Deprivation in Kensington and Chelsea. The Grenfell Tower local area and the richest area in the borough.

Grenfell Tower is located in Notting Dale Ward of the Royal Borough of Kensington and Chelsea

 

The denominator in which Grenfell Tower is located in the English Index of Multiple Deprivation, which measures deprivation in so-called Lower-layer Super Output Areas (LSOAs) which consist on average of about 600 households and a population of 1,500 people is E01002880 (Kensington and Chelsea 005D).

Map 1: The Grenfell Tower LSOA: the 11th most disadvantaged in Kensington and Chelsea
Map 1: The Grenfell Tower LSOA: the 11th most disadvantaged in Kensington and Chelsea
  • In 2015 the LSOA in which Grenfell Tower is located (E01002880) was ranked the 3,171th most deprived LSOA of the 32,844 LSOAs in England.
  • The Grenfell Tower LSOA* is in the ten per cent (lowest decile) of the most multiply deprived LSOAs in England.
  • The Grenfell Tower LSOA is ranked between the ninth and tenth per cent of the most deprived LSOAs in England. That is, its (rank 3,171) is located near the upper border (rank 3,284) of the 10 per cent most deprived LSOAs in England.
  • There are 3, 170 LSOAs in England that are more deprived than the Grenfell LSOA.
  • There are 29,673 LSOAs that are less deprived/more advantaged than the Grenfell Tower LSOA.
  • The Grenfell Tower LSOA is the 11th most deprived LSOA in the Royal Borough of Kensington and Chelsea.
  • The most deprived LSOA in the borough is ranked at 1,243 in the Multiple Deprivation Index whereas the Grenfell Tower LSOA is ranked at 3,171.
  • There are 92 LSOAs in the borough of a total of 103 that are less disadvantaged/more advantaged than the Grenfell Tower LSOA.
  • There are 12 LSOAs in the borough that are in the 8th decile of the least deprived/most advantaged and one LSOA in the ninth decile of the least deprived/most advantaged. The Borough does not have any LSOAs in the top decile of the least deprived/most advantaged LSOAs in England.  (But see Table 2 below where this absence is due to less favourable rankings in deprivation domains which the wealthy can easily overcome through private provision.)

The Index of Multiple Deprivation is derived from a number of domains of deprivation – income, employment, education, skills and training, health and disability, crime, barriers to housing and services and living environment.

 

Deprivation by domain in the Grenfell Tower LSOA was ranked as follows where 1 is the most deprived of the English 32, 844 LSOAs. The table includes a column that shows where each domain ranking is placed in terms of the deciles of deprivation where 1 is the most deprived ten per cent of LSOAs in England.

 

Table 1: The Grenfell Tower LSOA

 

Domains of Deprivation

LSOA Ranking by number of LSOAS  (32,844 in total) where 1 is most deprived

LSOA ranking by decile where 1 is most deprived decile

Income

1,737

1

Employment,

3,507

2

Education, skills and training

14,500

5

Health and disability

9,256

3

Crime

12,709

4

Barriers to housing and services

378

1

Living environment

5,573

2

Multiple Deprivation

3,171

1

 

When looking at domains of deprivation for the Grenfell Tower LSOA of the seven domains five score a ranking higher (that is, relatively less deprived) than the overall multiple deprivation ranking of 3,171,

 

But two score well below it (that is more deprived). The ranking (378) for the deprivation domain of Barriers to Housing and Services puts the LSOA in the one per cent of the most deprived LSOAs in England for this domain.

 

Whereas the the ranking (1,737) for the deprivation domain of Income puts the Grenfell Tower LSOA in the five to six per cent range of the most deprived LSOAs in England for this domain.

 

Just for comparison sake it is worth listing the ‘deprivation’ domains of the least deprived LSOA in the borough - what I have here called 'King's Rd South' (see Map 2). This is LSOA number E01002903 and it is ranked at 26,751 and located in the ninth decile (where the tenth is the least deprived).  The LSOA is to the south of the King’s Road and is bounded to the east by the Saatchi Gallery and to the west by Flood Street.

 

Table 2: Kings Road South: Kensington and Chelsea’s least deprived/most advantaged LSOA (E01002903)

 

Domains of Deprivation

LSOA Ranking by number of LSOAS = 32,844

LSOA ranking by decile where 1 is most deprived decile

Income

32,781

10

Employment,

32,806

10

Education, skills and training

31,667

10

Health and disability

32,841

10

Crime

13,131

4

Barriers to housing and services

16,043

5

Living environment

3745

2

Multiple Deprivation

26,751

9

 

Map 2: King’s Road South (E01002903) The most advantaged LSOA in Kensington and Chelsea
Map 2: King’s Road South (E01002903) The most advantaged LSOA in Kensington and Chelsea

The table above perhaps shows some perversity in the way that multiple deprivation is measured when it comes to the richest people in the UK. In the least deprived LSOA in Kensington and Chelsea the rankings for income, employment, education and health are all in the most advantaged decile and in the 96 to 97 per cent range of the least deprived. For income, employment and education the ranking are in the top one per cent of the most advantaged.

 

The overall deprivation ranking for the richest LSOA is brought down by its rankings in the deprivation domains of crime, barriers to housing and services and living environment.

 

Suffice it to say that the richest, most educated, most employed and nearly healthiest people in the country will surely have the resources to overcome these public failings with their own bespoke private provision.

 

Whereas those with some of the least favourable income and access to housing and services  - vis. the Grenfell Tower local area - will be at an acute disadvantage to overcome the multiple barriers to prosperity that face them.

 

Table 3 compares the deprivation domain rannking for the Grenfell Tower local area and that of the most advantaged in Kensington and Chelsea.

 

Table 3: The Grenfell Tower local area compared by deprivation rankings  to Kensington and Chelsea’s most advantaged local area by by deciles of deprivation/advantage where 1 = most deprived decile (10 per cent)  of local areas in England

 

Domains of Deprivation

Grenfell Tower decile ranking where 1 is most deprived decile

King’s Rd South  ranking by decile where 10 is most advantaged decile

Income

1

10

Employment,

2

10

Education, skills and training

5

10

Health and disability

3

10

Crime

4

4

Barriers to housing and services

1

5

Living environment

2

2

 

 

 

Multiple Deprivation

1

9

 

 

Note: *LSOA E01002880 is not called ‘the Grenfell Tower LSOA’ in the Index of Multiple Deprivation In England 2015 but I use it here as shorthand.

Sources:

For Index of Multiple Deprivation 2015

https://www.gov.uk/government/statistics/english-indices-of-deprivation-2015

For identification of LSOA number on map

https://www.doogal.co.uk/LSOA.php?code=E01002880

Top of the world in Edinburgh

HDR on the way up to Arthur's Seat with Edinburgh, Leith and the Firth of Forth in the background.
HDR on the way up to Arthur's Seat with Edinburgh, Leith and the Firth of Forth in the background.

A crisp frosty brilliant day. I dropped The Principal off at a conference near Hollyrood and drove around the park, stopping in Duddingston village to take a few photos of the church and the loch. A police diver was getting ready to do something with the loch - I hope it was not connected with the notice I saw for a man who went missing  in the vicinity back in October.

This part of town was all new to me and I rushed back to the flat to get some more clothes, boots and my camera. I then returned and walked up to the top of Arthur's Seat. Blimey. What a genius idea to put a big rock and wild park in the middle of Edinburgh.

I was amazed at the number of people at the top or going up. And the footwear. One tourist had even struggled up there with his suitcase. Another bloke bare chesting it.

I went down the steep stepped path on the south-ish side and then along the top of Salisbury Crags. Fabulous views of the town, the parliament, Hollyrood Palace.

Long shadows from Arthur's Seat.
Long shadows from Arthur's Seat.
People watching people watching people, Arthur's Seat, Edinburgh.
People watching people watching people, Arthur's Seat, Edinburgh.
Last seed heads catching the sun on the backslope of Salisbury Crags - yarrow?
Last seed heads catching the sun on the backslope of Salisbury Crags - yarrow?
Shadow tartan on the Preston field Golf Club - are these old runrig patterns in the low sun?
Shadow tartan on the Preston field Golf Club - are these old runrig patterns in the low sun?
350 million year old rock with harder stones picked out by weathering on the south side of Arthur's Seat, Edinburgh.
350 million year old rock with harder stones picked out by weathering on the south side of Arthur's Seat, Edinburgh.
Back view of Arthur's Seat from the north.
Back view of Arthur's Seat from the north.
The Scottish Parliament from Salisbury Crags.
The Scottish Parliament from Salisbury Crags.
Hollyrood Palace from Salisbury Crags.
Hollyrood Palace from Salisbury Crags.
View of the Old Town and Castle, Edinburgh from Salisbury Crags.
View of the Old Town and Castle, Edinburgh from Salisbury Crags.
Calton Hill, Hollyrood Palace and one man and his dog, Einburgh.
Calton Hill, Hollyrood Palace and one man and his dog, Einburgh.
Hollyrood Palace windows.
Hollyrood Palace windows.
People come and go. Arthur's Seat in late November sun.
People come and go. Arthur's Seat in late November sun.
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How sacrosanct is the freedom of movement of workers in the EU?

The freedom of movement of workers (not persons per se) is one of the four pillars of the European Union and is an integral part of the EU single market. This 'entails, among others, the right for workers of the Member States to accept offers of employment anywhere within the Union.'

 

(See pp.12-16 for useful summary in UK/Heads of Government New Settlement that Cameron sought from and was agreed by Council of Ministers in February 2016. This became defunct when the UK EU referendum achieved a majority in favour of Brexit.)

Population Growth and Immigration

 

In this Eurostat table population growth in the UK is attributed more to 'positive net migration and adjustment' than to natural change. This is the case in 12 EU and EFTA Member States. (see Table 1 below). In only two EU Member States is population change attributed  'only to positive net migration' - Germany and Italy. 

Table 1 (click for link).
Table 1 (click for link).

Freedom of movement of workers and the UK New Settlement of Feb 2016

 

In the UK/Heads of Government New Settlement of Feb 2016 the UK won, amongst other things, a concession on limiting the access of new EU workers in the UK to in-work benefits (such as in-work tax credits) for a period of four years on a tapered basis (seeD/2b p.15). This was termed 'an alert and safeguard mechanism'.

 

In Annex 5 to the New Settlement it states that 'The EC considers that the kind of information provided to it by the UK shows the type of exceptional situation that the proposed safeguard mechanism is intended to cover exists in the UK today.'

 

And 'accordingly the UK would be justified in triggering the mechanism in the full expectation of obtaining [EC?] approval' (New Settlement, Annex 5 p.2).

 

This decision seems quite important because:

 

a) the EC recognised on the basis of information provided to it by the UK that an 'exceptional situation' with regard to Freedom of Movement in the UK existed;

 

b) that this exceptional situation would have justified the UK in triggering the safety mechanism agreed in the New Settlement that would have restricted in-work benefits to newly arriving and newly employed non-UK EU workers in the UK four a four year period on a tapered basis;

 

c) that this restriction that applied only to non-UK newly employed workers would have constituted clear discrimination in the UK labour market which is expressly outlawed (at least a a general level) within EU legislation;

 

d) although Annex 5 recognises that an 'exceptional situation' exists in the UK the information provided to the Commission on which this is based was not published.

 

On the basis of a-c above this would seem to give the lie to those who assert that i) Freedom of Movement as it currently exists within the EU is sacrosanct, ii) that the EC and Council of Ministers will never bend on Freedom of Movement and iii) that the EC and Council has not been willing to make specific concessions to individual Member States on Freedom of Movement when that Member State can demonstrate an 'exceptional situation'.

 

Of course, it can be argued that that the New Settlement was made in extremis in response to the then forthcoming UK EU membership referendum. Which is true.

 

It can also be argued that the concession made was never actually put into practice and that the proposed amendment to Regulation 492/2011 was never actually agreed (by qualified majority voting?) by the EU28 Member States at the Council of Ministers. (The FT noted on Feb 3 2016 (p. that even high-priority EU legislation can take more than six months to be passed).

 

And lastly it could be argued that the change proposed was both time limited (4 years on a tapered basis) and  temporary (there was no agreement on how long it would last) and did not signify that big of a change in the Freedom of Movement pillar of the Single Market.

 

But it did show that in extremis the EC and Council of Ministers was willing to consider and propose changes to the sacrosanct Freedom of Movement of workers. And it seems to me that at least in principle if not in scale the shift was substantial because it sanctioned discrimination in the UK part of the EU labour market in favour of UK workers.

 

There is the question of the workability of these restrictions on the Freedom of Movement of Workers. One UK official at the time believed that they were 'unworkable' (see FT 23 Feb 2016 front page article)

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Eating Humble Pie and Reframing Immigration Policy

Introduction

 

A few days before the UK's EU referendum I got up in the very early morning and wrote down some thoughts I had been mulling over as immigration became the centre point of the Leave campaign. I didn't publish them becasue it was already too late and it felt that saying anything might further enflame the situation. Even though my 'reach' is very, very limited.

 

Since then much has been written about the Leave victory and what it might mean. I've added a few references and linked to the policy and empirical analyses I've found most useful. 

 

I publish my thoughts here more as an historical curiosity than anything else. Here they are.

 

Eating Humble Pie

 

Who is going to save Britain’s European bacon and eat some humble pie? Who, of our metropolitan elite, is going to front up and admit that as a political and economic class we have been cloth-eared, arrogant, self serving and too enamoured with our own certainties of aggregate analysis and light touch regulation that we have failed to hear, acknowledge, understand and meet and act upon the disquiet, anger, and frustration of those communities, families and individuals who often bear the brunt of large scale immigration and migration and their economic, sociological and psychological impacts?

 

Freedom of movement as a free for all

 

The facts are simple.

 

If we want the huge benefits of access to the single market we have to accept free movement. At least in the short to medium term that is a given. Maybe further down the line, with concerted action with our European partners some movement on freedom of movement might be possible?

 

If free movement is a given that does not mean that it has to be a free for all. And perhaps this is the greatest problem with European migration into the UK. There is a sense on the ground that there is nothing that can be done, that we have lost control of our labour markets, our high streets, our neighbourhoods and even our boot fairs; that the waves of migration are not only unstoppable but that they lap up and into communities left to fend for themselves, unmediated by the protection of an even-handed and watchful state. (See this good piece by Tony Hockley on the Southampton council estate where he grew up.)

 

Those beyond the pale

 

So often those who feel aggrieved are bullied and hectored by aggregate analysis and internationalist prerogative. Immigration is good for us, they are told, when looked at in the round, for all sorts of reasons: the demographic crisis; the labour shortages; the greater contribution to the Exchequer than strain upon it; the sheer diversity and richness of it all, Romanian folksongs and cheery Polish plumbers and builders whacking up our Islington extensions while our university faculties are enlivened by the best and brightest (and of course often those with greatest resources and advantage).

 

So often they are told that like us they should laugh into their breakfast granola topped with French yoghurt and Polish blueberries; they should smile at their good fortune that the streets teem with the reliable, cheap, resourceful craftspeople, labourers and factory workers and fruit pickers and nurses and carers of Eastern and Southern Europe (well, and France too, London is after all the sixth largest French ‘city’at 300,000 by population).

 

Bring me your huddled masses or at least your minibus-mobile, gang-mastered young men and women, your conscientious and religious settler families, your charming cuisine and news from foreign lands – or at least those snippets I hear before leaving you to look after my children, aging mum and incontinent dog.

 

 

Immigration plus

 

But it just doesn’t feel like that for many people. And, of course, it is a potent mix of concern and bewilderment and old prejudices are often close at hand. There is a sense of powerlessness at large and resentment at all manner of things – stagnant wages, the disappearance of jobs for life, the cold winds of global forces and new upstart economic powers, years and years of austerity, the surgeon’s knife cutting into the muscle and sinew of local service delivery, official indifference, condemnation from on high as bigotry and racism, and an ageing population that is feted by politicians while no-one is willing to pay the taxes that can be only way to save the sacred NHS that currently runs on thin air and Treasury fumes to meet exploding demand from increased life expectancy. (See this good piece by Will Davies on the Sociology of Brexit and the manner in which 1970s and 80s deindustrialisation laid the lasting ground for the Leave vote.)

 

So what can be done? Because even if the displacement and wage restraining impacts of immigration and migration are only ‘marginal’ there is a broader sense – horribly seized upon through the message discipline of the Leave campaign – that things are out of control. School places, A&E waiting times, the increasing difficulty of getting the GP you want, or any NHS dentist. The fight for housing as the public sector is cut ever more and private renting is left to the dogs while the once proclaimed right to home ownership recedes over the horizon in a cloud of noxious dust and hollow laughter.

 

And if those displacing and retraining effects are marginal why should the margins have to bear their full cost while the metropolitan middle classes reap the benefits, direct and indirect, of free movement?

 

So what can be done?

 

I think first what can be done is to eat some humble pie. It is time for some of the leading proponents of free movement and its benefits to admit that maybe they should have spent more time out in the sticks and out in real communities away from their spreadsheets and cost benefits analysis. And that from now on they will devote more attention to the local and real and perceived workings and effect and impacts and perceptions of free movement in the UK.

 

So set up some research that isn’t econometric and aggregate. And get people involved in it. Why not propose something like the Mass Observation research where ordinary people were encouraged to feed in their experiences and views through diaries, focus groups. Give people a stake in the process.

 

Reassure them that they will be heard. And that their concerns will be taken into account, be treated seriously and given due weight in policy formulation. Give people who have concerns about the levels and impacts of immigration a seat at the table and stop treating them as pariahs and racists. Which is not to say that there are not racists and right wing thugs amongst them. But stop making people who are frightened and angry feel that they are beyond the metropolitan pale of a tolerant society. (See this good piece by D'Marris Coffman on distribution of Leave votes by race as well as class).

 

Thirdly, set up a fund to mitigate the ‘marginally negative economic impacts’ of free movement in the UK. Others have advocated this but let’s do more than a fund (that might or might not be financed by the EU budget – as if that were infinitely elastic).

 

But also set up a task force or a department or a ministry. This would be charged with understanding and acting on issues arising out of present and future migration and immigration into the UK. It would monitor flows and destinations, commission fine grained and local studies as well as aggregate research. It would look at the tools that other EU members use – should there be compulsory registration of residence? should we look at the issue of identity cards? some kind of passport to public services and eligibility?

 

Take action in a joined up way to boost services where they are particular local strains through both improved provision but also local support in terms of understanding and mediating tensions. A Neighbourhood Support fund a bit like the old Neighbourhood Renewal Fund.

 

And it would be vigilant in terms of people abusing the welcome – grudgingly or not - extended to them by the UK – whether that be criminal activity, or benefits abuse, or illegal access to public services and the right to remain. (See Jonathan Portes ideas on reframing the immigration debate here published on 19 June 2016.)

 

Hopefully this would be more enabling and preventive than punitive. It would in some way be about setting out what the people of the UK expect – a set of common expectations – that would be as much aimed at reassuring the current population as ‘disciplining’ new arrivals.

 

But there is a sense that the UK is somehow a soft touch in the league of migrant destinations, that the UK is so gullible that it provides a warm and fertile soil for the feckless and criminal and those intent on doing harm and hoodwinking the bovine British people. That may not be ‘true’ (I really don’t know) but it seems to have some resonance.

 

Maybe, as Van Morrison said, it’s too late to stop now. Maybe we have gone beyond the tipping point. Maybe the arguments about managing and monitoring free movement are too subtle and maybe, well, too constrained by the principle of free movement.

 

But maybe, if you believe in the good, pragmatic and largely level-headed sense of the peoples of the UK (here is an analysis of the vote), there is just time to make amends, to offer a new, vigorous and vigilant deal, a verifiable pledge to urgent action that the current government would undertake to put in place with swiftness and resolve the days and months after the referendum.

 

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Solidarity, Self Interest and the UK contribution to the EU budget.

The Summary Quick Read

 

In this blog entry I argue that the UK's net contribution to the EU budget (at around £7bn in 2015) is money well spent. EU administration takes just 6 per cent of this. The rest supports economic development and agriculture within the EU, international development outside it, and helps companies to be competitive and people to be productive and access employment.

 

True, much of this money is not spent in the UK and helps, amongst others, the least developed regions of the EU. This is both an act of solidarity and an articulation of British self-interest. It gives the UK decisive advantages as one of the big three EU players. These come in the form of clout and heft within the policy mechanisms of the EU and the expansion of the single market in goods and services.

 

Compared to the economic advantages the UK has exploited as a member of the EU (it has grown faster than other major EU economies) the Budget contribution (the lowest by percentage of Gross National Income in the EU)  looks like an amazingly good deal and an effective piece of public investment.  Of course, there is room for improvement. There always is. But simply counting the beans (or miscounting them as the Leave campaign has done on an industrial scale) rather than looking at what those beans have grown into is a very narrow way of looking at the world, the EU and the UK's place at its heart.

 

As the one time Chief Executive of Cornwall Neighbourhoods for Change I have had more than a passing relationship with both managing EU regional and social cohesion funding and selecting and supporting projects to access that funding. During that time, and although accessing EU funding has its own learning curve to climb, it never seemed to me that the 'EU' or 'Commission' were deciding what the Cornwall Objective One programme - as it then was - was to be. It was a partnership that while complex and hierarchical also achieved many significant innovations and additions to Cornwall's economy.

 

Introduction

 

Although controversy rages about the amount of the UK's EU budget contribution this blog is less about the amount - although that is important too - than what actually happens to the public money that the UK feeds into the EU budget.  Maybe I have just missed the articles and blogs but I have yet to come across a piece of writing that looks at these issues. Instead the fixation is on the number of beans rather than what is being done with them.

 

That has certainly grabbed the headlines and has been a potent campaigning tool for the Vote Leave campaign.  But what is the EU budget actually for? What is it spent on? And what does the UK achieve by contributing to that spending?

 

To start at the beginning, this isn't an expert's view of the EU budget and the UK contribution. I've gone out and looked for answers to questions I've had.  At times I've had to make some guesses or estimates but by and large the figures presented here can be pretty robustly defended by the facts.

 

The EU Budget

 

The EU has a budget that is roughly equivalent to one per cent of the national income of the single market of the combined 28 EU member states. In 2015 the EU budget was £141bn. The EU budget is decided by the Council of Ministers (it's formal title is The Council of Europe) comprised of ministers of the EU ember states and the European Parliament comprised of its elected members.

 

Figure 1 below shows the different spending areas and proportions that that the EU 2015 budget covered. This is divided between spending on Competitiveness for private sector companies (11%), Social cohesion and regional development (36%), Sustainable Growth largely through agriculture (40%), Security and Citizenship (2%), foreign aid for international development (5%) and the administration (6%) of the institutions of the EU  - primarily the Council of Ministers, the Commission and the European Parliament .

 

Figure 1: from  https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/483344/EU_finances_2015_final_web_09122015.pdf
Figure 1: from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/483344/EU_finances_2015_final_web_09122015.pdf

The UK's EU Budget Contribution

 

Arriving at hard and fast figures for the UK's EU budget contribution is complicated by  factors such as the £/€ exchange rate and the different timing of tax and financial years. And it is a controversial area.

 

Part of this contention lies in the fact that although the UK pays into the EU budget it also receives money back from the budget under its different spending heads - think for example of Common Agriculture payments made to UK farms. So there is a gross figure that goes to Brussels and a net figure that takes into account the so-called public sector receipts of funding back to the UK from Brussels.

 

This is further complicated by the fact that the EU budget also funds private sector projects through competitiveness initiatives and funding for research.  These are the so-called private sector receipts of EU funding.

 

Keeping a track of and measuring these different funding streams as they cross between the UK and Brussels and back again is not always easy.

 

The UK Rebate

 

If this were not complex enough there is also the issue of the UK's EU budget rebate. Won by Margaret Thatcher and jealously guarded since this is an amount, well quite a big amount at £4.87bn in 2015, that is subtracted before the UK pays any money into the EU budget. So although the UK's nominal contribution in 2015 is listed as £17.8bn this was not the amount of money 'sent to Brussels'. It was actually £12.92bn (see Table 1 below).

 

But even the £12.9bn figure is potentially misleading because of those public and private sector receipts of money that flow from the EU budget to the UK via Regional Fund, Social Cohesion Fund and Common Agriculture Policy payments, amongst others. So when the the public sector receipts for 2015 are taken into account the UK contribution is further reduced from the gross-minus-rebate figure of £12.9bn to £8.47bn.

 

And, yet, there is more good news. But this is harder to quantify for 2015. 

