Jun 13, 2007 •
Below is a Q&A interview with Orcon founder Seeby Woodhouse who this week sold his business to state-owned broadcasting network operator Kordia. Read what Seeby has to say about nuclear power, local loop unbundling and taking Orcon to $100 million in revenue...
SW: Yeah, it’s the end of an era but the beginning of the next phase.
PG: Any sadness losing ownership?
SW: A little bit. Anyone gets attached to things, whether its spouses, companies or dogs. I’m the sort of person that believes in branding. That’s why I chose Kordia, they have absolutely no intention of re-branding the business and they want to keep it running largely as a separate entity. Hopefully I’ll be able to look back in a few years and say, wow, now it’s New Zealand’s second largest or even largest telecoms company.
PG: You said at the press conference you had something like 50 offers for Orcon over the last couple of years.
SW: It was more like 50 offers since people started getting more interested, which is more like over six or seven years. Once every couple of months, someone would come along.
PG: Did Vodafone have a sniff around Orcon?
SW: It was more that Ihug was for sale. There was a bidding war for Ihug. They got it and probably wanted to bed it down. I was aware they were potentially interested in additional acquisitions but I felt if we were going to be acquired by them, they probably wouldn’t want multiple brands. The company would have been rolled into Ihug and that wasn’t something I wanted.
PG: Why was it so important to you that Orcon maintained its identity and structure?
SW: It’s basically my baby. It would be a different story if someone was to buy it and suddenly Orcon no longer existed. I’ll still have involvement in the business for a couple of years as consulting director. I’m able to take my money off the table now, relax a little bit, but still have the upside of the business, the challenge and the things that I enjoy.
PG: Is that a fulltime position?
SW: No, it’s a consulting directorship. The time is variable.
PG: What will you do next?
SW: I don’t want to make any hasty moves. If I did that, I could potentially get drawn into something I don’t understand as well. There’s a temptation when you’re cashed up to invest in silly things and fritter it away. The thing about Orcon, since I was 15 I’ve been passionate about business and it was the business opportunity I was initially excited about. Telecommunications came second. I had a burning passion in the early days of Orcon for a good five years, working 16 hours a day solid. If I do anything in the future, I want something that’s going to get me that excited.
PG: I looked back at the TV3 interview you did in 2004 which was very interesting. You weren’t a networking guy, but you were trained as an electrical engineer?
SW: That doesn’t teach you much about computers. I didn’t really use any of my degree. I was also pretty computer illiterate when I started the company so I had to learn fast. These days I’m tech savvy, I didn’t even have a computer when I started the company.
PG: You’ve made some moves at Orcon in the area of content, the deal with Digirama, plans for IPTV, as this Web 2.0 thing takes off, do you want to get into the content side of the internet?
SW: Yeah, in some ways content is easier than access, because you don’t have to have a load of boxes that physically exist. The advantage Sam [Morgan] had with Trademe, was that if something grows really fast, you just stick in more servers. With Orcon, if you want to grow something fast you need infrastructure. Telecom’s got a worse problem with that than we do. I’m probably going to sit tight for six months to a year, take some long holidays, do some travel and not worry about things. If I have any interest at all, it’s in things like sustainability and biofuels. Global warming is a big concern of mine. Maybe there’s an opportunity to make some money but do some good at the same time. Maybe introduce something like solar energy to New Zealand that’s actually going to help. It’s something I’m investigating. Alternatively, if I enjoy being retired a lit too much, I may not do anything.
PG: You’re 30 now right?
SW: YES, 30.
PG: It’s interesting how goal orientated you’ve been throughout your life from when you got your first bank book as a kid through to wanting to take Orcon to $100 million in revenue by the age of 30. Did you get there?
SW: No, the turnover is a bit lower than that, but I think it will only be a year or two off target. I’ll still be involved with the company by the time it hits $100 million. But the real issue has been our margins being squeezed having to resell Telecom’s broadband and LLU happening a lot slower than was thought. There have been some unexpected difficulties. Our revenue is still growing pretty fast.
PG: Looking back to 2003 – 2004, it seemed that Orcon was more willing to embrace the Telecom wholesale regime than some of the other ISPs who were a lot more vocal in their criticism of Telecom. Do you think that gave you an advantage, that you were more willing to play ball with Telecom than your competitors?
SW: I don’t think it gave us a huge advantage, but we weren’t so distracted by regulatory arguments. My attitude is you should make the best of the situation you have. At that time it didn’t look like we’d end up with local loop unbundling. Theresa didn’t expect it was going to happen, let alone myself. I don’t think we got any concessions from them, but the working relationship was the most amicable and productive of any of the ISPs. That assisted us a bit, even on small things like fault resolution. The Telecom guys were happy to work with our guys. We weren’t going to report faults that weren’t true, we weren’t going to bitch and moan.
PG: You talk about margins being squeezed. Have the economics of reselling Telecom’s wholesale products deteriorated?
