I’ve Seen This Before…

I wasn’t really planning on an update to my last post, or anything else about the ongoing burger wars, but over the weekend I kept seeing the new Taco Bell ad (the one with a bunch of guys who are actually named Ronald McDonald eating the new Taco Bell breakfast products) in heavy rotation, and I could not shake the feeling that I had seen this somewhere before. Of course, I am getting older, and given my ongoing memory problems there are going to be times when a sensation of déjà vu is unavoidable. But then I saw an article on the AdWeek site which points out that this has, in fact, been done before…

You can pick up the original article here, if you want to, but the details are simple enough. About 12 years ago, one of the other quick-serve hamburger chains called Jack-in-the-Box pulled exactly the same stunt, finding a guy whose legal name was Ronald MacDonald and getting him to eat and express appreciation for their new burger product on camera. The Jack-in-the-Box people apparently selected a guy who uses the alternate spelling of MacDonald on purpose, just in case their larger competitor decided to give them grief about the campaign, but their ad agency admits that they also chose that particular Ronald because he performed well on the video. Other than that, though, the commercial uses almost exactly the same gimmick in almost exactly the same way…

Whether or not this will have any effect on the ad campaign – or on sales of the new products it is trying to promote – remains to be seen, of course. As of this writing the Jack-in-the-Box chain is only operating in 19 of the states, and with only 2,200 locations it’s still relatively small when compared to Taco Bell’s 6,500 locations, let alone McDonald’s. People in many parts of the country may never have seen a Jack-in-the-Box restaurant (the Company’s website lists the nearest one to East Lansing as being 210 miles away in Indiana), or even seen one of its ads. And even if they have, people don’t necessarily devote that much time to memorizing ads run by (relatively) small fast-food chains a decade or more ago. There’s also the issue that Taco Bell itself has a history of running with unconventional advertising…

Probably the best-remembered Taco Bell campaign is the Talking Chihuahua series of the late 1990s, although the late 1980s “Make a Run for the Border” campaign is still widely satirized. My personal favorite will always be the company’s stunt in 2001 when the Mir space station was falling out of orbit, and the company put up a 40’ by 40’ target in the South Pacific and broadcast that if any part of the falling station hit the target they would give a free taco to every person in America. With a history like that it’s hard to imagine that anyone would get that worked up about this new Ronald McDonald campaign, even if it is ripping off an earlier commercial made by a rival company. A much bigger issue is how McDonald’s will respond to the Company’s new breakfast products…

As I noted in my last post, the off-peak sales have been a key factor in making the McDonald’s locations more profitable than any of their competitors, and while it will take time for any new product to gain traction, let alone non-traditional offerings like a taco made out of a waffle, it seems highly likely that they will have to do something in reply to this new challenge. There is no question that McDonald’s represents an entrenched competitor with an established customer base and a large network of locations already optimized to sell breakfast products during the relevant business hours; the question is whether that will be enough to carry the day. Or, more to the point, perhaps, how will they respond to the challenge? Because if the history of the Burger Wars has taught us anything, it’s that McDonald’s is unlikely to just sit still for this…

Dispatches from the Burger Wars

In my travels around the US and occasionally outside of it I have encountered a number of quick-serve restaurants, mainly burger stands, that are attempting to knock off McDonald’s as the top company in that industry, and I have noticed one element they all appear to have in common: they are all failing miserably. This is not to suggest that the competition isn’t successful in its own right, or that all of the other companies in this industry are poorly run or unprofitable, because clearly this is not the case. But a recent article on the Bloomberg/Business Week site points out that in 2012 (the last year for which there is complete data) the average McDonald’s location made $2.6 million in revenue, while the second-best company, Burger King, averaged only $1.2 million per location. And despite the website’s attempt to make the reasons behind this seem dark, complex or arcane, they are for the most part depressingly predictable…

First off, there’s the difference in advertising budgets. If this story is accurate, McDonald’s is spending about $16.30 in advertising for each dollar Burger King spends, and that doesn’t even consider any of the other expenses involved in the Marketing function. Based on the relative success of the advertising and promotional programs alone, we can say with some confidence that McDonald’s has a superior understanding of their primary customer demographics and better forward planning for future products and programs. But even assuming that all of the other functions have parity in terms of budget, it does not seem far-fetched that a company outspending its largest competitor by a factor of 16.3 to 1 in advertising budget would be more successful in selling consumer products. Unfortunately, things just go downhill from there…

