Writings

COR Media Market Opportunity Analysis:
A P2P Value Creation Platform for the Cultural Creative

"Content is the DNA of the Internet."
KEVIN CLARK, CEO, SCREAMINGMEDIA, INC.

IN THIS YET NASCENT DIGITAL ERA, it is refreshing to read such a brazenly straightforward affirmation of the value of 'content' – which, it may be reasonable to say, has also been the 'DNA' of communication, culture and cognition since the dawn of human civilization. The above quote appeared in an article in Wired magazine describing another new brand of e-business, this a self-described 'content broker' chaired by former advertising guru Jay Chiat.

Elsewhere in the same issue, John Perry Barlow argues his now familiar prophesy that "paradigm-shattering technologies" such as Napster and Gnutella are ushering in "The Next Economy of Ideas," in which "copyright is dead." Barlow asserts, "It's all over but the litigation."

Still, such proclamations clearly are not deterring global content powerbrokers such as Time Warner, creative entrepreneurs like Chiat, and a surfeit of other players from struggling to revamp Old Economy publishing processes and build New Economy e-business models in which content equates to healthy profits.

We firmly believe the COR business plan provides an extraordinary leap forward in articulating and lending direction and clarity to this ongoing industry drama with a revolutionary synthesis of

• Advanced peer-to-peer collaborative networking, resembling technology developed by John Ozzie and his team at Groove.com;
• A unique synthesis of personal knowledge management tools, combining immediate online publishing with powerful inference search technologies;
• Driven by an innovative, synergistic business model.

The COR P2P media architecture employs specific new 'open-source' methods of generating, filtering, and rewarding personal creativity and expression while securing a free, virtual affective and aesthetic network, combined with a robust economic engine with which to carry this model solidly into the future.

This market opportunity analysis includes:

• An overview of the unique analytic tools COR employs to circumvent the current disorientation and dangers endemic to this industry
• A survey of the likely competitive landscape
• A description of the unique demographic audience to which COR will be targeted
• An outline of COR media features enabling the target audience to engage in optimal creative, collaborative, and knowledge enhancement activities.

I. The Market

Ferment in the Industry

In our analysis of the current industry, the COR team has identified the following six major e-business models, through which these and other players are seeking to carve out a sustainable niche in a $400 billion annual U.S. intellectual property market that is rapidly migrating to digital form online:

1. Clearinghouse model, e.g.,
A. iSyndicate
B. ScreamingMedia
C. Contentville

2. Provider model, e.g.,
A. Associated Press
B. Reuters

3. Aggregator model, e.g.,
A. VerticalNet
B. Commerce One
C. Ventro

4. Brand Subscription model, e.g.,
A. Online WSJ
B. New York Times

5. Monopoly model, e.g.,
A. AOL Time Warner
B. Bertelsmann

6. Emergent P2P models, e.g.,
A. Napster
B. Groove.com

These disparate efforts to establish viable models with which to manage and extract value from digital 'content' reflect both tremendous confusion and opportunity in the arena of intellectual property. The level of disarray and crisis currently in the market is most apparent, however, in the fact that a full 77% of e-content businesses recorded losses in 1999. Additionally, only 10% of respondents in a recent Forrester Research study reported a willingness to pay for online content. This Forrester study concluded that only those e-content business models with a thorough knowledge of their target audience and with diversified marketing and revenue vehicles would survive the next several years.

The COR business model proposes a highly unique market approach and opportunity altogether in tune with these Forrester findings and distinct from those pursued by either new or legacy players in the marketplace. This is accomplished in part by avoiding the acute epistemic crisis currently endemic to this industry. The confusion surrounding opportunities offered by today's massive, universal digitization of content may be ascribed to the following closely related cause-factors.

First, the 'convergence' of traditional media forms enabled by digitization is widely mistaken for a convergence in media content. It is this confusion of new communications technologies with the messages carried over these media that has given rise to much of the cognitive disconnect plaguing e-business models seeking to aggregate and market digitized sound, visual, and textual information.

A closely related pitfall of contemporary content businesses has to do with a crippling lexical lag: advances in linguistic tools have not kept pace with communications technologies. The newfound facility in rendering music, voice and sound, written text, and images in patterns of 0's and 1's has lead to injudiciously lumping all forms of creativity and intelligence into a single "content" category.

Finally, content-propelled e-businesses today by and large fail to factor into their business models a clear articulation of the distinct and identifiable value offerings of discrete modes of communication in virtual, living, and archived forms.
Combined, these uniquely Digital-Era hazards lay the flawed epistemic foundation for many struggling e-businesses, leading to the haphazard and counterproductive management of ineffectively bundled and marketed content products.