 

In the UK Treasury document that I have used here (European Union Finances 2015: Statement on the 2015 Budget and measures to counter fraud and financial mismanagement, December 2015) there is also mention that further EU payments come back to the UK via payments directly to the private sector. These do not appear in the public sector accounts but an estimate for these receipts in 2013 is given as £1.4bn. I have subtracted this figure from public-sector-receipts-net-contribution figure to arrive at an UK EU budget contribution - the public sector plus private sector receipts net contribution- for 2015 of £7.073bn.

 

Table A: UK Gross and Net Contributions to EU budget 2010-2015 (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/483344/EU_finances_2015_final_web_09122015.pdf)
Table 1: UK Gross and Net Contributions to EU budget 2010-2015 (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/483344/EU_finances_2015_final_web_09122015.pdf)

 

Of course, it is contentious to use the private sector receipt figure from two years back to work out the 2015 UK net budget contribution. But needs must. And strangely enough it sums out at a UK net contribution that is very similar to the one tentatively backed by the ONS.

 

Because the Office of National Statistics has looked at the European Commission's own data for the UK's net contribution (there is not yet a figure for 2015) and averaged this for the period 2010-14. This smooths out some of the variations in the EU budget size and comes out at a UK net contribution figure of  £7.1bn when all public sector and private sector receipts are taken into account. 

 

The ONS states that this way of looking at UK contributions  'is arguably a more complete picture of the money that flows between the UK and the EU.'

 

On that basis I have decided to use the sum of £7.07bn to represent a good enough estimate of the UK's net contribution (minus rebate and public and private sector receipts) to the EU budget in 2015, particularly as the 2015 net contribution (minus rebate and public receipts - see Table 1 below) - is smaller than the contributions in 2013 and 2014.

 

It is complicated. But it is not really that complicated.

 

I have put these different ways of arriving at a good estimate of the net contribution figure in Table 2 below. Column B is the gross contribution minus rebate. Column C is the net contribution that excludes the rebate and private receipts. And Column D is the net contribution that excludes the rebate and public and private sector receipts.

 

The Leave campaign's figure of £350m a week is simply wrong

 

One thing that immediately leaps out of Table 2 below (see the Weekly Payments row) is the range of numbers we can get for the supposed weekly contribution of the UK to the EU budget. The Leave campaign claims this is £350m. This is wrong, as many have pointed out,  as it fails to take into account the whopping rebate of £4.9bn which never even makes it to Brussels let alone the public and private sector money that comes back to the UK through different EU budget heads.

 

If we use the gross contriubtion figure minus the rebate we get weekly payments of £248m (Column B). Using the much more realistic figure of the UK net contribution (rebate and public sector receipts subtracted) we arrive at weekly payments of  £163m (Column C). And when we net off the rebate plus public sector and private sector receipts we get a still further reduced weekly payment of £136m (Column D).

 

These are still large amounts of money but the net contribution weekly payment of £136m (Column D in Table 2 below) is much less than half the £350m claimed as a fact by the Leave campaign. That the public is being asked to vote in probably the most momentous electoral decision for a generation on such a false, and yet widely believed (47% of the UK public),  prospectus is shocking.

 

I know they say that we get the politics and politicians we deserve. But surely we did not deserve this.

 

UK Net EU Budget Contribution by EU Budget Spending Heads 2014: My calculation using charts A and B above.
Table 2: UK Net EU Budget Contribution by EU Budget Spending Heads 2014: My calculation using Figure A and Table A above.

 

Where does the money go?

 

In order to try and understand where the UK's contribution to the EU budget goes I have taken the overall proportional allocations of the EU 2015 budget of £141.2bn and applied these to the UK contribution.  This is not as straightforward as it might seem because when we are dealing with a net contribution some budget head allocations stay constant and some change. (The note under Table 2 explains this.)

 

The EU budget allocation column (A) shows overall where the EU budget is spent. This is divided between spending on Competitiveness for private sector companies (11%), Social cohesion and regional development (36%), Sustainable Growth largely through agriculture (40%). These budget heads fund programmes that lead some EU budget funds back into the UK. 

 

There are smaller budget heads for  Security and Citizenship (2%), foreign aid for international development (5%) and the administration of the institutions of the EU (6%). I have assumed that none of this money comes back to the UK.

 

Administering the EU

 

Table B above shows that the UK contribution in 2015 to the administration of the EU and its staff of 55,000 civil servants was in the region of £775m. (That is 6 per cent of the UK's gross-minus-rebate contribution.)

 

For comparison, the cost of running UK government departments in 2013-14 was £11.7bn and the much reduced civil civil service headcount in 2014 was about 410,000.

 

So the UK's contribution to the EU budget, the so-called  'gravy train', is equal to 7 per cent of the cost of running the UK's central government departments. Or to put it another way it costs 15 times as much to run UK government departments as it does to run the institutions of the EU.

 

That's not really surprising. The UK government departments deliver programmes on the ground - think of state pensions, benefits assessment and payments, collecting taxes etc. - while the institutions of the EU do not.

 

And  the rest of the money?

 

If 6% of the UK's EU  gross-minus-rebate budget contribution goes to the administration of the EU where did the rest go?

 

Once funds (public and private sector receipts) coming back to the UK have been stripped out the UK contribution the biggest amount, (my estimated allocation) is the £2.5bn, (Column D in Table 2) that went to the budget head of 'Sustainable Growth'. This  is largely accounted for by payments to EU farmers.

 

But note this sum does not include CAP payments to UK farmers because we are dealing with the net contribution figure (that is, minus rebate which stays in the UK and public and private sector receipts that flow back to the UK - which includes CAP payments to UK farms). So this figure of £2.5bn is a transfer to non-UK agriculture.

 

You might well ask: why is the UK giving money to EU farms that are not in UK - it works out at roughly £38 per year per head of the UK population of 65m. I reckon that's 73p per person a week.

 

The second biggest part of the UK's net EU budget contribution goes to Economic Cohesion - this concerns both funds to regions that have less than 75% of the EU's average GDP and funds that go to assisting with the development of employment and access to employment opportunities. My calculations suggests this amount  was around £2.2bn in 2014 (Column D in Table 2).

 

As with the CAP figure above this is a net contribution because the cohesion funds that come back to the UK have been stripped out of Column C and D in Table 2. So in effect the UK is transferring £2.2bn to the other parts of the EU.

 

The same can be said with regard to the Competitiveness heading at £0.68bn.

 

The last two budget heads concern Security and Citizenship (£0.26bn) and Global Europe (£0.65bn). Global Europe is comprised of foreign aid donations to other countries both as help to EU neighbouring countries and as international development aid. I have argued that none of these funds come back to the UK although of course there may be exceptions. 

 

So where are we up to?

 

So far I have argued that the net UK contribution (minus rebate and public and private sector receipts) to the EU budget in 2015 was in the region of £7.1bn. And I've said that a small proportion (6 per cent) of the gross-minus-rebate contribution helped pay for the administration cost of the EU - the Council, Commission, Parliament and other institutions.

 

The bulk (80%) of the the UK's net EU budget contribution was in effect a transfer payment to other parts of the EU of something like  £5.4bn (Table 2, Column D - sum of Competitiveness, Economic Cohesion and Global Growth) via the mechanisms of the CAP, Regional and Cohesion funds and Competitiveness initiatives.

 

Maybe it is not surprising that these figures have not featured in the UK's referendum campaign - although you would have thought that the Leave campaigns would have exploited them mercilessly. Instead they have concentrated on the erroneous headline figure of a UK weekly contribution into the EU budget of £350m. Which they have of course exploited mercilessly.

 

Amazingly, despite being challenged and shown to be wrong, 47% of the UK public still believe this figure. By not giving the public details of the budget they are denied the material (he said super naively) to think these issues through.* See Footnote

 

Chart 1: Despite being a similar size to France in terms of Gross National Income the UK pays in less than it. And Italy, despite years of recession, pays in a similar amount to the UK. Germany is the biggest EU contributor.  (Click for link.)
Chart 1: Despite being a similar size to France in terms of Gross National Income the UK pays in less than it. And Italy, despite years of recession, pays in a similar amount to the UK. Germany is the biggest EU contributor. (Click for link.)

Is it a giveaway?

 

Such is the fever pitch of anger at the moment that we mightwell ask: what the hell is the UK doing 'giving away' £5.4bn annually to other parts of the bloody EU?

 

Don't we have enough unmet domestic spending needs to use our money for our welfare? And, of course, that is a perfectly valid question and one I've asked myself as a non-expert in these matters.

 

But before we go any further let's just check out what that £5.4bn means, put it in some context, because it sounds a chuff of a lot of money.

 

The total amount of economic wealth created in the UK - the gross domestic product - in 2014 was £1,582bn. So the bit that the UK 'gave away' to other parts of the EU was equivalent to 0.34% - give or take - of the UK economy's total wealth.

 

In terms of UK public spending (2014 £734.6bn) the percentage is a bit higher at about 0.73 per cent.

 

Is that a lot or a little?

 

Well, £5.4bn is a lot of money. No doubt about it. 

 

But we are not talking here about individual wealth or lottery wins. Put in the context of UK GDP it is about one three-hundredth of the total wealth created by the economy or slightly less than one per cent of total UK public spending.

 

Still, in a time of austerity (or not, for that matter) you'd want to know what that money was doing and what it was buying. Or at least know that someone - a public, elected politician for example -  knew what that money was buying and for why. It would be interesting to ask a few MP and MEPS about this.

 

On the face of it that £5.4bn looks like a giveaway,  a straight transfer to other people in other parts of the EU who are not part of the UK.  Why would you do that? Why, in fact, is the UK a net contributor to the EU?

 

The answer to those questions lies in three words. The first is solidarity and the second are self interest.

 

Chart 2: The UK actually pays in a smaller percentage of its internally created wealth - Gross National Income - than any other EU Member state (2014 figures - click for link to Prof Ian Begg study).
Chart 2: The UK actually pays in a smaller percentage of its internally created wealth - Gross National Income - than any other EU Member state (2014 figures - click for link to Prof Ian Begg study).

 

Solidarity for ever?

 

Since the emergence of social democratic politics and parties in the early 20th century - like the UK's Labour Party amongst many others - and the foundation of the welfare state there has been an avowed aim to lessen and combat the demeaning and life-shortening effects of inequality, poverty and misfortune.  So modern welfare states are designed, amongst other things,  to assist the poorest and most vulnerable members of society through welfare payments to individuals - whether this be for the unemployed, the sick, those with disabilities, the elderly, the poorly paid etc - and through programmes such as regional development and industrial adjustment projects to help particular geographical (think Port Talbot) or sectoral parts (think steel) of the economy and labour market.

 

Welfare payments are a moral good - they recognise that life chances are not equal and that through no fault of their own people fall on or are born into hard times through intergenerational poverty, social class, unemployment, sickness, accident, divorce, caring necessities etc.

 

But normally general transfers of welfare spending take place within a single welfare state rather than between states. Welfare payments in the UK in 2014/5 equalled £258bn.  These payments to individuals were made through state pensions and a range of individual and family benefits. 

 

Chart 3: Another graph from the study by Prof Iain Begg of the LSE of the EU buget study. The UK contributes less of it national wealth than other big and small EU members. This suggests that the UK is well able to look after its interests in Brussels.
Chart 3: Another graph from the study by Prof Iain Begg of the LSE of the EU buget study. The UK contributes less of it national wealth than other big and small EU members. This suggests that the UK is well able to look after its interests in Brussels.

The EU budget is not a welfare budget

 

The £5.4bn net contribution (Column D Table 2 Competitiveness, Cohesion and Growth summed) the UK made to the EU 2015 budget for agriculture, regional development, social cohesion and competitiveness outside of the UK was not a welfare transfer to individuals.

 

In the case of agriculture it went to agricultural enterprises (farms and smallholdings) and rural development and environmental projects outside the UK in pursuit of the aims of the slowly changing Common Agricultural Policy. In the case of Regional Funds it went to economic development projects in the so-called 'lagging' regions of the EU outside the UK (those with less than 75% of the average EU GDP).

 

This latter investment can be for infrastructure projects such as transport links or to help develop job creating initiativies and enterprises. Social cohesion funds tend to go to creating projects that assist individuals access work or gain the skills to be employable. Competitiveness funds go to companies and business support organisations working to increase private sector activity.

 

But why, you might ask, is the UK spending £.5.4bn to allow the EU to do this in the rest of the EU? What is the point?

 

Well, from a social democratic viewpoint of solidarity the point is that the EU of 28 member states is made up of  :

  1. member states who have very different levels of national wealth (think for example of Germany against Bulgaria) and
  2. member states who have very different levels of regional wealth within the nation (think, for example Madrid versus Andalusia).

Regional and social cohesion funds aim to reduce - however marginally - those differences in the entirely laudable pursuit of an inclusive, diverse and expanding European economy and society.

 

Chart 4 below shows this disparity of wealth between the EU 28 member states against the average GDP per head of the EU 28 (average = 100).

 

Tiny Luxembourg has a GDP per head nearly two and three quarters bigger than the EU 28 average. Whereas Bulgaria has a GDP per head that is less than half the EU average. The UK is above the average but not by a great deal.

 

Chart 4: EU 28 GDP per head by Purchasing Power Parity compared to EU 28 (average = 100) (Source: Eurostat. Click for link).
Chart 4: EU 28 GDP per head by Purchasing Power Parity compared to EU 28 (average = 100) (Source: Eurostat. Click for link).

 

Map A below shows the disparity of regional wealth in the EU 28 member states. Note that two UK regions and one country have less than 75% of the average EU GDP - Cornwall and the North East of England and Wales. As can quickly be seen from this map the majority of the poorest regions in the EU are in the south - southern Spain and southern Italy and Greece - and in the east and south east - Eastern Europe and the Baltic and Balkan states.

 

(NB Iceland, Switzerland and Norway are not part of the EU but they pay into its budget nonetheless.)

 

 

So EU regional and social cohesion funds are there to help the less fortunate regions of the EU 'catch up' with the rest. Although some would argue that the sums of money devoted to this task although substantial are insufficient to make a major impact on reducing levels of member state and regional wealth disparity. But that is what they are there for and along with the Competitiveness initiative that is what the UK contribution to the EU  budget of £5.4bn in 2015 was contributing towards.

 

It's not so much a 'hand out' as a 'help up' transfer and it does not go to individuals but via programmes and projects to public, private and Third sector (NGOS, charitable organisations etc) enterprises.

 

I have, for my sins,  been involved in both the spending and the administration of these funds and I think it would be safe to say that overall there is a robust accounting and accountability mechanism for accessing and using these them. As the ex-Chief Executive of Cornwall Neighbourhoods for Change I have personally been on the sharp end of a Level 3 EU Audit and, take it from me, it is not a pleasant experience if you are found wanting. (We were not.)

 

And the self interest?

 

But is this all done in the name of solidarity alone, you ask?

 

Well, as with much solidarity there is also a good degree of self-interest in it. Altruism, as they say, has a short shelf life.

 

So what is the return to the UK on the UK's contribution to the EU budget?

 

For a start, it buys the UK influence in the EU as one of the biggest member states and one of the biggest net contributors. As such the budget contribution helps to give the UK a powerful voice in the shaping of the EU's policies and regulations. Along with Germany and France, the UK is one of the three big beasts of the EU and not much happens without the approval of the UK at the Council of Ministers and within the Commission (see this very useful video by Professor Michael Dougan). This isn't the way much of the media presents the UK in the EU but that nest of vipers is for another day.

 

Note that the UK is such a clever player in the EU that it actually pays a smaller percentage of its Gross National Income to the EU than any other EU member state (see Chart 2 above). That is a fact that suggests to me that the UK is very good at looking after its interests within the Council of Europe, the European Commission and the European Parliament.

 

Secondly, the expansion of the EU has been a key strategic UK interest both in terms of increasing the size of the single market and opening it up to UK businesses, workers, students, tourists and consumers and in creating a stronger European political alliance in an ever changing world. The bigger the market the bigger the stick the EU can carry in global trade negotiations. This allows the EU to drive standard setting at a global level which in turn can reduce transaction costs for UK businesses exporting beyond the EU.

 

And thirdly, as with all funds for economic development, there is an expectation that the developing economic prosperity of other regions and countries of the EU will be to the benefit of the UK through the growth of the trade in goods and services in the single market.

 

An assessment of the EU's positive impact on UK economic performance - click for link.
An assessment of the EU's positive impact on UK economic performance - click for link.

 

So. The UK EU Budget contribution? Is it money well spent?

 

To put it slightly differently,  is the UK's contribution to the EU a waste of money and an unnecessary diversion of money away from UK needs?

 

No.  Membership of the EU and the creation and expansion of the single market has been hugely beneficial to the UK.  Yes, it is true that if we left the EU tomorrow we would have an extra £7bn to spend each year (unless we went crawling back to try and join the European Economic Area or do some complicated bi-lateral deal à la Suisse).

 

But it is very likely that by withdrawing ourselves from access to the single market the UK economy would suffer in the short and longer-term and the gain in not paying into the EU would be quickly wiped out by losses of tax revenue due to lower economic growth.

 

And after all, isn't it good to be part of, and a major player in, the the EU project? And isn't it good to give a hand up to those regions and countries that are so much less wealthy than the UK? That have shaken off dictatorship and that have joined in the shared values of the EU? Isn't that what solidarity is about? And doesn't it also serve our economic and strategic national interests at the same time? 

 

To me it's a no-brainer. Sure, there are improvements to be made in terms of the CAP and fraud and accountability. There always are. But positive changes have been made and will continue to be made. The EU - if you can say this - is not 'thick'. And the UK has a large and well-organised voice within it. And the world is a rapidly changing place. I think we are stronger and better together and that as a country we have enough clout and heft within the EU to quite happily look after our own interests, diverse and contradictory though at times these may be.

 

With all these things, if you only count the bean seeds rather than looking at what the beans have grown into it is a very narrow way of looking at the world, the EU and the UK's place at its heart.

 

 

 

Footnote

The same goes for the Vote Leave claim that the total UK contribution to the EU since membership began in 1973 is  £503.3bn.  This does not take account of the UK's rebate nor EU public sector receipts in the UK. Using a similar methodology to that used by the Vote Leave claim, Professor Ian Begg, at the London School of Economics has calculated that the gross contribution to the EU since membership is more like £400bn. But this is a gross figure and takes no account of the EU budget funds that come back to the UK through the Common Agricultural Policy and Regional and Social Cohesion funds, amongst others, since the UK joined up in 1973.  If we use the proportion of the UK's EU net (Column D in Table 2 above) to gross- minus-rebate proportion (Column B) in the UK 2015 EU budget contribution (55%) as a very rough and ready guide this would potentially reduce this 'lifetime contribution' to the EU from £400bn to just shy of £216bn - almost half the Vote Leave claim.

 

Here my blog on why I'll be voting Remain.

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Why I’m voting Remain

Cruel sun in a fickle summer: looking across the Dover Strait hours after Jo Cox MP was shot.
Cruel sun in a fickle summer: looking across the Dover Strait hours after Jo Cox MP was stabbed and shot.

I’d rather not vote at all. This referendum has polarized British society and brought out horrible and dark sentiments for no purpose other than to satisfy David’s Cameron’s political miscalculation. But we are where we are. And Jo Cox MP is now tragically dead.

 

There are of course many things that are wrong with the EU and its institutions and working practices. But the same can be said for democracy itself. It is the least bad system we have for both preventing a repeat of the horrors of Europe’s 20th century and for confronting the challenges of our own age.

 

The European Union is not just an economic union and a massive free trade area but also a place of solidarity and joint endeavor. Never have we needed this more given the threats we face – climate change, a newly aggressive Russia, terrorism, the Middle East crisis, the refugee crisis, and the financial crisis that we are only just now recovering from and the rise and rise of China.

 

The workings of the EU may be slow and ponderous and appear to lurch from crisis to crisis but by and large the crises are resolved. The politics of consensus and compromise are clumsy and the problems we face are complex. But these are not addressed by some faceless bureaucratic clique but by our national political representatives in the Council of Ministers and the European Parliament.

 

I personally am happy to share a degree of sovereignty because it is both in Britain’s interest and in the interest of Europe as a whole. As to the free movement of EU peoples this has clearly been beneficial for the UK economy at an aggregate level. But it has brought problems and costs. Our domestic politicians on all sides have been slow to wake up to these and tend to dismiss them as ‘marginal’. But some communities have born more of these ‘marginal’ costs whilst others have garnered all the advantages. That is not fair and needs to be addressed and corrected.

 

To be frank, our metropolitan elite has been cloth-eared on this one and treated those concerned by migration with a lack of dignity and respect that is reprehensible. But pandering to racism is no solution either.

Storm clouds over Dungeness: the referendum has released horrible and dark sentiments.
Storm clouds over Dungeness in April 2016: the referendum has released horrible and dark sentiments.

Migration and immigration are processes that need to be better managed both domestically and at a European level. This was something that was clearly recognized by Jo Cox MP. But whilst leaving the EU and shunning even membership of the European Economic Area (if it could be secured – which is doubtful) might give the UK control of migration as what cost would this come?

 

And do you really think that when the tap of EU labour is tightly closed the people that called for its closure are going to welcome an increase in non-EU migrants and labourers with open arms? Who then will keep the NHS and our care homes open? Who pick our fruit and harvest our veg? Who drive the vans and staff the restaurants and warehouses?

 

Yes. More needs to be done to help those who want to work to access work (although employment rates have never been higher). And more needs to be done to support those stuck in a life of benefit dependency to break that cycle. And still more needs to be done to build public housing and increase the housing supply. But that is not the fault of the EU. These are domestic political decisions.

 

And, lastly, I don’t believe for one minute that Farage, Gove or Johnson will actually be keen on any migration, particularly if brought to power by a Brexit vote. By then the public mood will be such that there will be no easy going back to nice laissez faire Britain. Or even matey points-system Australia.

 

I am very scared of what will happen to this country if we leave the EU. A broad consensus of economists believes that short-term recession and long-term uncertainty and a slowdown in growth will result. Britain and its famed soft power and persuasiveness is already diminished in the world by our ‘suicidal’ referendum and the brutal murder of Jo Cox MP. To be outside of the political heft of the EU will further diminish us and there is a very good chance that Scotland will leave the United Kingdom if we Brexit.

The economic consqeuences of Brexist will be swift and devastating hitting those with least hardest: car carrier off Dungeness Point.
The economic consqeuences of Brexist will be swift and devastating hitting those with least hardest: car carrier off Dungeness Point.

I don’t want to live in a declining Little England of bitter and impoverished citizens who hark back to a long gone and, to be brutally honest, not that nice golden age of Empire and colonialism while our welfare state and trade relations crumble around our ears.

 

I think I understand that urge to give the ‘Establishment’ a kicking by voting leave. We’ve had long years of austerity and our society is riven by inequalities. And I think I understand the fear of more and more immigration and migration. I have my own concerns about this and the way that the negative impacts are not being addressed. And I don’t want Britain to be seen as a soft touch.

 

But just because people are angry is it really so wise to rush across the busy road of global trade blindfold with no idea where we are going?

 

After all, we’re not dealing with some abstract niceties here but the value of the pounds in our pockets and the economic health of our lovely and largely peaceful middle ranking nation.

 

Anyone who really thinks that the brief advantage of not paying into the EU will not be wiped out by recession (whether it be short or long-term) has, I think, been sadly and deliberately misled by people who should know better or who are driven by naked political ambition or an ideology (and often an ugly one at that) that cares nought for the welfare of the man and woman in the street, let alone their children.

 

So I’m sticking with the status quo, boring and relatively safe though it is. I‘ve done some reckless things in my time but this decision is just too important for recklessness. Once done it will be done for good. And if we leave they will not have us back.

 

If there is one video to watch on UK/EU relations I would suggest this very sober analysis by Professor Michael Dougan.

 

Thanks for passing by.

 

New life in an ancient Kent wood: the bonds of solidarity and joint endeavour matter more than ever in a rapidly changing world
New life in ancient Kent woodlands: the bonds of solidarity and joint endeavour matter more than ever in a rapidly changing world

My blog post hot off the press on Solidarity, Self Interest and the UK contribution to the EU budget - what is it and what it for?

 

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Blipfuture: the art of the possible

The New Situation

 

In this blog I take a look at the revised Blipfuture Business Plan (BPv2). This was issued following the successful completion of the first phase of the negotiation for the purchase of the Blipfoto assets by Blipfuture. Please remember the purchase has not yet taken place and additional pledges/donations are still very welcome.

 

That negotiation (the details need to be tied down and the sale actually completed) significantly reduced the overall price of the sale and the cash element in the purchase agreement (which is made up of cash, non-voting shares and possible long-term payments).