According to Bloomberg, McDonald’s is outselling the competition in off-peak times, such as breakfast and mid-afternoon snacks, because of its superior product mix. Industry efforts to duplicate the famous McDonald’s breakfast menu have not been completely successful, and the introduction of viable snack foods (like the successful wrap products) and a competitive line of coffee products (good enough to cause trouble even for Starbucks in some markets) has made the company far more profitable. Even worse, the attempts by industry competitors to duplicate the success of the infamous Happy Meal ™ have met with indifferent results, which not only increases the number of families doing business with McDonald’s but helps the company develop life-long customers beginning at preschool age. At this point the popularity of the product has made it the premiere choice for movie tie-in promotions, which is just reinforcing the success of what was already the leading program in the industry…

Now, it should be obvious that none of these products would work nearly so well if the company offering them was not able to execute the programs correctly, and the same article goes on to point out that in addition to the well-known food quality and consistency measures, McDonald’s also surpasses the competition in terms of operational efficiency. This may not seem like a big issue, but consider the difference that a faster drive-through operation can make to the over-all profitability of a quick-serve restaurant, given that some locations will obtain upwards of 65% of their sales through the drive-through window. Now consider that McDonald’s averages almost 5% faster on drive-through orders over the competition. I don’t have current numbers on walk-up speeds, but the last time I looked the company’s edge was even higher there, given the efficiency of their kitchen designs and the high degree of automation in use in many of the restaurants…

I call this to your attention because most of the competitors I have studied tend to attribute their lower performance, or inability to compete with the industry leader on equal terms, to one or more of the advantages an entrenched opponent who already occupies the top spot will enjoy. And, in fairness, there are any number of ways in which McDonald’s does command specific advantages that derive from their market position, from improved name recognition to better negotiating terms when obtaining movie-tie in promotions. But if these statistics are correct, then the key factors that explain the firm’s dominance are simple enough to explain on a single web page – or a 732-word blog post…

Overcoming those advantages would be another matter entirely. But that’s a post for another day…

Have You Met Us?

The question of how far out of touch the average CEO is from his or her front-line personnel isn’t exactly a new one; people have been talking about this since the early days of the Industrial Revolution – which is to say, for as long as there have been CEOs or large corporations for them to be CEO of. Not surprisingly, this has become a more contentious topic as the gap in salary between senior management and line personnel has widened. In the days when the CEO made a dozen times what a line supervisor took home, and perhaps 30 times what the lowest-level worker made, it might have seemed reasonable to assume that the employees in question had at least some common frame of reference, but with CEO salaries ranging as high as thousands of times what the workers make it has become hard to imagine why an executive being paid hundreds of millions a year would know anything about the lives of minimum-wage employees. None of which makes the CEO of CKE Restaurants saying that his company’s fast food managers prefer “stature” to overtime pay any less fatuous, of course…

If you missed it you can pick up the story of HuffingtonPost, but the basic facts are clear enough. Andy Puzder, the CEO of the company that owns the Hardee’s and Carl’s Jr. chains not only said it, but took to the Op-Ed page of the Wall Street Journal to proclaim that the Obama Administration’s efforts to raise the salary threshold above which supervisory personnel can be declared “Exempt” and forced to work overtime for no additional compensation would constitute “demoting entry-level managers to glorified crew members by replacing their incentive to get results with an incentive to log more hours.” He then goes on to say that “What they lose in overtime pay they gain in the stature and sense of accomplishment that comes from being a salaried manager.” It’s enough to make you question whether Mr. Puzder has ever served as a supervisor in a fast-food operation, and if so, on what planet that restaurant was located…

Most of the people who work minimum-wage jobs in America are not doing so for the sense of personal achievement and/or self-sufficiency to be had by being gainfully employed; they’re doing so in order to pay the rent, feed their family and avoid becoming homeless. By the same token, most first-line supervisors are not performing their basic management responsibilities because of stature or a sense of accomplishment; they’re doing it because of (marginally) better working conditions and (slightly) higher pay. In fact, it’s not at all uncommon for senior hourly personnel to refuse promotion because it would result in an effectively lower salary – especially in situations where their hourly position is protected by a collective bargaining agreement and the lowest tier of management is not. Or, perhaps more to the point, when the actual work duties are almost identical but the position requires longer hours at lower pay and no overtime – which is commonly the case in both retail and food service…

