This is probably the biggest change that’s affected the gaming business over the last few years. It’s not just that we have digital distribution to our customers. It’s that we have this incredible two-way connection that we’ve never had before with our customers.
We’ve gone from a situation where we dream up a game, we spend three years making it, we put it in a box, we put it out in stores, we hope it sells, to a situation that’s incredibly more fluid and dynamic, where we’re constantly modifying the game with the participation of the customers themselves

The comments on piracy comport with insights from other industries:

One thing that we have learned is that piracy is not a pricing issue. It’s a service issue. The easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates. For example, Russia. You say, oh, we’re going to enter Russia, people say, you’re doomed, they’ll pirate everything in Russia. Russia now outside of Germany is our largest continental European market. … the people who are telling you that Russians pirate everything are the people who wait six months to localize their product into Russia. … So that, as far as we’re concerned, is asked and answered. It doesn’t take much in terms of providing a better service to make pirates a non-issue.

The information on pricing is really cool. “[W]e varied the price of one of our products. We have Steam so we can watch user behavior in real time. That gives us a useful tool for making experiments which you can’t really do through a lot of other distribution mechanisms. What we saw was that pricing was perfectly elastic. In other words, our gross revenue would remain constant. We thought, hooray, we understand this really well. There’s no way to use price to increase or decrease the size of your business.”

Yet he goes on to describe how sales such as a 75% price reduction lead to a “gross revenue increased by a factor of 40.” They tested against a product they did not own and saw similar results. Then they tested free. It turns out free to play and and free work differently. His thought is that the user base matters because they value the products differently including “what the statement that something is free to play implies about the future value of the experience that they’re going to have.”

Furthermore, conversion rates shift too. Free to play often “see[s] about a 2 to 3 percent conversion rate of the people in their audience who actually buy something, and then with Team Fortress 2, which looks more like Arkham Asylum in terms of the user profile and the content, we see about a 20 to 30 percent conversion rate of people who are playing those games who buy something.”

What do all these tests mean? As Newell said, it’s unclear. That is why I could see some rather cool studies being done for this emerging area.

For example as the NY Times puts it:

What has gone wrong? Plenty, say studio distribution executives, who point to competition for leisure dollars, particularly among financially pressed young people (the movie industry’s most coveted demographic); too many family movies; and the continued erosion of star power.

One more thing: “You have to go back and look at the content,” said Dan Fellman, president of domestic distribution for Warner Brothers. “Good movies always rise to the occasion. Bad ones, not so much.”

In the immortal words of Keanu Reeves, “Whoa.” Studios admitting that they compete for leisure dollars? Acknowledgement that star power is not that powerful? Furthermore, the article notes that consumers use social media and the Internet to sort rubbish copycat films from good ones” Per the Times, Phil Contrino, editor of BoxOffice.com, offers, “Because they have less disposable income and because they are more plugged in to audience reaction on Facebook and Twitter, the teenage audience is becoming picky,” he added. “That’s a nightmare for studios that are used to pushing lowest-common-denominator films.” Now let’s throw in video games. Call of Duty did $400 million dollars in its first day of sales.

In sum, the youth audience does not have huge amounts to spend and if choosing between a film that seems unoriginal and a video game, the video game often wins. And despite some odd spin about films aimed at older audiences doing well, the article also explains star vehicles aimed at older audiences failed which seems to go back to make a good movie and people are more likely to see it in the theater.

Will sequels and re-releases in 3D draw me to the theater? Yes (damn you Lucas and your 3d Star Wars ploy!)!! But would it help if there were really good new stories? Heck yeah!

For an odd closing, I offer that economists and academics in law could do well to study the way leisure dollars are spent, the demographics of the content industries, and way that some digital industries thrive while others claim to flounder. Then again, maybe nobody knows anything.

Another factor may have been better methods to collect and share data. The Times reports, “The U.S.D.A. said in a notice this month that savings obtained by creating a national operations center to centralize data collection had freed enough money to keep the reports going.” So what was the lever? Was there one lever? We may never know. Also interesting to me, is that hops industry has been paying to subsidize the reports (about $15,000 per year), was told it was not needed this year, but the industry is setting aside the money in case the budget crunches to come again jeopardize the ability to produce the reports.

