Is Law Simply a Short-term Setback for the Share Economy?

Effects of Stifling the Share Economy Like the Downfall of the Music Industry?

Let’s talk the music industry…

In the 1990s Shawn Fanning and Sean Parker were credited with “breaking the recording industry.”  In retrospect many people, including myself, believe that the industry was broken long before Napster introduced file sharing to the masses.  The music industry was fully dependent on record sales for their income at the time. Without diversity within their revenue model, they became angry, confused and sought retribution when they were forced to leave their comfort zone.  In the aftermath of Napster the record labels did what they considered to be “fighting back.”  Instead of restructuring their business model to find new revenue they focused their energy on legal battles with Napster, other file sharing platforms and those who used the platforms to download music for free.  These legal battles continue today, and while the labels may be monetarily winning, they lost valuable time and energy that should have been used on innovation within the industry as a whole. 

The question that the recording industry should have been asking themselves during this time, instead of fighting the file sharing networks was: why do the customers prefer the digital download to purchasing music?  What does this say about the user experience, and how can they restructure the industry to follow these trends?  Instead of doing this, the industry has watched as their revenue dropped from $14.6 billion in 1999 to $6.3 billion in 2009.

All the while, digital downloading has continued and those who have thought outside of the box have thrived.  Imagine what could have been if the recording industry had embraced file sharing from the get go instead of fighting to stop it.  They could be years of innovation ahead of where they are now.

The Share Economy: Who is Screwing Themselves Now?

Just like Napster and other file sharing platforms, the share-economy has come about because of a need and preference by consumers.  Mintel research has found that websites like Airbnb offer travelers a more cost-effective way to travel.  Along that same line, Mintel’s research notes that young people are less interested in traveling because of high prices of accommodations, and alternatives to hotels that are more personal and lower costs promote additional traveling. 

But Airbnb is having many setbacks comparable to those of the music industry.  Airbnb has continually been fought against by city laws—which are promoted by hotels that are not happy with the business that they are losing to Airbnb.  The main fight against Airbnb is that they are not paying taxes to the city on their stays.  "Laws like San Francisco's hotel tax, adopted in 1961, "were written long before the Internet or any of these activities were conceived," said Kim Rubey, an Airbnb spokeswoman. “Innovative new models that allow San Franciscans to generate additional income should be addressed by innovative laws and policies—not stifled by 40-year-old regulations."”  Like in the music industry, if the city focused on working with Airbnb to create additional revenue for the city in a more innovative way instead of waging war on the company, everyone would be better off. 

In addition to being price sensitive, the user experience provided by Airbnb is different and often better than that of regular hotels.  As part of the share economy, there is a two way street in terms of the buying and selling of lodging.  There is an initial issue of trust when utilizing the peer to peer network.  How does someone locking in the stay know that the accommodation is up to par, that the owner of the home is safe to send money to, and how will they go about securing the stay.  For those renting out their homes, can they trust that the person staying at their home is safe, will leave the accommodation in proper conditions, and will pay.  A mutual review opportunity is the first part of the answer to these issues.  People who use Airbnb rate those staying and the places they are staying to help future utilizers decide if they are the proper people to do business with.  In addition to this, utilizing social media within Airbnb allows you to see if you have connections with the people they are doing business with, and contributes to communication between them. Airbnb also enables safe payment which is truly important in the share economy.  These are all things that the consumers want, and when legal issues come up, they are often fought against by these exact consumers.  Because of the popularity of the home sharing process, Airbnb is not alone; HomeAway and VRBO are also extremely popular, specifically with an older set of consumers.

Legal issues are not only running rampant for Airbnb.  Car sharing companies are also getting beaten up by the law, yet are continuing on because of their popularity and practicality of their products.  In November of 2012, California Public Utilities Commission fined Uber, Lyft and SideCar each with $20,000 fines, claiming that they were operating without proper permits.  Their violations included operating as passenger carriers without evidence of public liability and property damage insurance coverage and failing to enroll drivers in controlled substance and alcohol testing programs.  Uber offers on-demand black car service, SideCar and Lyft are donation based ridesharing programs with regular drivers.  These fines are from the law, but really come from the taxi drivers that these programs are taking away their potential customers.  The taxi companies, like the music industry are fighting against innovation based on customer needs and preferences instead of finding a way to work with them to create additional revenues for everyone involved.  Cease and desist letters have been sent to all of these companies in many cities.  Uber was shut down for a time in Washington DC, NYC and more because of legal issues supported by the taxi companies.  After these letters, the internet went wild—supporters of Uber flooded the inboxes of the legal system as well as spreading their support across social networks.  With this support it is obvious that there is a customer need that is not being covered, and these ride sharing programs are necessary.  Unlike those who held the music industry back, people like NYC’s Mayor Bloomberg have fought for “taxi disruption.”  He has approved a pilot project to test these ride sharing programs for at least a year, and in turn Uber has re-entered NYC. 

