4 posts tagged “business”
A shocking thing when you get to the US and the UK is how advanced capitalism is in there. And in my view, Comparative Ads are a symbol of this sophisticated capitalism. It is the supreme sign that business american style really is an open fight between competitors.
In the US, firms don't hesitate to take the piss out of competing firms, by comparing directly each other's offerings. In contrast, this is completely prohibited in Continental Europe.
A recent example is how Apple is making fun of Windows Vista. These are part of the long line of aggressive Get a Mac ads showing a very fashionable Mac and a very old-fashioned PC engaging into hilarious conversations. But with those new commercials released recently in the US, Mac is no longer shooting at the PC industry, it is now directly attacking Windows!!!
This is a level of capitalism that we're very far from in Continental Europe.
Anyway, although I'm not a big supporter of Mac in general (great products, but too onerous for my humble use..), I must admit that these ads (especially the "security" one) are just pure genius. if you have some time to kill, or just want to get inspired from great advertising (BTW, who's the agency behind it, anyone knows?) you can watch them here
Here is an open letter by steve jobs to record companies. Although I am really wondering whether this is the most diplomatic way to adress this issue, I must say he does have a point. For a while, I have been pretty pissed off at the music industry and how stupid they were when faced with the arrival of file sharing softwares like Kazaa, and the transition to digital music in general. Instead of reacting in a progressive manner, not only were they super slow, but they also tried to use repression far too often and thereby made themselves an enemy, in the eyes of the consumer. We, capitalists, always like to beat the system, that's part of the game, but when those companies that we re fucking over react so stupidly, it's even more pleasurable..
Anyway, steve jobs has a point, and obviously Edgar Bronfman, CEO of Warner didn't get it.
Steve Jobs
February 6, 2007
With the stunning global success of Apple’s iPod music player and iTunes online music store, some have called for Apple to “open” the digital rights management (DRM) system that Apple uses to protect its music against theft, so that music purchased from iTunes can be played on digital devices purchased from other companies, and protected music purchased from other online music stores can play on iPods. Let’s examine the current situation and how we got here, then look at three possible alternatives for the future.
To begin, it is useful to remember that all iPods play music that is free of any DRM and encoded in “open” licensable formats such as MP3 and AAC. iPod users can and do acquire their music from many sources, including CDs they own. Music on CDs can be easily imported into the freely-downloadable iTunes jukebox software which runs on both Macs and Windows PCs, and is automatically encoded into the open AAC or MP3 formats without any DRM. This music can be played on iPods or any other music players that play these open formats.
The rub comes from the music Apple sells on its online iTunes Store. Since Apple does not own or control any music itself, it must license the rights to distribute music from others, primarily the “big four” music companies: Universal, Sony BMG, Warner and EMI. These four companies control the distribution of over 70% of the world’s music. When Apple approached these companies to license their music to distribute legally over the Internet, they were extremely cautious and required Apple to protect their music from being illegally copied. The solution was to create a DRM system, which envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices.
Apple was able to negotiate landmark usage rights at the time, which include allowing users to play their DRM protected music on up to 5 computers and on an unlimited number of iPods. Obtaining such rights from the music companies was unprecedented at the time, and even today is unmatched by most other digital music services. However, a key provision of our agreements with the music companies is that if our DRM system is compromised and their music becomes playable on unauthorized devices, we have only a small number of weeks to fix the problem or they can withdraw their entire music catalog from our iTunes store.
To prevent illegal copies, DRM systems must allow only authorized devices to play the protected music. If a copy of a DRM protected song is posted on the Internet, it should not be able to play on a downloader’s computer or portable music device. To achieve this, a DRM system employs secrets. There is no theory of protecting content other than keeping secrets. In other words, even if one uses the most sophisticated cryptographic locks to protect the actual music, one must still “hide” the keys which unlock the music on the user’s computer or portable music player. No one has ever implemented a DRM system that does not depend on such secrets for its operation.
