A famous Oatmeal cartoon showed the cartoonist making a good faith effort to buy Game of Thrones. He finds that the show is not available on iTunes, Netflix, Amazon, or Hulu. He tries to buy HBO Go, but it's only available as an add-on to a cable package. Finally, the cartoonist gives up trying to pay for the show and pirates it through Bit Torrent. This cartoon is probably the best ever expression of the "piracy is a customer service issue" thesis.
In a way, this doesn't make any sense for HBO, which makes its money off subscriptions and would ostensibly welcome an opportunity to sell subscriptions to another market segment. HBO claims that (a) people aren't interested in a la carte HBO Go and (b) the transaction costs are too high to do their own billing, etc. The technical term for these explanations is "bullshit." Cord cutters are a relatively small market segment but a fast growing one and I think it unlikely that cable subscriptions will fully rebound when the recession ends since the issue isn't just price but convenience. Moreover, I see no reason why HBO can't handle billing and other logistical issues when the Metropolitan Opera and the NFL, not to mention Netflix, don't seem to have any trouble running their own separately billed streaming video services. Of course there are transaction costs associated with billing, but it can't possibly be anywhere close to the cost of a basic cable package.
And here we get to the real issue. It's not that HBO would like to cut out the middleman and sell to us directly, rather requiring you to buy basic cable is the whole point. Cable is a total cash cow and a more flexible business model means lower revenues. The reason is that the incumbent business model of cable combines the features of bundling (basic cable) and a two-part tariff (premium cable channels) for a perfect storm of price discrimination. For much the same reason as Disneyland could only lose money if it sold a la carte tickets to Splash Mountain for $20 without requiring $80 park admission (which includes access to Main Street, Jungle Cruise, etc), cable companies would lose money if you could buy HBO Go for $20 without first buying basic cable (which includes access to ESPN, Mtv, etc). Basically, economic theory (and some reasonable assumptions about the structure of demand) suggests that an a la carte video market could not make as much money as a bundled video market.
So, that's why the cable companies don't want you to buy a la carte HBO Go, but why is that HBO's problem? Let's contrast it with the NFL. The NFL offers standalone access because the credible threat of a streaming business model gives them more leverage to negotiate with the MSOs. In contrast, HBO doesn't want leverage because most of its sister companies are part of the basic cable ecosystem. (They used to have an actual MSO as a sister company but they spun off Time Warner Cable in 2009). Time Warner makes a lot of money from HBO subscriptions, but it makes even more money from carriage fees on CNN, Cartoon Network, and most of the cable networks starting with the letter "T." Unlike HBO (which would do well under an a la carte model) most of these other channels rely more on channel-surfing audiences than cult followings and so couldn't sell subscriptions on their own and would have to settle for something like a Hulu Plus or Netflix business model, probably with less money per subscriber and far fewer subscribers than they currently get through basic cable. Basically, cord-cutting would help HBO but devastate the rest of the company. For what is a media conglomerate profited if it gain a few hundred thousand a la carte HBO Go subscriptions, and lose its carriage fees and ad revenue? What can a media conglomerate give in exchange for its Turner and WBTVG divisions?
Time Warner more or less acknowledges in their investor report that disruptive innovation could screw them: "Furthermore, advances in technology or changes in competitors' product and service offerings may require the Company to make additional research and development expenditures or offer products or services in a digital format without charge or at a lower price than offered in other formats." This is on the first page of the "risk factors" section of the report, whereas piracy doesn't come up until the third. This order is consistent with my own reading of the industry and with the history of the recorded music industry, the proximate problem of which is not piracy but digital singles.
So basically, we can call this the "HBO has to take one for the team" model. We can get a similar result with a slightly weaker model which doesn't require long-term corporate cross-subsidization but treats HBO as autonomous from the rest of Time Warner. In the short-term, HBO itself is highly dependent on cable companies. The target market for a la carte HBO Go would be households with broadband but no cable, or about 5% of all US households. This is dwarfed by the 20% of households that have cable but no broadband. Moreover, although 70% of households have both cable and broadband, most of them aren't familiar with streaming video through set-top devices. So as a rough ballpark, let's say that half of US households have cable but either lack broadband and or wouldn't know how to use it with a set-top device (even if they already own a Blu-Ray player or game console with built-in streaming support). This means that the number of households HBO could appeal to with a la carte HBO Go are one tenth as numerous as the households they rely on cable companies to reach. And HBO does rely on the cable companies to reach these households through marketing promotions and the like. If HBO figures that angering the cable companies could cost them even a small fraction of these households then they're better off alienating Matthew Inman and myself rather than angering Comcast. The same logic explains why Netflix is interested in creating a cable channel and recent rumors that Hulu will switch to the HBO Go business model.