Now, I’m not suggesting that Mr. Puzder doesn’t feel a sense of accomplishment and enjoy his stature as CEO; with a salary listed at $4.48 million and thousands of people who must comply with his orders or risk immediate termination. I’m not even suggesting that Mr. Puzder doesn’t work long hours himself; I’m quite sure that being the CEO of a company that size does require a fair number of long working days. But I have worked as the first-level supervisor in both of those industries, and I can tell you that there is all of the difference in the world between working in a beautiful, clean executive office where your largest hazard is a paper cut and working in a hot, greasy fast-food kitchen where your biggest hazards are third-degree burns from boiling oil and being shot to death in an armed robbery. Especially when the pay differential is between $2,153.84 per hour for the CEO and $9.81 per hour for the fast-food supervisor…

Without additional research I can’t be certain if Mr. Puzder was ever a fast-food restaurant employee or not. But I’d really like to ask him if he has ever met any…

Take a Stand

One of the great controversies of our time has arisen again, and no matter which side of the issue you find yourself supporting, you may be quite sure that sooner or later this divisive issue will confront you in one of its many forms. So I ask you, dear reader (assuming I have readers), to consider for yourself and make your own decision: is tofu actually evil, or merely unpleasant?

The matter has taken on an unprecedented urgency in this time, because just last month Chipotle announced that they will begin carrying tofu as one of the protein options on their menu at all 1,572 of their restaurants nationwide. This entire bean-curd menace began just one year ago, in only seven test markets, and initially met a great deal of resistance from customers dedicated to the idea of burritos with meat in them, but has gradually spread to nearly half of the company’s locations. And while the company has offered a number of (effectively) vegetarian options for years (usually including some combination of rice, beans, cheese and fajita-style vegetables) this is the first time they have actually stooped to the dreaded bean curd. The question all Americans must now consider is whether this is a good thing or a bad thing…

I kid, of course, but for anyone associated with the company this is a non-trivial issue. On the one hand, it seems reasonable for the company to attempt to accommodate people who can’t or won’t eat animal products by making a true vegetarian option available on their menu. Cheese is inherently an animal-based product, of course, being made from cow’s (or goat’s or occasionally buffalo’s) milk, but many common types of cheese are also made with rennet, which is a collection of enzymes taken from the stomach of a cow or calf. Tofu, on the other hand, is generally not made with any animal products or by-products, and neither are the rice or black beans sold by Chipotle as it stands. In theory, this should increase the company’s potential customer base, both directly in terms of additional people they will be able to serve, and also indirectly, in the case of parties containing one or more vegetarian diners who will now be able to go to Chipotle together…

On the down side – well, there is very little risk involved. The number of people who are allergic to tofu does not appear to be any greater than those affected by any other food allergy, and anyone who isn’t allergic to the stuff can just not order it. It is possible that there will be some investment required in additional kitchen equipment and/or modifications to the restaurants’ food assembly lines so that they can handle the new ingredient, as well as some additional expense in setting up procurement and distribution of the new ingredient, but given the gradual introduction of the product it seems likely that the company has worked out any bugs that might have appeared in their system. Which only leaves the philosophical problem I mentioned at the beginning of this post…

Personally, I’ve never give a fetid dingo’s kidney about what other people think of my eating habits. As long as they mind their own business and let me get on with mine, we can always get along – and anybody who actually has problems with somebody eating a nice steak burrito (or, for that matter, one which contains only tofu and beans and rice) should probably not be allowed to eat out in public in the first place. So while it is possible that PETA and the American Cattleman’s Association might be headed for a showdown sometime soon over a tortilla-wrapped entre, it seems much more likely that both sides will just pay their money, eat their lunch, and go back to fighting over something more important…

Remember, though: if a range war breaks out in your local Chipotle restaurant, you heard it here first…

