The Destruction of Innovation? On Pfizer’s Proposed AstraZeneca Acquisition

I worked at Pfizer for two summers during college, and although I no longer have any connections with the company, I’ve followed its corporate development with a distant fondness over the last couple of years.  My last summer corresponded with a changing of the guard and a shift in direction for the world’s self-proclaimed largest research-based pharmaceutical company.  Jeff Kindler, erstwhile CEO, was dismissed by the Pfizer board and replaced by current CEO Ian Read after a series of disappointing quarters and a bizarre case of senior-staff palace intrigue.  Check out this outstanding Forbes piece for a full rundown of the mutiny that occurred.  (Seriously, it’s worth the read.  You’d never imagine so much drama could be manufactured by a drugmaker.  Bickering over helicopters is involved.)

Read’s appointment as CEO heralded a new focus on investing in smaller, case-specific drugs instead of “blockbuster” drugs like Lipitor.  Pfizer’s revenue throughout the 1990s and 2000s was buffeted by a small cluster of huge sellers, but many of these products began to lose patent protection as the decade came to a close, leading to generic competition and significantly lower profits.  Attempts to invest in new blockbuster drugs were largely unsuccessful; multiple late-stage drugs, each bolstered with hundreds of millions of dollars of research funding, were cancelled due to poor late-stage trial results.

Beginning in the late 1990s, a series of company acquisitions (and their product portfolios) was used to shore up revenue streams in the absence of innovative drug creation.  Pharmacia, Wyeth, and Warner-Lambert were all purchased and integrated into Pfizer within the span of a decade.  The company’s revenue streams and size grew but its share price did not.  Read’s focus as CEO was to pare Pfizer’s organizational bloat and alter its boom-or-bust funding framework.  The new goal was investing in a broader cohort of smaller, targeted drugs that had better chances of success.

At least it seemed like Pfizer planned to chart this path over the next decade.  Instead, Pfizer’s recent attempts to acquire British drugmaker AstraZeneca suggest a new course has been abruptly plotted.  Pfizer is interested in purchasing AstraZeneca for the same reason it acquired Pharmacia, Wyeth, and Warner-Lambert: to obtain a new slate of prospective drugs in order to shore up its own pipeline.  The additional driving force that makes this deal unique is the tax incentives Pfizer could unlock by “reincorporating” and shifting its corporate headquarters to the U.K.  In doing so, it could take advantage of British rates and cut its corporate tax from the U.S. rate of 35% to 20%.

Talks between the two companies recently came to a standstill, but a number of major AstraZeneca shareholders are pushing the company to re-enter negotiations with Pfizer.  The last offer Pfizer made was £55 per share and AstraZeneca’s board was looking for £59 per share, which analysts think may be a palatable amount for Pfizer in the end.  This translates to a total purchase price for Pfizer that’s well north of $100 billion.

AstraZeneca, for its part, has been strongly resistant to Pfizer’s takeover attempts.  Since CEO Pascal Soriot took over about two years ago, AstraZeneca has posted strong fiscal results and has developed a promising pipeline that could drive significant growth in the near future.  Soriot’s position throughout negotiations with Pfizer is that his company’s potential for high-quality products will be subsumed by the hassles of integrating into Pfizer’s corporate structure.

He’s not alone.  Bill George had the following to say in an op-ed for Dealbook:

Does anyone believe pharmaceutical companies can create long-term shareholder value by chasing lower tax venues and cutting research and development spending?

AstraZeneca’s board would do well to evaluate whether the company’s progress will continue under Pfizer’s management. If history is any guide, the Pfizer acquisition would lead to a mass exodus of Astra executives and scientists, the closing of more research labs and lost momentum on vital research projects. Mr. Soriot’s scientific leadership could become a casualty, with Pfizer’s financially minded executives dominating the decision-making.

Who benefits from this merger? In the long term, it is doubtful that there will be any winners. AstraZeneca and Pfizer employees will lose jobs, patients may lose innovative new therapies and American taxpayers will lose as Pfizer legally avoids higher taxes in the United States. If history is any guide, Pfizer shareholders will be losers as well, along with AstraZeneca shareholders who retain converted shares.

There has been much grumbling of late regarding corporate acquisitions that seem to prioritize short-term profits or narrow brand assimilation over long-term innovation.  Facebook’s recent purchase of Oculus, arguably the most promising manufacturer of virtual reality headsets, was heavily criticized on the belief that Oculus’ amazing technology will be absorbed for limited, gimmicky commercial ends.  (Anyone want to dig up some 3D carrots in a virtual-reality Farmville?)  It’s similarly ominous when telecom monoliths like AT&T start gobbling up huge television organizations like DirecTV.  In both cases, customers are suddenly saddled with increasing corporate bureaucracy and a lack of independent market choices.

But these kinds of acquisitions have potential upside.  Facebook could use Oculus to build amazing virtual worlds and AT&T could leverage DirecTV’s content to provide a more robust programming experience for its phones.  With pharmaceutical companies, however, it seems like there are very low chances that any kind of synergy will develop.  Pharmaceutical acquisitions involve real disruption to research and laboratory testing and even moderate delays could result in lost trials or benchmarks.  Restructuring inevitably leads to a shakeup of teams and groups as assets are reorganized and paired down.  Jobs will be lost and employees will probably look to leave if they can.

It seems the primary (and perhaps only) beneficiaries of Pfizer’s acquisition of AstraZeneca would be (corporate) shareholders.  Shareholders like BlackRock are the reason AstraZeneca is even considering returning to the negotiating table, since a sale would yield enormous premiums for all parties with a stake in the company.  Bill George is right: this is a short-term boost for investors, and it hurts employees, scientists, doctors, and customers across the board.

Regulators have a responsibility to balance the right of businesses to conduct private deals and the benefits of the public who live with the consequences of those deals.  Most large-scale acquisitions have significant ramifications for communal well-being, but those in the health sector are arguably the most important since their impact is directly tied to life and death.  Pfizer’s purchase of AstraZeneca would signify corporate and legal prioritization of short-term moneymaking for a select number of shareholders over the potential health benefits of continued research.  If Pfizer could guarantee that this deal would result in additional funding for drug development, it’s doubtful there would be so much concern.  But this promise can’t be made, and Pfizer’s history with acquisitions (as George describes in his piece) is not promising.

I hope U.S. and U.K. antitrust commissions address these public benefit questions if an agreement comes to pass between Pfizer and AstraZeneca.  Megamergers and acquisitions are not inherently bad, but deals like this reek of corporatism instead of healthy capitalist expansion that will benefit the majority of parties involved.   This is even more emphatically true in this case given Pfizer’s lackluster history of sparking new innovation with its purchases.  Acquisitions should build on existing structural gaps to yield new value and innovation instead of just padding investor coffers.   At what point will regulators declare that enough is enough?

