 Thanks. Great pleasure to be here. Thanks for inviting me. We met years ago at Meet-Em and this was one of the good outcomes of Meet-Em. So it's a great pleasure to be here. If any of you is on Twitter or using Twitter, I'm G Leonhard on Twitter, G-L-E-O-N-H-R-D. And I will try to later on share my presentation through Twitter and of course through the organization. So it's a real pleasure to be here. I read yesterday when I was preparing a little bit about Denmark. The United Nations has said that Denmark is the happiest country in the world. Which is interesting because Switzerland, where I live, is supposed to be the most competitive country in the world, which is also not true. But maybe the happiness is true about Denmark. I don't know. So I would like to pick up some happiness from you before I go back on the plane tonight. Anyway, so a lot of people are wondering what a future is. I'll give you a short idea of what that is. Really, my company called the Futures Agency was sort of agents of the future. We're trying to find out what's going to happen in three to five years from now, roughly, and prepare companies to get ready for a different kind of future. A simple example is, for example, the airline companies know that in 10 years we're not going to be flying like we do today. We'll be doing virtual travel for holographics and telepresence. So this is quite obvious. I think if you care to look, but of course the airlines are not really interested in holographics and they want to smell the kerosene. But anyway, we deal with foresight, not predictions. Foresight is what everybody has. We just have to actually spend time on harvesting them. The motto of my company is it wasn't raining when Noah built the ark. So we have to actually think about this a little bit before it happens, otherwise we get blindsided. We work with hundreds of companies, technology companies, record labels, musicians, producers, publishers, broadcasters, technology companies from all over the place in about 20 different countries. Most of my books are free on the internet, not this first one that you may know, the Future of Music, which went with the publisher. Therefore it's not free, at least not officially. And all the other ones you can find if you just Google GERD, like G-E-R-D, and free PDF. Then you can find all my books all over the internet. This one, the Future of Content, is the latest. That's also on Amazon, on the Kindle, if you want to spend three dollars. You can, happy to do that as well. The CEO of Tesco that I saw a couple of weeks ago at a conference. This guy runs a company, Tesco is one of the biggest retailers for food and stores, of course, worldwide, 220,000 employees or so. He said at this conference that we have two choices. We can lead the revolution or be a victim of the evolution. And I think this is really extremely true when it's about media and content. There's a lot of things that have happened since 1995 when I started working on the internet. We thought that by 2000 we're all going to listen to music in the cloud. Which was completely obvious then, Napster and everything. And it took about 10 years for Spotify to emerge. Now that Spotify is here, the artists are complaining that there isn't enough money coming from Spotify. Because basically the system is broken and I'll talk about that in a second. But a lot of these things, I think it's a very true thing to remember for the rest of the day, maybe. The work that I do in the environment also has a lot of parallels to the media ecosystem. Al Gore has said that global warming is one of the biggest market failures of capitalism. In other words, if it made money to make sure that we have a planet in 50 years, then people would do it. But the money is concentrated on some place where it used to be. And I'm going to substitute this and say piracy is the biggest market failure in capitalism, along with global warming of course. Can't hardly beat that. Piracy is market failure. It's not that any of us are evil or have bad intentions to the artist or are too lazy to pay or any of those things. In fact, you can see that there are lots of markets where people are paying for content, a lot of money, like Netflix in the US. 32 million subscribers, $10 a month. How come people aren't paying for music or books? I mean, they are paying for books as well. So what's the problem with this? We're essentially looking at a dysfunctional capitalism. A system that doesn't actually work based on pure market forces. And so basically what we're seeing here is that because of this, we're now entering a whole new world. What's happening with mobile devices and social networks of course. Facebook being over 1 billion users and QQ 10 cent, roughly 850 million and other countries have their own networks like in Russia. I call this the social OS, the social operating system, not social media. But all of a sudden we're actually interconnecting with people. Everybody is on LinkedIn and before you come to the meeting, you look each other up on LinkedIn and this whole thing is becoming a whole operating system. And the world is slowly becoming more of an ecosystem. So in other words, we're all very much interrelated. Whatever happens over in Asia is impacting us here, not in terms of media, but also in terms of energy, communications, technology. And we're becoming very much interconnected. So TDC for example has launched one of the first flat rate of free music services here in Denmark, which we'll hear about later. Their model of TDC is being discussed all over the world as a blueprint. And how come it has happened here in Denmark, the happiest country in the world? How come? Well because there was an agreement that it was a good thing to happen, apparently. We'll hear more about that later. But in this world, in the social, local, mobile world that we live in now, we have computers, we have television, of course, we have mobile phones. And this has become sort of the war cry of the digital generation of social, local and mobile. Local means, you know, check in, Foursquare, localization services and so on. And this is where everything is going. So a lot of people who are working on the internet are now saying basically media has to become social, local, mobile also to be part of that future. So now we have this dual reality, right? We have the old media ecosystem, we have broadcasters, big organizations, public funded organizations. And then we have this startup scene which is in the cloud basically. There's hundreds of companies doing this and this is mostly technology driven. And this is mostly either media driven or content driven or financially driven. Clearly to have a television company in the old days, you need to spend billions of dollars on running satellites and cables. So these two things are now converging. And this creates a huge amount of opportunity because basically if you're looking in this direction, you know, we're looking at these sort of keywords, right? Social, local, mobile, cloud