I tried to oblige them with some insights onto why this kind of scandal keeps happening, and why. You can see the results of the interview in the segment below:

More on why the news business keeps getting hit with privacy scandals like this, and why it won’t stop after the jump…

I could tell in the pre-interviews that what CNN was really interested in was pretty much the same thing that the tabloids are: down & dirty tales about famous people doing Bad Things, and how tabloid reporters and paparazzi lie, cheat & steal in flagrant disrespect for the law.

Well, duh.

The deeper point, and one that it is difficult to do on television (although I did try to speak in TV-friendly sound bites) is that the real reason for the constantly recurring invasions of privacy, and for the generally rotten state of the news business (and not incidentally, society itself) is that the news business is no longer actually in the business of reporting news.

No, the business side of things now completely predominates, to the exclusion of just about every other consideration. This is because the last 30 years have seen newspapers, TV stations, radio stations and just about any other means by which reporters collect information and transmit it to the public at a large scale, bought up by increasingly larger corporations, who run things … well, pretty much the same way that every other Corporate America hellhole runs things. As cheaply as goddam possible, with utter contempt for the end consumers of their products (the whole “Make it just one tiny scootch about the level where people will vomit and refuse to buy it”) and complete & total hatred and fear of their employees and the (gasp!) prospect of those employees actually unionizing and demanding safe, sane and humane working conditions.

The fact that these statements are probably controversial says more about the nature of our denial of widespread reality than it does about the news business … although come to think of it, the fact that newspapers, network TV news (and the cable outlets that feast off them both) are so dysfunctional is probably in large part responsible for the “magical thinking” disease that has overrun politics and culture in America.

See, the problem is that every newspaper & TV station in existence (with a few exceptions) is part of a larger corporate behemoth. That corporate behemoth went deep, deep into debt to buy said newspapers and TV stations, back when the economy was sound and these media properties looked like no-brainer acquisitions. After all, newspapers had pretty much monopoly market positions in every city worthy of the name, while local TV stations were like owning your own mint. If you wanted to run a small-to-medium sized business in America, you had to advertise your products. And to advertise, you had to pay whatever the owner of the newspaper or TV station wanted to extract from you in this billing cycle. If you didn’t want to pony up … well, I’m sure your competitors did. And then they buried you, while your inventory grew cobwebs.

So with that long, flat, steady rate of return, all the projections for the future looked safe. And if there’s one thing that Corporate America loves more than anything else, it is the utter elimination of any hint of risk. A small rate of return over many years … well, they know how to make that dance. That’s how they turned home mortgages that pay 4-8% a year into financial instruments that paid 1,000% returns – by leveraging the living shit out of them. Borrowing huge quantities of loot, and putting it down on the Vegas craps table that is the U.S. banking system, meanwhile squeezing the budgets of these media properties to make the debt-service payments.

And to make those payments? Well, you gotta make sure that nothing disturbs that projected rate of return. That means for God’s sake, don’t do anything too daring or out of the norm. Second, bring in the efficiency experts to go over the budgets with a fine-tooth comb and start looking for any way possible to cut the budget. Fire people, delay buying new equipment, shrink the costs of the actual production of the news to the point that they can squeeze a couple more percentage points of profit out of the old Daily Beast.

These macro policies mean that the journalists who actually have to produce the content that goes into these media properties are running on the razor edge of make it/don’t make it; and the news editors are having to claw with every fiber of their being in the desperate attempt to make the quarterly numbers go up even a tenth of a ratings point.

And the way to do that … is to get the biggest possible audience. How do you get a huge audience without having to spend a lot of money on time-consuming, risky and potentially business-disrupting investigative reporting?

Why, lurid tabloid-style stories, of course.

That’s why the phone-hacking scandal at the News is only the latest iteration of what is a systemic problem. By that I mean, it is not the works of a few “Bad Apples.” It is the way that the whole goddam machinery is constructed. You could put the 12 Apostles into the modern Fleet Street newsroom and within a few months, they’d be doorknocking Amy Winehouse’s parents and rooting through Elton John’s trash. Or they’d be fired in favor of people who would actually do that.

The point is that the problems with the news business bear surprising resemblance to the problems of society as a whole. We’ve tied our fate to the unfettered free-market economic forces, without really taking notice of the fact that there are a few industries, at least, that are not prepackaged Cheetos. Where diluting quality and streamlining production schedules and all the other tricks of modern corporate management may work in the short term … but in the long term are not only killing the industry, but harming … well, basically putting Western Civilization in danger of collapse. If all we have are “Twinkie” news reports from chirpy, easy-on-the-eyes blondes, and the only way for politicians to prosper is to get on TV … and the way to get on TV is to spout lunatic jackassery … then we wind up talking about destroying the basic financial security of every person in the United States because a bunch of nitwits on talk radio need to keep their numbers up for Q3. 