The problem, of course, is that there are many smart people in the world, some with a lot of time on their hands, who love to discover such secrets and publish a way for everyone to get free (and stolen) music. They are often successful in doing just that, so any company trying to protect content using a DRM must frequently update it with new and harder to discover secrets. It is a cat-and-mouse game. Apple’s DRM system is called FairPlay. While we have had a few breaches in FairPlay, we have been able to successfully repair them through updating the iTunes store software, the iTunes jukebox software and software in the iPods themselves. So far we have met our commitments to the music companies to protect their music, and we have given users the most liberal usage rights available in the industry for legally downloaded music.
With this background, let’s now explore three different alternatives for the future.
The first alternative is to continue on the current course, with each manufacturer competing freely with their own “top to bottom” proprietary systems for selling, playing and protecting music. It is a very competitive market, with major global companies making large investments to develop new music players and online music stores. Apple, Microsoft and Sony all compete with proprietary systems. Music purchased from Microsoft’s Zune store will only play on Zune players; music purchased from Sony’s Connect store will only play on Sony’s players; and music purchased from Apple’s iTunes store will only play on iPods. This is the current state of affairs in the industry, and customers are being well served with a continuing stream of innovative products and a wide variety of choices.
Some have argued that once a consumer purchases a body of music from one of the proprietary music stores, they are forever locked into only using music players from that one company. Or, if they buy a specific player, they are locked into buying music only from that company’s music store. Is this true? Let’s look at the data for iPods and the iTunes store – they are the industry’s most popular products and we have accurate data for them. Through the end of 2006, customers purchased a total of 90 million iPods and 2 billion songs from the iTunes store. On average, that’s 22 songs purchased from the iTunes store for each iPod ever sold.
Today’s most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats. It’s hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future. And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.
The second alternative is for Apple to license its FairPlay DRM technology to current and future competitors with the goal of achieving interoperability between different company’s players and music stores. On the surface, this seems like a good idea since it might offer customers increased choice now and in the future. And Apple might benefit by charging a small licensing fee for its FairPlay DRM. However, when we look a bit deeper, problems begin to emerge. The most serious problem is that licensing a DRM involves disclosing some of its secrets to many people in many companies, and history tells us that inevitably these secrets will leak. The Internet has made such leaks far more damaging, since a single leak can be spread worldwide in less than a minute. Such leaks can rapidly result in software programs available as free downloads on the Internet which will disable the DRM protection so that formerly protected songs can be played on unauthorized players.
An equally serious problem is how to quickly repair the damage caused by such a leak. A successful repair will likely involve enhancing the music store software, the music jukebox software, and the software in the players with new secrets, then transferring this updated software into the tens (or hundreds) of millions of Macs, Windows PCs and players already in use. This must all be done quickly and in a very coordinated way. Such an undertaking is very difficult when just one company controls all of the pieces. It is near impossible if multiple companies control separate pieces of the puzzle, and all of them must quickly act in concert to repair the damage from a leak.
Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies. Perhaps this same conclusion contributed to Microsoft’s recent decision to switch their emphasis from an “open” model of licensing their DRM to others to a “closed” model of offering a proprietary music store, proprietary jukebox software and proprietary players.
The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.
Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That’s right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player.
In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves. The music companies sell the vast majority of their music DRM-free, and show no signs of changing this behavior, since the overwhelming majority of their revenues depend on selling CDs which must play in CD players that support no DRM system.
So if the music companies are selling over 90 percent of their music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system? There appear to be none. If anything, the technical expertise and overhead required to create, operate and update a DRM system has limited the number of participants selling DRM protected music. If such requirements were removed, the music industry might experience an influx of new companies willing to invest in innovative new stores and players. This can only be seen as a positive by the music companies.
Much of the concern over DRM systems has arisen in European countries. Perhaps those unhappy with the current situation should redirect their energies towards persuading the music companies to sell their music DRM-free. For Europeans, two and a half of the big four music companies are located right in their backyard. The largest, Universal, is 100% owned by Vivendi, a French company. EMI is a British company, and Sony BMG is 50% owned by Bertelsmann, a German company. Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace. Apple will embrace this wholeheartedly.
