thinking: relating- celebrating :-)

A few weeks back Microsoft paid a large sum for a very small slice of Facebook. There has been a lot of commentary but this post makes the most sense and includes some very good underlying reasons for that deal.

For some earlier discussion see Microsoft & Facebook on Rods blog. And over here on the valuation implications More on the MS/Facebook deal which quoted Nicholas Carr.

My comment at the time was: (It seems like the deal is much more about the advertising rights than anything else. This paragraph below is a direct quote from one of the news.com reports.)

“In a conference call on Wednesday afternoon with press and analysts, Van Natta and Kevin Johnson, Microsoft’s president of platform and services, emphasized that this deal is all about the existing advertising partnership between the two companies, which has been going on for over a year now. Facebook founder Mark Zuckerberg, it should be noted, was not present on the call.”

However Marc Lehmann* has absolutely nailed it in his excellent post on the topic -Facetime with Facebook Bought Cheap. You should read his whole post – it is so good I wish that I wrote it.

(Marc is Founder of Saasu.com – and previously a Debt/Equity Trader at Deutsche Bank.)

Marc notes about 10 of benefits this deal achieves for Microsoft.

• Buys probably the equivalent of 10′s or possibly close to 100 million dollars worth of PR. Online, paper and TV. Screen real estate for 3 months as people speculate. So their Facebook spend isn’t 260mio already it’s a lot less.
• Wash Facebook brand onto Microsoft’s brand.
• Makes it easier for Microsoft to buy a blocking stake later. They already have a start now.

These are just the first 4 -read the rest of his list. And even better -this paragraph near the end.

And the best M&A trick of all is…
Microsoft pays up for the first chunk, then the seller/victim re-benchmarks price in their mind and any suitors that come along look cheap and nasty.

As a result new suitors say no to Facebooks attempts to get some price tension. The new suitors don’t even try. Then all of a sudden Facebook is left with their initial investor who has only bought a small percentage.

Time passes, more time passes and Facebooks business model of low cash and high cost is starting to show particularly as the US economic slowdown hits. What do you know Microsoft does not want to pay the same price any more.

There is a much bigger story on the Microsoft / FaceBook deal as Marc highlights extremely well.

Blog Note: If you spotted that my post frequency has been down lately – here is what happened. WordPress completed not 1 but 2 version upgrades (now at 2.3.1) recently and I thought my upgrade processes were at fault. Consequently have rebuilt the entire blog not once but 3 times!

After hours of testing on mirror sites and the live version finally concluded that at least one of my plugins was at fault. Today I found out which one that is – have now fixed the problem and there will be some catch-up posts including one on WP plugins and how you can maybe save some time if you have WordPress and run into similar issues.

A quick note to say that this blog had a bit of a meltdown during an upgrade and had to be rebuilt. It may take a while to restore all the various options that were included before. Thanks for your support.

One of the joys of open source is that there are often multiple version upgrades within a short period of time. It doesn’t always pay to have the latest version and it is always a great idea to test first.

We also took the opportunity to strengthen security measures as any high traffic site attracts interest. Everything is back working better than before now.

Update: “This is Your Brain on Music“:The Science of a Human Obsession by musician and neurologist Daniel Levitin is a great book. Thanks to those who bought the book after my earlier post Uses Not Innovations Drive Technology which has more detail.

I was at an recent event where (in passing) a presenter recounted her experiences at various TV conferences along these lines. She told us that many of the industry attendees were still asking variations of “Help the Internet is coming…what do we do?”

The question isn’t new and neither are the answers, but in 2007 the shape of both might look a bit different. Here are some ideas and observations on how content providers and publishers might answer that question and address current and future opportunities.

This has been happening for more than a decade now at various music, film, TV, media and publishing conferences.

The various incumbents are still struggling to transition their business models into a time where distribution is much less of a controlling factor due to the ubiquity of the internet. Even now it seems some media (music, TV and film) businesses are still scared of the future. Even book publishing is also facing big challenges despite the long tail theory.

This fear of the change and the new reminded me of various conferences I attended back in the early 90′s when multi-media CD, CD-i, and DVD formats were just starting to break ahead of the internet wave.

Some Conclusions on the Way Forward

The conclusions back in ’92 and ’93 were that anyone involved in publishing should have some kind of “digital soup” of original content that they could roll out as the public caught up with all the new format choices. Broadcasters now appear to be revisiting the idea of multi format content and platforms but to me 14 years seems a very long time for the penny to drop.

