Category: Business & Marketing

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Business & Marketing Distribution Item of Interest

Why Waiting Until A New Business Model is Proven Doesn’t Work.

Why Waiting Until A New Business Model Is Proven Doesn’t Work http://bit.ly/bcybin

Technology changes business models. That’s a given. The problem is, the business models that are being disrupted are often very big businesses, with good profits and the company doesn’t want to disrupt those nice, regular, current revenue streams in order to accommodate a new one. The new revenue is (at least during these phases of disruption) very much below what they are now. No doubt you recall NBC CEO Jeff Zucker’s fear that that the Web will turn “analog dollars” into “digital pennies”.

The examples quoted include Netflix (who innovated and disrupted because they had no stores to protect) and Blockbuster (who had stores to protect; and Kodak who saw digital coming, new it was important but failed to act in time leading to massive layoff and factory closures.

The problem with waiting until you see a clear path forward to the sorts of profits that will be available in a disrupted industry, it’s almost always way too late for the disrupted to catch up. This is why disruption does not come from the major players in an industry, but rather from the small innovator who has no legacy to protect.

There are a few reasons for this:

  1. Companies always misjudge the speed of trends, especially the rate of change. Things like digital revolutions start out slowly, and the quality seems bad. So companies in legacy businesses figure they have a long time to make the change. But the rate of change increases rapidly, especially once it “tips” and reaches a critical threshold. At that point, if you’re not fully invested in the new business, you’re, way, way, way behind.
  2. It’s difficult to really understand the new technology/market unless you’re playing deeply in the space. This is the same thing we noted with people who claim that patents are necessary because once a good idea comes along others will just copy it. In many cases, that’s not possible. That’s because the truly innovative ideas require some real hands-on experience. Watching others do it is not the same thing.
  3. It’s very difficult, culturally, to build up businesses that cannibalize your existing cash cows. The skill sets may be different, and people begin to recognize that these “new” people may be working on projects that replace the “old” people. That leads to a lot of resentment and makes it really difficult to actually hire the good new people — since they recognize they’re going to face those kinds of institutional restrictions. For them, it’s just easier to go to a “native” company that has bet entirely on the new offering.

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Business & Marketing Distribution Item of Interest Monetizing

Is $10 The Magic Number In Online Publishing

Is $10 The Magic Number In Online Publishing? http://bit.ly/d9NS5x

Now that advertising isn’t going to be the only way to fund film and TV distribution, there are all sorts of ideas on how to fill the gap.

While this article is really focused on news, it’s not that removed from the idea of “1000 true fans” although with the true fans meme it is an average of $10 a month that you’re looking for from some “valuable consideration” – doesn’t have to be directly paying for content.

For example, as Shanahan notes in his blog, where he tries to compare ARPUs of public sites, People’s print magazine clocked a high $409 per customer in 2009 while Demand Media, many of whose users don’t hang around longer than to read a how-to article, notched just $1.60 per reader per year.

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Business & Marketing Item of Interest

Hurt Locker: Why no Takedown notices?

Hurt Locker Still Shared Widely Online; Wonder Why Producers Aren’t Issuing Takedowns? http://bit.ly/aKUIzZ

In what is clearly a new business model for filmmakers, the producers of Hurt Locker look set to make more money from “settlements” than it did from the box office.

If the above scenario becomes reality, The Hurt Locker would make $25 million in settlements alone in the coming months. This number could of course go much higher, as thousands of people are still downloading the movie every day.

With this $25 million the film makers would have collected more money from BitTorrent users than they did from U.S. movie theater visitors. Despite the recognition from Academy members and the huge success among downloaders, the U.S box office revenue has been relatively low at $16.4 million.

http://torrentfreak.com/piracy-will-earn-hurt-locker-more-than-the-box-office-100530/

No wonder they haven’t filed DMCA take-down notices. It’s not in their best interested to prevent unauthorized copying (something that has never been show to harm a film’s revenue) because they stand to make more money from suing (on flimsy evidence that probably wont’ stand up in court if any of these get there, unlike Tennenbaum et al, which were Kaza or eDonkey based) than from distributing the film in a traditional manner.

Congratulations for finding a way to make unauthorized distribution pay. And turn fans against you.

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Business & Marketing Item of Interest

Amanda Palmer Sells $15,000 of music and merchandize in 3 minutes.

