Epcot Central gets it right

Readers of this blog know that I frequently disagree with Epcot Central. However, today's post is one that I couldn't agree with more strongly.

"Imagine, if you will, had The Walt Disney Company, not Exxon, been in control of what was presented and described in the Universe of Energy for the past 25 years. Imagine if it had been solely the Imagineers, without dictates from a corporate sponsor, who determined how and what to tell guests..."

"Disney has an opportunity, now that ExxonMobil is no longer a sponsor, to determine what content is presented and how. This is a fantastic chance for Disney’s best writers, designers, researchers, filmmakers and artists to tackle a complex, intensely intriguing topic and help shape the way millions of people a year think about it."

Here, here! I remember when I first went to Epcot as a kid. I was so excited by science and the future. Its time to move beyond Ellen and teach this kind of "enviromentality" that is increasingly becoming part of the thinking at Disney.

Good Porn

Check out this...um unique presentation of statistics on Internet porn by Good Magazine.

(Thanks, Techcrunch!)

Warner Music continues dive

Confirming the slow down in music sales, Warner Music announced a revenue decline of 2% for the quarter despite a 23% increase in digital music sales. And they are laying off 400 people which is only 10% of their workforce.

Now sure, they can bitch about declining music sales. But let's look a little deeper. The reason that music sales are down is in part piracy but more so ability to buy singles online. WMG and all the other labels have been hooked on a dishonest business model of making you buy 9 songs you don't care about to get one song you want. And consumers are no fools, so they are buying only what they want. That takes the record company's revenue from $13-$15 to only $1. The obvious answer is, make more songs people want to buy, but that's a little easier said than done because you have to come up with a lot of solid gold hits to replace all the crap the music industry has shoveled year in and year out.

But enough of decline revenues, how does WMG do with wringing profits from the revenue it does get. In FY06, WMG made a miserable 1.7% profit. This quarter wasn't much better with only a 1.9% profit. That's pretty shitty for an intellectual property business, don't you think?

Where does all that money go, you ask? Well, this past quarter, 55% went to cost of revenue. I haven't dug deep in WMG's financial filings, but I would imagine a lot of this is the cost of running a physical goods business. Eliminate the physical goods by going all digital (eventually), and increase the profit substantially. Then there's SG&A otherwise known as overhead. This part quarter, it was 31% of revenue. So all in COGS and SG&A are 86% of revenue. Wowsers! No wonder WMG is cutting heads.

But here's a question. Do you really need 4k people to run what is essentially an intellectual property business especially when you don't really make the intellectual property?

Here's a radical idea, move entirely to licensing. All the bitching and complaining about piracy is a bit of a smoke screen. This business just isn't well run. If running a physical goods business is so costly, stop doing it. Sell off the physical goods distribution business and move to pure licensing. Revenue will drop dramatically, but profits will increase substantially as well.

Consider this, Disney Consumer Products is the largest trademark licensing business in the world and is in a more diverse set of businesses than I can possibly think of. Total retail sales have been reported at $21B globally. (WMG's total revenue last year was $3.5B. But this is comparing apples and oranges because WMG is reporting wholesale not retail.) DCP delivered $2.2B in FY06 and $618M in operating income, or 28%. WMG's OI was only 8% of sales. See what licensing does for you.

If WMG moved to licensing, put less focus on DRM, and more on making its back catalog of long tail content available, it could turn this situation around. But I doubt we'll see that until Carl Ichan gets on the board.