- The Economist
- January 4, 2007
As he prepares to take his company public, Mr Charney is trying to strike a less provocative tone than he used to. Previously he emphasised his use of sex as a marketing tool and his tolerance of his workers' sexual preferences: he even posted a video of himself walking around in his underwear on his company's website. Today he prefers to talk about his belief in capitalism, self-interest and globalising markets. But true to form, Mr Charney is taking his firm public in an unusual way. On December 19th American Apparel announced its takeover by Endeavor Acquisition, a "special-purpose acquisition company" formed for the sole purpose of seeking out takeover targets. The deal, due to be completed this summer, will allow Mr Charney to go public without the scrutiny that attends most stockmarket listings.
American Apparel's rise is a striking success story. Mr Charney opened his first shop in 2003. Today he has 143 in 11 countries selling casual clothes for men, women and children. American Apparel's sales for 2006 were an estimated $300m. His company's 80% gross margin, an indicator of its profitability, is well above the industry average of 60%. Its unbranded, brightly coloured and moderately priced T-shirts, sweatshirts, underwear and jeans have become wildly popular among the young, well-travelled crowd that Mr Charney says represents the "world-metropolitan culture".
From American Apparel's inception Mr Charney has put great emphasis on making his workers happy. Pay is performance-related, and amounts to $12 an hour on average, far above California's minimum wage of $6.75. American Apparel staff can buy subsidised health insurance for $8 a week. They are entitled to free English lessons, subsidised meals and free parking. Their workspace is properly lit and ventilated. When the company goes public employees will receive an average of 500 shares, expected to be worth about $4,500.
Anti-sweatshop activists praise Mr Charney as a pioneer of the fair treatment of garment workers. The benefits he provides are expensive: subsidising health insurance costs his firm $4m-5m a year; subsidising meals costs another $500,000. Even so, Mr Charney says he has no plans to scale back these benefits. He considers his contented workers the reason for his success. Treating them well means they are less likely to leave, for one thing, which saves money. "American Apparel is not an altruistic company," says Mr Charney. "I believe in capitalism and self-interest. Self-interest can involve being generous with others."
Anti-globalisation activists like Mr Charney, too. Whereas Gap, another American fashion chain, outsources 83% of its production to factories in Asia, all of the 4,000 or so workers involved in American Apparel's manufacturing process work in the same factory in downtown Los Angeles. But this is not because Mr Charney is opposed to outsourcing or globalisation. His motive, once again, is self-interest: it gives him control over every stage of production, and enables him to monitor the fickle fashion market and respond quickly to new trends. In any case, he cannot outsource anything, he says, because he lacks the necessary infrastructure—and he has no plans to set it up.
Underneath the ethical clothing
Nor does Mr Charney intend to change his controversial approach to advertising. An amateur photographer since childhood, he takes the company's characteristic snapshots of young men and women in various states of undress himself. Half of his models are employees; the others are friends or strangers who send in photos. He pays them a small fee. But sex is more than a marketing tool at American Apparel, according to Mr Charney's critics. Four former employees have filed lawsuits against him alleging sexual harassment. Three of the suits have been settled and one is still pending. Mr Charney's accusers say he disgusted them with dirty talk and gestures, made their lives miserable and sacked them when they complained. He says they are exploiting California's lawsuit culture for personal gain, and they were fired for being bad at their jobs.
Mr Charney has also made enemies among liberals, who accuse him of overstating his firm's progressive credentials. Peter Dreier and Richard Appelbaum, two left-leaning academics, accused American Apparel of a "vicious intimidation effort" against Unite, a garment workers' union, and its supporters. Mr Appelbaum, who is co-author of a book called "Behind the Label: Inequality in the Los Angeles Apparel Industry", wants Mr Charney to submit to an unannounced audit to verify his claims about the treatment of his workers. Mr Charney responds that Unite has a history of corruption and racism, and denies anti-union campaigning, though none of his workers is a member of Unite. "I cannot placate the Left," he grumbles.