SW: They’ve always been bad. The issue is that there are less and less dial-up customers sustaining the ISPs. It’s a global problem. Telecom has issues with making money out of broadband as well. I’m sure dial-up is more profitable for telcos than broadband. Someone like Telecom with toll calling and fixed line rentals, those things are declining. Broadband revenue is going up to replace those, but Telecom has one set of revenues going down and another set going up. ISPs have internet revenue that is profitable being replaced by internet revenue that isn’t profitable. With LLU telcos like Orcon will get access to the physical phone lines as well as additional services like IPTV. That will be fine in the future. The issue at the moment for ISPs is if a consumer spends $40 a month on a phone line, $20 on tolls and $40 on broadband, traditional ISPs don’t get to attack much of that and even if they do, most of the money goes to Telecom in the form of a wholesale arrangement. Under LLU you might buy the line for $15 and whack on as many services as you can. Then it sorts to become more profitable.
PG: You’re getting out at a time which for New Zealand is the most uncertain. Some of your competitors like CallPlus and Woosh are banking on WiMax to expand their networks, then there’s the big investment needed in unbundling. Is that why you chose to exit now with all that uncertainty ahead?
SW: The uncertainty was one reason that I chose to exit, but I’d been doing the same thing for ten years, I need to slow my life down a bit and have a bit of a change. Also I’ve started to become more interested in things like global warming. With the uncertainty there’s also huge opportunity, around unbundling. I’m sure Kordia will do extremely well out of their purchase. I may not have done so well by not selling because without sufficient funding you can fall flat on your face. I was concerned that if the capital started drying up, because Orcon was always self funding, my wealth forms the company. If the company was going to do anything it would have to make a profit so we could reinvest it. That’s been the strategy all along.
PG: So everything was funded out of revenue at Orcon throughout?
SW: Everything at Orcon from day one was funded out of cash flow. It was started with $100
PG: During the first dotcom boom, did you feel a sense of urgency that you had to get capital to take advantage of it?
SW: At that stage I didn’t understand how a venture capital relationship might work and the issue is they may only ask for 20 per cent of the company but not be prepared to pay what you want. They always want a good chunk of the business and then there are usually effective control clauses, so even if they only own 30 per cent, effectively they can remove you as a director. I’ve always been opinionated about what I wanted to do. I didn’t want to have the risk of bowing down to someone else and be depressed about it. Whenever a proposal was presented to me, I was reluctant. I said to myself, I’ll just try and grow the business as fast as I can, if it grows a bit slower, I don’t care.
PG: Orcon always had a reputation for very good service. How did you instill that culture?
SW: It comes from all those cheesy sayings, the customer being king, that type of thing. But it was important for Orcon to differentiate and the piece of copper you’re selling is largely the same thing, like petrol stations all sell the same gasoline but they all charge different prices. They differentiate through branding. I always thought we had to differentiate in as many different areas as we could and a lot of the time, ISPs were doing a pretty poor job on service. We made it one of the things we were going to differentiate on. One technique I employed early on was that we hired non-technical people like myself for the call centre rather than geeks. You can’t teach a geek customer service. There are only a hundred questions that will ever be asked at a help desk and you can teach someone the answers to those. We got happy, bouncy customer services people and taught them what they needed to know.
PG: Did you have any mentors?
SW: people come and go. There are people who will say, I helped Seeby out. But not really, I’ve always had a strong vision about where things should go. Most of the mentors’ advice I’ve had over the years, I’ve ended up disregarding.
PG: Was there anyone in the telecoms industry you admired as a young businessman?
SW: The Wood brothers were an early inspiration, because they were in game a year ahead of me. It was always a case of me having to catch up to Tim and Nick. They did really well exiting a few years ago and got more money than Ihug sold for (to Vodafone).
PG: And the successful exit at the peak is the real sign you’ve made it, isn’t it?
SW: It was certainly planned, choosing Kordia was planned as well. It was important to be Kiwi owned, there’s no risk of Kordia being taken over by an Australian outfit. I’m proud of the Kiwi heritage. Obviously, getting what I thought was a fair price was important. Ultimately I didn’t necessarily expect, even a year ago, to sell. But I started thinking, what does this business need? All internet companies are becoming phone companies and all phone companies are becoming internet companies. Then they’re all becoming converged media network companies. Looking at the regulatory environment after the Government’s announcement after LLU, we did the Siemens deal so we had vendor finance, but what we were lacking was media expertise and a network. We were going to have to build the network and invest in media technologies. Kordia as a network and broadcast type company, had the two pieces of the puzzle that we lacked.
I thought either I’m going to have to get a venture capitalist onboard or load the company up with heaps of debt. Take on a whole lot more risk where potentially it could fall flat on its face or sell it to someone who can extract the value. There was the risk that I could try and do all the stuff Kordia is trying to do, by myself.
PG: CallPlus has secured US$450 million for its WiMax plans. Maybe there’d have been an appetite for investment if you’d wanted to go that route.
