Is The Fan Who Buys A Product He Wants A Big Dope?

from the uh,-no dept

When we talk about the various new business models that work well for content creators, one of the complaints that some of our regular critics have pointed out is that if most of the people are getting the content for free, and only a small group of superfans are paying, aren't those who pay getting "ripped off" somehow -- leading to them eventually jumping on the free-rider bandwagon and leaving no one to pay? Reader JJ sent over a well-articulated version of this argument by a self-described cynical musician in a Polish hard rock band. He describes this as: The Hunt For The Big Dope.

Tragically, this is a total misunderstanding of the economic arguments people make. In fact, it's a gross distortion of the argument to make it easy to dismiss, rather than taking the time to understand it. In fact, what we're really arguing is the opposite of finding the big dope. It's about using content to create fewer dopes, replacing them with people who are willingly buying something of value that they actually want. It's the old system that was focused on getting big dopes to pay for things they didn't need or want. The new business models that we talk about -- focused on giving people a reason to buy -- are about just that: offering scarce value, above and beyond the content, that is worth buying -- and that helps fund the content creation. There's no big dope in this scenario, because the people who are buying get a lot more than just the content, and they're thrilled with the transaction. Everyone comes out of the transaction better off.

If you believe in the "big dope" theory put forth by this guy, then anyone who buys a car is a "big dope," because they're financing all of those commercials, which they get to see on TV without paying for them. The percentage of people who buy a car that they saw in a TV commercial compared to the number of people who actually see the commercial is a tiny, tiny number. But does that make those buyers "big dopes?" Of course not. They got something they wanted (a car). Yes, that's a more extreme example, but when you recognize that the content is acting as an advertisement for the bigger reasons to buy, making them more valuable, the analogy fits perfectly. A large percentage of people will never buy products they find out about via an advertisement. But some do. And if enough do, and the product they're driven to buy is scarce and valuable enough, the company makes money. Same thing for content creators.

They're not looking for "big dopes." They're looking for people who want to make an informed decision, in which they get something of additional scarce value, well beyond the content. That sure beats the old system, which appeared to be focused on hiding the content to force a bunch of dopes to pay without knowing what they'd get -- leading them to be disappointed all too often. No offense to this particular musician, but I'd rather have the system I describe, with no dopes at all, than the old one he appears to pine for, in which all your fans are considered dopes.

Filed Under: business models, economics, music

It's The Execution That Matters, Not The Idea

from the ideas-without-execution... dept

For years we've tried to explain the difference between ideas and execution, and how lots of people have ideas (in fact, many have the same ideas entirely independently), but without good execution, those ideas aren't really worth much at all. This point comes up a lot in the debates we have over the patent system -- with patent system supporters often overvaluing the idea part, and grossly underestimating the importance of execution. Often this is because they've never built a real business, and don't realize how little an initial idea plays into the final product. The two are often oceans apart. But stopping others from executing well (or forcing them to fork over a ton of money) just because they executed well where you did not? That doesn't seem like encouraging innovation or promoting progress at all.

DSchneider points us to an excellent recent Jeff Attwood post about the differences between the idea and the execution. It's well worth reading as it covers a bunch of different things, including a common refrain made against those who successfully execute: that they were only able to do so because they were "well-connected." As he notes, being well connected may get you an initial head start, but if you can't execute well, no one will come back. The idea, alone, is almost meaningless.

Attwood highlights this by pointing to a recent letter to a mailing list from one of the guys who started a crowdfunding operation called Fundable a while back, which failed miserably (and very spectacularly in public, with an open letter posted to its website laying out all the dirty laundry). There were all sorts of problems with the execution, which the guy even admits:

Yes, Fundable had some technical and customer service problems. That's because we had no money to revise it. I had plans to scrap the entire CMS and start from scratch with a new design. We were just so burned out that motivation was hard to come by. What was the point if we weren't making enough money to live on after 4 years?

The "technical and customer service problems" underplayed how significant some of those problems were. And yet... now that other crowdfunding platforms are getting attention, such as Kickstarter, this guy is crazy upset that they "stole his idea."

I feel that this story is important to tell you because Kickstarter.com copied us. I tried for 4 years to get people to take Fundable seriously, traveling across the country, even giving a presentation to FBFund, Facebook's fund to stimulate development of new apps. It was a series of rejections for 4 years. I really felt that I presented myself professionally in every business situation and I dressed appropriately and practiced my presentations. That was not enough. The idiots wanted us to show them charts with massive profits and widespread public acceptance so that they didn't have to take any risks....

I cannot tell you how painful it is to watch 5 assholes take your idea and run with it and not even give you credit. I hate all 5 of them for that. If I see them, I may punch each one of them in the face. If you have never started your own company and then had someone else steal the credit for what you worked hard to develop, you don't understand.