Of course for the cable companies to punish HBO would require them to forgo their half of HBO subscription revenue. This sounds like cutting off your nose to spite your face but that's not unheard of, especially if doing so deters your face from pissing you off again by flirting with a disruptive business model. We see a similar dynamic with how theatrical exhibitors react whenever movie studios suggest closing the video release window from its current 17 weeks. (Ironically in this scenario it's the cable companies who are the innovators trying to disrupt the stodgy incumbents). For instance last year, Universal floated the idea of experimenting with tightening up the pay-per-view window for Tower Heist. The theaters were livid and threatened to boycott the test film. This despite the fact that the experiment was on ridiculously unappealing terms to the consumer: $60 to watch a mediocre film three weeks after theatrical premiere and that's only if you live in Atlanta or Portland. Ultimately Universal backed down, deciding it was better to keep their old trading partners happy than try to develop new ones.
(By the way, I'm sure you'll agree it's a total coincidence that Universal was bought by a cable company shortly before the Tower Heist incident. Similarly, a total coincidence that this same cable company has a history of playing hardball with internet companies that offer infrastructure for streaming video services that compete with cable TV).
All that is to say I can understand why HBO Go isn't available yet to cord cutters. Still, let's say that tomorrow HBO starts offering standalone HBO Go subscriptions (as I sincerely hope it does), how would I explain that? I could see this happening if HBO decides that the transition will happen eventually and it is better to do it while they can still do so favorably. We saw a similar dynamic ten years ago with the recorded music industry, which acceded to a low price point digital singles market as it saw its market share eroded by piracy, but only moderately so. In 2003, when the record labels agreed to participate in iTunes, unit sales were down about 15% from the pre-Napster peak, which wasn't fun but also wasn't catastrophic. Most people were still buying CDs when the record labels agreed to a legal digital singles market that would eventually destroy the CD market. They did so in order to transition consumers to a new model before most of us had fully committed to piracy. It's a lot easier to get someone to buy singles for $1 if they're used to buying CDs for $15 than if they're used to pirating singles for nothing. Similarly, as the number of cord-cutters increases this will be an increasingly attractive market for HBO, and not just because it can get these people as customers but because it can keep them from developing the habit of pirating content that isn't promptly made available through legitimate streaming markets. We may not be at that point yet, but I wouldn't be surprised if we reach it before HBO runs out of Fire and Ice novels to adapt.
The Islamic State is no mere collection of psychopaths. It is a religious group with carefully considered beliefs, among them that it is a key agent of the coming apocalypse. Here’s what that means for its strategy—and for how to stop it.
What is the Islamic State?
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
I spent a year in Tromsø, Norway, where the “Polar Night” lasts all winter—and where rates of seasonal depression are remarkably low. Here’s what I learned about happiness and the wintertime blues.
Located over 200 miles north of the Arctic Circle, Tromsø, Norway, is home to extreme light variation between seasons. During the Polar Night, which lasts from November to January, the sun doesn’t rise at all. Then the days get progressively longer until the Midnight Sun period, from May to July, when it never sets. After the midnight sun, the days get shorter and shorter again until the Polar Night, and the yearly cycle repeats.
So, perhaps understandably, many people had a hard time relating when I told them I was moving there.
“I could never live there,” was the most common response I heard. “That winter would make me so depressed,” many added, or “I just get so tired when it’s dark out.”
But the Polar Night was what drew me to Tromsø in the first place.
The untold story of the improbable campaign that finally tipped the U.S. Supreme Court.
On May 18, 1970, Jack Baker and Michael McConnell walked into a courthouse in Minneapolis, paid $10, and applied for a marriage license. The county clerk, Gerald Nelson, refused to give it to them. Obviously, he told them, marriage was for people of the opposite sex; it was silly to think otherwise.
Baker, a law student, didn’t agree. He and McConnell, a librarian, had met at a Halloween party in Oklahoma in 1966, shortly after Baker was pushed out of the Air Force for his sexuality. From the beginning, the men were committed to one another. In 1967, Baker proposed that they move in together. McConnell replied that he wanted to get married—really, legally married. The idea struck even Baker as odd at first, but he promised to find a way and decided to go to law school to figure it out.
Mike Huckabee and Ted Cruz are suggesting there might be ways for states and cities to nullify the justices’ ruling. They’re wrong.
The Supreme Court’s decision last week did make gay marriage legal around the nation. Unfortunately for social conservatives, it did not, however, make nullification legal around the nation.
Nullification is the historical idea that states can ignore federal laws, or pass laws that supersede them. This concept has a long but not especially honorable pedigree in U.S. history. Its origins date back to antebellum America, where Southern states tried to nullify tariffs and Northern states tried to nullify fugitive-slave laws. In the 1950s, after Brown v. Board of Education, some Southern states tried to pass laws to avoid integrating schools. It didn’t work, because nullification is not constitutional.
For centuries, experts have predicted that machines would make workers obsolete. That moment may finally be arriving. Could that be a good thing?
1. Youngstown, U.S.A.
The end of work is still just a futuristic concept for most of the United States, but it is something like a moment in history for Youngstown, Ohio, one its residents can cite with precision: September 19, 1977.