Heartbleed Gushes; How Will Republicans (and Democrats) React?

Bloomberg reports that the National Security Agency allegedly knew about the Heartbleed computer bug for almost two years and exploited its security flaws to collect “critical intelligence,” including passwords and internet records.  Heartbleed, which was revealed to the public on April 7, has been called one of the most significant security threats the internet has ever seen.

According to Bloomberg:

Putting the Heartbleed bug in its arsenal, the NSA was able to obtain passwords and other basic data that are the building blocks of the sophisticated hacking operations at the core of its mission, but at a cost. Millions of ordinary users were left vulnerable to attack from other nations’ intelligence arms and criminal hackers.

The NSA has come under heavy scrutiny in recent months due to Edward Snowden’s leaks on its data-collection activities.  If the Bloomberg report is true, the NSA will have to contend with allegations that it sacrificed the digital security of millions of American citizens in order to collect information on a small cadre of potential security concerns.  The NSA has already issued a statement denying Bloomberg’s claims.

It would be deeply troubling, to say the least, if any of Bloomberg’s assertions are corroborated by additional evidence or reporting.  That the NSA collected bulk quantities of phone records for purportedly defensive ends was and remains highly questionable, but to additionally put huge quantities of personal data at risk in the collection process is a horrifying prospect.  It is difficult to claim a moral imperative for protecting a country when said efforts directly lead to greater, tangible risk for its citizens.

Additional investigations will elicit more information about the NSA’s involvement in perpetuating Heartbleed’s security gap.  But they will also likely invite political commentary and spur a fresh cycle of debate over whether internet privacy and federal data collection have become too invasive.

What’s politically unique about this situation is that both Democrats and Republicans have been surprisingly fragmented in their views on national data collection over the last few months.  Neither party has seen a consensus in terms of a policy imperative going forward.  Huffpost Religion reported back in February:

The Republican National Committee and civil libertarians like Kentucky Sen. Rand Paul have joined liberals like Massachusetts Sen. Elizabeth Warren on one side of the debate — a striking departure from the aggressive national security policies that have defined the Republican Party for generations.

On the other side, defending surveillance programs created under the Bush administration and continued under President Barack Obama, are Florida Republican Sen. Marco Rubio, Democratic former Secretary of State Hillary Rodham Clinton, and the House and Senate leadership of both parties.

One might expect the Democratic Party to be the preeminent voice against data collection programs, but President Obama’s proposed security policies aim for cautious reform instead of a full rejection of the status quo.  This is not necessarily a bad thing, as stripping the entire program to the bone could impair key programs that do help prevent terroristic activities.  But the new Heartbleed allegations suggest even greater NSA influence than what was previously understood, and given the President’s figurehead role and current cautiousness in proposing new restrictions, Democrats may be handcuffed in how far they can push back against this kind of overreach.

This would, in theory, present Republicans with the opportunity to remake at least one facet of their national policy platform.  Internet security and “individual digital liberty” could become a significant plank in the GOP’s body politic as it looks to rebound and re-brand after a shellacking in 2012.  To champion individual rights online without government oversight or intervention could be the starting process in building a new coalition of voters, particularly those in the 18-35 range who would otherwise be turned away by the GOP’s current platforms.

The NSA leaks have yielded a Republican Party that has been surprisingly nimble in making that switch.  The Atlantic noted in January:

And is if to signify that the GOP establishment is changing along with its elected officials, the RNC voted in a winter meeting to literally renounce NSA domestic surveillance. “It was passed by a voice vote as part of a package of RNC proposals,” Benjy Sarlin reports. “Not a single member rose to object or call for further debate, as occurred for other resolutions.” That’s incredible, because it’s almost impossible to exaggerate how unequivocally the resolution condemns the NSA.

Of course, as noted above, there are still significant factions in the party that are opposed to how far these kind of condemnations should go.  That Atlantic article notes that Bush-era GOP architects fear that such a full-scale repudiation of the NSA will undo the national security gains made in the preceding decade.  The Huffpost article cited above paints a similarly conflicted perspective of the party as a whole, too, suggesting that things might not be as cut-and-dry as one RNC vote suggests.

Still, it’s striking to see just how far the Republican Party has changed course since President Bush left office in 2008.  Does this suggest the GOP will continue to pursue policies that protect technological liberty going forward?

Not quite, unfortunately.  Other individual-centric digital policies are being opposed by the GOP, and those kinds of policy measures negate credibility earned in opposing domestic surveillance.  For example, Republicans oppose recent FCC measures to re-instate net neutrality rules, arguing that they prevent internet service providers from fairly adjusting service prices based on consumption use.  That kind of policy makes sense from a pro-business perspective but comes at the expense of open, equal access for individuals.  One might say that pursuing such corporatist policies ahead of the interest of individuals will nullify the GOP’s chances to claim the mantle of deregulated, “for-the-people” internet use.  Businesses can be regulators just as much as governments.

The Snowden leaks and the Heartbleed allegations have presented the Republican Party with the opportunity to initiate a much-needed policy refresh.  Unfortunately, it looks like they won’t take that opportunity, at least not in full.  But it is good to see both Democrats and Republicans working together to tackle the problems raised by allegations of excessive data collection.  Hopefully these efforts will lead to both logical change in domestic policy in the short term and additional room for collaboration on other issues going forward.

The Church as an Institutional Ethical Consultant

I enjoyed reading Matt’s recap of Daniel K. Finn’s “Building Better Economies: Why Popes and Economists Need to Talk” lecture at Fordham. One paragraph of Matt’s write-up, in particular, stood out to me:

As Finn concluded his remarks, I was left wondering about what might actually be done to further the sort of dialogue he believes is necessary. Sure, popes have consulted with economists when they want to write about economics; have economists consulted with popes when they want to write about ethics? Do economists ever want to write about ethics? I approached Finn after the talk and asked him what he made of this asymmetry and how he thought it should be addressed. He acknowledged that this was a problem, and offered a few examples of forums and conferences that have modeled the kind of interaction wants to see become more widespread. Yet his examples were events that were sponsored by the Church! My point still stood.

As important as Finn’s thesis is, Matt’s observation speaks to the underlying issue with any sort of ecumenical-economic dialogue: it’s always a one-way discussion. No matter the extent to which the Church incorporates economic theory into papal encyclicals and other official documents, there’s no guarantee major economic institutions will integrate Christian ethical principles into their organizational frameworks.

Matt’s main point still stands, indeed. Not only are most forums for conversation usually initiated by the Church, but most ethical discussions in the business and finance community are reactive in nature. Prosperous environs are not conducive to calls for temperance. It’s clearly not a coincidence that major banks instituted more responsible protocols after the damage of the risk-fueled 2008/2009 crisis had already been done.

So what, if anything, could encourage secular organizations to engage the Church in constructing moral guidelines? Is it ludicrous to even consider this happening on anything more than a miniscule scale?

