A new idea for the record industry - Snapster
- Thread starter timwhit
- Start date
pffffff...Cringely said:
(1) what does your average lawyer know about the securities markets ?
(2) I see many flaws outside of the legal aspect
Isn't this "new economy" mentally getting a little stale. Greed - bringing a company which has no revenues whatsoever to speak of to market. Guilible - investors who buy into such tripe.
Maybe Cringley should learn what market cap is before he starts throwing it around.
A million shares is broad ownership?
Does he even know how IPOs are distributed? How many of you have been able to get in on an IPO? Simply, the primary market (i.e. that which relates to new stock issues) is a tough place for the little guy, and you are usually lucky if your broker is able to offer them to you through the distribution chain. The end, non institutional, investor tends to play in the secondary market (ie. where securities are traded after their initial offering).
A stock split is not the sale of additional shares! Further, lets entertain for a moment that the price of the stock rises enough to warrent a split - In that case, if new investors can't get in by virtue of supplemental offerings (which is actually known as a "seasoned issue" i.e. issuance of new shares for a company whose shares already trade in the secondary market), then the only way in for outsiders is that a current share holder is willing to part with one of the split shares. That seems to be the major premise that he is going by - that the investor must recognize that, if the model is to succeed, he must sell a share in the secondary market with each new stock split. Essentially he's trying to create a type of co-op whereby creation of new membership is left to the intelligence and good will of each investor.
But lets look at something rather interesting for a moment. First off, a stock split does not create new wealth for the investor. Whether you own 1 share @ $40 or 2 shares @ $20, the bottom line is the same. Thereby, the only way wealth is increased is by capital gains or dividends (which his model seems to completely neglect). So lets say the original investor bought in at the IPO for 1 share at $20 and the stock price rises to $40, at which point it does a 2-for-1 split. Now for the benefit of the model (i.e need additional new stock owners who will increase d/l sales, and thus supposedly drive the stock price up again), the wise investor recognizes this pertinent fact and sells one of his two shares in the secondary market. Or does he/she? No, they don't. The wise investor completely avoids the costly transaction charges (i.e. trading commisions). Even going with a ~$12 discount brokerage like Ameritrade or something is going to eat about 60% of the sale of that single $20 share. The wise investor realizes that the $20 paper profit is certainly better than the $8 in pocket profit. Thus they would hold and await each next round of stock spliting. Can you see where this is going?
what is he talking about? His concept of ownership and market cap is retarded.
1) I think I just disproved why his growth model won't work - it rellies on the good nature of man, who should be all so concerned about the good for all. Idealistic? Yes. Realistic? Not on this planet. I guess its also somewhat similar to the prisoners matrix - mutual benefit, singular benefit, get screwed, we all get screwed.
2) He believes that a because a free P2P network obtained such traffic, that a pay model can accomplish the same....hmmm, maybe, but he'll have to do better then that to convince me that there exists such interest currently
Okay, this gets back to my earilier point about how IPOs are distributed to the market place and the effect of commisions. What are the chances a discount brokerage would be offering you a single share of an IPO. Can you say zero to none. Welcome to the world of institutional equities Mr. Cringley.
Another point - how many investment houses are going to be jumping up an down to underwrite a million lossey shares? Welcome to the wonderful world of underwriting Mr. Cringley - you'd be hard pressed to get a best efforts (ie. the underwriter doesn't buy the sale or make any gaurentees, they just distribute on a best efforts basis).
Cringley, your killing me with your misconception of what Market cap equals. Please stop now.
Sigh....he just doesn't quit does he.
Okay, heres the deal. He pulled $200M out of thin air ... there is no justification in his explaination
Second, market capilization = number of outstanding shares * share price. That is what the market prices the compay's worth as.
Third, 1M shares * $20 per share = S20M market capitalization.
Fourth - when underwriters price an IPO they are essentially placing a valuation on the company. And to get to the fact, valuation theory holds that the value of any asset is the present value of the assets future cash inflows.
Sometimes IPOs are underpriced, in order to insure success of the issue. But an offering that is underpriced to 10% of its true worth, as in his ridiculus example, is, shall I say, retarded?
Again is this a logical user base?
So, what he's saying is that initial 1M investors of 1 share each has magically grown to 60M investors of 1 share each and the company is trotting along with earnings before depreciation, any interest expenses and taxation (ie. EBDITA) of $3.2B. With a little guess work, we can make an assumption about Earnings per Share.