The Ethics of Suckers

I joined a new work group some years ago, and after getting my desk and my computer password, the next thing that came up was whether or not I wanted to join the office Lottery club. On learning that the people in my office each put up $10 twice each week (for a variety of different games) I declined, noting that I’d really rather have the thousand dollars ($20 per week times 52 weeks is $1,040). This did nothing to endear me to my new coworkers, who made a point of telling me that when they won the State Lottery they were all going to retire en mass and leave me and the handful of other non-players behind to run the office. In hindsight, I probably shouldn’t have asked if they had ever won enough to cover the $1,040 each of them was spending per year – and I definitely should not have asked if any of them would rather have had an IRA worth $5,000 or more (they had been doing this for nearly five years at that point) instead of a pile of losing lottery tickets. But I can’t help thinking that there is a larger ethical issue in play here…

I don’t propose to debate the ethics of gambling in this space – I like a nice bet as much as the next man, and I’ve been known to play cards or buy the odd lottery ticket when I’m somewhere that such things are available. And I’m not suggesting that my former coworkers were harming themselves or their families in any way; they could afford the $20 a week easily enough. I’m not even going to debate the ethics of state lottery games, although there are certainly enough arguments for and against to keep us busy for months if this blog was about public policy rather than business. The point that came to my mind today as I was considering buying a ticket for one of my state’s new games was issue of whether we, as business people, would have any responsibility to keep people from actually harming themselves with bets they can’t afford…

Consider, for example, the case of a retailer who knows that a given customer is wagering his or her rent money on state lottery tickets – or, worse yet, the money they need to purchase their meds and stay alive for another month. There is no law against making bets you can’t afford to lose, of course, nor is there any law (of which I’m aware) analogous to the one that would require a bartender to cut off a drunk patron before they can harm themselves or endanger others. At the same time, there really isn’t any question at this point that gambling addictions are real, and that some people will, if not prevented from doing so, gamble away not only the money they need to stay alive, but that needed to feed and shelter their families, or even worse. If the retailer knows this to be the case, does he or she have an ethical responsibility to cut the customer off at a sane number of bets?

On the one hand, it could be argued that the customer is a (presumably) competent adult, and should be allowed to make all of his or her own purchase decisions, even those where are ultimately detrimental or potentially fatal. Certainly, no one wants to have to convince a retailer to allow them to purchase alcohol or unhealthy foods, just to take the obvious example. On the other hand, most bartenders will cut someone off if they believe their customer is at risk for alcohol poisoning or driving drunk, even in places where there is no law compelling them to do so. And, in a more general sense, the principle of enlightened self-interest suggests that keeping a customer alive, so that he or she can continue to purchase things from you in the future, is a far better strategy than just letting them crash and burn. But I can’t say I like the thought of some store clerk getting to decide whether or not I get to buy a lottery ticket this week any better than the next person. Which brings me to the question:

Do we, as business people, have any ethical responsibility to our customers to try to prevent them from harming themselves through irresponsible purchases, even if those purchases are legal? Do we, as citizens of a still (effectively) free Republic have a responsibility to guarantee that all members of our society are free to destroy their lives or even their bodies as the result of harmful purchases, even though we know they are going to do so and have the means to prevent this? Or should we just offer legal goods and services for sale and let our customers make their own decisions, good or bad?

It’s worth thinking about…

Flying Pumpkins

As noted in my last post, the current research into hybrid airships – effectively blimps that use aerodynamic body shapes and ducted-fan propulsion to generate greater lift and control – is showing some real promise for applications where efficiency and short/vertical take-off and landing are more important than being fast or pointy. However, this isn’t the only time in the 77 or so years since the Hindenburg blew up in New Jersey that someone has tried to revisit the concept of lighter-than-air vehicles as low-speed high-efficiency cargo vehicles. It isn’t even the first time that someone has tried to combine lifting body aircraft with the lifting power of helium to create a neutral buoyancy or slightly heavier than air flying machine. However, that previous attempt did not end well…

As documented by John McFee in his definitive history The Deltoid Pumpkin Seed, the Aereon 26 was an experimental aircraft developed in the late 1960s by a group of rouge inventors and scientists under the company name of The Aereon Corporation, and first flown in 1970. The concept was one of those things that seems so simple you would need to be a genius to think of it in the first place: an airplane that doesn’t fall when it stops moving forwards. Or an airship that can climb and dive like an airplane, depending on your point of view. Conventional airplanes generate lift by forcing air over their wings, and thus have a minimum speed (the “stall speed”) below which they can’t generate lift anymore and plummet like rocks. Airships rise or fall depending on their buoyancy relative to the air they are in – add more lift gas to go up and vent it to go down, although there are also ways to control lift using ballast. If you want to use either technology for commercial purposes, there are going to be issues…