What have we learned…

The fight that the music industry enacted against innovation and their customer needs proved just what a poor decision that fight is.  Classic industries like hotels and taxis need to consider and learn from the music industry in order to keep themselves from cutting their own revenues.  The legal issues facing the share economy are similar to those that faced file-sharing.  My belief is that legal issues will continue to face the share economy, and the share economy will continue to thrive because of their customer insights.  The industries fighting against their disruption are the ones that need to learn from the past and instead of fighting innovation, embrace it and learn how that they can innovate themselves.

Generative Research Design

Family and Friends:  Obviously these two things are very important for me.

Sleep: When I don’t get enough sleep I am cranky and often can’t get anything else done in my life.  I tend to need more sleep than the normal person, approximately 8 to 10 hours a night.  On weekends I don’t feel bad sleeping past noon, and every morning that I wake up for my 9:30am classes is a struggle.

iPhone: My iPhone is my connection to the world.  This includes keeping in touch with family and friends via text and phone calls, as well as having a mobile device to keep me up to date on news, gossip, shopping, jobs and social networks.  I use my iPhone constantly, and when I do not have it with me I feel naked.

Computer: In addition to my iPhone, my computer is necessary to perform more intensive activities.  I use the computer for regular school activities, as well as to perform online duties and errands.  It is also useful for video chatting with my family and friends.

Dresses: I love dresses.  I own more than 100 dresses and love every single one of them.  My style is differentiated by my affinity for dresses, and my distaste for pants.  I believe that I look better in dresses, they are more comfortable and easy to throw on quickly while still looking well put together.

Beach: While I grew up thirty minutes from the California beaches, beaches became a major part of my life later on.  My family has owned a home in Santa Barbara since I was 15, and my parents have lived there permanently since I went to college in Los Angeles.  They live directly across the beach and have incredible views in which I could never get sick of.  The atmosphere around the beach is always laid back yet exciting, and my fondness for this atmosphere took me to Venice Beach after school.  I lived half a block from the beach and made sure to spend as much time as possible in the sand.  The beach invigorates me, and I currently miss it every day.

Television:  I didn’t have TV for a year and I missed it terribly.  I enjoy TV as a way to turn my brain off at the end of the day and enjoy mindless entertainment.  In addition I enjoy top quality shows that are well made and take me on an adventure straight from my coach.

I use web search and social networks more than any other digital sources.  I am constantly googling anything I have questions about because with my iPhone I am able to have constant availability of information, and I do not have to wait to find answers that I am looking for.  I use social media for both information regarding friends and collegues as well as pure entertainment.  So much communication is done through social networks, as well as announcements and sharing.

During the time that I am prepping for school I use my iPhone to gain insight into my day.  I check the weather, local/national news, celebrity gossip and more. 

Lunch time is utilized to socialize as well as keep myself nurished for the rest of the day.  I spend time catching up with friends as well as checking out new restaurants.

I usually have meetings after my classes are over to take care of group projects, clubs and community activities.

I have recently put more of an effort into making time for me to work out.  It is important for my health as well as my confidence.

I end my evenings with dinner, TV and homework.  I will either cook, microwave a meal or go out with friends.  In addition, once I finish my homework for the day I like to turn my brain off and watch TV that is either thrilling or mindless—both do the job.

Persona & Empathy Map

Denaya is a 31 year old woman who is married with no children, no debt, lives in San Francisco and works as a physical fitness professor. 