centric, distributed, collaborative, decentralized. All of the success in the last 10 years of companies that were in this turf are actually most typical to those keywords. For example, Google, YouTube, Twitter, Skype, eBay, Amazon, the list goes on. They're all actually on this side of the equation. Except for Apple, of course, you know, which is solely on the tower side of things. But if you're looking in this direction, basically this is where we're going in the future here. This idea of saying, okay, we're now in a different mindset. You know, we're entering a new era and that is the era of mobile and social and local. I mean, mobile is taken over as the primary access point of the internet. There's estimation saying that over 80% of the entire internet traffic and files will be mobile on mobile devices. And now we have cheap smartphones which are going to go down to the level of about 10 euros for a smart tablet. In India, you can buy a tablet called the Aakash that's $32. It's an Android tablet. Of course, you won't get Apple products for that, right? But anyway, it will go down to about 10 euros. In fact, people are saying the Kindle could very well be free. Of course, we'll do enough to pay with books to give us free Kindles. In Brazil, where I do a lot of work, the government is considering giving every student a tablet, a cheap tablet, like 100 million of them. And to buy them at $7 each to replace books for studying. So when that happens, I mean, we're moving into a whole different era here for content. Imagine 5 billion people being connected to those devices. And the business model today, we have this complete convergence of television and the internet. This is very good news for television. Because basically what happens here is that because people can converge these ways of watching television, we need a whole new idea of how this business model works. Who pays for what? I mean, what kind of public structure do we need here? The rights logic to a large degree is broken. For example, the windows of movie distribution. I live in Switzerland, so I have to use 5 different iTunes logins to get the movies I want to watch. And that won't be solved because Apple has no interest in solving this. And neither do the studios. In fact, they make money off the friction. They make money off making us pirates, makes them money. It's kind of a paradox. In China, if you live in China, you can use Google's search engine that they own. It's called top100.cn. And there you can download and listen and stream music for free. Because Google wants to compete with Baidu, which is all basically all free music. So that made a deal with the record labels to share the advertising money from the search engine. So as a Chinese user, you have free downloads and free streams because they share money from the advertising. We here in Europe don't have anything like this because we are too stupid because we're still buying stuff. I mean, the logic is mind-boggling. So anyway, a different new rights logic is needed. I mean, clearly if you're going to be like me and buy movies and iTunes, you feel the punishment right after you buy. Because guess what? After you spend 10 euros, it only lasts 24 hours for you to watch. If you fall asleep, you're out of luck. You have to buy again. I mean, talking about a punishment for an honest person, unbelievable. I mean, no wonder this can't be a solution. It's like punishing will take your bicycle rather than driving a car. The same logic. So I do a lot of work for Google and I don't speak anything on behalf of Google or anything, but I do want to disclose that I work with them. So they had this fantastic slide show that came out. I forgot exactly what it was called. A World View came out about three weeks ago. You can Google for it. And they found out a bunch of stuff it has to do with mobile. First, they're saying television no longer commands the full attention. People are still watching, but they're doing other stuff while they're watching. I'm sure most of you do this. For example, Googling stuff or being on Facebook, Twitter, doing Skype calls. This is a global phenomenon. This is bad news for television because basically while you're watching TV, the attention goes in different places, which means that the advertising model is shifting. And they're saying if we spend about four hours of our leisure time in front of screens, we've become a culture of screens. So it's really distributed. I mean, all this stuff is happening in terms of how we spend time between the different devices, television, computers. It's clear this is global numbers. So clearly this is a shift towards tablets. I mean, tablets are becoming a global phenomenon. How do people use this? What do they do there? Simultaneous usage of different kinds of devices. Multi-screen delivery, you know, trading back and forth, starting on the mobile phone, then switching to television. You guys all do that anyway. Activities, emailing, browsing, social networking, which is, as I said earlier, becoming a default. I mean, basically the list goes on and on and on about how important mobile has become now. And of course Google is betting on this very heavily, with basically doing everything they can to be part of this mobile world. Okay, that's what Google is doing now. If you look a little bit further, you know, Google wants to essentially replicate traditional media. Replicate in the complete sense. Look at all the companies that they own. I mean, they've bought over 100 companies in this place to replicate media over the Internet. Now you can ask, is that a good thing or is that a bad thing? Is it going to do the right thing and actually pay the creators? But it's all going to be about mobile. This is already an old chart because we have this overlap of more mobile Internet access within the next six months. More mobile than fixed. So here's a key question, some of you on the radio business or in the radio industry, what's going to happen to this? Well, clearly, if you have mobile Internet high speed in the car, isn't the radio for sports or for traffic or maybe some branded radio that you really like, but for music, no. I mean, my kids, when they're in my car, they're fighting for the Bluetooth connection. There's no more radio. It doesn't exist anymore for those guys. They use Spotify or whatever they have to go into the car radio. A USB port is enough. So radio really has to change to create, because radio is really going to stay relevant there. Because radio can't allow people to download the show. You can only listen to it while it airs. So lots of problems here, books, same thing. On the mobile device, a book is a 500K download, even on GPRS, that's two minutes. So what's going to happen with this? Lots of questions there, but basically we're heading into a world where we're going to have five billion people connected, countries, China, India, Indonesia, Russia, Brazil, and 75% of the mobile internet creating a market