SW: I was surprised by the CallPlus thing. I think it’s a real figure, but it’s probably a line of credit, so it will have to be drawn down over time and they’ll have to build the network. And its debt funding. If you borrow $450 million, you’re paying 40 – 50 million a year in interest. Just because they have $450 million, doesn’t mean they’re won’t be saddled with debt and crippled by it, in much the same way Woosh is. They’ve spent $100 million plus building a network and don’t yet have the customers to sustain it. If CallPlus goes and spends the US$450 million and only gets 100,000 customers, it will be a bit of a disaster.
PG: What’s your view on wireless technologies. Are you optimistic that some of these alternative models may work?
SW: There are a lot of variables. There’s a lot of uncertainty around the Government’s spectrum auctions. CallPlus has the same concerns. Wireless technology rests on having the right spectrum available at the right price. If it goes for a horrendous price and Vodafone and Telecom pay to block out competitors, it could be a moot point. One technology doesn’t tend to replace another. When email came along it didn’t replace the fax machine, when the fax came along it didn’t replace postal mail. Now we’ve got postal mail and couriers and FedEx, faxes, email and instant messaging.
The biggest success will be the company that can offer a seamless solution, wireless and wired technology, TV and phone calling together. I’m not just talking about multiple things on one bill, but being able to use your internet service wherever you are and pay in a consistent manner. We’re a long way away from that.
PG: Where you nervous when Vodafone bought Ihug, seeing as Vodafone @ Home is aiming for one converged device that acts as fixed line and mobile with seamless switch over?
SW: I saw it as an advantage but I wasn’t threatened by it. Orcon’s got an MVNO agreement with Vodafone anyway. We’ll be doing the same type of services, just in a different way. It just depends what pieces of the puzzle you have control over and which pieces you don’t.
PG: Did you benchmark the sale of Orcon against the $41 million sale of Ihug in terms of what you were looking for?
SW: It’s difficult to compare the two. Certainly, in terms of customer numbers, we’re 80 per cent the size of Ihug. It would have been nice to get more but I’m not unhappy with the sale price. We have different ebitda figures and more customers have multiple services with Ihug. They’ve a more established voice base. I got a fair deal and Kordia paid a good price.
PG: How do you feel about the fact that your staff is effectively now public servants?
SW: They’re not really. The Government has very little input into how Kordia is run apart from maybe appointing the board of directors. It’s certainly not the case that the Government wanted to do this to create a competitor to Telecom. They’ve some great products they want to sell like DVB-H (mobile TV). They haven’t had a lot of interest from the ISPs in terms of taking some of these services up.
PG: What’s been the reaction to the sale from staff.
SW: It’s been good, there’s been no tears. People have said it’s the end of an area, but once they realized there’s no change in job descriptions, they’re not suddenly Kordia employees, they’ll still be managed by the same people, there’s no redundancies, they’re okay with it. I’ll still be popping into the office, I’ll still be around for at least two years in an advisory capacity.
PG: And Scott Bartlett, your lieutenant, will be the CEO?
SW: Yeah, essentially I’d already stepped back a bit anyway. With a company the size of Orcon it’s important to spend a lot of time thinking about what’s next. You can’t get too caught up in the day to day issues or you can wake up and find you’ve been going in the wrong direction for two years.
PG: So the future, alternative energy technologies, are there good opportunities to invest here?
SW: I’m passionate about business, that’s number one, New Zealand is number two. The thing I’m concerned about is basically if we’re already past peak oil [production] and some of the wells start to dry up and the price goes to US$120 a barrel, then New Zealand is at serious risk of collapse because we haven’t got the densely populated cities. If you had a global price shock like the 1970s, the countries that do well will be the ones that have all their population gathered in one place. With New Zealand, everything in this country is run on gasoline, you have to have a car, and public transport is not good enough. We have to stop this urban sprawl. People need to get into more densely populated areas where there’s a subway infrastructure. We’re obviously not going to be able to build that infrastructure in the next five to ten years. If there is a serious oil shock, New Zealand will be at its mercy, particularly for things like exports.
The only country that will do well is Brazil, because 60 – 70 per cent of their cars run on ethanol produced by sugar cane, which is six times more effective at producing ethanol than corn.
New Zealand should be able to produce ethanol technologies and the Maui gas fields.
We should be working on complete energy independence.
PG: You’re moving out of a field that’s complicated enough and into one even more so. Are you going to go on a fact-finding mission to some of these places using alternative fuel sources.
SW: I’ve been doing a lot of reading. I’ll try and work my contacts, ask government officials. If a light bulb switches on in my head and I decide the best thing to do is buy a heap of land in the South Island and start growing sugar cane, that’s what I’ll do.
Solar generation or green homes.
If I can start a company that provides green technology to homes, it’s a way to start.
PG: How’s Orcon Racing going?
SW: It hasn’t been in operation this season.
PG: What happened?
