expensive it is going to end up being. When the clerk asks me pleasantly, “did you find everything you were looking for?” when you’re paying $70 for a cord that should have cost about $12, you have to suppress an urge to throw the person through a wall. After all, it’s not their fault. They just work for the company that charged you an outrageous amount of money for something you should never have had to pay that much for. Hence, sometimes I get help from https://exprealty.com/us/va/augusta-county/houses/ and listen to what they have to say before buying a property.

The second reason is that the stuff you get is no longer the best stuff for the best price. Yeah, it can sometimes be cheaper than other places, but at some point Best Buy stopped being all about great prices and then became a good price PLUS an extended warranty for even more money. It used to be that when you bought something in the ole’ good ole’ US of A, you were guaranteed a product that lasted forever. Now, it’s guaranteed for a year, somewhat, and then you have to pay if you want it to last longer. The prices aren’t that much better since those days, and with inflation it’s even more expensive. But now you know that whatever you buy is guaranteed to fall apart, so the only thing you can do is expect to buy a replacement soon or to pay extra to have it “guaranteed”. No, the US is not the country of quality it used to be.

So, when we’re trying to figure out why profit is down 16%, perhaps the reason has more to do with the fact that you can get what you want online cheaper, and that what used to be the best buy isn’t really the better buy any longer.

I’m just saying….

The Music Industry Just Doesn’t Get It…They Lied to Us

Economics, Music, , , , , , , , , ,

You would think with the amount of money that goes into music studios that they would have actually hired someone who is capable of telling the executives what is really going on. Instead, we have a bunch of studio heads that are so convinced they understand the pulse of the consuming public that they don’t have to listen to anyone, and for some reason they’re losing more and more money every year.

The problem emerged in the beginning when music went from albums to CDs and then online. The old paradigm consisted of music studios finding talent, packaging it and then filtering it out to radio stations that then opened the doors for people to rush to record stores to purchase the brand new content. Well, somewhere down the line that model fell apart, mainly because a few little promises made never came through, and then the industry changed overnight as a result.

What I’m talking about was a promise that the music industry made to consumers when albums were on the out and CDs were coming in. The simple promise was that CDs, which were cheaper to make than albums, were going to be cheaper for customers. This was the selling point to get people to give up their vinyl albums and welcome CDs. The promise was that CDs would cost $9.99 all of the time. Well, when CDs first came out, that WAS the price, and then quickly they started to increase to $13.99 and other such prices. Now, if you’re lucky, a CD can be found “on sale” for $9.99 off of the retail price of much more.

We were lied to. Oh, the naysayers will claim such a promise was never made, but for those of us who were paying close attention back then, the promise definitely was made. Instead of following the plan, executives realized that consumers are stupid, or so they thought, so they just went back on their word and sold CDs for what they figured they could get, rather than for how much it was promised.

A funny thing happened right after that. The Internet showed up. You see, if that never happened, the music industry would still be the major entity it was a few decades ago. But no one anticipated that a couple of geeks at universities wanting to talk to each other would lead to something so powerful and so overwhelming. But the Internet happened, and the music industry was in the wrong place at the right time.

The consumer population was kind of pissed at the music industry at this time because of the whole lie thing, and then when the next generation realized that it could get all of this expensive technology for free, they jumped on it. So two things happened at once. The music industry cheated the older customers by lying to them while the younger customers grew up with a new paradigm where they got everything for free. You see, if the music industry hadn’t lied to the older generation, they might have actually had powerful allies on their side. Instead, they had a bunch of pissed off customers who decided to just let the music industry fend for itself. Where these people could have been the “moral” guides to the younger generation, who wants to be the moral guides to people who are doing something you figure the bad guys deserve anyway?

Well, the music industry sat it out, thinking things would fall back in place, but their real ally, musicians jumped ship on them as well. Oh sure, the established musicians were in their corner, but consumers are a fickle sort, dumping old artists for new ones because music really doesn’t have standards that are controlled by executives. Music is music and people will seek it wherever it can be found.

And a lot of future musicians realized that if they wanted to make it in the industry, there was a new direction to take, one that required they take their music directly to the people. This opened up the industry to everyone, and as more and more independent artists showed up, the music industry had less and less control over the content.

That’s kind of where we are today. The music industry is trying to save itself by reestablishing the controls, but no one really cares anymore. There was an attempt to force streaming content under draconian rules, but music executives are starting to realize that this isn’t leading to sales. What the music industry never realized was that the future was going to be somewhat of a free for all because if you can’t trust the industry to do what they promise, then you look elsewhere for results.