As anyone who travels by air already knows, airplanes have issues with needing inconveniently large runways to take off or land. Airships can just float up, at least to a point, but have trouble exceeding the altitude of their point of buoyancy, and can’t go down without venting valuable lift gas (helium doesn’t grow on trees). There are also issues with how fast you can propel an air-resisting mass of gas bags through the sky. The Aereon was designed to combine all of the advantages of both technologies into a single vehicle that could take off or land anywhere, fly for days on a tank of gas that would only last a few hours on an airplane with the same payload, or even stop in mid-air and wait, if that was what you needed. And, in fact, it appeared that the prototype would be able to do all of those things, given its remarkable performance without even being filled with helium…

And, unfortunately, that’s where things ended. The Aereon company proposed a number of variants of their design, ranging from a small patrol craft that could do everything a Coast Guard helicopter could do while staying in the air for days instead of hours, to a heavy lift vehicle that would have had 20 times the payload of a C-17 and operated using less fuel. But in their innocence the people running the company apparently failed to consider that exotic new technologies are difficult to sell, even when they aren’t actually new or exotic, and that entrenched competitors are hard to contend with even when they aren’t “donating” millions of dollars to the “re-election funds” of government officials whose support you would need to sell such a product. For much of the last 40 years the Aereon 26 prototype has been sitting quietly in a hangar in the Midwest, waiting for the world to catch up…

There are any number of business lessons in this case – not the least of which is that how well your invention performs is only one of the factors involved in marketing it successfully. At this time it isn’t clear if Hybrid Air Vehicles (the company behind the current blimp/lifting body development) will be able to succeed where Aereon failed, but as of this month they are at least getting development money from their national government, and at least tentative interest from two other countries. Given the place that wildcat inventors, high-tech visionaries and entrepreneurial geniuses have come to occupy in contemporary culture, maybe this is an idea that will finally get off the ground…

Keep watching the skies, folks…

Making a Comeback?

It may seem fantastical to us now, after 70 or so years of the skies being dominated by airplanes, and ruled by especially pointy ones, but back in the yearly days of the last century some of the most important flying machines were actually lighter-than-air vehicles: rigid airships and blimps. Many of these were cargo and passenger carriers, but several nations (notably including the U.S., U.K. and Germany) also produced military versions, including bomb-carrying attack craft and the infamous flying aircraft carriers U.S.S. Macon and U.S.S. Akron. Unlike a conventional airplane, lighter-than-air vehicles can stay in the air for as long as desired, provided their crew is kept supplied with food and drink, and while not particularly fast (military versions had a top speed of around 85 MPH) there was no reasons they couldn’t just keep flying until they reach their destination. Or, to look at it another way, it’s four times as fast as an ocean-going ship, is not limited by shallow water or a need for natural harbors, and can travel over land as easily as water, and for their time they carried a relatively good payload…

Unfortunately, as every school child knows, the era of the airship came crashing down on May 6, 1937, when the German airship Hindenburg exploded at the Naval Air Station at Lakehurst, New Jersey, killing 35 of the 97 people aboard and one of the handlers on the ground. It didn’t really matter that the Hindenburg had been filled with hydrogen because the U.S. had embargoed helium as a strategic material, or that a conventional airplane exploding in mid-air would probably have killed a lot more than 35% of the people on board; the disaster got too much ink and captured too many imaginations. Even the often-repeated claims that the explosion was caused by sabotage did nothing to change public opinion. From about 1940 onward, lighter-than-air vehicles were limited to recreational and promotional use, hardly more than curiosities in sky filled with noisy, fuel-guzzling, smoke-spewing craft with airfoils…

Until now…

Even if the public relations issues surrounding airships could have been overcome – and that would have been a tall order even for helium-filled craft following the Hindenburg disaster – the greater speed of conventional aircraft and the relatively low cost of fuel to power them made the slower but more fuel-efficient airships unappealing. But with the cost of aviation gas and jet fuel rising, along with concerns regarding global warming and air pollution, the idea of something that floats along at the speed of a fast truck or train and carries 70 metric tons (around twice what a semi carries) to any point on Earth is starting to gain traction. An article on the Bloomberg website from earlier this month tells the story of a company named Hybrid Air Vehicles (HAV) and its plans to start building blimps designed to carry ores to market from remote parts of Canada starting in 2016…