SW: We didn’t sponsor the car this reason for two reasons – Orcon is focusing on call to action marketing rather than branding. Potentially motor racing is going to become a bit un-PC. Because I have environmental concerns I started thinking gasoline is in short supply, there’s all this concern about global warming, we don’t necessarily want to be involved in a sport that in two years time everyone is up in arms about.
PG: You did a sabbatical a while back right?
SW: Yeah I’ve seen a good portion of the planet. I’ll do some more.
PG: That’s the plan, take some time and explore?
SW: Yeah, I just came back from China so I’m a bit tired. But there are a lot of things I want to see. If I’m interested in environmental things, it may give me a better perspective while I’m traveling. One of the huge un-harnessed technologies is wave power. The ocean is always moving. If we can have submerged power generators creating power by the motion of the sea, that would be ideal.
I get the feeling we need to keep our nuclear material for use in the future. I don’t think it’s a smart idea to go burning it all up. We may need it for exploring the stars or powering space ships. It would be really sad if we saved the planet but in 500 years time we’ve got these ambitious plans to colonise the stars but were 20 pounds short of uranium or something.
Jun 13, 2007 •
by Peter Griffin | from the Herald on SundayRemember the little gadget that seemingly started the whole mobile computing craze, the Palm Pilot?It came out in 1996, had a grayscale screen, a measly 128KB of memory and no wireless connections.But it had ...
Jun 07, 2007
CONNECT | from the New Zealand Herald
by Peter Griffin
Mobile phone operators are set to claim a larger share of the broadband market in the next couple of years, but one factor may hold these services back – a lack of radio spectrum to deliver them over the air.
Swedish telecoms equipment maker Ericsson estimates the current European mobile operators will have run out of radio spectrum by 2010. That makes the looming auctions of 2.5GHZ (gigahertz) spectrum across Europe highly contentious to mobile operators who just six years ago shelled out billions for licences in the first wave of “3G” spectrum auctions.
The mobile industry sees the radio spectrum as crucial to maintaining the flat-rate charging model that has emerged in Europe for mobile data services.
“In Europe we have 3.6 [megabits per second] service, no data cap, and I mean no cap, for 20 euros a month,” said Mikael Halen, Ericsson’s director for government and industry.
Halen met with Government officials this week, urging them to ensure December’s state auction for 2.5Ghz (gigahertz) radio spectrum be structured to make it attractive for mobile operators to obtain spectrum.
“It’s an extremely important band for providing mobile services and it’s critical for the introduction of Long Term Evolution (LTE) technology which will come to market in 2009,” he said.
By 2009, Ericsson claims that LTE, an evolution of the system currently used by Vodafone and other many other operators, will offer download speeds of up to 100Mbps. That is sufficient for most voice and data services, bar high-definition TV which is better delivered via satellite, ground broadcast or fixed-line connections.
Communications minister David Cunliffe last week revealed a December auction would see two blocks of spectrum put up for sale, in the 2.3Ghz and 2.5GHz bands.
“The new auction can allow for up to six nationwide users and a generous managed park of at least 30 MHz and potentially up to or exceeding 50 MHz. This will ensure plenty of space for smaller and regional providers, including those with a focus on delivering services to Maori,” Cunliffe said.
Both bands are suitable for the provision of wireless broadband services based on the WiMax service and operators CallPlus and Woosh have expressed interest in obtaining spectrum to develop national networks.
But Halen believes CallPlus and Woosh are unlikely to ever offer mass-market services based on WiMax.
“They have an uphill struggle. They’re smaller and they have spectrum in the higher bands which makes it more difficult to penetrate buildings and build coverage.”
But the biggest problem they face, says Halen is also inherent in the CDMA technology
Telecom is now about to replace – a lack of global scale.
That means higher technology development costs, less choice in handsets and an inability to match the mobile operators on pricing plans.
“Generally mobile operators aren’t at all interested in WiMax,” said Halen.
“Their enthusiasm has diminished considerably in the last half year.”
While Halen believes WiMaz services can be delivered using the 2.3GHz spectrum, bidding for the 2.5Ghz block between established mobile operators and fledgling WiMax start-ups is likely to be fierce.
Ironically Ericsson, which built Telecom’s now-decommissioned 025 mobile network, may be left out of local mobile developments for some time to come.
As the Herald reported last week, Telecom is understood to be finalizing a $300 - $400 million deal with its existing outsourcing partner Alcatel Lucent to build a new network based on the same GSM/UMTS standards commonly used around the world.
Ericsson had begun building TelstraClear’s Tauranga-based “Unplugged” network before the project was last month canceled and the network dismantled.
Aspiring new entrant, New Zealand Communications is using Chinese vendor Huawei to build its mobile network and Nokia is well entrenched in the Vodafone camp.
But Halen’s message seems relatively non-partisan and advocates mobile operators in general having the first bite at 2.5GHz spectrum.
“Our suggestion is that when you do the [radio frequency] band allocation, make sure they have access to technologies that are available with huge scale advantage,” said Halen.