Amanda Palmer Sells $15,000 Worth Of Music & Merch In Three Minutes http://bit.ly/aSX730

Amanda Palmer, recently dropped by her record label to her great pleasure, has been experimenting with different revenue models to fund her music. (Note I didn’t say “selling her music”.) She’s a big believer in the Techdirt formula of Connect with Fans and give them a Reason to Buy (something) and you have profit. Or at least a decent income for the work of making music.

From our view here at Bandcamp HQ, yesterday’s launch of Amanda Palmer Performs the Popular Hits of Radiohead on Her Magical Ukulele less resembled a record release than a coordinated strike of ravenous piranha. In one three minute period, her fanbase snapped up $15,000 in music and merch. It didn’t let up much from there: 4,000 digital EPs were sold, the vinyl sold out, most of the high end packages disappeared in minutes, and at the time of this writing, it looks like every other package will be gone in a matter of days

Different options giving fans different places to connect, including a “pay what you like” option. The money is there but artists have to “think different”. Remember, if you have 1000 real fans, who can be provided with something of $10 value a month (on average) in music, merchandise, tickets or participation, then that’s a comfortable $120K a year.

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Business & Marketing Distribution Media Consumption

What is my beef with advertising?

Yesterday’s post about $10 being the “magical figure” for video-on-the-web from prime sources, and I basically said that there’s no way I’d pay for a service that included advertising. I hate advertising: it’s intrusive and about 99.9976% irrelevant to my needs or interests.

I also hate advertising for another reason: it’s an economic intrusion on my life. It costs me far, far more than the benefit that Hulu – or a network – gets from advertising even though they’re charging more than they would normally get from advertising.

Here’s why. Typically a major network TV show will garner 25-65c per viewer per show. Very occasionally a top-rating, network-leading show might crack 85c per viewer per show.

Now, an “hour” long TV is is 42 – 44 minutes, not 60. The other 16-18 minutes are advertising. My time to watch those ads has a finite value and it’s not an equitable one at all.

Hulu does not have anywhere near the ad load of a Network but there’s less inventory so the same ads keep repeating in a very annoying fashion. Let’s say that there are 5 x 20 second spots in each 45 minute show. At best Hulu will be getting 65c from those five ads, more likely they’ll be getting a fraction of that, but let’s be generous.

At my charge-out hourly rate, that 2.5 minutes costs me $6.25!!! At my nominal salary rather than charge-out rate that’s still $2.79!! An average plumber would have a $3.33 opportunity cost from the advertising!

So, Hulu Plus wants to charge me $10 a month and then cost me $2.79 for every show to cover my attention to the show. Every single show I watch. Since we watch very little TV, way under 2 hours a day, that’s an additional (using the extremely generous 65c per hour show figure) $78 in revenue to Hulu Plus, although given the size of Hulu’s audience I doubt they get even 20c per viewer per hour show making that closer to $24 in advertising revenue.

But that time has cost me $334.80 for the month in attention.

And that, Hulu, is why you can’t have it both ways.

And before you all start in the comments, watching any TV is an opportunity cost. I choose to do that but I choose not to watch advertising because watching the advertising adds an additional $335 in opportunity cost to watch the advertising.

The cost to me is 4.3 to 16.5 times higher than the benefit to Hulu. I guess I’ve just convinced myself that a Hulu-like service, that I can watch on my TV and covers all programming ever made, will be worth $20 a month to me. Without advertising. With advertising it’s just too expensive.

PS, the numbers supporting advertising still don’t make sense at even more modest salaries. AT $20 an hour, the five Hulu ads still “cost” 83c up against a maximum revenue at Hulu of 65c (and more likely 20c). Monthly opportunity cost at $20 an hour is $59.40 for Hulu’s $79 down to $24 in revenue.

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Business & Marketing Item of Interest

“Pay what you want” benefits companies, consumers, charities!

“Pay what you want” benefits companies, consumers, charities http://bit.ly/d9yk1l

When pay nothing is an option, there will be a group of people who will pay nothing, but like Radiohead found, the total revenue from pay-what-you-want can be (is always?) higher. This article is interesting because they tried a number of strategies that took average profit per person from 6-7c with the normal fixed price option, up to 20c per person.

According to the authors, the “pay what you want” strategy works because it allows companies to chare social responsibility with consumers. When buyers are able to set prices in a way that directly shows their support for a cause, everybody wins.

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Business & Marketing Distribution Item of Interest

Author Puts Novel Online For Free… And gets a book deal.