I am wondering what centralized data collection did here. If it reduced internal costs, that seems good. But if the data were open for those in the industry to study and for others to create tools that approach may further reduce costs or shift them. Here, I am drawing on a paper written by David Robinson, Harlan Yu, William Zeller, and Ed Felten, called Government Data and the Invisible Hand. They

“argue that the executive branch should focus on creating a simple, reliable and publicly accessible infrastructure that exposes the underlying data. Private actors, either nonprofit or commercial, are better suited to deliver government information to citizens and can constantly create and reshape the tools individuals use to find and leverage public data. The best way to ensure that the government allows private parties to compete on equal terms in the provision of government data is to require that federal websites themselves use the same open systems for accessing the underlying data as they make available to the public at large.”

It is not entirely clear to me what is going on with the USDA and these reports. But if the government is improving how it gathers data and shares it, that seems like a good thing. If it is also analyzing data and writing reports, that activity too has merit. It may be better to have a somewhat objective party offer the data in a report format. And, if the government is putting that data out there so that others can interact with it, a range of good things could flow from private reports. Reports that question official stories would be more possible. Apps and tools could be created so that those who may not be able to pay for a report could still use the data and maybe learn from it over time. Raw data about hops and weather or catfish and water temperatures and so on, might allow farmers, conservationists, and others to learn how to achieve balances in farming techniques, cost management, and interests in sustainability. None of these potential upsides is guaranteed. But I think the potential for them increases in a system that recognizes where government is well-placed to provide fundamental resources and some neutrality (and thus needs funding) and where to allow non-governmental actors to draw on those resources to be creative.

Untold tons of carbon were being pumped into the air, with people losing billions of dollars in energy costs, all because there was no easy, automatic way to control the temperature. But what if you could apply all the skills and brilliance of Silicon Valley to produce a thermostat that was smart, thrifty and so delightful that saving energy was as much fun as shuffling an iTunes playlist?

So far, you may be thinking that programmable thermostats are old hat. They are and may not have worked as well as hoped given that the Times reports “Two years ago, the federal government eliminated the entire programmable thermostat category from its Energy Star program.” Yet, there is something different here. Improved, networked climate control is not your father’s Oldsmobile. It sounds crazy, but the pre-orders sold out and demand is high. Others are in the game as well. Some require more tech savvy to install. Regardless the idea is that data and networks will allow one to manage energy costs well.

The Nest seems to be the leader for easy use and install. The Times explains that the design is great but then the iPod designer would have to do that, right? The best part for me is that the Nest uses Wi-Fi which means software updates, programming from the Web or an App, and it learns.

Learns? Yes, learns. The system tells users how much time it will take to raise a house’s temperature (which stops the habit of cranking heat to get to a lower temperature), notes manual adjustments for home, midday, away, etc. to start to offer an automatic cycle attuned to habits. Motion sensors help set basic overrides for heating and cooling to take care times when no one is home. In a nod to behaviorial economics and some things that I think Ryan Calo has been considering, the Times explains that “Nest says that turning down your thermostat by even a single degree can save you 5 percent in energy. To that end, it offers a little motivational logo: a green leaf. It glows brighter as you turn the ring beyond your standard comfort zone. As a positive-reinforcement technique, it’s a lot more effective than an exhortation from Jimmy Carter to put on a sweater.”

I always feel a little sad when reminded of President Carter’s attempt to address the energy crisis of the 1970s. It seems to flow from a view of WWII America when people buckled down for the greater good, but that had perhaps faded years before his plea. Still, if we have learned that other approaches can aid better judgment and action, maybe we will turn those thermostats to 68 and wear that sweater as the then President asked us to do.

It requires a full read, and I recommend reading it pretty much start to finish. That being said, the sections break out in rather nice ways. For example, the markets and information section offers a great way to understand things that are often thrown around in law and policy circles. The most obvious example is the Wisdom of the Crowds idea. It turns out that only certain types of crowds are “wise.” As the authors point out: “The basic argument there, drawing on a long history of intuition about markets, is that the aggregate behavior of many people, each with limited information, can produce very accurate beliefs.” They explain:

Our results on state prices illustrate some of the technical basis for this intuition. In particular, we found that the crowd at the racetrack determines the odds, or the state prices, and these odds are an average of the opinions in the crowd. If the opinions in the crowd about the probability of horse A winning are independently drawn from a distribution whose mean is equal to the true probability of horse A winning, and if wealth shares are equal, then the state prices actually do converge to the true probabilities as the size of the crowd grows. This occurs because the state prices are actually the average belief in the crowd, and this average converges to the truth with the size of the crowd.

But these claims have two important qualifications embedded in them, both of which are important for understanding the limitations of the wisdom of crowds. First, it is important that the opinions are independent. … Second, it is important that all beliefs are equally weighted.