How well these craft will work is anyone’s guess, but the company’s technical manager claims that the blimps will use about a quarter of the fuel a cargo airplane with similar payload would require, will be able to land anywhere on water or land without port facilities or a runway, and can use any engine type that could be used to power an airplane. The company also claims that the craft will cost something around $100 million, or about one-third of what a large cargo jet with none of those capabilities would cost (a new Boeing 777 freighter is about $300 million according to the Boeing website). Or, to look at it another way, less than the access road to a single distant mining operation would cost to build even before you purchase the trucks to drive on it…

Now, it remains to be seen if the company can overcome 77 years of “conventional wisdom” telling everyone that lighter-than-air vehicles are impractical and/or dangerous. If they can get even a few of these things flying and prove the concept works (e.g. lower cost and higher efficiency) I’d expect to see some commercial interest in the design. It probably helps that it’s a British company (rather than an American one) building them; it would also help if the potential buyers from Siberia (where roads are even less practical than they are in Northern Canada) come through with additional purchases. But believe it or not, this isn’t the first time somebody has tried to sell this concept – and the last time did not end well…

Closer to Home

In my last post I described the extraordinary story of a request I received from one of my students, that I give him my blessing to appropriate some of the materials from our class and post them to a supposedly free website that might or might not compensate him for doing so. It may be that the world has changed even more than I realize, but when I was a student I would certainly not have run the risk of being expelled from the University, let alone sued or charged with a criminal offense, in return for a vague possibility of some future compensation. In fact, there is no way I would have risked angering my instructors – not all of whom were as even-tempered as I am – by asking such a question in the first place. But to me, this is only the beginning of the mystery…

Almost as puzzling, as far as I am concerned, is how does this website make any money? It is possible that they don’t actually give out any gift cards (e.g. everyone who “enters” one of their “drawings” is told that he or she didn’t win), but even if their web hosting and bandwidth are also free, how do they make any revenue on this service if the people downloading the class materials aren’t paying anything for them? It is possible to make money by hosting web ads, but people who come to your site looking for class materials for free are not likely to click on ads offering products for sale – and even less likely to make any purchase if they do. It’s also possible that there is a “premium” version of the site, offering even better stolen material (old test questions, perhaps?) in return for modest subscription fees. But this would make it much easier to catch the people running the site if you wanted to charge them with a crime – and much more likely that someone would be motivated to do that…

It is possible that the people behind this site – whoever and wherever they are – are planning to sell the materials to someone else, possibly other college instructors. A colleague of mine once told me that he had gotten a call from a professor at a university somewhere in Southeast Asia who was using his class materials to teach her school’s equivalent of his class, and who wanted to know if he would send her copies of his last few midterm exams so she could use the questions from them. It’s hard to imagine why anyone would be willing to pay for my slides and materials when they could just make their own, or obtain similar resources from colleagues, departmental archives or publishers, all of whom are potentially sources of free teaching materials that do not involve copyright violations. It’s even harder to imagine when you consider that I’d probably make those materials available to anyone who asked politely…

When I was an undergraduate there was a note-taking service available on our campus that sent a professional note-taker to each class and then typed up that person’s notes and printed copies for anybody who wanted to purchase them. Ostensibly intended to give people the chance to focus on the class without needing to stop and take notes, it was more commonly used by students who were not attending the lecture on a given day to find out what had been covered. I don’t know if the professors whose classes were covered by the service were compensated or not, but they clearly knew these notes were being taken, since there was a published list of classes for which printed notes were available posted each week in the Student Union building. And I must admit that I don’t really care if my students take their own notes, copy a classmate’s notes, or purchase them from a service, so long as they actually study those notes at some point. So if the people who are running this website were to make contact with me directly about listing notes for my class, I would certainly discuss it with them…

They’d have to come up with better compensation than a vague chance in a drawing for a gift card that may or may not actually exist, however…