Welcome to Disintermediation 2.0, where the content is video. It’s
entertainment not news. And the stakes (at least the monetary ones) are
much higher.

While everyone in online video is challenged by the reality that digital
presents to any media — measurement, targeting, accountability —
traditional “editors” are also being squeezed by the very same process
that beset news in the late 90′s.

The article goes on to (correctly) identify the growth of highspeed broadband as the catalyst for the coming collapse of the traditional broadcast video model. I’d add to that the increasing popularity of DVRs, which are teaching the audience that we don’t necessarily all have to gather at 9 o’clock Eastern, 8 o’clock central, to begin our nightly turn-off-the-Alpha-waves sessions. Instead, the time-shifting that in the 80s had David Letterman jokingly producing a “morning Late Night show” because so many of his fans were using VCRs to watch him while scarfing their ham&eggs — that has become commonplace.

From econtent:

This has led to a new
rating system, called either “C3” or “live-plus-three”; instead of only
counting viewers who watch shows live, Nielsen counts anyone who records
and plays back the program up to 3 days later. This captures more of
the time-shifted viewing audience. By the end of 2010, McDonough says,
Nielsen’s ratings will combine both DVR’d and online streaming content.

Kate
Sirkin, executive vice president and global research director for
Starcom MediaVest Group, sees the DVR, particularly the TiVo, as
fundamentally changing the way Americans view television. “We have three
in our house,” Sirkin says. “My 5-year-old doesn’t understand live TV;
she’s always had a DVR.”

The other effect of DVRs, of course, is the commercial-skipping. Used to be that you had to hack your TiVo to be able to skip 30 seconds at a time. Now that comes programmed directly into the remote on the DirecTV HD controller (but I still prefer the TiVo, since it skipped you automatically 30 seconds forward in time, rather than making you watch blurred fast-forwarded action).

But the biggest eye-opener for me is that articles predicting that broadcast TV, the cash cow for so long for the advertising industry, is about to head into the abyss … well, that’s news. Because what took down newspapers was not that nobody was reading them anymore – in fact, the stats show that more people are reading newspaper content than ever before.

What has laid print newspapers low is that the revenue streams from traditional print advertising have dried up & blown away.

Most, if not all, of the major media buyers that I’ve run into over the last three years at various ad industry events, have all admitted that they know that advertising on TV really doesn’t work the way that it used to. The profusion of channels on cable and satellite, the DVRs, the growth of internet, all mean that they are getting less reach than they used to. Meanwhile, they’re getting charged through the nose for that same 30-second spot.

This relationship is inherently abusive, much like the relationship was between newspapers and their advertisers. When a viable alternative comes along, and you’ve managed to piss off your customers, guess what they do?

The song itself is kinda beside the point – it’s bubblegum synth-disco-pop, about as bland and processed as the stuff the taxi drivers in Moscow used to subject me to on the way back & forth from my gig there. Which may be why it’s getting so many views – this is the kind of stuff that works internationally, since the thumping beat and lyric structure make it sound pretty much interchangeable with everything else on the radio.

Can't wait until she starts marketing the exploding bustier shown here; Madonna's Wannabees all wore their undies over their shirts. Wonder if GaGaEttes are going to be lighting their smokes off their flaming boobs.

But the real action here is in the video to the song. Blew my mind. Didn’t think that people had budgets like this anymore. Costumes that would make Gaultier sick with envy — white latex with “Where the Wild Things Are” shiny plastic crowns, some kinda homage to LeeLoo’s orange strappy outfit in The Fifth Element and a Eastern European mobster/white sex-slave buyer with a steampunk-ish articulated brass chin. Looked to my eye like about a week in production, probably about $500K in total costs of models, locations, crews, lighting, post-production.

The plot seems to be that Lady GaGa wakes from her sleep the way normal people do – by sticking her hand out of a gleaming white Tylenol-shaped coffin – getting forced to drink high-end vodka and the gyrate for & be sold to a bunch of strange pervy dudes.I half expected to see Liam Neeson kicking someone’s ass in the backdrop and telling her, “Here’s the scary part. You’re going to be taken…”

Nobody does these kinds of elaborate music videos anymore, because there is no way to recoup that kinda cash from the moribund music industry.- at least, not until now.As Dan Neil points out in the LA Times

the “Bad Romance” video, which features placements for no less than 10 products: a black iPod; Philippe Starck Parrot wireless speakers; Nemiroff vodka; Gaga-designed Heartbeats earphones (via Dr. Dre); Carrera sunglasses; Nintendo Wii handsets; Hewlett-Packard Envy computers; a Burberry coat; those crazy, hobbling Alexander McQueen hyper-heels; and enough La Perla lingerie to choke an ox.

