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Concerning those controversial .wine domains

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I’ve been watching developments for the last few months concerning these new .wine and .vin Internet domain names. Not closely, just sort of casually. I knew there was some controversy about them, but I wanted to keep an open mind, and besides, who has the time nowadays to research every complicated issue of social, economic or technological policy?

So it was that yesterday’s big article (by my old friend Chris Rauber) in the San Francisco Business Times really grabbed my attention.

“Noted wine regions, including Napa and Sonoma, protest new .wine Internet domain names,” the headline screamed. In addition to the Napa Valley Vintners and Sonoma County Vintners, those opposed to the proposed domain names include the Paso Robles Wine Country Alliance, the Santa Barbara County Vintners’ Association and—in other states—the Willamette Valley Wineries Association, the Walla Walla Wine Alliance, and even the Long Island Wine Council.

Pretty impressive lineup. These are power players. I know the California regional associations quite well from my many years of rubbing elbows with them; with the power of their member wineries behind them, they possess clout. And they’ve been joined in their opposition by some powerful Congressional representatives: Mike Thompson (one of the senior Democrats in the House) and Anna Eshoo.

I can’t remember a time when so many regional associations joined forces publicly in opposition (or in support of, for that matter) a pending issue. So I figured I ought to look a little more deeply into what’s going on.

At first blush it makes sense to carve out .wine and/or .vin domain names. We all know the Internet is running out of domains and has been for years.

This is why ICANN, the corporation in charge of domain names, added additional ones to the more familiar .com, .org, .gov, .edu and .net—because “the internet—or .com at least—is running out of space. So many names on .com are taken that people and businesses have to struggle to find a suitable one.”

Enter .wine and .vin.

Two years ago, ICANN, in response to the problem, announced it would accept applications for additional domain names. It got nearly 2,000, many of them contested. ICANN decided to auction off the non-trademarked domain names to the highest bidders; the first auction was a year ago, and brought in over $9 million, through the sale of such domains as .club, .college and .luxury.

So what’s the problem with .wine and/or .vin? After all, even the U.S. government approves of the auction plan, which, after all, is an expression of classic free market principles. Last March, an agency of the Commerce Department declared that “ICANN is uniquely positioned…to develop the transition plan” toward a new set of domain names. Although the department urged ICANN “to convene global stakeholders to develop a proposal” for the transition—an encouragement to compromise and conciliation—the wine associations aren’t buying it.

Rauber writes: They “contend that ICANN’s plan includes ‘non-existent to grossly insufficient safeguards from illegitimate companies’ hijacking their names, histories and legacies. They claim ‘unscrupulous’ bidders could grab web names such as napavalley.wine or wallawalla.wine and in effect hold them hostage.” A spokesman for the Napa Valley Vintners told Rauber, “[H]is organization fears the proposal would ‘provide a new playground for nefarious actors to poach the place names of famous wine regions around the world.’”

These are serious and legitimate concerns. Nobody wants to see a situation wherein some for-profit wine company buys the rights to, say, “napacabernet.wine”, thus misrepresenting itself and its association with venerable Napa Valley. Napa “has had our name ripped off” before, the Napa Vintners spokesman said (most of us remember when and by whom that was!) and isn’t about to let it happen again.

You’d think that ICANN and other legal entities could address the concerns of those opposed by building in rights and protections for stakeholders, and that’s exactly what ICANN has proposed to do. They’ve created a “Legal Rights Objections (LRO)” mechanism by which disputes can be resolved when someone objects to “a third party’s application for a new TLD [top-level domain].” Negotiation is more or less normal operating procedure in our era of contention and litigiousness, but the wine region associations remain unconvinced, and certainly they have a point when they fear they’ll be forced to spend a whole lot of money, either on lawyers or on buying back the rights to names they want.

This is a sticky one, and I have to admit I’m not sure which side I come down on. What do you think? Should .wine and .vin be up for sale to the highest bidder?


From the front lines in China: The end of the three-tiered system?

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China never developed the complex infrastructure for the distribution of alcoholic beverages that the U.S. has in the three-tiered system, and it might never, because e-commerce is becoming the distribution method of choice.

That’s according to an article in the Taiwan-based China Times, which says that e-commerce is preventing the emergence of “leading brokers or end retailers,” as they’ve arisen in this country. This is also having an impact on the price of wine in China: “the popularity of e-commerce firms have [sic] shrunk the profits of wine companies,” with “most” of them seeing huge revenue falls.

No one should be surprised. “The golden age of wine e-commerce is coming” to China, according to a Chinese businessman who co-founded one of the country’s biggest such firms.