 

That this very positive outcome was possible speaks to the flexibility and openness of the current owners of Blipfoto and their desire to see Blipfoto continue as a going concern. It, of course, also speaks to the skills of the Directors of Blipfuture and the cordial relations that have been sustained with the owners, either directly or through intermediaries. Last but not least, it is due to the determination of the Blipfoto user base – the community – to stump up the monies to make a deal possible.

 

The reduction in the cash element of the price agreed for the purchase of Blipfoto has in turn made possible a revision downwards of the minimum target of the Blipfuture crowdfunding campaign from £180,000 to £120,000. This has already been achieved – the crowdfunding total continues to tick up and now stands at £129,850 (plus £2,000 via the PayPal donations portal).

 

The crowdfunding monies pledged will be withdrawn on or after Tuesday, 26th January provided that the pledge total is still at or above £120,000 (and I see no reason why that should not be the case). It will be possible to buy shares and donate via the crowdfunding website until March 1st, 2016 after which the current offer of shares in Blipfoto will close.

 

At the same time as the purchase price and that all-important cash element has been reduced (which allowed the crowdfunding target to in turn be reduced) the Directors of Blipfuture and the Blipfoto community have been learning much more about the Blipfoto community.

 

Two things have become very apparent. First, the Blipfoto community is not as large as many thought and has also considerably reduced in size since December 2014. The total number of users who Blipped in November 2015 stood at 3,698 – a big reduction (of about 40%) on the 6,300 user who blipped at least once in December 2014.

 

Second, the number of Blipfoto users who were willing and able to put in a pledge for the community buyout seems to be limited to about a third of the current Blipfoto user base. Current pledgers stand at a little above 1,200.

 

These more limited figures in terms of current Blipfoto use and future commitment through investment in the buyout and/or paid membership caused the Blipfuture Directors to look again at projected Blipfoto member numbers and revenues.

 

This has led to a major reduction of projected future revenues from paid membership and a linked reduction in operating costs to match this. That reduction in costs is in part based on a more accurate understanding of current operating costs (particularly server costs and the possibility of getting rid of or farming out to volunteers the maintenance costs for the little used Android and iPhone apps). But most importantly it is based on the decision to dispense with a paid full-time Blipfoto co-ordinator post and a physical office space.

 

I have to say I think this is a very sensible and admirably prudent reappraisal of the revenue stream upon which Blipfoto’s future financial sustainability will be absolutely reliant.

 

Not having a full-time (or even part-time) paid co-ordinator will, of course, have an impact but the Directors are confident that through their continued efforts and the many offers of volunteer help they have received the day-to-day running of the company and its different functions can be achieved.

 

And should the membership grow by more than the current ‘no-growth’ estimates this is an area that can be revisited at a future date. But at this point in time it is surely better to plan forward on a relatively restricted membership revenue stream than to take a punt on growing user numbers that may not be realizable.

 

The Revised Blipfuture Business Plan

 

To turn to the revised Business Plan (available at the Blipfuture crowdfunding page) the first thing to say about this is that the larger part of it is unchanged from the first version of the Business Plan (BPv1) made available at the start of the crowdfunding campaign on 4th December 2015.

 

The Version One Business Plan (BPv1) was supplemented by the issue of a subsequent Financial Plan’(16th December 2015) that looked more closely at emerging user statistics and added some more financial information with regard to the possible membership fees and member numbers and made the financial summary table more accessible. Some of the information from the Financial Plan has been incorporated into the Revised Business Plan.

 

Having said that the revised plan is substantially the original plan plus additions from the Financial Plan it is actually quite difficult to see where the changes occur and where new material has been added - other than at the front of the document under the heading of ‘What has changed’ (pp. 2-3).

 

So here is a list of the major changes that I have been able to see for those who want to see them. (I did this using a free online pdf comparison tool called Diffnow.

 

The major changes between BPv1 and BPv2 are:

 

  • Section What has changed (pp.2-3) added.
  • 1.5 Blipfoto statistics added (these are taken from the Financial Plan).
  • 3.3 Paypal section (p.13) added.
  • 3.6 Paid Membership (p.14) is from the Financial Plan but without the subsequent section on possible fees/numbers of paid members.
  • 4. The diagram of the Blipfuture organisation has been amended to reflect the removal of a paid worker as ‘a co-ordinator to run day-to-day operations’ (p.14)
  • 4.5 of BPv1 on ‘Staff’ has been deleted.
  • 4.2.2 A section has been added here taken from the Financial Plan
  • 5. The Financial Plan (pp.18-20) – this has undergone major revision in both the Summary Table and the 5.2 Key Assumptions.
  • 7.3 Risk: Low membership take-up has been adjusted to reflect the reduction in projected costs between version 1 and 2 of the Business Plan

The Financial Summary Table

 

To finish up it is worth taking a quick look at differences between the Summary Financial Tables in the Financial Plan (which is very similar to the original table in BPv1) and Version Two of the Business Plan (I’ve reproduced these below).

The Blipofuture Financial Plan Summary Financial Table
The Blipofuture Financial Plan Summary Financial Table
The Blipfuture Revised Business Plan Summary Financial Table
The Blipfuture Revised Business Plan Summary Financial Table

 

This gives a good sense of the scale of the revision of the Blipfuture running costs and the projected future revenue stream from Blipfoto memberships.

 

User Revenue Stream (see heading ‘Sales Revenue’)

 

In the Financial Plan Sales Revenue from membership fees is projected to rise steadily from a low figure of £57,000 (due to setting up and collecting subscriptions) in Year 1 to £110,000 in Year 2 and £131,000 in Year 5.

 

In BPv2 this Sales Revenue line has been massively revised downward. Year 1 projects £25,000 rising to £47,000 in Year 2 and staying steady from there to Year 5.

 

Operating Costs (see heading ‘Overheads’)

 

Given this major revision of the projected revenue that underlies Blipfuture’s sustainability the operating costs of the company have also been revised sharply downwards. In the Financial Plan summary table Overheads in Year 1 (which include all the start-up costs) are £148,000 and fall in Years 2-5 to around £100,000.

 

In BPv2 Overheads in Year 1 are £96,000 and grow slightly from Year 2 to 5 from £39,000 to £44,000. This is an annual reduction on the FP Overhead projections of about £60,000 or 60%).

 

This is largely accounted for by not having a paid member of staff, no office, cheaper hosting costs than previously expected and getting rid of the maintenance costs for the Android and iPhone apps.

 

The drastic reduction in projected revenues and operating costs is represented in the diagram below. The blue columns are the projected figures from the Financial Plan (Dec 16th, 2015) and the red columns are from (BPv2).

 

 

Indicative Membership Fees

 

As BPv2 makes clear the Directors have looked at a number of different models of membership charging but have rightly left a discussion of this and a decision to a later date so that the community can make its different views and preferences known.

 

But as an indication if we take the Sales Revenue figure for Years 2 to 5 in BPv2 of £47,000 we can get a sense of possible annual fee levels in the plan.

 

So, for example, dividing £47,000 by the current number of pledgers (say 1,250) would give an annual membership charge (assuming all were paying) of £37.60 per annum.

 

There are likely to be more paying members than this from initial indications received at Blipfuture HQ. So for 1,500 members the annual fee would reduce to £31.30 and for 2,000 to £23.50.

 

Obviously, a debate needs to be had about membership charges , exemptions, introductory periods and the collection of fees but these figures give, what seem to me, good grounds for being optimistic about Blipfuture’s financial sustainability.

 

Conclusion

 

Given past problems with user figures failing to live up to forecasts and the subsequent liquidation this level of prudence seems entirely wise at this stage.

 

Better to project a relatively barebone and realistic operation than to aim at stars and galaxies that we may never reach. If membership fee revenue is greater than forecast so much the better. This could either be used to fund lower fees in future of take on developments not currently in the Business Plan.

 

And the great thing about a business plan is that it is a living document and a framework against which to measure the impact of change in the future.

 

It seems to me that getting Blipfoto onto a stable and sustainable footing must be the key priority. This will take a while. I think it will also take a while to work out the limits and freedoms of being a community-owned company where the community, volunteers and Directors can begin to shape the future of Blipfoto.

 

Lastly, you might wonder what the point is of investing in or donating to Blipfuture now that the minimum crowdfunding target has been reached and surpassed.

 

Well, for a start it gives people a stake in the company. Not because of any expected monetary return but because it gives a sense and right of ownership. (Quite how we balance out the voting rights of shareholders and the consultation of donors remains to be worked out.)

 

And for a finish, every new pound invested in Blipfuture above and beyond the £120,000 minimum will help to finance possible developments that have been mooted by members of Blipfoto.

 

The future is bright, the future is Blipfuturefoto.

 

0 Comments

Here's hoping.

The old breakwater, St Margaret's Bay, 12th January 2016.
The old breakwater, St Margaret's Bay, 12th January 2016.

The funding total now stands close to £125,000. This is made up of £123,351 in pledges and around £1,500 in donations via PayPal. This is a fantastic sum.

 

Today talks begin with the owners of Blipfoto. As the latest Blipfuture post made clear (see Tidying Up) this could take some time.

 

I suggest we keep our comments positive at this point and give the Blipfuture Directors some clear ground and our full support.

 

I went down to the Bay this morning and it's true: the coldest part of the night is the hour before dawn. It was perishing. But the sun came up and the tide turned.

 

Here's hoping. (And I did put in another pledge just to nudge that total along).

Blipfoto: the coldest part of night's the hour before dawn

The Dawn of Frank, 30th December 2015. The coldest hour. Blipfuture. Blipfoto.
The Dawn of Frank, 30th December 2015. The coldest hour.

New from HQ

 

The latest Blip Central post from the Blipfuture team is a useful summary of what we are, where we are at, and the stakes we are now playing for.

 

Just to quickly reiterate: (NB I use 'we' in the broadest sense here. I'm not part of the company nor party to its discussions.)

 

Who we are: We are Blipfuture, a community interest company, attempting to buy the assets of Blipfoto and create a sustainable, self-funding Blipfoto.

 

Where we are: the minimum target for the funding campaign – through crowdfunding investment and donation pledges – is £180,000. The pledged funding total currently stands at a magnificent £100,000 (00.20 7Jan 2016).

 

On 5th Jan 936 people  had pledged money to the campaign, an average per head commitment of around £100. That number must be getting very close to ONE THOUSAND.

 

It may seem that there is a long way to go but the funding keeps ticking up (£6,000 on 6th Jan) AND the number of people pledging also keeps rising.

 

This is a campaign that has had to learn as it has gone along and has faced all sorts of issues – targeting communications, payments hassles, the split between investors and donors and confusion over deadlines. It is not a ‘normal’ funding campaign and mid-stage momentum is really encouraging.

 

The fact that pledger numbers continue to rise is critical: the future sustainability of the company will depend on committed members and this pledger number is a good indication of commitment. It could also be critical in negotiation with the current owners of Blipfoto.

 

What are the stakes: there will be an absolutely crunch meeting and negotiation on or around the 11th January 2016 review date set by the current owners of Blipfoto. This will determine whether detailed negotiations for the sale of Blipfoto go ahead or if Blipfoto closes.

 

Going forward depends on the Blipfoto Directors being confident they can make the company work. And that and the current owners of Blipfoto are confident that the new company will be sutainable to protect their 'upside interests' (see below).

 

Every penny and every new pledge and new pledger is absolutely critical to the success of this meeting.

 

 

In a nutshell

 

So that’s the situation in a nutshell. Time is very, very short. The clock is ticking faster every day to 11th January.

 

 

The Reluctant Leavers

In the rest of this blog I address some issues head on that may be stopping some Blippers from investing.

 

One surprising and new fact in the latest Blipfuture post is the disparity between those registering on the crowdfunding site (1,600) and those who have pledged (932). Some of this number will be made up of curious non-Blippers but let’s assume that most are members or ex-members of Blipfoto.

 

I’ve seen a lot of ‘reluctant leaver’ comments in journals, on the Blipfoto Friends Facebook page (1,430 members) and in comments on my blogs. A composite of those comments might go a bit like this,

 

‘I would pledge but I’ve had it with Blipfoto. I was burned once for life memberships/books. I can’t stand the Polaroid connection. And I’ve feel I’ve been lied to and/or deceived. The ‘old community’ is gone and I don’t like the new website. And why and what are we paying the new owners? Who’s pockets are being lined, who’s palms greased? Much as I love the old girl/fella it’s best to let it die. I’ll find somewhere else (I think). RIP Blip, you poor old thing.’

 

I’m not surprised there is still a lot of distrust and hurt and resentment in the Blipfoto community. But I find it strange, ironic even, that people are deciding to leave Blipfoto when there is a real possibility to address and change the very issues that are propelling them to leave. So I thought I’d try (given that I am not party to any more data than anyone else outside the new company) to address them briefly here.

 

 

1) The money lost

 

Legally people who lost money lost it to another entity than the current Blipfoto. They lost it to a company called ‘Blipfoto Ltd’ that went into liquidation and has ceased to exist. The Blipfuture line has been: not our business. Talk to the official liquidator.

 

That is kind of understandable. But doesn’t address the anger at the loss and the fear of chucking good money after bad. Some people have suggested some kind of restitution from Blipfuture but that raises issues of equity: why should I in some measure pay for your past losses? Particularly when the funding situation is looking pretty tight.

 

And would early life member investors really want a special ‘early investor’ badge? Maybe. After all, the life member subs were critical to getting Blipfoto over one of its earlier funding chokepoints.

 

I guess it’s a question of how much of the old the new outfit and community takes forward. It’s not easy.

 

 

2) Lies and deception?

 

I’ve dug around more than most in the smouldering wreckage of Blipfoto Ltd and I have come across no lies. But I do think messages got very mixed as the company shifted from a small scale and local/global platform to an investor-driven company going for global, and particularly US, expansion.

 

I can understand why people felt and feel betrayed. What had started out as a neighbourhood, shared enthusiasm was transformed into a huge ambition. When that ambition floundered – the failure to secure sufficient new users in Jan-March 2015 - the investors pulled the plug and the £1m new investment failed to materialise. And that was that. And it was pretty brutal for all concerned.

 

And since the new owners picked up the Blipfoto assets in April 2015 the communication has been woeful. Almost non-existent. And justified resentment feeds on a vacuum. An apology and explanation would have been really helped.

 

 

3) Polaroid

 

Ah Polaroid. It’s clear that the Polaroid licensing agreement (widely seen and still often seen as a ‘take-over’) caused a lot of anger. People did feel betrayed. There seems to have been little consultation – which exposed the fragility of claims that the ‘community’ was sacrosanct – and there was little market testing amongst existing Blipfoto members. When the new platform was launched some people (how many we don’t know) voted with their feet and the Blipfoto airwaves were filled with rancor (not a good way to secure new members).

 

Since the new owners bought up the Blipfoto assets in March 2015 the Polaroid branding has remained exactly in place. This is maybe not surprising as the two current owners were or are key executives in the two companies that originally bought and continue, in part, to own the remains of the once mighty Polaroid Inc. And they were very much instrumental in turning Polaroid into a licensing platform that monetized the Polaroid brand and distinctive logos.

 

But this dance with Polaroid (if you want detail it’s here) will come to an absolute end if the buyout is successful. There will be no licensing agreement and the branding will be removed from the Blipfoto site.

 

Some could ask if it might not be better to rename Blipfoto after acquisition (there’d be months of fun here) because the name has become so associated with Polaroid, a difficult history and a mass of dark emotions.

 

 

4) The deal with the current owners: the cash

 

The proposed acquisition of the Blipfoto assets from the current owners is cast as a mix of cash, non-voting shares and possible long-term payments.

 

The overall ‘price’ will not be more than the current owners paid for Blipfoto in March 2015 plus for running costs in the interim.

 

As far as I can see the cash element is unlikely to be over £60,000 and probably slightly less.

 

It's worth remembering that the Blipfuture documents talk about a 'very significant' part of the £180,000 fundraisiing target being for the running of Blipfoto - start-up costs, the working capital and cash buffer to run the company over the first year (the projected 'loss' for Year 1 and 2 before drawing on the £180k is £105k and the cash buffer is £23k which makes £128k. Leaving only £58k for a cash payment) (see Blipfuture CIC - Financial Projections).

 

I may be wrong on this but that's what the figures seem to show. It’s well worth taking a look at Blipper David Donnan’s thoughts on purchase versus starting afresh here. He's thought about it a lot.

 

To reiterate: most (say £122,000) of the minimum funding target of £180,000  is to cover the Blipfuture start-up and Year 1 running costs while providing a cash buffer to stop the company becoming insolvent.

 

 

5) The deal with the current owners: the shares and possible payments

 

But what about the shareholding to go to the new owners? In an ideal world there would be a clean break but that’s not the world we are operating in.

 

It is possible to argue that the share deal is a sign of the current owner’s

 

a) flexibility (they are willing to payments other than  cash) and;

 

 b) it affords them some protection if Blipfoto went into galactic overdrive and made a ton of money (most unlikely).

 

It’s called ‘upside protection’. It’s a bit like if you sell something to a friend at what you think is below market value and you have some kind of agreement that if the friend sells the thing for a profit she/he will share it with you.

 

Except, a Community Interest Company makes it very hard to sell or transfer shares and even if a profit is made any distribution to shareholders has to be agreed by an AGM and is limited by the regulator to 30% of the total profit.

 

The same goes for those ‘long-term’ payments. They are dependent on making a profit and then having a voting shareholder agreement to distribute part of it rather than reinvest it.

 

Both these outcomes seem highly unlikely for the foreseeable future.

 

 

6) The old community

 

Communities change. It’s a fact of life. People change. They come and go. But Blipfoto did suffer a particularly stark rupture. First, with the Polaroid licensing relaunch and then the liquidation. A lot of people left (from 6,300 blipping at least once a month in Dec 2014 to 3,698 in November 2015).

 

To repeat. A lot of people - 2,600 - left. All of a sudden. And in dribs and drabs. And you can still feel the very palpable reverberations of that rupture.

 

It’s like 40% of a small town suddenly ceasing to exist.

 

And Blipfoto is like a small town in that the empty houses of the town where once people lived are echoed in the still visible but mute journals of the departed. The silence rings out. Particularly for those who are left and knew them.

 

 

7) The website

 

As for the website and the community and all the other stuff going forward – the grey background, the challenges, the forums, the competitions etc. This is all up for grabs. It will all be ‘in play’ and for the future Blipfuture outfit and community to define and redefine.

 

 

The Coldest Part of the Night

 

It’s true that the coldest part of the night is in the hour before dawn (or more precisely just before and after dawn – something to do with long-wave radiation).

 

I get why a lot of Blippers and ex-Blippers are feeling cold. And bloody cold. There is a lot of stuff bottled up. And there has been nowhere to say it and be witnessed for saying it. To be heard.

 

But on the other hand, you wouldn’t want to cut your nose off just to spite your face, would you?

 

Not now when, improbable though it seems, we the community (in all its different and difficult facets) have the chance to recreate Blipfoto in a way that both harks back to its more intimate past and opens new and exciting future possibilities.

 

There feels to be something particularly bitter in leaving now. Be sure before you go. For it is hard to return when you part in sadness with thorns in your heart.

 

£10 quid gives you a stake in the game. A way back in. And a part in an uncertain but beguiling future.

 

https://blipfuture.sharein.com/invest

Blipfoto: quarter to midnight

blipfoto sale blipfuture buyout
Thinking out loud. Something like this posted by everyone one day this week to make sure the message is getting across?

Posted on Jan 3: Additions in this colour font.

I thought I’d just give a quick reaction to the #pledgeblipfoto initiative and the state of the fundraising campaign as we near the crunch meeting with the owners of Blipfoto on or near 11th January 2016.

 

The Pledge Total

On the plus side the pledge-ometer continues to chug upwards – with a £14k increase in the last couple of days. The total now (09.56) stands at £85,623 (I just put in my third pledge).

 

The link to the pledge figure and the blue slider scale above (not very obvious – to me at least) is here.

 

Numbers taking part

 

This morning the #pledgeblipfoto tag reveals 39 pages of 18 blips a page. A total of 702. There are a few multiple entries here and I’m sure some (like me) forgot to put the tag on (I have now). (If you search by  ‘Blipfoto pledge’ you get 50 pages but this includes many non-challenge blips).

 

Just less than 20% of the 3,698 blippers who posted at least one blip in November 2015 responded to the challenge and/or put the #pledgeblipfoto tag on their 1st Jan blips.

 

This is a great response (702 posts) but also a troubling one (20% of Blippers) given the crisis Blipfoto faces.

 

The Crunch Meeting on or near 11 January 2015

 

On or near 11 January 2016 Blipfuture will meet with the owners of Blipfoto. This is how this meeting will proceed (see Blipcentral post 24 Dec 2015),

 

‘If we are all confident that the crowdfunding will succeed we will start detailed negotiations [on the purchase of the Blipfoto assets]. If the existing owners are not confident of success at that time we are likely to lose this opportunity, and Blipfoto will close.’

 

To summarise, Blipfoto is likely to close after this meeting if

 

a) the Blipfuture directors are not confident that the crowdfunding will succeed (minimum target £180,000); and/or

b) the current owners of Blipfoto are ‘not confident of the success’ of the crowdfunding.

 

The stakes could not be higher.

 

Funding and Numbers

 

As of today( 3rd Jan 2015) at 09.56 the pledged donation/investment total stands at £85,623.39.

 

That is 47.6% of the minimum total Blipfoto needs to survive of £180,000.

 

The last Blipfuture update on the funding campaign (24Dec) showed that £59,431 had been pledged by 614 people at an average of £97 a head. Extrapolating from that per/head figure would give a total investor/donor number of 882 for the current total of £85,623.

 

(I suspect the per head figure may be higher, and the number of pledgers lower given the amount of double and triple pledging that is probably going on).

 

The Crowdfunding Campaign

 

The campaign has now been running for a month (it was announced on 4th Dec 2015).

 

It has been a difficult campaign to run – ideally you build up expectation before you put up the pledge box but Blipfuture did not control the timeframe for the community buyout. We have gone from a standing start, there was a steep learning curve and it is an odd situation where you are reliant on someone else to use their data and systems to make contact with potential investors/donors.

 

The investor/donor split and the time it took to allow non-EU/EEA/CH donations put a kink in the momentum of the campaign. And confusion over deadlines (1st March or the imminent meeting of 11 January) have probably not helped. But that is all water under the bridge and largely a result of a situation not of our making.

 

A month in, with just less than half the total of £180,000 pledged.

 

So what to do?

 

The #pledgeblipfoto challenge
The #pledgeblipfoto challenge

 

Is there more juice in the bottle?

I am still surprised how small the core community of Blipfoto appears to be. It doesn’t necessarily equate to the numbers of blippers doing the New Year challenge nor to the number of pledges. And it’s vital to remember that there are those who are not in a position to pledge.

 

But even so, it looks like the core community of regular blippers who are committed enough to pledge financially or pledge their support and determination to do what they can is less than one thousand.

 

That more than big enough for me but it has implications for fundraising and possibly future membership numbers and charges.

 

I do wonder that so many people posting New Year blips seemed unaware of the #pledgeblipfoto challenge or the imminent peril faced by Blipfoto. And some of those unaware Blippers were solid day-by-day blippers (a very rough guess would be 15% of those blipping). Others were more sporadic and some were blipping for the first time in months.

 

I know some blippers are very unkeen to be approached directly on these issues and there has been some concern at the enthusiasm of other blippers to do this by posting on their journals.

 

But surely we need to reach out (sensitively) to other blippers and at least make sure they are aware of what is going on? And if that ruffles a few feathers so be it?

 

It does occur to me that winning each and every investor and donor is important not only for their financial contribution they make but also because this shows a commitment that hopefully will follow through into a paid-up membership in the new Blipfoto.

 

As such, each new contributor to the crowdfunding campaign is vitally important as a future indication of the revenue stream and financial sustainability of the company. Big, medium and small investments are all really important as are the actual number of investors. It's critical to bear this in mind.

 

When the Blipfuture Directors sit down with the current owners of the company they will not only be looking at the 'money on the table' but also at forecasts regarding the future sustainability of the company. After all, what's the point of having a block of non-voting shares in a company if it is going to fold in six months to a year. So every new contributor (as well as every contribution) really, really counts.

 

There is a real issue here about 20 per cent of the community carrying the other 80 per cent.   I know it is ugly to say it. But there it is. I personally am very happy to pledge where others can’t. I’m less so where others won’t. But I'll go ahead anyway.