This isn’t a music video so much as the QVC Channel you can dance to.

I had thought that Madonna and Michael Jackson were about as sophisticated as you could get when it came to figuring out ways to build up a juicy public image, and then squeeze it until rivers of cash started running out. Not so. Lady GaGa has rightly recognized that selling CDs if for chumps; anyone can pirate them, and pretty much does.

No, you need to sell things that people can’t copy – or at least, if they do, it kinda defeats the purpose. So Lady GaGa’s come up with the list of high-end commercial goods to do “Hero Shots” of in the video and obviously done revenue deals with them.

As a business model, I have to say hats off to the Lady. She’s adapted to the draining of value from the content (i.e. nobody actually buys music anymore – at least, not like they used to), and migrated over to where the money still lies.

When advertising no longer works, when information is a commodity in which we all drown for free, then the only things that are left that have any value are physical objects that we can wear, eat, drive or plug in, as well as what cultural anthropologists call “fetish objects” that bestow special status because they signify that we hae enough disposable income so as to be able to waste a couple grand on some gaudy sunglasses.

I’m not sure if this is the way that all news & entertainment is going to have to go in the future. All of it sponsored, with big shout-outs to the guys footing the bills worked into the info-stream every 10 seconds or so.  I do know that if this works, we’re going to see a lot more of these “branded videos” online.

It’s late and I’ve got a lot more post-processing to do on the photos, so here’s just a couple of the images that I shot.  The video of the discussions can be found at This Week in Startups.

Before the lights were adjusted, standing on the platform over the audience made the speakers look like they were either making a dramatic entrance - or having their identities concealed in some "60 Minutes" tell-all segment.

The energy of the old VIC was certainly present – a little too much, as techies on the make back at the bar made it a little hard to hear the speakers at the time. This, despite the overt threat by organizers to find the yapping networkers and toss them out.

Anyway, here’s Calacanis discussing what the future of social media sites is going to look like, and what smart companies should do in the next couple of years to try to adapt to the increasing pace of innovation.

As I said in an email to Nye, Jason would probably be secretly pleased at the whole Citizen Kane-esque imagery here. And then, of course, he'd feel conflicted about it and make a self-deprecating joke.

One of the more interesting areas of discussion – particularly since I just got back from Costa Rica – centered around virtual currency as being “the next big thing.”  Certainly seems that way in places like Costa Rica, where you’re getting an increasingly large, tech-savvy and connected labor force.  A lot of people either work in the internet gambling industry there – or have relatives/friends that do.  The speed of internet connections in San Jose – and even out in the jungles on the Pacific side – stunned me. I’ve had much worse connections in the small town U.S.A.

One of the things that has stuck in my head the last week or so has been the stories coming out about how spammers are getting around the Captchas by simply hiring dirt-cheap human labor to fill in the blanks on the pages to stuff spam onto our hard-constructed sites.  I’m not sure what the next step in trying to get rid of the spam is going to be – Calacanis lamented how from the very first days of blogs, spam started becoming a problem, and it has kept pace with our attempts to try to get rid of it.  Now it’s starting to get into the social networking world (viz today’s Phishing attacks on Twitter), where the level of trust that we have for our social circle is going to make the impact of a malicious click that much heavier.

I am also posting this over on the AIM Group blog, as part of what I think might become a regular feature, “This week in the paid content debate.” The best of the bunch is the back-and-forth between billionaire Mark Cuban, and the bete noire of many print publishers, Michael Wolff, who runs the Newser.com content-aggregation site.  Cuban actually suggests something that shows that he’s put more thinking into the issue than the kneejerk “Up with the paywalls!” bunch.  I note below the flaw in his plans – my ex-roommate used to describe for me in detail how impossible it was at Time-Warner-AOL to get the jealous VPs of Home Video, say, to play nice with the guys from HBO and pay-per-view. Why make someone else’s P&L sheets look good? That just means they are going to get the Exec VP slot faster than you…

This is an example of a newspaper that has developed multiple, reliable, alternative revenue streams. UOL in Brazil is doing quite well, thank you. They planned ahead, unlike so many complacent U.S. papers.(Click for larger)

Anyway, the discussion in all cases gets heated very quickly. Insults are thrown around, fisking takes place in the comment threads, but a few actual new ideas & fact-based analyses sneak in here and there. The fact that some very smart entrepreneurs are actually interested enough to toss in some innovative thinking is rather heartening, actually.