The Government will release a discussion paper by August which will outline the technicalities of how it expects to carve up spectrum in the auction. Ultimately, said Halen, broadband was being viewed as essential infrastructure in most countries, hence the growing interest in partial or full government funding of broadband networks.
“It’s like electricity or water. It’s essential everyone in the country gets access to it,” he said.
“That’s the way it will go around the world, including New Zealand.”
RUNNING OUT OF SPECTRUM
- Mobile operators are running out of radio spectrum making the 2.5GHz (gigahertz) spectrum auctions happening around the world crucial to expanding their services.
- The Government will auction two lots of spectrum in December, which will likely see mobile operators and new WiMax players competing for licences.
- Mobile broadband is increasingly seen as an alternative to fixed line services as its reliable data speeds increase.
Jun 07, 2007 •
WEBWALK | from the New Zealand Herald
by Peter Griffin
Google’s new Street View service is pretty symbolic of where the web is going. First we had Google Maps which game geographical information, then Google Earth which added satellite maps to the mix. Then the maps were mashed-up to include everything from holiday photos to Wal-Mart outlets. Now Google takes us to street level and confronts us with the reality we’ve only seen before from a bird’s eye view.
It’s all about adding more detail, more clarity, going deeper into the data, re-using the same underlying technology to layer on yet more useful services. That’s the new internet for you.
But how much information is too much information? That’s the debate raging over Street View at the moment, touching on important issues such as privacy, copyright and human rights.
But first the technology – Street View is very impressive. It’s only available for a handful of US cities at the moment but the potential is obvious. It gives you the ability to stand at a busy intersection in New York and pan around 360 degrees to see the lie of the land in full colour.
It's great to be able to get a street-level feel for a place rather than depending on blurry web cameras or the photo-shopped images the tourism industry wants you to see. Once the maps are fleshed out with more Street View locations from around the world, it will be really useful.
How is it put together? Google uses images from a company called Immersive Media which for the last couple of years has sent people driving around the US and Canada in grey Volkswagen Beetles with multi-lens cameras attached to them. The special cameras capture images as they go and those images are then plotted on streets on Google Maps, matched up using GPS co-ordinates. What is impressive is that you can get down to street level and then follow an arrow to travel along at street level.
Using Street View reminded me of the overlooked New Zealand service Roadworks Street Scroll (http://www.roadworks.co.nz) which features photographs of the main streets of Auckland from street level, giving you one big panorama of the likes ofQueen Street, Ponsonby Road and the ViaductBasin.
Street Scroll was ahead of its time when its creator Matthew Hart started putting it together back in 2000.
“It was a New Zealand first. Now we see everyone else trying to bite at our ankles,” says Hart, who was in the process of negotiating a deal
to license the street-scrolling technology to a US company when the September 11, 2001 terrorist attack on the WorldTradeCenter occurred.
“We were going to get $25,000 per state,” says Hart. “We spent a year on the deal and it was almost ready to happen.” Post 9-11 jitters killed the deal, though Roadworks had started photography in the US – you can see both sides of the Las Vegas strip on its website.
Hart has a New Zealand patent for the street-scrolling imaging technology and is going through the patent application process in the US. He realises that even if he secured it, enforcing the patent would be difficult given the size of rivals like Google and Microsoft, which is developing its own service, Street-Side.
“I don’t know if I’d be in a position to fight them,” says Hart. “It costs a hell of a lot of money to do that.”
Roadworks has photographed a few overseas locations, notably, both sides of the Las Vegas strip and version three will include Flash video and the ability for shop keepers to dynamically update their shop fronts to keep things fresh. Hart also wants to photograph the entire New Zealand coast – one giant scroll around the Queen’s Chain. Good luck to him, it’s a fantastic idea.
As for the privacy concerns around Street View, I think they are being over-played. After all, a newspaper photographer can stand in the middle of a public place and take photos legally and have them published to be viewed by a massive audience. Why shouldn't a company or a member of the public be allowed to?
I'm perfectly happy for someone to take a photo of the front of my house, as long as they do so from the road and stay off my property.
Obviously there has to be some policing. Street View needs to steer clear of all the things the mainstream media currently has to avoid - like nudity, violence, photos of school playgrounds, that sort of stuff. There also needs to be scope for take down requests so people who are offended at appearing in random shots can have them removed.
Still, Street View may run into trouble in places like the European Union, which has strong laws around publishing photos of people without their consent. It’s one thing to take a photo of someone in public, it’s another to publish that photo without their consent, especially if it could cause them distress. I’m sure the woman showing off her G-string to the world on Street View wasn’t too impressed about being snapped for the world to see. But where should the line be drawn?
I'm comfortable with Street View as it is. Anything I do in public I do assuming that everyone can see me anyway. I hope the service flourishes, but what's the next step? Web cameras covering every street and constantly updating as feeds in Google Maps? High magnification zoom cameras that let people peek between your blinds?