 

And I don’t know if ‘won’t’ or ‘can’t’ or the difficulty of key messages reaching the broader community is the issue here. But at the very least can we not get another email out in the next three days that spells out the situation? And make the banner across the top of the Blipfoto page more informative and  forceful?

 

Otherwise, we are going out of business unless current pledgers more than double the amount they have already pledged.

 

Yesterday's blip with the funding bar attached.
Yesterday's blip with the funding bar attached.

Is there a wider community?

The Blipfuture Financial Projections (‘Financial’ PDF at the bottom of this page if you are registered) shows a wider community of unique visitors to the website of nearly 120,000 a month. It is a shame that the banner is not visible to them and that there is not an easy way to donate small amounts (particularly for those inside the EU). There is a problem here because Blipfuture is not a registered charity and does not have charitable objectives. This excludes us from using myriad easy-to-use donation portals.

 

Presumably a lot of these visitors are friends and family of Blippers who drop by to look at their journals. Is there any way we can reach out to them? Even a one per cent response at £10 each would be another £12,000?

 

 

Are there commercial partners or sponsors?

I think that we need to consider all options at this point even though the timescales are now very short. Mention was made in the original business plan about the possibility of commercial partners investing in Blipfoto? I wonder if there is any news to report on this front?

 

The  owners will give it up for free?

 

There is a view that the Blipfoto owners might simply take what money is offered them. I don't think this will happen and even so the payment for the assets is a mix of cash (less than £60,000 I reckon), shares in Blipfuture and long-term payments.

 

It's worth remembering that the Blipfuture documents talk about a 'very significant' part of the £180k being for the running of Blipfoto - start-up costs, the working capital and cash buffer to run the company over the first year (the projected 'loss' for Year 1 and 2 before drawing on the £180k is £105k and the cash buffer is £23k which makes £128k. Leaving only £58 for a cash payment). (see Blipfuture CIC - Financial Projections).

The fact of the matter is that as the crowdfunding stands (£89, 563 at 12.17 4 Jan) there is not enough funding to keep the projected Blipfuture afloat for the first year, let alone the cash element of the payment to the owners.

 

Given the tightness of the timescales it seems to me the options are limited:

 

a) Redouble efforts from the centre (emails, banners, posts) to ensure all Blippers know what is going on. Every new contribution and every new investor is important.

 

One day this week everyone to blip a blank screen or "For Sale' sign with a huge banner or blank screens or something else?  (added 4th Jan with thanks to MadchickenWoman and David Stebbing)

 

b) Individual blippers to keep the crisis firmly in their posts and photos with links to info and pledge page.

 

c) Pledgers who can to up their pledges (remember nothing goes out of your account until and if we reach the minimum £180,000 target)

 

d) Maybe we should do a challenge a couple of days before the crunch meeting where we 'reach out' to the owners of Blipfoto. Ideas please.

 

Who knows how the meeting on or near 11 Jan with the owners will go. Who knows what assessment the Blipfuture directors will make before the meeting of the crowdfunding campaign’s potential to reach the minimum target of £180,000. And who knows what assessment the owners of Blipfoto will make.

 

Last year 1,104 community interest companies were dissolved (of over 10,000). This was largely because they could not access funding (p.25 of this report).

 

Let’s do everything possible after the huge amount of work undertaken and the funding pledged to make sure this is not the fate of Blipfuture CIC.

 

Please comment your ideas for saving Blipfoto below. I'd appreciate it you left your Blipfoto name.

 

For previous blogs go here. For a brief summary of the Blipfuture proposition that some have found useful see this one in particular.  Thanks to all blippers who've read and commented on previous blogs. Particular thanks to AkkuV for our discussions of statistics and Blipfoto users.

27 Comments

Blipfuture: For Christmas only unless we stump up.

Para Added 20 Dec: thank you for comments and 429 visits yesterday. As a number of people pointed out the Christmas spending period is a big factor in our bank balances. Pledges are not the same as money being drawn from accounts. You will be informed before any money leaves your account and can cancel your pledge at that time. Far from spreading doom and gloom my purpose in this blog was to try to galvanise support for the buyout.

-------------------------------

I wanted to put up another blog but my time is very limited. So here are some comments on the recent figures released on the crowdfunding campaign so far, Blipfoto users and the wider community. This blog is not as polished (!) or thought through (!) as some of my efforts. But it felt important to write something. My thanks to fellow Blipper akkuv for his input and insights.

 

I've reverted to the old comment system.

 

Where are we up to with the Blipfuture campaign?

 

As of the morning of 18th December 2014 the investment pledged for the community buyout and startup of Blipfuture was £43,615. The target of the campaign is a minimum of £180,000. Without reaching that total Blipfuture will not go forward and chances are that will be the end of Blipfoto.

 

The funding raised is up £8,170 on the pledges announced by the Blipfuture team on 9th December.

So in the first phase of the campaign (4th Dec to 9 Dec) £35,445 was pledged. In the second longer phase (10th Dec to 18th) much, much less was raised (£8,170). (These ‘phases’ are ones I’ve defined arbitrarily).

 

The pledging figures released on 9th Dec showed that the total sum raised had been done through 296 pledges averaging £119.75. Using that average pledge figure on the pledges since 9th Dec (til 18th Dec) would give another 68 pledges and a total of 364 pledges since 4th December.

 

I am surprised at these figures.

 

The total raised so far (£43,615) is about 24% of the total needed. And ‘only’ 364 people (give or take for double pledges from individuals) have pledged.

 

Given the apparent and much lauded strength of the Blipfoto community this low total of pledgers is really puzzling.

I know (see previous blogs) that there are issues with non-EU Blippers in terms of them not being yet able to make donations and not being able to buy shares. But even taking this into account I find it amazing that only approximately 364 people have felt inclined or able to make a pledge.

 

Blipfoto User Numbers

 

For the first time we have some hard, if imprecise data. The revised Financial Plan published on 16 Dec on the Blipfuture investment page gives the following figures

 

Date                      Member:              Members:

Logins                  At least one blip

 

Nov 2014             6,424

Dec 2014                                           6,300

Jan 2015                                            7,337

Nov 2015             6,400                    3,698

 

At the end of 2014 there appear to have been 6,400 users logging in (November) and 6,300 users who blipped at least once in December 2014. The number posting blips rose in Jan 2015 – after the Polaroid branded relaunch – to 7,337 (although the footnote that gives this figure ends in a mysterious ‘but’).

 

Although this figure rose it clearly did not rise fast enough and Blip went into voluntary liquidation in March 2015.

By November 2015 the number of users posting at least one blip in that month (3,698) had fallen by a staggering 41.3% (2,602 members) on the number blipping one year earlier before the Polaroid branded relaunch.

 

As Akkuv (a Blipper and statistician) has calculated, many of this number of 3,698 do not blip every day. He estimates this is more likely closer to 1,500.  ‘He says, ‘My guess still is that there will be about 1,000, maximum ,1500, who will invest’.  

 

This is a pretty calamitous fall in Blip user numbers in terms of the core community of people actually Blipping. Unfortunately we don’t know when the greatest fall took place but it would probably be fair to surmise that it happened when the liquidation of Blipfoto was announced. Since then there has been scant communication from the new owners and little or nothing in the way of marketing or incentives – with the exception of the ‘Extra photo’ feature in April 2015 - put in place to tempt old Blippers back.

 

It is also interesting to compare the logins versus people posting Blips. In Nov/Dec 2014 these figures more or less matched – a login seems to have meant a Blip in effect. But by November 2015 although the login figure had held up at over 6,400 many fewer (41.3%) people were Blipping (3,698).

 

Without more detail it is guess work but my hunch is that a lot of old Blippers still login to comment on photos and journals posted on Blipfoto even though they are not posting. (After all you don’t need to log in to view Blip or Blip Central journals and Blipfoto quickly unlogs users  – in less than half an hour in my experience).

 

The figures above suggest that there is a core community of Blippers of below 3,698 as this figure will include occasional blippers and new members trying out the site’s offer. I suggested in a previous blog a figure of 2,500 before I revised this upwards using ‘view’ data on Blip Central posts. But I suspect the core community fluctuates somewhere around this figure. AkkuV above reckons there is a core of 1000-1,500 max who will feel committed enough to invest.

 

So to recap the number of people posting on Blipfoto appears to have fallen dramatically in the last year by 41.3% to 3,698. The number currently  blipping on a daily basis is probably somewhere between 1,000 and 1,500.

 

New Users and the Wider Community

 

Blipfoto continues to attract new users – (487 signed up in November 2015) but only 37.6% went on to post a blip in that month.

 

There is an important wider Blipfoto community of people who do not have accounts but who view the site. In November 2015 116,349 unique users visited the Blipfoto site. We don’t know for how long or how regularly but that seems like a fair flow of website traffic. If we ignore the members visiting the site who are part of this number that would equate to 31.5 unique visitors per Blipping member in November 2015.

 

So when people have rightly said that the number of Blippers probably is too low to appeal to advertisers – even specialist photographic ones – there may be a bigger traffic flow that could appeal to advertisers.

 

Where did the Blip community leavers go?

 

We know little about this. There was a rush to join Project 365 but a rough count on the ‘Blipfoto refugees’ page of the site shows in the region of 380 Blipfoto members who opened accounts – either in parallel or as a replacement to their Blipfoto account. That’s not to say that more blippers didn’t open Project 365 accounts. If they did they just did not announce themselves on the ‘refugees’ page.

 

Having said all this, the thing that really puzzles me at this stage of the campaign is the low number of members of the Blipfoto community who have pledged as future investors in the company (by my reckoning less than 400).

 

Why aren’t you investing?

 

We can guess at some of the reasons for this low number through comments on the Facebook and Blipcentral pages: 

  • People who paid for services not received – books, life memberships – under the previous company, Blipfoto Ltd;
  • People who think they are throwing good money after bad or who think the community buyout is doomed;
  •  People who would invest but can only donate (ie those outside the EU/EEA/CH);
  •  People who cannot yet donate (ie those outside the EU/EEA/CH);
  • People who simply do not have the funds to invest or who are worried that if they invest they will not be able to afford the membership fee;
  •  People who will not invest until they see more convincing projections of future business (see the revised figures on the Blipfuture home page in Financial Projections);
  •  People who are unsure of the involvement of the founders of Blipfoto in the new venture and who have developed a distrust or dislike for them;
  • People who will only invest when membership fees are decided;
  • People who hated the link with Polaroid and are unsure if these ties have been severed;
  • People who like Blipfoto but are just not that fussed one way or the other;
  • People who are facing the financial demands of Christmas and simply see no way to finance Blipfuture at the same time;
  •  People who think they see cheaper and sustainable alternatives to Blipfuture;
  • People who think that if we wait the owners will lower the asset price;
  • People who think we can just 'start again' and somehow not lose the community and archive in the process;
  • People who think, 'I told you all along it would fail and it has. That's why I didn't invest in it's future in the first place.'

 

Momentum is key

 

The trouble is that those who are waiting or hesitating add to the loss of momentum in the campaign. And the more the campaign losses momentum the more hesitant will be many people to make a commitment to it. It becomes a self-fulfilling prophecy. If pledges dry up or slow down with the total at less than a quarter of the target it is hard to see how momentum can be gained again.

 

If we as a community cannot generate some momentum come the New Year I suspect that we as a community are doomed.

 

As AkkuV above says, and I am paraphrasing, ‘Paying for Blipfoto as investors and users is pretty cheap as hobbies go. The sums involved are often dwarfed by the amounts people pay for their photographic kit.’

 

 

Alternative provision and sustainability?

 

For those who have already left Blipfoto or are looking at alternatives I’d say this: is the alternative you are looking at any more secure in the medium to long-term future than Blipfuture? Do you know what business plan they operate and do you know if they are sustainable? Do you turn the criticism you level at Blipfuture (or have levelled at Blipfoto in the past) on your current or preferred future provider?

 

I don’t know the detail of the Project 365 finances but it seems to be a one-man operation without a formal community involvement structure. The Project 365 FAQs page states quite openly that the site,

 

‘is lovingly made by Ross Scrivener … He makes this site as a part-time hobby whilst working on web development projects for clients’.

 

I'm not saying he will, but what if Ross falls out of love with Project 365? Or his work commitments prevent him pursuing his hobby?

 

Another site, Kujaja, that was discussed on the Friends of Blipfoto FB page (1,400+ members) says in its Basics,

 

‘To date we have been absorbing all of the running costs. The costs are continuously rising as the site grows bigger and bigger so we are always very grateful to receive a donation.’

 

It seems to me that we either pay up and work out how to ensure a high level of community involvement and ownership in Blipfuture or we go somewhere else and sooner or later stumble across the same old problems of sustainability and accountability. Blipfuture is about building a long-term future of stability and real ownership.

 

Yes, there if Flickr and Twitter and Facebook and all sorts of photography sites. But do they do what Blipfoto does? And do you have any say whatsoever in how they do what they do?

 

Another point to bear in mind: Blipfoto has had significant investment over the years – both private and public. The current platform works exceptionally well – I’m aware of one outage over my 365 blips and I’m amazed at the upload speeds at peak periods.

 

I have no experience of other platforms but if Blipfoto goes it will go for good. And that is without talking about its community.

 

So I say:

 

If you can, invest or donate now. Don’t wait.

 

A community owned social media platform is not just for Christmas. But it will be if we don’t stump up.

 

And while it may not literally save your life how lessened would our lives be without this fantastic beast that links us from Iceland to Oman and the four corners of the earth?

 

17 Comments

Blipfuture: Communications and Community

The recent (6th December) Blipfuture message delivered through through Blip Central (not an easy arrangement) was a great improvement on the first (4th December).

 

In my experience, user and community-owned initiatives can rarely have too much information. It's vital that people who have pledged, might pledge, are waiting to pledge and those not in position to pledge are kept informed and involved. Anticipating and monitoring information flows and user feedback is vital to keep people on board, to maintain unity and to build a sense of ownership. This is particularly the case when Blipfoto members have been left in the dark for nearly nine months and when promises made by the previous company of involvement and information have been broken.

 

My sense is that the disquiet and doubts that are expressed by the community and the thirst for information and involvement that is clearly 'out there' is not to be dismissed as some phenomenological 'froth' (or worse 'malcontentedness') that will disappear with the passing of days.

 

And it is important to remember that others will be looking on who may have left Blipfoto or who are thinking of joining the new venture. Their access to clean, updated and 'unfuzzy' information is important.

 

After all, the most important way of marketing Blipfuture’s offer and growing future member numbers may be by peer-to-peer (word-of-mouth) communication and recommendation (rather than by expensive advertising campaigns or general media exposure) and the profile the social media platform has in a relatively restricted market of photo-journaling offers.

 

The prospectus for the crowdfunding Blipfuture CIC – the pitch to investors (and donors) – sometimes feels as if it has been written in a sort of standard start-up language with little concession to the specifics of the Blipfoto community. Yes, mention is made of the community and consultation and the role of shareholders. But the financial table at the end baffles me and I suspect baffles many. (There is a very lively debate on the Blipfoto Friends Facebook page and in responses to Blip Central 6 December about the figures and user numbers).

 

No-one likes to be made to feel stupid or likes to feel they are being talked over or around. It can raise the suspicion that there is an inner core community – a group of mates even – who can understand this talk and who are its real audience. I don’t think this is the case (although the Blipfoto community is a community of many different communities over both space – 150 countries - and time – from the 8 year journals to the new members) but these impressions need to be guarded against.

 

The new Blipfuture adventure, which I think we have to assume will be successful, is a new phase in the development of the old Blipfoto community. In particular the rhetoric of community consultation and engagement now has to become a reality. It is literally written into the rules of the company as a Community Investment Company.

 

But how that consultation, engagement and control (through membership, shareholding and the unresolved issue of donors) happens is all to be played for. I don’t think we have the luxury of waiting for this to happen until the funding is secured and the Blipfoto assets are bought.

 

The new journey started back in October of this year and was made official by the public launch of Blipfuture this Friday last (4th December). Great strides have already been made: a company formed, Directors in place, negotiations with Blipfoto for the asset purchase at an advanced stage and a fundraising campaign underway.

 

No-one should underestimate the cost of the effort to get this far. But the process itself also begins to set the parameters for a new conversation and, if you like, the settlement (or a series of settlements) between ‘the company’ and ‘the community’. At the same time, we are not starting with a clean slate and a legacy of past troubles, hurts, financial losses and broken promises could all too easily be freighted onto the shoulders of the new company.

 

So maybe now is the time to begin  to set the tone of the new enterprise and to create a culture of member engagement that was paid lip service to but neglected in the past. This may seem unfair to the Directors who are doing so much with so little under their own heroic voluntary efforts but I suspect that if the new company does not keep up and even stay in front of its investor/donor and membership base it will be forever struggling to catch up in the future.

 

As a minimum it would be useful if the Directors could state how often and through what means they will be communicating. It would also be useful to know the broad outlines of what they will be communicating. What they can and cannot comment on.


Some things will be off limits. Outline what can’t be said and why this is the case (e.g. details of the current Blipfoto setup like member numbers, the cost of the deal, the cash to share to long-term payments mix). Let us know what will be revealed when the money is raised and the deal is done.

 

Others issues should be easier to communicate: the progress of the crowd funding appeal and the sorting out of ongoing issues like donations payments, clearing up misapprehensions and repeating and developing core messages. And building or protecting a sense of united community rather than letting fissures open up between some stereotype of 'positive' and 'negative' members (something we should perhaps all bear in mind).

 

This is a new initiative and to some extent a process of community re-building needs to take place. But let’s not build it on the tired rhetoric of a company that had different – often conflicting - objectives and that ultimately failed.

There are a lot of pissed off people out there as well as the unabashedly positive. It’s really important to bring along as many as possible. Acknowledge their hurt and suspicion. They were left in the dark for a long time and people felt and were unheard.

 

New members are going to be critical to mission success. Even now what is said and how it is said will help determine how people outside the community perceive the community and the possibilities for the future – particularly those ex-members who might return.

 

I do think Blipfoto has created something unique that no other photo-journaling site or photography social media platform replicates. That mix of words and single images, that commitment to a daily blip (for better or - at least in my case - sometimes worse) and a particular spirit of community, reciprocity and even courtesy marks it out in a crowded marketplace.  And the bold Blipfuture proposal  to take the platform into community ownership and put it on a realistic and achievable road to long-term financial sustainability only adds to its uniqueness.

 

And the community, in all its different aspects and in its old treasured and hopefully new guises will be critical to making it work. Getting the communications right it not an option for later.

 

Blipfuture: clarifications and contentious points

When does the money get taken from my account?

 

Just a note on the difference between pledges and payments given that we are so close to Christmas. As I understand if you make a donation or pledge to buy shares in Blipfuture no money will be debited from your account until the target of £180,000 is reached (see the Blipfuture FAQs).

 

At that point all investors/donors will be informed that the deal (ie the purchase of the Blipfoto assets) is going ahead. You can cancel your payment at this point if you have changed your mind. Clearly, no-one can tell when that point might be reached.

 

But to reiterate at this point people are being asked to pledge money and not actually pay it. That comes later. Once the £180,000 target is reached any further pledged funds will probably be withdrawn at the end of the fundraising campaign - 1st March 2016.

 

No one 'chose' to launch this so close to Christmas. It's just where things are at. There is not a little pressure to conclude a deal with the owners of the Blipfoto assets.

 

Donations from outside the EU/EEA/Switzerland

 

Some people have been trying to donate from the US. This appears to not be possible at the moment.

 There are some technical and regulatory issues that are being worked through. Hopefully they'll be sorted by next week.

 

Can I still be a member of Blip without investing/donating to Blipfuture CIC.

 

Yes. Being a shareholder or donor does not confer membership of the Blipfuture online site. This will be through a membership subscription that is open to all. Details of subscription rates are not yet known. There is a scale of discounts on membership fees for larger investor/donors to Blipfuture CIC.

 

Is it possible to pay with Pay Pal?

 

Will check with Blipfuture Directors.

 

Will there be regular fundraising feedbacks?

Will check with Blipfuture Directors.

 

What is the cost of the Blipfoto assets?

 

I have said on the FB Blipfoto Friends page that the cost of the deal to buy the Blipfoto assets from the current owners is £180,000. It is more complicated than that and apologies for not grapsing this first time. To clarify, the £180,000 target is the amount that the Directors of Blipfuture belief will be sufficient to gainn control of the Blipfoto assets and to provide sufficient working capital to take the Blipfuture company forward.  The fundraising aspiration is greater than this and a figure of £400,000 is mentioned in the business plan.

 

The actual agreed cost of the Blipfoto assets is not publicly known. This is because the purchase will be a mix of cash, non-voting shares and long-term payments if and when the company becomes profitable.

See the Blipfuture Business Plan 3.3 states,

 

‘They [the current owners] have been very flexible in offering to take payment in a combination of cash, non-voting shares in the new company and long term payments which are only made when and if the company generates a surplus’.

 

Do we need to know more about this?  I guess as an investor or donor one has to make a decision that the purchase deal represents fair value and that the Directors have struck as hard a deal as they can.

 

Are there concerns that the current owners might have a stake in the new company through non-voting shares? It is conceivable that non-voting shares could benefit from a dividend payment (see Articles 28 and 37) although these are capped at 35% of profits within the CIC structure. But frankly that is perhaps a worry for another day and further down the line.  The important thing to note here is the Directors' view that the current owners are showing [admirable] flexibility in coming to a deal in terms of the mix cash, shares and long-term payments.

 

It could be argued that the value of the transaction is mere chump change to joint Blipfoto owner, Bobby Sager.

 

Here's an extract from an earlier blog.

 

With regard to Bobby Sager you might want to take a look at this Daily Telegraph article titled, 'Bobby Sager the not-so-secret-millionaire.' It's surprising. He also has a page on the Gordon Brothers website.

 

 

 

He is a very wealthy man - but to say how wealthy would be, he says, 'so boring'. (So bore us, I say).  Sager says,  “I have enough,” he says, “so that I can spend the rest of my life engaged in giving away money. Especially the way I do it.”

 

But this giving is philanthropic and neither Blipfoto nor Blipfuture are philanthropic/charitable ventures. It's a commercial deal.

 

Clearly the more entirely owned Blipfuture is owned by its community the better, I would have said. But that all depends on the pocket and willingness of the community. There might also be advantages in having some commercial partner investment.

 

Blipfoto Member Numbers (Updated 6th December)

 

This is a vexed issue but not surprisingly membership numbers have never been made public.  It would be nice to know these numbers, particularly with regard to regular members and changes in membership. But I wouldn't hold your breath on this one. 

 

There are now 1,400 people signed up to the Friends of Facebook page and earlier this year my blogs on Blipfoto got 1,800 hits. My two blogs yesterday got just short of 1,200 hits. This seems to indicate a very actively involved community of users.


I don't know why I didn't think of this before but one way to get a proxy for Blipfoto member numbers might be to use 'Views' of important BlipCentral posts.  Below is a table looking back over the last year.


It shows that the highest number of Views (may include multiple views by one user?) of a BlipCentral page was on 24th April 2015 when the Extra Photos feature was announced. The number of views was approximately 28,300 (it's recorded on the page as 28.3k).  If these are all unique individual user views rather than repeat views this suggests at least 28,300 Blipfoto users in April 2015. (Although it is puzzling that there are 11,000 more views for the Extra Photos announcement than the Liquidation announcement).



Table of BlipCentral Views and Comments on Recent High Use Days.
Table of BlipCentral Views and Comments on Recent High Use Days.



The BlipCentral post launching Blipfuture on Friday 4 December 2015 is currently (6th Dec 15.1) showing 7,063 views .

This figure should be treated with caution because it is still rising as Blippers catch up with their journals over the weekend and hear the news of Blipfuture.


The data above should be treated with caution but they might be an indication (with an unknown margin of non-viewers or repeat views) of Blipfoto regular and active members (with the proviso that the 'view' figures are unique user views rather than possible repeat views).


We could speculate endlessly about the average investment/donation per investing regular member that is needed to meet the £180,000 target (for example at 1,000 investing/donating members it averages £ 180 at 2,500 it averages at £72 and at 5,000 it averages £36).


But this is kind of beside the point.  Some members will be inclined/able to give/invest more and others less. 


I'm hoping that there will be some feedback on the fundraising and how it is going.


Could the money be used differently?

 

Some people have commented that £180,000 could buy a lot of development time and they wonder if starting afresh rather than buying Blipfoto is a possibility. I can't answer for the Directors but the trouble with starting afresh could be that 1) the accumulated journals of Blip users would be lost 2) the systems would be lost and 3) the community might disappear in the interim between the lights going out on Blipfoto and some new platform appearing.