Close to Home

After rereading my last two posts I realized that I probably sound like I’m taking the whole matter much too lightly; as if I don’t consider the unauthorized use of copyrighted material to be a crime, or at least not a serious one. Let me assure my readers (assuming I have readers) that this is absolutely not the case. While I have never published any fiction, music or video, I have written several hundred of these short essays on a variety of topics, and I would be quite annoyed if anyone decided to steal my work – especially since I’m not charging to view it. But as I am one of 100,000,000 or so bloggers in the world, with only two followers and a few hundred visits a month, it has never really come up. It had never occurred to me that the issue might turn up in my day job instead…

A few weeks ago, one of my students emailed me requesting permission to post lecture materials and PowerPoint slides onto a website where other students would be able to download them. He mentioned that in return for these postings the owners of the site would offer him some small compensation, possibly in the form of gift cards, or at least chances in a drawing to win a gift card, although he did not seem to be clear on how that worked or why it would be worth his time, let alone worth the potential consequences of unauthorized use (theft, really) of intellectual property and the attendant possibilities of being arrested, sued, or thrown out of the University (any such action would be an Honor Code violation at MSU). Even more bizarre, at least from my perspective, was the argument he offered as to why I should give him my blessing to do this…

Somebody, my student argued, would steal my lecture materials eventually, since they are available to every member of every one of my classes each semester. If this was the case, wouldn’t I prefer that the credit (and theoretical compensation) go to someone who was at least polite enough to ask my permission first, as opposed to someone who would just steal it without any additional discussion?

This is the first time anyone has ever told me that the theft of my property (in this case, intellectual property) was inevitable, and suggested that I might as well just go along with it. In point of fact, I’m not at all certain this is the case, since my class materials are of no use to anyone who isn’t enrolled in one of my classes – all of whom can download them for free from our class homepage. There’s also the reality that most people are not that eager to be sued, charged with a crime, or thrown out of the University, or for that matter willing to risk all of those outcomes in return for – I really cannot stress this enough – vague promises of compensation later. The least unpleasant of these outcomes would effectively cost you thousands of dollars, and possibly your entire career – why would you risk that for one chance in a thousand at $20 worth of free merchandise?

Of course, none of this even addresses the truly eccentric aspects of the situation, such as why would you suggest to one of your instructors, who has the ability to give you a failing grade and prevent you from graduating (I teach a required class), that you are going to steal his work and there is nothing he can do about it? Or, for that matter, why would such a website exist in the first place? If there is no charge for using the site, how do the people running it make any money?

But that, alas, is a question for another day…

The Ethics of Piracy

I had considered an Ethics post about DRM following yesterday’s ravings about digital coffee, but there doesn’t appear to be much to talk about; the sellers certainly have the right to offer or restrict functionality on the products they are offering, and the buyers have the option of voting with their feet (and their wallets) and not purchasing products with DRM or any other measure/feature to which they take exception. Either of these positions could be seen as wrong, greedy/stingy, or actively evil, depending on which side of the debate one happens to be on, but there does not appear to be an ethical issue to discuss. By the same token, there doesn’t appear to be much question that somebody who downloads a program, a movie, a song or whatever from a copyrighted work and does not pay for it is committing an actual crime, and can’t really justify that under any ethical grounds, either. It’s only when one or more of those conditions does not apply that things begin to get murky…

Consider, for example, the case of people who are downloading and using any work that is unavailable to them, specifically because it is out of print and neither the original author or the publisher ever intend to make new copies available. Technically, this is still a copyright violation, and can still be prosecuted to the fullest extent of the law, or pursued in civil court for uncompensated use. But if there was no chance whatsoever of the author or publisher ever selling another copy, or earning any other revenue from this product, is it still unethical for people to obtain unauthorized copies for their private use? Does our answer change if these unauthorized users will not make any profits of their own from the product? What if there is no alternative product they could have used for this purpose – as in the case of orphaned or obsolete software?

