the vital few, principle of factor sparsity...2012/09/06 · The Pareto principle (also known as...

The Pareto principle (also known as the 80-20 rule, the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes

The distribution shows up in several different aspects relevant to entrepreneurs and business managers. For example:! ▪! 80% of your profits come from 20% of your customers! ▪! 80% of your complaints come from 20% of your customers! ▪! 80% of your profits come from 20% of the time you spend! ▪! 80% of your sales come from 20% of your products! ▪! 80% of your sales are made by 20% of your sales staff

This was (and is) more true for physical retailing, it’s not true for web and downloads

Blockbuster goes bankrupt!

Blockbuster tried to be netflix too late

Death of the 80/20 rule

the 65- 35% rule?

Thursday, September 6, 12

The 80/20 rule. old retail, you made 80 percent of your profit from 20% of your inventory.

Still big hits are gonna be a lot of the money. but as people

changed my mind given evidence

“death of the death of the 80/20 rule”

the 80/20 rule is back

still most sales come from top 20%But things have changed

it’s now profitable to sell way out in the long tail.


Q. If most of the profit in the music business is in those black swans where is the rest?

A. In the long tail

Hip Hop 1981Hip Hop 2008


Not totally true these are just catalogue items. As cultural tastes change once obscure artists and songs from the past can become more popular. or styles that belonged firmly in the “tail” become mainstream. rap, hip hop, jazz, metal, disco... etc. will the next be norwegian black metal? will it be

Short VolatilityBlack Swans?

Review Long Tail/Long Volatility


Great Whiteand the

Rhode Island Fire

Negative Black Swan


Short VolatilityConcert Promotion

40 watt club presents dinosaur jr.

tickets sold

0 200 400 600 800

limited upside

demand

volatility theory says they should eventually “blow up”

all create other sources of income to make real profit


Concert promoter/Venue/Live Nationoff the settlement sheet income

Ticketing feesBeer and Liquor sales

ParkingPremium/VIP/ or season ticket arrangements


concert promoters use perfectly legal off the settlement sheet income to make a profit.basically “settlement sheet” is the split between artist and promoter but it only covers ticket sales and the artists merchandise. promoters all make profit directly or indirectly from other sources. above.

Annually, Live Nation promotes or produces over 22,000 events, including music concerts, with total attendance exceeding 50 million—more than the NBA, NFL, and NHL combined.[3] As of September 30, 2005, Live Nation owned or operated 117 venues, consisting of 75

US and 42 international venues. These venues include 39 amphitheatres, 58 theatres, 14 clubs, 4 arenas and 2 festival sites. In addition, through equity, booking or similar arrangements Live Nation has the right to book events at 33 additional venues.

What is Live Nation?

Also owns ticketmaster

Live NationAEG

Two largest concert promoters


http://en.wikipedia.org/wiki/Live_Nation#cite_note-2

http://en.wikipedia.org/wiki/Live_Nation#cite_note-2

ticketing fees vary

$1 facility charge at 40 watt club

Ticketmaster “convenience charges” kickback to promoter

all other ticket agencies do this also

Live Nation goes one step farther. They bought ticketmaster. They make money on their competitors

shows!


why does scalping still exist?

in certain cases promoters make a profit from it.more on this later in the year.

Promoters would love to directly auction ticketshigh demand tickets on the secondary market

make concert profit less limited.


Live nation able to quickly scale and change size of a venue

helps it in some cases lets it “capture” some of the upside from surprise hits


9:30 club in washington dc does something similar.

stage, lights, curtains and pa on track that expands or shrinks size of venue

while they can not rapidly expand upwards in capacitythey can dramatically adjust staff size downward

even climate control bills


Short Volatility-Concert Promotersin particular

Negatives:Certainty is overpriced.

Black Swans can only be negative or revenue neutral events.

Positive adjustments:Other revenue streams-Beer/Wine Liquour, Parking, Ticket Fees, Premium Seating

Can share in ticket price increases in secondary marketArtists want to perform! So they often play for less than they are worth.

(compensation vs adulation)

“It’s a dirty job but someone’s got to do it”


banking and large brokeragesalso short volatility

Also use fees and other charges to make moneybuild a cushion to insure against losses.

example when you get a mortgage they charge closing feesand often you “buy” points


Almost all short volatility businesseshave additional sources of income Almost all short

volatility businesseshave additional sources of income

The death of the recorded music industry

What killed it?

A. Bad MusicB. Mp3s and digital piracyC. The single


the degusta article and explanation in depth.

The death of the recorded music industry

What killed it?

B. Mp3s and digital piracyC. The single

(Bad Music had nothing to do with it)


the degusta article and explanation in depth.

Analysis by M Degusta- Business Insider

Thursday, September 6, 12In January, Bain & Company produced the following chart as part of their report on “Publishing in the Digital Age” (PDF):

Image: Bain Analysis

Then on Tuesday, someone posted it on Flickr. Subsequently, Peter Kafka of Wall Street Journal's MediaMemo noticed it and passed it along to Jay Yarow, who made it Business Insider’s Chart of the Day on Wednesday, citing Kafka and the Flickr post. On Thursday, the excellent John Gruber at Daring Fireball linked to it and between those two postings the chart garnered a fair bit of attention, including from the likes of apparent digital music expert Bob Lefsetz (“First in Music Analysis”). No one seems to have tracked it back to the original source nor noticed what happened to catch my eye straight away:This chart sucks.