EPS = [ (per share sales estimate) (EBITA %) - Depreciation - Interest ] * (1 - tax rate)
- the per share sales estimate is plug and chug: $3.6B / 60M = $60/share
- EBITA % he gives as 90%
Recall that his plan calls for:
- Depereciation per share is negligible - first off, depreciating the 100,000 CDs and the server & misc equipment ($1.5M total) over 60M shares is negligible. second off, I ain't going to bother figuring out an appropriate amount of depreciation. third, where does he expect to store all this crap? (and for free?) - nonetheless, I'll ignore it, thats his problem.
- Interest expense is zero according to his $2M initial investment, unless of course you finance said investment by taking out a loan. Lets say he does, at 10% (well above current lending rates). Then $200K over 60M shares is agian some piddly negeligible amount ... I also highly doubt that anyone raking in $3.2B is going to have an outstanding balance for $2M
- Lets assume the gov't takes 50% of the booty.
Then the EPS = (60 * .9)(.5) = $27 per share
I wonder if Cringley realizes that a P/E represents the current price (Pn) divided by the next periods expected earnings (En+1). Better yet, I wonder if he realizes that if you multiply this P/E by next periods EPS, you get an estimate of the current value of the stock? Lets see,
current value = $27 per share * 10 = $270 per share
Nope, I guess he doesn't. Oh well Mr. Cringley, don't feel bad, there isn't much difference between $20 and $270 .... well just a bit.
No, I think you chose that number cause you don't have a clue what your talking about in these respects
Not even close
[valley girl mode]like, what-eveerrrr[/valley girl mode]
Don't get me wrong, I think the shared rights and d/l costs you suggest are excellent ideas....but the investment idea, as it stands is pretty craptacular. You need to develop a co-op and distribution model outside of the securities market.
There are many other points to pick on but lets just say I'm getting bored.
CK
Mercutio
Fatwah on Western Digital
Are you "investment involved" or some form of financial pro, CityK?
Personally, I'm of two minds on the subject of file sharing. I like the idea that I might be able to snag something when I want it, but realistically, the only person sharing music that *I* like is me, and that's not going to change.
On the other hand, the more that's done to limit interest in MP3, the better. MP3 is a lousy format. It's lossy. It's stereo-only. It's encumbered IP laws. File sizes are even high compared to other formats.
I want next-generation audio to move closer to the SACD or DVD-Audio end of the spectrum. Moving to a future of MP3 (and that's what I see; new CD players seem to support the format, and solid-state and disk-based MP3 players seem to have very high adoption rates) is a lot like taking a step back to the days of audio tape, at least in terms of sound quality.
Personally, I'm of two minds on the subject of file sharing. I like the idea that I might be able to snag something when I want it, but realistically, the only person sharing music that *I* like is me, and that's not going to change.
On the other hand, the more that's done to limit interest in MP3, the better. MP3 is a lousy format. It's lossy. It's stereo-only. It's encumbered IP laws. File sizes are even high compared to other formats.
I want next-generation audio to move closer to the SACD or DVD-Audio end of the spectrum. Moving to a future of MP3 (and that's what I see; new CD players seem to support the format, and solid-state and disk-based MP3 players seem to have very high adoption rates) is a lot like taking a step back to the days of audio tape, at least in terms of sound quality.
timwhit
Hairy Aussie
Mercutio said:
Mercutio-
The thing is that most people don't even care how good their music sounds. A lot of people can't tell the difference between their giant KHL speakers they bough at BestBuy for $99.99 and my NHT speakers that cost over $800. As long as the music has a lot of bass the masses think that it sounds good.
Frankly unless I am sitting down in front of my speakers really paying attention to how something sounds then I can't (or just don't) tell the difference between a high quality CD and a MP3.
Why did the MiniDisc catch on so well in Japan? It is a really crappy format, maybe even worse quality than a high quality MP3. But it is small and highly portable to people like it. MP3 players are even smaller and more versatile than MDs. Plus most people get them for free.
The thing is, I don't know how many people are going to pay for MP3s when so many people are used to getting as many as they want for free. I know that I am not going to pay if I can get them for free. The current file sharing networks are pretty good. I can get almost anything I want, save for a few artists that are just not widely listened to.
Mercutio
Fatwah on Western Digital
Try listening to something outside mainstream pop. Jazz and classical music barely exist out there.
timwhit
Hairy Aussie
Mercutio said:
Ya, I know. I was trying to find some jazz, but it is super hard to find. All I could find was the more popular stuff. If you know where to get some of Ben Sidran's music let me know...
Mercutio
Fatwah on Western Digital
I know a lot of people who can't tell the difference between stereo and mono until they stop and listen. I don't have a problem distinguishing stereo from 4ch surround or 5.1. Anyway, those people who have trouble with mono stereo... if you ask 'em what sounds better, they'll cock their head, listen for a moment, and come back with: "stereo".
