Tag Archives: Fortune

Bitcoin prices dive: 58 bitcoin facts that will amuse and enlighten

It has been a decade since the appearance of bitcoin, the alternative or cryptocurrency based on a blockchain, a “decentralized” network or shared ledger that facilitates transparency. 

The currency’s pricing gyrations have been nothing short of a roller coaster ride, with bitcoins trading in 2017 as low as $750 and as high as $5,000.

Bitcoin is down from its September 2 high of $5,000 “on speculation,” reports Coindesk, “that the Chinese government is launching a crackdown on [bitcoin] exchanges.” Some others are blaming JP Morgan CEO Jamie Dimon’s scathing attack on bitcoin for the meltdown in the prices seen on September 13.

Business Insider says that as of last September 7 bitcoin is up 355% for 2017 (for the current price, go here).  More recently, it has hit a three-week low, and some believe it appears to be hurtling toward correction at around $3,000.

Hyped & Misunderstood

“No term at present is more hyped or misunderstood than blockchain,” reports FORTUNE. “A blockchain is a kind of ledger, a table that businesses use to track credits and debits… [It is] a definitive record of who owns what, when.“tp

“Properly applied, a blockchain can help assure data integrity, maintain auditable records, and even, in its latest iterations, render financial contracts into programmable software… Even if participants don’t trust one another, they can rely on the shared ledger through the transaction dance of their software.”

Goldman Sachs, Bank of America and MasterCard are among the most frequent recipients of blockchain patents. As reported in IP CloseUp, patent publications and grants are on the rise.

But despite price volatility, or perhaps because of it, bitcoin continues to attract converts. Among those who accept transactions with them are Microsoft, PayPal, Fortune magazine, Intuit, Amazon, Home Depot, Target and more than 100 companies.

Bitcoin is not blockchain, but the currency made possible by a blockchain platform or “shared ledger that underlies it. This is said to allow for transparency without any one party controlling clearing or profiting unfairly.

Bitcoin = Blockchain 1.0

Bitcoin is one manifestation of the blockchain ecosystem. It is an example of what a blockchain can do, but it is just the beginning. Blockchain 1.0, if you will. Industries as diverse as energy, healthcare and law are already using variations on blockchain technology.

The attraction of bitcoin is many-fold. Most important, it is highly private if not totally anonymous and eliminates the cost of middle-man and confusion from lack of transparency. 16.4 million bitcoins have been minted; after 21 million no new coins will be created. Once all coins have been mined value from the system, it has been said, will be derived from transaction fees (kind of like shares of stock).

For a bitcoin primer go here.

For those of you interested in the history of the bitcoin and early blockchain era, the following infographic – “10 Years of the World with Bitcoin – 58 Insane Facts” – from BitcoinPlay will enlighten as well as amuse. Source urls can be found at the bottom of the image.

 

Image source: bitcoinplay.net; bitcoin.com

 

Apple is seeking to cut license royalties paid to record labels

While the share of revenue from streaming paid to record labels and recording artists is rising, Apple Inc., among the fairest licensees in on-line music, is now seeking to reduce record labels’ share of revenue from streaming.

Bloomberg reports that the record labels’ deal with Apple were expected to expire at the end of June, though they are likely to be extended if the parties can’t agree on new terms, according to the people who asked not to be identified.

“Part of negotiations is to revise the iPhone maker’s overall relationship with the music industry.”

The negotiations would bring number two Apple closer to the rate industry streaming leader Spotify Ltd. pays labels, and allow both sides to adjust to the new realities of the music industry. Streaming services have been a source of renewed hope following a decade of decline in the digital age.

Patent holders may believe there is an element of deja vu taking place in music content. Once rock solid copyrights are now subject to renegotiation and diminished revenue because of lost leverage due to lower valuations and easier access. A key will be finding what will make copyrights more relevant again, and creating more competition among streaming services for content.

More Optimistic

Record labels are now more optimistic about the future health of their industry, which grew 5.9 percent last year worldwide thanks to paid streaming services Spotify and Apple Music. They recently negotiated a new deal with Spotify further lowering their take from the service, provided Spotify’s growth continues.

“Apple initially overpaid to placate the labels,” says Bloomberg, “who were concerned Apple Music would cripple or cannibalize iTunes, a major source of revenue.”

For the full Bloomberg article, go here.

Sales vs. Streams 

Though online sales of music have plummeted over the past few years, they still account for 24 percent of sales in the U.S., according to the Recording Industry Association of America. Vinyl record sales also are up but they are still limited to a specialty audience, while CD sale are way down.

