the human network

I. The Wheels Fall Off the Cart

In mid-1994, sometime shortly after Tony Parisi and I had fused the new technology of the World Wide Web to a 3D visualization engine, to create VRML, we paid a visit to the University of Santa Cruz, about 120 kilometers south of San Francisco. Two UCSC students wanted to pitch us on their own web media project. The Internet Underground Music Archive, or IUMA, featured a simple directory of artists, complete with links to MP3 files of these artists’ recordings. (Before I go any further, I should state that they had all the necessary clearances to put musical works up onto the Web – IUMA was not violating anyone’s copyrights.) The idea behind IUMA was simple enough, the technology absolutely straightforward – and yet, for all that, it was utterly revolutionary. Anyone, anywhere could surf over to the IUMA site, pick an artist, then download a track and play it.

This was in the days before broadband, so downloading a multi-megabyte MP3 recording could take upwards of an hour per track – something that seems ridiculous today, but was still so potent back in 1994 that IUMA immediately became one of the most popular sites on the still-quite-tiny Web. The founders of IUMA – Rob Lord and Jon Luini – wanted to create a place where unsigned or non-commercial musicians could share their music with the public in order to reach a larger audience, gain recognition, and perhaps even end up with a recording deal. IUMA was always better as a proof-of-concept than as a business opportunity, but the founders did get venture capital, and tried to make a go of selling music online. However, given the relative obscurity of the musicians on IUMA, and the pre-iPod lack of pervasive MP3 players, IUMA ran through its money by 2001, shuttering during the dot-com implosion of the same year. Despite that, every music site which followed IUMA, legal and otherwise, from Napster to Rhapsody to iTunes, has walked in its footsteps. Now, nearing the end of the first decade of the 21st century, we have a broadband infrastructure capable of delivery MP3s, and several hundred million devices which can play them. IUMA was a good idea, but five years too early.

Just forty-eight hours ago, a new music service, calling itself Qtrax, aborted its international launch – though it promises to be up “real soon now.” Qtrax also promises that anyone, anywhere will be able to download any of its twenty-five million songs perfectly legally, and listen to them practically anywhere they like – along with an inserted advertisement. Using peer-to-peer networking to relieve the burden on its own servers, and Digital Rights Management, or DRM, Qtrax ensures that there are no abuses of these pseudo-free recordings.

Most of the words that I used to describe Qtrax in the preceding paragraph didn’t exist in common usage when IUMA disappeared from the scene in the first year of this millennium. The years between IUMA and Qtrax are a geological age in Internet time, so it’s a good idea to walk back through that era and have a good look at the fossils which speak to how we evolved to where we are today.

In 1999, a curly-haired undergraduate at Boston’s Northeastern University built a piece of software that allowed him to share his MP3 collection with a few of his friends on campus, and allowed him access to their MP3s. This scanned the MP3s on each hard drive, publishing the list to a shared database, allowing each person using the software to download the MP3 from someone else’s hard drive to his own. This is simple enough, technically, but Shawn Fanning’s Napster created a dual-headed revolution. First, it was the killer app for broadband: using Napster on a dial-up connection was essentially impossible. Second, it completely ignored the established systems of distribution used for recorded music.

This second point is the one which has the most relevance to my talk this morning; Napster had an entirely unpredicted effect on the distribution methodologies which had been the bedrock of the recording industry for the past hundred years. The music industry grew up around the licensing, distribution and sale of a physical medium – a piano roll, a wax recording, a vinyl disk, a digital compact disc. However, when the recording industry made the transition to CDs in the 1980s (and reaped windfall profits as the public purchased new copies of older recordings) they also signed their own death warrants. Digital recordings are entirely ephemeral, composed only of mathematics, not of matter. Any system which transmitted the mathematics would suffice for the distribution of music, and the compact disc met this need only until computers were powerful enough to play the more compact MP3 format, and broadband connections were fast enough to allow these smaller files to be transmitted quickly. Napster leveraged both of these criteria – the mathematical nature of digitally-encoded music and the prevalence of broadband connections on America’s college campuses – to produce a sensation.

In its earliest days, Napster reflected the tastes of its college-age users, but, as word got out, the collection of tracks available through Napster grew more varied and more interesting. Many individuals took recordings that were only available on vinyl, and digitally recorded them specifically to post them on Napster. Napster quickly had a more complete selection of recordings than all but the most comprehensive music stores. This only attracted more users to Napster, who added more oddities from their on collections, which attracted more users, and so on, until Napster became seen as the authoritative source for recorded music.

Given that all of this “file-sharing”, as it was termed, happened outside of the economic systems of distribution established by the recording industry, it was taking money out of their pockets – probably something greater than billions of dollars a year was lost, if all of these downloads had been converted into sales. (Studies indicate this was unlikely – college students have ever been poor.) The recording industry launched a massive lawsuit against Napster in 2000, forcing the service to shutter in 2001, just as it reached an incredible peak of 14 million simultaneous users, out of a worldwide broadband population of probably only 100 million. This means that one in seven computers connected to the broadband internet were using Napster just as it was being shut down.

Here’s where it gets more interesting: the recording industry thought they’d brought the horse back into the barn. What they hadn’t realized was that the gate had burnt down. The millions of Napster users had their appetites whet by a world where an incredible variety of music was instantaneously available with few clicks of the mouse. In the absence of Napster, that pressure remained, and it only took a few weeks for a few enterprising engineers to create a successor to Napster, known as Gnutella, which provided the same service as Napster, but used a profoundly different technology for its filesharing. Where Napster had all of its users register their tracks within a centralized database (which disappeared when Napster was shut down) Gnutella created a vast, amorphous, distributed database, spread out across all of the computers running Guntella. Gnutella had no center to strike at, and therefore could not be shut down.

It is because of the actions of the recording industry that Gnutella was developed. If legal pressure hadn’t driven Napster out of business, Gnutella would not have been necessary. The recording industry turned out to be its own worst enemy, because it turned a potentially profitable relationship with its customers into an ever-escalating arms race of file-sharing tools, lawsuits, and public relations nightmares.