My read of the above is that those who invoke crowds as being wise should stop and consider whether the judgments are independently made. Online independent judgments are probably not as common as many think. In other words, crowds are not necessarily wise. To be honest, I am not sure I have digested the equally weighted insight. But I defer to the authors about that one.

Maybe it is the time of year when food feasts like Thanksgiving and the season of holiday giving make me think about simple, direct need and especially hunger. Whatever the reason, today that fundamental issue is upon us more than ever. The Times reports “Millions of American schoolchildren are receiving free or low-cost meals for the first time as their parents, many once solidly middle class, have lost jobs or homes during the economic crisis, qualifying their families for the decades-old safety-net program.” The numbers are stark: “The number of students receiving subsidized lunches rose to 21 million last school year from 18 million in 2006-7, a 17 percent increase, according to an analysis by The New York Times of data from the Department of Agriculture, which administers the meals program. Eleven states, including Florida, Nevada, New Jersey and Tennessee, had four-year increases of 25 percent or more, huge shifts in a vast program long characterized by incremental growth.” More than 3 years ago I wrote about the problems of a stigmatized school lunch program. I don’t know whether that system has evolved, but “apparently many of these formerly middle-income parents have pleaded with school officials to keep their enrollment a secret.” Society’s tendency to look down on the less fortunate is absurd. I am not sure what can be done about that. But perhaps we can reconnect with efforts to provide food across the world. The hard part could be the tensions between industrial farming and the organic movement. Yet, good science and data could show us a way out.

A Long Now Foundation seminar by Pamela Ronald and Raoul Adamchak Organically Grown and Genetically Engineered: The Food of the Future shows that rather than combat, we can sue data and reflection to marry these efforts. Sustainable food should: Provide abundant safe and nutritious food…. Reduce environmentally harmful inputs…. Reduce energy use and greenhouse gases…. Foster soil fertility…. Enhance crop genetic diversity…. Maintain the economic viability of farming communities…. Protect biodiversity…. and improve the lives of the poor and malnourished. (He pointed out that 24,000 a day die of malnutrition worldwide, and about 1 billion are undernourished.)

That is a tall order. As the speakers noted organic farming works well and mitigates the problems of pesticides, (Data point: “Every year in the world 300,000 deaths are caused by the pesticides of conventional agriculture, along with 3 million cases of harm.”). But organic techniques can’t address all the diseases and pests out there and “Its yield ranges from 45% to 97% of conventional ag yield. It is often too expensive for low-income customers. At present it is a niche player in US agriculture, representing only 3.5%, with a slow growth rate suggesting it will always be a niche player.” Genetic engineered plants (often not allowed under current regulation) can fill the gap.

According to the report of Dr. Ronald’s part of the talk, “One billion acres have been planted so far with GE crops, with no adverse health effects, and numerous studies have showed that GE crops pose no greater risk of environmental damage than conventional crops.” Examples include, cotton, papayas, and rice. “About 25% of all pesticide use in the world is used to defeat the cotton bollworm. Bt cotton is engineered to express in the plant the same caterpillar-killing toxin as the common soil bacteria used by organic farmers, Bacillus thuringiensis. Bt cotton growers use half the pesticides of conventional growers. With Bt cotton in China, cases of pesticide poisoning went down by 75%. India’s cotton yield increased by 80%. Other pest management techniques are needed but genetics can do much work. Hawaiian papaya was going extinct from ringspot virus, but a GE solution inoculated the fruit and the saved the industry. As I have written, basic food supply is a huge problem and rice is a key example of that. Dr. Ronald’s work on rice is impressive. The data: “Half the world depends on rice. In flood-prone areas like Bangladesh, 4 million tons of rice a year are lost to flooding—enough to feed 30 million people.” Her work developed “a flood-tolerant rice (it can be totally submerged for two weeks) called Sub1. At field trials in Asia farmers are getting three to five times higher yield over conventional rice.”

Seems compelling to me.

The story starts in the usual eco-group takes on industry way with the NC buying “out area fishing boats and licenses in a fairly extreme deal — forged with the local fishing industry — to protect millions of acres of fish habitat.” But the NC put the fleet back to work using a commons model.

Bringing information technology and better data collection to such an old-world industry is part of the plan. So is working with the fishermen it licenses to control overfishing by expanding closed areas and converting trawlers — boats that drag weighted nets across the ocean floor — to engage in more gentle and less ecologically damaging techniques like using traps, hooks and line, and seine netting.

The conservancy’s model is designed to take advantage of radical new changes in government regulation that allow fishermen in the region both more control and more responsibility for their operating choices. The new rules have led to better conservation practices across all fleets, government monitors say.