• Mark Cuban gives some free advice to fellow billionaire media mogul Rupert Murdoch: http://blogmaverick.com/2009/08/08/my-advice-to-fox-myspace-on-selling-content-yes-you-can/ Basically, he advances the idea that to get consumers to pay for news, you have to bundle it up with other goods, services and content that exist within giant organizations such as Fox or Time-Warner. A “Newsjunkie” subscription would come with access to special sections of Fox News, a couple of books from HarperCollins, magazine subscriptions and DVDs of 20^th Century Fox movies.  Commenters point out that such “synergies” remain elusive in these big media conglomerates, as each of the divisions is still in its own silo, with its own P&L, jealously guarding its own turf. Cuban paid special attention to aggregators, suggesting that newspapers ban links from aggregators such as Michael Wolff’s Newser.com.
• Michael Wolff responds with a post entitled “Mark Cuban is a Big Fat Idiot” http://www.newser.com/off-the-grid/post/237/mark-cuban-is-a-big-fat-idiotmdash3bnews-will-stay-free.html Highlights include “some people” finding Cuban bumptious, arrogant and rich only through a dot-com fluke. Wolff maintains that news will always be free and ad-supported, and suggests that Cuban must be “smoking something” …
• …leading to Mark Cuban responding with a schoolyard-taunt opus: I’m Rubber, You’re Glue http://blogmaverick.com/2009/08/12/to-michael-wolf-im-rubber-youre-glue/ Not sure what it means when the discussion over paywalls degenerates so quickly, even amongst intelligent and successful publishers.  Apparently, Cuban takes umbrage to Wolff calling him a “big fat idiot,” and in turn, taunts Wolff by criticizing his “outdated model” of a site.
• The fallacy of the Link economy: http://paidcontent.org/article/419-the-fallacy-of-the-link-economy/ This is another assault on the value of inbound links from Google and other news aggregation sites.  Arnon Mishkin says that even sites that publish a headline and short description of a news story appearing on another site are destructive, because readers mostly skim stories, and therefore get the news content they need without having to click through. No word from him on what he thinks newspapers should do on newsstands – perhaps they should be like old-school porn magazines, in plain brown wrappers.
• Ken Ellis responds on NP-Harder: http://npharder.wordpress.com/2009/08/14/the-fallacies-of-arnon-mishkin/He picks apart some of the assumptions as to what constitutes value from links, and concludes, “All that being said, I still agree in principle with his final three points.  However reclaiming value from aggregators isn’t going to help publishers much.  They need subscribers and a pay wall.  Not an iron curtain, but a permeable pay wall along the lines of the Wall Street Journal.  There’s no save-my-business-model pot of gold out there in the hands of aggregators to help you pay for all that good journalism.”
• TechCrunch proclaims “The Media Bundle is Dead,” http://www.techcrunch.com/2009/08/16/the-media-bundle-is-dead-long-live-the-news-aggregators/ Erick Schonfeld addresses paid content by claiming that back when newspapers still enjoyed local monopolies on news, “80 percent of the stories in the paper sucked,” but that the audience was still forced to buy the paper because there was no alternative.  Kind of like the argument that the music industry has failed because people are no longer willing to pay $15 for a CD that contains one song they like, and 9 others that are crummy.
• Five Key Reasons Newspapers Are Failing: http://www.splicetoday.com/politics-and-media/five-key-reasons-why-newspapers-are-failingOnly the first point really addresses paid content, but the suggestions at the end of the piece on how to transform a newspaper into a web-based news operation that will produce the type of content that readers will actually reach into their wallets and pay for – is very instructive.
• A post drawing an interesting parallel between Microsoft’s dilemma on how to compete with Google’s free Open Office product, while still maintaining its huge profits from its own MS Office suite http://www.pbs.org/idealab/2009/08/future-of-local-news-about-more-than-paid-content225.html
• A rather scathing piece on how Reuters should take advantage of the AP’s “suicide” http://techdirt.com/articles/20090724/1533155652.shtml
• From “Scooping the News” a post entitled: Newspaper Access Fees Destined for Failure: http://www.scoopingthenews.com/2009/08/newspaper-access-fees-destined-for.html He compares the paywall solutions to pop-up ads.  He lists five points that he claims explain why access fees will not generate that much revenue. Basically, the argument against boils down to the “internet readers are used to getting information for free, and they have lots of alternatives, so they’ll never pony up when newspapers start slamming down the paywalls.”
• Steve Outing gets psychological in explaining what changes to user behavior will have to take place before consumers start paying for news: http://www.editorandpublisher.com/eandp/columns/stopthepresses_display.jsp?vnu_content_id=1003997955
• And finally, another piece about how raising the paywall will “kill the buzz” around quality content, pointing out that even print newspapers get shared, picked up, discussed in the pub and curated. http://23musings.com/2009/08/15/raise-the-paywall-stop-linking-kill-the-buzz/

