BLOG SMOG

As I was sitting at my computer, working on my blog, I came across this Dentyne commerical entitled "Blog Smog." And no, at the moment I do not have Blog Smog.

Disney Joins the Hulu Heyday

Today Disney announced that they were becoming full equity-owning partners of the Hulu website. Disney has joined NBC, News Corp, and Providence Equity to become co-partners of Hulu, a commercial-based website that provides streaming video of TV. Obtaining 30% stake in the venture, Disney hopes to keep up with the fast pace video industry. Once the deal is finalized, Disney's ABC channel will provide streaming of various television shows such as: Desperate Housewives, Lost, and Grey's Anatomy. Bob Iger, CEO and president of Disney stated,

"Disney and Hulu share a focus on delivering the highest-quality entertainment experience and we look forward to working with Hulu to build value for our consumers, our brands and our shareholders."

COO and president of News Corp, Peter Chernin, agreed saying that,

"Hulu, quite simply, now has the best premium content on the Web...With three major networks and over 150 leading content providers providing content, combined with the best video user interface anywhere on the Web, Hulu offers consumers the finest premium online video experience available today."

Creative and Humorous Advertising

Zappos Real-Time Shopping Map

Zappos.com has created a real-time map that shows recent purchases made on the e-commerce site. While on the site, you can click on the different items and it takes you directly to the page where you can view and/or purchase the same exact product. It is updated consistently and contains a little window at the top showing the past ten purchases. On the website it describes their new strategy saying,

"You're watching orders placed on the Zappos website, from all over the United States, coming in and being mapped to the location the order is being shipped to, in real time."

http://www.zappos.com/map/

Amazon's Pricing Strategy Outshines the Others

I have already discussed how Amazon has gained recognition as an e-commerce business utilizing their web business model approach. Using the tactics of a virtual merchant, Amazon solely relies on the internet and online consumers purchases. Although all traditional pricing models apply online, consistency is necessary between online and offline strategies. Because Amazon is strictly a pure play business, the company does not need to worry about uniformity. Even though Amazon is an e-commerce site, picking the best pricing strategy for their products is still essential. With all that being said, Amazon employs a fixed pricing strategy.

A fixed pricing strategy means that the price for each and every customer is the same. If I buy a Movado watch today and my friend loves it, she’ll be able to go online a week from now and get the same watch for the same exact price (assuming it’s not sold out). This helps to assure that every customer is getting the same deals. This concept means that everybody gets the same discount, the same quality, and the same overall experience.

Under the umbrella of fixed pricing falls markup, volume-based, bundling, and promotional pricing. Amazon relies mainly on promotional pricing. The e-commerce site almost always gives you discounts and/or incentives to purchase the products sold online. A cool feature that Amazon contains is the amount and percent you save on your purchase. This helps to convince consumers that it’s a good deal and that they should buy the heavily discounted product. Like most e-commerce sites, they also have a section that includes items that are frequently bought together. This also urges the consumer to keep shopping online for other products they might like. Amazon also offers you “Free Super Saving Shipping” options on purchases over a certain allotted amount. There are also special promotions from time to time. Today there was a free 2-day shipping period, without any minimum price. This tactic encourages customers to shop there, hopefully satisfying them with their needs and ultimately attracting them back in the near future.

“Amazon offered free shipping with any order over $25 with such success that it became standard. It didn’t arrive at that order amount, however, without trying several other price points first to find the optimum promotional offer to motivate sales” (Strauss and Frost 248)

However, Amazon’s original product, books, uses a bit different strategy. Their online book store utilizes a dynamic pricing strategy. Dynamic pricing strategies are variable by the customer and encompass yield management, negotiated, segmented, and personalized pricing. Amazon’s book store specifically uses the personalized pricing strategy. Although you are able to buy the new Amazon priced book at any time, you are also able to buy used books from other Amazon customers. These used books are personally priced by the Amazon user who is selling them. They are allowed to customize their pricing options for each product they sell. Although they can’t necessarily change the price for each customer, they can ultimately change the price whenever they please.