Recently, I bought a CD for the first time in about a year. Yeah, it’s been that long. I’m still pissed. It was Taylor Swift’s new album, and it was on sale for $9.99. Imagine that. Anyway, it’s a great CD, but it’s probably the only one I’ll buy for at least another year. I’m one of their solid customers, and it’s taken a long time to bring me back to the market. Before I stopped buying music, I used to buy three or four albums a week. They’ll never regain the market share they had before. It’s just not going to happen.

Like I said, the music industry lied back when it needed to win over its customer base. So, hopefully as these executives find new jobs mowing lawns, or whatever it is unemployed music executives are capable of doing, they’ll remember it was really their fault. And they should keep in mind that if they promise to mow someone’s lawn and then go back on their promise, they’re probably not going to get paid. The real world is kind of mean that way.

Bioware is Ripping Off Gamers Again

Computer Games, Economics, , , , , , , ,

Last year, one of the better games to come out was one called Dragon Age, and it was created by famed game design company Bioware. I’ve been a huge fan of Bioware for many years, mainly because they created some of the best roleplaying games known to mankind, like Neverwinter Nights, Knights of the Old Republic and Mass Effect. Well, they’ve recently been working on the sequel to Dragon Age, appropriately called Dragon Age II, and like most gamers, I’ve been looking forward to it. But part of me has been a bit apprehensive, and let me explain why.

When I was playing Dragon Age last year, there was a point in the game where I found myself staring at the computer, wondering if the game was actually taking me seriously. Let me explain futher. You see, a lot of games have what’s called downloadable content (often abbreviated as DLC). This is almost always new content designed for the game after the game has been released, where the developer has figured out new ways to expand the adventure. Sometimes, it’s new armor or weapons, and quite often it’s completely new quests and adventures. For someone who has played through a game, when new content like that gets released, you jump for joy, enter your credit card information, pay a nominal fee, and you’re off slashing at enemies again.

Well, in Dragon Age, there’s a certain part of the game which is considered a rest area, where your characters set up a camp, and you can go talk to the individual members of your group. It’s often a neat way to explore the quests that exists with secondary characters. If there’s a new quest, Dragon Age had a way of showing you this which was blatantly stolen from World of Warcraft, but you see an exclamation point above the character’s head and go talk to him, or her. Well, one of those characters had that exclamation point over his head, and I went to talk to him, but his conversation was different from the others. Unlike the others who gave me more information, he was essentially telling me that if I wanted to explore his adventure, I would have to buy downloadable content from Bioware first, and he even offered me an opportunity to exit the game and go buy that DLC. Yes, it was very tacky. But I was interested, and it wasn’t that expensive, so even though I felt dirty entering my credit card information, almost as dirty as some woman on the other end of the phone asking me for my credit card information before pretending to be a naughty schoolgirl. Okay, not as dirty, but definitely not as fun.

This, to me, was a pretty tacky way to do it, but I figured that this was how they had added some of their extra content, and it was probably patched into the game a few patches after the game was released. Pretty tacky, but I was willing to go along with it.

Well, on Tuesday, January 7, Bioware announced new DLC for Dragon Age II. Great, except there’s one caveat. Dragon Age II hasn’t even been released yet. In other words, Bioware has announced downloadable content that will cost $7.00, and the game hasn’t even gone gold (been released). As many gamers are sure to immediately think, this is ridiculous, as this is something that should have been released with the original game because this isn’t “after the game has been released after thought material”. This is material being released WITH the game.

Part of the problem is that Dragon Age II isn’t some game that is going to be released for $19.99 and this is a way of making up some of the lost cash. No, Dragon Age II is going to be released and charged at the maximum a game can be charged. This is straight out greed in the name of stupid profit. It’s looking at the gamers and saying, hey, fuck you and give me more money.

What’s really also happening is that every other developer out there is going to be watching this to see what happens, and next thing you know, games are going to be released half done, and then they’ll charge you for the other half of the game. But they’ll release the game at full price the first time and then like a blackmailing girlfriend with pictures of you and her and a midget, she’s going to charge you to get the full experience.

I may not buy Dragon Age II because of this. As much as I respect Bioware, this is a line that shouldn’t have been crossed. It’s not like they’re not going to be making insane profits anyway. This is just a way of them saying, we know you’re all a bunch of stupid kids, so pay up or we’re not going to let you play our game.

Well, there are always other games.