of $250 billion of mobile advertising. Just the advertising would be enough for all of the cultural industries to blossom if that was the case today, but it's not. Today, mobile advertising is nothing. It's not enough. I mean, if you have 100 million views on YouTube, how much money are you going to get? 32 euros. Because YouTube is not there yet to where that market is powerful enough to fund this. So here's a big opportunity and a challenge. Moving into a mobile world, anything that's not mobile and can be carried across different platforms connecting to the cloud won't work. I mean, clearly we're seeing this starting with music but also with books. The reason that people buy Kindle books or Amazon electronic books is not because they're cheaper. They are sometimes cheaper but in general not because it's so easy to buy a book and synchronize across all of your devices and even tell you where you left off reading. That's why I mean, I can download... There's Russian book sites that have every single mobile book in the world. You just have to speak Russian and you're fine. You can get anything you want. But the difference is I spend $5 because the book is synchronized and it takes away the pain. I don't buy the book, I buy the wrapper. So research shows that entertainment companies, CEOs, they think of three things that are most important. Mobile devices including smartphones and high-speed internet. And the third one is social networks. And this is a global phenomenon. Now this means a lot for the future of television, for the future of music, for the future of newspapers. Imagine this. You have a mobile device, you have high-speed internet, maybe it's about to become free. Right now it's very expensive. But in many countries, the governments are thinking about making the internet tax-free because they know that 10% more penetration gives 1% more GDP growth. Which is a good argument but not perfect, of course. So we're looking at this global device sales. I mean, you see in this personal computer it's essentially on the way out. I mean, we're using this for work but not for the other stuff. So smartphones and tablets. Very good news for creators because clearly with smartphones and tablets we can also make payments, right? We have a mobile operator, we can pay. We have mobile ways of mobile money. So that should be good news. So heading into this world basically, where the mobile is the centric part, right? We also have billions of recorders and copy machines. That's what these devices are. They copy stuff, right? So current devices, pretty much any mobile device, I can hold it up in a concert and record DVD quality video and audio. Audio is sometimes not so good. And it's going to be perfected. So just imagine three years from now any concert in Denmark, any place in the world, right? I can hold up the device and make a live broadcast that usually the Danish radio or television does. Not entirely the same quality. But close enough. Anything will call the copied, traded back and forth, right? I mean, we're seeing this on a global scale happening basically that this kind of idea of content being in those devices is ubiquitous. And how do you prevent people from copying? That's like saying you prevent people from going to the bathroom by putting a credit card slot into the door or something. People wouldn't be happy about that, right? I mean, we're seeing visuality. It's all about visuals. I mean, every company in the world now, the top 1,000 companies, 98% of them have a YouTube channel where the CEO is talking about what he wants to do, the new products and, you know, I mean, the Nike channels that they even have a women's channel, right? Nike women talking about empowering women. It has nothing to do with the shoes, right? So mobility, shareability, empowerment. I mean, empowerment, for example, trip advisor or quiet or, you know, we can raid restaurants immediately, you know? That's good news for us, but not for the restaurants necessarily, right? Because, you know, it makes it more transparent. So basically what we see here in this world is that if this is becoming the standard, and then we're all socially connected. So when I listen to a song on Spotify, you guys can see what I'm listening to. Or if I have a queue on Netflix, I can look at my film queue and you can subscribe to my playlist. This is, of course, the benefit of having a social sharing service, right? Then we're going to need some rights, you know, laws, rights, traditions that are based on this, you know, that are native to the Internet. And our rights are not at all native to anything, really. I mean, they're actually pre-industrial evolution, right? The word streaming doesn't exist in copyright law. In fact, the word copy is of the audio paradox, right? Because on the Internet, everything that I do makes a copy. So how do we do this, right? I mean, how do we create a new rights logic for this age? I mean, we have to essentially remake the content industry in many ways. And this is happening on a global level in various countries at various speeds. But content is now becoming something that resides in the cloud, not just music, but films, television, entertainment, our health records, our education. Moving into mobile devices. The reason that 1.4 billion people don't have regular education is primarily because they can't access the books. There's no materials. Imagine how you could solve this with a device that costs $10 connected to a network like Amazon does with the Kindle. That's always on. How many problems could we solve? So Robert Turczyk, who's a friend of mine, another future, he says, we have to switch now. We have a choice of saying, okay, we need to go towards more offensive innovation. Not a defensive innovation. Because what's happening is that the speed of things is just mind-boggling. Look at how many tweets are being posted just this very second. There's probably a million. It's mind-boggling how the speed is increasing. So we need to be more offensive with innovation in this regard. And then ultimately we have to think about what's happening here is we have to base our future on the digital, mobile, and social-native system. Not on the native print system. Print is nice. I love books and I love printed newspaper. But that is not the future system. The operating system is digital. So how do we do this? And here's the other thing that came with this, of course, until now, if you had a newspaper or a TV station, you had an attention monopoly. Because the fact that most people needed to invest a lot to be on television or to have a printed newspaper, you have to print it, you have to put it in the truck, you have to put it into the store, cost lots of money. In return, you've got to have a monopoly. Not monopoly in the sense of bad, but in the sense of fact of distribution. When I was a musician and producer, you couldn't exist without a major label contract, because you wouldn't get distribution. That was the end of it. So now