Wednesday 4 April 2012

A new business model for the content industry. (By B)

Hey content industry!

Yes you Sony, Warner, Disney, Universal and ALL the others...

I've got a new model for content sales that will make your life easier and make you more money... Ready? Here goes:

Step 1) Let go of control.

Thats it.

Yes, it really is that simple.

The current problems in the content industry all flow from the attempt to maintain complete control - the DRM systems that specify how often a bit of video or music can even be played are proof of that. If some content providers had their way you would not be able to buy a DVD or a CD you'd only ever be able to rent them and you'd have to provide photo ID and a deposit to do even that.

But it's counter productive.

For an industry to grow (and the content industry has been growing, don't let the fear mongers fool you) the level of consumption needs to increase - so it needs to get easier not harder.

The enforcement of copyright and DRM is just hampering consumption and the industry itself is only maintaining it's position because popular music artists get lured to it with promises of big contracts and promotion, and new and popular video productions need investment and distribution deals.

But look at youtube and you'll star to see the future of content - free video podcasts with increasingly professional production and integrated advertising or user subscription models for regular targeted content.

So why is the content industry (especially the music industry) so mad on maintaining control?

2 words: Price Pointing

The content industry thinks that it's best way to make money is to control the price, something they cant do if they dont have an iron grip on distribution control.

The truth is they DON'T have an iron grip on distribution, they dont even have a marsh mellow grip on it. Most music consumer in the world is done so via piracy and video is rapidly following. Many young people dont even realise that pirating music is illegal.

So the attempt control distribution is just making it harder to get and the result is that uncontrolled music gets a disproportionate slice of the consumer attention pie.

As was recently demonstrated by Paul Heald the enforcement of copyright actually has a negative impact on both the rates of consumption and the income earned from original works:
(The video is long so get a cup of coffee first)

The growth in music and video piracy has proven that when distribution is relaxed consumption skyrockets.

Setting the dogs of war (RIAA and MPAA legal teams) onto the pirates doesn't actually help (watch strict P2P laws in France failing to increase regular sales) because you are reducing consumption - the exact opposite of what a growing industry wants to do.

So the logical thing to do is relax.

Let go of control.

Allow the music to be easily distributed at price points relative to the level of demand rather than a flat fee for back catalog work.

If the content industry developed a solid way for the pricing to self regulate to demand, then they would find the big concerns of piracy go away. They would make more money while expending less overhead in "protecting" their assets, and they would ride the wave of the migration from a physical to a virtual economy.

The truth is that the entire pricing model for content is outdated. Digital distribution has changed the market forever and there is no going back to the level of control offered when the content was nearly impossible to duplicate or steal.

Right now the content industry is throwing all it's eggs into the "subscription" basket, because this model gives projections for consistent recurring revenue.

Yeah, right... the mobile phone industry thought that 10 years ago too...

They have had to learn the hard way that people prefer more flexible pay per use models rather than committing to a life long tax - hence the growth of prepay accounts. Subscription ingages more people and make it easier to pay but the price control is still in the hands of the labels and not representative of the consumption patterns of the users

The content industry will eventually see the same light as the mobile industry. Of course, at this rate it's going to take them another 10 years.

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