One big wine e-commerce firm, Wangliu—said to be “China’s priciest”—is venturing beyond mere sales; “The fledgling company is also looking to engage wine connoisseurs offline, opening experience stores and private clubs in major cities across China.” It’s as if Southern Wine & Spirits was opening winetasting “experience” venues in New York, San Francisco and L.A.

China does have a handful of private distributors “who are looking to source wines, beers and spirits from suppliers,” and that segment traditionally has sold wine to on-premise and off-premise accounts, as the three-tiered system does here. But “there are not many big wine distributors,” like Southern, in China, with online or e-commerce wine distribution websites instead filling the void. This would seem to make distributing wines from smaller wineries—the kind that have trouble getting picked up by big distributors in America—easier in China, although the challenge for small wineries is the same there as here: for Chinese consumers, “brand name remain[s] today the leading factor that influence[s] purchasing choices…due to the great complexity…that make[s] wine difficult to understand.” The winery that can work the e-commerce market successfully, and also help the e-commerce company to intelligently explain its wine, should reap the benefits of success in China.


Wednesday wraparound: Boredom, urban wineries, and medals, medals, medals

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Once upon a time, people bought the wines they liked and had trusted over many years, because they knew they would not be disappointed.

It may have been a Gallo Hearty Burgundy, or a Sancerre or Pouilly-Fumé, a Chianti or Mateus or Wente Grey Riesling. The wines could always be found on the local supermarket shelf, and the price didn’t break the bank.

That was then; nowadays, we have “the paradox of choice. Overstimulated by so many options,” writes Joyce Goldstein, in Inside the California Food Revolution, “we have become accustomed to constant change and instant boredom.”

Granted, Joyce is talking about how and where we eat—the amazing proliferation of types of cuisine we have at our disposal. But the same could be said about wine. And this is making life very difficult for the small family winemaker.

I was hanging out yesterday with a guy who owns his own wine brand, but he’s not likely to in the future. Business is not good, and he, himself, doesn’t know what to do about it. He can’t afford a staff, which means he has to do it all: vineyard contracting, winemaking, sales, marketing (such as it is) and all the rest. This is obviously too much for one person, so the end of the road is near.

It’s a sad story, especially since I’ve known this guy and know what a terrific winemaker he is. But his plight is the direct result of Joyce’s observation about our food proclivities: We’re accustomed to constant change, and we grow quickly bored. Under those circumstances, someone might have bought my friend’s wine and enjoyed it. But that person will be reluctant to become a loyal customer because of this constant search for the new and different.

I don’t know what the answer is. There may not be one. Not every problem has a solution. And it’s not enough to warn a young person not to get into the wine business, because when you’re young, you’re starry-eyed and ambitious, and you can’t believe that all your dreams might not come true. They might not—but usually, people don’t realize that until they’re in the forties.

* * *

Our little, homegrown East Bay Vintners Alliance is preparing for their annual fiesta. This year it’s August 2, down at Jack London Square. This is the Oakland version of “the urban wine experience,” a keen piece of marketing wines made in our nation’s increasingly popular, hip cities. For whatever reason, the phenomenon (if that’s what it is) is getting widespread press. For instance, there’s an article in the latest issue of “Via,” the AAA magazine, called “Wineries go to town,” that includes several of the East Bay’s locals: Donkey & Goat and Rosenblum, as well as wineries in San Francisco (Bluxome Street) and Portland (Enso).

I’ll be at the August 2 event and hope to see you there!

* * *

Not to knock my friends who organize and judge at the California State Fair’s wine contest, but a headline like “Thousands of medals awarded in State Fair wine completion” doesn’t exactly gain my respect. According to the local ABC affiliate, “There were 2,829 wine entries in this year’s competition. A panel of judges awarded 2,068 medals to competitors.” That’s a lot of medals: nearly half of all the wines won one. Bragging rights are, of course, the payoff for winning a medal—but something about this kind of inflated result makes me think of Garrison Keilor’s witticism about the kids of Lake Wobegon: “and all the children are above average.”

Have a good day!


Another study on social media’s failure to live up to expectations

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The headline on yesterday’s Wall Street Journal article on social media says social media has “fail[ed] to live up to early marketing hype.” True enough, but the situation is even graver than that innocuous header implies. Readers will encounter a litany of social media ills so extensive that the article reads more like the autopsy report of a particularly horrendous car crash than a dry little analysis on the front page of the “Marketplace” section.