Now, I have started my own company, and I've had lots of other people either come up with the same idea separately, or even blatantly decide to do something similar to various aspects of our business. So I do know how it feels. And, certainly when you first hear about it, it may be annoying, but it's really just a challenge. I'll be honest, there are times when others have done a better job executing on ideas than I have in the past, and in the end you either compete, or you tip your hat and move on. Competition breeds innovation and better execution since you know you need to do more. And that means not screwing up your technology and customer service and not lashing out and blaming others when someone else executes better.

And, the thing is, given what we write about, and all the business model examples we've see over the years, we're pretty damn familiar with many of the players in the whole "crowdfunding space." There have been lots of players who have come and gone, and there are at least a dozen players in the space today. And it's not because they all "took" the idea from this guy, but because lots of people recognized that it's an idea that makes sense. Kickstarter is certainly getting a ton of press these days, but that's mostly because of some top notch execution on its part.

Filed Under: crowdfunding, execution, ideas

Connecting With Fans Is An Ongoing Process: Do Something Small Weekly, Big Monthly

from the one-mantra dept

I've been meaning to write about Topspin CEO Ian Rogers' "moonlighting" foray into managing the band Get Busy Committee. Given Ian's close involvement with new music business models, it's no surprise that he's been doing a lot of interesting things, from selling uzi-shaped USB keys with the album (the album is called "Uzi Does It") to using Kickstarter to fund a vinyl picture disc -- including an offer for $1,000 to have the band write a song about the buyer, which would go on the release. It turns out that option sold out in a day (though it looks like some of the other options are still a bit short on buyers).

What's really great, though, is that Ian is revealing as much of the process as he has time for in semi-regular blog posts. Recently, he explained part of the general thinking that he's been pushing on the band, that they should: "Do Something Small Weekly, Something Big Monthly." The specific implementation doesn't fit for all content creators (or even all musicians), but the concept is a good one. It's a recognition that the old way a content creator related with fans was through major one-off "releases" (new album, new book, new concert, etc.). But times have changed, and the way you connect with fans is an ongoing process, and like it or not (and plenty don't like it), there is a sense of "what have you done for me lately." But if you're going to thrive in that sort of world, you have to keep doing stuff and keep experimenting. Setting a specific pace (something small weekly, something big monthly) is quite a useful way for many to think about this sort of experimentation in small, easy to comprehend and implement steps.

Filed Under: business models, connecting with fans, get busy committee, ian rogers, music

Will People Pay For Content Online?

from the false-hopes dept

One fascinating thing to watch is how people in certain content professions continue to hold out hope that there's some way that maybe, possibly, really people will suddenly see the light and magically start "paying for content online." Now, obviously, many people do pay for content online, but it's a very difficult market position to sustain due to basic economic forces, unless you're doing something special, and have figured out a way to effectively bundle that content with some sort of real and valuable scarcity -- i.e., a true reason to buy.

But, figuring out those business models aren't easy, and for those who grew up in a world of artificial scarcity, there's always this vague hope that, magically, people will start paying again. Believers in this fantasy were pretty happy to gloat and point us to a recent report from Nielsen, concerning some survey data on whether or not people would pay for content. The suggestion passed along was that this shows that we're crazy for questioning whether or not people will actually pay for content online, as seen in the following chart, released by Nielsen plotting the data: Of course, you can read this chart in a variety of different ways -- and I found it interesting that the data is not actually to scale, since it cut off at the 60% mark. To put this into a bit more perspective, it's a bit more helpful to show what the data actually say on a full 100% scale, so I did a quick & dirty version of that myself to help out: Ah, amazing what a different scale will do, as the latter image makes the numbers (accurately) look a little less impressive than the image released by Nielsen.

But, even beyond that, these numbers don't actually look all that good for the folks who claim that there's some way to suddenly get people to start paying for this stuff, for a whole variety of reasons. First, this is survey data, which is notoriously bad at getting people to accurately predict if they would pay for something. You can lop off a big percentage of people who say they would pay, because when asked, lots of people who would never actually pay for something will say they will pay. I won't even bother to estimate that amount, but I would argue it's a significant chunk of those orange bars.

However, even if we grant the premise that these people potentially would pay, it still doesn't support the "if we just did x, they'll pay" camp (where x is anything from "shut down The Pirate Bay" to "kicked file sharers off the internet" to "passed three strikes legislation" to "increased enforcement" to "beefed up copyright laws" etc.). And the reason for that is when you look at how many people are actually paying. That is, it's really those tiny blue percentages that matter here. And those are tiny across the board -- and the reason isn't copyright infringement or unauthorized file access, but the fact that the producers of the content haven't figured out how to give most people a true reason to buy. They're used to a world where you didn't need to figure out a business model, but artificial scarcities and a small number of gatekeepers were able to make it so people had little choice.