Amazon carries a wide variety of products ranging from books, DVDs, and video games to pet supplies, groceries, and apparel. Having options ensures that every customer will be satisfied. One of Amazon’s biggest markets is their online book store. Like I stated in my previous blog, Amazon essentially became an e-commerce site to sell books. With the great success of the Kindle and the Kindle 2, let’s compare Amazon’s prices to their competitors. As we have discussed in class earlier in the semester, there has been a lot of stir over Malcolm Gladwell’s book, Outliers: The Story of Success. On the Amazon website, Gladwell’s book is being sold new for $15.39 and used copies are on sale for $11.24. In comparison to Barnes & Nobles, an online competitor, Gladwell’s popular book is being sold new for $18.12 and used for a price of $15.15. Although Amazon only saves you a few dollars, during this economic downturn people are looking for the absolute best deals.

Amazon’s pricing strategy is quite effective for their business model. By simply comparing Amazon to Barnes & Noble we can evaluate who has the better overall sales. By generating such great sales and by offering free shipping options customers are bound to become loyal Amazon users. In my previous blog I talked about PriceRunner, a price comparison website, which ranked Amazon the top pure play business out of seven different online brands as the most trustworthy coming in with 62%. This statistics alone shows that Amazon surely has customer loyalty.

Amazon has also been a leader in sales. In 2007 the business reported $14.8 billion in sales and $476 million in net income. According to Morgan and Stanley, in 2005 e-retailer Amazon had the highest number of sales amid all other online retailers. Toping the charts in trustworthiness and sales shows that Amazon’s presence on the web is a force to be reckoned with.

With the ever present growth of internet usage, consumers are depending more and more on e-commerce. E-commerce has been a growing exchange method which is defined as “online transactions: selling goods and services on the internet, either in one transaction or over time with an ongoing subscription price” (Strauss and Frost 33). People no longer have to physically search through brick-and-mortar stores but can virtually window shop, add items to their online shopping cart, pay for their products electronically, and get their merchandise shipped directly to their homes. This idea of solely having presence on the internet is the concept of a pure play e-business model. Dominantly at the top of Strauss and Frost’s level of commitment pyramid, pure play models are defined as “businesses that began on the internet, even if they subsequently added a brick-and-mortar presence” (34). Diverse companies such as E*TRADE, eBay, Netflix, and Zappos all have substantial presence on the internet.

Created in July 1995 as an online bookstore, Amazon’s e-commerce model was open for business, demonstrating a perfect example of a successful pure play business. The company “offers the ‘Earth’s Biggest Selection’ of goods. Operating both North American and international segments, Amazon sells millions of unique products sold by the company itself and by third parties across dozens of product categories” (Amazon.com Inc. 2009).

This web business model mirrors that of a merchant more specifically a virtual merchant. You can explore the range of products from books and electronics to jewelry and exercise equipment. After selecting a product category, you can then continue your search. After clicking on a product, you can view the retail price, Amazon’s price, and how much you’d be saving. On top of price, you are able to see other views, other colors, product descriptions, special promotions, as well as a list of similar products. All of these amenities are offered right on the same page. This idea of a virtual merchant makes the shopping experience less stressful and a lot more efficient.

Companies such as Amazon can use performance metrics to gauge the success of the company. Performance metrics are “specific measures designed to evaluate the effectiveness and efficiency of an organization’s operations” (Strauss and Frost 2009). Many of these metrics are only beneficial if they are actionable. Using past metrics as benchmarks, companies can then set goals for the future. A few performance metrics that Amazon could use to evaluate their success are through sales, net income, gaining trust in consumers, and through web analytics.

Although Amazon hadn’t made a profit until 2001, just six years later in 2007 the business reported $14.8 billion in sales and $476 million in net income. According to Morgan and Stanley, in 2005 e-retailer Amazon had the highest number of sales amid all other online retailers. To remain profitable, it would make sense for Amazon to aim for even higher sales essentially boosting their profits and overall net income in the coming years.

Another way Amazon can ensure positive performance is through maintaining their customers. One way Amazon can do this is through providing the best possible and most trusted services as a pure play business. If the consumers enjoy the buying process, many of them have the potential in becoming repeat customers. Suzanne Bearne discusses a study conducted by PriceRunner, a price comparison website which evaluated seven different online brands. The findings show that “pure play retailer Amazon ranked the most trustworthy brand with 62%” (2008). Gaining consumers trust is a huge task in succeeding and remaining profitable on the internet.

