FAKE TEENS AND COMMODIFIED SUBSCRIBERS
German media giant Bertelsmann owns Random House and Bantam Doubleday Dell (which between them run two dozen book publishing titles), 15 European TV stations, a big chunk of barnesandnoble.com, two dozen magazines including Family Circle and McCall's, and a host of New Media properties, plus the fourth-largest music company in the world.
In the past year, BMG Music has learned the magic of paid-for "word-of-mouth" promotion on the Internet -- just offer teens a bunch of free CDs and T-shirts from their favorite bands, and then send them off to music chat rooms and bulletin boards to talk up some new artist they've never even heard of. This strategy helped create a huge buzz about mall-tart Britney Spears before she'd ever had a song on the radio.
"I think if one fan tells it to another fan, which is what we're trying to create, I think it's more organic," BMG Music Publishing Creative Director Joshua Neuman told me. "I think that if BMG Music Publishing sent an e-mail to all the fans of Bush, they would probably feel like they were violated in some way. But I think if you empower fans, then that's great."
The most meaningful New Economy catch-phrase is "monetizing the database." The Internet has created millions and millions of user lists, endlessly divisible by every imaginable demographic, buying pattern and credit history. Meanwhile, e-mail is cheaper and more effective than the postal system by orders of magnitude. Every time you buy a book on bn.com, or subscribe to Parents magazine, or purchase a Fodor's travel guide, or download a Santana song, you are entering the Bertelsmann Matrix. And this year, the Germans and their rivals are finally figuring out how to harvest and use these enormous banks of information.
"The Holy Grail for entertainment marketing has always been direct marketing," BMG Entertainment CEO Strauss Zelnick said at a recent conference. "If you can boost the response rate by using a demographically stratified sample, which you can, it gets very interesting indeed. ... From a promotional point of view we have the opportunity to change the economics of the entertainment business."
Music is at the vanguard of all of this. With kids downloading music like crazy, and record companies desperately trying to protect their copyrights, the monetizing of music consumer databases is the top priority for big media companies right now.
"We think AOL Time Warner will be able to do for music what AOL did for e-mail," said AOL CEO Bob Pittman in a teleconference call, less than a month after Warner Music merged with EMI under AOL's umbrella. "And once we make [digital downloading] easy and convenient, we will be able to build community, commerce and a powerful new delivery vehicle around Warner Music."
In one way, this is good news -- the entertainment industry has made a horrible mess out of letting even hardcore fans know when their favorite artist has a new release, and films especially have a tendency to disappear before the message gets out. But there are five ominous flip sides -- hidden advertising (of the kind mentioned above), editorial cross-promotion, violation of privacy, spam, and the fact that the people who have no qualms about abusing consumers in this way now control Big Media.
The creepiest development of all may be how our personal information is collected, chopped up, traded and used without our knowledge, let alone permission.
"Professionally, I like the idea of the least amount of privacy,
because I'm in artist development," Neuman said. "The opportunities to
market to a large group of people who might have similar [tastes] ... are
probably the most exciting marketing opportunities that have become
available, ever. ... [But] the most interesting thing to me, is the
potential tapping into the databases of advertising companies, of ISPs,
Database lust is just one step away from info-rape. Last November, a music download company called RealNetworks was caught spying on the listening and Web-surfing habits of its 13.5 million registered customers without asking permission, the New York Times uncovered.
In a much more serious case, leading Internet advertising agency DoubleClick announced in February that it would combine the "anonymous" Internet usage data it collects from serving billions of banner ads, with millions of real names, addresses and purchasing data of consumers collected by a direct-marketing company Abacus Direct that it had just bought. CEO Kevin O'Connor, before his stock took a well-deserved pounding, added insult to insult by saying: "I don't see why we should let consumers know what we know about them."
These are not isolated incidents. Amazon.com subsidiary Alexa was sued for sending customer info to the parent company
without permission, many health-related sites (Yahoo.com, Drkoop.com, WebMD.com, iVillage.com, OnHealth.com) were caught violating their own privacy promises by sharing
confidential medical information with third parties, and AOL doesn't even apologize for allowing "opt-out" agreements
for customers to avoid annoying (and snooping) pop-up ads to automatically
lapse after one year.
Even privacy-obsessed techie anarchists aren't safe -- the Internet's brief history is littered with examples of rebellious anti-commercial sites (Ultimate Band List, SonicNet, SlashDot) which were either bought out by the Man or morphed of their own volition into New Economy companies leveraging their lists. As for subscribers to "free" Internet access ... fuhgeddaboudit.
All the corporate offenders, obviously, assure us that they "care deeply about privacy issues" (especially e-mail list vendors like NetCreations, which will sell you 7 million customer e-mail addresses from 225 companies including CMPnet, NetZero and Internet.com). Whatever; with the exception of companies like TopClick -- a search engine that doesn't allow advertising to affect results -- 99% of Internet companies care more about monetizing their database than protecting your privacy.
This stuff, like the spam it generates, is cheap and profitable, and will keep growing until its most egregious advocates are punished by the marketplace. It is no wonder then, as OJR editor Robert Scheer has reported, that AOL is lobbying Congress to water down pending legislation that would require customer consent to share or trade personal information about them. The world's largest media company is considered the best-ever at monetizing databases, decency be damned, and following the Time Warner deal it has well in excess of 100 million registered subscribers. It's only a matter of time before senior citizens who have received Time for 50 years will be bombarded by spam from every pyramid scheme and info-fraud who can operate Eudora Light.
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