Perhaps. But the papacy of Francis has presented a unique opportunity for the Church to capitalize on its current favorability and crossover appeal with nonbelievers and non-Christians. And if we think of Francis’ first year as a period in which the papacy regained respect from secular society, it’s possible that the next few years could see the Church itself become a body worth consulting for guidance.

What I’m proposing, in effect, is a scenario wherein the Church heavily promotes itself as a sort of Christian Ethical Consulting Firm, a body that provides advice for organizations looking to reshape their culture. In effect, members of the Church could work with businesses and major economic groups to provide advice for growth and success within a Christian ethical framework.

Why would this scenario appeal to big businesses? The public’s post-crisis perception of most major institutions is still deeply negative; banks, in particular, continue to look for ways to make it seem like they’re working to atone for their sins. The Church could take advantage of this opportunity (be it sincere or simply superficial) and gradually work to advise the company on more responsible practices going forward.

To suggest that big banks would go to a religious institution for advice seems slightly crazy, especially given that the profit-maximization objectives of most financial institutions are in opposition to the Church’s economic philosophy. Without question, there would be limits to the Church’s ability to achieve the kind of economic justice described in Rerum Novarum or John Paul II’s encyclicals. Goldman Sachs would not begin donating its quarterly profits to charity after a brief morality sesh with Timothy Dolan. But the underlying goal would be a gradual integration of Christian ethics into different facets of a bank’s macro workflow, with the intent of achieving responsible outcomes over the long term. Not only is this kind of guidance going to look good from a PR standpoint, but it could engender business practices that might actually lead to more temperate growth and development. I’d bet that, in retrospect, the Bear Stearns board would have jumped at the opportunity to take on the Church as a consultant in exchange for moderately lower short-term profits.

The key to this scenario, of course, is the Church’s ability to employ people for this kind of consulting work who know what they’re talking about. If there is one concrete outcome from this year’s upcoming Synod of Bishops, I hope it’s the elevation of lay Catholic leaders in business, medicine, science, and other professions to more influential roles in the Church. Espousing a theology with effective, measurable outcomes requires the input of those who know their disciplines best and who also have a deep sense of faith and service. Their views should be viewed with equal weight to those of cardinals and bishops, at least in matters of their expertise.

The good news is that this is already happening! Late last year, the Financial Times ran a detailed story of how lay bankers were helping clean up the Vatican Bank’s messy finances. Just a few days ago, the panel of the Vatican’s new Council of the Economy (a sort of “ministry of finance”) was announced, and it includes seven laypeople with backgrounds in financial governance and executive leadership. I’d imagine lay professionals have long been asked to assist in high-level Church initiatives, but Francis has indicated a more extensive and foundational role for these kind of experts going forward. Let’s hope this is the case.

As noted above, there’s no need for this kind of consultation to be limited to business and economic matters. There are plenty of areas where the Church could apply its ethical principles in service of secularists who would otherwise have no interest in learning about Church teaching. Marriage comes to mind as an intriguing case study. The oft-cited statistic is that 50% of marriages in the U.S. end in divorce. Much has been said of how the Synod will likely tackle the issue of divorced and remarried Catholics later this year, but what if the Church worked to tackle the breakdown of civil marriage as well? Perhaps a consultant board could provide services to couples who are considering getting married, with a message of, “Let us help you make the most of your commitment to each other so that it’s as rewarding as possible.” It could employ lay relationship counselors to provide advice along the journey, advice rooted in secular language with distinctly Christian underlying principles.

The important phrase in the previous paragraph is “in service of.” Right now, one fears that non-Christians might view the Church with an attitude of skepticism for what Pope Francis would call its “legalistic” trends: pronunciations of what not to do combined with a focus on the consequences of these transgressions. The Church as a “consultant” would instead emphasize gradual reformation with a combination of firmness, compassion, and logic. You won’t engage nonbelievers by telling them what they’re doing wrong, but you might get their attention by proving to them the advantages of the Church’s way.

Most studies of Church attendance in the last few months have not found any measurable impact of the so-called “Francis Effect.” That is, there has been no jump in people attending mass despite the Pope’s high favorability. And that makes sense. One man might make people more understanding of the Church as an institution, but it’s difficult to single-handedly convince non-believers that Catholicism’s beliefs and practices are a worthwhile paradigm. Even if the Church doesn’t adopt the measures outlined above, the general conceit should be its priority going forward: engaging more effectively with non-believers on their grounds. This requires the presentation of ideas and beliefs in a way that makes sense on a secular level.

To be frank: my comparison of the Church to an “ethical consultant” is somewhat watered-down and clinical. It strips the mythology of a communion of people into a panel which provides advice sapped of explicit Christian associations. No doubt this would strike many as foolishly ineffective or a betrayal of the Church’s tradition, but I’m finding myself increasingly drawn in the other direction. The Church’s size and ability to unite believers across countries, languages, and governments is an advantage it should leverage. Using that weight to make a concerted push for dialogue with nonbelievers, on their terms, is something the Church can – and should – do.

Returning to Matt’s original question about economists and Christian ethicists: imagining the Church operating in the aforementioned manner wouldn’t turn the one-way street of economic-ecclesiastical dialogue into a two-lane highway. But it would provide a broader and more effective set of tools to make sure that conversation keeps growing and the effects of such dialogue have progressively greater impact. Francis has laid the groundwork for this type of cooperation to begin in earnest; let’s see if we can’t take those next steps to make it happen.

Shipping Out into the Cosmos

You’d be forgiven for thinking that RM has turned into a one-man operation over the last few weeks, what with Matt posting a slew of excellent pieces and me not making a peep. Thankfully, a couple of other side projects that have kept me occupied of late are winding down, and I’m looking forward to jumping back in and tackling Matt’s recent slate of arguments. (Especially that one about Douthat et al. siding with the Democrats. That should be a rollicking good debate.)

In the meantime, I wanted to post some brief thoughts on Neil deGrasse Tyson’s Cosmos relaunch last Sunday night. You’ve probably heard the backstory ad nauseum at this point: NdGT is hosting a successor to Carl Sagan’s popular 1980 television program, and the format has been juiced up with slick new graphics and high-definition footage. Perhaps the most interesting part is that Fox gave the show a relatively plum primetime slot, an unheard of decision for what amounts to a science documentary. Credit to Fox – a network whose current programming roster includes not one but two shows with “Hell” in the title – for trying something a little different.

The first episode was a mixed bag. Tyson is an engaging host with a warm, booming voice. He effortlessly nails the role of cosmic tour guide, providing a grounding point of familiarity in a frighteningly massive expanse. The organization of the episode didn’t take full advantage of his easygoing, jocular presence, though. Most problematic was the erratic pacing wherein some segments lasted far too long or were given unexplained weight in what amounted to an introduction for the show’s central conceit and thesis.

