Corporate Convergence Cognitive Dissonance

In the "News From the Ironic" department: Recently a Google employee was fired for running a blog that was apparently critical of his employer. The irony, of course, is that Google bought Blogger in 2003. (Point to ponder: was he fired for blogging about work, or for not using Blogger to do so?) Now, of course, Blogger does have an article in their Knowledge Base warning against this sort of thing — but this still means they provide easy access tools that can be used to break their own corporate rules.

It seems to me that this sort of corporate cognitive dissonance is becoming more frequent, especially in the age of technological convergence. Take Sony, for example. They own some major movie studio labels, including Columbia and TriStar, so they are understandably worried about movie piracy — both in the theater and at home via DVD copying. Thing is, they also sell digital video cameras, recordable blank DVD's, DVD recorders, and computers with movie-editing capability — all tools that can be used to copy movies. Sony owns some major record labels, such as Columbia and Epic, featuring big-name artists like Barbra Streisand, Celine Dion, AC/DC and others, and they run a downloadable-music online store that supposedly has fool-proof Digital Rights Management (DRM)... but they sell blank CD's and CD recorders that can be used to copy commercial CD's. (And just remember this: Even with the best DRM, any audio you can listen to can be re-recorded onto other media. It may not be a perfect digital copy, but it's still usually better than old vinyl.)

Apple ran into this, to some extent. When Mac OS X first came out, you could use the included Disc Copy program to create the image of a blank CD, and then easily trick the computer into thinking you'd just inserted a real blank CD, which you could burn files to, read files from, and "eject" without using up a real CD. When they rolled out the iTunes Music Store (and their own brand of DRM), they disabled this feature — which could be used to easily convert a protected song into an unprotected one, without ever actually burning a physical CD.

Disney encountered this dissonance and lost (in my opinion); it didn't even involve technology. The Disney Store chain was wildly successful at first, providing the best, or only, outlet for Disney merchandise in most communities. The division that ran the stores, though, also ran licensing to get products into stores like Wal-Mart, Sears and Sam Goody. The licensing team drove competition with the in-house retail outlet. It was only a matter of time before customers saw that they could buy virtually identical products for much less than what Disney was charging. Ultimately, Disney HQ got the money either way, but it was inevitable that the Disney Stores would fold — now Disney reaps the profits of licensing without the overhead of public operations.

One company that faced convergence and internal competition, and came up with a radical solution to the dissonance, was Roxio. Roxio was a software company that I knew mainly through their Toast CD-burning software. In 2002, they bought the remains (actually, probably just the name) of Napster. When the "new" Napster launched, this meant that Roxio's Toast (and associated PC products) could illegally copy CD's of music purchased at Roxio's Napster. Their solution: sell the Roxio name and assets to another company and change their name to Napster, Inc. Instantly, no more internal competition.

Extreme cognitive dissonance surely requires extreme solutions; I'm not saying Roxio's solution was the best one. However, I'm interested to see how companies continue to solve the inevitable conflicts of attempting to grow and merge into similar yet potentially contradictory businesses.