Denaya thinks about her future on a regular basis.  Specifically at this time she thinks most about purchasing a home with her husband and the potential of starting a family.  In addition, her job is not just a job, but part of her lifestyle as well.  She works out regularly, not only to keep in shape, but also to further her knowledge and ability within her profession.  She aspires to be a full time professor instead of working at multiple different schools part-time.  She recognizes that the educational institutions that she works at do not currently have full time positions available, and worries that when one does open up the competition for that position will be intense.  She regularly works to find ways to make herself more valuable to these institutions so that she will have a better chance at a full time position when it comes up. 

Her worries do not end with her career.  She worries about the housing market in San Francisco.  While her husband makes a healthy income, her income is also necessary to afford a home.  The housing market in San Francisco is one of the most expensive in the nation, yet she has high hopes for a delightful and lovely home in the heart of the city.  So far, she has seen no homes that match her hopes and are within her budget.  Additionally, while looking for a home she must take into consideration how the home would be to bring up a child.  This is an added concern while house hunting. 

Starting a family is an even bigger concern for multiple reasons.  First, there is intense pressure from her overzealous mother to start trying for a child.  She does not want to discuss the possibility of starting to try for a baby in fear of her mother becoming controlling in regards to the process.  Additionally, trying to get pregnant is not always an easy thing.  While in her head she hopes that she will get pregnant right when she is ready, that is regularly not how it works.  It can be very difficult, stressful, time consuming and expensive to get pregnant.  In addition, having a child is very expensive, especially if you plan to bring them up in the city of San Francisco.

            Denaya has her eyes open.  Yet, she sees the world with rosy colored glasses.  She has an incredible relationship with her husband who she has been with for more than a decade.  She has a loving family and enjoys her career.  She strives to present herself to the world the way that she sees herself.  For this reason she has close relationships with other dancers and fitness professors as well as her students.  She sees herself as an upstanding citizen who has improved as a person year over year.  In addition, she sees herself as a catch that her husband is lucky to have because of her beauty, kindness and curiosity about the world.  She surrounds herself with beautiful things and people as that is what she prefers to see.

            As someone who is improving as a person on a regular basis she aims to put her best foot forward at all times and is genuinely interested in the world and others.  As a fitness professor she recognizes that her work clothes do not consist of suits, yet she must make a respectable impression on her students.  For this reason she prefers high end workout attire such as Lululemon.  She sees this brand as something that reflects how serious she is about her position and exudes professionalism.  She also recognizes that she must have knowledge beyond her own career in order to be a positive part of the community.  She reads regularly and listens to podcasts that increase her knowledge about the world.  Because of this she is able to hold interesting and well-informed conversation with a variety of people on a variety of topics.  While she appreciates those who add to her life intellectually or creatively, she has little patience for those who have little to contribute and prefers to not make an effort with those that she sees as such.

            Denaya has a plethora of positivity around her.  As she has a very close immediate family she is regularly inundated with projections of love, appreciation and enthusiasm.  She frequently receives positive reinforcement and complements from her husband and those around her.  As a professor she receives feedback on a consistent basis from both her students and her directors.  99% of this feedback is positive.  Her close relationships with her students allow her to act as a mentor as well as a friend, which gives her confidence and happiness.  Many of these students have spread the word about Denaya as a teacher, and because of this her classes always fill up and commonly have waitlists.  These students also invite her to social occasions in which they shower Denaya with praise and her only concern is that she portrays herself as the person that they describe her as. 

            As noted above, Denaya is at a major crossroads of her life.  She is officially an adult and this leads to many decisions as well as sacrifices.  Denaya and her husband love to travel—she must take into account how buying a home and having a child would affect this passion.  Money would obviously be much tighter and freedom would be limited.  Being able to haphazardly make decisions would not be possible.  Everything she did would have to be planned and prepared.  She fears that having a family will limit the ease in which she currently lives her life.  She wonders if she as a person will change when she has a child.  She wonders if she will even enjoy having a family.  She sees the intensity and control that her mother has within her family and hopes to be able to avoid some of those tendencies.  Or, are those tendencies completely necessary in order to have a thriving family?  She also fears that her dreams of having a family in the city are impossible.  She does not want to have to change her plans, but recognizes that things do not always go according to initial plans.

            During this time Denaya is looking for role models and mentors to help her keep her head on straight.  It is very difficult to balance all of the aspects of life that she is hoping to balance, while not going completely insane.  She is a young, happily married woman with drive and ambition who is hoping to have it all and is aiming to start that adventure as soon as possible.