While the writers did a fantastic job of showing the geographical and temporal scope of the cosmos, a condensed “history of scientific inquiry” was comparatively short and punchless. It featured an oddly lengthy profile of Franciscan monk Giordano Bruno, one of the first Europeans to understand the extent of the cosmos but one who suffered persecution by the Church for his beliefs. Identifying the Church as a roadblock to pre-Enlightenment scientific development is an important point to make, but the central focus on Bruno seemed disproportionate to other deserving cosmic researchers and scientists. This segment created a narrative foil for progress in the Church but did so at the expense of a more holistic view of other key contributors to our understanding of the cosmos.

Additionally, I would have liked to see a more structured episode that clearly laid out where the rest of the series is heading and what specific topics will be addressed. A more clearly constructed breakdown of the history of science would also have been welcome.

That said, the graphics were very well done and should attract younger viewers in particular. The combination of live action film, animations, and sharp comic-esque animation for the Bruno history scenes worked well. The presentation was roundly engaging and attractive.

Of course, it all comes down to content, and the next couple of episodes will indicate whether Tyson’s work has the consistent substance to back the style. I’ve never seen Sagan’s original series, so I can’t provide an informed opinion as to whether Tyson’s charisma lives up to that standard or whether the writing does justice to its forbear. But the very fact that this team has pulled an educational science show back onto television – in prime time! – is already a measure of success.

The Benefits and Dangers of Personal Brand Journalism

Earlier this month, John Allen, Jr. announced that he would be leaving the National Catholic Reporter to take a new position at The Boston Globe. In its press release about the hiring, the Globe included this interesting nugget: “(Allen) will also help us explore the very real possibility of launching a free-standing publication devoted to Catholicism, drawing in other correspondents and leading voices from near and far.”

Allen’s move comes days after Wonkblog founder Ezra Klein’s pitch to the Washington Post for “an ‘eight-figure’ investment to launch a new site focused on explanatory journalism.” It also comes as Nate Silver, erstwhile New York Times employee and current Editor-in-Chief of FiveThirtyEight, prepares to re-launch his site as a Disney venture.

These and other recent high-profile journalist departures from newspapers (Walt Mossberg from The Wall Street Journal, Glenn Greenwald from The Guardian) are the latest indicators of what Michael Wolff calls the rise of “personal brand journalism.” Wolff argues:

There is a new vision of journalism – call it the auteur school – in which the business shifts from being organized by institutions to being organized around individual journalists with discrete followings… That’s a new notion, this solipsistic brandedness. The old organizational notion in journalism was exactly the opposite. There were never enough readers interested in one subject or one writer so you created a package of many subjects and writers, sharing the attention and the rewards.

Wolff focuses on the profitability of personal brand journalism in his column, but another question arises from his astute observation. Is personal brand journalism beneficial or harmful to the integrity of news reporting?

Newspapers, of course, are not doing well. They are losing both money and readers and have been for almost a decade. It would seem that high-profile reporters like Klein, Silver, and Greenwald would thus benefit the entire industry by leveraging their reputations to deliver high-quality reporting and content. Klein’s demand for $10+ million to start his new site seems outrageous at face value, but it suggests he is serious about providing an excellent and informative product with broad public appeal. This is certainly a good thing.

The problem with “personal brand journalism” is that while its lead figures may intend to provide substantive and objective reporting, their central roles might preclude the balanced, wide-ranging coverage that traditional news organizations provide. This doesn’t refer so much to an implicit ideological slant as to the fact that coverage will be largely aligned with each founder’s primary interests, or a more narrow news spectrum than “old media” organizations. Wonkblog tackles a pretty wide range of policy issues but does so from a specific “wonkish,” graph-based perspective. FiveThirtyEight will utilize data analysis to report on politics, business, sports, and more. Mossberg’s site focuses primarily on technology and culture.

The risk is that each of these individual ventures will lead an increasing number of viewers into more limited sub-strata of news coverage that (perhaps unintentionally) masquerades as a holistic overview of the news. Some people might argue that Wonkblog can be categorized as an objective news source that replaces the need for the Washington Post, but it’s a tough argument to win. That Klein’s name is so integrated with the site’s genesis and production reinforces the idea that it is not a true equivalent to the Post and cannot serve as a 1:1 supplement in its reporting and scope.

This issue isn’t particularly urgent at the moment. Major news sources, which provide broader coverage and demarcate news and opinion, are sufficiently vital to act as complements to personal brand journalism. But the trends are increasingly ominous going forward. The rise of “sponsored content” at sites like Time and The New York Times suggests readers will have to be more vigilant about what information is news and what constitutes well-integrated advertising. If this trend continues, more people will flow to personal brand journalism portals for their news than today, and fewer stories will be sourced from independent news organizations.

This is, in other words, a double edged sword that threatens to strike at the profitability and sustainability of objective news. The incorporation of too much sponsored content risks diluting the reputations major news organizations have developed as impartial and comprehensive, while personal brand journalism features an inherent risk of bias based on limited coverage and the influence of each key figurehead. Personal brand journalism might result in devoted readership bases that help prop up the news industry, but it does not necessarily follow that personal brand journalism is helping save the industry. The actual result might be precisely the opposite.

Of course, it’s not fair to group all of the aforementioned personal brand journalism purveyors in one uniform pool. Different blogs or sites have different aims and some might be more inclined to produce objective reporting than others. We might distinguish the problematic potential of personal brand journalism by breaking its purveyors down into different categories. Wolff distinguishes ventures like The Huffington Post, Buzzfeed, and Business Insider from Klein and Greenwald’s sites by noting that the former are “working at a self-sustaining level.” I’d say it’s more a question of scale. The Huffington Post and Buzzfeed have expanded to a point where the editorial spectrum is no longer dictated by a single person. In contrast, people like Klein and Greenwald will have more significant influence on what their sites publish.

In addition to these two groups, I would add a third category to personal brand journalism in order to recognize a separate type of new media entity: the professional blogger-curator whose only original content is his/her personal analysis of the news. The commonality between the Huffpost / Greenwald groups is that they provide readers with either original reporting or sophisticated data analysis. Larger media organizations like Huffpost might feature editorials as a driving source of traffic, but they do publish independent reporting as a key part of their content stream.

In contrast, the blogger-curator publishes no independent reporting and primarily serves as an aggregator of both original journalism and other blog content. My main point of reference here is Andrew Sullivan and his site, the Dish. Sullivan left The Daily Beast just over a year ago to launch his popular blog as a “freemium,” paywalled independent venture. The Dish is a curated collection of articles supplemented with Sullivan’s commentary; as of now, aside from interviews with Mikey Piro and Dan Savage, the Dish has published no independent journalism or sophisticated data analysis. All of the Dish’s exclusive content has been based off of Sullivan’s own reflections or ruminations.