The challenges here were that “There wasn’t scientific information at that level that could match the fisherman knowledge.” Fisherman did not trust the NC, but when the NC bought some of the boats or permits from those who wanted to leave the industry, “The fishermen soon divulged which nurseries and rock formations needed to be protected and which areas where mature fish congregated should be left open. What resulted was a proposal that included large areas of closings — nearly 4 million acres — that most fishermen thought was fair. It was adopted easily by the fishery council in 2006.”

Now let’s look at the data magic. The NC uses a system called eCatch. According to the Times, fisherman were not sure about this reporting requirement “But fishermen have come to believe that the data will show patterns — for example, high catch rates of certain species after full moons along the edge of the shallow water shelf in July — that will help them all predict the danger zones. Independent fisherman have joined the risk pool and eCatch system because they see benefits. By handing out free iPads, the conservancy made the posting of real-time results almost effortless.”

And, it seems other areas are emulating this approach. “In Massachusetts, scallop fishermen, with the help of the University of Massachusetts, have developed a similar reporting program to avoid pulling in endangered yellowtail flounder.” Could lobster fishermen be far off from this method? Afterall at least with other seafood efforts the new method “yields profits and hardly any bycatch” (the term for catching sensitive species which can lead to market problems). And in what looks like another aspect of this commons comedy, in one case a family that sold its permit and leases it back at fair market value as long as the method “continues to use Scottish seining, which is far gentler to the ocean bottom than trawling is.”

Rather than the fight between nature groups and industry the fisherman offered a different picture: “The Nature Conservancy had identified that the small family boats were sustainable, and they wanted to help,” Mr. Fitz said. “We recognized that we needed help negotiating this increasingly confusing path into the future.”

More specifically, these examples make me think that some rather cool new text and opportunities are headed our way. As Richard Lanham noted in the Electronic Word almost 20 years ago, the standard linear text may give way to new forms. Like illuminated manuscripts we are seeing a new way of communicating. Hyperlinked, and how about animated, and I’d say even holographic, interactive text is coming. (I am guessing this stuff is occurring elsewhere, but the stories I have seen are U.S. So as always share what I am missing politely please.)

First, in professorland, Erik Brynjolfsson and Andrew McAfee’s Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy, follows Tyler Cowan’s work released as an ebook, but I think Race Against the Machine is only available as an e-book. Although the ideas in the book, or rather as Hal Varian reminded me, monograph may fit its length, are interesting, I was intrigued by the ebook model. At $3.99 and as an electronic publication, the tightly written piece can be written as intended without bloat to justify a larger spine (yes that matters for shelf-space marketing). And I think the press is run such that the authors will receive a fair amount of the proceeds. I found that the hyperlinked citations worked rather well. I jumped out and then back into the piece as supported assertions drew me away from the text, but I wanted to go back quickly when done. All that on an iPhone Kindle App.

Second, the Atlantic’s How to Build the Pixar of the iPad Age in Shreveport, Louisiana demonstrates the promises of technology that Race Against the Machine offers in some ways. The word, book, fails to capture this work. As the article describes:

Their first project, The Fantastic Flying Books of Mr. Morris Lessmore, was released for the iPad last May. It recounts the wondrous adventures of a book lover who dotingly cares for a living library before writing a book himself that tells of “his joys and sorrows, of all that he knew and everything that he hoped.” Gorgeously illustrated, Lessmore breaks new ground in the way that it incorporates interactivity. Each page has a wormhole of interaction. Read about a song and perhaps a keyboard will pop up and guide your fingers to plunk out “Pop Goes the Weasel.” When Morris Lessmore hand-feeds alphabet cereal to his books, the reader gets a bowl too, with letters that can be dragged along through the milk to spell out words. Each page holds its game like a secret and puzzling out what to do encourages the reader to look harder, knowing they’ll be rewarded. The games pull the reader deeper; the narrative pulls the reader farther. The tension between lingering and racing is potent.

It is technically an App! And it was the best-selling one for a bit too. That success has led the team to hire 20 people and become a small studio in this new medium.

And like the professors, these creators are doing what they want their way and kicking open new markets to boot. “There isn’t a huge market for animated shorts, certainly not the multibillions that can be reaped from a wide-release. If they’d wanted a world-class studio, they might have been forced to supersize their operations.” Technology like the iPad in this case is opening the door for folks to create and sell on their terms. They can “stay smaller, retain more creative control, and tell stories in new ways. They have faith that stories are more fundamental than technology, but that technology will enable a storytelling renaissance.”