 

So yes maybe it would be nice to start afresh - although personally the fact that Blipfoto has continued to function with hardly a blip is a pretty good sign to me - but I imagine the current owners of Blipfoto would be much less co-operative if they thought Blippers were going to abandon their platform en masse. In that situation I certainly wouldn't wait around for a new platform to emerge. I'd either look for another buyer or cut my losses and close it down.

 

See also my point above about the cost of Blipfoto assets.

 

What about people who can't hold shares ?

 

Unfortunately people living outside the EU/EEA and Switzerland cannot buy shares in Blipfuture for complex regulatory reasons that would take thousands of quids to sort out at this stage. This is a real bummer. It immediately creates a donor class of 'investors' who do not have representation in the governance of Blipfuture through voting rights.  I think this issue does need to be addressed given the international nature and spirit of Blipfoto.

 

One thought that occurred to me was to create some kind 'special representative' Director/Board Member of sections of the Blipfuture community who cannot acquire voting rights.

 

It's not as if US or New Zealand members would necessarily have different interests than other members. But, if through no fault of their own they are 'relegated' to donor status rather than shareholding status there should maybe be some kind of compensatory representative initiative?

 

And this situation is currently exacerbated on the https://www.blipfuture.com/invest page where investor status and benefits (Bronze, Silver, Gold etc) is specifically linked to the number of shares bought. Well, what if I can't buy shares?? Do I get badges and stuff too??

 

The Business Plan financial projections?

 

I find the very outline financial projection table -well- very outline. With no notes on how figures have been arrived at, particularly the sales revenue and the numbers of members that make up these figures, it is really hard to make sense of these, particularly the large growth in sales revenue between Year 1 and 2.

 

This could be particularly worriesome  in the light of the Blipfoto Ltd's failure being based on the failure to materialise of new members between the relaunch in December 2014 and the liquidation in March 2015. However, I hope the Blipfuture Directors have been fairly conservative in their assumptions. Investment is a risky business and forecasting is not a science (sticks thumb in wind).

 

But at the end of the day investing in Blipfuture is going to be an act of faith and hope based on the information available. £180,000 is considered to be the minimum to get control of the Blipfoto assets, cover the start-up costs and have enough working capital to get the company going before subscription revenue can be generated.

 

Postscript

 

Someone quite rightly commented on one of my blogs yesterday that I am may be giving some of the Blipfuture material too easy or too positive a ride. I am caught in a dilemma. I want Blipfuture to succeed and I do not want to start hares running that undermine trust in the new company. On the other hand, if issues are not dealt with at the outset and subject to proper scrutiny they are more likely to prove costly and disruptive - in terms of community relations if nothing else - at a later stage. So I'm walking a delicate line. And trying to clarify issues with Directors if they seem particularly contentious.

 

And sorry for not replying to comments left on my blogs. It's a bit of a clunky commenting system and I could do with updating it. But rest assured they are much appreciated and always read.

 

2 Comments

Blipfuture: CIC-starting community ownership.

Here are some initial comments and information drawn from the Blipfuture Business Plan and Articles of Association which I have only had sight of in the last few hours. To see these important documents go to the https://www.blipfuture.com site and register as a potential investor. It is free and there is no commitment of any sort.

 

In October 2015 the current owners of the Polaroid Blipfoto social media site contacted members of the community with a view to offering to sell the company into community ownership.

 

Since that time and through a consultation with a ‘large number’ of Blipfoto users a small core team of four was formed to take forward negotiations with the owners of the Polaroid Blipfoto site, establish a Community Interest Company, Blipfuture CIC, and to run the company for the first year.

 

The Business Plan 4.4.2 states, The team was brought together by the current owners through Joe Tree (founder of Blipfoto).’ The team are Annie Andrews, Graham Colling, Bob Hamilton and Ian Stevenson.

The four Directors of the new Blipfuture community investment company with their Blipfoto handles and years of participation in Blipfoto (from the Blipfuture Business Plan).
The four Directors of the new Blipfuture community investment company with their Blipfoto handles and years of participation in Blipfoto (from the Blipfuture Business Plan).

It is proposed that the CIC will be 100% owned by its voting shareholders and that other non-voting shares will be used in part-payment for the assets of Blipfoto.

 

It is unclear if all current Blipfoto members will be able to hold shares given different national jurisdictions on shareholding. Currently shares will only be available to citizens of the European Union, the European Economic Area and Switzerland.

 

(Blipfoto has considerable membership in the USA, New Zealand, Australia and South Africa amongst other locations outside these organisations.) Donations are possible from any country but obviously this does not confer voting share ownership.

 

Joe Tree and Graham Maclachlan, the original founders of Blipfoto Ltd are supporting this initiative and helping the Blipfuture team during the transition.

 

The controversial branding link-up with Polaroid will end.

 

Financial sustainability will be via subscriptions.

 

Blipfoto is currently owned by private investors, Jeff Hecktman and Bobby Sager. The Blipfuture Business Plan 3.3 states,

 

‘They [the current owners] have been very flexible in offering to take payment in a combination of cash, non-voting shares in the new company and long term payments which are only made when and if the company generates a surplus’.

 

It may also be possible for commercial partners who have worked with Blipfoto to invest in Blipfuture so long as this does not damage either the values of Blipfoto or the concept of community ownership.

 

The company will be run by staff – currently the Business Plan names only a ‘co-ordinator’ - and managed by a Board of Directors. Volunteers will be encouraged to support the website operations and maintenance and develop community activities. Shareholders (one vote per shareholder not per share) will own and control the company. The broader Blipfuture community of members will be consulted on significant decisions.


It's important to emphasis that a Community Interest Company has to do what it says on the tin.  It  can’t just pay lip service to community members that are not also shareholders. Indeed its an annual report a CIC has to justify to the CIC Regulator it is consuling and serving it community. 

The layers of staffing, management control and consultation envisaged at Community Investment Company, Blipfuture (from the Blipfuture Business Plan 2015).
The layers of staffing, management control and consultation envisaged at Community Investment Company, Blipfuture (from the Blipfuture Business Plan 2015).


Shareholders will exercise control through resolutions at general meetings and via written resolutions and will appoint and remove directors.

 

Of particular interest and importance is the fact that there will be one vote per shareholder rather than one vote per voting share. That is, no matter how many voting shares an individual holds they will only have one vote. The Business Plan 4.2 states that this is so that, ‘everyone who invested in the company has an equal say.’

 

This is correct in as much investors are those that buy shares but it rather neglects the position of donations from members who cannot hold shares because they do not live in the EU, EEA or Switzerland.

 

The company aims to raise at least £180,000 through crowdfunding using the company InShare to do this.

 

In Year 1 of operation the company projects sales revenue of £57,000. This jumps to £110,000 in Year 2 and then grows moderately to £131,000 in Year 5. Gross Profits are projected at 79% for Year 1 rising to 89/90% in subsequent years.

 

As a CIC neither gross nor net profits will be distributed and will be ploughed back into the company. In exceptional circumstances a dividend could be paid on shares but this is capped by the CIC regulator at 35% of profits.

 

Under CIC structures Directors can be remunerated/paid (unlike Charitable organisations) but no mention is made payments to directors in the Business Plan and it must be assumed that they are giving their time voluntarily.

 

TheArticles of Association (25) state in what I assume is a standard clause that Directors are entitled, subject to the Articles and in particular Article 3, ‘to such remuneration as the Directors determine.’

 

Again, no heading is shown for Director’s remuneration in the Business Plan and it must be assumed that the Directors will not be determining remuneration for themselves.

 

Continued community ownership of the company is guaranteed both by the CIC structure and CIC Regulator and by the ‘objects’ of the company as set out in the Articles of Association. These include an object which, ‘which state[s that Blipfuture] is to be run on a not-for-profit basis for the benefit of the Blipfoto community.’ Theoretically the objects could be changed by a shareholder vote but this change would need to be approved by the CIC Regulator.

 

There is a very useful section on risks. Raising the initial £180,000 for the purchase of the Blipfoto assets is considered to be a medium risk with a low impact on investors (if the crowdfunding fails investors are not debited their committed payment) and a high impact on the Blipfoto community in that the site is likely to be closed down.

 

The detailed contract to purchase Blipfoto has not been finalized but failure to complete is considered a low risk – again with a high impact in that closure could be likely.

 

Low membership take-up – in terms of paying members – could be an issue. It was low membership growth (paying and non) that caused investors to cancel further investment and sink Blipfoto Ltd in March of this year. This is considered to be a low risk with a high impact.

 

Unfortunately, if understandably (Blipfuture may not have access yet to commercially sensitive Blipfoto data) they are no figures for current or future membership or subscription charges. To raise £400,000 from say a membership of 5,000 would require an £80 investment or donation on average.

 

On the other hand, the crowdfunding campaign is not aimed at investors expecting a financial return but rather at community members who want to save and sustain their community. This does require a leap of faith but there is protection, as I understand it, in as much if the crowdfunding does not reach its target no money will be taken from investors.

 

There is a brief survey of competitors with Project 365 at the top. And a graphic showing that Blipfoto occupiers a unique position in the photosharing world in that it is contrained (one photo a day) and based on photo saving rather than photosharing. The lack of a key or explanation does not make this graphic easy to understand and I am unclear if Project 365 is shown on it.

 

The potential closeness of Project 365 to Blipfoto/Blipfuture is a strategic issue that may need further consideration.

 

The Business Plan does not state where Blipfoto’s management and day-to-day activities will be located but I assume it will be in Edinburgh. This does have some bearing on volunteering activities but much of this will also be conducted at a virtual level.

 

Location could also be a consideration for General Meetings at which shareholders vote by a show of hands. It seems proxies (Articles 56 and 57) could be used but votes will be on the basis of one vote per attendee (ie a proxy could not represent say 20 votes from Finland with the right to vote 20 times (see Articles 53). Written resolutions can be voted on via a postal ballot (Articles 59).

 

Polls on a resolution may also be called (Articles 54) but these do not appear to be postal polls but rather ones conducted before or at a General Meeting.

 

Minutes (Articles 62) are to be kept but there is no stipulation to send copies of them to shareholders.

 

There are two types of shares – Ordinary and A Ordinary. Only Ordinary shares have a voting right. Both are priced at £10. Votes are limited to one per shareholder present (or by proxy) on a show of hands at a General Meeting.

 

There is an issue that will need to be dealt with concerning user representation. Within the Articles of Association the only users who have representation are those holding an Ordinary Share or shares who can either attend a meeting or arrange for a proxy to attend a meeting (a fairly complex procedure). This is different for written resolutions that can be dealt with through a postal ballot (although this clearly has major administrative costs attached to it).

 

The Blipfuture community (if anything like the Blipfoto one) could be scattered geographically across seven continents and 150 countries. Members residing outside the EU, EEA and Switzerland cannot hold shares. And those who do hold shares would normally be expected to represent themselves physically at General Meetings or arrange for a proxy to attend.

 

There is a danger here that a significant part of the community is prohibited from owning voting shares and those that can own them experience considerable difficulty in attending General Meetings.

 

Given these difficulties, every effort must be taken to stop Blipfuture becoming or becoming seen to be a community that by necessity needs to situated near the seat of the company which is presumably Edinburgh.


For background on the Blipfoto story see blog entry below this one and seven more posts here.

23 Comments

In my end is my beginning: the fall and rise of Blipfoto

 Today’s announcement that the social networking site, Blipfoto, is to attempt a community buyout marks the end of the ‘capitalist’ trajectory of this innovative Scottish start-up.

 

After a powerful relaunch a year ago that announced a licensing tie-up with the Polaroid brand the long death knell of Blipfoto as a commercial enterprise is finally over. In March 2015 the failure to make significant headway with user growth led to a crisis of investor confidence and the liquidation of the company. In a preferred bidder deal the entity was bought by two US distressed asset investors who had close links with the hollowed out licensing platform that the once mighty Polaroid had become.

 

Since that time there has been almost no communication from the owners or the founders of Blipfoto.  Blipfoto users kept posting their daily photos and journal entries. Anecdotal evidence suggests some/many left to join the UK-based 365 Project or at least opened accounts there. In the meantime the Blipfoto Friends Facebook page spawned different fixes to allow users to download and protect their precious journals, some of which stretch back five years and more.

 

Apart from one or two blackouts the Polaroid Blipfoto site has continued to run with remarkable consistency. No-one really knew how it was all working or what costs were being incurred to keep the lights on. But someone was doing it and presumably the new owners were paying. For this Blipfoto users can be very thankful in that the integrity of the site and its ‘collective memory’ have been kept intact and operational.

 

So although the thrusting, growth-oriented, private investor-led (with substantial public investment it must be said) trajectory of Blipfoto Ltd plummeted to earth (as happens with so many tech start-ups) the fabric of the entity remains largely intact (at least as far as we know). The hugely important staff team has been lost and again best guess estimates suggests that the founders of the company have been keeping it going on a shoe-string basis. One new initiative, the photo extras feature, was launched in April this year but since then to all intents and purposes Polaroid Blipfoto has been running on autopilot.

 

Quite what happened in the interim may one day be known. I suspect that the new owners bought the distressed company from a mix of motives. Personal contacts, enthusiasms and chemistry were probably important. The owners were also past masters at turning around and maximizing the value of distressed assets and maybe they sensed a possibility to create some kind of convergence or synergies with other parts of the Polaroid licensing stable.

 

But it seems that sometime after the summer of 2015 the owners decided they didn’t want to carry Blipfoto any more and approaches began to be made about disposal. Again, I suspect (and this is with my positive hat on) that the personal relationships developed by the founders with the owners through the Polaroid licensing tie-up and the integrity of the founders (who were arguably torn from the beginning between the community and market focuses of Blipfoto Ltd) played an important part in the way the disposal became a possibility for a community buyout.

 

The much-lauded Blipfoto community is now confronted with an opportunity and a dilemma. The opportunity is to take Blipfoto into community ownership through the structure of a Community Interest Company. The dilemma is that if the necessary funding (buy-out plus working capital – at least £180,000 and ideally £400,000) cannot be raised through a community/crowd sourcing initiative Blipfoto, and all it stands for, may soon disappear.

 

But lets give thanks where thanks are due.

 

Firstly, to the founders of Blipfoto who have stuck with their baby as it has grown and eventually foundered. This last nine months cannot have been easy and at times must have been acutely uncomfortable.

 

Secondly, to the ‘new owners’ who kept Blipfoto running at their own cost and who have maintained its integrity.

 

Thirdly, to the four Blipfoto members who stepped up to the plate and have seized the possibility of creating a new, innovative and perhaps world first community-owned social media platform.

 

And last but not least to the users and community of Blipfoto, the Blippers, who kept the faith and kept posting their single (and limited extra) photos and journal entries day after day to the site during its uncertain future.

 

The story of Blipfoto is very much a story of our times. Made possible by the remarkable transformative power of the internet and mobile computing (and all the complex commercial and technical infrastructures that support it) Blipfoto’s rise and fall plays out some of the tensions between an internet of private enterprise and profit and an internet of user empowerment and democratisation.

 

The story of a back-room Edinburgh start-up is dwarfed by the giants of the internet and their social media platforms. But all face the same dilemma of finding ways to monetize their operations and actually make a profit or find alternative and sustainable funding models or eventually die.

 

In the meantime users have dined out at the most fantastic and varied free-lunch-of-the-internet. As they have done so they and their data, preferences and lifestyle buying choices have become the ‘product’ that the new moguls one day hope to turn into revenue streams and corporate profits that can match the capital growth of their share holdings.

 

The good times can’t and won’t last forever. Paywalls and the growing privatization of the internet may happen and users must make choices. Either we pay to keep afloat what we hold dear (for example the recent second fundraising round for Wikipedia Foundation and subscriptions to cherished and independent media sources) or we take what we are ‘given’ hiding behind our ever more threatened walls of ad-blockers and fragile privacy settings.

 

Today’s proposed community buyout of Blipfoto represents a fork in the path through the internet woods. May we have the courage and fortune to take 'the road less travelled'.


I---------------------------------------------I


For background to this blog entry and a detailed account of the events and players referred to above see my previous posts about Blipfoto here.  I will be writing further Blipfuture blogs as the details of the new proposition are released.


I was given two days advance notice of the forthcoming community buyout launch but did not have access to the details of the proposal until the launch today.


To read the Blipfuture Business Plan and Articles of Association register as a potential investor at Blipfuture invest page.

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More from the Bay

Grey wagtail hunting in a puddle, St Margaret's Bay 28 November 2015.
Grey wagtail hunting in a puddle, St Margaret's Bay 28 November 2015.
Planes of white,  St Margaret's Bay 28 November 2015.
Planes of white, St Margaret's Bay 28 November 2015.
Great black-backed gull from Windmill Down cliffs, St Margaret's Bay 28 November 2015.
Great black-backed gull from Windmill Down cliffs, St Margaret's Bay 28 November 2015.
Cathedral of autumn light, St Margaret's Bay 28 November 2015.
Cathedral of autumn light, St Margaret's Bay 28 November 2015.
Light-catching cliffs, South Foreland, St Margaret's Bay 28 November 2015.
Light-catching cliffs, South Foreland, St Margaret's Bay 28 November 2015.
Stain-glass leaf window, St Margaret's Bay 28 November 2015.
Stain-glass leaf window, St Margaret's Bay 28 November 2015.
Shingle bank and early light, St Margaret's Bay 28 November 2015.
Shingle bank and early light, St Margaret's Bay 28 November 2015.
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Beautitude

It did feel like 'supreme blessedness' today. This sun. At this time. In November. When all around the world. Is going to hell. In a handcart.

Beach. (St Margaret's Bay, November 26th 2015).
Beach. (St Margaret's Bay, November 26th 2015).
Sleeping dogs lie. (St Margaret's Bay, November 26th 2015).
Sleeping dogs lie. (St Margaret's Bay, November 26th 2015).
The pippits on my heart-strings sing through winter's gales and trouble.
The pippits on my heart-strings sing through winter's gales and trouble.
Bench. (St Margaret's Bay, 26th November. 2015).
Bench. (St Margaret's Bay, 26th November. 2015).
Black-headed gull. (St Margaret's Bay, 26th November. 2015).
Black-headed gull. (St Margaret's Bay, 26th November. 2015).
Raven. (St Margaret's Bay, 26th November. 2015).
Raven. (St Margaret's Bay, 26th November. 2015).
Alamo. (St Margaret's Bay, 26th November. 2015).
Alamo. (St Margaret's Bay, 26th November. 2015).
Blue. (St Margaret's Bay, 26th November. 2015).
Blue. (St Margaret's Bay, 26th November. 2015).
Bunch. (St Margaret's Bay, 26th November. 2015).
Bunch. (St Margaret's Bay, 26th November. 2015).
Bench head. (St Margaret's Bay, 26th November. 2015).
Bench head. (St Margaret's Bay, 26th November. 2015).
Scale. (St Margaret's Bay, 26th November. 2015).
Scale. (St Margaret's Bay, 26th November. 2015).
Doorway. (St Margaret's Bay, 26th November. 2015).
Doorway. (St Margaret's Bay, 26th November. 2015).
Obelisk. (St Margaret's Bay, 26th November. 2015).
Obelisk. (St Margaret's Bay, 26th November. 2015).
Thicket (Where the guns roared). (St Margaret's Bay, 26th November. 2015).
Thicket (Where the guns roared). (St Margaret's Bay, 26th November. 2015).
Transformer. (St Margaret's Bay, 26th November. 2015).
Transformer. (St Margaret's Bay, 26th November. 2015).
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More from the Bay

The Dexter cows are back on the headland, keeping down the scrub and being hassled by lazy-dog-walkers' dogs at St Margaret's Bay, Kent.
The Dexter cows are back on the headland, keeping down the scrub and being hassled by lazy-dog-walkers' dogs at St Margaret's Bay, Kent.
Beech tree in the fading cold light at St Margaret's Bay, Kent.
Beech tree in the fading cold light at St Margaret's Bay, Kent.
The police chopper did a low level pass over the cliffs looking for something or someone at St Margaret's Bay, Kent.
The police chopper did a low level pass over the cliffs looking for something or someone at St Margaret's Bay, Kent.
Going cold pigeon at St Margaret's Bay, Kent.
Going cold pigeon at St Margaret's Bay, Kent.
The Dover Patrol memorial and the old coastguard lookout at St Margaret's Bay, Kent.
The Dover Patrol memorial and the old coastguard lookout at St Margaret's Bay, Kent.
Cottoneaster on the cliffs at St Margaret's Bay, Kent.
Cottoneaster on the cliffs at St Margaret's Bay, Kent.
Not quite a full moon rising over the Dover Strait at St Margaret's Bay, Kent.
Not quite a full moon rising over the Dover Strait at St Margaret's Bay, Kent.
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Eventide

Against the white of the sea-scoured cliff
Against the white of the sea-scoured cliff
Blowing offshore at the Ness, St Margaret's Bay, November 21 2015.
Blowing offshore at the Ness, St Margaret's Bay, November 21 2015.
The end of a day of cold North-westerlies in St Margaret's Bay, November 21 2015.
The end of a day of cold North-westerlies in St Margaret's Bay, November 21 2015.
Setting-sun wave at the Ness, St Margaret's Bay, November 21 2015.
Setting-sun wave at the Ness, St Margaret's Bay, November 21 2015.
They may come, but they will not prosper, St Margaret's Bay, November 21 2015.
They may come, but they will not prosper, St Margaret's Bay, November 21 2015.
The line, St Margaret's Bay, November 21 2015.
The line, St Margaret's Bay, November 21 2015.
Reverse swell on the north-westerly gale. St Margaret's Bay, November 21 2015.
Reverse swell on the north-westerly gale. St Margaret's Bay, November 21 2015.
The pool, the fall, the might on the incoming tide.St Margaret's Bay, November 21 2015.
The pool, the fall, the might on the incoming tide.St Margaret's Bay, November 21 2015.
Beach. House. St Margaret's Bay, November 21 2015.
Beach. House. St Margaret's Bay, November 21 2015.
Dirtied up: the pool, the fall, the might on the incoming tide.St Margaret's Bay, November 21 2015.
Dirtied up: the pool, the fall, the might on the incoming tide.St Margaret's Bay, November 21 2015.
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First September gale in the bay

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Can you help Dexter?

Dexter Murray

 

I am a 3rd year undergraduate studying Sport Management at Bournemouth University. My degree has a strong emphasis on the business of sport and I am looking for a 40-week placement as part of my third year.

 

I would prefer the placement to be in a sport business setting but my main concern is to use and develop the business skills I have learnt so far on the course.

 

I am particularly interested in opportunities in a Marketing environment from brand development and licensing to market analysis and specific marketing campaigns.

 

The sports I am particularly interested in are football and baseball. However I will follow and watch almost any sport I can get my hands on.

Other students on my course are currently employed in a range of placements including:

 

· sales for a food and drinks company

· data analyst for Microsoft

· sports events organisation.

 

I am outward going, confident and well-rounded and I am hungry to apply the skills I have developed so far in a real-life business environment.

 

I will bring great enthusiasm and initiative, will work effectively as a team member and work with dedication, energy and humour.

 

I've suffered a bit of a setback in that the placement I had lined up have let me down. If you can help I would really appreciate it.


Start date: second week in September


Dex's Linkedin profile is here https://www.linkedin.com/pub/dexter-murray/a5/11/26b

 

If you can help please contact me - Fergus - in the first instance via the Contact page of my site and I'll pass it on to Dex. Thank you. Thank you.

0 Comments

Spring Gale in the Bay

0 Comments

Keeping Out the Midnight Sun

In the Emergency Exit seats on Norwegian Air you have to improvise (there are no blinds) to keep out the slanting rays of the Midnight Sun.
In the Emergency Exit seats on Norwegian Air you have to improvise (there are no blinds) to keep out the slanting rays of the Midnight Sun.
Some of the Norwegian Mountains leaving Tromso this morning
Some of the Norwegian Mountains leaving Tromso this morning.
1 Comments

Norwegian Otter

Here's one of the two otters we saw today as they rushed up a steep slope from the sea to their den in a tangle of rocks.

Otter on the Lyngen Peninsula at Russelv, Northern Norway
Otter on the Lyngen Peninsula at Russelv, Northern Norway
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One day at a time

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Barking up the wrong tree?

A reinterpretation of the Blipfoto/Polaroid tie-up.