Back in the 30′s sheet music publishers controlled the music business. They were mostly displaced by recorded music and recording industry companies. Those companies kept getting confused on the strategic intent of their industry and we all know what happened to them, just like now.

In a world where everyone can be a content producer and a consumer at the same time – publishers need to learn from history, rethink their business models and adapt. Follow the money, Andrew Dubber is brilliant at deciphering the business side of this. See also the future of music.

The music industry refused to recognise a legal digital music format for some years until iTunes partially rescued them. Now a generation has got used to not paying because they couldn’t – even if they wanted to.

Multimedia History

However, back in ’93 no one really had an idea of how big and how much the internet would change things as modems at the time were running at 1200/2400bd and only used by geeks on bulletin boards for help desk style services. Even then, some people could see the ability to deliver 600Mb + of content on a CD of some kind would be mean industry transformation would be needed.

Perhaps the difference with those multimedia conferences, was that for the most part we were outsiders to the publishing world. I had the pleasure of presenting at a conference in Melbourne where I talked about exploding value chains and other “MBA speak” with growing excitement..little did we know the full implications.

During a coffee break I also showed a music video clip of the Emma Paki song – “System Virtue” by arrangement with her record company as an example of future media content. If you’ve seen the video it has various staunch East coast references which to a middle class white audience was quite a shock.

My thesis was, that given access to a new distribution format which could hold video we would see the music industry trying out new things including new artists. I was only going on instinct and guess work but I believed better access to a suitable medium / or media might allow us to hear different voices, and different politics – such as Emma Paki.

Fast forward to the future again.

A few weeks ago I was listening to this radio interview between Pat Pattison* who was described as the songwriting teacher of Gillian Welch and John Mayer at Berklee College of Music, Boston. He started the course as an Analysis of Song Lyrics.

Berklee offers one of the few songwriting as a major courses in the music world. He was talking with Kim Hill who asked this question. (* now a local podcast copy) in case you tried it and the archive copy didn’t work. The Radio NZ Saturday Kim Hill programme reference is here. Podcast is here http://www.dialogcrm.com/audio/sat-20070818-1005-Playing_Favourites_Pat_Pattison-064.mp3″> (duration: 35’41sec)

Key question: Do you think that we’ve run out of songs that sound new?

She added these song references to her question from one of Pat’s former students.

“There’s gotta be a song left to sing
Cause everybody can’t of thought of everything
One little song that ain’t been sung
One little rag that ain’t been wrung out completely yet
Gotta a little left

One little drop of fallin rain
One little chance to try again
One little bird that makes it every now and then
One little piece of endless sky
One little taste of cherry pie
One little week in paradise and I start thinkin’ “

The verses come from “one Little Song by Gillian Welch.
(See 2 verses above) I really liked Pattinson’s answers.

Especially since there are now about 103.5 million blogs and over 250 million pieces of tagged social media. The same reasoning now applies to other published content such as blogs.

Here are some of Pats answers (from about 15minutes into the audio) as transcribed by me.

“Even if every song has been written’ – every song hasn’t been written by me. And in the journey of writing a song, one discovers things on a deeper level.

No matter whether that idea has been written a thousand times before.

And so songwriting is certainly a process of self discovery and in terms of it being something has never been done before,

I really loved Bob Dylan in the ‘No Direction Home” Scorsese DVD; who says – There I was in the ’60′s, ….I was doing something that nobody had ever done before. He paused and said -”I think I was wrong about that.”

New question by Kim on – The use of the senses in songwriting?

Pattinson’s answer:

You need to stimulate your listener to get / make the listener involved in your song.

There is a difference between saying “Somethings changed between us” which is sort kind of telling and abstract and..

“You never close your eyes anymore when I kiss your lips” (Number 23 in a list of top 25 recognised song lyrics. )

One shows and the other one tells.

When you can stimulate your listeners senses
They put their stuff into your words and the song becomes theirs.

Ain’t that the truth; and best of all his insights are valuable to all content communicators including marketing contact.

Great songwriting is distilled experience with a personal flavour. The connection is that like a great song our insights can help our customers if we are open to that possibility.

(Prof Pat Pattinsons full profile. More from Pat on songwriting.)

Every new generation appears to collectively relearn things some of us have forgotten and that is why reflecting on the history of everything is so important.

Incredibly one of Gillian Welch’s other great songs is on topic and is called Everything is Free off album Time (The Revelator) or over here and is about the music industry and some of these ideas.

Next week: Part 2 on what we can and should do about the great opportunities in content creation and publishing.

“Gillian Welch”, “publishing futures”, “music formats”