On the one hand, it could be argued that something does not stop being your property just because you aren’t currently using it, and the owners of the copyright could elect to do something with them at some future point. It could also be argued that if the unauthorized users could not pirate this property they would have to purchase something else, which might actually involve giving revenue to the owners or some other deserving person. On the other hand, it could be argued that some users would not have been able to afford to make any purchase; that if they had not been able to access the pirated work their only other choice would have been nothing – in which case there is no way in which their actions could be of harm to anyone. There is also the possibility of future benefit if you do allow them to access the work…

For some years now a number of companies – notably including Baen Books – have been releasing electronic copies of various works in electronic format, generally DRM free, on the principle that people who read free electronic copies of books will then want to acquire hard-copy versions. It’s also common for some publishers to make the first volume of a series – or a very basic version of a software package, to take another common example – available for free, with the understanding that the rest of the material is available for sale at reasonable prices. This appears to have been moderately successful for the publishers, and is believed to drive a lot of the sales for smart phone apps and the like – which really makes you wonder…

Are there conditions under which the unauthorized access of copyrighted material can be of sufficient value to the holder of the copyright in order to ethically (if not legally) justify doing so? Does our answer change if there is no way the legal owner could possibly make any money on the copyright through any legal or authorized channel? What if the unauthorized use later leads to income for the legal owner from some other enterprise; do the ends then justify the means? Or should we just assume that anyone who wants to see their work freely distributed will use some form of Creative Commons license, and respect the ownership rights of anyone using a conventional copyright or patent, even if doing so is ultimately NOT in the owner’s best interest?

It’s worth thinking about…

Digital Coffee

Unless you have been extremely fortunate over the past decade or so you have probably already encountered Digital Rights Management (sometimes parodied as Digital Restrictions Management) or DRM technologies. These come in a variety of flavors, depending on the media and the platform they intend to restrict, but all of them serve the purpose of controlling (or attempting to control, anyway) the use and distribution of digital content after it has been purchased. This is usually defended by the people who make money on digital content – who should not be confused with the people who actually make digital content – as being the only way to combat the specter of copyright piracy; it is usually decried by people who believe in freedom of speech, or just in being able to use content you have purchased when, where and on whatever platform you like as invasive, manipulative and generally evil. But whichever side of the debate you happen to be on, I’d be willing to bet that you never imagined anyone applying the idea to coffee…

An article on the Tech Dirt website from earlier this month describes how the Keurig company – which makes a line of coffee makers that use single-serving cartridges, or “K-cups” – is planning to release a new line of machines that will not accept product from any other company. In effect, if you have one of these machines, your choices will be to use genuine Keurig reloads or throw it out and get something else with which to make coffee. The same report also claims that Keurig has been signing exclusive deals with various coffee suppliers so that they will be the only ones who carry those brands of coffee – meaning that in addition to preventing customers from using cheaper cartridges from third parties, the company will also become a monopoly source for some popular types of coffee. This has given rise to protests, outraged news stories both online and also in the real world, and at least one actual lawsuit (see the linked story). Federal sanctions may or may not be in the works as well…

Now, there is no mystery as to why the company would want to restrict customers to purchasing coffee from them in addition to the coffee machines: the reload cartridges or “pods” are the most lucrative part of the entire system. Much like printer link, or software applications for computers and smart phones, the coffee machines themselves are mainly a platform from which Keurig can sell products at much higher margin to what will now effectively be a captive market. Nor is there much question as to why the company would want to bring out new machines and attempt to take control of their corner of the market. With competing single-cup brewing systems and third-party companies offering “pods” now flooding the market (to cash in on the single-cup fad) Keurig’s original competitive advantages are being eroded. One has to wonder how well their efforts to make up those losses will work if the company ends up being sued, sanctioned by the government, and mocked by millions of scruffy bloggers…

At the same time, it’s hard to see how else Keurig is going to dig itself out of the hole in which it has landed. Using the brewing machines as a loss-leader and making money on the cartridges won’t work if there are cheap third-party cartridges on the market; raising the cost of the brewing machines won’t work if there are similar machines or knock-off units on the market, and it was clearly naïve of the company to assume that monopolistic business practices like cornering the market on coffee brands wouldn’t be challenged in court and disallowed by the government. I don’t believe there is any way to prevent them from releasing machines that will only work with supplies that they also sell, but this won’t keep them from losing market share to similar systems or to more traditional forms of coffee maker…

Of course, there is also no way of knowing how long the single-cup fad will last, or if it will become a dominant segment of the coffee market going forward. It is possible that once it becomes too expensive and inconvenient to use the K-Cup system and its imitators the entire segment will simply die off – which will solve Keurig’s problems. Just not in a good way…