Author Puts Novel Online For Free… And Gets A Book Deal http://bit.ly/aS6DpH And sometimes self-publishing can lead to a deal with a major book publisher as has happened to Mac Video’s Rick Young who now publishes his Easy Guide to Final Cut Pro.

In this example, the author put her “young adult vampire novel” on document distribution site Scribd for free and the resulting publicity helped land a traditional book deal.

Now, just giving your content away for free and praying for a return isn’t going to work, but there are – according to my How to Grow and Monetize and Audience for your Independent Project seminar – 13 or 14 ways to use free distribution of content as a way of selling something else.

The rationale is that digital content is not scarce – it’s very easily reproducible for virtually nothing – then it’s hard to sell, because classic economics is based on scarcity. There are those who have tried to create artificial scarcity for digital goods, but those have generally failed badly. Where there has been success is where the infinite digital good is distributed free in order to promote something scarce: like concert tickets, merchandise and so on.

This is not that removed from traditional Record Label deals where the band makes nothing from their music but does from touring.

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Business & Marketing Distribution Item of Interest Media Consumption New Media

The Lack Of A ‘Golden Ticket’ doesn’t mean you give up and go home.

The Lack Of A ‘Golden Ticket’ Business Model Doesn’t Mean You Give Up And Go Home http://bit.ly/axLkMF

Kara Swisher goes to meet with Hollywood Executives who are all looking for a Golden Ticket (Willy Wonka reference) so that they can charge the same monopoly rents they did when they (used to be) a monopoly.

Michael Masnick deconstructs Swisher’s reporting and parses it for us. This is a worthwhile read, even if a little long.

From music to movies to television, the biggest minds here still sound perplexed as to what will finally be the golden ticket to carry them through to the inevitable next era of digital distribution.

That single sentence basically describes the problem. These guys are sitting back and waiting for someone to hand them a golden ticket that replicates the old ways of doing things. That’s not how it works. No one gave the buggy whip makers a golden ticket that let them keep their old lines of business going.

The unnamed executives even ask why the customer always gets to be right. Yep, that’s how far removed they are from any sense of commercial reality. The customer is always right because there’s always someone else that will meet the customer need if you don’t. (Where is my “any program, any time, any device for a fair price” service again? There’s a customer demand for it but the old guard won’t deliver.)

Final words:

The role of the disruptor is not to make life easy for the disrupted. Swisher and these execs seem to be confusing the role of certain folks in the legacy industry with the overall entertainment industry itself. As noted, the entertainment industry is thriving. More movies, music and books are being created. More money is being spent. It’s just that it’s going to different players. There’s no reason to “figure out a way to keep talent from being dragged into the future.” The opportunities and wide open path are there. The problem isn’t that tech leaders haven’t made it easy for them. They have. It’s that these guys are so myopically focused on the way they used to make money they don’t realize that the new opportunities are already there and have been embraced widely by others.

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Business & Marketing Item of Interest

Marketing Tips for Web Video Series

Marketing Tips for Web Video Series. Two views from creators of Compulsions http://bit.ly/dmCVf6 and http://bit.ly/9lzIP8

The post from CompulsionTV’s own site does refer to the excellent article by Pam Kulick but also adds some additional insights.

The points made in both articles are applicable to any independent project be it film,web video, tv or music.

If you want to learn about Web series marketing challenges and how to surmount them, then you will enjoy this account of launching the Web series, Compulsions.  As the marketing lead for Compulsions, I can attest that they were formidable:

  • No brand sponsors or advertising partners
  • No Web TV Network Partner or distribution strategy
  • No marketing budget
  • No launch strategy
  • No clear-cut genre
  • Mediocre Web site
  • No previous Web series credentials for the creator
  • Eight episodes
  • Needed to launch by December 2009 for Streamy Award qualification (Holiday Season)

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Business & Marketing Item of Interest

5 Media Relations Tips from Scott Kirsner

5 Media Relations Tips from Boston Globe Columnist, Scott Kirsner http://bit.ly/90HTGV

Scott’s been on both sides of the interviewer/interviewee equation so he knows his stuff. (He knows his stuff anyway!)

  1. Be Open!
  2. Be Seen
  3. Be an unselfish resource
  4. Create a dialog not a press release and
  5. Never call to ask if a press release was received.

These are great basics for dealing with an interview and certainly parallel what I’ve been teaching in my various seminars.