That’s a little voyeuristic for me. Being photographed at a point in time at a reasonably low resolution is one thing, being digitally stalked via web camera, as happened to some unfortunate sunbathers at Mt Maunganui beach a couple of years ago, is another. There are already thousands of web cameras covering public places. But there needs to be provisions preventing someone on the other side of the world from watching me without my knowledge, when I’m in my home. I think they’d find the view of the street far more interesting anyway.
On the web:
Jun 04, 2007 •
Below is my Webwalk column from last week's Herald about how one of my favorite bands, Vast, has managed to harness the long tail to stay independent in the music industry. There are thousands of stories like this but Vast's example is one I've followed closely as a fan and someone who has downloaded their music.
By the way, Vast is a fantastic, highly under-rated band. They're hard to put in a box, but there's a bit of Nine Inch Nails in there, some Garbage, echoes of U2 and New Order. It's melodic, luscious sounding hard-edged rock and Jon Crosby is a great vocalist who pens thoughtful lyrics. A good starting point with Vast is their first album Visual Audio Sensory Theater. Music For People was a terrific follow-up to that. Once you've tried those two, there's a Vast world to explore.
By Peter Griffin
The New Zealand music chart began counting songs downloaded via the internet this week and already the change is noticeable.
As the Recording Industry Association pointed out yesterday, hip hop and R&B songs are climbing higher up the Top 40 chart, largely due to the fact that music downloads to mobile phones are now counted.
And Regina Spektor’s catchy single Fidelity debuted at number 16 thanks to digital downloads. It wasn’t released as a CD single here, only as a digital download and on the album Begin To Hope.
The changing shape of the charts illustrate how the internet is being used to get music to a diverse range of niche audiences, something known as the “long tail” effect. It means that in future, the charts may not be full of only those acts that are receiving the most airplay and industry promotion, but also acts that have successfully captured the attention of the online community.
It made me think of one little music industry story of the long tail I’ve been following closely.
One of my favourite bands is an inventive rock outfit appropriately called Vast (Visual Audio Sensory Theater). It’s the creation of American singer-songwriter and multi-instrumentalist Jon Crosby, who much like Nine Inch Nails’ Trent Reznor, likes to twiddle away in the studio on his own, comfortable working in the digital medium.
Vast flirted with big label success at the turn of the century after its song Touched appeared on the soundtrack to the Leo DiCaprio movie The Beach.
There were a lot of rave reviews.
“VAST will appropriately be huge,” proclaimed Kerrang magazine in 1999.
But Vast was dropped by Elektra when its sophomore album Music for People failed to make an impact on the charts.
So Crosby signed with small, independent label 456 Entertainment to release his third album Nude.
“There were so many problems dealing with them on every level,” says Crosby in an interview on Realvast.com.
“I feel we made a big mistake not believing in ourselves enough and doing it on our own.”
For every album since, Vast has gone it alone and gone digital, releasing its music primarily via the internet.
It was an acknowledgement by Crosby that maybe his music isn’t really for the mass market after all. But in the era of the long tail that doesn’t matter, because numerous lucrative niches can be reached via the internet.
Crosby set up his own label and media company 2Blossom.com.
As a Vast fan its great for me. Getting hold of the band’s albums even in specialist music stores like Real Groovy has always been tricky. After all, why would retailers devote shelf space to an album that isn’t a hot seller?
Now I can just download the albums through the website. The music is free of digital rights management, the files are mp3s encoded at 320Kbps (kilobits per second), which is CD quality. I can pay with my credit card via PayPal.
Best of all the music is very good value, too good really. I just downloaded Vast’s new album April, which cost me an embarrassingly paltry US$5.
But because Crosby owns the music and the record label, he’s not getting a mere slice of album sales, he’s now getting every cent.
Artists signed to major labels receive as little as US$1 per full-priced album they sell Cutting out the music industry middlemen means more money goes directly into the artist’s pocket. Without the marketing muscle of a record company which can hold great sway over which artists get radio play, which in turn influences music sales, an artist is unlikely to sell as much music.
But bypassing the traditional music industry business model has become viable, thanks to the rise of digital music download services and social networking websites that act as a digital hub for an artist’s fan base. The most notable examples are Myspace.com and Facebook.com. Vast has fan communities on both sites.
“The days of the aloof rock star are over,” says Crosby.
“Now more than ever doing new things is important, and if you can’t keep up with what’s going on, you’re left in the dust.”
In addition, since 2005, he has been selling annual subscriptions to the Vast fan club for $36 which includes a greatest hits compilation, audio commentaries on Vast albums and the chance to buy VIP ticket to shows. There have been 745 downloads of those – worth around US$27,000.
It’s not the big money usually associated with the music industry, but with music sales, touring and merchandise, it may be enough for a Crosby and his band mates to earn a living – and keep control of their destiny.
Crosby seems to like the model: “I feel like for the first time I have found my niche and my voice.”
This way of doing business will become the norm for all sorts of industries, but especially the creative, publishing and technology sectors which are most comfortable dealing in the digital medium.