Sullivan’s work is perhaps the most dangerous case study of how of personal brand journalism could siphon resources and traffic away from news organizations providing original content and reporting. One of Sullivan’s goals since going independent was to provide groundbreaking long-form journalism, but it remains uncertain whether Dish revenue will be able to support this initiative. In the interim, Sullivan is essentially charging readers for personal commentary and article aggregation. That readers are being asked to pay for full access to the Dish means money is flowing away from alternate news organizations that do produce independent reporting.

I do not mean to unfairly malign or downplay the quality of the work that Sullivan produces, nor do I mean to suggest that the Dish’s published material is of negligible value. The Dish is a wonderful site with an unparalleled range of content and commentary and Sullivan has every right to ask people to pay for his analysis of contemporary culture. But it seems hypocritical to hear Sullivan argue how the Dish is “building a future for a whole range of new media on the ashes of the old.” In no way has the Dish, as constructed, been able to replace traditional old media without losing the core principles of journalistic integrity that Sullivan lionizes.

Again, this is not a pressing issue now, and the popularity of personal brand journalism does not mean traditional reporting is soon to be extinct. But the question still remains: is there a way to combine the best of personal brand journalism with the broader objectivity of old media?

Perhaps this is where John Allen’s new deal with the Globe could prove instructive. Allen’s case is unlike any of the other personal brand journalists listed here. He is a reporter first instead of a commentator, and he’s partnering with a major old media institution to create something new. He’s clearly going to be the most important figure in this “free standing” Catholic publication but it’s not implied that he will be a dominant figurehead a la Klein or Silver. In many ways, it seems like Allen is splitting the difference: leveraging his credentials to do something new and specialized within the context of a broader reporting service.

This seems like a good path for old media organizations to follow: hire high-profile, respected reporters (and commentators) to run specialized affiliates that combine intensive reporting and high-quality analysis. A well-run niche site will always have viewers, and tying that site to a major news brand allows readers to access both a broad spectrum of news and a specific range of coverage with personal flair. Wonkblog is probably the most successful example of this now, though Ezra Klein’s initial influence on the site (and his affiliation with things like JournoList) skews it slightly more towards the “personal brand” side of the spectrum. That said, if I were Jeff Bezos, I would pay Klein to start that new site and try something even grander. In this climate, there will be no great rewards without risks.

It is good to see so many “new media” organizations arising amidst the ascendance of personal brand journalism. Readers are better off when there is more choice and better argued interpretations of current events. To this end, there is certainly a place at the journalism table for Sullivan’s passionate opinions, Silver’s statistical analysis, Klein’s wonkish lens, and Greenwald’s political focus. Let’s just hope “old media” organizations will be able to capture the vitality of these branded publications and employ it in the service of continued objective journalism.

Failed Connection: On Arcade Fire’s “Reflektor”

On September 9th of last year, Arcade Fire released an unusual music video to accompany the launch of the first single from their fourth album, Reflektor.  The plot of the video is not terribly noteworthy or unconventional – it features a young Haitian woman dancing in various locales, culminating with a wild street party in the dead of night.  Unique to the clip, however, is that the viewer is able to alter the images onscreen using a synced-up smartphone.  Waving the phone left to right, for example, might create a haze effect onscreen that mirrors the viewer’s gesture.  The viewer’s mobile device, in effect, becomes the eponymous “reflektor” that alters how they see the music video.

It’s an amusing piece of audiovisual wizardry that also comes across as a gimmick.  None of the effects amount to anything more than you would find in an equalizer.  But there is one slightly jarring moment at the end of the video that gives the viewer pause.  At this point, the computer screen approximates a cracked mirror through which the young woman is visible.  Suddenly, the woman disappears and the viewer’s face is imposed on the glass shards, thanks to the activation of the viewer’s webcam.  And lo and behold, the woman appears on the viewer’s phone or tablet, having made the virtual jump from big screen to small.

It’s a strange feeling to suddenly encounter your own face in those glass shards and even stranger to essentially hold the woman, previously an abstracted “other,” in the palm of your hand.  That feeling is what Arcade Fire wanted to elicit with this project – a prompted pulse to reconsider how the devices you use define your relationships with others, as well as your conception of yourself. 

This deep-seated introspection is at the core of what Arcade Fire tries to convey on Reflektor.  The album is framed as a mediating mechanism to break through the digital stupor that comes from prolonged electronic communication.  Reflektor has appeared on a host of 2013’s “Best Albums” lists, in large part because of its engagement with this theme.  Countless reviews of the album have praised its insightful look into how people communicate via technology and its illuminating commentary on avoiding the dangers of cold, abstracted interaction. 

I disagree with these positive reviews.  Arcade Fire has produced an album that has a host of catchy moments and individual triumphs but sags under the weight of lazily mashed-together lyrics and themes.  Why does this matter?  Reflektor underscores and calcifies a number of tendencies that Arcade Fire has been cultivating since their first album.  As the biggest independent band in the world and a shorthand for independent pop music as a whole, it bears discussing how and why they’ve gotten to this point and the ways their musical inclinations begin to falter on Reflektor.

Arcade Fire’s first three albums were solid affairs that, in retrospect, generated critical acclaim perhaps incommensurate with the quality of the final products.  Funeral is a simple but compelling reflection on death whose sound, unique in 2003, has not proved timeless.  Neon Bible is an overbearing critique of religion that features a mixed bag of beautiful and middling songs.  The Suburbs, in my opinion their best album, is a fully-realized look at suburban life that’s overly long but contains some of their most compelling work.  It is not a world-beating record and does not deserve the scores of accolades it earned in 2011, including the Grammy for Album of the Year, but it accomplishes its aims with consistency and nuance. 

In all three previous albums, lead singer Win Butler was able to milk the dichotomy of “us vs. them” to moderate, occasionally even great, success.  Funeral saw “us kids” confronting adult hypocrisy, Neon Bible featured outsider critiques of poisonous adherence to religious monocultures, and The Suburbs was a twenty-first century meditation on alienation (“us kids vs. society,” if you will).  Reflektor tries for a new variation on the same theme, but there’s no strong central narrative arc, no convincing foil, to hold any attempted contrasts together. 

The result is a weak appropriation of the “us vs. them” idea that’s far less incisive than anything Arcade Fire has produced in the past.  We’re treated to tepid, straw-man attacks on the “other” in songs like the mundane and cringe-worthy “Normal People,” which strips away the characterizations and differences (age, religion, social orientation) that make “us vs. them” a potentially fruitful concept.  Instead, we’re left with the most basic, torpid contrasts that lead to pointless musings on whether a “normal person” is “cool enough” or “cruel enough.”  “Normal people” is a loaded term that begs to be either avoided entirely or commented upon intelligently, and Butler provides no nuanced evaluation or lyrical meat for listeners to chew.  He’s content to employ it without qualification and we’re not better off for it.

