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I Want My Stuff Back

September 28th, 2008

Only an retarded ostrich could ignore the financial crap raining down, and due to my WaMu scare I’ve been pondering my dependencies on corporations in general. Things are unwinding quickly, and a word I keep hearing is “deleveraging.” In the financial sense, that means fleeing from debt and getting into cold, hard assets with tangible worth and value.

But it’s safe to say this “deleveraging” isn’t just an exercise for financial institutions. Now, just in order to save our own skins (because nobody is going to bail us out) – average Joe middle class is well advised to get out of hock – pay down consumer debt, diversify across financial institutions, and you may even want to have some cold, hard cash handy in case there’s a run on the bank. After all, it was our bone-headed appetite for debt in the form of wacky mortgages that created this entire mess.

Now, a potential collapse is being predicted for the tech scene in general. There was a monster of a “warning” post from Jason Calacanis, which is now inaccessible. Mathew Ingram has a bullet-point summary. Some of the advice: that have borrowed money – well, the kinder term is “taken VC funding” – are being advised to demonstrate a similar financial thrift and start making money – well, the kinder term is “find a revenue stream” in order to survive the potential, huge shakeout.

The advice for startups is essentially the same as that for financial institutions and average Joe middle class – get out of hock and start saving cold, hard cash.

But the possible doom of many startups brings me to the one last step in “deleveraging.” We have to get used to the idea that many of the companies we give our hard earned cash and data to, will soon cease to exist. Many of us have “invested” our personal data in web services. Now just consider the implication if they start shutting down at a rapid pace.

A glimpse of the grim future was seen in the death of Wal-Mart’s DRM music servers – anybody who bought music was told to back up their music ASAP or their songs wouldn’t play. As a consumer, that to me, is utter BS.

In addition to DRM, it’s time to seriously investigate data portability for all social networking sites that may go under in the next few years.

The steps I’m now taking upon myself:

  • DRM: Find the “workaround.”
  • Personal data in any website: Figure out how to get it out, in an open format and bring it down to my local computer.
  • Support the “open” sites, the ones that understand open standards, data portability, and free flow of information – and avoid the “walled gardens”.
  • Have desktop software that can handle the backed-up data.
  • Consider a disaster scenario: how to stay productive in the absence of an Internet connection, or even the absence of a computer, for critical functions (financial, food, medical, transportation).

With this change in perspective, one huge, personal, bugaboo regarding DRM is now Apple. I’m completely invested in the Apple ecosystem via iTunes in particular, with a lot of digital content purchased from the iTunes Store. I strongly doubt Apple will be adversely affected by an economic down turn to where they pull the plug on the iTunes Store – but I’ve suddely become fairly paranoid.

This morning I took stock of the crapload of music and videos that I purchased through iTunes, and spent a few hours this morning – um – “adjusting” my audio files, if you catch my drift. I still haven’t tackled the video ones.

Essentially, I’m starting a personal run on technology. It was fun letting various technology companies borrow and control my personal data for a while, but I want control back. There is no FDIC or $700 billion bailout pending for startups, and hell if my stuff is going down with the sinking ship.

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  • Yeah, DRM sucks the big one. Yahoo had a bit of a mess too when they announced the closing of their music service (which used calls to remote DRM servers). And as much of an Apple fanboy as I am, I can't use the Apple Music Store for music anymore since the DRM'd tunes won't play on my Slimp3/Slimserver audio system. So I've had to turn to Amazon for non-DRM'd mp3s. It sucks. I'd prefer to give Apple my money, but I refuse to purchase DRM-broken content for many of the reasons you outline above.

    It certainly makes you wonder what will happen if a big consumer web email service ever goes down! That would be bad news.
  • It is worth noting that some of the iTunes content (iTunes Plus) is DRM free
    - I wish all of it were. And it definitely is a big advantage to Amazon's
    DRM free music. Now in terms of videos I want to own (as opposed to rentals)
    even DVDs are preferable than the iTunes downloads since I can "work around"
    the limitations on those.
  • Mike
    Yep, feels like what I've been saying for a long time. Always need to prepare for the worst case scenario, because you never know when it's going to happen.

    I'd rather run my own server at home, with my personal data - it guarantees the privacy of my stuff, allows me to store things in any format that I choose, and allows me to have as much space as I want.

    Until I can figure out Mac OS X Server though, am proceeding cautiously.
  • Mike
    Also, I wonder how long some of these web services will last. Facebook, Twitter, etc. aren't making any money, are they?
  • I assumed Twitter would be bought this year. Facebook was hoping for an IPO
    a few years from now. I'd guess both plans would be shifting what with the
    market turmoil. http://mashable.com/2008/02/14/facebook-valuati...
  • Mike
    So they're going to survive on handouts until 2010? How long until Google and Microsoft can't afford that?
  • jcieplinski
    Don't count Apple out just yet. Keep a couple of things in mind. For starters, Apple isn't a startup. Not only does it make profits every quarter, it also has $21 Billion in cash sitting in a war chest for just this kind of economic downturn. And it has no debt whatsoever. So it's fairly immune to the rise in the cost of debt that is happening right now. They can survive a few years of the worst very easily, as opposed to Microsoft, who doesn't have nearly as much cash on hand at this point as it used to.

    You're suggesting that it's good advice to "get out of hock" and invest in good old assets. Apple did that over the past few years already, perhaps anticipating just this kind of event.

    Another thing to keep in mind; in times of economic downturns, entertainment usually experiences heightened profits, not losses. The film industry was at its best during the Great Depression. As people need to escape the reality of their crappy financial situations, they flock to movies, music, and other forms of entertainment. All the better, then, that Apple has become the number one seller of music on earth (not just online) and one of the top video sellers online. The move into consumer entertainment, in retrospect, was even more brilliant than anything else Jobs has done over the past six years.

    There is virtually no chance that Apple will be closing its iTunes doors anytime soon. If anything, they are the JP Morgan to Walmart's WaMu in this industry. They will sit on their war chest as the competition dies, or they will just buy competitors who have something to offer.

    The real companies to worry about are companies like Google, who are essentially one-trick ponies dependant on advertising dollars, which will certainly dry up as companies tighten their budgets across the board. Microsoft, too, has wasted a lot of money trying to jump on the 2.0 bandwagon. Maybe Apple's small efforts in "the cloud", which seemed short-sighted a year ago, aren't such a bad thing, after all. Even MobileMe, Apple's only real 2.0 venture, is driven by subscription dollars, not ad revenue. And it's highly profitable.

    So I wouldn't worry about stripping all that Apple Fairplay DRM just yet. With any luck, as Apple's competitors get washed away by the downturn, Apple will finally be able to negotiate to rid its files of DRM once and for all anyway.
  • Sage advice. I do agree that Apple - since they went to hell and back - is
    stronger than the other companies that haven't suffered through a punishing
    downturn. That huge cash horde will come in handy. Then there's Jobs'
    comment to "innovate out of the downturn" that I remember during the dark
    days post 2001.
    http://money.cnn.com/galleries/2008/fortune/080...
  • Nice article.
    @ Mike I think facebook, orkut type of sites are earning a hell lot of money but i am sure that they wont earn it for long. Because trend changes with the passage of time. Like first Orkut was introduced and every one started using it and then Facebook was introduced with more enhanced features. So many orkut people shifted to Facebook. So i think it all depends upon the trends and the utilization of that website.

    Rest this article is great :)
  • Mike
    Regardless of how people use these sites, they cannot independently survive until they're making money.
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