But these days, with widespread abundance in content -- which is growing every day -- the era of artificial scarcities is rapidly ending, and anyone who wants to build a 21st century business model needs to start looking for real scarcities that offer real value, not artificial scarcities that seek to limit value while boosting price. So, yes, there's some interesting data here, but it's not the savior of those who think there's a business model in selling content directly. It really says the exact opposite.

Filed Under: business models, content, paying

Understanding What's Scarce And What's Not...

from the sell-the-experience dept

A bunch of folks sent over Jeff Jarvis' recent blog post entitled stop selling scarcity, which I actually think is slightly misleading. If you read the details, he's actually saying that you should very much sell scarcities -- but that you should avoid pretending that you're selling a scarcity when you're really selling something that it infinitely available:

If you are selling a scarcity -- an inventory -- of any nonphysical goods today, stop, turn around, and start selling value -- outcomes -- instead. Or you're screwed. Apply this rule to many enterprises: advertising, media, content, information, education, consultation, and to some extent, performance.

I have to admit, while I get what he's saying, I'm not sure it's particularly useful to most people, because they've always thought they were selling "outcomes" in the first place. I think that a similar post by filmmaker Ross Pruden may actually be a lot more useful, in that he talks about selling experiences, which is something that's scarce:

You think you sell a movie--you do not.
You think you sell a book--you do not.
You think you sell a song--you do not.

You sell an experience, something communicated, something elusive and ephemeral. Something mystical and transformative and inspiring. All these abstract things simply come in the shape of a movie, a book, or a song.

Never before has it been possible to strip away these experiences from the product... until now, the Digital Age.

The Digital Age lets us duplicate products infinitely. And, for the first time in human history, creators are not deprived of their original copy.

From that he points out the simple problem that many folks who were used to the old way are facing:

...now we can read a novel without buying a book.
...now we can watch a movie without buying a movie ticket.
...now we can listen to a song without buying a record.

From there, he lists out a bunch of different scarcities that come up with you separate the experience from the physical product, and notes that this is how things have always worked in reality, it's just that conceptually we merged the experience with the scarce physical product, which is why it's often so difficult to separate them conceptually now that they've become untied in reality.

The key to the Digital Age is to recognize that many existing products already embed intangibles, which is why those products are still being bought. However, once those tangibles stop being offered, or a competitor offers better intangibles, the customer will go elsewhere.

Creators can sustain. They will sustain. The market wants to sustain creators. Yet only the ones who realize that they don't sell products, but experiences. Only those creators are the ones worthy of survival in the Digital Age.

This is a great point, and more eloquent than my own post from a few years back on how every "product" was really a mix of scarce and infinite goods. To understand what the technology allows, and how to embrace it in a way that's sustainable, you need to be able to break out the components, and properly figure out what's really scarce, and what isn't.

Filed Under: abundance, business models, scarcity

When Declining To Enforce Your Intellectual Property Rights Strengthens Your Market Position

from the well,-quite-often dept

Over the years we've shown many examples of times when it makes much more business sense not to enforce your intellectual property rights, but reader Jerry Leichter sends in another example. It discusses how Apple is benefiting from not going after those who copy its iPhone UI, suggesting that Apple's aggressiveness in such lawsuits with PCs helped Microsoft win the personal computer war in the 80s and 90s:

The more different competitors Apple faces in smartphones, the better it fares. One major reason why Apple lost its pioneering position in graphical desktop PCs to Microsoft in the 90s was related to the company's efforts to stamp out rivals in "look and feel" lawsuits during the late 80s that shut down windowing products from HP and GEM, leaving Microsoft free rein to consolidate a competitive-free monopoly juggernaut around its own Windows product.

In this decade, Apple has conspicuously refrained from attacking rivals on copyright or patent infringement issues in both the iPod and iPhone markets, outside of defensive measures it has taken against patent challenges from Creative and more recently Nokia. Competing in the market has historically worked out much more successfully for Apple than trying to compete in court.

I think it's a good point -- and accurate that Apple is better off not enforcing its IP, and that Microsoft was helped by Apple's mistake last time around, but I doubt that's why Apple isn't doing it this time around. My guess is that the reason it didn't bother this time was because it lost so badly when it tried to go after Microsoft for copying the "Windows" look and feel. Still, it is a good example where sometimes it really does help to have more people recognize your user interface -- even if sometimes they're using it from someone else.

Filed Under: business models, enforcement, intellectual property, market position
Companies: apple, microsoft