 

Introduction

 

This blog (I won't call it the 'last' because I've already caught myself out with this) is one of a series and puts forward a reinterpretation of the Blipfoto Ltd story with particular regard to the tie-up with Polaroid. This has come about through discovering and new facts about the tie-up and by looking more closely at Polaroid's modus operandi as a licensing platform. These are laid out in more detail here.

 

My thanks once again to Ian Stevenson at Salient Point who has helped discover and interpret the new findings. I think it is fair to say that we both think this is the best interpretation of events we are likely to come up with based on the tangible evidence available, careful interpretation and that knowledge we have of the character of the players involved.

 

It is still an incomplete picture but it seems to have a stronger inner coherence than previous one's I have attempted to paint.

 

A Reinterpretation

 

I have developed an analysis  spelt out in more detail in this blog, 'The Blipfoto and Polaroid Licensing Agreement', that suggests that the Polaroid/Blipfoto tie-up cannot be seen as an aggressive takeover by 'corporate America' or a 'sell out' by Blipfoto Ltd even though it was often seen as this by Blipfoto users.

 

The 'tie-up' as I've called it was rather a licensing agreement that gave Blipfoto a licence to use the Polaroid brand and gave Polaroid a share allocation in Blipfoto Ltd, an observer on the board, and possibly a right to royalties from the acquisition of new Blipfoto Ltd customers.

 

Without further information we don't really know what demographic Polaroid Blipfoto was going after except that the US market was key but in the broadest terms there seems to be a poor fit between the Blipfoto user demographic and ethos (aka 'the community') and that which was being targeted by many Polaroid products.

 

However, maybe that lack of fit didn't really matter. When we discount the licensing agreement as a 'takeover' by Polaroid it is much more likely that the Blipfoto rebranding was more about increasing the recognisability of the Blipfoto proposition to users across all age groups and was supposed to be the key that opened the US market and possibly other markets.

 

I've previously thought that Polaroid saw Blipfoto as a strategic partner or 'acquisition' (which it wasn't) but the facts that we now know don't support this view.  It seems that Polaroid was willing to sell licenses without seeking  product or marketing synergies between the different and diverse Polaroid licensees - maybe it was a more ad hoc process as long as a certain quality threshold was met. That's the view of some observers although they would argue that even the quality thresholds were weak.

 

(For much more detail here on the development and range of Polaroid's licensing activities and the way brand licensing works see the my blog, The Polaroid and Blipfoto Licensing Agreement).

 

It came as something to a revelation to me when I realised that the contemporary Polaroid is no corporate giant. My back-of-the-fag-packet calculation values it at around $108m - a corporate minnow - and it has a workforce of 'a few dozen staffers in a humdrum Minnetonka office building, its headquarters, and in Boston and New York City'.

 

So the Polaroid that emerged from the 2009 liquidation was a small operation, with tens of staff, a bankruptcy trust and a corporate shell that has been completely hollowed out. All it had was a brand that had to be reinvented and begin to attract some revenue. The story of Polaroid's tansformation is briefly documented in a Gordon Brothers' case study of the company they acquired with Hilco Global in 2009.

 

Gordon Brothers Group shifted Polaroid from a distribution model to a "license/royalty" business model and began aggressively securing global licensing agreements. Gordon Brothers Group initiated a raft of organizational enhancements to align with this new business model approach, including retaining the majority of Polaroid’s Minnesota-based licensing team and appointing the Executive Vice President & Director of Marketing from the acquired entity as CEO of Polaroid.

 

But if Polaroid's strategy was based on an ad hoc way of creating revenue from licensing deals and royalties why agree to take untradeable shares in lieu of cash, as happened in the Blipfoto Ltd deal?  Maybe this was just another new avenue Polaroid was interested to explore - a kind of weak joint-venture where Polaroid took a backseat observer role. Or maybe Blipfoto could not demonstrate a strong enough flow of potential royalty income to Polaroid to secure a deal without a share transfer.

 

For Polaroid there may have been an attraction in putting little bit of corporate skin in the game to explore what potential there might be in a social media licensing tie-up with potential marketing synergies between Polaroid licensed products and the growing user base of Polaroid Blipfoto. Although as far as I know Polaroid's modus operandi seems to not involve share holdings in licensees. It's strategy is about licensing and not becoming a holding company.

 

Whatever the details of the case the Polaroid agreement with Blipfoto Ltd was a limited commitment, small scale, discreet and exploratory.

 

If the deal carried no opportunity cost for Polaroid - (ie if there wasn't another similar social media platform who was offering to pay cash for licenses) - it was a win-win situation for the company.  If Blipfoto went belly-up (and as long as there wasn't a reputational taint to the affair) Polaroid didn't really lose anything - some corporate time and maybe some lawyer fees. And if Blipfoto Ltd suddenly started to grow and gain capital value or revenues Polaroid was sitting pretty with it's convertible, redeemable preference share-holding, an inside view of how and why the company was succeeding and, possibly, a growing stream of royalty income.

 

I've also tended to see the Blipfoto link to Polaroid as something to do with the Blipfoto founders' affection for the company but thinking about this further and the train of events at Blipfoto it now seems more likely that the licensing agreement was a way of convincing investors to put more money into the company. Or it was driven by investors who wanted Blipfoto Ltd to beef up its marketing effort and visibility by linking to a big and recognisable brand.

 

Whatever the detail of the drivers of the agreement it signaled a certain arrival. 'Here we are', it seemed to say. 'Look at the potential growth our new branding is going to bring in. We're up there with an iconic American brand. It's take-off time'. And perhaps,  'Billion dollar company here we come.' 

 

And that new investment was almost forthcoming - nine hundred thousand pounds' worth was on the table in December 2014 . The share allotment was in place and a share price had been agreed. All that the company now needed was to produce the results and avoid an 'underperformance event' and the new investment would be released.

 

Once we move away from seeing Polaroid as an 'aggressive acquirer' of Blipfoto Ltd the stress I have previously put on 'demographic fit' between Polaroid's other offerings and the Blipfoto Ltd offering also becomes much less important. It wasn't that Polaroid (or its owners) wanted Blipfoto Ltd and its particular model of client capture and those 'magic moments once a day' as I argued in this blog. It was that Blipfoto Ltd wanted a branding agreement with Polaroid. Blipfoto was the suitor not Polaroid.

 

If the initiative for that licensing deal came from Blipfoto Ltd and not Polaroid the picture is very different. The licensing deal was about gaining recognisibility, prominence and credibility for the Blipfoto Ltd product in a rapidly expanding and crowded social media and photographic market place with a particular emphasis on the US market.

 

Polaroid was probably not that fussed if Blipfoto Ltd's activities led to cross selling opportunities to other Polaroid licensees as long as they were getting paid in shares and (possibly) royalties for the use of the license. And Blipftoto Ltd must have made an assessment that the Polaroid brand had a broad relevance and resonance to their target customers and that it would help encourage and translate initial website views into signed up customers.

 

I've also tended to think that either Polaroid identified Blipfoto Ltd as a partner or Blipfoto actively selected Polaroid from a range of potential licensing partners. But maybe Blipfoto Ltd just didn't have that much choice in its quest for a licensing agreement. (What other relevant brand licenses were available in the photographic field?)

 

It may have been that Blipfoto Ltd's investors and Directors were pushing for a branding agreement as a quid pro quo for further investment in the company and instructed the management team to go out and find one that was relevant to the company's expansion plans vis a vis the US market. (In this regard it is noteworthy that Blipfoto Ltd had appointed a Sales and Marketing senior manager in late 2013 to take forward Blipfoto's 'customer acquisition internationally as well as its marketing and PR activity'.)

 

Some consequences of the reinterpretation

 

If we move away from seeing the licensing agreement as some form of 'takeover' by Polaroid and instead see it as a move by Blipfoto Ltd to secure greater visibility in the US market place what consequences flow from this?

 

Firstly, with regard to the preferred bidders it is understandable why Polaroid did not bid for Blipfoto. Owning third-party companies is not Polaroid's way. It sells licenses to its brand.

 

On that basis, it seems exceedingly unlikely that Polaroid would have had any interest in 'taking down' Blipfoto Ltd, even if it could have, as a precursor to a 'takeover'.

 

Secondly, although there was an allusion to cross-selling possibilities in the preferred bidder press release from Hilco Global these cross-selling issues and my related analysis of the lack of fit between the Blipfoto user demographic and the Polaroid product demographic now seem much less important.

 

Fundamentally, the licensing agreement was never driven by the prospect of cross-selling between Polaroid licensees. Rather, it was about Blipfoto using the Polaroid brand to gain market recognition, particularly in the US in exchange for shares and possibly royalties. 

 

This in turn suggests the Blipfoto community is probably less in danger of being supplanted by some new teen/millennial demographic than I thought and will remain an important asset for the new owners. A conclusion which, if proved correct, would be from my point of view a very good thing.

 

Thirdly, if the nature of the licensing agreement - as a strategic marketing operation - had been spelt out n more detail and the idea that Polaroid was somehow 'taking over' Blipfoto Ltd had been scotched by the Board of Blipfoto  perhaps some of the user hostility to it could have been avoided.

 

Of course, there is a balance to be struck here between confidentiality, the detail of the license agreement and keeping the user community informed. But while Blipfoto may not be 'a commune' - it is a private company - the trusting and relatively open relationship between its founders and management team and user community was an important part of the ethos and tradition of the company. Whether user hostility to the deal played through into the disappointing new customer acquisition figures in January and February 2015 is a moot point bit it can't have helped.

 

Reinterpretation and the new owners

 

Where does the above reinterpretation leave us with regard to the new owners?

 

I think one thing that we probably can say is that although both owners come from a corporate sector renowned for liquidating assets (as I've detailed in this blog) they have also been interested in creating value in a longer-term fashion from some of the assets they have acquired, the example of Polaroid and other brands being cases in point.

 

Quite why they bought up the assets of Blipfoto Ltd may become clearer in the future but the personal and corporate linkages between Gordon Brothers, Hilco Global and Polaroid and the licensing agreement with Blipfoto Ltd might suggest that there is both a good working knowledge of, and even a passion for and interest in, tiny Blipfoto. 

 

The licensing agreement with Polaroid had not really had time to prove itself before liquidation and  the new owners must see enough potential for future growth to be willing to take a punt on and steer (in a more-or-less hands on/off fashion) Blipfoto's future.  And they made a personal investment because - at least with regard to one of the owners - money is not a problem and because Blipfoto is simply too small to fit into the huge operations of Hilco Global and Gordon Brothers.  It would be like having a yacht in fleet of supertankers.

 

I think a key issue going forward will be the business model that underlies plans for Blipfoto's future.  What will keep the lights on and what will satisfy the new owners and attract new investment or (possibly) new investors? And what will be the key aim of the new business plan?

 

One of the things that the new owners are very good at doing is looking at the cost base of a company and stripping out what they see as excessive costs and impediments to a return to profitability. But they will also be looking to create a revenue stream and/or to increase the value of the company (possibly with an eye to a future sale - see Note 1).

 

It will be interesting to see what emerges and hopefully Joe and Graham will be fully involved and the Blipfoto community will be kept abreast of developments and find a way of representing its voice in the company's future.


Note 1

See this article in the FT where Julie Meyer of Ariadne Capital Entrepreneurs Fund argues that the European venture capital industry has just 'one play in its playbook' and that is


'to find the best European tech entrepreneur ... and to sell their business to a US technology platform company, 25 of whom buy most of the continent’s venture-backed start-ups.'

 

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Phoenix rising: the new Polaroid Blipfoto?

Update 30/3/15: Since writing this blog entry I've posted another, 'Barking up the wrong tree?A reinterpretation of the Blipfoto/Polaroid tie-up' which should be read alongside this one.  Thanks.


Introduction

Someone -'Cameraman00' - (an untraceable fictive name) - commented on one of my previous blogs asking what my thesis and objectives were in writing these blogs as if I must have an 'agenda'.

 

But I don't. I'm not out to 'get' anyone nor I am trying to point the finger of blame. Rather I'm trying to understand what has gone on and what is going on. I've set up and run a small company with a very vocal user community, Cornwall Neighbourhoods for Change, and I'm genuinely interested in the dilemmas that small companies with active user communities face.

 

I'm also a Polaroid Blipfoto user and I care about what is going on and hope that the best (which seemed pretty exceptional to me) in the company, the infrastructure and the community can be carried forward - hopefully with the support and involvement of the users.

 

Aftermath and renewal

 

Late in the evening of  March 25th 2015 Joe Tree, founder and and now ex-CEO and ex-Director of Blipfoto Ltd, posted a message from BlipCentral about the future of ... well of 'An Exciting Future'. It's in full at the end of the blog.


Whilst the message comes from Joe it is probable that it was agreed with, and possibly drafted by, the new owners or their representatives and agreed with the liquidator.

 

We don't actually know what Joe and Graham Maclachlan's positions in the new entity are yet and if these have been decided.  When Joe and Graham were Directors and shareholders of Blipfoto Ltd they had considerable influence on the direction of the company. Between them they had two votes in a Board of Directors of five where the Chair had no casting vote.


They also owned 12% of the company's shares (6.08% each) and were the biggest shareholders in the company by share numbers save for Scottish Enterprise (see this blog). Their fellow directors were  local and represented the angel investors and others who had invested in the company over the years.

 

As such Joe and Graham were in a position of authority and influence and deeply embedded in the supportive startup investor world of Edinburgh. That's not to say, of course, that they had everything or anything their own way with the Board and its observers.


Board decisions are, after all, taken by the Board and responsibility resides with all directors equally. And whilst having considerable sway as founders and senior managers they were a minority on the Board.  It's rather to say that things have changed.

 

The relatively transparent ownership and governance structure of Blipfoto Ltd disappeared with its liquidation. It is now owned by two US citizens (if my surmise below is correct) and it is unclear what structure the company will have and where it will be registered. The other directors are gone and the investor and director ties with the Edinburgh startup world have been severed as far as we know.

 

So when Joe speaks about the entity 'Polaroid Blipfoto' ater the  liquidation he is speaking from a very different structural position than the one he occupied pre-liquidation. And the company structure and ownership has changed beyond recognition.

 

If the new owners want to appoint Joe and Graham to a Board of Directors - if indeed there is or will be one - that is in their gift. They could make them first among equals. But until that is known it might be unwise to assume it is the case.

 

The Announcement

 

In this blog I try to tease as much meaning as I can out of the announcement about the new company's future. I had expected it to be followed by a press release - rather along the lines of the one issued by Hilco Global through their PR agents when news of a preferred bidder broke. But the absence of one might also mean something. 

 

Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)
Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)

 

The new owners of the 'Polaroid Blipfoto platform' are named as Jeffrey Hecktman (later 'Jeff') and Bobby (Robert) Sager. It appears that even though these 'gentlemen' are linked in the sentence to their respective companies (Hilco Global and Gordon Brothers)  it is they, rather than the companies that they are associated with, that now own Polarodi Blipfoto - aka 'the platform' - it is now in their 'hands'.

 

The original Hilco Global press release that announced the preferred bidders mentioned 'a group of investors' that 'included' Hecktman and Sager. This group now seems to have disappeared to leave just two owners as private individuals (And, hence, why there is no Hilco Global press release - because the assets of Polaroid Blipfoto are owned by individuals not companies).

Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)
Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)


The New Owners

 

It would be hard to dispute the phrase 'extremely successful' with regard to the new owners.  Hilco Global and Gordon Brothers are big  - not to say massive - companies operating in the investors-in-distressed-debt sector. Having said that and at least with regard to Hilco Global I have found it difficult to find out anything about their financial dimensions or numbers of employees. Here's a Bloomberg profile of Hilco Trading , LLC, which apparently does business as 'Hilco Global' but there are no financials.

 

Here is a Bloomberg Executive Profile of Jeffrey Hecktman. He looks a very successful and very busy man. He also has a page on the Hilco Global website that lists his professional achievements and philanthropic activities.

 

With regard to Bobby Sager you might want to take a look at this Daily Telegraph article titled, 'Bobby Sager the not-so-secret-millionaire.' It's surprising. He also has a page on the Gordon Brothers website.

 

He is a very wealthy man - but to say how wealthy would be, he says, 'so boring'. (So bore us, I say).  Sager says,  “I have enough,” he says, “so that I can spend the rest of my life engaged in giving away money. Especially the way I do it.”


But note, that giving is philanthropic. Not commercial.

 

He's a committed “eyeball-to-eyeball and hands-on” (his phrase) philanthropist through the Sager Family Travelling Foundation at Team Sager. He's also a friend of Sting, who gave him a Harley Davidson motorbike that sits in his home which has  a fully plumbed in guest bathroom from a Boeing 747 and a chunk of meteorite for which he paid in the region of $50,000.  His apartment is huge and made from twelve apartments knocked together - he made the neighbours offers they couldn't refuse, apparently, as they came up for sale.


He was also the Chair of Polaroid (at least in 2011) and 'and was instrumental in bringing in Lady Gaga as the company’s hands-on Creative Director.'

 

With regard to philanthropy he wants his money to work hard. He says,

 

“I’m an entrepreneur, so I’m looking for opportunity, I’m looking for huge return on investment, both for my money and my time." (My emphasis).

 

I wonder how hard he wants his Blipfoto/Polaroid Blipfoto dollars to work and how many of those dollars he and Jeff Hecktman are planning to invest (see 'future sustainability' below) ?

 

Sager's story is not a quite rags-to-riches biopic but it would certainly qualify as emblematic of the 'American Dream' narrative. And its made its way onto TV (see below).

 

For another perspective on the sector in which Sager made all that money that he so bored to talk about see this  Financial Times article from 2011 where the 'colourful' former president of 'liquidator' Gordon Brothers, Bobby Sager,  "regaled guests with tales of his good work in 'messed-up places'" at the charity fundraising dinner held for London’s  Norwood charity by 'investors in distressed debt'.

 

The very detailed article is titled, 'Vultures circle Europe’s debt mountain' and gives an assessment of the investors-in-distressed-debt sector, which is made up largely of hedge funds and private equity firms, and their activities in Europe.

 

I also came across in my searches  a blog entry here on the Gawker that claims to be reproduce a hacked email from Mr Sager to Bouthaina Shaaban, a senior media adviser to President Assad of Syria in 2011.

 

I had no idea if the email was true or not but this report in the Boston Globe titled, Sager defends support of Syrian dictator, suggests it, or something like it,  was.


As this article points out, Sager's Foundation also supported the acclaimed film, Budrus about peaceful resistance to the building of the Israeli West Bank Barrier.

 

Here's a video of Bobby Sager in Khayelitsha township, outside Cape Town, talking about indestructible soccer balls his Sager Family Travelling Foundation were giving away (For Khayelitsha see my site's history of those townships and conditions in them).

 

The South Africa TimesLive website reported Sager's Cape Town visit with his indestructible footballs in World Cup year under the headline, 'American do-gooder puts a stop to breaking of balls'.

 

Oh and just so you know, there is also an eight-part TV show loosely based on Bobby Sager's life called - natch - The Philanthropist.  And he is a photographer.

 

Platform Passion

 

So yes these guys are successful, very successful, and one of them spends more time giving away money than making it. Although he is still a Director of Gordon Brothers , the 'liquidator', as the FT puts it (above).

 

Maybe they really do share 'our' (I don't know who this 'our' is) 'collective' passion and enthusiasm for the 'Blipfoto'  'platform'.

 

It's very possible they were both involved in the discussions around the Blipfoto Ltd/Polaroid tie-up and what's not be be enthusiastic about? Aren't we all passionate about the platform?

 

'And they are as eager as I am [not 'we are'] to see it continue to grow and expand.' Again, what's not to like?

 

And to be honest, they both look kind of busy for photo-journaling, but I could see blipping from the Sager Family  Travelling Foundation from 'messed up' places around the world could be fun and informative (see for example the lovely Blipfoto journal, WellsforZoe).

Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)
Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)

 

The message from the 'platform' continues with Joe Tree expressing relief that business leaders have been found found that share 'his vision for Blipfoto' (again without the 'Polaroid') . He expresses his confidence that the new owners have the 'creativity and resources to support a long term plan for the platform.'

 

There's that 'platform' word again. Was that always part of the Blipfoto lexicon? First time I came across it was in a Polaroid press release about Polaroid becoming a 'licensing platform' in 2014.

 

And you can see why there is 'confidence' with the new owners because Blipfoto Polaroid had direct corporate and possibly personal links with them during the development of the 'Blipfoto' vision under its 'Polaroid Blipfoto' guise.

 

It's unclear in the announcement whether the new entity will be 'Blipfoto' or 'Polaroid Blipfoto': both are used in the text. But my guess is that it will be called,  'Polaroid Blipfoto',  and that the licensing agreement will be renewed in one form or another.  The website and apps are all now designed around the Polaroid Colour Spectrum and Border and the branding is embedded everywhere.

 

It would also be pretty strange for the owners to back away from Polaroid when they have such strong corporate links with it even if they are investing as individuals.

 

(Although the 2014 shift in the ownership of Polaroid with a 65% controlling share now owned by Minnesota's Pohlad family investment group might be something that needs to be factored in. But probably not.)

Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)
Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)

New Roles and Clean Sheets

 

I'm glad that Joe and Graham are being asked to 'play an active role' in the company. The 'boundaries [that there will be] to work within' could be difficult or not. When you have been founders, senior managers, directors, owners and the original users all rolled into one a reduced role could be difficult. But there could be share deals or other emoluments to lessen the bitterness of the pill.

 

The platform's priority 'always will be future sustainability' we are told but we don't really know what that means - does that mean revenue break-even, capital-growth oriented,  profit-making? Or something more to do with the future of the planet?

 

Starting with a 'clean sheet' is an interesting phrase and again what to make of it?

 

A clean balance sheet, for sure, because the company was liquidated and creditors payed off as far as the liquidator could achieve this.

 

I do wonder about the money Scottish Enterprise put in - £430,000 - (see previous blog). It seems a lot but that's the risk-taking model of economic development often used by state-agencies and you win some and lose others.  And all is not necessarily lost - there's still the platform, the management and the community.

 

But if I were a bone fide reporter I'd be asking Scottish Enterprise for a statement. (It's funny there has been no news in the media about the announcement. Maybe there were just not enough facts in it to build a story.)

Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)
Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)

 

The Community

 

I'm relieved the community will be 'well represented' as work begins on future plans for 'the platform/company' but disappointed that the way that the community will be represented is not detailed and that all that 'scurrying around' is going to take place first.

 

How and who will represent the community? And when?

 

It would be interesting to know what the new owners think about that. As far as I can tell they have largely worked in private companies that don't report to or consult with 'communities' and have little public transparency. It would be nice to get a steer from them because the mood music coming from them will have an important influence on whoever is actually running the show from Edinburgh or wherever.

 

And in the meantime the 'community', disparate and unknowlable as it is from within (we don't even know the user numbers in the community let alone the demographics and growth trends), might think about representing itself? You know, given that there is a 'clean sheet' and all that? (See my sign up here).

 

That phrase 'putting resources back in place that were lost at the beginning of March' makes you think. What would those 'resources' have been? The Blipfoto Team maybe? I wonder if rehires are in prospect - it sounded a fun place to work. But again I've not seen any news on this.

Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)
Excerpt from a Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015. (See full document at end of this blog for link.)

 

The New Dawn

 

The last two paragraphs are a corker. Talk about alchemy. What was a pretty catastrophic liquidation (for the staff team, the investors and the customers of Blipfoto Ltd.) has now given birth to an 'exciting transition' that has ' a bright future' and 'many wonderful new ideas in store'. Sort of - bang - crash - rebirth - and all in less than a month.

 

We can all toddle off now and 'rest assured' even if things in the 'very near term' might be a little bit unresponsive.

 

To be fair, what else can you say but I find this a strange statement. So full of unknowns and glowing optimism for the future. But then, as I said at the outset, maybe the announcement is more the new owners speaking than the old.


And maybe as more becomes known that optimism will show itself to be well founded and the tensions between the drive towards the Polaroid brand and its demographic and the different layers and segments of the Blipfoto community will be ironed out and we can all get on with what we came to Blipfoto or Polaroid Blipfoto to do. Blipping.

Note 

I think this will be my last blog on Blipfoto for a while. As of today the series has had 3,245 page views and the feedback I've received has been overwhelmingly positive. Thanks for taking the time to read the blogs and thanks particularly for your feedback, views and information about the Blipfoto story. I do go back and put in updates as better information becomes available.


I'd also like to thank Ian Stevenson at Salient Point, the high tech start-up service in Edinburgh, for helping me understand the inner workings of the startup world. He's also stopped me making a fool of myself on a number of occasions for which I am most grateful.  Anywhere else I've overstepped the mark into foolishness is entirely my own responsibility.