Once Gnutella and its descendants – Kazaa, Limewire, and Acquisition – arrived on the scene, the listening public had wholly taken control of the distribution of recorded music. Every attempt to shut down these ever-more-invisible “darknets” has ended in failure and only spurred the continued growth of these networks. Now, with Qtrax, the recording industry is seeking to make an accommodation with an audience which expects music to be both free and freely available, falling back on advertising revenue source to recover some of their production costs.

At first, it seemed that filmic media would be immune from the disruptions that have plagued the recording industry – films and TV shows, even when heavily compressed, are very large files, on the order of hundreds of millions of bytes of data. Systems like Gnutella, which allow you to transfer a file directly from one computer to another are not particularly well-suited to such large file transfers. In 2002, an unemployed programmer named Bram Cohen solved that problem definitively with the introduction of a new file-sharing system known as BitTorrent.

BitTorrent is a bit mysterious to most everyone not deeply involved in technology, so a brief of explanation will help to explain its inner workings. Suppose, for a moment, that I have a short film, just 1000 frames in length, digitally encoded on my hard drive. If I wanted to share this film with each of you via Gnutella, you’d have to wait in a queue as I served up the film, time and time again, to each of you. The last person in the queue would wait quite a long time. But if, instead, I gave the first ten frames of the film to the first person in the queue, and the second ten frames to the second person in the queue, and the third ten frames to the third person in the queue, and so on, until I’d handed out all thousand frames, all I need do at that point is tell each of you that each of your “peers” has the missing frames, and that you needed to get them from those peers. A flurry of transfers would result, as each peer picked up the pieces it needed to make a complete whole from other peers. From my point of view, I only had to transmit the film once – something I can do relatively quickly. From your point of view, none of you had to queue to get the film – because the pieces were scattered widely around, in little puzzle pieces, that you could gather together on your own.

That’s how BitTorrent works. It is both incredibly efficient and incredibly resilient – peers can come and go as they please, yet the total number of peers guaratees that somewhere out there is an entire copy of the film available at all times. And, even more perversely, the more people who want copies of my film, the easier it is for each successive person to get a copy of the film – because there are more peers to grab pieces from. This group of peers, known as a “swarm”, is the most efficient system yet developed for the distribution of digital media. In fact, a single, underpowered computer, on a single, underpowered broadband link can, via BitTorrent, create a swarm of peers. BitTorrent allows anyone, anywhere, distribute any large media file at essentially no cost.

It is estimated that upwards of 60% of all traffic on the Internet is composed of BitTorrent transfers. Much of this traffic is perfectly legitimate – software, such as the free Linux operating system, is distributed using BitTorrent. Still, it is well known that movies and television programmes are also distributed using BitTorrent, in violation of copyright. This became absolutely clear on the 14th of October 2004, when Sky Broadcasting in the UK premiered the first episode of Battlestar Galactica, Ron Moore’s dark re-imagining of the famous shlocky 1970s TV series. Because the American distributor, SciFi Channel, had chosen to hold off until January to broadcast the series, fans in the UK recorded the programmes and posted them to BitTorrent for American fans to download. Hundreds of thousands of copies of the episodes circulated in the United States – and conventional thinking would reckon that this would seriously impact the ratings of the show upon its US premiere. In fact, precisely the opposite happened: the show was so well written and produced that the word-of-mouth engendered by all this mass piracy created an enormous broadcast audience for the series, making it the most successful in SciFi Channel history.

In the age of BitTorrent, piracy is not necessarily a menace. The ability to “hyperdistribute” a programme – using BitTorrent to send a single copy of a programme to millions of people around the world efficiently and instantaneously – creates an environment where the more something is shared, the more valuable it becomes. This seems counterintuitive, but only in the context of systems of distribution which were part-and-parcel of the scarce exhibition outlets of theaters and broadcasters. Once everyone, everywhere had the capability to “tuning into” a BitTorrent broadcast, the economics of distribution were turned on their heads. The distribution gatekeepers, stripped of their power, whinge about piracy. But, as was the case with recorded music, the audience has simply asserted its control over distribution. This is not about piracy. This is about the audience getting whatever it wants, by any means necessary. They have the tools, they have the intent, and they have the power of numbers. It is foolishness to insist that the future will be substantially different from the world we see today. We can not change the behavior of the audience. Instead, we must all adapt to things as they are.

But things as the are have changed more than you might know. This is not the story of how piracy destroyed the film industry. This is the story how the audience became not just the distributors but the producers of their own content, and, in so doing, brought down the high walls which separate professionals from amateurs.

II. The Barbarian Hordes Storm the Walls

Without any doubt the most outstanding success of the second phase of the Web (known colloquially as “Web 2.0”) is the video-sharing site YouTube. Founded in early 2005, as of yesterday YouTube was the third most visited site on the entire Web, led only by Yahoo! and YouTube’s parent, Google. There are a lot of videos on YouTube. I’m not sure if anyone knows quite how many, but they easily number in the tens of millions, quite likely approaching a hundred million. Another hundred thousand videos are uploaded each day; YouTube grows by three million videos a month. That’s a lot of video, difficult even to contemplate. But an understanding of YouTube is essential for anyone in the film and television industries in the 21st century, because, in the most pure, absolute sense, YouTube is your competitor.

Let me unroll that statement a bit, because I don’t wish it to be taken as simply as it sounds. It’s not that YouTube is competing with you for dollars – it isn’t, at least not yet – but rather, it is competing for attention. Attention is the limiting factor for the audience; we are cashed up but time-poor. Yet, even as we’ve become so time-poor, the number of options for how we can spend that time entertaining ourselves has grown so grotesquely large as to be almost unfathomable. This is the real lesson of YouTube, the one I want you to consider in your deliberations today. In just the past three years we have gone from an essential scarcity of filmic media – presented through limited and highly regulated distribution channels – to a hyperabundance of viewing options.

This hyperabundance of choices, it was supposed until recently, would lead to a sort of “decision paralysis,” whereby the viewer would be so overwhelmed by the number of choices on offer that they would simply run back, terrified, to the highly regularized offerings of the old-school distribution channels. This has not happened; in fact, the opposite has occured: the audience is fragmenting, breaking up into ever-smaller “microaudiences”. It is these microaudiences that YouTube speaks directly to. The language of microaudiences is YouTube’s native tongue.