Web analytics are one of the most important performance metrics. Web analytics is “the study of user behavior on web pages. Companies collect data as users click through pag4es and use it to optimize their online investments” (Strauss and Frost 2009). According to Compete.com an analytics website, Amazon had a minimum of 615 million visitors annually, a number that nearly doubled Wal-Mart’s. There’s a simple way to view this concept, the more customers that come to the Amazon homepage the greater the chance that people will buy the products. If Amazon can continually put up unbeatable numbers, the company should remain profitable.

Many pure play businesses face challenges when establishing themselves on the internet. These new brands have to compete with the already established ones (both online and brick-and-mortar), and ultimately take away their customers. Amazon had no problem making proper adjustments. Brian McBride, managing director of Amazon UK, shows confidence when asked about emerging competitors and rarely feels threatened. “‘The more the merrier’ he argues. ‘There are very few pure e-tail sites that can compete across the board like us and we still think we are in a very different, if not unique, space’” (The King of the Jungle 2008). One advantage of having a pure play business is essentially the option to change prices instantly, at any moment. Amazon is able to monitor and tailor its prices for any item to ensure that each customer is getting the best deal possible.

Eventually, many pure plays team up with brick-and-mortar stores to obtain ultimate power. Brick-and-mortar businesses offer physical presence with more trusted brands whereas pure play companies offer the online shopping experience (Davis and Schwartz 2001). Partnering together seems like a positive step in the right direction. Amazon teamed up with stores such as Target, Sears, Bebe, and Timex and now runs their retail websites. Establishing a multichannel method between brick-and-mortar and pure play businesses, both sides can successfully benefit from one and other. Analysts say that “‘as many as 70 percent of people who check out a product on a Web site go into a store to buy it’” (Davis and Schwartz 2001). Each company can learn from the other effectively establishing a relationship both online and in person. Two concepts that American strongly believe in are having options and obtaining them not only quickly but efficiently. Forming these partnerships prove to be a win-win for brick-and-mortar and pure play business models ultimately having the capability to learn from each other.

As a pure play, virtual merchant, Amazon has established great presence on the web. Amazon has “maintained its status as the undisputed top dog in pure play e-tailing, leading the field by so huge a margin that it would be near impossible for anyone else to close the gap” (The King of the Jungle 2008).

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Dr. Dre vs. Napster

“Cause over and above all, it’s all just another day.” Spoken like a true musician, these optimistic lyrics sung by Dr. Dre summarize the controversy between the notorious rapper and the late Napster. In his lawsuit brought against Napster, Dr. Dre victoriously fought for the right of his songs. Not only did he win, but he paved the way for all other recording artists battling with copyright infringement and illegal downloading.

Dr. Dre is a famous artist and producer who can bring the West Coast flair to his hip hop music. Throughout his career thus far, he has sold over 40 million records and has been awarded a variety of Grammy nominations. Dre has also been honored as the Producer of the Year in 2001. It is no wonder that when faced with copyright infringement, he fights for his music.

According to Strauss and Frost, “copyright appears to be established as the primary means of protecting most expression on the internet” (2009). With the uproar of technology and the rise of the internet, online legal action has had to make the necessary adjustments. The copyright law was written “under American law, it is derived from the Constitution as a protection established for the benefit of the public” (Strauss and Frost 2009).

The Copyright Act of 1976 gives exclusive rights and protection to authors who have created “original works of authorship.” These works include literary, dramatic, musical, artistic, and other intellectual pieces. Under this act, the creator has exclusive rights in reproduction, to prepare derivatives of the work, to perform the work publicly, and in the distribution process. Beyond these rights, it is “illegal for anyone to violate any of the rights provided by the copyright law to the owner of copyright” (Copyright Basics 2009).

Relevant to Dr. Dre, his musical works were being put on Napster and download in surplus by Napster users. This process was ultimately violating copyright issues resulting in copyright infringement. Napster was distributing copies of Dr. Dre’s work to the public in an illegal manner. Documents show that Dr. Dre presented a conclusive list of over a hundred thousand usernames that had downloaded his musical content form the Napster program. He brought the list forward to Napster and asked Shawn Fanning to immediately block them from using his illegal program. He argued that their accounts should be expired due to copyright infringement. Dre took another step and sent a letter to Napster CEO Eileen Richardson. He demanded all of his tracks be removed or else he would press charges.