This is a recurring problem throughout Reflektor.  On Arcade Fire’s previous albums, one of Butler’s strengths was his ability to link together impressionistic imagery and pointed motifs or themes around an overarching concept.  The summation of these motifs usually created depth and multiple angles from which the songs could be approached and appreciated.  In The Suburbs, for example, we see recurring automobile references that suggest an ability to navigate the suburban wasteland but never to escape it. 

While Butler is quite good at crafting imagery that gives his albums thematic consistency, his actual lyrical prowess (his ability to write sharp, insightful lines) has been inconsistent.  For every concise, intriguing idea or theme (see “My Body is a Cage” or “Half-Light II”), there is a lyric that is either repetitively simplistic, fails to evoke meaning, or comes across as heavy-handed and overly preachy (“Rebellion” or “Intervention”).  But for the most part, in the past, the tightness of each album’s thematic core has balanced the lack of specificity and categorical quality in his lyrics. 

This isn’t the case for Reflektor.  Butler says that the album was inspired by the Orpheus and Eurydice myth, the film Black Orpheus, Søren Kierkegaard’s essay “The Present Age,” and his and wife Régine Chassagne’s time in Haiti.  Unfortunately, these themes never quite mesh into a convincing narrative as in The Suburbs.  We’re left with scattershot reflections on death OR isolation OR the link between the two in the Orpheus and Eurydice myth.  This lack of cohesion isn’t necessarily a fatal flaw, but it’s more glaring and grating because Arcade Fire have already made albums that explored these themes.  We really don’t need another analysis of how “we’re so connected, but are we even friends?”  It’s a question they addressed at length in The Suburbs, and by now it’s a stale prompt that any Facebook user already asked in the preceding five years. 

The thematic looseness of the album makes the lyrical insufficiencies more noticeable than those of any previous Arcade Fire record.  And they are problematic indeed – this is far and away Butler’s weakest set of lyrics.  Repetition is the order of the day; “You Already Know” features the title phrase repeated 16 times throughout the song, and other tracks suffer the same lyrical stagnancy that precludes the presence of meaningful color, plot, and poetry on the album.  Tired love tropes that add little to the Orpheus / Eurydice myth are employed over and over again.  Here’s a sample lyric from “Awful Sound (Oh Eurydice)”:

You came home from school

And knew you had to run

Please stop running now

Just let me be the one

Goodness gracious.  Other lines in the album, probably meant to be amusing or pseudo-profound (or both), fall equally flat.  “Oh man / Do you like Rock and Roll music? / ‘Cause I don’t know if I do,” Butler sings on “Normal Person.”  (IRONY!)  “What if the camera / really do / steal your soul?” he breathes on “Flashbulb Eyes.”  (INTRIGUE!)  These lines, and others throughout the album, do not convey the sense of sly amusement Butler was probably aiming for.  They sound ridiculous.

Again, it’s a shame that so much of Reflektor is comprised of this dreck.  The motifs that Butler employs throughout the album are actually well thought-out and complement each other nicely.  Much has been said about how Reflektor is thematically similar to U2’s Achtung Baby, which is loosely centered on the idea of losing oneself in a hazy electro-Joycean Nighttown.  Arcade Fire drills even deeper with this idea, conceiving this journey as one that explores the dividing lines between authenticity and life, illusion and afterlife.  References to and dichotomies involving mirrors, prisms, cameras/lenses, (super)symmetry, and invisible dividing lines provide a promising vehicle for realizing these contrasts.  But the total lack of connective tissue between these ideas and consistently meaningful lyrics to convey them means the concepts are never fully developed.  Instead, we’re left with musings about “reflektors” and “resurrectors” that provide few memorable moments of cohesion or insight.

Also problematic is the near-total disconnect between the style of music and the album’s themes.  The Suburbs is a well-crafted album because its musical and lyrical content align almost perfectly; Arcade Fire’s tendency to create simple, lush, hook-laden songs provided a lockstep complement to their commentary on the circuitous helicon of suburban life.  The music reflected the album’s themes of being trapped and going “around and around and around and around” while simultaneously serving as the primary vehicle for escaping that rut.  There’s a reason why “Sprawl II” sounds as glorious as it does when the album is coming to a close. 

Reflektor posits an attitude of looseness and partying inspired by the Haitian street festivals that Butler and Chassagne participated in while visiting Haiti.  The interplay between this kind of partying and the album’s focus on death isn’t unusual, as many cultures mark funerals or mourning periods with celebrations.  But the record’s other emphasis on alienation is a strange bedfellow for music ostensibly made to have a good time.  There is evident jubilation on “Afterlife” and “Here Comes the Night Time,” but it’s a moody jubilation tinged with the fear of isolation.  Many of Arcade Fire’s earlier albums featured juxtapositions of uplifting anthems and soaring chords with gloomy, introspective (some might say self-indulgent) tracks that drove the thematic basis for their albums.  But here, Reflektor’s similarly introspective bent is severely at odds with the near-uninterrupted stream of upbeat rhythms and melodies that the band deploys.  In particular, Butler’s singing frequently comes across as almost too faint to embody the energy and excitement these songs would seem to demand. 

Talking Heads have been a constant comparison for Arcade Fire’s target of loose, slick dance-pop-rock with Reflektor.  I guess this makes sense to the extent that they’re white people making supposedly rhythmic-centric music, but I don’t think this appraisal is particularly apt, at least when the supposed connections are analyzed in greater detail.  Most critics have drawn analogies to Talking Heads’ incorporation of African beats and employment of Brian Eno as producer for Remain in Light, in that Arcade Fire added some Haitian flourishes and consulted James Murphy of LCD Soundsystem for Reflektor.  But save for “Here Comes the Night Time,” only a couple of the tracks on Reflektor have any appreciable world music influence, and only a handful deliver on the supposed dance promise that the record has made.  “Joan of Arc,” “Normal People,” and “You Already Know” are all straightforward rock pieces.  “We Exist,” “Awful Sound (Oh Eurydice),” and “It’s Never Over (Hey Orpheus)” only have slight dance or rhythmic influences, including hooky bass grooves and some funky drum loops.  Over half of the album has no appreciable world or dance influence at all.

More importantly, I’d argue that the musical concepts that underpin Remain in Light are almost totally absent from Reflektor, which reduces the number of meaningful comparisons in virtuosity or even basic intent that can be made between the two records.  Here’s David Byrne discussing the methodology behind the “modular music” of Remain in Light:

While the groove usually remained constant, different combinations of instruments would be switched on and off simultaneously at different given times.  One group of instruments that produced a certain texture and groove might eventually be nominated as a “verse” section, and another group – often larger-sounding – would be nominated as the “chorus.”  Often in these songs there was no real key change.  The bass line tended to remain constant, but one could still imply key modulations, illusory chord changes, which were very useful for building excitement while maintaining the trance-like feel of constant root notes.