In order to illustrate the transformation that has completely overtaken us, let’s consider a hypothetical fifteen year-old boy, home after a day at school. He is multi-tasking: texting his friends, posting messages on Bebo, chatting away on IM, surfing the web, doing a bit of homework, and probably taking in some entertainment. That might be coming from a television, somewhere in the background, or it might be coming from the Web browser right in front of him. (Actually, it’s probably both simultaneously.) This teenager has a limited suite of selections available on the telly – even with satellite or cable, there won’t be more than a few hundred choices on offer, and he’s probably settled for something that, while not incredibly satisfying, is good enough to play in the background.

Meanwhile, on his laptop, he’s viewing a whole series of YouTube videos that he’s received from his friends; they’ve found these videos in their own wanderings, and immediately forwarded them along, knowing that he’ll enjoy them. He views them, and laughs, he forwards them along to other friends, who will laugh, and forward them along to other friends, and so on. Sharing is an essential quality of all of the media this fifteen year-old has ever known. In his eyes, if it can’t be shared, a piece of media loses most of its value. If it can’t be forwarded along, it’s broken.

For this fifteen year-old, the concept of a broadcast network no longer exists. Television programmes might be watched as they’re broadcast over the airwaves, but more likely they’re spooled off of a digital video recorder, or downloaded from the torrent and watched where and when he chooses. The broadcast network has been replaced by the social network of his friends, all of whom are constantly sharing the newest, coolest things with one another. The current hot item might be something that was created at great expense for a mass audience, but the relationship between a hot piece of media and its meaningfulness for a microaudience is purely coincidental. All the marketing dollars in the world can foster some brand awareness, but no amount of money will inspire that fifteen year old to forward something along – because his social standing hangs in the balance. If he passes along something lame, he’ll lose social standing with his peers. This factors into every decision he makes, from the brand of runners he wears, to the television series he chooses to watch. Because of the hyperabundance of media – something he takes as a given, not as an incredibly recent development – all of his media decisions are weighed against the values and tastes of his social network, rather than against a scarcity of choices.

This means that the true value of media in the 21st century is entirely personal, and based upon the salience, that is, the importance, of that media to the individual and that individual’s social network. The mass market, with its enforced scarcity, simply does not enter into his calculations. Yes, he might go to the theatre to see Transformers with his mates; but he’s just as likely to download a copy recorded in the movie theatre with an illegally smuggled-in camera that was uploaded to The Pirate Bay a few hours after its release.

That’s today. Now let’s project ourselves five years into the future. YouTube is still around, but now it has more than two hundred million videos (probably much more), all available, all the time, from short-form to full-length features, many of which are now available in high-definition. There’s so much “there” there that it is inconceivable that conventional media distribution mechanisms of exhibition and broadcast could compete. For this twenty year-old, every decision to spend some of his increasingly-valuable attention watching anything is measured against salience: “How important is this for me, right now?” When he weighs the latest episode of a TV series against some newly-made video that is meant only to appeal to a few thousand people – such as himself – that video will win, every time. It more completely satisfies him. As the number of videos on offer through YouTube and its competitors continues to grow, the number of salient choices grows ever larger. His social network, communicating now through FaceBook and MySpace and next-generation mobile handsets and iPods and goodness-knows-what-else is constantly delivering an ever-growing and increasingly-relevant suite of media options. He, as a vital node within his social network, is doing his best to give as good as he gets. His reputation depends on being “on the tip.”

When the barriers to media distribution collapsed in the post-Napster era, the exhibitors and broadcasters lost control of distribution. What no one had expected was that the professional producers would lose control of production. The difference between an amateur and a professional – in the media industries – has always centered on the point that the professional sells their work into distribution, while the amateur uses wits and will to self-distribute. Now that self-distribution is more effective than professional distribution, how do we distinguish between the professional and the amateur? This twenty year-old doesn’t know, and doesn’t care.

There is no conceivable way that the current systems of film and television production and distribution can survive in this environment. This is an uncomfortable truth, but it is the only truth on offer this morning. I’ve come to this conclusion slowly, because it seems to spell the death of a hundred year-old industry with many, many creative professionals. In this environment, television is already rediscovering its roots as a live medium, increasingly focusing on news, sport and “event” based programming, such as Pop Idol, where being there live is the essence of the experience. Broadcasting is uniquely designed to support the efficient distribution of live programming. Hollywood will continue to churn out blockbuster after blockbuster, seeking a warmed-over middle ground of thrills and chills which ensures that global receipts will cover the ever-increasing production costs. In this form, both industries will continue for some years to come, and will probably continue to generate nice profits. But the audience’s attentions have turned elsewhere. They’re not returning.

This future almost completely excludes “independent” production, a vague term which basically means any production which takes place outside of the media megacorporations (News Corp, Disney, Sony, Universal and TimeWarner), which increasingly dominate the mass media landscape. Outside of their corporate embrace, finding an audience sufficient to cover production and marketing costs has become increasingly difficult. Film and television have long been losing economic propositions (except for the most lucky), but they’re now becoming financially suicidal. National and regional funding bodies are growing increasingly intolerant of funding productions which can not find an audience; soon enough that pipeline will be cut off, despite the damage to national cultures. Australia funds the Film Finance Corporation and the Australian Film Council to the tune of a hundred million dollars a year, to ensure that Australian stories are told by Australian voices; but Australians don’t go to see them in the theatres, and don’t buy them on DVD.

The center can not hold. Instead, YouTube, which founder Steve Chen insists has “no gold standard” of production values, is rapidly becoming the vehicle for independent productions; productions which cost not millions of euros, but hundreds, and which make up for their low production values in salience and in overwhelming numbers. This tsunami of content can not be stopped or even slowed down; it has nothing to do with piracy (only nine percent of the videos viewed on YouTube are violations of copyright) but reflects the natural accommodation of the audience to an era of media hyperabundance.

What then, is to be done?

III. And The Penny Drops

It isn’t all bad news. But, like a good doctor, I want to give you the bad news right up front: There is no single, long-term solution for film or television production. No panacea. It’s not even entirely clear that the massive Hollywood studios will do business-as-usual for any length of time into the future. Just a decade ago the entire music recording industry seemed impregnable. Now it lies in ruins. To assume that history won’t repeat itself is more than willful ignorance of the facts; it’s bad business.