The first of the COR model's several key value offerings, then, is the following first-level redifferentiation of content-messages in terms of three interrelated categories:

• Functional Content (e.g., software code, technical standards)
• Cognitive Content (e.g., medical research reports, academic articles)
• Affective Content (e.g., poetry & fiction, music, painting)

This delineation provides a desperately needed means of understanding both general and specific instances of the epistemic crisis so evident in content-related business models. For instance, management and incentive structures suited to maximizing efficiencies in producing and marketing the functional content of software code have proven unsuitable to the production and marketing of the cognitive and affective content of compelling journalism and literature. Bill Gates himself has learned that, though "Content is king," a company's demonstrated competence in producing and marketing functional content does not necessarily translate to success in the realm of cognitive or affective content. This first-level, foundational analysis is thus critical in the conceptualization and creation of a viable and sustainable digital content business model.

COR is therefore purpose-built from the ground up expressly for the highly diachronic, extremely fine granularity required of affective, aesthetic content and peer-to-peer networking suited to the following specific target audience.

II. The Market Opportunity

Unmet Demand

In spite of the plethora of content and the various delivery systems being utilized to distribute it via the Internet, the market has yet failed to address the networking and media needs of a large demographic. Drawing heavily on the work of sociologist Paul Ray, who has spent thirteen years studying over 120,000 individuals through surveys, focus groups and in-depth interviews, COR has defined its primary market audience as the "Cultural Creatives." Individuals classified as part of this demographic demonstrate a deep commitment to the environment, social equality, personal spirituality, relationships and self-expression, striving to integrate these values into all aspects of their lives.

Cultural Creatives may be contrasted with two more visible American subcultures, the Moderns and the Traditionals. According to Ray's research, 50 percent of Americans are Moderns, those who prioritize wealth, status, and scientific 'progress.' Traditionals comprise 25 percent of the population, share socially conservative values, and long for a return to a simpler and more "righteous" time. Though Cultural Creatives constitute a full 25 percent of the American population, their voice in mainstream media generally loses out to the other demographic groups. Thus, though 50 million people in the United States may be classified as Cultural Creatives, many report feeling isolated because their values clash with those of Americans whose values and worldviews are far more commonly reflected in the mass media. While a common trait among individual Cultural Creatives is heightened self-awareness, the group does not yet have a sense of its shared values, characteristics, and its collective identity,

Further, Cultural Creatives tend to be both better educated and better off financially than most Americans.

• Disposable annual income after taxes for the group totals $1.1 trillion.
• Annual spending on products & services targeting this group is currently $230 billion in the U.S., $500 billion worldwide.

Members of this demographic tend to be highly cautious consumers, eschewing materialism and consciously assessing the ways in which their spending impacts the environment and society as a whole, making them a traditionally hard-to-reach market. Yet they are strongly attracted to products and experiences in tune with their worldview, particularly as they see these as unique and seldom found in mainstream American culture. A majority of media venues, including the Internet, are currently conceived and marketed to appeal to America's dominant culture, the Moderns. Cultural Creatives spend approximately $10.6 billion each year on personal development products and services. COR seeks to capture approximately

• 0.15% of spending in this category ($15 million) within three years of launch,
• and 1% market share within seven years ($100 million).

It should be noted that some businesses have, of course, previously recognized the buying power of Cultural Creatives and have successfully provided services that cater to the subculture's given needs and values. For example, the "Lohas" (Lifestyles of Health and Sustainability, see table) industry group, which sells goods and services appealing to ecological lifestyles, healthy living, alternative health care, and personal development, will do approximately $154.5 billion in business this year with Cultural Creatives, who make up the majority of its customer base.

Yet many markets for this large and affluent group of Americans remain largely untapped. Crucial to the COR plan is that a disproportionate number of Cultural Creatives produce superior works of self-expression in the form of autobiographical writing, social commentary, scholarly analyses, visual arts, and musical compositions for which a majority receive no monetary return. Though these quality works would certainly resonate with and appeal to other members of this subculture, the works generally go unpublished. Because Cultural Creatives as a rule desire shared experiences with those possessing similar values, it is anticipated that members of this target audience would welcome media and activities specifically designed to facilitate such interaction.

Again, COR will be purpose-built to address this group's unmet communications needs and fill the community void commonly expressed by members of this group, providing an integrated space where these individuals may communicate and collaborate in order to create the "new, saner, and wiser culture" Ray believes will emerge as members of this large, intelligent group connect and develop a sense of their shared vision and mission.

III. The COR Solution

COR represents a pioneering set of lifestyle products and services tailored to the characteristic interests and needs of the Cultural Creatives, exploiting imminent P2P technological opportunities, and based on a robust model for generating value through synergistic revenue sources.

The absence of demonstrably successful business models for effective digital content management and value extraction (as described above) argues for a radically new approach to generating returns through digital content. COR's triadic business model provides such an approach. This model synthesizes revolutionary peer-to-peer digital communications services ("Soft COR"), feeding directly into a novel approach to publishing traditional hard media ("Hard COR"), and generating ongoing participation in educational and aesthetic events ("Live COR").

Soft COR's major value offerings with regard to the Cultural Creatives market include

• free and immediate online publishing of personal journals, creative writing, social commentary, scholarly analyses, and musical compositions;
• the sharing of similar, relevant material posted to COR through automatic and transparent keyword and inference comparison searches;
• all within an entirely novel, high-end integrative UI environment available for free download, or through a simplified Web site interface.