For much of the 20th century, Youngstown’s steel mills delivered such great prosperity that the city was a model of the American dream, boasting a median income and a homeownership rate that were among the nation’s highest. But as manufacturing shifted abroad after World War II, Youngstown steel suffered, and on that gray September afternoon in 1977, Youngstown Sheet and Tube announced the shuttering of its Campbell Works mill. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. The effect was so severe that a term was coined to describe the fallout: regional depression.
People labeled “smart” at a young age don’t deal well with being wrong. Life grows stagnant.
At whatever agesmart people develop the idea that they are smart, they also tend to develop vulnerability around relinquishing that label. So the difference between telling a kid “You did a great job” and “You are smart” isn’t subtle. That is, at least, according to one growing movement in education and parenting that advocates for retirement of “the S word.”
The idea is that when we praise kids for being smart, those kids think: Oh good, I'm smart. And then later, when those kids mess up, which they will, they think: Oh no, I'm not smart after all. People will think I’m not smart after all. And that’s the worst. That’s a risk to avoid, they learn.“Smart” kids stand to become especially averse to making mistakes, which are critical to learning and succeeding.
As he prepares for a presidential run, the governor’s labor legacy deserves inspection. Are his state’s “hardworking taxpayers” any better off?
This past February, at the Conservative Political Action Conference (CPAC) outside Washington, D.C., Wisconsin Governor Scott Walker rolled up his sleeves, clipped on a lavalier microphone, and without the aid of a teleprompter gave the speech of his life. He emerged from that early GOP cattle call as a front-runner for his party’s nomination for president. Numerous polls this spring placed him several points ahead of former Florida Governor Jeb Bush, the preferred candidate of the Republican establishment, in Iowa and New Hampshire. Those same polls showed him with an even more substantial lead over movement conservative favorites such as Ted Cruz, Rand Paul, and Mike Huckabee. In late April, the Koch brothers hinted that Walker would be the likely recipient of the nearly $900 million they plan to spend on the 2016 election cycle.
This week, there were fires in at least six predominantly African American churches. Arson at religious institutions has decreased significantly over the past two decades, but the symbolism remains haunting.
Updated on July 1, 11:50 a.m. ET
On Wednesday, July 1, a fire was reported at the Mount Zion African Methodist Episcopal Church in Greeleyville, South Carolina. The AP reports that an anonymous federal official said the fire did not appear to be intentionally set, but Winfred Pressley, a division operations officer at the regional Alcohol, Firearms, and Tobacco division, said that the investigation is still ongoing, as did other local investigators. Shanna Daniels, a spokesperson for the FBI, declined to comment on the case, but said that church arson “has been a hot topic over the past few days.”
“What's the church doing on fire?”
Jeanette Dudley, the associate pastor of God's Power Church of Christ in Macon, Georgia, got a call a little after 5 a.m. on Wednesday, June 24, she told a local TV news station. Her tiny church of about a dozen members had been burned, probably beyond repair. The Bureau of Alcohol, Firearms, and Tobacco got called in, which has been the standard procedure for church fires since the late 1960s. Investigators say they’ve ruled out possible causes like an electrical malfunction; most likely, this was arson.
In 1908, photographer Lewis Hine traveled across the U.S. to document child laborers and their workplaces. His portraits were used by reformers to drive legislation that would protect young workers or prohibit their employment.
At the start of the 20th century, labor in America was in short supply, and laws concerning the employment of children were rarely enforced or nonexistent. While Americans at the time supported the role of children working on family farms, there was little awareness of the other forms of labor being undertaken by young hands. In 1908, photographer Lewis Hine was employed by the newly-founded National Child Labor Committee (NCLC) to document child laborers and their workplaces nationwide. His well-made portraits of young miners, mill workers, cotton pickers, cigar rollers, newsboys, pin boys, oyster shuckers, and factory workers put faces on the issue, and were used by reformers to raise awareness and drive legislation that would protect young workers or prohibit their employment. After several stalled attempts in congress, the NCLC-backed Fair Labor Standards Act passed in 1938 with child labor provisions that remain the law of the land today, barring the employment of anyone under the age of 16.
The social network learns more about its users than they might realize.
Facebook, you may have noticed, turned into a rainbow-drenched spectacle following the Supreme Court’s decision Friday that same-sex marriage is a Constitutional right.
By overlaying their profile photos with a rainbow filter, Facebook users began celebrating in a way we haven't seen since March 2013, when 3 million peoplechanged their profile images to a red equals sign—the logo of the Human Rights Campaign—as a way to support marriage equality. This time, Facebook provided a simple way to turn profile photos rainbow-colored. More than 1 million people changed their profile in the first few hours, according to the Facebook spokesperson William Nevius, and the number continues to grow.
“This is probably a Facebook experiment!” joked the MIT network scientist Cesar Hidalgo on Facebook yesterday. “This is one Facebook study I want to be included in!” wrote Stacy Blasiola, a communications Ph.D. candidate at the University of Illinois, when she changed her profile.