This means that the one-size-fits-all production-to-distribution model, which all of you have been taught as the orthodoxy of the media industries, is worse than useless; it’s actually blocking your progress because it is effectively keeping you from thinking outside the square. This is a wholly new world, one which is littered with golden opportunities for those able to avail themselves of them. We need to get you from where you are – bound to an obsolete production model – to where you need to be. Let me illustrate this transition with two examples.

In early 2005, producer Ronda Byrne got a production agreement with Channel NINE, then the number one Australian television network, to make a feature-length television programme about the “law of attraction”, an idea she’d learned of when reading a book published in 1910, The Science of Getting Rich. The interviews and other footage were shot in July and August, and after a few months in the editing suite, she showed the finished production to executives at Channel NINE, who declined to broadcast it, believing it lacked mass appeal. Since Byrne wasn’t going to be getting broadcast fees from Channel NINE to cover her production costs, she negotiated a new deal with NINE, allowing her to sell DVDs of the completed film.

At this point Byrne began spreading news of the film virally, through the communities she thought would be most interested in viewing it; specifically, spiritual and “New Age” communities. People excited by Byrne’s teaser marketing could pay $20 for a DVD copy of the film (with extended features), or pay $5 to watch a streaming version directly on their computer. As the film made its way to its intended audience, word-of-mouth caused business to mushroom overnight. The Secret became a blockbuster, selling millions of copies on DVD. A companion book, also titled The Secret, has sold over two million copies. And that arbiter of American popular taste, Oprah, has featured the film and book on her talk show, praising both to the skies. The film has earned back many, many times its production costs, making Byrne a wealthy woman. She’s already deep into the production of a sequel to The Secret – a film which already has an audience identified and targeted.

Chagrined, the television executives of Channel NINE finally did broadcast The Secret in February 2007. It didn’t do that well. This sums up the paradox distribution in the age of the microaudience. Clearly The Secret had a massive world-wide audience, but television wasn’t the most effective way to reach them, because this audience was actually a collection of microaudiences, rather than a single, aggregated audience. If The Secret had opened theatrically, it’s unlikely it would have done terribly well; it’s the kind of film that people want to watch more than once, being in equal parts a self-help handbook and a series of inspirational stories. It is well-suited for a direct-to-DVD release – a distribution vehicle that no longer has the stigma of “failure” associated with it. It is also well-suited to cross-media projects, such as books, conferences, streamed delivery, podcasts, and so forth. Having found her audience, Byrne has transformed The Secret into an exceptional money-making franchise, as lucrative, in its own way, and at its own scale, as any Hollywood franchise.

The second example is utterly different from The Secret, yet the fundamentals are strikingly similar. Just last month a production group calling themselves “The League of Peers” released a film titled Steal This Film, Part 2. The first part of this film, released in late 2006, dealt with the rise of file-sharing, and, in specific, with the legal troubles of the world’s largest BitTorrent site, Sweden’s The Pirate Bay. That film, although earnest and coherent, felt as though it was produced by individuals still learning the craft of filmmaking. This latest film feels looks as professional as any documentary created for BBC’s Horizon or PBS’s Frontline or ABC’s 4Corners. It is slick, well-lit, well-edited, and has a very compelling story to tell about the history of copying – beginning with the invention of the printing press, five hundred years ago. Steal This Film is a political production, a bit of propaganda with an bias. This, in itself, is not uncommon in a documentary. The funding and distribution model for this film is what makes it relatively unique.

Individuals who saw Steal This Film, Part One – which was made freely available for download via BitTorrent – were invited to contribute to the making of the sequel. Nearly five million people downloaded Steal This Film, Part One, so there was a substantial base of contributors to draw from. (I myself donated five dollars after viewing the film. If every viewer had done likewise that would cover the budget of a major Hollywood production!) The League of Peers also approached arts funding bodies, such as the British Documentary Council, with their completed film in hand, the statistics showing that their work reached a large audience, and a roadmap for the second film – this got them additional funding. Now, having released Steal This Film, Part Two, viewers are again invited to contribute (if they like the film), promised a “secret gift” for contributions of $15 or more. While the tip jar – literally, busking – may seem a very weird way to fund a film production, it’s likely that Steal This Film, Part Two will find an even wider audience than Part One, and that the coffers of the League of Peers will provide them with enough funds to embark on their next film, The Oil of the 21st Century, which will focus on the evolution of intellectual property into a traded commodity.

I have asked Screen Training Ireland to include a DVD of Steal This Film, Part Two with the materials you received this morning. You’ve been given the DVD version of the film, but I encourage you to download the other versions of the film: the XVID version, for playback on a PC; the iPod version, for portable devices; and the high-definition version, for your visual enjoyment. It’s proof positive that a viable economic model exists for film, even when it is given away. It will not work for all productions, but there is a global community of individuals who are intensely interested in factual works about copyright and intellectual property in the 21st century, who find these works salient, and who are underserved by the media megacorporations, who would not consider it in their own economic best interest to produce or distribute such works. The League of Peers, as part of the community whom this film is intended for, knew how to get the word out about the film (particularly through Boing Boing, the most popular blog in the world, with two million readers a week), and, within a few weeks, nearly everyone who should have heard of the film had heard about it – through their social networks.

Both The Secret and Steal This Film, Part Two are factual works, and it’s clear that this emerging distribution model – which relies on targeting communities of interest – works best with factual productions. One of the reasons that there has been such an upsurge in the production of factual works over the past few years is because these works have been able to build their own funding models upon a deep knowledge of the communities they are talking to – made by microaudiences, for microaudiences. But microaudiences, scaled to global proportions, can easily number in the millions. Microaudiences are perfectly willing to pay for something or contribute to something they consider of particular value and salience; it is a visible thank you, a form of social reinforcement which is very natural within social networks.