For New Zealand entrepreneurs located far from our key markets, the opportunity that lies in the long tail is, well, vast.
Jun 04, 2007
My Herald on Sunday column about the Earthrace team abandoning their bid to circumnavigate the globe in their bio-diesel powered boat. The boat cracked after receiving a battering in the Mediterranean but it looks like the team may make a fresh attempt next year. Here's hoping it's smoother sailing second time around...
They had a futuristic-looking boat, the noble intention of powering it with clean-burning biodiesel and the goal of motoring around the world in record time.
But the Earthrace expedition, its largely New Zealand crew headed by former oil exploration engineer Peter Bethune, on Friday abandoned its circumnavigation of the world.
The Earthrace boat cracked after receiving a major pounding in the Mediterranean and the time it would take to haul it out of the water and repair it would have made it impossible for the team to make the dash to San Diego and beat the 75 day circumnavigation record set by British boat Cable & Wireless in 1998.
Following the race on the internet, I was relieved when the boat successfully passed through the Suez Canal and into what I thought would be the relative safety of the Mediterranean. After all, the racers had endured so much. A week after setting out on its voyage on March 10, Earthrace was involved in a night-time collision with a fishing skiff off the coast of Guatemala which resulted in one of the fishing boat’s crew being killed.
If that wasn’t enough, it was also dogged by funding shortfalls and engine and propeller problems.
Reading the blog postings on the Earthrace website gives you an appreciation for the courage Bethune displayed in carrying on despite all these set backs.
On March 28 he writes of meeting the family of the fisherman killed in the crash with the skiff: “All were there except for Gonzalez, the man still in hospital. I start to speak to the group and there’s already a sore ache in my throat. Thirty seconds later and I start to cry, and that just sets of a chain reaction amongst almost everyone there.”
A few weeks later, with Earthrace plagued with technical problems, he ponders: “What if the crash hadn’t occurred? What if the original propellers had been OK? A whole series of incidents, that sees us in a difficult situation on a tiny Pacific island.”
It would have been nice to see Earthrace complete the 24,000 nautical mile trip and slip into San Diego in enough time to claim the world record. That won’t happen now, but what of the expedition’s real mission – to raise awareness of biodiesel fuels?
Well, the crew was interviewed wherever they touched land and pushed the biodiesel message. I saw Bethune on CNN late one night with a reporter from Singapore who went up to the Malaysian fields where the crops that made the fuel filling Earthrace’s tanks were harvested.
It wasn’t the biodiesel that held back Earthrace, though getting a regular supply of it, particularly in the Pacific ocean proved difficult at times and Bethune reluctantly had to fall back on conventional diesel at one point. The biofuel came from a wide range of suppliers and was derived from various cash crops.
Biodiesel production and usage is growing quickly around the world and new methods of biodiesel production are constantly appearing.
Marlborough company Aquaflow Bionomic last year produced what it claimed to be the world’s first samples of biodiesel fuel made from algae in sewage ponds.
But in the US, the fledgling industry faces major channels with the rising price of soybeans, a primary crop used for biodiesel there.
According to a study by economists at Iowa State University, US biodiesel production will double this year to 500 million, which accounts for around one per cent of US diesel consumption.
Corn-based ethanol production could grow to 15 billion gallons per year over the next 10 years according to the study which argues that further Government subsidies will have to be made available to encourage investment in biodiesel refineries.
In general, the business model for producing biodiesel still has plenty of kinks in it and will do until government policies to promote its production are widespread and crop growers and biodiesel makers alike are able to make a reasonable rate of return from their alternative fuel investments. The buy-in of the consumers of oil is also crucial.
The trials and tribulations of Earthrace are synonymous to those of the biodiesel industry itself. But like Earthrace’s goal to get around the world in less than 75 days was ultimately achievable, so too is a viable, global industry in cleaner fuels. It won’t be easy to get there, but as Bethune can attest to, its one goal worth making a considerable effort to meet.
Jun 04, 2007 •
A flood of news stories arrived over the weekend to celebrate the 40th anniversary of the June 1, 1967 release of The Beatles Sgt. Pepper's Lonely Hearts Club Band.I've seen plenty of superlatives used to describe the album, which some reviewers have h...
May 30, 2007 •
UPDATE: A more in-depth Herald piece looking at the implications of Telecom's shift in mobile strategy and my cHerald comment piece here. The Sunday Star Times business editor Tim Hunter explains the mobile roaming revenue Telecom can expect to tap into when it has a foot in the GSM/UMTS camp.
Juha's scoop gives some interesting details of Telecom's decision to spend $300 - $400 million on a GSM/UMTS network, confirming rumours that Telecom has been looking to extricate itself from CDMA.
I blogged about it in detail my Herald blog early this morning. So far, no official confirmation of the leak from Telecom and its shares are not on a trading halt, which is unusual given a development that is so material to Telecom's business has been revealed. There'll be lots of angles to this story. For instance:
- What will it mean for the newly flush New Zealand Communications which is set to build a GSM network itself? Maybe it's a good thing as it will open up GSM roaming options.