The Epic Battle for Your Money

Economics, Politics, , , , , , , , , , , ,

There’s an epic battle being fought these days in which the goal is nothing less than your hard earned money. Sadly enough, the only ones not benefiting from the struggle are us, the actual consumers. We’re mainly the victims, the targets and the ones who manage to keep making it so that we keep getting screwed over, cheated and abused. If it wasn’t so tragic, it would be funny.

I’m not exactly sure when it happened, but at one point we went from being consumers who were part of the system to consumers of content who are outside of the system. In the old days, maybe as recent as the 1970s, we were seen as consumers in a big triangular product cycle that started with us working for companies that produced content that was sold by businesses back to the people who were responsible for making the products. It was a closed system where people in other businesses provided products while we sold the products from our revenue stream back to them. Everyone came out ahead because we all made enough to survive, and we all got the products that everyone was making for everyone else.

But something happened that caused a real problem to the system. You see, at one point, those companies that make the products realized they could make these products without the actual consumer production staff being a part of the manufacturing cycle. In other words, they could automate the production without having to pay a production staff and still manage to create enough products to sell to those other cells of the manufacturing cycle. Except, those other cells were also figuring out how to cut out the production people so that they could automate their production and maximize their profits. After a certain amount of time, we cut out one prong of the triangle, leaving basically the profitable company management and the salespeople. However, we’ve kind of cut out the people who used to be the producers of content, figuring we can do it without them.

Unfortunately, those people were also the main consumers of the content. Without them, we end up producing a lot of product for people who can no longer afford to purchase it. This was fine as long as we were only cutting out a certain segment of the production audience, but now that everyone has figured this is the way to profitability, well, we’ve made it so that there may be too few consumers to actually participate in the broken triangle.

This was a problem that has been seen for quite some time, but big companies refused to pay attention because they were making money without very much effort, and they saw no end to it. Let’s examine that for a moment. And we’ll do it by examining the old model and then see where the new model sort of makes everything no longer make sense.

The old model of capitalism was that as long as we continued to produce products, we could always sell them for a profit. This always existed with the necessity that the consumer market was always going to be able to actual purchase the items needed. Well, what has happened is that a lot of the money that is to be made in this area has now been transferred to huge corporations that reward very few people for their efforts. Outsourcing and downsizing was inevitable as companies started to exist for the sole purpose of providing better results on stock market exchanges rather than to a people-driven profit margin. But eventually, outsourcing was going to hit a point where the native population of people within these companies was going to start suffering, with more and more jobs being lost, even though prices for products would continue to go down as the labor became cheaper through the outsourcing process.

What this meant was that one of two things would happen, and the result was really based on what ideology you believed. If capitalism was truly the victor, then the outsourcing would eventually hit a point where there is no more possible outsourcing location, so that eventually the corporations would have to start feeding back on themselves, and that would lead to consolidation to the point of where expansion would have to stop and the products being produced would fall back to a Maslowian base level of survival products rather than those that feed self-actualization. There would be no profit in leisure products, like iPads, because no one would be able to buy them any more. Instead, the main production would fall back to basic necessities as the people who still had jobs would be focusing on survival rather than leisure-like activities. The numbers of elites benefiting from the system would have shrunk so small that the luxury good market would dry up overnight. Where it would go from here is unknown as we’ve never reached this expansion end point before, so anyone can guess as to what would happen next.

The other choice is the old one of eventual communism, which is almost a direct insult to anyone who believes in corporatism and capitalism. Communism needs capitalism, however. Because once we’ve reached what’s called a saturation point (where companies have pretty much grown as big as they can become and profit is no longer profitable), then the system turns inwards, and the mass population that has been forced into corporate slavery then turns on the economic system and takes over its cogs and wheels. Their success would be in direct violation of the system, so this would probably bring on an economic revolution where the state would eventually turn into a police state where the military and police would act in the interests of business, turning on individual workers. The workers would probably suffer a number of defeats, with many deaths and even worse working conditions, until eventually they succeeded and overthrew the corporate entities that maintain control over the dynamic.