What about drama, comedy and animation? Short-form comedy and animation probably have the easiest go of it, because they can be delivered online with an advertising payload of some sort. Happy Tree Friends is a great example of how this works – but it took producers Mondo Media nearly a decade to stumble into a successful economic model. Feature-length comedy and feature-length drama are more difficult nuts to crack, but they are not impossible. Again, the key is to find the communities which will be most interested in the production; this is not always entirely obvious, but the filmmaker should have some idea of the target audience for their film. While in preproduction, these communities need to be wooed and seduced into believing that this film is meant just for them, that it is salient. Productions can be released through complementary distribution channels: a limited, occasional run in rented exhibition spaces (which can be “events”, created to promote and showcase the film); direct DVD sales (which are highly lucrative if the producer does this directly); online distribution vehicles such as iTunes Movie Store; and through “community” viewing, where a DVD is given to a few key members of the community in the hopes that word-of-mouth will spread in that community, generating further DVD sales.

None of this guarantees success, but it is the way things work for independent productions in the 21st-century. All of this is new territory. It isn’t a role that belongs neatly to the producer of the film, nor, in the absence of studio muscle, is it something that a film distributor would be competent at. This may not be the producer’s job. But it is someone’s job. Someone must do it. Starting at the earliest stages of pre-production, someone has to sit down with the creatives and the producer and ask the hard questions: “Who is this film intended for?” “What audiences will want to see this film – or see it more than once?” “How do we reach these audiences?” From these first questions, it should be possible to construct a marketing campaign which leverages microaudiences and social networks into ticket receipts and DVD sales and online purchases.

So, as you sit down to do your planning today, and discuss how to move Irish screen industries into the 21st century, ask yourselves who will be fulfilling this role. The producer is already overloaded, time-poor, and may not be particularly good at marketing. The director has a vision, but might be practically autistic when it comes to working with communities. This is a new role, one that is utterly vital to the success of the production, but one which is not yet budgeted for, and one which we do not yet train people to fill. Individuals have succeeded in this new model through their own tireless efforts, but each of these have been scattershot; there is a way to systematize this. While every production and every marketing plan will be unique – drawn from the fundamentals of the story being told – there are commonalities across productions which people will be able to absorb and apply, production after production.

One of my favorite quotes from science fiction writer William Gibson goes, “The future is already here, it’s just not evenly distributed.” This is so obviously true for film and television production that I need only close by noting that there are a lot of success stories out there, individuals who have taken the new laws of hyperdistribution and sharing and turned them to their own advantage. It is a challenge, and there will be failures; but we learn more from our failures than from our successes. Media production has always been a gamble; but the audiences of the 21st century make success easier to achieve than ever before.

I. The Wheels Fall Off the Cart

In mid-1994, sometime shortly after Tony Parisi and I had fused the new technology of the World Wide Web to a 3D visualization engine, to create VRML, we paid a visit to the University of Santa Cruz, about 120 kilometers south of San Francisco. Two UCSC students wanted to pitch us on their own web media project. The Internet Underground Music Archive, or IUMA, featured a simple directory of artists, complete with links to MP3 files of these artists

Recorded yesterday morning, edited with slides last night; transcoded and uploaded to YouTube just five minutes ago.

Recorded yesterday morning, edited with slides last night; transcoded and uploaded to YouTube just five minutes ago.

Introduction

I read a very interesting article last week. It turns out that, despite their best efforts, the Communist government of the People’s Republic of China have failed to insulate their prodigious population from the outrageous truths to be found online. In the article from the Times, Wang Guoqing, a vice-minister in the information office of the Chinese cabinet was quoted as saying, “It has been repeatedly proved that information blocking is like walking into a dead end.” If China, with all of the resources of a one-party state, and thus able to “lock down” its internet service providers, directing their IP traffic through a “great firewall of China”, can not block the free-flow of information, how can any government, anywhere – or any organization, or institution – hope to try?

Of course, we all chuckle a little bit when we see the Chinese attempt the Sisyphean task of damming the torrent of information which characterizes life in the 21st century. We, in the democratic West, know better, and pat ourselves on the back. But we are in no position to throw stones. Gilmore’s Law is not specifically tuned for political censorship; censorship simply means the willful withholding of information – for any reason. China does it for political reasons; in the West our reasons for censorship are primarily economic. Take, for example, the hullabaloo associated with the online release of Harry Potter and the Deathly Hallows, three days before its simultaneous, world-wide publication. It turns out that someone, somewhere, got a copy of the book, and laboriously photographed every single page of the 784-page text, bound these images together into a single PDF file, and then uploaded it to the global peer-to-peer filesharing networks. Everyone with a vested financial interest in the book – author J.K. Rowling, Bloomsbury and Scholastic publishing houses, film studio Warner Brothers – had been feeding the hype for the impending release, all focused around the 21st of July. An enormous pressure had been built up to “peek at the present” before it was formally unwrapped, and all it took was one single gap in the $20 million security system Bloomsbury had constructed to keep the text safely secure. Then it became a globally distributed media artifact. Curiously, Bloomsbury was reported as saying they thought it would only add to sales – if many people are reading the book now, even illegally, then even more people will want to be reading the book right now. Piracy, in this case, might be a good thing.

These two examples represent two data points which show the breadth and reach of Gilmore’s Law. Censorship, broadly defined, is anything which restricts the free flow of information. The barriers could be political, or they could be economic, or they could – as in the case immediately relevant today – they could be a nexus of the two. Broadband in Australia is neither purely an economic nor purely a political issue. In this, broadband reflects the Janus-like nature of Telstra, with one face turned outward, toward the markets, and another turned inward, toward the Federal Government. Even though Telstra is now (more or less) wholly privatized, the institutional memory of all those years as an arm of the Federal Government hasn’t yet been forgotten. Telstra still behaves as though it has a political mandate, and is more than willing to use its near-monopoly economic strength to reinforce that impression.

Although seemingly unavoidable, given the established patterns of the organization, Telstra’s behavior has consequences. Telstra has engendered enormous resentment – both from its competitors and its customers – for its actions and attitude. They’ve recently pushed the Government too far (at least, publicly), and have been told to back off. What may not be as clear – and what I want to warn you of today – is how Telstra has sewn the seeds of its own failure. What’s more, this may not be anything that Telstra can now avoid, because this is neither a regulatory nor an economic failure. It can not be remedied by any mechanism that Telstra has access to. Instead, it may require a top-down rethinking of the entire business.