To access previous blogs go here and scroll through. Thanks again.

Message from Joe Tree titled, Update: An Exciting Future from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd. Posted 10.15 pm, 25 March 2015 (click for link)
Message from Joe Tree founder of Blipfoto and former CEO and Director of Blipfoto Ltd titled, 'Update: An Exciting Future.' Posted 10.15 pm, 25 March 2015 (click for link)
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The Polaroid and Blipfoto Licensing Agreement: Of all brands this one?

Update 30/3/15: Since writing this blog entry I've posted another, 'Barking up the wrong tree? A reinterpretation of the Blipfoto/Polaroid tie-up' which should be read alongside this one.  Much of the detailed work that informed 'Barking up the wrong tree?' is contained in this post.

 

Introduction

 

In 2009 Polaroid was a defunct, hollowed out company associated with instant film photography that had missed out on the great shift to digital and had lost vast amounts of money ($89m) attempting to develop the Polaroid Instant Home Movie camera named Polavision.

 

Ironically, given user reaction to the Blipfoto/Polaroid tie-up, the name ‘Polaroid’ came from the polarising polymer patented in 1929 and further developed by Polaroid founder, Edwin (‘Dr Land’) H Land who started out from a garage in Cambridge, Massachusetts.

 

The Polaroid Heritage

 

Described as the 'Steve Jobs' of his time Dr Land,

 

‘stuck to his guns, never diversified into other businesses, never sold out to another company, and never borrowed money on a long-term basis’.

 

Life magazine pictured him on its front cover in 1972 with the caption, ‘A Genius and His Magic Camera’.

 

At its height Polaroid had revenues of $3bn (1991) and and employed 21,000 people in 1978.

 

Polaroid did attempt to get into the digital market but largely failed and passed through bankruptcy twice in the 2000s.

 

It was a classic one-man led US corporation with a compelling garage-to-billions-to-bankruptcy narrative.


Promotional video for the SX-70 launched in 1972


At 8.50 minutes the film talks of the user where the SX-70 'provides a rich texture to memory and more than that thoughtful use can help reveal meaning in the flood of images that makes up so much of human life.'

Originally posted here.

 

The SX-70


The Polaroid SX-70 SLR with instant film launched in 1972 was a huge technological breakthrough and extraordinarily complicated. A long time Polaroid executive who wrote the book, Land's Polaroid,  Peter C. Wensberg said of it,

 

The SX-70 program was so complex and so extended the boundaries of half a dozen technologies that those who worked on it had difficulty in stretching their faith and their optimism beyond the piece of the whole on which their own energies were concentrated. Land was virtually the only person in the company who knew in detail all the difficulties that had to be surmounted. The rest of us could only guess.

 

Land had a maxim that went, “Don’t undertake a project unless it is manifestly important and nearly impossible.”

 

The story of the SX-70 never became the game-changer Polaroid had hoped for and was dogged by technical problems  and failed to meet initial sales projections. It went on to make Polaroid a lot of money, particularly when issued as the cheaper 1977 $39.95 OneStep. But only seven years after the SX-70's launch Lands was forced out of the CEO role by the Board (see technologizer.com).

 

In a coincidence that Joe Tree, founder of Blipfoto, draws attention to in his Blipfoto journal on a 7th Jan 2015 visit to the Polaroid Museum in Las Vegas the SX-70 was launched in the same year that he was born - 1972. He goes on to say that the two SX-70s he owns are amongst his most treasured possessions.

Photograph from the early 1970s of Ken Williams of the Polaroid Revolutionary Workers Movement that exposed Polaroid product links with the Apartheid regime in South Africa. He was fired by Polaroid in 1971 (click for African Archivist link).
Photograph from the early 1970s of Ken Williams of the Polaroid Revolutionary Workers Movement that exposed Polaroid product links with the Apartheid regime in South Africa. He was fired by Polaroid in 1971 (click for African Archivist link).

 

The Polaroid Revolutionary Workers Movement


There was a darker interlude to the Polaroid story that was revealed in the early 1970s by the Polaroid Revolutionary Workers Movement – formed by two African American Polaroid employees who discovered that Polaroid equipment was being used to take the photos for Apartheid South Africa’s notorious and hated Pass Books.

 

‘The company responded by sending a delegation to South Africa that recommended what became the "Polaroid Experiment." The company banned all sales to the government, including the military and police, and promised to raise wages and increase job training at its distributors. The plan was announced in the U.S. in full-page advertisements in major daily newspapers and 20 black weekly papers’ (African Archivist).

 

But in 1977 Polaroid film was still being sold to the South African government by a distributor and Polaroid ended all direct sales of Polaroid products to South Africa.

 

Artists and Polaroid


Polaroid instant film became a big hit with experimental photographers and artists. In 1948 Ansell Adams was hired to test their cameras and Andy Warhol, Chuck Close and David Hockney all had a go.  There's a nice little vignette on that experimentation here that notes a book, The Polaroid Years: Instant Photography and Experimentation. Also see the huge 20 x 40 inch  giant instant Polaroid camera made in 1970 and used by Chuck Close to create the Vanity Fair Hollywood Portfolio.

 

Bankruptcy and Decline


Polaroid's very messy and public decline, with two bankruptcies, the conviction and  imprisonment in 2010 for 50 years of CEO, Tom Petters,  of the Polaroid holding company, Petters Group Worldwide, for running a huge Ponzi (pyramid selling scheme) cannot have helped the brand's reputation and many industry commentators thought that Polaroid could not rise from the ashes of its demise.

 

The post-2001 Polaroid had already shifted towards becoming a licensing platform with a three year exclusive deal with World Wide Licences to produce and distribute cameras under the Polaroid brand. And at this time TVs and DVD players started to emerge under the Polaroid brand. It also sold of its manufacturing operations to Flextronics in 2005 who sent most of the manufacturing to China.

 

The New Polaroid: Remaking the brand

 

Despite those past glories and that rich heritage by 2014 Polaroid was largely a licensing platform (with a few dozen staff - see below) operating out of Minnetonka, Minnesota (apparently Tonka Toys were named in honour of nearby Lake Minnetonka) and owned by two distressed asset recovery giants, Hilco Global and Gordon Brothers (see previous blog entry).

 

The story of Polaroid's transformation is briefly documented in a Gordon Brothers case study of the company they acquired with Hilco Global in 2009.

 

Gordon Brothers Group shifted Polaroid from a distribution model to a "license/royalty" business model and began aggressively securing global licensing agreements. Gordon Brothers Group initiated a raft of organizational enhancements to align with this new business model approach, including retaining the majority of Polaroid’s Minnesota-based licensing team and appointing the Executive Vice President & Director of Marketing from the acquired entity as CEO of Polaroid.

 

In a previous  - now updated -  blog I've calculated a valuation of Polaroid at about $108m from the recent acquisition of a 65% stake by the Minnesota Pohlad family for $70m. Interestingly the article detailing the investment notes that the Minnetonka HQ of Polaroid employs less than 25 people.

 

From being unsure of where it was going (again see below)  Polaroid under its new owners and CEO Scott Hardy seemed much more confident with a string a cute ex-Apple designer designed products (the entry level action camera, the Cube, the tablet printer, the Zip, the printer/camera, the Socialmatic and the tiny zoom lens for iPhone's, the iZone).

 

Scott Hardy declared the company's new role in the press output surrounding the Polaroid/Blipfoto launch at the start of 2015 as a 'curator of innovation'. (There is a Fox New profile of Hardy, who has been with Polaroid since 2004,  here).

 

More particularly he said elsewhere,

"We're looking at all the technologies and new ideas happening in the country, and we're trying to curate that innovation."

 

Chair of Polaroid, Bobby C Sager, of Gordon Brothers, said in an interview with the Boston Globe in January 2011,

 

“Polaroid is a magnificent, iconic brand that stands for innovation. It was the original Apple. It could be the next Apple, and it’s going to be... We didn’t buy Polaroid to take a walk down Memory Lane. We’re at the very beginning of our innovation road map. ... We’re not only going to be thinking outside the box, we’re going to crush the box....Polaroid needs to be re-imagined. And that’s what I do: I re-imagine.’’"

 

The article goes on to look at the acquisition of Polaroid (for $85.9m). Regarding Polaroid’s niche Sager says that it is,

 

"about real people, real moments. You take someone’s picture, write something on the bottom, and give it to them. Polaroid pictures are the original social network.’’

 

The language here, way back in 2011 is interesting. Sager was already seeing Polaroid as a 'social network' long before Blipfoto Ltd began talking to the company about a licensing agreement.

 

The way this article tells it, the Gordon Brothers of acquisition of Polaroid was personally driven by Bobby Sager:

 

"Nearly two years ago, Sager was working on a philanthropic project when he read a routine Gordon Brothers memo that mentioned Polaroid was for sale.

 

“I was interested right away,’’ he said."

 

 

In the last chapter of the book, Instant: the Polaroid Years, (Christopher Bonanos, 2012) Bonanos notes that Sager alludes to 'mysterious future products' that will 'not be physical'  that will be 'connected to photo-swapping that goes on via social networks like Facebook' p.175

 

In another article a Minnesota ad agency exec gives a view of the Polaroid brand. He says,

 

"Polaroid has maintained an incredibly cool, retro feel to the brand. They’ve done a nice job keeping themselves relevant with the next generation, but the challenge is retaining that relevancy going forward.”

 

Another industry commentator says,

 

Consumer confidence in Polaroid and HMV is largely due to them being considered ‘heritage brands’ – or brands with nostalgic value – which allows them to retain brand value through their intellectual property after insolvency.

 

The Polaroid brand has been through a real beating and it was further damaged by the licensing undertaken in the bankruptcies period  (2001-9). You could argue that the brand has now been stabilised and a process of rehabilitation and growth is underway that is both generic across demographics and also specific with certain licensees focusing on particular market segments.

 

As a brand Polaroid does seems to have a strong residual appeal as a heritage and 'retro' brand with strong links to photographic innovation. And a lot of effort is going into remaking those connections and rooting the brand in that innovative past - for example through the 'history' sections on the Polaroid websites and through the Polaroid Museum just a stone's throw from Caesars Palace in Las Vegas (visited by 41m people last year).

 

And the company's forward strategy seeks to 'curate' further innovation and build the the brand, whether through cameras, printers, accessories, retail outlets and side licensing deals. You can argue that this innovation is never likely to replicate the scale or quality of the innovations developed under Land's inspired leadership in the post-war period. But I would imagine there is an aspiration as the brand is strengthened by focusing on the backstory and developed though current licensing agreements to attract more innovative products around it.

 

The Polaroid Licensee stable

 

What is the Polaroid group of licensees that Blipfoto Ltd joined when it negotiated a licensing agreement with Polaroid to rebrand as Polaroid Blipfoto?

 

There are the flat screen TVs, tablets, instant film cameras, action cameras, sports cameras, wireless photo printers, the 'Impossible Instant Lab' for turning mobile digital photos into prints (at least in Australia where the three volumes of Polaroid founder Edward Lands' essays are also available) and accessories that are marketed and sold online through the Polaroid website.

 

There is Polaroid Fotobar with so far 11 franchise stores in California, Nevada and Florida and an online operation. 

 

This was set up by entrepreneur Warren Struhl who approached Polaroid with the idea. Fotobar is, according to the marketing blurb,

 

'the first-of-its-kind, fun, and experiential retail destination that is changing the paradigm of how people "liberate" [ I think that means 'print'] their photos and turn them into innovative and memorable products.'


With regard to the brand Struhl says,

 

"I don't know of another company that has a name as associated with photos as Polaroid. They stand for quick. They stand for quality."

 

There is a bit of a trend for 'making the digital physical' at the moment. Whilst it may seem strange to start a bricks and mortar outlet for the digital age Struhl says,

 

"There's something to walking into a trusted location, with a name like Polaroid. You can feel the wood frames, the metals, the glass, the bamboo, the canvas, and see what you can do with that picture in person."

 

From the initial California, Florida (Boca Raton) and Las Vegas store locations Fotobar is not a 'happy snaps' type operation but looks to be spending heavily on getting the appearance of the shops just right and building a series of photography events around them.

 

See this video at Bloomberg where Struhl talks about the Polaroid brand and Fotobar as one of the top ten brands in the USA:

 

'It is truly one of the greatest brands of all times, in fact a few years ago research was performed and [it came out] a top ten most recognised brand so it's really deep in our culture, deep in the veins of society and we're blessed to have it as our name.'

 

Fotobar appears to have undertaken the development of the 4,500 sq ft Polaroid Museum and Fotobar shop at the flash and very expensive retail development at The Linq centre in Las Vegas on the main strip as well as opening shops in Florida and California. According to a Caesars Entertainment Corp filing (Form 8-K),


'The [Linq] location will take advantage of the significant foot traffic and visitation to the Las Vegas Strip and should provide increased visitation to our nearby Strip properties by attracting visitors to the area. Project Linq is planned to appeal to the region’s growing Generation X and Generation Y clientele (ages 21 to 46) whose market share is estimated to grow in the future.'


Polaroid Fotobar announced in June 2014 that it was offering its new retail experience as a franchise opportunity. DI Reporter noted,

 

There are a variety of design options for franchisees, including a traditional 1,400-square-foot store and a micro-retail experience. Initial investments will range from $135,000 to $439,000, depending on the type of Polaroid Fotobar concept selected.

 

On the ownership of Fotobar see Note 1.

 

 

There is a recent licensing agreement with L'Image Home Products Inc. 'to bring to market a new line of Polaroid-branded home lighting products in Canada, Spain and Russia'. A Polaroid smartphone was recently unveiled for the European market. And there's a Polaroid 'fit band'.

 

There are also marketing tie-up with retailers like Urban Outfitters in the USA and ASDA in the UK.

 

Internationally and judging by the Polaroid international website outside the USA Polaroid is most active in Australia, Brazil, France, Germany, Mexico, South Africa, Spain and the UK.

 

You can also still buy Polaroid 'polarized' sun glasses online from Polaroid Eyewear Limited in the UK and which is located on the Vale of Leven Industrial Estate in Dumbarton, Scotland (see also the jazzier Polaroid sunglasses website)and a Facebook with a quarter of a million 'likes'.

 

It looks like the Polaroid Polarized Sunglasses brand may be owned as part of a stable of proprietary brands by Italian eyewear giant, Safilo which had revenues of €1.2bn in 2014 (see here where in 2013 Safilo announces a 10 year licensing agreement with opthalmic lens producer, Essilor. Roberto Vedovotto, CEO of Safilo Group said,

 

'We consider this project an extraordinary opportunity for Polaroid ... to confirm its credibility and worthiness as a reference brand for the protection and improvement of eyesight.'

 

Safilo acquired the Polaroid eyewear business in 2012 for about €66m.  Polaroid had sold the eyewear business to StyleMark in 2007.

 

There is also a new company, Impossible, that makes the  £129 Instant Lab, which 'photographs a picture on your phone’s screen and converts it into a Polaroid print'.  Impossible also buys and refurbishes old Polaroid cameras (30,000 and counting in six months in 2014) and has re-started the old Polaroid film factory in The Netherlands. With $40m investment the company expected to sell 1.4m packs of Polaroid photo paper in 2014.

 

Thre's even an award winning documentary about the alomst-death of Polaroid instant film and one man's attempt to save it called, Time Zero. (Thnaks to nhc for bringing this to my attention).

 

Ironically Impossible does not appear to be a licensee of Polaroid. It sells refurbed Polaroid cameras and it makes 'Polaroid' film. But these do not bear the Polaroid logo and Polaroid itself actually sold in 2011 Fuji film and an instant camera rebadged as Polaroid rather than the film made by Impossible in Polaroid's old Netherlands film factory on superior quality grounds.

 

Florian Kap, one of the three founders of Impossible was not worried by the Fuji film competition in that he reckoned the Fuji film was so perfect it was almost like digital.  By contrast, the Impossible film, at least according to Polaroid CEO, Scott Hardy, has that 'artsy, surprise-me-with-how-it-develops' quality beloved of some photographers. 

 

And there is Polaroid Blipfoto - although I have yet to come across a link from the other Polaroid licensee family websites to it but there again I haven't seen links between any of them.

 

But it is interesting to see just how ubiquitous the Polaroid 'colorstripe' logo - developed in 1968 as packaging for Polaroid colour film - see here - is across all Polaroid licensees.

 

Criticism of Polaroid products

 

The Polaroid products do not always garner praise. In a caustic review of Polaroid's stall at CES 2013 this article from The Verge includes this assessment of an interchangeable lens camera powered by Android,

 

The casing was cheap, the software kept freezing, and the actual camera app just... didn't work. At all. "Where Polaroid promises a fun, inexpensive, easy-to-use compact system camera ‘for your mom,' what's actually on offer is a hollow, plastic, inoperative piece of landfill debris.

 

The same Verge article says of the UK ASDA marketing tie-up,

 

In 2012, Polaroid partnered with UK chain Asda, agreeing to slap its brand name on whatever random electronics the Walmart subsidiary chooses.

 

The article ends with biting critique of Polaroid suggesting that the once great company has been sliced and diced so many times that it no longer knows what it stands for chasing different demographics:  the 'hipster' market with Lady Gaga at the helm and then the "photo-happy moms" and now a return to hard copies and stores.

 

Quoting a New York Times article at the time of the first first bankruptcy  that opined "most experts predict that Polaroid will never emerge" the Verge article ends by asking: 'At what point do you say, do not resuscitate?'

 

But since 2013 the Pohlad investment and more recent product launches suggest that there is a growth and learning curve that is being climbed by Polaroid. There may also be a deliberate non-linking of the licensee family to avoid cross-contamination of the brand if individual projects sour.

 

Others are more optimistic including, Christopher Bonanos, author of the book, Instant: the Polaroid Story,

 

"I am rooting for them. These guys appear to understand what they have purchased. They appear to be better stewards. I would just love them to come up with, or hook up with, a great idea."


Selling Polaroid to Blipfoto Users

 

On January 2nd 2015 Blipfoto Ltd CEO, Joe Tree, explained the logic of the tie-up with Polaroid in glowing terms: Polaroid was iconic, the one we all grew up with, the original photo sharing network, a real leveler, fun, accessible, easy, and he saw it as critical to one of Blipfoto's missions.

 

He said,

 

'With Polaroid standing beside us, we are a huge step closer to our goal of being the place where the world tells its story.'

 

And added, as if aware of possible adverse reaction,

 

'We will continue to ensure that the community comes first.'

 

It's worth recalling that the CEO of any company takes his lead from the Board of Directors and conveys their strategy and priorities to staff, users etc. And in May 2015 it was the Board that agreed the licensing agreement with Polaroid.

 

At CES 2015 (a huge consumer electronics convention that was attended by 160,000 people in 2014) in Las Vegas there was great feedback about the tie-up and what was now Polaroid Blipfoto coming in. Joe Tree reported on his blip of 8th January,

 

Another incredible day for us. Everyone loves everything we're about and it's wonderful getting the chance to meet so many important people and tell them our story.

 

But there were also 208 comments on the Polaroid Blipfoto web page that announced the Polaroid licensing agreement entitled, 'Our exciting new chapter ...'.

 

I didn't read them all but there seemed to be about a 50/50 split between wholehearted and guarded optimism and scepticism, anger, and incomprehension. 

 

With hindsight and for many at the time the fit between Blipfoto's user community demographic, ethos, and camera ownership with the 2015 teen/millenial-oriented world of cheap and cute cameras and printers (with more expensive add-ons) looked almost non-existent. It was just baffling. Of all the camera brands why this one?

 

Despite the announcement asserting that,

 

“Polaroid is recognized around the world and is synonymous with the kind of fun and sharing that Blipfoto is all about.”

 

a lot of Blipfoto users were dangerously off message. And a few left the community on the strength of their unhappiness.

 

The Polaroid/Blipfoto Licensing Deal

 

Blipfoto Ltd's Resolution and Adopted Articles of Association of May 2014 and the 2014 Annual Return don't really tell us a lot abut the deal with Polaroid other than that Polaroid got a fully paid up share allocation of 85,534 convertible redeemable preference (CRP) shares, 'full voting rights' and that the amount 'paid per share' was £2.74 and they entitled the holder 'in respect of capital to a full participation in a distribution (including winding up)'.

 

The CRP shares in the 15 May 2015 allotment were to be fully credited as paid up in cash (9.10.2b) and 'rank pari passu [on an equal footing]' with all existing Ordinary shares (9.10.2c) (May 2014 Articles of Association).

 

On the face of it, it looks like Blipfoto Ltd paid for the licences granted to it by Polaroid with a share allocation with a face value of £234,000.

 

Polaroid (PLR IP Holdings) also got a non-voting observer on the Board of Directors named as the CEO of Polaroid, Scott Hardy.

 

A Licensing Agreement was drawn up but it is not a publicy-available document.

 

We don't know the details of what Blipfoto got from the deal but the footer on the Polaroid Blipfoto webpage gives a good idea of some of it. It says,

 

'Polaroid, Polaroid & Pixel, Polaroid Classic Border Logo and Polaroid Color Spectrum are trademarks of PLR IP Holdings, LLC, used under license.'

 

The footer at the bottom of the Polaroid web page includes the text,

 

Instantly recognizable. Instantly reassuring. The Polaroid Classic Border and Polaroid Color Spectrum logos let you know you've purchased a product that exemplifies the best qualities of our brand and that contribute to our rich heritage of quality and innovation.

 

Was that what Blipfoto Ltd was buying with shares given to Polaroid with a face vale of £234,000? Instant recognizability and reassurance that let's you know that what you're using or about to use exemplifies the best qualities of the Polaroid brand?

 

I personally think the branding works well - if you like the brand - across the different Blipfoto social media channels - from the website to the Android and iPhone apps. And to consumers already aware of the Polaroid brand I can see that the Polaroid Colour Spectrum  and 'color stripes' logo (developed from  a film packaging design of 1968) could act like a reassuring beacon that immediately makes  Blipfoto visible  in the swirling seas of Appland. 

 

And there was the joint launch at the CES 2015 Las Vegas Conference Center and maybe other joint marketing initiatives. Maybe there were other things too - access to the Polaroid customer base or such like. We don't know.

 

Looking back at the Polaroid website press release of 2nd January 2015 it's strange to see that Polaroid Blipfoto was being advertised 'a free online photo journal' that was ,'free to use and available to everyone - because life’s worth celebrating, every day.'

 

(The Polaroid press release of 6 January 2015 also announces Polaroid Blipfoto as part of Polaroid's stand at CES 2015).

Were there alternative brands?

 

My anecdotal knowledge of the Blipfoto community suggests Blipfoto users have invested heavily in quality DSLR cameras and lenses with ownership focused on Nikon and Canon.


Interestingly, the one hint at an evaluation of the Polaroid brand I have come across by John Gerzema on TheBrandBubble.com has this to say in relation to Canon


Polaroid “once was simply ‘magic’” but now it is “perceived as 35 percent less up-to-date and 23 percent less visionary than Canon.” Gerzema analyzed data from the BrandAsset Valuator, a massive brand database, to arrive at this conclusion.

 

Could Blipfoto Ltd have made a licensing deal elsewhere? As far as I can see Nikon does not license out its brand or trademarks and vigilantly protects its intellectual property rights. This appears to be the case with Canon too.

 

Perhaps Kodak might have been a contender but it's post-digital history is one of massive lay-offs, a foray into digital printers, aggressive patent litigation and finally the sale of many of its patents for $525m.

 

Kodak now focuses on providing packaging, functional printing, graphic communications and professional services to businesses throogh its Digital Printing & Enterprise and Graphics, Entertainment & Commercial Films divisions.

 

Next steps

 

At the turn of the year on January 1st 2015 everything was now dependent on the new Polaroid tie-up and the creation of a multi-channel platform  (website, Android and iPhone apps and links into Twitter and Facebook) delivering new users and delivering them fast.

 

Richard Branson was on the telly last night advertising a new show. He said words to the effect that there is a very narrow margin between business success and failure.

 

At some point in the two months that followed the announcement of the Polaroid Blipfoto tie-up that margin from being a highly successful startup business to being a company in catastrophic trouble was crossed.

 

Conclusions and Reinterpretation

 

(This section is now superseded by this blog entry)

 

When we take the foregoing analysis the Polaroid/Blipfoto tie-up does not look like an aggressive takeover by 'corporate America' or a 'sell out' by Blipfoto Ltd even though it was often seen as this by Blipfoto users.

 

 It was rather a licensing agreement that gave Polaroid some but by no means decisive influence in the affairs of Blipfoto Ltd - after all the Board observer did not have a vote and votes by shareholders only apply at Annual and Extraordinary meetings.