Here are the sad bullet points:

-       “Social media are not the powerful and persuasive marketing force many companies hoped they would be,” says Gallup, whose report on this topic the Journal got an advance copy of.

-       More than three-fifths (62%) of consumers Gallup polled say social media has “no influence at all” on what they buy. Ouch.

-       Gallup: “Consumers are highly adept at tuning out brand-related Facebook and Twitter content.” (What, you thought you were the only one who manages to ignore them? So does everyone else!)

-       Then there’s Nielsen, which reports that “global consumers trusted ads on television, print, billboards and movie trailers more than social-media ads.” Considering the skepticism with which consumers see all forms of advertising, this means the level of trust in social media ads is less than zero.

-       Brand advertising on Facebook is increasingly unsuccessful. “Brands reached [only] 6.5% of their fans with Facebook posts in March [2014], down from 16%” a year earlier.

-       Small companies, including family-owned wineries, are frustrated with the results of Facebook ads. “[T]he return is really disappointing,” one restaurateur said. “Unless you spend to boost a post, you only reach 300 to 400 people.”

-       The dislike social media users have of anything that smells like advertising or marketing has reached new heights and seems irreversible. More than 90% of social users say they use social media simply “to connect with friends and family.”

-       As for piling up fans, “friends,” “followers” and the like, which has been the Holy Grail for companies, “Researchers [now] say many fans are fake, or automated.” One researcher found it cost him 42 cents to buy 700 retweets.

Statistics and anecdotes like these won’t be enough to seal social media’s coffin permanently, nor should we be overly quick to criticize social media for what it cannot do. As an ardent social media user myself, I’d hate to be without it: it has changed my life, and for the better.

But there can no longer be any doubt that social media (as I wrote six, five, four, three and two years ago, and again last year) is not, and cannot be, the alpha and omega of brand marketing strategies. That’s not what social was created for; it’s not what social users want; and the only reason why anyone continues to believe in the marketing value of social media is because a cadre of social media consultants insists (still!) that it works to sell stuff.

If I was a winery, would I be doing social media? You betcha. But I’d be careful to avoid any hint of puffy-fluffy PR, which turns people off. To sell wine, you need to do it the old-fashioned way: shoe leather, personal relationships and—yes!—scores, which still count.


What electric car patents and some AVAs have in common

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Elon Musk made a bit of news last week when his Tesla Motors announced that the company is “opening all its electric car patents to outside use.”

This “open sourcing” means that anyone can use Tesla’s proprietary procedures without having to worry about a patent lawsuit.

Why would a successful company like Tesla give the farm away? Originally, Musk had hoped that “the big car companies would copy our technology and then use their massive…sales and marketing power” to promote electric cars. While this would have presented Tesla with serious competition, it also would have promoted the concept of the electric car, which is a hard sell for most consumers. This “rising tide lifts all boats” concept would, Musk hoped, in the end benefit Tesla.

But it didn’t happen. “The unfortunate reality,” he said, “is…electric car programs…at the major manufacturers are small to non-existent.” Musk therefore is gambling that giving his manufacturing secrets away for free will help lift the tide that will help lift Tesla.

This story neatly dovetails with something that’s been on my mind lately, namely whether a winery in an appellation should promote only itself, or promote also its appellation, which means promoting all the other competing wineries in its appellation. This can be a tough decision for a winery. For example, I remember when I was a critic how surprised I was that Fess Parker Winery almost never put local appellations on their wines, like Santa Ynez Valley. Instead, they put Santa Barbara County. I thought it was wrong then, and told company officials so, but they argued that in their judgment no one had ever heard of Santa Ynez Valley, whereas everyone knew about Santa Barbara (which conjures up images of white-sand beaches, palm trees, movie stars and affluence). When I asked them, in turn, how the public ever would learn about Santa Ynez Valley, if wineries wouldn’t put it on their labels, there was radio silence.

We have a similar situation with regard to the Santa Maria Valley. It’s a great place to grow wine grapes, as I assume readers of this blog know. But it’s off the beaten path; even wine tourists to Santa Barbara County are more likely to visit Santa Rita Hills or Santa Ynez Valley than this northwestern, fairly remote part of the county. How, therefore, should S.M.V. wineries deal with the situation?