I: Network Effects

For the past several thousand years, the fishermen of Kerala, on the southern coast of India, have sailed their dhows out into the Indian Ocean, lowered their nets, and hoped for the best. When the fishing is good, they come back to shore fully laden, and ready to sell their catch in the little fish markets that dot the coastline. A fisherman might have a favorite market, docking there only to find that half a dozen other dhows have had the same idea. In that market there are too many fish for sale that day, and the fisherman might not even earn enough from his catch to cover costs. Meanwhile, in a market just a few kilometers away, no fishing boats have docked, and there’s no fish available at any price. This fundamental chaos of the fish trade in Kerala has been a fact of life for a very long time.

Just a few years ago, several of India’s rapidly-growing wireless carriers strung GSM towers along the Kerala coast. This gives those carriers a signal reach of up to about 25km offshore – enough to be very useful for a fisherman. While mobile service in India is almost ridiculously cheap by Australian standards – many carriers charge a penny for an SMS, and a penny or two per minute for voice calls – a handset is still relatively expensive, even one such as the Nokia 1100, which was marketed specifically at emerging mobile markets, designed to be cheap and durable. Such a handset might cost a month’s profits for a fisherman – which makes it a serious investment. But, at some point in the last few years, one fisherman – probably a more prosperous one – bought a handset, and took it to sea. Then, perhaps quite accidentally, he learned, through a call ashore, of a market wanting for fish that day, brought his dhow to dock there, and made a handsome profit. After that, the word got around rapidly, and soon all of Kerala’s fisherman were sporting their own GSM handsets, calling into shore, making deals with fishmongers, acting as their own arbitrageurs, creating a true market where none had existed before. Today in Kerala the markets are almost always stocked with just enough fish; the fishmongers make a good price for their fish, and the fishermen themselves earn enough to fully recoup the cost of their handsets in just two months. Mobile service in Kerala has dramatically altered the economic prospects for these people.

This is not the only example: in Kenya farmers call ahead to the markets to learn which ones will have the best prices for their onions and maize; spice traders, again in Kerala, use SMS to create their own, far-flung bourse. Although we in the West generally associate mobile communications with affluent lifestyles, a significant number of microfinance loans made by Grameen Bank in Bangladesh, and others in Pakistan, India, Africa and South America are used to purchase mobile handsets – precisely because the correlation between access to mobile communications and earning potential has become so visible in the developing world. Grameen Bank has even started its own carrier, GrameenPhone, to service its microfinance clientele.

Although economists are beginning to recognize and document this curious relationship between economics and access to communication, it needs to be noted that this relationship was not predicted – by anyone. It happened all by itself, emerging from the interaction of individuals and the network. People – who are always the intelligent actors in the network – simply recognized the capabilities of the network, and put them to work. As we approach the watershed month of October 2007, when three billion people will be using mobile handsets, when half of humanity will be interconnected, we can expect more of the unexpected.

All of this means that none of us – even the most foresighted futurist – can know in advance what will happen when people are connected together in an electronic network. People themselves are too resourceful, and too intelligent, to model their behavior in any realistic way. We might be able to model their network usage – though even that has confounded the experts – but we can’t know why they’re using the network, nor what kind of second-order effects that usage will have on culture. Nor can we realistically provision for service offerings; people are more intelligent, and more useful, than any other service the carriers could hope to offer. The only truly successful service offering in mobile communications is SMS – because it provides an asynchronous communications channel between people. The essential feature of the network is simply that it connects people together, not that it connects them to services.

This strikes at the heart of the most avaricious aspects of the carriers’ long-term plans, which center around increasing the levels of services on offer, by the carrier, to the users of the network. Although this strategy has consistently proven to be a complete failure – consider Compuserve, Prodigy and AOL – it nevertheless has become the idée fixe of shareholder reports, corporate plans, and press releases. The network, we are told, will become increasingly more intelligent, more useful, and more valuable. But all of the history of the network argues directly against this. Nearly 40 years after its invention, the most successful service on the Internet is still electronic mail, the Internet’s own version of SMS. Although the Web has become an important service in its own right, it will never be as important as electronic mail, because it connects individuals.

Although the network in Kerala was brought into being by the technology of GSM transponders and mobile handsets, the intelligence of the network truly does lie in the individuals who are connected by the network. Let’s run a little thought experiment, and imagine a world where all of India’s telecoms firms suffered a simultaneous catastrophic and long-lasting failure. (Perhaps they all went bankrupt.) Do you suppose that the fishermen would simply shrug their shoulders and go back to their old, chaotic market-making strategies? Hardly. Whether they used smoke signals, or semaphores, or mirrors on the seashore, they’d find some way to maintain those networks of communication – even in the absence of the technology of the network. The benefits of the network so outweigh the implementation of the network that, once created, networks can not be destroyed. The network will be rebuilt from whatever technology comes to hand – because the network is not the technology, but the individuals connected through it.

This is the kind of bold assertion that could get me into a lot of trouble; after all, everyone knows that the network is the towers, the routers, and the handsets which comprise its physical and logical layers. But if that were true, then we could deterministically predict the qualities and uses of networks well in advance of their deployment. The quintessence of the network is not a physical property; it is an emergent property of the interaction of the network’s users. And while people do persistently believe that there is some “magic” in the network, the source of that magic is the endlessly inventive intellects of the network’s users. When someone – anywhere in the network – invents a new use for the network, it propagates widely, and almost instantaneously, transmitted throughout the length and breadth of the network. The network amplifies the reach of its users, but it does not goad them into being inventive. The service providers are the users of the network.

I hope this gives everyone here some pause; after all, it is widely known that the promise to bring a high-speed broadband network to Australia is paired with the desire to provide services on that network, including – most importantly – IPTV. It’s time to take a look at that promise with our new understanding of the real power of networks. It is under threat from two directions: the emergence of peer-produced content; and the dramatic, disruptive collapse in the price of high-speed wide-area networking which will fully power individuals to create their own network infrastructure.