Dr. Dre’s attorney, Howard King, stated that this controversy had nothing to record sales but solely revolved around piracy. After these events, and the noncompliance of Napster, Dre filed a lawsuit on April 25, 2000 in the California U.S. District Court. He was suing Napster for both unlawful use of a digital audio interface device as well as copyright infringement. Present on Napster, “more than 250 Dre tracks are listed on the site’s directory. The lawsuit seeks $100,000 per infringement and preliminary and permanent injunctions” (Fitzpatrick 2000). Dr. Dre wasn’t going to fall victim to copyright infringement without setting the record straight.

Under the Copyright Act, Dr. Dre’s music is protected “from the moment of its creation and is ordinarily given a term enduring for the author’s life plus an additional 70 years after the author’s death” (Copyright Basics 2009). Based on these restraints, the copyrighted material becomes property of the author following the conclusion of the work. Because Dr. Dre’s is still alive, his songs, CDs, and lyrics are still thoroughly protected.

One situation in which the copyrighted work can be used is defined as fair use. Under this component, fair use “use consists of the ability to copy without cost reasonably portions of protected material for purposes relating to such public activities as education, news reporting, and editorial comment” (Strauss and Frost 2009). These stipulations include criticism, comment, scholarship and research as well. To decide if fair use applies, the courts can discuss the reason for use (commercial vs. non-profit), the environment of the copyrighted material (factual vs. fiction), the amount of use (portion vs. whole), and how it essentially effects possible profits (neutral vs. lost revenue).

In 1999, Napster, an online music downloading and sharing service was created. This new program spawned from the genius of Shawn Fanning. Using the great technology of the internet, he developed a website that allowed people to copy and share music files with others present on the web. The Napster model “popularized peer-to-peer technology…and tried to turn it into a profit-making business” (Statement 2009). Gaining downloads and users at a rapid speed, Fanning failed to realize the legal and ethical aspects of the internet, “it quickly became clear that Napster was being used extensively for the purpose of copying and distributing an unprecedented number of copyrighted works, primarily sound recordings of musical works” (Statement 2009). Dr. Dre among many other artists had something to say about their rights being abused. Metallica started the revolution and sued Napster for violating their copyrighted material. In a statement before the United States Senate involving peer-to-peer networks, Marybeth Peters states, “the law is unambiguous. Using peer-to-peer networks to copy or distribute copyrighted works without permission is infringement and copyright owners have every right to invoke the power of the courts to combat such activity. Every court that has addressed the issue has agreed that the activity is infringement” (Statement 2009). The music artists did just that. Dr. Dre, Metallica, and others took their cases straight to court.

Between the Ninth Circuit and the District Court, they both concluded that Napster was responsible for two counts of secondary liability, contributory liability and vicarious liability. Contributory liability occurs when someone knows about the infringement activity and is involved in or contributes to the material. Vicarious liability occurs when someone oversees the infringement action and has a potential to earn a profit off of it. After investigation, Napster was considered to be both a contributory infringer as well as a vicarious infringer.

On Thursday July 12, 2001, Napster finally settled all of the legal arguments with both Dr. Dre and Metallica as well. In a statement put out by founder Shawn Fanning, he stated that “‘it’s time to end the court fight and shake hands’” (Napster Settles Suit 2001). Representatives from both parties refused to identify the settlement that had been reached whether a financial reward or not. Napster later apologized to the musicians and Dr. Dre saying we “‘regret that we were not more sensitive’ to the rap artists desire to control how his music is distributed” (Clark and Gomes 2001). The infringement case between Napster, Metallica, and Dr. Dre has been said to be “digital music’s highest-profile legal dispute” (Learmonth 2001) and it has finally come to an end.

Dr. Dre holds no grudge with Napster and those affiliated, “I work hard making music that’s how I earn a living. Now that Napster’s agreed to respect that, I don’t have any beef with them” (Thomas 2001). He has even promised that if the music service revamps the program he would be willing to supply his musical content from time to time. In the great words of Dr. Dre, seemingly reflecting his relationship with Napster, “I’m out of sight now I’m out of their dang reach.”

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