Leigh Householder, VP/Managing Director of Innovation Strategy

Reddit cofounder Alexis Ohanian and USC’s Annenberg Innovation Lab director Jonathan Taplin are wrapping up the Innovation Uncensored conference with a fiesty debate on where the boundaries of the internet should be. And, we’re talking about a serious debate here: podiums, a coin toss, rebuttals, a bell, a lot of calls of “that is nonsense.” Wow.

This talk was inspired by the heated debate over SOPA (and apparently all the people in the audience who raised their hands when asked if they’d ever pirated a song or movie).

When Taplin was 22 years old, he went to work as the manager for The Band. For many years after they stopped recording, they made a good living – $150,000 – $200,ooo/ year. Eight years ago that stopped. Two of those great musisicnas are now bankrupt.

We live in a world where the only things people care about are intellectual property – software, books, music. But we don’t value them. The income in these industries has dropped precipitously. And, no one seems to care.

There are two typical answers we explore: technology and diplomacy. One we can break; the other doesn’t work.

People believe it should be free – you should just see ads to ssupport the content. Who benefits from free? Reddit benefits from free, Google benefits from free.

Artists don’t. That’s who gets hurt.

The issue isn’t about laws. It’s about volunteering to do the right thing. Starting with Google not selling ads on pirate websites, not linking to pirate websites, not pretending they can’t control the content on YouTube.

Change of sides:

Ohanin wants us to bring us data and hope. He says the data we see from people like Taplin is slective – yes, ticket sales at movie theaters have dropped dramatically, but revenue has held steady and even increased.  Yes, music revenue have decreased, but dollars spent on gaming have increased. With limited dollars, we’ve changed what we buy.

Ohanian is in the industry because he believes in hope. Like Kickstarter, where $99,344,382 has been raised – people giving people money directly for their art. The internet is a global stage where anyone with an internet connection can get access to your work and choose to support you. 10% of the films at Sundance were funded by Kickstarts.

It has a downside, sure – you can no longer build a business model around scarcity. You can’t force people to buy a little black discs.

But this is innovation. We’re going to see more projects like this that let people work with their fans and not treat them like criminals.

Here they begin the hand-to-hand combat:

• Only 19% of theatrical revenue is from movie tickets. It’s the DVD sales that are disappearing
• Gaming is using a scarcity model – that’s how they continue to make revenue
• These flimsy independent models on Kickstarter aren’t serious filmmakers – most won’t get a distribution model
• Artists cannot compete with free

It’s the business model that’s under debate. Pre selling your work (Kickstarter) or paying per download (only 27% of music downloaded is paid for).

The one part of the music businesss that continues to do well is Music Publishing – the flat fee that bars, stores, etc., pay to play music in their venues. What if we extended that model to the Global ISPs – every broadband subscribers pays a few bucks a month to get access to all the music in the world.

Ohanian sees another model – micro patrons. Harking back to the time when rich people funded an artist painting, say, the Sistine Chapel. Maybe people would pay, say $1/month, for ongoing exclusive access to an artist they care about.

Sooooo – what do you think?

As we wrap up here (i.e. in the last seconds before we dash out for a cab and an airport cocktail), just a quick nod to Baratunde Thurston – the best conference host we’ve seen. Thurston is the director of digital at The Onion and the author of How to Be Black. And, honestly, a complete delight.

Some of the editors of Fast Company were given a chance to bring a favorite innovator to the stage to talk about the founding principles of their company. Tyler Gray, Editorial Director, Digital, Fast Company picked Paul English, Chief Technology Officer and Cofounder, KAYAK.

In his introduction, Gray said that English is what’s known in business as a “weirdo.” He’s got a clicker on the outside of his office (like the kind that bouncers use to count how many people are coming in to a bar). He got it because he doesn’t like large meetings. When he sees 10 or more people in a room who pops in to see what they’re doing - three of you couldn’t do that? More people in a meeting are just more people who can say no.

That’s not the only iconic wackiness he’s added to the 162 person company. There’s a red phone in the dev area – if it rings its a problem with the site and it can’t be answered by a customer service rep, it has to be answered by a developer.

English credits a lot of his companies success (14 million app downloads,  100 million queries/month, profitable since 2008) to hiring the right people and giving them permission to fail. If someone isn’t failing or making mistakes, they’re not innovative. I don’t want 10 person meetings deciding thing. Taking risks is a requirement. We give people ridiculous power to try things and change things.

He looks for people who are fast and good, but also really fun. People who have past successes in different domains – he’s hired people (in part) because they had an Olympic gold medal, claimed a national foosball champion, or became an international grand chess master.At KAYAK it’s team first, customer second, efficiency third. English is working hard to foster the culture that inspires the best work.

English does hand off a lot of the creative to people who he trusts to take risks, but he stays involved in the business. He answers emails, takes phone calls from the millions of users who come to the site.

He says their ads are part of their risk-taking culture.

Like this one – the character is based on a real person who bullied the creative director in high school. He called the bully up to get permission to use his name and then gave a casting and makeup team a Facebook photo to create the character from:

BTW: This is the bully’s real Facebook photo (Revenge is sweet, huh?)

English says, it’s all about knowing when to make rules and know when to let go. It’s very liberating as a manager.