it's digital. So that changes the whole equation. We're all moving the cloud. Basically all content moves into the cloud now. And that creates an entirely different universe of what we can do. Because the costs are lower, much, much lower. In fact, their copy costs are zero, essentially. Production costs are probably somewhat the same, depending on what you do. Also the cost of promotion. When I was a musician, if we wanted to get a gig, we had to send out CDs, like 500 of them, and then make phone calls to get a gig. Today, you use YouTube and Sonic Bits and Twitter and Facebook, and people say, we hate you, we'll never give you a gig, whatever they're going to say, but you don't have to spend any money. It's a whole different way of thinking. So in Brazil, where I do a lot of work, this newspaper, Folha, has already pretty much said what all newspapers around the world are about to say, which is that print is just another screen, an expensive screen. In Switzerland, where I live, people don't mind to spend the money, because they still have money. It's very price-insensitive. In Spain, if you can save five euros by stopping to buy a newspaper, you will. You read it on the mobile phone. So this system basically means that now we have five or six different screens. The print screen, the mobile screen, the television screen, whatever you're going to use, a tablet, a smartphone, and so on and so on. It's just another screen. And the challenge here will be that the cloud, with the crowd, with the people, it's all going to be about the filtering, the curation, and the packaging. So when you're in the content business, you're not actually selling the content. And we never have. This is not a surprise, I hope, to most of you. But 78% of the entire content industry worldwide was paid for by advertising. And the rest was paid for by taxes. And very little of it was paid for by direct subscription or by purchase. Of course, apart from books, which are physical products. So how will all that work? We're basically looking at this combination of things and the values shifting from distribution to attention. And if you stake your future on distribution, you're in deep trouble. Because distribution becomes omnipresent now. Yes, you need a high-level satellite cable network to broadcast live sports events. If you put it on the mobile internet, it won't work. A million users will make a crash. That's today. In five years, that problem is solved. Brazilian, Chinese, and Africans will use that to watch live sport events. So where will this go? I think in general what that means is that attention will be shifting from this idea of saying, yes, I can get a copy. To the idea of saying, I have an audience. And the business model chains. And the users themselves are now creating what's referred to as meta content. So when I'm watching a TV show, and I use my tablet, I can tweet about the show. That creates content that's relevant to the show. In fact, now a lot of TV producers have started watching the Twitter stream of their current show to write the future show to see what people are going to see there. So the meta content becomes really important for a lot of people. And basically these shifts are really, really powerful for authors and creators and the people who actually make stuff. They're not so good for people who used to distribute the stuff. Because clearly what's happening here is that as a maker, I'm going to be indispensable here. I mean, whatever you're going to do without me would not be the real thing. You can make a copy of my song, but how about everything else around it? You become more important as a creator, because people through the internet are also connecting to the creators, as we can see on YouTube and many others. So almost all creation becomes transmedia. We have more likelihood of what are called digital Darwinism. Everybody publishing everything all the time creates a huge amount of noise that has to be filtered. Distributors and the non-creators will resist fiercely this change. Clearly because if you are a pay TV distributor, your business isn't content, your business is distribution. And you don't like this idea because it cuts you out. So there are a lot of things here that basically says that legal frameworks of this must be adapted to fit this age. Because a lot of these things result in dysfunctional markets. To where the creators are looking to connect to the users, the users are willing to pay the creator, but the middleman says, no, no, no, we don't do it this way. Basically the Apple proposal is my way or the highway. You buy the Apple stuff, you pay the euro, and you're a nice guy. But you're going to spend 10,000 euros on 10,000 songs. Kind of unlikely. So what we have here is a real issue. This is an old ad from the National Music Publisher Association. Who is there to protect your rights? And this of course is 10 years old. I hope they have changed the headline. They probably have put two question marks at the end now. But what we need to do here is we need to move from protection to engagement. Protection will not make any money here. Protection will just make sure that everybody gets around to you to do what they want to do in the first place. There is no technological answer to this. For example, copy protection hasn't worked. Hadope law hasn't worked. Three strikes hasn't worked. DVD encryption has only worked for the dishonest. If you're honest enough to buy a DVD in America, it won't play here. Okay. So clearly the idea of protection is kind of an interesting scenario, but it's like a stone age kind of an idea. Because it's the survival of the strongest. Benjamin Franklin said about this, those that are willing to give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety. I mean it's not me saying, it's him saying so. Complain to him about that, you know. This was when? Was it 17, whatever? So those laws designed to protect distribution, not the creator. This is the same law that says we're going to pay $1.8 trillion of gasoline subsidies around the world so people can continue to drive their cars because we don't want the oil companies who make a boatload of profit to lose their benefit. It has nothing to do with us, the consumers or the planet itself. Same issue. So Tim O'Reilly is a publisher from the US. He says basically if you take out more than you put in the ecosystem eventually fails. And this is what happened in the regular industry. You take out as much as you can but you don't actually make a new structure. You just mill out the old structure until it collapses. So we have this issue, I think, with many of these as I said earlier, the movement to an ecosystem, right? This is currently in the making. The parts of this ecosystem are, of course, the social networks led by Facebook and many other internet-based ideas. One of the central ideas of this, of course, is the fact that it's now about access, not ownership. You can buy vinyl records if you're a collector. You can buy books. You can do that. But the trend is not that people are going to buy more physical books or buy more records or buy DVDs. It's that we're now starting to say, well, if we can access it, that's enough. In America 78 million people listen to Pandora, which is an online streaming radio, on the 3G network, replacing regular radio, basically. That's where everything is going. And many of us who are creators like this idea, because we make more money with ownership and we can control it. I mean, clearly if I'm a book author, ownership is better in the sense that I have something to look at, of course, but I have a privileged position in the store, in some physical store. I don't have a privileged position on the internet. There's 60 million other books. Think, what is the number? 