- What about TelstrsClear? Will it exit the 029 arrangement with Vodafone in favour of some wholesale deal with Telecom?
- What about the hybrid network model Juha talks of, where CDMA is kept for high-speed data. How will this work for customers? Will they need dual-mode handsets to talk and use data? Will
EV-DO be restructed to PC data cards?
- What will Telecom do with its Hutchison 3G partnership? How will it leverage H3G services over here?
A few comments via the Herald:
Interesting comments about Telecom going GSM. I have been a Telecom mobile customer since 1989. I take a bit of an exception to your comment about CDMA being a bad choice. I have found call clarity and connections generally to be better with 025/027. In the early days 025/027 was far superior. Admittedly that may have changed in more recent times. Equally, my reading of the mobile data situation was that the Telecom products have offered better speed. Perhaps the only bad part of the decision is that the rest of the world went with a different standard. Had they gone CDMA then Telecom's choice would have looked inspired!
As for a better selection of handsets. So what! It may be important for geeks and fashionistas but the rest of us get by with the Telecom selection (currently I have a Treo 600). I also have a work 021, a very nice and expensive Nokia, which I like. As for the Motorola RAZR phones, my previous experience with Motorola phones and modems including cable modems is that they are hopelessly unreliable. This was confirmed very recently when the boss "upgraded" to a Motorola RAZR which managed to die just prior to his overseas trip. I wouldn't touch Motorola gear, no matter how nice it looks. I've also managed to persuade my kids to avoid it as well.
Telecom didn't really have much choice by the looks of it, but for most of us it comes down to price and service, not technology.
Of course, with number portability maybe none of it matters. Not that the networks are saying much about that. Where is it at?
Interesting story on Telecom NZ move to GSM. I left NZ in April 1996 and went to work in Vietnam, where GSM mobile phone connections outnumber landlines by a considerable amount. I quickly realised (as you do when you work outside NZ) that a good proportion of the rest of the world also used it, and on my first trip back six weeks later gave my 027 phone to my wife and have been a Vodafone customer ever since. Interestingly, at the same time a good friend of mine owned (and still does) a Telecom franchise in New Plymouth and had no qualms telling me that CDMA would take over the world and texting would never take off. I could never convince him at the time that I thought Telecoms was a poor choice and that the rest of the world was moving in a different direction. I now own a triband Smartphone and use it in the US, Europe, the Middle East and SE Asia, roaming all of the time on Vodafone. It even worked in Brazil!
Your article is interesting but to share another aspect with you, as it happens Vodafone are erecting a tower & base outside my house today. This is despite my cries to Auckland City and Vodafone to move over it over the road where there are no houses.
So possibly this explains their hard stance with me.
There are bigger more powerful reasons, e.g. Telecom using the same facilities? Who cares about the safety (traffic concerns as base box obscures road & frequencies of units etc) of people when theres more profit to be made. Maybe the next time we read the glowing reports in the business section of the papers, you can highlight that the real price is being paid by a handful of affected people sacrificed for the sake of profit. What do you think??
May 30, 2007 •
Here's the deal: New Zealand rolls out digital TV, claiming that being years behind the rest of the world in doing so means we'll do it better, learn from the mistakes of others.
So our Freeview consortium goes and accredits only two suppliers of satellite receivers, to the outrage of set-top box importers who want their own various boxes accredited. One of those "official" suppliers, Zinwell, then delivers dodgy, faulty set-top boxes to the New Zealand public. How exactly did boxes causing serious radio frequency interference get C-tick certified? Bizarre. This is Zinwell's business, it sells set-top boxes around the world. What's its quality control processes like if it can't handle something that basic?
Next Electronics, which acts as the service agent for the Zinwell boxes, put the below press release out last night, the first official acknowledgement from it and Zinwell that there is an issue with the Freeview receivers:
Zinwell ZMX-7500 Freeview Digital Receiver
Since the launch of Freeview on 2nd May and the retail sale of a significant number of Zinwell set-top-boxes we have had a 4.0% warranty return rate.
In introducing any new broadcasting technology into a country minor interference and or interface problems can be experienced due to varying standards of TV and audio systems’ interconnections.
Prior to the launch of the service both Zinwell and Freeview tested many units over an extended period and did not find the faults which have subsequently come to light.
These minor manufacturing defects have been investigated and will all be rectified shortly.
We are pleased to say that the experience of most installers with the Zinwell unit has been positive and they have had no problems installing them.
A new shipment of the product has arrived in NZ and will be used to replace units for customers who are experiencing any faults. This will be done on a case-by-case by basis by NEXT Electronics.
The warranty process is as follows:
- Warranty card in each box
- 12 months warranty
- Total replacement
- Contact NEXT Electronics on 0800 GO NEXT (0800 466 398)