That’s if you believe either one of these theories of economics. However, what should be pointed out is that we have hit a point where people with economic clout are trying harder than ever to sell us crap we don’t need, and the crap that we do need is being put into flux, so that we are actually having to fight for these things. An example of the former is the various industries of utilities and intellectual property. Heat and electricity is pretty low on the Maslowian scale, meaning that we generally need electricity and heat. Often, the industries that hold power in these areas see themselves as a necessity and do everything possible to act like they are working in our best interest. Gas companies make really cute commercials about how the cars are all fuzzy and happy, and that they’re our friends. Meanwhile, the executives of these companies make insane profits and even when they destroy our natural resources with bad decisions on their part (like BP and Exxon), they do as little as possible to maintain their hegemonies and then try to make the problems go away by paying off only as many people as they need to do. The clean-ups in Alaska and on the East Coast have been afterthoughts, and already there have been attempts to do the least possible, while lawyering up rather than be the conscientious industries we’d like them to be. In the end, they’ll still manage to pull off outrageous profits, and the ones who were hurt the most will always be hurt the most.

The latter of those two choices (utilities and intellectual property) is even more fascinating in that the consumer isn’t even being considered a part of the discussion, even though the consumer is the one who funds pretty much everything. Organizations like the Recording Industry Assocation of America (RIAA) have been so outdated for so long now, holding onto old technology like record companies, that rather than modernize themselves as they should have done so long ago, they sue anyone they can think of, realizing that if they cast their net wide enough, they’ll manage to bring in enough profit to keep themselves going in perpetuity. The fact that they haven’t been relevant in years is rarely discussed by them; they’re more interested in maintaining a status quo that has been gone for many years now. Let’s face it. People are now getting a lot of their intellectual content (music, movies, TV, and games) for free because the Internet has made that possible. A lot of the potential customers they have lost are young people who have grown up getting this stuff for free for most of their lives. The RIAA and other such organizations should have been catering to these kids a long time ago, not slapping them with lawsuits the second they realized there was a problem already out of control. And even worse, the customer base they already had (older people like me), they abandoned by focusing on that young crowd, trying to sell the ideological equivalent of freezers to Eskimos. Had they continued to support the older class of customers, who were used to buying content from stores, they might have maintained years of profitability while slowly switching over to a model that could have catered to this younger crowd. Instead, whenever I walked into a record store, or an establishment that sold CDs, I see tons of titles that are geared towards young kids who aren’t going to buy any of the stuff because they can get it for free. There’s none of it that caters to me, and I’m sorry, but an occasional compilation CD of music I already own is NOT what anyone my age considers “catering” to me. It’s not even trying.

So, this brings me to what’s going on today. There are all sorts of people who see the rest of us as nothing but blind consumers they can take advantage of because they don’t care anything about us because they either outsourced us, or they see us only as mindless automatons who are only around to buy their junk. Google announced today that they are now going to be giving us the ability to buy books online. Basically, even though Amazon and Barnes & Noble have already done, Google indicates that it’s going to allow people to buy books in e-reader format, but then turns around and pretty much tells publishers that they’re only offering 52 percent of the profit of the books sold. Amazon and B&N have been offering closer to 70 percent profit. Apparently, Google seems to think that it deserves more of the money for a product that they did not create and basically only offer as a reading service. It’s like a tape recorder company demanding half of the profit of all music produced because it provided the tape recorder used to make the music. The only reason Google can offer this is because Google has power right now, and it will be interesting to see how the publishers respond to this insult of an offer, especially when they already have two viable processes for releasing e-reader content. Google is proving itself to be a great successor to Microsoft in all ways Dr. Evil-like.

Another story that has been making a play is also very important to this issue, and it involves reality TV stars the Kardashians, who are basically a trio of tarts who have no actual talent other than being famous for being famous. When their launch onto the public scene was through a sex tape that was sold by one of them, we really shouldn’t be expecting a whole lot more. Yet, they decided to play the profit game by tapping into their fan base and offering a misleading credit card that essentially cheats the living crap out of anyone stupid to ever use one. They’ve suddenly decided to distance themselves from the card AFTER a public outcry came out following the revelation that the card was generally little more than a massive scam, in that it does so many things that a paid for credit card should never do. In reality, the Kardashians backed away from their card because they were found out and it was going to become a headache to have to explain how they were profiting by cheating the crap out of people who were stupid enough to believe in them.

But their case is an example of what is going on today. Companies, celebrities and even governmental officials have no problem cheating the crap out of potential consumers mainly because they don’t see these consumers as a part of the original triangle I was talking about. So many people have been taken out of the equation that we’re no longer considered associates, friends or partners, but potential victims to take advantage of.

So what can we do about it? Stop buying the crap that people are selling you whenever you discover they’re part of this bad group of profiteers. Right now, we have a little bit of say in the future of where this goes, but as long as we continue to act like sheep and get taken advantage of, things will only continue to get worse, and eventually we’ll have little to no say in the matter.