10,800 new books every single day in Europe are published. So this is the Akash in India. I already talked about this. So when books, for example, go into the cloud and they become electronic, then we have to create new means of monetizing them. We have to find new ways of how the money is being generated. And Kevin Kelly from Wired Magazine calls this the new generative, the new ways to make money, the digital ways. Give you an example for the opera, the New York Metropolitan Opera. They have now put a system in place to where you can go into a movie theater in 380 places around the world and you can watch the opera remotely. People dress up and they pay $10 and they go there to watch the opera, live stream in high definition. That's a whole new revenue stream for the opera. That didn't exist. It's not that hard to do. So I'll give you more examples on this later, but basically here's a whole list of things that are happening here. And in the old world of content, it was all about centralized media, about schedule TV shows. All the content was made inside. You had hyper-competition, a pyramid set up, proprietary things and so on and so on and so on. And now you have a shift towards this side of the equation. To where it's about distributed media like we have, for example, on YouTube. Real-time, invented anywhere. All lists, you can download the PDF later and look at this in detail. But this is where the whole shift is going. What we need to do as a society, however, we need to build the framework for this to happen. The framework means we have to have a licensing provision. We have to have a way that says this is okay and this is not okay. Right now we live in a pretty bizarre world. Everything that we do on the internet has to do with movies or books or music is largely illegal. In many countries, parentheses are illegal because it's not actually licensed yet. It takes years to figure out how to do this. So this process of catching up with reality, we're now living in a world like this, based on millions of devices, very cheap ones, very expensive ones. And this is going to be less and less about making a copy. What is that actually making a copy? And so by extension, what is the copy? Right. I mean, if everything is a copy, then I need a right for everything, which I'm not going to get. So then, by extension, I'm a criminal every time I do something, which is a fact for our kids. My own son was busted for downloading music from the internet and he didn't actually do it. It was somebody else on his network. So it creates a bizarre situation where our society isn't able to monetize at the same time that all the people are happily selling those devices and the telecoms are selling us access. Kevin Kelly once again, he said, this is a real dilemma. He says, when copies are free, you need to sell things that can't be copied. And the copies are in fact free. I mean, we may not want it to be free, but it's very easy to get a copy of pretty much anything. So how do we do this? How do we sell things that can't be copied? Those are the new contexts, the things that surround it. And if you're looking at these stats from the US, that's going to happen in Europe as well. Research in the US from August 2012, it says almost 50% of kids asked how much money they spent on music, zero. And that's just music, right? We're going to go to films, books, and so on, right? And some of them spend a little bit something. That basically means that music, for example, has to initially be somewhat, I call it, feels like free, like TDC is doing, to where you don't notice that you're paying, but you are paying somewhat, because you're part of some payment mechanism. This is very much like radio. When you're listening to radio, you're not paying, but it's not free to the artist to be on radio, but no artist in his right mind would refuse to be on radio, because it's free to us. But do keep in mind, of course, that radio was initially a pirate medium. Every artist, producer, musician, labels back then, no labels, but publishers said we don't want radio, it's free, bad. People will stop going to the show, they will stop buying the sheet music, because the radio's free. Turns out radio was the biggest boost for music ever, invented. And the same thing is happening here with the internet. So in this, you know, we hear the sucking sound of money. When you look at what's happening on the web, if you put all the DVD library of the world on the internet, and you would ask people what they're happy to pay, then in general the answer is about one-tenth of the physical value. That's bottom line. So if the DVD is 20 euros, you know, if I was in the right mind of things, I may spend a euro or two to get it on the internet. That's sort of what people are willing to pay. For example, a song would be a dollar, then on the internet would be 10 cents. That's what people are saying. So you can hear the sucking sound of money there, because basically what's happening is, in the digital shape, people don't think of it in the same way. Because the copy is just a copy. So how do we do this? How do we define selling? What does it mean to sell a book? I mean, now you can rent a book on the Kindle. You can take my book and buy it and rent it out to people around the network of Kindle. And then while they are reading it, you can't continue to read it. But they haven't bought it. How do we make money when selling is a different word. And I think, unfortunately, this is BP, of course, in the Gulf. Traditional rights licensing is essentially a burning platform, just like oil. Because what's going to happen here basically is that we have those old rules based on those resources, but the new rules have to be different. And this is not against copyright per se, but it's saying, what do we do with this when everything is a copy? Fred Wilson, who is one of the lead investors in Twitter, he says, restricting access to content is a bad business model in the age of a global network that costs nothing to distribute on. As I was saying earlier, if we manage to get away from distribution and go towards an attention-based model, which is really what the internet is all about, publishing-based model, then we