Regarding technical implementation, Soft COR recombines largely pre-existing online technologies and exploits the untapped distributed-intelligence potential of the P2P paradigm by featuring

• a highly integrated, configurable online publishing and community-space platform (COR Kernel), which enables unprecedented levels of content collaboration and sharing among network members;
• transparent, real-time inference and keyword cross-referencing of all content on network member machines based upon the user's own self-generated material;
• and multiple, streaming radio stations featuring member musician's original compositions.

Hard COR's real space, static media are generated out of the Soft COR community, which in turn provides a highly engaged market audience for these salable 'solid' products. These products would include, but would not be limited to,

• thematic periodicals based on issue-areas of greatest interest among the COR online community;
• books by community members who, through the quality and topic-relevance of their material, have generated a strong following throughout the community;
• and CD recordings of musical works by composer musicians who have similarly generated an interested following within the online community.

The management team has triangulated forecast Hard COR revenues in Section IV.

Live COR's real space events would similarly be generated out of online community activities, based upon areas of clear interest, and would be marketed back into the community. These would include

• educational lectures, courses and conferences on topics statistically, demonstrably of compelling interest to members,
• as well as musical concerts by member musicians whose work has generated a given threshold of interest in given localities,
• all provided in locations most appropriate to the target audience.
  

IV. How We'll Get There

P2P 'Viral' Distribution

The central functionality of COR is driven by a new and exciting means of online exchange rapidly catching fire in the online world: P2P networking. This "COR Kernel" will be the focus of development during the first full year following funding and launch, followed by the rollout of subsequent dimensions of the program.

Media coverage surrounding this technology has primarily focused on companies built on P2P technologies, such as Napster, its proliferating clones, and Scour. To date, the technology has largely been employed for the exchange of music and video files, to the chagrin of the MPAA and the RIAA. However, the technology also holds profound (and legitimate) implications for other business and networking models, such as that being developed by the above-mentioned Groove.com. Following is a brief breakdown of how this technology would function in the context of the COR model:

• The COR Kernel code is distributed "virally," free-of-charge from one user to another or, alternatively, downloaded from a COR server Web site.
• User A uses the COR Kernel interface to execute explicit keyword searches, or to input self-generated (affective or cognitive) content, allowing the COR Kernel to then conduct an automatic, transparent inference search for related material.
• Users B, C, D have self-generated content on their personal PCs, all of which exhibit a 'threshhold' similarity of information (in terms of keyword matches).
• Additionally, these users have accessed further similar content on the network of particular relevance, providing further search data and a fine-grained means of inferring content quality and interest.
• User A chooses to access (read, view or listen to) specific information she finds compelling from User B, providing further inference data for the network of users.
• A five field message is returned to the COR administrative server: date, time, UserIdDown ("User A"), UserIdUp ("User B"), and filename.

The server maintains a record of filenames and their owners, user IDs, and the geographic/demographic information of all users. In the process of tracking popular exchanges, the server also manages information on the location and demographics of individuals who download files (written into the user agreement). This detailed information (geographic density maps, venues in the area, age, gender, referral density.

In this P2P model, exchanges happen independently of the central COR server. The server's job is to track who accesses what information, user information, and to flag popular files for consideration to be included in the COR journals/modules. The COR Web site is then organized by aggregating most-popular files into these subject journals/modules. It is important to note here that all necessary technological elements of this initial development are available in either freeware code, or through strategic partnerships. COR's overall value offering is in the unique synthesis of industry analysis, customer knowledge, market opportunity, and newly available technology, rather than in any as-yet-undeveloped technologies.

The scheduled rollout of specific products and services described in Appendix 1.1 must be based on both the means employed to procure each technological element (i.e., adapting available opensource P2P network search code vs. partnering), as well as the readiness of the specific content area (i.e., establishing contacts in music combined with procuring the needed technology allows for more rapid deployment of streaming audio).

Building Profits Through Virtual Network Effects & Real Revenue

Once the virtual dimension of the COR equation is established and growing, hard returns on investment will be seen through the generation of tangible Hard COR products in 'real space' formats, including paper journals, books and CDs marketed back into the COR network community.

The team has triangulated conservative Hard COR revenue projections (at right) based on actual "hard media" sales reported by the American Publishers' Association, the MPAA and the RIAA, against actual current spending by the Cultural Creatives target demographic, as well as conservative forecast growth in COR's virtual community size.

Similarly, projected revenues from Live COR educational, personal development, music and arts events have been triangulated based on estimated spending by the target demographic and forecast growth in Soft COR network size.

The COR team estimates that, in order to fund preparation of

• a prototype UI and detailed COR Kernel specifications,
• detailed and viable business operations and financials,
• formation of an initial, reputable advisory board,
• and presentation of this plan to potential technical, content and investment partners,

$100,000 will be required over a six-month period. At the end of this period, the team will be in a strong position to take a fully developed plan and prototype to potential high-profile partners and backers.

COR is purpose-built from the ground up expressly for the highly diachronic, extremely fine granularity required of affective, aesthetic content and peer-to-peer networking suited to this specific target audience.