According to Billboard, streaming led the U.S. music industry to its first back-to-back yearly growth this millennium and in the first half of 2016 was the single ­highest source of revenue in the U.S. recorded-music industry, ­bringing in $1.61 billion. All three major labels — Universal, Sony and Warner — posted streaming-driven double-digit percent boosts in earnings throughout the year.

The Trichordist, a publication devoted to “Artists for an Ethical and Sustainable Internet,” reports that Spotify was paying .00521 back in 2014, two years later the aggregate net average per play has dropped to .00437 a reduction of 16%.

                     Apple Music generates 7% of all streams and 13% of revenue

YouTube now has their licensed, subscription service (formerly YouTube Red) represented in these numbers as opposed to the Artist Channel and Content ID numbers we used last time. Just looking at the new YouTube subscription service numbers isolated here, they generate over 21% of all licensed audio streams, but less than 4% of revenue! By comparison Apple Music generates 7% of all streams and 13% of revenue.

Apple sits in the sweet spot, generating the second largest amount of streaming revenue with a per stream rate .00735, nearly double what Spotify is paying. But, Spotify has a near monopoly on streaming market share dominating 63% of all streams and 69% of all streaming revenue.

The top 10 streamers account for 99% of all streaming revenue.

New Technology, New Values

IP rights holders, including those with patents and trademarks, need to think through where they fit in the current digital scheme of things, and how much should be expected in a world that finds not paying for others’ intellectual property increasingly acceptable.

For patent holders, the streaming/copyright battle could be the proverbial canary in the mine.

Image source: fortune.com

Taylor Swift assists recording artists, Apple Music, and (even) herself

Taylor Swift, a pop star with sufficient power to move mountains, succeeded in moving an equally resolute object last year: Apple Music’s position on paying royalties to recording artists. 

A year later it is unclear if was the musicians, Apple, or Swift who benefited the most.

A Wall Street Journal op-ed last week reminded us that there are more important things to cover other than Kardashian/West war of words that the combatants and media are jointly milking.

In Support of Taylor Swift, Economist, Hong Kong based op-ed writer David Feith says,”Never mind the feud with Kanye West, the pop star has waged more important fights defending the value of intellectual property.”

Taylor-Swift-Apple-642x3611

The Top Earner

Forbes ranks Swift as the number one celebrity artist in 2016 with $170M in earnings. According to the magazine she is in the top 100 of self-made women and power women.

Swift has sought to champion the IP rights of recording artists by using her star power to assure that they (not she) are paid. That’s admirable, for sure, as the streaming services, Pandora, Spotify and YouTube, to name a few, have built valuable businesses without paying their fare share of artists royalties. (YouTube has been valued by Bank of America at $80 billion.)

But maybe Swift was at least somewhat motivated by dollars, not sense.

After outing Apple Music for refusing to pay artist royalties in a now infamous tumblr post, Swift wound up receiving not one but two spots from the company, promoting their new streaming service. I guess they were more interested in thanking her for the exposure than punishing her for the dis. Both ads went viral generating huge attention for Apple Music and her. Good timing, I guess.

Here is the latest Taylor Swift Apple Music ad, which generated more hits than most TV series (via Fortune).

Below is the original tumblr piece in which Swift challenged Apple – and the stream industry – to change their music rights policy. Swift won more than the argument, and so did Apple. The argument is well-stated:

 Free-riders come in many shapes and sizes

“This may be the ‘information wants to be free’ era, when online content is glibly swiped by millions who would never dream of shoplifting,” said WSJ’s Feith, “but Ms. Swift has a deep appreciation for the profit motive and the fruits it bestows on society.

“Ms. Swift’s most ambitious [IP] crusade may be in China,” writes WSJ’s Feith, “where she has launched branded clothing lines with special anti-piracy mechanisms to combat rampant counterfeiting on e-commerce sites like Alibaba’s Taobao.”

Swift has been known to trademark not song or titles, but phrases from songs which can be used to build her brands and fashion portfolio.

*****

I hope that Taylor Swift invents something soon, so she can bring her loyal following and keen business instincts to patents and patent holders. They sure could use them. 

Image source: appadvice.com 

 

Apple v. Samsung Shows Brand Matters to Patent Holders, Juries

There is a Tendency to View Patent Prowess as a Function of Reputation and Perceived Innovation

Much of billion dollar verdict in Apple v. Samsung turned on brand reputation and perception of what it does that is truly innovative.

“What Apple v. Samsung Says About US Jury Trials” in Managing Intellectual Property quotes Ronald Beaton of Trial Graphix as saying “Juries in Silicon Valley are particularly IP-Savvy. The longer you live there the more it gets into your head.”