In different ways. Although they all (to my knowledge) put Santa Maria Valley on their labels, they still struggle with the public’s general absence of understanding of this region (which is shared, alas, in too many cases by sommeliers and merchants). Therefore, it would stand them all in good stead to promote the valley, but this would mean cooperating together, which is easier said than done. There have been efforts over the years to promote Santa Maria Valley, mainly through a local association, but, having followed these efforts, I have to admit they’ve been fairly tepid. Some influential local powers organized the Chardonnay Symposium a few years ago (with which I was involved), and held it at Byron Winery, where it largely showcased Santa Maria Valley wines. But this year, the Symposium closed up shop and moved north to Shell Beach, so now, even that slight exposure of the valley’s wines to consumers has ended.

My own feeling is that a single winery can’t promote its appellation, especially these lesser-known AVAs. A winery doesn’t have enough money, manpower or clout to pull off the massive consumer educational program that’s needed. It takes collaboration between all the local wineries, but as I said above, this can be politically difficult to achieve, because after all, these wineries are competing against each other. But in the end, collaboration is something they should do. It’s like Ben Franklin’s old woodcut says: Join, or die.

join_or_die_flag

 

Unity is better than disunity. It worked for Napa Valley: that region promoted itself with ruthless efficiency, so that now, a winery that isn’t even making very distinguished wine benefits from having “Napa Valley” on the label. Even earlier than that, it worked for Bordeaux. Promoting the appellation is a tried-and-true practice.

* * *

I’m off to Anderson Valley today, to spend a little time at Edmeades. It’s been a couple years since I’ve been there and I’m looking forward to it. I’ll be reporting from there for the next several days.


The shift from print to digital is getting stronger

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Two articles in yesterday’s Wall Street Journal, taken together, suggest that the transition from print to digital journalism is gathering steam.

 

The first, “The Vanishing Everyman’s Art Gallery,” actually is a bit of nostalgia for the old days when newsstands were on every street corner of every city in America, and their publishers hired artists to paint pictures for the covers. (The classic example is Norman Rockwell’s relationship with the Saturday Evening Post.) The writer asserts that millions of American thus gained exposure to, and an appreciation of, good (if sentimental) art—thus the “Everyman’s Art Gallery” heading. He laments the passing of those days (and also the passing of LP album covers, replaced by not-so-interesting CD covers).

But his real point is to underline the continuing weakness of print magazines, which are rapidly moving online. There’s nothing particularly new in that—we’ve been talking about the migration from the printed page to digital for years—but what’s different now is that advertising dollars may finally be finding their way to these digital websites.

The challenge in the past for magazines that wanted to move online was that advertisers—who account for the great majority of a magazine’s income, as opposed to paid subscriptions—weren’t willing to spend anywhere near the big bucks they would pay for on a printed page. For example, let’s say a quarter-page ad in a print publication cost $25,000. On a digital version of the magazine, the advertiser would have to be content with a little button or banner, at a cost of, say, $750. That was a big hit for publishers to absorb, and nobody quite knew how to get around that dilemma.

But now, according to that second WSJ article, “At long last, TV money flows to web.” Granted, this movement of money is starting with online movie outlets, not general or specialized magazines. But it’s a start, a crack in the dike that previously kept big money from migrating online. As one ad buyer remarked, “For us, it’s really about shifting to where audiences are.” And, as audiences increasingly glue their eyeballs onto computers and portable devices, advertisers have no choice but to go there.

It’s still unclear, though, if advertising for smaller web sites—like those of wine magazines–will reach the stupendous levels currently flowing to print and television ads and commercials. “How much these [digital] outlets can draw [in ad revenues] in the near term will be determined in part” by future negotiations, the WSJ says. Smaller online digital outlets don’t draw anywhere near the number of views of major TV programs, like the Super Bowl, and so digital ad revenues aren’t going to reach those levels anytime soon.

But “Younger consumers are consuming less TV as a portion of their total media consumption,” pointed out one analyst, meaning that in eventually, the playing field could level out, as big network and cable TV attracts fewer and fewer viewers.

What this means for magazines is that they have to negotiate a delicate transition from reliance on the printed page to crossing the digital doorstep. You can’t go from the former to the latter in one quick move; if you do, you’d be out of business. Instead, publishers must seek to attract new, younger viewers and readers who prefer their mobile devices, while avoiding alienating older viewers who like their magazines the way they’ve always been. Wine magazines are in an especially vulnerable place, because the divisions have never been starker between older, Baby Boomer readers (who made today’s wine magazines famous and successful) and younger, less tradition-bound consumers. Millennials don’t drink their grandfather’s wines, their grandfathers don’t drink their grandkid’s wines, and a publication that wants to appeal to everyone might just fall between two stools.

* * *

Finally, R.I.P. Bob Sessions. Great job at Hanzell.

 

http://www.winespectator.com/webfeature/show/id/49997


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