Read more: http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1ZudbPmHJ

What’s Wrong With ItOh, Bain – I hope no one has hired you for your expert “analysis” in this field: ▪ The chart uses raw revenue numbers, not adjusted for

inflation or population. ▪ The chart is labeled “Global Music Turnover” but the data is

actually US only. 1 ▪ The chart says “Bain Analysis” but it’s very unclear that they

did any analysis, since anyone paying the RIAA $25 can login and immediately see virtually the same chart, albeit formatted slightly differently.

▪ They fail to clarify how & if they distribute the RIAA's 16 sometimes vague categories amongst the 4 they use.

Read more: http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1ZueQuWE2


https://www.riaa.com/shipmentlogin.php

https://www.riaa.com/shipmentlogin.php

http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1ZueQuWE2




All discussion herein is for US recorded music as covered by the RIAA. The above chart is adjusted for inflation & population – for full details, see below.

So let’s correct the inaccurate conclusions one might reasonably draw from the misleading Bain chart:Wrong: The music industry is down around 40% from its peak in 1999Correct: The music industry is down 64% from its peak.Wrong: At least the music industry is almost 4 times better off than in 1973.Correct: The music industry is actually down 45% from where it was in 1973.Wrong: The CD era was the aberration. (Mr. Gruber’s reasonable take)Correct: The CD peak was only 13% better than the vinyl peak, not over 250% better as the Bain chart implies.The overall conclusion is that the music industry is actually doing much worse than the Bain chart implies:10 years ago the average American spent almost 3 times as much on recorded music products as they do today.26 years ago they spent almost twice as much as they do today.

Read more: http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1Zuf4xM6i


http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1Zuf4xM6i




What Happened?Turns out that, somewhat unsurprisingly, the recording industry makes almost all their money from full-length albums:

Read more: http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1ZufgoBLC


http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1ZufgoBLC




No one is buying albums anymore.“The Single is killing the album”

Just over 1 album a year per capita CDs.25 downloaded albums per year

Thursday, September 6, 12Equally unsurprising, no one is buying full albums any more:

Image: Recording Industry Association of America

That’s just over 1 album per person per year now, and only 0.25 downloaded albums per year. Here Mr. Gruber’s guess is more on target, though current numbers are still substantially below pre-CD numbers. In addition to piracy and the general lack of interest in buying albums vs singles (see below), it’s also possible that consumers' ability to convert CD to digital versus having to rebuy vinyl albums on CD accounts for some of the disparity as well.

Read more: http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1ZugTlvlJ

Two key elements of the “digital” strategy are not workingmobile and subscription based models.

At least not yet. If apple goes to a subscription model that may change.

Thursday, September 6, 12Downloaded albums & singles have grown nicely, but we’ve already established that is not nearly enough to offset the loss of the physical equivalents.Mobile, which includes “Master Ringtunes, Ringbacks, Music Videos, Full Length Downloads, and Other Mobile”, hit its peak in 2007 and has actually been in decline the past 2 years. Looks like the death of the ringtone - and possibly the birth of the iPhone?Subscriptions – presumably Rhapsody, Zune Pass, and the like — have also drifted downward the past 2 years.To reiterate what I was very surprised to find: two of the big new areas, mobile and subscriptions, appear to both already be in decline.That only leaves internet & satellite radio – Pandora, etc — and others that pay via SoundExchange. It had a good uptick since 2007, but that’s when they negotiated royalty rates for online broadcasters. Even if they maintain some solid growth, it still adds up to a pittance.Looks like the smaller and shrinking recorded music industry is here to stay.

Read more: http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1ZuiOpg1E

No speculation. Digital brought about the era of the single


Napster June 1999 - July 2001

iTunesJan 9th 2001

iPodlate 2001


EMI employees 1999 about 11,000EMI employees now (2010) 2,000

down 81%

Recorded music sales down 64% from peak

Why does this suggest good news?


Totally unscientific. but it suggests that the music business got a lot more efficient. This should make the business more profitable. And there is circumstantial evidence that a larger percentage of the remaining sales is going to artists, managers and the other independents in the business.

This suggests:

The record labels may have become more efficient and productive.

Some of those jobs lost by record labels have been recreated by other companies.

Amazon, iTunes, Spotify, Pandora, CD baby, Tunecore,Thirty tigers.

Majority of jobs were lost in distribution and record stores. Above companies replaced some of their

distribution functions.


Despite what you may read on the internet and from various experts, you can’t replace recorded music revenues

with revenues from touring.

Fall 2011“Tourpocalypse”

(One is Scalable economic activity the other is non-scalable)

Too many artists on the road.

Except for the top tier touring has always been unprofitable


most cyberlocker sites are tied to if not operated by organized crime groups

uTorrent/BitTorrent is really operated out of Belarus

Music is not “free” on these sites they slather linksin advertising and charge for premium accounts with faster downloads

Large Multinational Corporations make a lot of money directly off of “Filesharing” including:

Google, Microsoft, Yahoo, Dell, Intel, Amazon, Facebook, MasterCard, American Express, Visa and Paypal.

This is the real reason these companies fought SOPA not because they believed so strongly in free speech.


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the vital few, principle of factor sparsity...2012/09/06 · The Pareto principle (also known as...

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