II: DIYnet

Although nearly all high-speed broadband providers – which are, by and large, monopoly or formerly monopoly telcos – have bet the house on the sale of high-priced services to finance the build-out of high-speed (ADSL2/FTTN/FTTH) network infrastructure, it is not at all clear that these service offerings will be successful. Mobile carriers earn some revenue from ringtone and game sales, but this is a trivial income stream when compared to the fees they earn from carriage. Despite almost a decade of efforts to milk more ARPU from their customers, those same customers have proven stubbornly resistant to a continuous fleecing. The only thing that customers seem obviously willing to pay for is more connectivity – whether that’s more voice calls, more SMS, or more data.

What is most interesting is what these customers have done with this ever-increasing level of interconnectivity. These formerly passive consumers of entertainment have become their own media producers, and – perhaps more ominously, in this context – their own broadcasters. Anyone with a cheap webcam (or mobile handset), a cheap computer, and a broadband link can make and share their own videos. This trend had been growing for several years, but since the launch of YouTube, in 2005, it has rocketed into prominence. YouTube is now the 4th busiest website, world-wide, and perhaps 65% of all video downloads on the web take place through Google-owned properties. Amateur productions regularly garner tens of thousands of viewers – and sometimes millions.

We need to be very careful about how we judge both the meaning of the word “amateur” in the context of peer-produced media. An amateur production may be produced with little or no funding, but that does not automatically mean it will appear clumsy to the audience. The rough edges of an amateur prodution are balanced out by a corresponding increase in salience – that is, the importance which the viewer attaches to the subject of the media. If something is compelling because it is important to us – something which we care passionately about – high production values do not enter into our assessment. Chad Hurley, one of the founders of YouTube has remarked that the site has no “gold-standard” for production; in fact, YouTube’s gold-standard is salience – if the YouTube audience feels the work is important, audience members will share it within their own communities of interest. Sharing is the proof of salience.

After two years of media sharing, the audience for YouTube (which is now coincident with the global television audience in the developed world) has grown accustomed to being able to share salient media freely. This is another of the unexpected and unpredicted emergent effects of the intelligence of humans using the network. We now have an expectation that when we encounter some media we find highly salient, we should be able to forward it along within our social networks, sharing it within our communities of salience. But this is not the desire of many copyright holders, who collect their revenues by placing barriers to the access of media. This fundamental conflict, between the desire to share, as engendered by our own interactions with the network, and the desire of copyright holders to restrain media consumption to economic channels has, thus far, been consistently resolved in favor of sharing. The copyright holders have tried to use the legal system as a bludgeon to change the behavior of the audience; this has not, nor will it ever work. But, as the copyright holders resort to ever-more-draconian techniques to maintain control over the distribution of their works, the audience is presented with an ever-growing world of works that are meant to be shared. The danger here is that the audience is beginning to ignore works which they can not share freely, seeing them as “broken” in some fundamental way. Since sharing has now become an essential quality of media, the audience is simply reacting to a perceived defect in those works. In this sense, the media multinationals have been their own worst enemies; by restricting the ability of the audiences to share the works they control, they have helped to turn audiences toward works which audiences can distribute through their own “do-it-yourself” networks.

These DIYnets are now a permanent fixture of the media landscape, even as their forms evolve through YouTube playlists, RSS feeds, and sharing sites such as Facebook and Pownce. These networks exist entirely outside the regular and licensed channels of distribution; they are not suitable – legally or economically – for distribution via a commercial IPTV network. Telstra can not provide these DIYnets to their customers through its IPTV service – nor can any other broadband carrier. IPTV, to a carrier, means the distribution of a few hundred highly regularized television channels. While there will doubtless be a continuing market for mass entertainment, that audience is continuously being eroded by a growing range of peer-produced programming which is growing in salience. In the long-term this, like so much in the world, will probably obey an 80/20 rule, with about 80 percent of the audience’s attention absorbed in peer-produced, highly-salient media, while 20 percent will come from mass-market, high-production-value works. It doesn’t make a lot of sense to bet the house on a service offering which will command such a small portion of the audience’s attention. Yes, Telstra will offer it. But it will never be able to compete with the productions created by the audience.

Because of this tension between the desires of the carrier and the interests of the audience, the carrier will seek to manipulate the capabilities of the broadband offering, to weight it in favor of a highly regularized IPTV offering. In the United States this has become known as the “net neutrality” argument, and centers on the question of whether a carrier has the right to shape traffic within its own IP network to advantage its own traffic over that of others. In Australia, the argument has focused on tariff rates: Telstra believes that if they build the network, they should be able to set the tariff. The ACCC argues otherwise. This has been the characterized as the central stumbling block which has prevented the deployment of a high-speed broadband network across the nation, and, in some sense that is entirely true – Telstra has chosen not move forward until it feels assured that both economic and regulatory conditions prove favorable. But this does not mean that the consumer demand for a high-speed network was simply put on pause over the last years. More significantly, the world beyond Telstra has not stopped advancing. While it now costs roughly USD $750 per household to provide a high-speed fiber-optic connection to the carrier network, other technologies are coming on-line, right now, which promise to reduce those costs by an order of magnitude, and furthermore, which don’t require any infrastructure build-out on the part of the carrier. This disruptive innovation could change the game completely.

III: Check, Mate

All parties to the high-speed broadband dispute – government, Telstra, the Group of Nine, and the public – share the belief that this network must be built by a large organization, able to command the billions of dollars in capital required to dig up the streets, lay the fiber, and run the enormous data centers. This model of a network is an reflection in copper, plastic and silicon, of the hierarchical forms of organization which characterize large institutions – such as governments and carriers. However, if we have learned anything about the emergent qualities of networks, it is that they quickly replace hierarchies with “netocracies“: horizontal meritocracies, which use the connective power of the network to out-compete slower and rigid hierarchies. It is odd that, while the network has transformed nearly everything it has touched, the purveyors of those networks – the carriers – somehow seem immune from those transformative qualities. Telecommunications firms are – and have ever been – the very definition of hierarchical organizations. During the era of plain-old telephone service, the organizational form of the carrier was isomorphic to the form of the network. However, over the last decade, as the internal network has transitioned from circuit-switched to packed-switched, the institution lost synchronization with the form of the network it provided to consumers. As each day passes, carriers move even further out of sync: this helps to explain the current disconnect between Telstra and Australians.