can find the key to this and we don't have to do what these guys are doing, expiring movies or blocking my access to the New York Times for $300 a year. Restricting, protecting, I think, is essentially a suicidal strategy with very few exceptions. There are some exceptions, but in general, that's where we're going. So I think what needs to happen here, and this is, you know, Denmark is a very good example of this, we need to actually bark up a different tree. This is a tree of control and this is the other tree of engagement and permission. Finding a solution is based on permission. I mean, there are many provas to this. You know, that control does not usually generate money when it's so easy to be on a different tree. So this assumption of saying that control makes money is substantially flawed. And so, in all of the hundreds of conversations I have with media company executives, this is what they think, you know, that the Pope is God and control is money. Well, you know, Pope is important, but he may not be the same as God. But content and controlling content is not the way to monetize in the future but is to find a way for people to actually make a payment without being forced as they are doing in hundreds of other cases. So here's a short list, right? Traditional violence logic is based on distribution and therefore it's mostly flawed. Because distribution is no longer a problem. And in five years we don't even know what that means. It's just a click of a button for anything. New social contracts are emerging quickly. For example, on Facebook, there's a new social contract that says if I like somebody on Facebook push the like button I get something in return and they get to be liked and look better to the others, right? That's a form of a social contract. So if I hit the like button on British Petroleum or they call themselves now Beyond Petroleum, whatever that means. But if I hit the like button they say, you're just an idiot, he likes BP, right? That's a social contract and you're watching what I like and there's what's called Lycanomics where there's a book with that name now too. So real time and social is beating search. This is the other thing that's happening. When I hear my friends what they're listening to and what books they've purchased on Amazon I may buy the same book. I don't search for books anymore. I just monitor my friends. Control no longer results in higher prices. I mean telecoms know about this, right? Now that you have competition you can't control what people are paying. Like in Switzerland we paid the highest prices for telecom services in the world because we were controlled by two companies. And that's now changing, right? So increasing the client of attention monopolies, newspapers, radio and so on, inevitable interdependence. This is the other really painful thing. If you worked in media 20 years ago you were interdependent. You were independent. I mean the empire of Microsoft and software, right? Electronic arts and games. Universal music. This were essentially empires and they could do whatever they wanted. We just part of it or not. All of a sudden we're finding out YouTube is building an ecosystem advertisers, device makers, networks, mobile operators, content creators. YouTube has just launched a program where they spend $500 million on actually commissioning their own shows. Because they want to start a new ecosystem. So the problem is that we've grown up with what I call an ego system, right? With systems that are controlled and we're in it or you're out. In the music business where I worked a long time you had to be part of the top level four guys that exist. So irrelevance is the threat for incumbents. Television, radio and news. Irrelevance means as we saw in America the Huffington Post, you know, a block, a bunch of amateurs basically took over AOL. I mean when you become irrelevant you're in deep trouble. And this is going to happen with newspapers and radio stations and television stations with broadcasters unless you find a way which has happened in Denmark fortunately in many ways, or in England the BBC iPlayer, to remain relevant. Your threat is that not that people don't like you if you're a public broadcaster they obviously do, they pay taxes, right? But that you may become irrelevant because the way that you're doing things is from 50 years ago. So remaining relevant is one of the key challenges. And you know, if I got a euro every time the question is content king? Like reality really is. It's all these things that are the royal family, right? Context, packaging, timeliness, interface. For example, I'm a subscriber to the Economist. I don't particularly like their views they're fairly conservative. But what I like about the Economist is that when I get this app from the Economist for $150 a year or so what I really like about it is of course the writing is good, that's a must, right? But I can listen to the audio version of the magazine in my car. They give me an audio version. You can download MP3s into the app of the entire magazine. And that's the only time I have is to read this magazine while I'm driving. I obviously can't read it, right? Not yet. So I pay $150 for what? For the embodiment of the content. Not for the content. I pay $10 a month for Netflix not because I don't know how to use BitTorrent, right? It's a lot easier and it's only $10. For movies that's a pretty good deal. Your cable is $100. So basically I have to create a way of saying, okay this is really the future. I mean in every little future what we've seen in music and films and other content people copying and sending stuff around that's just about to happen with physical objects. This is a thing called a 3D printer. You think this is science fiction this is happening right now, right? Print my shoes. Print all kinds of things. This is happening with actual products. In five years most of the stuff that we're using in companies everyday products like cups or most will be printed on demand. So first media and next copying stuff. This is a little license for printing a shoe. I mean it's look at the Eiffel Tower it's quite nice actually. So my friend Ross Dawson who is also a futurist in Australia you can download this from his website FutureExpiration.net He looked at the newspaper business and he analyzed it and said basically the reason that people are spending money on news is not because they like the author which they have to of course that's a starting point but because there's hundreds of different kinds of benefits why you would do this, right? Community, reputation the brand like in music this will be like ECM records why am I buying ECM records music you know I could get it on YouTube for free but I'm buying the record because I like Manfred and his work, right? It's a brand. Filtering, personalization, relevance, timeliness that's basically the idea of new values built around the content and for example the Kindle is a great example of this the value of the Kindle is not the book