The Digital Content Business Model: http://bit.ly/a23D7f (by @baekdal ).There was a great comment in my article "How to really stop piracy" from Paulius, who commented on another commenters suggestions that movies should only cost $1.
He wrote:
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"Movies cost millions to make and millions to market. For example, after marketing, etc 'Avatar' cost around 500 million to make.
$1 for a HD download? Even if they could somehow get hosting and bandwidth completely for free that would mean, they'd have to sell half a billion copies of the movie just to break even.
If we're looking at it realistically, a HD movie clocks in at around two gigabytes. Given that from box office takings alone 40 million people saw Avatar, that's 78,125 TERABYTES in transfer, and bandwidth isn't free.
Do I agree that movies should be cheaper, especially when downloaded? Absolutely. Is a dollar a download reasonable? No."
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Paulius makes a very important point. This "free" internet has created an unhealthy disconnect between people's perception of what it costs to make something, and the actual price.
Selling a movie for $1 would devastate the movie industry, and... worse... make it impossible for independent producers to operate at all. The only ones who would be able to make any kind of money, are the really big guys, who miraculously create a blockbuster movie, on a really tiny budget.
It is not just about movies, but all kinds of products; ebooks, articles, news, games, eggs, pillows, and iPad cases. Not only does it remove the financial foundation of businesses, it also lowers the quality and value of each individual item.
This disconnect is also hurting many small businesses. One example: My mom owns an online shop selling yarns and knitting recipes (+ baby clothes).
In the past, her business was to produce unique knitting instructions, for a price + selling the yarn that you needed to produce the clothes or scarfs.
Today, her customers "demand" that she give them the knitting recipes for free, otherwise, they will not pay for the yarn. So what used to be two unique products is now being forced into a freemium model. Give us the recipes, or lose the sale altogether.
That isn't right. People have labeled a whole group of products as something that should be free - even though they are far from free to make.
The common element is that people are willing to pay for physical things. People pay for potatoes, pillows, printed magazines, art, concerts, iPhones, printed books etc. All things that have to be manufactured physically.
People are not willing to pay for recipes, ebooks, digital articles, digital art, music, movies etc. All products that don't have a physical presence.
We are stuck in the traditional mindset. We are not willing to pay the farmer for the time it takes him to grow a potato. They are not willing to pay him for great articles he posts on his blog about how to grow better potatoes, or how to use them in a delicious salad. But, people are perfectly willing to pay for the actual potato, because that a thing.
This is a problem!
This free culture, or free-for-something culture, eliminates all levels of creativity and people's willingness to make something special. If you cannot get paid for your time, why spend so much of it? We reduce the internet to a hobby - or a marketing channel.
If a farmer cannot get paid for giving advice, but can get paid for his potatoes, why spend time writing articles, or creating podcasts about it?
Social media people (myself included at times) will point out, that he should make a blog and give advice away for free. We tell him that it is an incredible effective way to build a community - which in turn will generate higher sales. We talk about Social ROI, and how doing all these digital things really work.
But it doesn't work - not really. It works if you have a "physical thing" to sell. It works because the farmer makes potatoes.
The business models that works right now are:
...and that's pretty much it. There are always exceptions, but they are rare.
We still lack the most important business model of all: Sale of digital content, combined with a digital community.
We need to change the culture. Right now, the internet is mostly a hobby or a marketing channel for physical products. But, if we want a successful digital future, we need to make the internet self-sustainable.
The solution isn't the pay-wall. While it reintroduced financial sense, it also block all the reasons why people use the internet in the first place.
We need a business model where we can sell digital content, combined with a digital community. The pay-wall is "sell digital content, while blocking the community" and that doesn't work. It just make things worse.
But, we need to stop giving away our content for free, which means that the business model must be if you buy my product, you also get all the advantages of the internet community.
Don't pay me, and you don't get to read or share the article, unless you know someone from the tribe (who can share the article with you).
That's the business model of "Sale of digital content, combined with a digital community."
If you want to sell digital content online, you have to do it trough what the internet is all about. The internet is about the link, the act of sharing, the social engagement, the feeling of being a part of something, the feeling that you can show this to your friends, and the feeling of you are getting smarter because of it.
The crap the old media people put out is simply staggering, especially from the constant barrage from people trying to save the newspapers. The latest is this version of "We need to change copyright laws to save newspapers."
In the midst of the media's frantic search for a viable business model, we often hear media executives telling us that people *want* to see ads in traditional magazines. And it's true. In traditional magazines, ads actually work.
Every year, Oriella PR is doing a study among journalists on how they see the future of media, and what they focus on.
As much as I like the views of Jeff Jarvis, I do not like his views on monetization. He basically says that content has to operated at a loss.
Admit all the changes faced by news organizations, like the lack of monopoly, real-time reporting, creating original content, and the disappearance of print, there seems to be one element that most news people still do not understand. There is no distribution market on the internet - it's a link economy.
Yesterday, I updated to iOS 4 on my iPhone (like everyone else), and downloaded iBooks. The iOS 4 is nice, pretty fast, and a welcome upgrade. But iBook was a disaster.
I have been playing around with my iPad for a few days, and I noticed the Reuters App. It is a very well-made news app, which gives you a quick look at the latest headlines. And it extends to be a kind of mini Bloomberg market and stock watch.
The iPad has arrived, and the media industry is saved. Of course, when I say it has arrived, what I really mean is that it is now available in the US. And when I say that the media industry is saved, I really mean they think they are saved.
The social web is starting to sound more and more like the dot.com days. We are in the middle of a transition. The ways we do things are radically different. What works and doesn't work seems new. And many people are getting very excited about numbers, but not the right ones.
Several blogs and media outlets reports that the NY Times will start to charge money for reading their newspaper online.
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