 

And the tie-up was embraced by the Board in as much as they approved it and it secured the definite prospect of a further, and large, round of investment in Blipfoto Ltd.

 

Without further information we don't really know what demographic Polaroid Blipfoto was going after except that the US market was key but in the broadest terms there seems to be a poor fit between the Blipfoto user demographic and ethos and that which was being targeted by many Polaroid products.

 

However, maybe that lack of fit didn't really matter. When we discount the licensing agreement as a 'takeover' by Polaroid it is much more likely that the Blipfoto rebranding was more about increasing the recognizability of the Blipfoto proposition to users across all age groups and was supposed to be the key that opened the US market and possibly other markets.

 

I've previously thought that Polaroid saw Blipfoto as a strategic partner or 'acquisition' (which it wasn't) but the facts that we now know don't support this view.  It seems that Polaroid was willing to sell licenses without seeking  product or marketing synergies between the different and diverse Polaroid licensees - maybe it was a more ad hoc process as long as a certain quality threshold was met. That's the view of some observers (see The Verge article earlier) although they would argue that even the quality thresholds were weak. (For much more detail here on the development and range of Polaroid's licensing activities and the way brand licensing works see the my blog, The Polaroid and Blipfoto Licensing Agreement).

 

It came as something to a revelation to me when I realised that the contemporary Polaroid is no corporate giant. My back-of-the-fag-packet calculation values it at $108m - a veritable corporate minnow - and it has a workforce of 'a few dozen staffers in a humdrum Minnetonka office building, its headquarters, and in Boston and New York City'.

 

So the Polaroid that emerged from the 2009 liquidation was a small operation, with tens of staff, a bankruptcy trust and a corporate shell that has been completely hollowed out. All it had was a brand that had to be reinvented and begin to attract some revenue. The story of Polaroid's transformation is briefly documented in a Gordon Brothers case study of the company they acquired with Hilco Global in 2009.

 

Gordon Brothers Group shifted Polaroid from a distribution model to a "license/royalty" business model and began aggressively securing global licensing agreements. Gordon Brothers Group initiated a raft of organizational enhancements to align with this new business model approach, including retaining the majority of Polaroid’s Minnesota-based licensing team and appointing the Executive Vice President & Director of Marketing from the acquired entity as CEO of Polaroid.

 

But if Polaroid's strategy was based on an ad hoc way of creating revenue from licensing deals and royalties why agree to take untradeable shares in lieu of cash, as happened in the Blipfoto Ltd deal?  Maybe this was just another new avenue Polaroid was interested to explore - a kind of weak joint-venture where Polaroid took a backseat observer role. Or maybe Blipfoto could not demonstrate a strong enough flow of potential royalty income to Polaroid to secure a deal without a share transfer.

 

For Polaroid there may have been an attraction in putting little bit of corporate skin in the game to explore what potential there might be in a social media licensing tie-up with potential marketing synergies between Polaroid licensed products and the growing user base of Polaroid Blipfoto. Although as far as I know Polaroid's modus operandi seems to not involve share holdings in licensees. It's strategy about licensing and not becoming a holding company.

 

Whatever the details of the case the Polaroid agreement with Blipfoto Ltd was a limited commitment, small scale, discreet and exploratory.

 

If the deal carried no opportunity cost for Polaroid - (ie if there wasn't another similar social media platform who was offering to pay cash for licenses) - it was a win-win situation for the company.  If Blipfoto went belly-up and as long as there wasn't a reputational taint to the affair Polaroid didn't really lose anything - some corporate time and maybe some lawyer fees. And if Blipfoto Ltd suddenly started to grow and gain capital value or revenues Polaroid was sitting pretty with it's convertible, redeemable preference share-holding, an inside view of how and why the company was succeeding, and possibly a growing stream of royalty income.

 

I've also tended to see the Blipfoto link to Polaroid as something to do with the founders' affection for the company but thinking about this futher and the train of events at Blipfoto it now seems more likely that the licensing agreement was a way of convincing investors to put more money into the company.

 

It signaled a certain arrival. 'Here we are', it seemed to say. 'Look at the potential growth our new branding is going to bring in. We're up there with an iconic American brand. It's take-off time. Billion dollar company here we come.' 

 

And that new investment was almost forthcoming - nine hundred thousand pounds' worth was on the table in Decembver 2014 . The share allotment was in place and a share price had been agreed. All that the company now needed was to produce the results and avoid an 'underperformance event' and the new investment would come.

 

Once we move away from seeing Polaroid as an 'aggressive acquirer' of Blipfoto Ltd the stress I have previously put on 'demographic fit' between Polaroid's other offerings and the Blipfoto Ltd offering also becomes much less important. It wasn't that Polaroid wanted Blipfoto and its particular model of client capture and those 'magic moments once a day' as I argued in this blog. It was that Blipfoto Ltd wanted a branding agreement with Polaroid. Blipfoto was the suitor not Polaroid.

 

If the initiative for that licensing deal came from Blipfoto Ltd and not Polaroid the picture is very different. The licensing deal was about gaining recognisibility, prominence and credibility for the Blipfoto Ltd 'product' in a rapidly expanding and crowded social media and photographic market place with a particular emphasis on the US market.

 

Polaroid were probably not that fussed if Blipfoto Ltd's activities led to cross selling opportunities to other Polaroid licensees as long as they were getting paid in shares and (possibly) royalties for the use of the license. And Blipftoto Ltd must have made an assessment that the Polaroid brand had a broad relevance and resonance to their target customers and that it would help encourage and translate initial website views into signed up customers.

 

I've also tended to think that either Polaroid identified Blipfoto Ltd as a partner or Blipfoto actively selected Polaroid from a range of potential licensing partners. But maybe Blipfoto Ltd just didn't have much choice in its quest for a licensing agreement. (What other relevant brand licenses were available?)

 

It may have been that Blipfoto Ltd's investors and Directors were pushing for a branding agreement as a quid pro quo for further investment in the company and instructed the management team to go out and find one that was relevant to the company's expansion plans vis a vis the US market. In this regard it is noteworthy that Blipfoto Ltd had appointed a Sales and Marketing senior manager in late 2013 to take forward Blipfoto's 'customer acquisition internationally as well as its marketing and PR activity'.

 

Blipfoto Ltd: The Last Acts (Investment)

Update 30/3/15: Since writing this blog entry I've a number of others. The last,  'Barking up the wrong tree? A reinterpretation of the Blipfoto/Polaroid tie-up' should be read alongside this one.  Thanks.


This is the fifth in a series of blogs about the demise of Blipfoto Ltd and the future for its user community.

 

This post attempts to shine some light (however weak this in places might be) on the events behind the downfall of Blipfoto Ltd. in March 2015.

 

The only official explanation that has been given thus far is found in the message from Joe Tree of 18th March and an article in The Scotsman of 18th March which quoted Blipfoto Ltd. Chair, Ian Ritchie.

 

Joe Tree, founder, CEO and a Director of the company said,

 

Two weeks ago, following events outside its control, the Blipfoto Board of Directors took the incredibly difficult decision to put the company into liquidation.

 

The Scotsman article of March 18th 2015 said,

 

Ritchie said yesterday market research had suggested that the strength of the Polaroid brand would ensure a leap in subscriber numbers, but it did not happen.

 

He said: “Because of that some other funding that was due to come in was no longer available and the company found itself in a position where it could not continue trading. The loyalty of members was very strong, but we didn’t have enough of them.”

 

That is all we know so far. On March 2nd Joe Tree and Graham Maclachlan (co-founder, Head of Community and Content, Company Secretary and a company Director) posted their last blips - at least for now - and on March 3rd the Polaroid Blipfoto Facebook page posted its last post.


In the middle of March news broke that Blipfoto Ltd. had been placed in compulsory liquidation. This news was published in The Gazette on Friday 20th March and confirmed that the company had put itself into liquidation.

Publication of the Petition to Wind Up Blipfoto Ltd From The Gazette.
Publication of the Petition to Wind Up Blipfoto Ltd From The Gazette.

News also broke of a preferred bidder to buy the Blipfoto's assets but I have covered that elsewhere in these blogs. At the moment an eery and unsettling silence reigns.


So what did happen?


This blog looks at a crucial event shortly before Blipfoto announced its partnership with the Polaroid brand to the world at the CES convention in Las Vegasthe in early January 2015.  By March 2nd something so catastrophic had happened that it forced the Directors of the company to petition for liquidation and appoint a liquidator.


According to the Chair of Blipfoto's Board of Directors two key events took place in this period. Firstly, a leap in Blipfoto subscribers did not take place. And secondly,  'some other funding that was due to come in was no longer available'.


The sources of evidence for examiningg those two linked events - the one appearing to cause the other - are pretty sparse indeed. These include past Blipfoto statements, media coverage of Blipfoto's rise as a tech start-up, and the documents Blipfoto Ltd was obliged to post with Companies House. A last source of information comes from Blipfoto itself.

It is ironic and, I think unique, that Blipfoto - the photo-journaling company where 'history lives' - can shed additional  light on this period because two of the key players, Joe Tree and Graham Maclachlan as senior managers and Directors and Secretary of the company, were posting publicly-viewable daily journals and photographs during this period.


Maybe one to place to start is the second event - the investment that was not forthcoming.

 

Well. what do we know about that?

 

Almost nothing. It was supposed to happen but it didn't because of the absent 'leap' in new users/subscribers. 

 

But as Ian Stevenson of Salient Point, the Edinburgh startup advisers, implies in his really useful blog entry of today companies don't just raise investment with a snap of the fingers. A whole number of things need to be set in place to issue new shares and such like. And where will that be documented but at Companies House.

 

And there we find a document that is publicly available (for a quid) called ADOPT ARTICLES 12/12/2014.

Excerpt of list of filings by Blipfoto Ltd at Companies House.
Excerpt of list of filings by Blipfoto Ltd at Companies House.

So what is this document about?

 

Firstly, it is about creating new Blipfoto Ltd shares. And secondly it is about the adoption of an amended set of Articles of Association - which is the rule book that the company is run by (like a constitution) and something that the Company Secretary has to ensure is complied with by the company's Directors.

 

It appears from the document and it's timing - in the middle of December 2014 - that this was preparing the way for a new round of investment in the company.

 

With regard to share creation the Board of Directors agreed through an Ordinary Resolution on 12.12.14 to do the following:

 

  • create 222,202 ordinary 0.001p shares with a subscription price of £4.09 per share - the 'Ordinary Shares'
  • create 24,690 0.001p convertible redeemable preference shares - 'the CRP shares'
  • create 110,223 ordinary 0.001p shares for an options agreement for Directors and staff - 'the Options Shares'
  • create 5,928 ordinary 0.001p Warrant shares - the 'Warrant Shares'

As I understand it this suggests the company was preparing for new investment that would be made through the sale of the 222,202 'Ordinary shares'. The other share issues - CRPs, Options and Warrants - were issued without a purchase price because these were to stop the dilution of other shareholders' percentage holdings of the total share capital of the company.

 

So how big was this round of investment to be?

 

Multiply 222,202 by the purchase price of £4.09 and you get £908,806.18. That's nearly a million quid and would have practically doubled the investment in Blipfoto Ltd since its inception.

 

It's a very precise sum and you wouldn't go all to all the trouble of passing and drafting the resolution and the new/amended articles unless you had a very firm offer of that new investment.

 

So that's the investment side of the 12.12.14 filing at Companies House. It really was a major, major development.

 

What about the stuff with the Articles?

 

Well. it's complicated. Very complicated.

 

But a few things first on the invovlement of Polaroid through the parent company, PLR IP Holdings.

 

From the 12.12.14 document we now know the license agreement with PLR IP Holdings (Polaroid) was signed on 15 May 2014 (see 'License Agreement' in Defined Term 1.1) and that the CRP shares to PLR IP Holdings (Polaroid) were issued on the same date (see 9.9).

 

And that PLR had the right to have an observer at Board meetings with no voting rights (8.1.4) and that provisions were included to ensure that the Articles could not be changed without PLR's written consent (9.9 CRP shares protective provisions).  And that the PLR share capital holding of the company could not be reduced below 10% of the fully diluted share capital (9.10.1)


(The PLR observer status was granted in the 15 May 2014 Articles rewrite - and named as 'Scott W Hardy' who is CEO of Polaroid.)

 

Further new issue of CRP shares to ensure PLR's share holding was not diluted were to be paid up by the capitalisation of available reserves of the Company - ie of Blipfoto Ltd (9.10.2.a).


(NB This was also the case with the CRP shares in the 15 May 2015 allotment - 9.10.2a - and to be fully credited as paid up in cash 9.10.2b and 'rank pari passu [on an equal footing]' with all existing Ordinary shares 9.10.2c.)

 

As for the rest of the Articles the impression they give is of an increasingly carefully defined relationship between the major shareholders/investors, their particular directorships, and the company. There is also generic reference to possible 'Underperformance Events' and a provision (8.15) is made to allow the Board (excluding the executive Directors - that is Joe Tree and Graham Maclachlan) to remove any director and appoint up to two additional directors.

 

From the mention of these 'Underperformance Events' - that is, where the Company is adjudged by the Directors to have failed 'to deliver any material aspects of the Business Plan (1.1) - it seems that the Directors may have been increasingly aware of, not a coming crisis, but rather of the mission critical nature of key upcoming events - which reading between the lines and with hindsight related specifically to the launch of the rebranded website in the next month and projected new user figures that were forecast to flow from this. (NB 'Underperformance events' are not listed in the Defined Terms 1.1 of the May 15 2014 adoption of new Articles.)

 

As to who the new investors were to be we have little indication. But the fact that a new named directorship is not created in the Articles of December 2014 tends to suggest that the the new investment was to come from one or a combination of the existing investors, with the probable exception of PLR IP (Polaroid).  I deduce this latter opinion from the issue of more convertible redeemable preference shares which in went to Polaroid and were issued at the Blipfoto's expense.


The passing of the share increase resolution and the new Articles of Association was a huge, huge day for Blipfoto and it came just shy of a month before the launch of the new website and Polaroid partnership in Las Vegas.


You can imagine how hopeful this development must have made the Board feel. The proposed injection of investment could have really boosted the company and provided a cash buffer to fund new development until that magical point of positive cash flow was reached (see Ian Stevenson here on the importance of this.)

 

Joe Tree's Blip for 12 December gives a sense of the occasion. It entitled 'Ends and Starts' says,


It's the end of the week, almost the year, and a long, long process. Next week is the start of new things, opportunities and adventures.


It was a hopeful time. 


But everything rested on the success of the new launch and media campaign to pull in new users. The Board must have been very confident that the company was going to make its numbers. But just in case there were those caveats about Underperformance Events written into the Articles.

Point 9.3.5. in the Blipfoto Ltd adopted Articles of Association of 12.12.2014. A clause which seems to allow a 21 day grace period for those acquiring shares if an Underpeformace Event 'subsists or occurs during the 21 day share offer period'.
Point 9.3.5. in the Blipfoto Ltd adopted Articles of Association of 12.12.2014. A clause which seems to allow a 21 day grace period for those acquiring shares if an Underpeformace Event 'subsists or occurs during the 21 day share offer period'.
3 Comments

The Blipfoto Community: a possible snapshot

Update 30/3/15: Since writing this blog entry I've posted a number of others. The last,  'Barking up the wrong tree? A reinterpretation of the Blipfoto/Polaroid tie-up' should be read alongside this one.  Thanks.


This blog entry, the fourth in a series on the uncertainty surrounding the future of Polaroid Blipfoto, analyses the web traffic increase at my site - fergusmurraysculpture.com - over the period 17 to 21 March 2015. This increase was entirely caused by the blogs I posted and the social media and blog links to these.

 

I have looked at the traffic generated to see if it is possible to develop a better understanding of the Blipfoto community with all the dangers inherent in using a small and uncertain dataset.

 

At the end of the blog I've suggested three things that can be drawn from the data and the possible knowledge it gives us of the Blipfoto community.

 

If you were one of the many blog readers who didn't last ten seconds on the other pages I wrote I suggest you scroll to the bottom *really quickly* for the take away points.

 

Cheers

 

Website traffic at fergusmurraysculpture.com during March 2015 and the Blipfoto blogs effect (JimDo statistics).
Website traffic at fergusmurraysculpture.com during March 2015 and the Blipfoto blogs effect (JimDo statistics).

The chart above shows the dramatic increase in web traffic at my site - which I can assure you is not monetized in any fashion - following the publication of three blogs about Blipfoto on March 17th, 18th, and 19th in 2015.


Using Google Analytics I wondered if the data behind the aggregate web traffic could tell us anything about Blipfoto. Throught out the analysis presented here it is vital to bear in mind two really important caveats. Firstly, this is but a Blipshot of self-selecting internet users - who may or may not be Blipfoto users and who may or may not be representative of the broader Blipfoto community (which has been said to number 'tens of thousands'). And secondly, the underlying traffic on my site, which chugs along at about 50 visitors a day, has to be discounted.


With regard to the three Blip Blog pages and my generic blog page these received  1,948 views between 17 and 21 March out of a total of page impressions (which I assume is the same as 'views') of 2,500, that is 78% of all page views.


Page views at fergusmurraysculpture.com 17-21 March (JimDo statistics).
Page views at fergusmurraysculpture.com 17-21 March (JimDo statistics).


During this period there were 1,715 visitors to the website with a high percentage of returning visitors - 32% - suggesting people came back to look at the different pages as they went up.


Website sessions for that period came through four channels - social media, direct, organic search and referral. 50% (884 sessions) per cent came from social media with the great majority from Facebook and the remaining 41 from Twitter.


34% per cent were direct - (which Google Analytics support defines as  'a user used a bookmark or typed your site URL into his or her browser'). And 11% came from internet searches and 5% from referrals - with 54% of the latter coming from Ian Stevenson's blog at Salient Point. 


Channel origin of web traffic sessions to fergusmurraysculpture.com 17-21 March (Google Analytics).
Channel origin of web traffic sessions to fergusmurraysculpture.com 17-21 March (Google Analytics).


What does this last data tell us?


In a nutshell, that having the Facebook Blipfoto Friends page has been critical in getting traffic to the blog pages and that cross-referral between blogs is also important. The Facebook page is particularly important because this is a closed (ie non-public) page and I would imagine that nearly all its members are members of the Blipfoto community.


Unfortunately I cannot present demographic data for site visitors because in order to get this data on Google Analytics you have to enable something called 'Advertising Features' which allows Google to collect data with more identifiers attached to it than I would be comfortable with. So I've steered clear of this but this is what Google Analytics says about Advertising Features,


By enabling the Advertising Features, you enable Google Analytics to collect data about your traffic via Google advertising cookies and anonymous identifiers, in addition to data collected through a standard Google Analytics implementation. Regardless of how you send data to Google Analytics (for example, via the Google Analytics tracking code, Google Analytics SDK or the Measurement Protocol), if you use Google Analytics Advertising Features, you must adhere to this policy.


So no demographic data unfortunately.


But in terms of the geographical data that is available - see map and chart below - shows that the UK and the US accounted for the vast majority of sessions (62 and 12 per cent respectively). Europe, Australasia, South Africa and Brazil, India, Vietnam and the United Arab Emirates comprise the other locations. 


Cyprus, South Africa and New Zealand are probably over-represented in that I get traffic from these countries to other page groupings on the site - particularly my site's all time most visited page The history of Cape Town's townships in the 67,000 page views the site has had since Dec 2011.


Geograpical origin of fergusmurraysculpture.com site sessions 17-21 March 2015  (Google Analytics).
Geograpical origin of fergusmurraysculpture.com site sessions 17-21 March 2015 (Google Analytics).


How do you interpret this geographical data bearing in mind the caveats at the start of the blog?


I think broadly it's possible to say that those members of the Blipfoto community engaging with the Facebook Page Blipfoto Friends and the blog on my site are overwhelmingly from the UK first - by a long shot (63%) - and the USA (12%) second. But that these two countries 'only' account for 75% of the traffic and that there is a broad spread of session visits from a wide range of countries.


Whether or not this is representative of the broader geographical location of Blipfoto users is another point but I would imagine (for no other reason than it seems to fit in with the company's historical development) that it is.


Top 25 countries by origins of sessions at fergusmurraysculpture.com site sessions 17-21 March 2015 (Google Analytics).
Top 25 countries by origins of sessions at fergusmurraysculpture.com site sessions 17-21 March 2015 (Google Analytics).


If we  look at the data by the top 25 city-origins of website sessions this shows - that at least from the data set here of self-selecting Blipfoto users and interested parties - Blipfoto still has  strong Scottish roots with 16% of sessions originating in Scottish cities with Edinburgh in the lead of city-origins overall  at 10.8%.


English cities in the top 25 city-origins in this data account for 18% of sessions. But this has to be set in the context of the much larger population of England (53.9m 2013 estimate) compared to Scotland (5.3m)


City-origins of website traffic to fergusmurraysculpture.com 17-21 March 2015 (Google Analytics).
City-origins of website traffic to fergusmurraysculpture.com 17-21 March 2015 (Google Analytics).
Top 25 City-origins of website traffic to fergusmurraysculpture.com 17-21 March 2015 (Google Analytics).
Top 25 City-origins of website traffic to fergusmurraysculpture.com 17-21 March 2015 (Google Analytics).

 

Whilst remembering that this data is not statistically representative of the Blipfoto user community for the reasons described above it is interesting that there are only three US city origins in the top 50 city-origins for the data set - New York, Portland (Oregon), Warwick, (Rhode Island - thanks David!) and Seattle.

 

And that the English city-origins do not suggest a concentration in the North of England I had imagined.

 

26-50 top city-origins of website traffic to fergusmurraysculpture.com 17-21 March 2015 (Google Analytics).
26-50 top city-origins of website traffic to fergusmurraysculpture.com 17-21 March 2015 (Google Analytics).


What can we suggest about this geographical data?


If, as suggested in previous blog entries, Blipfoto has been pushing to develop it's US user base, from this data it would suggest it has some way to go. Further, if the Polaroid Blipfoto phase pressages post-liquidation  - as seems very likely- an acquisition by the US owners of Polaroid and stronger links between Blipfoto and the Polaroid brand  - which is (I think) strong in the US but weaker in Europe - this could prove challenging.


But again, the data here is a particular snapshot of a particularly engaged user.


I would suspect that this data tends to be more representative of the longer-standing Blipfoto users. It may be that there is stronger demographic representation in the US won in the last year or two (or last three months even - although Blipfoto Chair, Ian Ritchie's comments (see first blog rather go against this go against this) that is less engaged and less aware of the troubles swirling around the company.


Session duration of website traffic to fergusmurraysculpture.com 17-21 March 2015 (Google Analytics).
Session duration of website traffic to fergusmurraysculpture.com 17-21 March 2015 (Google Analytics).


Lastly, and for the sake of openness, although I've suggested that the number of visits to the Blipfoto blogs at my site is suggestive of a strong sense of user community 'engagement' it's important to point out that of the 1,806 sessions between 17 and 21 March 1,500 were 'fleeting', to say the least, at 0-10 seconds duration.


Perhaps more heartening is that 14% of the sessions were timed at between one and thirty minutes.


If ever there were ever a message that long-windedness (or even middling-windedness) is a turnoff on the internet this is surely it. And I guess if you were one of the 10 second sessions visitors you'll not be reading this either.


Is there anything to be learnt from these, after all fairly scant, statistics?


Firstly, if a user community wants to engage with its 'owner', company or whatever, it is much stronger if it can know itself beyond the personal links and knowledge that its members have.


Secondly, if a user community is to represent itself it's handy if it not only knows itself and has access to 'independent' data but also has a way of talking to itself though an independent forum. And it does occur to me that if the Blipfoto user community had a database of its members - even partial - and a way of communicating with them this could be a powerful tool in representing itself and even, should it come to it, organising an orderly migration elsewhere while putting it possibly in a position to win certain concessions.


Thirdly, the data here, with all the reservations noted, suggests Blipfoto - at least in terms of of it engaged users - is very much concentrated in the Scotland and England and the UK (62%) with the USA coming second (12%) and then a broad but relatively thin representation in other European countries, Australasia and South Africa and an even thinner representation in many more countries.


It will be interesting to see what the new owners have to say when they communicate with the Blipfoto community in terms of their strategic direction and possible investment in the website, marketing campaigns, revenue generation and possible links with other Polaroid licensees such at Polaroid Fotobar.


As usual I welcome comments but if you disagree with what I have to say I'd really appreciate it if you could say why you disagree and what alternative analysis you want to offer.

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