Tuesday, September 29, 2020
Episode 160: Three Necessary Tiers of Freedom
Play Now!In the last episode, I bitched about not finding my show in a portal search; but what might happen next? Things could get so much worse for podcasters who refuse to bow to ad pressures, as I explore in this Episode 160: Three Necessary Tiers of Freedom.In this episode, I read from: A February 8, 2020 article written by Matt Stoller for his anti-monopoly newsletter Big (the name of which contains a certain Stain I'd rather not mention by name); and from Tim Wu's 2010 book The Master Switch: The Rise and Fall of Information Empires.I play: Pee Wee Herman observing buts; and Sydney Greenstreet telling Clark Gable how advertising really works. Musically, I play: three from Jahzzar; first "Mr. Bleach", then "Servants", then "about u"; KMFDM opens the show with Representative David Cicilline opening congressional hearings into big tech; and I close with Mistle Thrush.
Subscribe to:
Post Comments (Atom)
This was an interesting episode! (As you know I'm catching up after falling off the grid for a family emergency for a couple months.) The first time I heard about this "Three Tier System" was... in a class I took from San Diego State called "The Business of Craft Beer!"
ReplyDeleteIn pre-modern times, especially in Europe, brewers used to monopolize their local markets by making exclusive distribution deals with bars. To avoid this, after Prohibition, the US implemented a three-tier system: there were brewers (producers), distributors, and retailers (bars and liquor stores, etc.), and alcohol laws said that nobody could own more than one tier. Big brands ended up dominating the market with sheer volume, but at least consumers had a choice of several different big brands. Monopolies were discouraged.
When the so called "craft beer revolution" started hitting in the early 2000s, it blossomed in part because many States immediately started _loosening_ the strict 3-tier system. Craft brewers (microbrewers) had trouble finding distributors because of their comparatively small volume and higher prices. Many States started permitting microbrewers to self-distribute locally, and allowed them to have more than one "tap room" (it used to be that a brewer could directly sell beer to the public _only_ on the brewery property; now there are satellite "tap rooms" all over town). As microbreweries gained local fans, they became more attractive to the distributors, who picked them up.
This loosening of the 3-Tier system still to this day seems to be working pretty well for the beer and alcohol industries. Craft beer in general has taken around a 20% bite out of the major breweries, not enough to cause the majors to squelch them, but enough that the majors are taking craft beer seriously and improving their products. While microbrewers compete with each other and are also widening their distribution networks. It's a volatile sector of the economy, we still have the occasional tale of woe where a major brewery buys out a craft brewer and screws up their recipes -- and breweries go bankrupt at the same rate as restaurants. But all in all, the _loosening_ of the 3-Tier system has had good results in promoting competition, small local businesses, and innovation in the beer and alcohol industries. So why did _loosening_ the 3-Tier system work for beer, and not for digital music? (Cont'd)
Obviously it's tough to prove a definitive answer to that question, but it's interesting and perhaps instructive to note the differences between the beer/alcohol market, versus the digital music market.
Delete* Alcohol has very strict regulations about how and when the companies can advertise. Effectively, their ads will never be intrusive nor pervasive. They can't advertise to kids. Every company wants to build lifelong consumers, of course, but brewers can't really start doing that until their customers are close to 21 years old and a bit more mature. Whereas kids start to suck up digital entertainment these days when they're barely out of diapers.
* Nobody drinks beer digitally. Brewers love to target their limited advertising, but they have to do it with old-fashioned market research methods.
* There's no "Beer App" that spies on you via the cell phone that you carry with you 24/7. (Well, there are in fact "Beer Apps," but nobody besides a handful of home brewers carry them on their phones.) Brewers don't automatically vacuum up a "data surplus" of their customer's habits that aren't related to beer, and thus brewers don't have an incentive to sell their customer's personal data to anyone else.
There are lots of other interesting differences, of course. Beer is a physical product which must be shipped from place to place, with new taxes and restrictions every time it crosses a border. Whereas digital entertainment can be effortlessly distributed worldwide and copied for free.
Nevertheless, I suspect that a reason that loosening the 3-Tier system was good for craft beer but bad for digital music, may have a lot to do with restrictions on advertising. Those restrictions kinda knock out one leg of the three-legged stool, the leg that involves pervasive advertising and customer data collection. So nobody can build a monopoly upon that rickety structure where a leg has been knocked out.
Glad you liked it, Kevin!
DeleteYeah, I heard about beer distribution in the movie Beer Wars. It was disheartening, to say the least. But you're right: being able to sell your swill in more locations than the card table set up alongside your garage door is a huge advantage over seeking a distributor, with all the hassles that entails.
I also heard a disturbing rumor, from (IIRC) a brewer interviewed on a podcast that may or may not still be producing. He said a bunch of vulture capitalists have descended into the garages, chucking cash at start-up brewers with the purpose of turning a profit. Folks that haven't yet been brewing for any time at all are getting a hundred grand for… what? Marketing.
As a result, everyone is "hearing" about new brews, really, before those brews are made with anyone with any experience making them. I've also noticed that it used to be common to find a craft beer for a buck a 22 oz. bottle/can; no more. The better stuff now goes for almost $2/can. I suspect the VC money has cranked up the retail prices beyond what they otherwise would have been.
And yep, you're probably right: beer don't scale. Maybe that's why we love it so!
Laterz!
—Jim
We reeeaaallllyyyyyy have to meet in person sometime, so that I can give you some of my home brew!!
DeleteNM to WA might be a bit of a drive, especially if we manage to transport the quantity necessary…
DeleteAfter The Plague?