“This current economy has stimulated a new marketing consciousness,” said Laurence Boschetto, president-CEO, DraftFCB. “Clients are saying they want accountability for every dollar they spend, and they want cause and effect. Clients will continue to rally behind ideas that build business, and we as an industry have to accept that things will never revert back to the pre-recession mind-set that wasn’t totally focused on accountability.”

At every conference I’ve attended this year, especially OMMA and Digital Hollywood, I’ve sat in the room with media planners and ad buyers (AKA the guys in expensive suits who write the multi-million dollar checks to buy 30-second spots on American Idol), and listened to them piss & moan about their jobs.

“The goddam clients are calling me every day and screaming in my ear,” groused a Tums-chomping buyer for a major food company. “All they talk about is ‘The Board,’ and how everyone is shit-scared of winding up on the front page of the New York Times for blowing millions while we’re in a Depression.

“The orders have come down from on high that every nickel they spend has to be tracked, assessed, spreadsheeted and connected to a dollar in sales. Well, it all rolls downhill to me. I have to show results for everything, and when it comes to print and broadcast, that’s getting harder and harder to justify.

“Even if the scale and the reach aren’t there yet, when I’ve got a Google Analytics spreadsheet tracking the ad buy, at least I can walk into the client meeting with more than my dick in my hand.

“I’ve got a $300 million budget for the next year. Zero point zero zero is going to print. Nada. Nothing. I can’t justify it anymore. And broadcast TV is next.”

Anyway, this is a 3-D animated tag cloud to promote the Adobe MAX conference here in LA; but I think they might want to regulate this a bit more, because some of the user-chosen tags are getting a little … pungent.  Hey. That’s pretty good. Maybe I’ll go there and add “pungent” to the mix…

Battelle says he stayed up late one night (visions of the mythical college dorm room & heavy inhalation) to come up with this heavy information and interface theories, and worked up this speech to try to describe where he sees the future of the web going.

If what he said above is right, then there is about to be another evolutionary stage, and the current titans of search (i.e. Google, Yahoo, etc.) are going to be replaced by The New Hot Thing.  He seems to be hanging his hat on “conversations” which sounds pretty good to me – the human urge to connect & trade information is one of the strongest forces on the web.  I’m just not entirely convinced that the Facebook/MySpace paradigm is at all viable.  We’re been waiting a while now for anything remotely resembling a business model to emerge, and the latest news is that Google’s shareholders are starting to get a bit bent out of shape about subsidizing the world’s inconsequential home videos, and that Emperor’s Missing Wardrobe-type questions are starting to get asked about the 1/2 billion a year burn rate.

Money quote:

YouTube will manage to rake in about $240 million in ad revenue in 2009, against operating costs of roughly $711 million, leading to a shortfall of just over $470 million. This half-billion dollar loss comes after more than a year of feverish experimentation in various forms of advertising, cross-product embedding, licensing and partnership deals. YouTube is adamant that ultimately they’ll find an advertising solution that will enable the ungainly behemoth to reach profitability. Looking at the math, it doesn’t seem likely.

Battelle’s take on where all this is headed is pretty complex, and not all that out of line with things that you’ve probably heard before.  This is only the first part, so stick with it – it gets more rewarding as we go along.

Here’s some teaser quotes to get you to click over and watch the video – please excuse the camera movement, but Battelle kept pacing around on the stage, and I had to either go so wide that focus was a problem, or track him, making the camera movements a little jerky.

Every publisher is now a marketer … you have to engage the audience in a conversation … if you don’t know how to do that, you’ll die.  That’s it. It’s over.

I call this the conversation economy.  It’s kind of a sequel to the search.

The three-bump theory of how man interacts with technology … as Eric Schmidt is fond of saying ‘25% of GDP is fine with me.”

We all give Apple credit, but basically we know that Windows won.  I call this the “hunt and poke” interface … that’s way better than learning a foreign language like FORTRAN.  That’s also called the “I’m lost in a foreign country interface.”

We started having conversations at scale with our customers.  All of a sudden every customer could talk to every company, and nobody was ready for the conversation. But around the turn of the century, we started to develop that interface, and that interface, I argue is search.  This is the first time we have ever been able to have a conversation in our own natural language with a machine.  People don’t see search that way, but I do.