How to combined traditional royalty business model with free? After just read Free by Chris Anderson, my mind is all set at looking at the Free-model. No doubt that Free is on in the talks right now, but how can it be applied on a traditional business model like royalties for artists/composer (really the person(s) who owns the right to the song).
Take Spotify for example (was selected as one of the 50 best internet services by Time Magazine). A free-music streaming service that have growned incredible since start. And yet it still isn’t making any money. The big cost is the royalties interest for every time a song is played. Is an old model in the music industry for radio, tv and concerts. The more time a song is played, the more royality will Spotify have to pay to the artist (through different organisations depending on the country). This sort of cost should be considered Variable cost, which should be kept low. In this model the consumer don’t pay anything for listening to the song, the owner. At the moment Spotify isn’t making any money other than investees pulling in more cash. They in terms what to see a return on their investment.
Today Spotify makes its money on advertising and premium paying customers.
One news recently told that the big record companies basically got shares in Spotify. As it is important with content, and the record companies have the power here. So its a good idea to get the big boys to own a part of the service to keep them providing content and try to push the service. And in Sweden the record labels makes more money from Spotify than from iTunes. The backfire I see is the smaller labels that feel that the big ones gets to much power in the service and how it will affect newer artist and labels.
As stated, the problem lies in the continues royalties interest that only will rise the more users the service will get. Even if the Free in the service help it to expand and grow a good Brand, the money printing device isn’t really in place yet. Google didn’t start out with a business model to create revenue, but it found it later. Spotify might find its model soon, but time is running out, mostly due to the royalties, something Google didn’t have to think about. I really hope the service find a good model soon, cause I am a big fan of it.
Chris Anderson - Free: The Future of a Radical Price
On my way to Germany last week I finished reading Chris Andersons book Free: The Future of a Radical Price. The expectation from the Long Tail have been sky high, and though not as good, or revolutionary as the Long Tail, its still a must read. Some part very rather slow to get through while some chapters I found felt more valued in my opinion. What I like about is how Chris don’t claim that everything should be free, rather how the concept of Free can be utilised to build business from scratch or even for big companies to stay competitive. Even some example when the big boys have to adapt to the changing digital market, thanks to the spread use of free software and services on the web. How Google is one of the biggest forces pushing and expanding free.
I really like the part were he write about combining Free and Paid, with a lot of great examples.To use Free to build a potential customer base, and then charge for a premium service for those who want more advanced features or more storage.
Maybe what I missed was a discussion of which companies that can benefit from Free, and those who don’t. I think it would be great to try to criticise his theories to strengthen them.
It is great to see that Chris take this concept into reality by giving his book away for Free in either Audio book and eBook. This isn’t new, to give away as many books as possible to get interest up and build his own brand. He doesn’t make his money on book sales, but rather on people booking him to come and speak and going into details about his theories. The same way music artist start to give away their music, broaden the fan base who then will pay for other things such as concert and merchandise.
By reading this book, after many fictional books recently, it got my business mind and thoughts start working again. It really inspired me, which is a good thing!
Last week I was in Köln, Germany at the GamesCom 2009 convention. I had a great convention with lots and lots of good meeting. Unfortunately I didn’t get any time to try out some new games. Did get to see James Cameron’s Avatar: The Game, the new game for the upcoming film. One version was with some nice 3D effects really working. Looking forward to play the game later this year. And also some clips from Final Fantasy XIV, but still not sure about the game play or the fact that it is a MMORPG, but open to be persuaded.
Most of the time I ran around in the business area from meeting to meeting. Some of the partners I met was: Ubisoft, 2K Games, Electronic Arts, Eidos, 1C and Paradox, aswell as some potential partners. The first two days was packed with meetings, and some parties in the evening. Though we were to tired to party any hard. And at the end of Thursday we even had dinner with our contacts at Ubisoft.
But on Friday I actually had some spare time and took a walk to the entertainment area. Kodus to those who worked in the booth over there. When crazy for all the sounds and people in just under two hours of being there. The lines was just crazy, specially around the Blizzard booth (Or should we call it Castle?). Say around 4 hours of wait, to play 10 minutes of a game. Well well.