Now, someone walks into my apartment while I'm listening to a DVD-Audio might not immediately appreciate the multi-channel-ness of the recording, but if I flip between two and six channels, which do you think most people will like better?
If I'm listening on anything better than cheap computer speakers, an MP3 doesn't sound very good (er, at least until you hit 224kbit/sec). Maybe it just depends on musical tastes (are things different for someone who listens to Nirvana vs. John Coltrane vs. The Who vs. Mahler vs. Run DMC?). Maybe people are less picky because their point of comparison is the cheap speakers in their car or the cheap speakers on their boombox or maybe the cheap speakers on their Bose Lifestyles cube-things?
I've never heard of anyone complaining about multichannel - even given the higher setup costs, once they've actually heard it. Some say "I'll work up to having this." but never "This in no way impacts my enjoyment of this material."
Lots of new, upper-end boomboxes are coming as 5-speaker sets, now, BTW.
As far as the jazz thing - What inspired my complaint regarding jazz is that I couldn't find positively seminal jazz recordings on FastTrack a few weeks ago. Jazz is basically "compromise music" in my office, since everyone tolerates it and no one dislikes it (unlike country, classical or "U2"). So we stick with Jazz, and look up bits about it and it's kind of interesting for everybody. One of the women in the office is of the generation that grew up on jazz and jazz-ish pop (Tony Bennett etc). We listened to her CDs until we grew tired of them. Then we hit amazon to find other "essential recordings". Only... No Duke Ellington. No modern Miles Davis (couldn't find Bitches Brew, f'r instance, and had a helluva time finding "Sketches of Spain"). All kinds of Diana Krall, Norah Davis. No Cab Calloway except "Minnie the Moocher". Maybe ten different songs sung by Ella Fitzgerald, even fewer from Lena Horne. There isn't even a whole lot of Frank Sinatra unless you're into "My Way", "New York, New York" or "It was a very good year."
Frank Sinatra may be "oldies" music to a lot of people but there's no way it isn't mainstream. Every time Bono or Britney Spears passes gas near a microphone, it shows up on the internet.
The whole of the music industry is about catering to the masses. It's getting harder and harder in the age of the internet. Is there such a thing as Top 40 radio any more? I realize that demographics play a big role in "what's out there" but in the name of some future electronic music service, things need to be very different than the current systems before they're anything like an acceptable replacement for a manufactured product.
Now, someone walks into my apartment while I'm listening to a DVD-Audio might not immediately appreciate the multi-channel-ness of the recording, but if I flip between two and six channels, which do you think most people will like better?
If I'm listening on anything better than cheap computer speakers, an MP3 doesn't sound very good (er, at least until you hit 224kbit/sec). Maybe it just depends on musical tastes (are things different for someone who listens to Nirvana vs. John Coltrane vs. The Who vs. Mahler vs. Run DMC?). Maybe people are less picky because their point of comparison is the cheap speakers in their car or the cheap speakers on their boombox or maybe the cheap speakers on their Bose Lifestyles cube-things?
I've never heard of anyone complaining about multichannel - even given the higher setup costs, once they've actually heard it. Some say "I'll work up to having this." but never "This in no way impacts my enjoyment of this material."
Lots of new, upper-end boomboxes are coming as 5-speaker sets, now, BTW.
As far as the jazz thing - What inspired my complaint regarding jazz is that I couldn't find positively seminal jazz recordings on FastTrack a few weeks ago. Jazz is basically "compromise music" in my office, since everyone tolerates it and no one dislikes it (unlike country, classical or "U2"). So we stick with Jazz, and look up bits about it and it's kind of interesting for everybody. One of the women in the office is of the generation that grew up on jazz and jazz-ish pop (Tony Bennett etc). We listened to her CDs until we grew tired of them. Then we hit amazon to find other "essential recordings". Only... No Duke Ellington. No modern Miles Davis (couldn't find Bitches Brew, f'r instance, and had a helluva time finding "Sketches of Spain"). All kinds of Diana Krall, Norah Davis. No Cab Calloway except "Minnie the Moocher". Maybe ten different songs sung by Ella Fitzgerald, even fewer from Lena Horne. There isn't even a whole lot of Frank Sinatra unless you're into "My Way", "New York, New York" or "It was a very good year."
Frank Sinatra may be "oldies" music to a lot of people but there's no way it isn't mainstream. Every time Bono or Britney Spears passes gas near a microphone, it shows up on the internet.
The whole of the music industry is about catering to the masses. It's getting harder and harder in the age of the internet. Is there such a thing as Top 40 radio any more? I realize that demographics play a big role in "what's out there" but in the name of some future electronic music service, things need to be very different than the current systems before they're anything like an acceptable replacement for a manufactured product.