the book has to be good otherwise I wouldn't do it in the first place is that I can transfer it to my different devices and synchronize it that's the value and it's easier than stealing it basically again Kevin Kelly says immediacy, personalization, authenticity cross pistols and Nash it's a band that some of you may know if you're really ancient like I am they launched an iPad app a week ago you can subscribe be a fan of this is about $30 a year or so but everything on the iPad app is available on the internet and on YouTube and on whatever websites you can find all of it but the iPad app puts it into a nice little box like a DVD basically and when you have it it's a lot easier than searching on YouTube or making lists or you know so it's about authenticity it's from them, right? it's real, it's immediate and you have to go search so I spent the $30 if it was $500 I wouldn't do it so that's basically the trick behind the whole thing we're now moving into a society that is based on moving away from the centralized media to the decentralized to the distributed here's an example of how that works basically RTL and big television stations and networks like them to decentralized and distributed Facebook, we are the content of Facebook and Facebook doesn't have TV not yet but there they will we are in fact the content producers of Facebook, our photos, our videos our comments, we are the show of Facebook in fact some people would say we are the virtual perpetual reality show on Facebook with us but this is a trend and will there be centralized media in the future? Yes, it won't go away and there has to be for example for news and public services but you'll see this moving towards distributed media, content commerce, users, publications and then you have this phenomenon that traditional television is just an app it's one of the buttons on your screen so if you are a television station that used to be the button number one on the remote control and now you're just one of a hundred buttons on my iPhone what are you going to do? how are you going to stay relevant? how are you going to get people to pay attention to you? I mean I can put you right next to Ted Talks and 4RTV and Big Think and all the other places and they just option menus and will I pay taxes for that? I would because I want stuff to be produced to be inside of this which is why I do but the logic clearly is if you're not going to be on there you're not going to do the same thing so television for example now is merging with social networks social networks are the next broadcasters all this stuff happening in what's called social TV people being able to interact through television is mind boggling and a huge opportunity of course for television companies and we're going to see this cloud based services like Spotify and others they're creating a huge rights dilemma because the cloud is cheaper it has to be cheaper than the physical product like one tenth as I was 90% cheaper how do we do this? and how do we get the right framework for this to be loud and not allowed and so the economists as I was mentioned earlier they said basically the broken idea of a pay wall this model is completely broken so my take on this is it has to be pay will not pay wall how are you going to force people to pay for content when it's so easy to just ignore you well the reason is you know it's a pay will because it's going to be so good that I want to pay and that is the model that we need for music and for books and everything else so rather than putting up this wall like this and saying you can go over this wall just put money in you'll get 2% of people like you do with ITNs roughly 2% and gets voluntary payments I mean last year 6.5 billion dollars were spent on virtual products flowers cards on farm will what have you people are spending money on things we just have to find a way to get them to convert them so the problem is not the pay it's the wall Netflix versus New York Times this is the most prominent newspaper in the world the best writers are globally the most traditional newspaper it's been around forever now they have this ingenious idea that they should cash in on this so the pay wall in New York Times is 300 dollars a year so when I go there more than 10 times in a week they say wait a minute you like us so go away or pay 300 dollars and now I thought about this I started an argument with them and said ok I'd be willing to pay under the following circumstances but they basically say it's 300 dollars or you can just not be there so what has happened is the biggest newspaper in the world in a country of 320 million citizens the US you have a million subscribers I mean this is a complete other disaster a million subscribers ok a million times 300 but they don't all pay 300 it's quite a nice amount but at the same time they lose all of their advertisers saying you know what's going on with your traffic traffic has dumped 70% or something that's a suicide model so at the same time New York Times saying we solved the problem we've got a pay wall so Rory Sutherland the chair of the IPA said basically what we are prepared to pay for things is extraordinarily subjective and incredibly contextually determined in other words there's no recipe we have to figure this out every time and movies aren't the same as music people expect music to be feels like free and maybe some upselling but movies not the same thing because we're watching for 2 hours so the other thing that's happening in this context is that we have telecom companies and we see in this country as a good example telecom companies are saying you know what if we don't become part of what people do with content we become marginalized to just being a stupid pipe and wireless traffic phone calls so this is what's happening that telecom companies around the world are saying we're going to get involved with media not by producing it of course but becoming a platform so Singapore Telecom, MTN Telefonica, O2, TDC and all the other companies are going in this direction this is the what I call a telemedia ecosystem it's inevitable the telecom economy is roughly 3.5 trillion dollars a year music business 17 billion you can't even count the zeros in terms of percentage so clearly this is the way to look into the future to say if you're content producer that is your partnership device makers social networks and operators and telcos they're not the enemies as they've been pointed out in many ways to be enemies basically this is completely clear that content and connectivity belongs together they're like twins why would I connect and buy DSL services if there's nothing to look at TDC model is based on this added value of free music so we're seeing this in Europe all of the mobile operators they are in deep trouble because calls are getting cheaper data is getting more expenses are going up but competition means that the revenues are going to decline brutal decline in core revenues so they all have to come and do something in the