We are about to see an adjustment. First, the data on the network was broken into packets; now, the hardware of the network has followed. Telephone networks were centralized because they required explicit wiring from point-to-point; cellular networks are decentralized, but use licensed spectrum – which requires enormous capital resources. Both of these conditions created significant barriers to entry. But there is no need to use wires, nor is there any need to use licensed spectrum. The 2.4 GHz radio band is freely available for anyone to use, so long as that use stays below certain power values. We now see a plethora of devices using that spectrum: cordless handsets, Bluetooth devices, and the all-but-ubiquitous 802.11 “WiFi” data networks. The chaos which broadcasters and governments had always claimed would be the by-product of unlicensed spectrum has, instead, become an wonderfully rich marketplace of products and services. The first generation of these products made connection to the centralized network even easier: cordless handsets liberated the telephone from the twisted-pair connection to the central office, while WiFi freed computers from heavy and clumsy RJ-45 jacks and CAT-5 cabling. While these devices had some intelligence, that intelligence centered on making and maintaining a connection to the centralized network.

Recently, advances in software have produced a new class of devices which create their own networks. Devices connected to these ad-hoc “mesh” networks act as peers in a swarm (similar to the participants in peer-to-peer filesharing), rather than clients within a hierarchical distribution system. These network peers share information about their evolving topology, forming a highly-resilient fabric of connections. Devices maintain multiple connections to multiple nodes throughout the network, and a packet travels through the mesh along a non-deterministic path. While this was always the promise of TCP/IP networks, static routes through the network cloud are now the rule, because they provide greater efficiency, make it easier to maintain the routers, diagnose network problems, and keeps maintenance costs down. But mesh networks are decentralized; there is no controlling authority, no central router providing an interconnection with a peer network. And – most significantly – mesh networks now incredibly inexpensive to implement.

Earlier this year, the US-based firm Meraki launched their long-awaited Meraki Mini wireless mesh router. For about AUD $60, plus the cost of electricity, anyone can become a peer within a wireless mesh network providing speeds of up to 50 megabits per second. The device is deceptively simple; it’s just an 802.11 transceiver paired with a single-chip computer running LINUX and Meraki’s mesh routing software – which was developed by Meraki’s founders while Ph.D. students at the Massachusetts Institute of Technology. The 802.11 radio within the Meraki Mini has been highly optimized for long-distance communication. Instead of the normal 50 meter radius associated with WiFi, the Meraki Mini provides coverage over at least 250 meters – and, depending upon topography, can reach 750 meters. Let me put that in context, by showing you the coverage I’ll get when I install a Meraki Mini on my sixth-floor balcony in Surry Hills:

From my flat, I will be able to reach all the way from Central Station to Riley Street, from Belvoir Street over to Albion Street. Thousands of people will be within range of my network access point. Of course, if all of them chose to use my single point of access, my Meraki Mini would be swamped with traffic. It simply wouldn’t be able to cope. But – given that the Meraki Mini is cheaper than most WiFi access points available at Harvey Norman – it’s likely that many people within that radius would install their own access points. These access points would detect each others’ presence, forming a self-organizing mesh network. If every WiFi access point visible from my flat (I can sense between 10 and 20 of them at any given time) were replaced with a Meraki Mini, or, perhaps more significantly, if these WiFi access points were given firmware upgrades which allowed them to interoperate with the mesh networks created by the Meraki Mini – my Surry Hills neighborhood would suddenly be blanketed in a highly resilient and wholly pervasive wireless high-speed network, at nearly no cost to the users of that network. In other words, this could all be done in software. The infrastructure is already deployed.

As some of you have no doubt noted, this network is highly local; while there are high-speed connections within the wireless cloud, the mesh doesn’t necessarily have connections to the global Internet. In fact, Meraki Minis can act as routers to the Internet, routing packets through their Ethernet interfaces to the broader Internet, and Meraki recommends that at least every tenth device in a mesh be so equipped. But it’s not strictly necessary, and – if dedicated to a particular task – completely unnecessary. Let us say, for example, that I wanted to provide a low-cost IPTV service to the residents of Surry Hills. I could create a “head-end” in my own flat, and provide my “subscribers” with Meraki Minis and an inexpensive set-top-box to interface with their televisions. For a total install cost of perhaps $300, I could give everyone in Surry Hills a full IPTV service (though it’s unlikely I could provide HD-quality). No wiring required, no high-speed broadband buildout, no billions of dollars, no regulatory relaxation. I could just do it. And collect both subscriber fees and advertiser revenues. No Telstra. No Group of Nine. No blessing from Senator Coonan. No go-over by the ACCC. The technology is all in place, today.

Here’s a news report – almost a year old – which makes the point quite well:

I bring up this thought experiment to drive home my final point: Telstra isn’t needed. It might not even be wanted. We have so many other avenues open to us to create and deploy high-speed broadband services that it’s likely Telstra has just missed the boat. You’ve waited too long, dilly-dallying while the audience and the technology have made you obsolete. The audience doesn’t want the same few hundred channels they can get on FoxTel: they want the nearly endless stream of salience they can get from YouTube. The technology is no longer about centralized distribution networks: it favors light, flexible, inexpensive mesh networks. Both of these are long-term trends, and both will only grow more pronounced as the years pass. In the years it takes Telstra – or whomever gets the blessing of the regulators – to build out this high-speed broadband network, you will be fighting a rearguard action, as both the audience and the technology of the network race on past you. They have already passed you by, and it’s been my task this morning to point this out. You simply do not matter.

This doesn’t mean it’s game over. I don’t want you to report to Sol Trujilo that it’s time to have a quick fire-sale of Telstra’s assets. But it does mean you need to radically rethink your business – right now. In the age of pervasive peer-production, paired with the advent of cheap wireless mesh networks, your best option is to become a high-quality connection to the global Internet – in short, a commodity. All of this pervasive wireless networking will engender an incredible demand for bandwidth; the more people are connected together, the more they want to be connected together. That’s the one inarguable truth we can glean from the 160 years of electric communication. Telstra has the infrastructure to leverage itself into becoming the most reliable data carrier connecting Australians to the global Internet. It isn’t glamorous, but it is a business with high barriers to entry, and promises a steadily growing (if unexciting) continuing revenue stream. But, if you continue to base your plans around selling Australians services we don’t want, you are building your castles on the sand. And the tide is rising.

Introduction