Having gone public, American Apparel plans to open another 650 shops across the world. This will not be possible without moving production to China, Mr Appelbaum predicts. Retail analysts also doubt that American Apparel will be able to expand without resorting to outsourcing. Mr Charney insists that China is too far away for his T-shirt production, even though moving textiles by ship from Hong Kong to Los Angeles takes just 11 days. But as his firm grows, he may have to decide whether he is more a capitalist or a maverick.
http://www.economist.com/people/displaystory.cfm?story_id=8486888
Talking about Apple as a whole, I have to say it is a company led by very smart people, who have understood one crucial thing: that our generation is more quality sensitive than price sensitive. In other words, people no longer care about the value for money as much as was the case in the past. They do care however about purchasing "perfect" products.
American Apparel and Diesel also understood that. Levi Strauss didn't.
If you make great products, you can afford to price them very agressively, and people will still buy them, almost irrespective of the price. For instance, Levi Strauss always believed that people would never purchase a pair of jeans at more than 100 bucks. Diesel showed that this psychological limit was pure nonsense for the new generations and that even yougsters with limited income would go as far as $200 if they think that the product is good. Levi's is in fact better value for money, as for the price of one designer pair of jeans, you can buy up to 6 Levi's pair of jeans, but this value for money thing no longer matters in the yeear 2000s. Levi's got it all wrong: as Diesel and Guess were booming in the US, they kept selling $30 pairs of jeans at discount retailers such as Target and Walmart... Now Levi's is on the merge of bankruptcy, and they are soooo desperate... check this out for instance. lol .
American Apparel founder Dov Charney also understood it. Although it originally seemed weird that blank t-shirts could be priced as high as $30, he proved that if those were well fitted and of high quality, their price would no longer matter for young customers. Whether at $30 or $40 they would buy it, as they do consider it as being much more than a simple t-shirt.
These firms such as Apple and American Apparel, no longer focused on Value for Money but on "Exceptional Value for a lot of Money", are the hottest and are likely to remain so. They're the sign of a changing society, full of Singles more focused on their immediate consumerism and well-being than on raising a family and saving up for a house for instance.
This is also the reason why I am convinced that Yelo, the start up I worked for during the summer 2006 will be a great success. The first Wellness Center for exhausted Urban Warriors was launched this month in NYC's westside, and it is already making quite a bit of noise.. the concept is audacious: selling naps (and reflexology treatments) to over-stressed corporate clients. The conservative part of us might question the rationale behind paying for a nap (just like it did question before the rationale behind a $30 blank American Apparel T-Shirt), but Yelo is now going to prove that if this Nap is taken within a YeloCab, in NYC's Westside and in such a well thought about environment, then it's nap that is well worth its 70 cents a minute...
Not to mention the second business line of Yelo, reflexology treatments, that can be either combined with a nap or taken alone. These are offered by well trained professionals. Reflexology is a holistic medicine that lies on the belief that by touching specific pressure points on the hands, feets, or even ears, the patient can acheive an immediate well being. I personally witnessed the passion that Asians have for these treatements during my time in Hong Kong, and the Chinese even believe that diseases in all parts of the body are curable with reflexology. Given their record life expectancy, we'd be right to believe them... Most of us are very skeptical about this kinds of (magic) treatments, especially the fact that it might help in curing diseases. Yet, one thing is sure, the well being achieved following a reflexology treatment is exceptional. Nic's goal is to convince workers that they will be more productive during their day if they take refreshing breaks throughout the day. Ciao Ciao to the coffee break!
Nic is a marketing expert and more importantly, he is a very demanding and intense client. Therefore, Yelo will be very client focused..with a few details worth mentioning such as a strict no-tip policy to reflexologists (this is extremely rare in NYC) as Nic wants the clients to be fully focused on their treatments without having to worry about anything else.
If you want more info on this very promising start up, check out the brand new Yelo website.