All in all I was very happy with the convention as it was my first real one. Next week I am heading over to the States for some meeting and PAX 2009 in Seattle.
Took some pictures from the Entertainment area as well as a Church we visited.
The other week I had MTV on in the background when fixing dinner, and the program running at that time was 50 Cent: The Money and the Power. Despise my preconception of the program I got hooked. And that week I ended up viewing the whole season on the MTV website (praise web-TV). At first I didn’t really understand why I found the series so interesting, then it hit me. Is actually 50 Cent, and how he is caring and evolving his trademark, himself.
He try to build a new image of himself, former gansta, now successful business man. The idea of the show is to let a couple of driven young people learn from 50 Cent and prove why he should invest $100 000 in the person who wins. Basically The Apprentice, Gangsta style! I find this really interesting to monitor and analysing the transformation. The usual story of Hip-Hop artist begins in the slum, surrounded by drugs, weapons and gangwars. One of the things that created lot of talk and PR for 50 Cent was being shot 9 times (even though that have been questioned recently). Never the less, he became successful with In da Club, working with Eminem and Dr Dre and from that we have build his empire.
No question that he have made very much money! But I question how he portrait it in the show. For example, he have been working with some great people. Sure he have become a businessman today. For some of his fans this change of is trademark is inspiring, and for some probably feel he have abandoned the gangsta style, and with it his credibility. But its a smart move to evolve your own trademark to something that truly represent success.
It seems to be a trend now with shows about transforming people to businessmen/women. Another popular MTV show, From G to Gents, is a testament to this. Were Gangster will be trained to become gentlemen. Shaping up their life. I think his is great, to inspire young people how uncool it is to be a real Gangster.
You are your own Brand, and its up to you what you want to represent and be perceived.
Today I just started reading the new Chris Anderson book, Free: The Future of a Radical Price. Expectations after the Long Tail is sky-high, but I have read more before reading this new book and have some good understanding of the concept. I’m looking forward to be somewhat convinced of this new changing model or if we should call the future digital market. A review of the book will come sooner.
Despise the shaky economic in the world today, the game industry have held up high sales numbers and total revenue stream. Even though some big studios and and famous name have had to close. We see more games than before today. I see it everyday in my work, and the increase of Free-2-Play games (many MMO). How more and more game are based on In-Game Advertising and In-game items (transactions). But for this model to be successful the number one basic thing must be in place, a huge audience (or potential customers). And the possibility to sell directly to your potential consumer is huge today for smaller developers.
You think that prices on games should decrease according to the three parameters Chris talk about in his book, Processorpower, bandwidth and storage. But the cost of the biggest titles have just increased anyway. One big news on the web in recent times is the price point of Modern Warfare 2, one of this years biggest game. They when in the opposite way and increased it above the highest price point when it will be released. They will do the same on DJ Hero and the new Tony Hawk game. And they will probably still sell millions of units. I know I will get my copy anyway.
The Activision CEO have said that he would like to increase the general price point even more than it is today. When every trend is pointing in the other direction, its a bold statement to want to increase prices. And the economy still haven’t recovered, so potential consumer will have to re-think their game spending money, and people will buy fewer games. I think it would be smarter, specially as a smaller company to lower price even more to sell more units.
Also a interesting even increasing trend is DLC to increase the life time as well as value of a game. But for DLC to be successful, the game have to be good to begin with. As with everything, the most important thing is the quality of the initial product! Any time, anywhere.
The recent month have been very slow on blogging. Mostly cause I’ve been on vacation, and as always its hard for me to find time now a day to sit down and write. Also the subjects doesn’t just come to me the same way.
And now I also have a new interest, the stock and fond trading that have been taking most of my free time lately. Just learning how it works and then getting some practical experience.
Now that I am back at work we have much to do and plan. Later in August we will attend GamesCom in Köln, so we have much to do until then.