He noted that on the one hand, the FBI had shut down a DNS changer fueled operation that “redirect[ed] infected computers to rogue websites.” As he explained, “The sheer scale of this DNSChanger scam is likely to increase the momentum for technology that makes it harder to subvert DNS for illegal purposes namely DNSSEC, short for DNS Security Extensions. The goal of DNSSEC is to protect the Internet from certain attacks, such as DNS cache poisoning, man-the-middle attacks, and the kind of DNS changing the FBI has so dramatically brought to light.”

On the other hand the proposed bills use the same technique to achieve their goals. “These bills would require DNS server operators in the US to replace the correct IP address for a website with an alternate address provided by the Attorney General’s office, if the website was “infringing.”

Mr Cobb captures a view that I think reflects what many in security believe. Finding solutions to online IP issues is not a bad idea. But the model on the table right now “is fundamentally incompatible with DNSSEC, a technology that will, if it is allowed to proceed, make many parts of the Internet more resistant to abuse, and expand the possibilities for lawful and profitable business in cyberspace. While the FBI and other law enforcement are working hard to stop the bad guys making millions by infecting our computers and subverting DNS it seems unwise to give private companies the ability to go ahead and change DNS armed only with court orders.”

And for those who want to get a bit more deep on the tech, Mr. Cobb offers “the whitepaper by Paul Vixie and other Internet lunimaries “Security and Other Technical Concerns Raised by the DNS Filtering Requirements in the PROTECT IP Bill” (pdf file).

This interview with Stefan is a great way to get into the area. For example, did you know that the drug war and security may share similar features? And yes reading beyond one’s direct field is wise. A key insight was that assigning value to malware and spam helps fight the problems and that a focus on only technical solutions was not as effective as one might think or hope:

We’d been working together for quite a few years on large-scale attacks (e.g., worms, viruses, DDoS, etc.), and while we’d had lots of technical successes looking at those problems head on, it was pretty clear that the world wasn’t getting any more secure . Around that time we became exposed to the breadth of activity involved in underground trading of compromised accounts, credit cards, spam mailers, email lists, etc .—anything you could think of . This was really our inspiration, because we came to recognize the role that the profit motive was playing in all this (although spam was key to this evolution, we wouldn’t make the link until later).

I think it helped that at the time I was reading a book on the history of the drug war and the failings of supply reduction as a strategy due to the poor understanding of drug distribution economics. We came to see that our community had a similarly poor understanding of the value chain for economically motivated attackers and thus didn’t understand that our various technical interventions actually played minor roles, at best, in mitigating their actions.

Furthermore, the interview is simply a fun read of the way some serendipitous encounters, failed projects that nonetheless connected people working on the problem, and good old fashioned “I didn’t know I couldn’t do that” lead to “oh, yes I can do that”

this little team got excited about understanding how Storm worked, but—aside from Brandon—they had basically zero skill doing reverse engineering. So not knowing that this was a crazy approach to pursue, they tried reverse engineering the command and control (C&C) protocol in a blackbox fashion—sending data at a captive bot, writing down what it did, theorizing about why it did those things, or letting it talk to its normal C&C and seeing what it tried to do in response to various commands it received . Brandon was busy, but provided key insights when they hit roadblocks (e .g ., message encryption), but the rest was just raw guesswork over a period of several months . Vern and I had our doubts whether this was a good way for everyone to spend their time, since we weren’t confident they could do it, or even what the research question would be if they succeeded. Geoff Voelker was on sabbatical in India for this period, so he was bliss- fully unaware of how much time was being wasted on this . However, we gave the students a long leash and somehow they pulled it off, documenting most of the C&C protocol and then building a set of parsers that could interpret it.

Some key insights:

–Spammers work on commission
–Trying to explain to a university why one needs to buy goods from criminal organizations is funny (They were really trying to understand the entire system) and can lead to “Why can’t you just use a purchase order?” responses
–Failures matter

First, we failed repeatedly to wrap our minds around this paper. We had at least two aborted attempts to submit a paper only to discover that we still didn’t really understand what we were doing . I know that Vern, Geoff, and I all had doubts if this thing would ever come together (18 months of work without anything to show can shake even the most confident person) . We tried, but ended up failing, to incorporate a strong analysis of the spam delivery component (which programs were advertised by which botnets, which used Webmail, etc .), and we spent months building complex models for inferring the different individual affiliates of different program,s ultimately to discard them for the final paper . There is at least another paper’s worth of work in all the stuff that we left on the “cutting room floor,” but we chose to focus on the parts we were the most confident about.