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Apple’s brand reputation is tops, but what about its less than stellar IP performance? You can hardly argue with Apple’s virtually world leading market value (PetroChina is number one) and unrelenting growth. It’s patent strategy, while less cohesive, did not stop it from winning a billion dollar victory over a generally stronger patent (but not brand) rival. If nothing else, Apple is the consummate technology packager, and it takes every opportunity to let audiences know it. Its reputation as a design leader was at stake, as was its perception as an innovator. Samsung’s infringement of that asset, it could be said, is what the local jury rewarded.

Brand and IP reputation are intrinsically bound. Apple’s patent history is not the most auspicious. Many say it has the wrong or too few patents (probably less than 3,000 worldwide, excluding those it paid $2.6 billion for in the Rockstar Consortium). The company is believed to be vulnerable in many areas that it sells products. (See smart phone suit chart below.) Samsung has some 30,000 patents.

Faith in Proprietary Design

Putting so many eggs in its design patent basket was a bold move for Apple that paid off for now. The right combination of foreign infringer, venue (Silicon Valley) and jury pool,  clearly paid off. So did the company’s perceived value as a technology innovator.

One wonders if the chips would have fallen the same way if it were Google or Facebook defending itself in San Jose on a patent infringement charge asserted by a Silicon Valley neighbor. Apple to SV is what the General Motors was to Detroit. I’m not certain the others can claim the same loyalty.

At the end of the day Samsung is not likely to have to cut a check for $1 billion anytime soon, if ever. The effect on an injunction on its devices, should it be granted, will be negligible according to Sanford C. Bernstein analyst Mark Newman. The devices in question are older ones and will account for less than 1.4% of the Korean company’s worldwide profits. And bet you didn’t know this: Apple is still Samsung’s biggest customer for mobile device components.

In the end, Apple v. Samsung is really about a kind of court-ordered mandatory license that sets a high bar for any potential competitors. Samsung can certainly afford the “damages,” and what’s wrong with their having to live with an oligopoly if the high cost of entry narrows the competitive field? For smartphone outsiders the answer is simple: they will have to innovate better to succeed.

The uncharacteristic respect that the court and jury showed for design patents may have more to do with the fact they are Apple’s than any legal precedent or direction from the bench.  Brand can be powerful tool for enhancing patents and positioning a business as inherently innovative. It is something that Marshall Phelps realized at IBM in the late 1980s, as did Bill Gates at Microsoft starting in the late 1990s.

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A Culture of Success

Patent portfolio holders would be wise to be more transparent about their IP activities, and, where appropriate, attempt to establish a culture of IP success and ROI. A company’s reputation for innovation and managing its IP rights proficiently, today, can be a valuable asset.  Often, it can hinge on its perceived ability to innovate.

Michael Hages, an IP attorney writes in Core 77, a design magazine, that “The traditionally meager status of design patents is the reason why many designers are likely surprised by the prominence of design patents in Apple v. Samsung.”

“The real potential for impact, however lies in the mere fact that the design and business worlds are paying close attention to the design patent side of this case in the first place. Design patents have been around for over 150 years and in that time have only seen limited usage. Sure, many people or corporations have sued in the past to enforce their design rights with some success, but both the number of design patent lawsuits and the number of design patents granted pale in comparison to those of utility patents.

” …In all reality, practically everyone who has an opinion holds design patents in the lowest esteem of all the different forms of IP protection.”

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So, how did Apple pull off the design patent victory of a lifetime? What does it mean for other industries and products where design rights are crucial but not typically enforced?

That will depend on who else is willing to step up and defend their design patents as vigorously as Apple. It also will depend on who the parties are. The auto industry is one area where gentlemanly cross-licenses have trumped aggressive enforcement. Design patents can be useful, even if it is just to slow competitors down. But they have to be enforced, a nasty, expensive and somewhat speculative process that does not always result in direct financial return.  For Big Three U.S. automakers design enforcement has not been a cultural imperative. It will be interesting to see if Apple v. Samsung will have a lasting impact consumer electronics and other industries.

Illustration sources: hypebot.com; wsj.com; ritholz.com 

Disclosure: I have no position in the shares of or current business relationships with any companies mentioned in this article.

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SIDEBAR:

Apple v. Samsung jury foreman, Velvin R. Hogan, is a 67-year old retired engineer who holds a patent and has had a 35 year career in hard-drive technology with Memorex, Storage Technology and Digital Equipment, companies that are either out of business or have seen better days. Fortune’s summary of interviews with Hogan about the case and what led the jury to its decision makes for fascinating reading.


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