content space which is clearly going to be our future so now we can say goodbye to this idea you guys are over here and the creators and the TV guys and then there's the tech people the evil tech people over here that's gone those silos are toast the business model means that you have to converge those you have to completely converge those otherwise there won't be a business for any of those I don't have enough time to get into details of bundles but bundling is happening anywhere in the world just two weeks ago Spotify bundled into Deutsche Telekom T-Mobile unfortunately an island is happening as is TDC we'll hear about later books bundled into services like 3 and clearly the reasonable permission solves the piracy problem reasonable permission I mean clearly we can see this happening on a global scale as soon as there's a model available that works, that is low friction high quality little money but everybody is using it problem solved there's possibility what's happening with mobile devices I mean clearly going from roughly a billion smartphones to 5 billion smartphones I mean if we can't get money out of that then I don't know how that's going to happen I'm going to jump ahead a little bit because being vastly optimistic as usual about how much time we have here so you can see I had a few other things panked out here for you alright, I'll publish this later so you can just look at the PDF so most important now I think for our future is to think about what's happening with free free has made out to be a bad word because basically allegedly means that we don't get paid but what's happening with free is that it becomes a basis of putting stuff on top LinkedIn for example is a great example most of you guys are on LinkedIn let me see who pays for LinkedIn who is a premium member of LinkedIn come on you don't want to admit it but usually in each room I get one or two people and you know how much money LinkedIn made last year out of the free model 560 million dollars most of us use it for free but we create value by being there by having a profile and then these companies want to hire people they use LinkedIn to find people so it's based on very much the same idea of free so basically what's happening here is that as Kevin Kelly again says the new generative and there's many we have to create those in each industry music, publishing books, magazines, news they're all different in each industry and television and radio to actually be relevant I mean all of these things are enough what's called RTP reason to buy reason to pay this is crucial for example localization creating context cloud to device management all of these things that are basically becoming part of our technology so J. Walter Thompson JWT has a great slideshow on this about music that you can find on Slideshare just look up JWT and music on Slideshare they have like 150 slides on how new values are being generated from music and this is quite interesting to see for example live streaming concerts branded products motivational objects apps as I was talking about earlier app albums all these are examples of what can happen on a digital platform but all of these things are based on one thing this will not work if we don't have permission to engage if all we're doing is fighting for the old model to stay around this will clearly not work so you can download this themselves but basically I think that the model that we're looking at this model for the future and this unfortunately what's happening now is because of the nature of the internet is that this initial thing is also going away so basically we have to start with free or feels like free and this is what's going to happen with Amazon Kindle for example that Amazon will say you know what the Kindle device is free if you buy 10 books anytime just next year or two or three because that creates the same sort of sucking effect I have this I'm going to use it so with music or with films or television it's the same idea the same concept that we're going to see this happening in the future again I'm going to have to jump ahead a little bit because time is fleeting another good thing that's happening that's really kind of crucial is that content producers are starting to go direct this is Louis C.K. he's a comedian he's a very famous comedian in the US he said basically he has enough fans now on the social networks and he has enough social capital to start selling directly so he's bypassing all of the ticket agencies the labels the publishers and selling direct and going direct to the web and this is becoming a much business model that we're going to see explode the next couple years and the brands are also going direct like the Maya Clinic is using Facebook as a primary vehicle of talking to people this is also quite a challenge of course for media companies storytelling is changing using all different formats of audio and video and you know I'm sure if you're in that business you know exactly what I'm talking about let's get back to what I said in the beginning if you're in the content business you've got to lead the revolution not be a victim of the evolution because the evolution is now moving so fast you don't even know anymore what happened last week it's already moving at the speed of light and when the other three billion people are coming online which is what's happening right now the Brazilians, the Indians, the Russians they're going to show us how this works and this is very important so I'll summarize very quick you know the offensive innovation okay here's my summary don't have time to go through all of this but we have to take our future on social local mobile that's where everything is moving the creators and the users are becoming center stage this is also very important so the distributors and the vehicles are now less important than the creators and the users the friendly mobiles are coming back and this is a very important point that public content licenses are inevitable we have to figure out a public structure for example if there was a public license for music on the internet would we have to worry about piracy? we wouldn't because people could use a license like they use for radio if what TDC is doing here as a private company would become a compulsory collective license then everybody would use it but if that doesn't exist then you have to go and negotiate for five years and spend lots of money there's too much friction and won't work as we can see in other countries has been tried so public licenses are inevitable to regulate and help this grow access on ownership think tablets video and creating a new ecosystem I think the challenge here really is that once we go away from what content on media used to be like which was a system based on distribution then we have to reinvent what it means for the future good news is that I think again the creators and the users are the centerpiece of this and this is the most important thanks very much for your time and it's getting hot in here thanks