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Delivering the (Digital) Goods or

Delivering the (Digital) Goods or. The Canary in the Coal Mine. Jim Noble Warner Music Group. “There is nothing more powerful than an idea who’s time has come”. Victor Hugo. “Being ahead of your time is as bad as being behind the times”. Tim Berners-Lee WWW - 1992. Guglielmo Marconi

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Delivering the (Digital) Goods or

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  1. Delivering the (Digital) Goods or The Canary in the Coal Mine Jim Noble Warner Music Group

  2. “There is nothing more powerful than an idea who’s time has come” Victor Hugo

  3. “Being ahead of your time is as bad as being behind the times” Tim Berners-Lee WWW - 1992 Guglielmo Marconi Radio - 1901 Thomas Edison Elec Light - 1907 John Logie-Baird TV - 1925

  4. Dot Coms and Making Money “The wild fling between a young & promising technology and impetuous financial markets is ending in an acrimonious separation. The only outstanding question: what can be salvaged from the break up?” Financial Times, October 13, 2000

  5. Business on the Internet 10 Leading Internet Companies’ Financial Results (excluding Cisco and AOL) ($ billion) Losses as a% of sales: (36%) (28%) (52%) Source: Mercer Management Consulting

  6. Business on the Internet Advertising Balance of Trade($ Billion) Source: Mercer Management Consulting; Competitive Media Research; Internet Advertising Bureau; Advertising Age; Forrester

  7. However……. The rebound is coming soon as the Internet matures from metadata to product

  8. MOORE’S LAW Pages on the World Wide Web(Billion) Source: Cyber Atlas; IDC; Industry Standard Exponential curves are most interesting at the “knee”

  9. MOORE’S LAW 1990 1995 2000 2005 Exponential curves are most interesting at the “knee”

  10. Technology Drivers 1) Compression 2) Broadband 3) Internet peer-to-peer file sharing 4) Wireless

  11. 1) Compression in real time For audio / video: 5:1 400:1 1984 • Sony ATRAC 1 • ADPCM / FFT • Motion Picture Experts Group 1, Layer 3 • MP3 • DTS • Sony ATRAC 3 • Dolby AAC • Real Networks RealAudio • Microsoft Windows Media Technology 4.0 • MPEG 2, 4, 7 • ..etc. 2000

  12. 2) Broadband Time for Typical MP3 File Transfer (~4 Mb) Narrowband Broadband 37 Min 19 Min 10 Min 4 Min 20 sec 3 sec 1 sec <1 sec 8 sec <1 sec 1 Min Kbps 300 - 1965; 14.4k - 1985; 56k - 1995

  13. 2) Broadband Time for Typical MP3 File Transfer (~4 Mb) Narrowband Broadband 37 Min 19 Min 10 Min 4 Min 20 sec 3 sec 1 sec <1 sec 8 sec <1 sec 1 Min Kbps Mbps 300 - 1965; 14.4k - 1985; 56k - 1995; DSL - 2000; T1 - 2000; Cable - 2001; OC - 2005

  14. 2) Broadband U.S. Broadband Adoption(% Total) Broadband Households Narrowband Households Source: Goldman Sachs (11/15/1999)

  15. 3) File SharingMP3.com: Centralized Model User User User User User User Source: Deliotte & Touche

  16. Central Registry 3) File SharingNapster: Decentralized Model User User User User User User Source: Deliotte & Touche

  17. G G G G G G 3) File SharingGnutella: Peer-to-Peer Model User User User User User User Source: Deliotte & Touche

  18. 3) Emerging P2P AIMSTER 3.3 million Packages delivered by Federal Express 224 million Bulk rate letters delivered by the USPS 280 million Phone calls on the AT&T network 851 million AOL instant messages 2.1 billion Personal e-mail messages sent in the U.S. (average daily rate in January 2000) FLYCODE From the creators of Napster Legal file sharing, with Rights & Payments

  19. 4) Wireless (with XML) • Cellphones with microbrowsers • PDAs (Omnisky, BlackBerry…) • Airports • Spaceway (GM Hughes) • Teledesic (Microsoft) • etc…. Internet in the Sky

  20. A) 1/2 million B) 3 million C) 7 million D) 12 million 4) Wireless (with XML) How many users will access the Internet worldwide via devices other than a PC this year?

  21. Global Wireless Market(Millions) Source: Industry Standard (May 22, 2000)

  22. Music Books Television Movies The Canary in the Mine Digital Source Available? Easily Uploaded/ Downloaded? Easy for Consumer?

  23. Delivering Digital Goods CONTROLS PRODUCT COMPRESS ENCRYPT CONTAINER META DATA TRANSMIT RIGHTS PAYMENT DECOMP DECRYPT UNWRAP

  24. Music Channels to Market U.S. Music Industry Sales ($Billion) Online Sales 41% Retail Outlet Sales 59% Source: Goldman Sachs 11/15/1999; Forrester Research

  25. THE INTERNET IS NOT A ZERO SUM GAME Digital Downloads 18 16 Online Sales 14 12 10 8 Retail Outlet Sales 6 4 2 0 91 92 93 94 95 96 97 98 99 00 01 02 03 Source: Goldman Sachs 11/15/1999; Forrester Research

  26. Strategy to Compete This has extraordinary implications for Information Systems

  27. Lessons Learned Internal I.T. must become expert on Internet service providers (not just ISPs and ASPs, but DAM, DRM, DGM….) If you don’t get it, the business will outsource I.T. by the back door The CIO must be seamless with the CTO Music has one year to get it right - how long do you have?

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