BrainTrust Query: How Can Retailers Harness Digital’s Fragmented Future?

Jan 29, 2013

Through a special arrangement, presented here for discussion is a summary of a current article from the newmarketbuilders blog. The article first appeared on the Licensing Industry Merchandisers’ Association (LIMA) blog.

In a recent article for The Guardian, journalist and science fiction author Cory Doctorow expounded on dynamics that he refers to as "positive externalities" which arise "when you do something you want to do that also makes life better for someone else." As an example, he describes driving your car slowly to avoid a wreck and thereby making the road safer for other drivers. His example may sound benign but the concept has far-reaching and potentially contentious implications for digital age dealings in content marketing and intellectual property.

Mr. Doctorow calls the internet the natural home of positive externalities. Google has built an entire business model on harvesting the byproducts of internet activity, while Facebook has created a platform that encourages people to socialize and then mines and markets the resulting data to retailers and brand marketers so they can leverage it to sell more stuff. According to Mr. Doctorow, both companies are essentially taking ownership of externalities by "locking them up in proprietary walled gardens," but he’s far from opposed to the model. In fact, he calls resentment over the harnessing of positive externalities "our era’s defining mania."

Mr. Doctorow cites various digital rights management (DRM) restrictions, such as those keeping people from selling used games, lending e-books, or even taking DVDs from one country to another as prime examples of externality phobia gone mad. He compared such restrictions to levying a fee whenever a book is used for a purpose other than reading, like propping up a wobbly table. Some argue that dropping DRM altogether would future-proof the publishing industry, since the future of e-readers is unknowable and doing so would ensure that publishers have the agility to leverage new formats and technologies. A DRM-free world would also provide more choice to consumers and allow smaller e-book retailers to stay in the game.

Meanwhile, businesses that monetize the run-off from personal technology usage and other businesses’ activities are sprouting up and causing quite a bit of controversy. At the Consumer Electronics Show (CES), Aereo, the web TV service backed by Barry Diller, revealed plans to expand its budget-cable service outside of New York to 22 additional cities. Aereo’s technology pulls broadcast TV signals into the cloud, charging subscribers $8 per month (or $1 per day) to access live TV on multiple devices. Is this a clear-cut case of Aereo stealing broadcaster’s content? Management argues that since people can purchase antennas and pull in broadcast signals with impunity, Aereo’s individually assigned subscriber antennas aren’t an exception or a violation.

Mr. Doctorow has summed up the positive externality fear mindset in this way: "If something I do has value, I deserve a cut." The cuts may get thinner as media continues to fragment, and as more stakeholders grab at the shards.

What do you think about the theory of “positive externalities” as it relates to digital content? How should retailers and brands take advantage of the more fluid and fragmented view of intellectual property in the digital content arena?

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9 Comments on "BrainTrust Query: How Can Retailers Harness Digital’s Fragmented Future?"

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Joan Treistman

“If something I do has value, I deserve a cut.” That could become the mantra for commercial businesses and individuals as well. You can’t use the side of my house for a billboard unless you pay my rent. You shouldn’t be able to leverage my personal behavior and information without paying me for it. Marketers have traditionally used data to identify large target audiences and the media to reach them. And this has been acceptable to all.

With ability to identify individuals and the media to reach them there is an invasion of a person’s space and perceived privacy. Not too many people will be happy knowing that marketers (lots of them) know who they are, what they do and how to reach them directly. Add the construct of value to the above and consumers will soon demand their fair share or demand to opt out.

Matt Schmitt

Retail’s collection and use of customer activity, behaviors and preferences could be considered an example of Doctorow’s notion of the “walled garden” of data locked up by an organization. However, the data can be directed into digital media and messaging designed to guide the broad base of consumers in positive way.

Adrian Weidmann

For far too long, brands and their band of agencies have, and continue to, create content that they believe has a very short life cycle. In today’s digital landscape, brands need to think of themselves as publishers! ‘Brand as Publishers’ strategy will allow brands to create, manage, deliver and manage relevant and personal brand communication to their global shoppers and customers.

Brands should treat everything they create—digital media, audio, video, image, training and education material, and investor relations presentations—as a valued asset that should be kept in a central brand library. Then and only then can a brand manage their communication and ‘positive externalities’ through all channels.

David Schulz
David Schulz
4 years 9 months ago

Just enough marketers are going to push the envelope just far enough to create a massive backlash when it comes to the collection of commercial use of individual consumers’ information, behavior, demo- and psycho-graphics.

People can understand notices from retailers they buy from regularly, but when e-mail comes from companies they’ve never heard of, it becomes spam. Too much spams leads to cries for regulation, which is bad for everyone since lawmakers repeatedly enact the law of unintended consequences.

Unfortunately, if brands do not practice ethical behavior as the curators of their customers’ data, strict regulation and perhaps criminal prosecutions will be in the offing.

Shilpa Rao

One more example along these lines is IP telephone which is still charged in many countries. When you have data service, why pay for voice again?

Crowd sourcing of ad content, or going viral on YouTube could be classified under this. Retailers need to constantly analyze how their target customers are leveraging digital media and weave in offerings and, explore new ways of doing things online which people previously did offline, e.g. sharing books. Retailers who are able to emulate the real world better online will emerge as a winner.

Ralph Jacobson

A very slippery slope here. Rights-managed properties, be they digital (imagery, audio, etc.), physical (books, movies, etc.) or the more or less tangible (brand value, logos, etc.) hold intrinsic value to their owners. Much is to be gained by appropriately leveraging IP by merchants and brands to drive revenue and potential loyalty. However, the key is to enter into an agreement with a clear understanding of what is within scope and what is not. There are countless abuses across the globe as we speak that literally go into the trillions of dollars of lost revenue.

I think there is all the potential in the world to utilize these digital assets in proper ways. “Business partners” (retailers, etc.) need to leverage them within a more stringent set of guidelines… that should be better addressed by the industry.

Herb Sorensen
The “rights” part of this discussion go to the fundamental issue of intellectual property. In his “The Birth of Plenty,” Bernstein identifies four prerequisites to prosperity, one of which is property rights, which includes intellectual property. Patents, trademarks and, now, digital rights are subsumed in this. The lack of intellectual property rights is a killer to prosperity. Without those rights, creative people, the ones who create intellectual property, are demotivated to spend time, and often considerable money, to produce that intellectual property. So society makes the trade-off of giving the creator exclusive rights, typically for a limited time. As someone who holds 12 “shopper” patents, my opinion is that the whole world of “rights” is under assault, at least partly because of the abuse of those rights by those who have them. But it is hard to say which abuse is worse: that by owners of the property; or a piratical populace that neither knows nor cares about the fundamental concept of “rights.” This issue of “positive externalities” is a legitimate issue. But it is only one factor in the raucous, ongoing war about property rights, which has extended so far as the US Supreme Court approving government seizing of… Read more »
Cathy Hotka

Society is inexorably moving toward immediacy for content. A number of external frictions are going to fall away; today’s teens watch television shows, for instance, but they watch them on a computer. The momentum is there and it’s never going away.

Kai Clarke

This is a poor example of how we should be managing our intellectual property rights in the digital age. We need to drop DRM and all other obstacles which hinder access to electronic versions of products, and move forward with a new, updated model that embraces DRM in our digital electronic age.


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