This kind of recording process simply doesn’t seem to be present in Reflektor, save for a couple of instances on tracks like “Porno.”  There is a greater emphasis on bass grooves and more complex rhythm work than in Arcade Fire’s three previous albums, but it’s not a wholesale change or reordering of what they did in the past.  So I don’t really understand criticisms like this from Steven Hyden: “Instead of the orchestral sweep of the first three records, Arcade Fire has rebooted as a rhythm-oriented outfit. This requires an entirely new skill set that this band simply does not have.”  I don’t have a background in musical arrangement, but to my ears, this isn’t even an issue that crops up on Reflektor.  Arcade Fire isn’t doing anything structurally different this time around.  They’re tweaking the emphasis on a few songs – often with mixed success.

How much you get out of the individual songs and general musicianship on Reflektor will vary depending on your musical background and preferences.  I don’t know enough about technical music criticism to say whether each song is performed poorly or not, and I find it foolish to engage in criticism of timbre and texture.  (I don’t particularly like the guitar tone on “Joan of Arc” but many reviewers find this to be one of the album’s stronger tracks.)  That said, there are a few general trends on Reflektor worth identifying.

“We Exist,” “Normal Person,” “You Already Know,” “Joan of Arc,” “Awful Sound (Oh Eurydice),” and “It’s Never Over (Hey Orpheus)” can essentially be reduced to individual hooks – the slick “Billie Jean”-esque rhythm on “We Exist,” the chorus on “Joan of Arc,” the roiling bass on “It’s Never Over.”  The Orpheus-Eurydice pair, in particular, are unnecessarily long.  These songs provide immediate gratification and little else. 

“Afterlife” and “Porno” are similar to the aforementioned hook-defined songs but feature additional depth or characteristics worthy of further consideration.  In “Afterlife,” Chassagne’s vocals shine, and the driving drums and the irregular synth pulses add a Haitian rhythm that gives the song a unique sound on the record.  Butler’s lyrics are also probably at their most affecting as he sings about what happens “after all the breath and the dirt and the fires are burnt… after the hangers-on are done hanging on to the dead lights / of the afterglow.”   “Porno” actually lacks a hook like the other songs mentioned earlier, but it combines the wonky synth of Paul McCartney’s “Wonderful Christmastime” with a chorus melody that echoes Kanye West’s “Runaways.”  It’s a deeply repetitive track and most closely hits at the Talking Heads comparison, but it’s also saddled with embarrassingly sterile lyrics. 

The title track is a seven-minute muted disco banger that develops nicely into an extended groove at the end.  But it’s mixed very quietly and Butler’s faint vocals sap the song of energy at the beginning.

“Here Comes the Night Time II” and “Supersymmetry” are short, lush, beautiful pieces that fit well as the opener and closer to the second disc but are let down by the one-trick ponies saddled in between.

“We Exist” is straight dub with horns.  I found it to be one of the more successful tracks on the album because it’s short (the only track under three minutes) and doesn’t even attempt for profundity, as most of the other songs on this album do.  The ridiculous camera lyrics don’t matter much because the overdubbed, washed-out bass and congas are blowing up your headphones or stereo.  One can imagine a scenario where Arcade Fire trimmed most of the cuts on this album to fit this kind of self-contained, self-justifying format: sub-3:00 songs that provide a fun hook and don’t shoot for philosophical depth (and miss). 

The best track on the album, in my opinion, is “Here Comes the Night Time,” which is also one of the best songs Arcade Fire has recorded.  It’s a mess in the best possible way- a frenzied, pulsing mariachi opening eventually transitions into a simple bass-loop-driven slow-burner.  Twinkling pianos and synths along with Butler’s lyrics about nightfall paint a refreshingly vivid picture of dancing on a warm summer evening.  As opposed to the majority of tracks on Reflektor, “Here Comes the Night Time” also employs form changes and instrumental variation throughout.  This was the most compelling recording on Reflektor by a significant margin, though the lyrics veer into preachy clichés as the album comes to a close.

If you’re a fan of Arcade Fire songs like “Month of May” and “Wake Up,” you’ll probably enjoy this album as most of the songs feature similar rock riffs and heavy punchiness.  If you prefer airier, melodious tracks like “Keep the Car Running” or “Une Annee Sans Lumiere,” the music on Reflektor is more of a mixed bag and might get old quickly. 

In the end, though, the quality of the music doesn’t make up for the album’s lyrical insufficiencies, especially given Arcade Fire’s penchant for thematic depth.  Reflektor simply doesn’t have the cohesiveness to convey anything more than semi-interlocked ruminations on technological interaction.  More damning is the band’s reticence to move beyond criticism of ideologies and trends.  Through all four of their records, Arcade Fire has taken an almost clinical approach to their subject matter, trying to tease out revelations under a probing artistic microscope.  Increasingly this lends their work a sort of coldness and abstraction that I’ve found to be off-putting.  Reflektor is no different, with an excessive number of tracks lamenting the difficulty in making connections between people.  Creating a prescriptive analysis of such problems only goes so far in prompting the listener to forge an emotional link with the music itself. 

Perhaps that’s the core problem with Arcade Fire in the wake of their fourth album.  They focus so much on the difficulty of making connections across oceans of artifice and differences (age, religion, geography, occupation) that, eventually, it becomes tough to connect with the band about anything outside their criticisms.  What do Arcade Fire stand for?  Fans of the band will no doubt point to the deep connection between Chassagne and Butler, the band’s hymns to youthful vigor, and their powerful and energetic live shows- all things that emphasize just how amazing connection can be.  But the bulk of their discography, especially when examined after the release of Reflektor, subordinates this emphasis on connection to the damned difficulty of actually making it happen.  (Literally damned – in the Orpheus and Eurydice myth, Orpheus retrieves Eurydice from hell but loses her forever before she exits the underworld.)  It’s not exactly galling or infuriating that Reflektor maintains an upbeat attitude while pounding the same drum, but the tune has become stale.  And relationships defined by their shared mistrust and disaffectation lack the substance for extended longevity and passion.  One has to wonder if this will be a problem the band will face with casual fans going forward. 

One qualification: many music commentators have bitterly criticized Arcade Fire over the tangential controversies that arose during the marketing and touring of Reflektor, including the album’s excessive and annoying advertising and the “pretentious” dress code request the band put out for show attendance.  The supposed narrative here is that Arcade Fire is becoming overly haughty and selling out, reinforcing a holier-than-thou attitude that speaks to the lack of connection I described in the previous paragraph.  I don’t agree with these criticisms.  The ads were kind of annoying and the dress code request is a little quirky, but neither decision can meaningfully contribute to an indictment of the band’s authenticity.  I also disagree with any arguments that the band is willingly false and smarmy for propagating material about exclusion and loneliness while achieving superstar status and playing to millions of people.  The marketing and performance of the album do not mandate that the band’s outlook must change, nor do they render the themes of the album hypocritical and false.  I find the album’s lyrical insufficiencies to be a far more valid target of criticism than side issues related to its dissemination.

I appreciate many of Arcade Fire’s songs and some of their work on Reflektor will no doubt become hallmarks of their music.  At the same time, I hope the band shifts gears for their next album and tackles subject matter that expands beyond criticism of alienation and ostracism.  Reflektor suggested a tentative move away that wasn’t enough, and the thematic messiness made these concepts more central than they probably should have been.  They have the talent and skill to make a transcendent pop record rather than a mere description of what’s wrong with the status quo. 

In other words, let’s hope that our next encounter with Arcade Fire sees them focusing on who that mysterious dancing Haitian girl from the “Reflektor” video is and why she matters, rather than the fact that she jumps from screen to screen.  

Media Consumption Trends for 2014: The Rise of the Upgrade

Joshua Topolsky, editor-in-chief of The Verge, recently penned a column in which he argues that “we have now become defined by our penchant and desire for the upgrade.”  His thesis is that heightened consumer interest in technology initiatives across most major industries, including finance, transportation, science, food, and more, is fueling “a collective dream” of revolutionary, epochal change at a faster pace than ever before.

Topolsky’s large-scale envisioning of a coordinated push for a massive social and cultural “upgrade” seems a little too hyperbolic and optimistic.  On a smaller-scale, though, I think his use of “upgrade” as a talisman for 2014 is unintentionally prescient.  I predict the following three kinds of “upgrades” will gain increasing prominence in 2014 and will become central to our cultural economy over the next three to five years.   

1) Component Upgrades

Phonebloks, a modular phone concept created by Duth designer Dave Hakkens, attracted a social outreach of 36 million people in the last four months of 2013.  The Phonebloks device features a base motherboard that allows the user to “plug in” other components – the screen, battery, processor, camera, etc. – based on his/her preferences or needs.   Hakkens created the concept as an alternative to current phone and electronic manufacturing conventions, wherein one broken or outdated component requires scrapping the entire device.  His goal was to decrease needless electronic waste and allow for greater personal customization. 

Google and subsidiary Motorola liked what they saw.  In late 2013 they brought Hakkens on to their Project Ara team and announced that they were developing hardware to make his vision a reality. 

The powerful social and corporate response to Hakkens’ concept suggests there is substantial demand for technology that features easily upgradable components.  Hakkens correctly identified the financial and ecological inefficiencies in many of today’s products and his insight resonated with consumers- it really does cost a good deal of money to upgrade your phone, computer, tablet, game console, and other electronic devices every product cycle.  Creating devices that allow for lower-cost incremental upgrades is a logical and potentially profitable solution to this problem.

Other tech companies seem to agree.  Razer recently announced its Project Christine PC concept, which features similar swappable hardware modules designed to make modding or upgrading performance a hassle-free experience.  I wouldn’t be surprised if other tech firms hop on the component upgrade bandwagon over the next year, especially if Google is able to create enough buzz about Project Ara by previewing working prototypes.  Expect pushback from entrenched companies like Apple, but the swappable, component upgrade platform seems like a concept that’s going to become a prominent alternative pretty quickly.

2) Ownership Upgrades

The purchase of digital files and software is not the future of media ownership.  Billboard reports that music download sales fell 5.7% to 1.26 billion units in 2013.  eBook sales were only up 4.8% through the first eight months of 2013, compared to double-digit growth rates in previous years. 

The streaming database model is replacing the necessity to buy digital files.  Netflix, of course, is the company exemplar for why streaming is profitable, but other firms are starting to offer subscription services in additional media sectors.  Spotify is credited for the reduction of music download purchases in 2013 and recently received a fresh injection of $250 million in investment money.  eBook subscription services like Oyster and Scribd seem poised to attract new customers in 2014, especially if they can agree to licensing terms with additional publishing houses.  Microsoft’s push for Office to become a subscription, cloud-based service indicates that software ownership is trending away from the cyclical upgrade model too.  My guess is that video games are the next industry to take the plunge; perhaps Valve could negotiate some sort of a package “rental” service that gives gamers access to large swaths of its Steam catalog for a (relatively hefty) monthly fee.

The purchase of a digital file is increasingly a less preferential option for consumers, who can spend their money on supplementary services that offer equivalent accessibility and additional variety.  The concept of digital ownership will become increasingly unpopular as customers choose to upgrade to subscription models. 

3) Physical Upgrades

Of course, there are some products that simply won’t be available via subscription service- a given out-of-print album or a movie that’s not included in Netflix’s catalog.  In these cases, physical purchases will become an increasing norm instead of digital file purchases.  Look for publishers to increase the value that their physical products provide by offering additional services and benefits inaccessible in a digital subscription model. 

Vinyl sales were up by almost 33% in 2013 to 6 million units and account for 2% of album sales.  This is still far short of digital album sales at 40.6% of the market, but vinyl offers superior sound quality as well as the option for bonus physical products bundled with the music.  (CD sales allow for the same bonus packaging as vinyl, but their inferior sound quality makes it more likely that they’ll continue to bottom out in the forseeable future.)

Hardcover book purchases were also up by 10% in the first eight months of 2013.  As consumers spend more and more time working with screens and consuming content on mobile devices, there will be a market opportunity for print books to be a “digital overload alternative.”  Lavish book covers and high quality designs will allow for physical books to be reborn as luxury items that serve a decorative purpose beyond functional reading.

The popularity of subscription services presents an opportunity for publishers to show why their products are valuable enough to warrant a specific purchase.  In this sense, I am bullish on the prospects of print and physical sales as an alternate kind of upgrade to digital media purchases.

Summary

Taken together, these three trends suggest individuals will pursue consumption patterns that involve:

  • Pooled streaming software and content that involve higher recurring costs
  • Occasional physical purchases that supplement the streaming pool
  • Interchangeable hardware that features lower, more infrequent costs

Hardware will still be integral to consumer purchases, since the device is the medium to access the content, but it seems that the trend going forward will be decreased annual spending on hardware upgrades.  This decreased spending might instead flow towards software and content. 

Content subscription services are no sure thing, of course.  There is a wide discrepancy between Netflix’s soaring stock price and Spotify’s inability to turn a quarterly profit.  Sustained consumer interest in modular hardware is also not guaranteed, since there will always be demand for self-contained devices that guarantee form and content work in perfect synergy (such as the iPhone).  

Yet the relative affordability of subscription services (at least with respect to their marginal utility) coupled with increasing market permeation suggests that streaming companies are poised for significant expansion in the coming years.  And the significant interest in interchangeable hardware products indicates this is an avenue worth pursuing in the short term.  These kind of upgrades might not precede the macro technological revolution that Topolsky envisions, but they do promise more choices and easier information accessibility going forward.  That is cause for celebration and, indeed, (moderate) excitement.