At MIDEM 2010, one of the leading music industry events held in Cannes, annually, I gave a talk about how other content industries (apart from music) are using the Internet to monetize.
The video is about 14 minutes long, and goes with the slide-show, below, and addresses these examples:
What will magazine publishers do with the new iPad and other tablet devices (examples from Bonnier, Wired and Sports Illustrated)
How Salesforce.com is making 1.29 Billion USD by selling access to the cloud
How OReilly's Safari Books is selling access to 15.000 technical books for $42 / month
How Zynga's Farmville social game (on Facebook) is selling 800.000 tractors as virtual items, per day
Today, I am delighted to announce a very special event on "The Future of Books & Publishing in a connected World", on March 19th, in London. I have teamed up with Clive Rich (Rich Futures / Olswang) and Dominic Pride (the SoundHorizon) to jointly present a powerful, conclusive and inspiring program (8.30 am to 12 noon), geared towards Senior Executives, strategists and decision makers from all sectors of the book publishing industry, including the creatives, i.e. the authors / writers and their agents and representatives.
The Future of Books will present C-Level publishing executives with the real (and so far unspoken)
learnings from the music industry, a business which has been in transition since the days of Napster 1.0
and the first MP3 players. The speakers will present their views on what book publishers need to
understand, believe and do, to take advantage of this dramatic shift from selling copies of printed books
to selling access to a digital book (or both). Clive, Dominic and me will be making one presentation each, centering around several key questions: 1) what can and should really be learned from the music industry as far as adopting web-native business models is concerned? What really happened during the last decade in digital music, and why, and how could book publishers avoid a very similar situation? Is protection in technology or is it in the business model? 2) What are those 'immediate-future' business models for what we like to call Books 2.0, what exactly are the most likely new revenue streams and how can those real "New Generatives" be nurtured? 3) What needs to change so that a win-win-win future for publishers, authors and consumers can be constructed and realized?
In addition, we will try and address questions such as:
How can publishers respond to these rapidly emerging scenarios? Will books become "free"
and ubiquitous on all digital networks? If customers continue to pay, will authors and their
publishers get digital pennies instead of pounds?
As reading becomes another part of new retail environments and other services, how will it be
taken to market? And what are the additional services and usages which will form part of the
new value proposition, and ultimately new revenue streams?
Publishers need to act now to ensure that they continue to play a valuable role in fostering
talent, nurturing careers and in providing great content to readers
About the Speakers (apart from myself):
Dominic Pride: Founder and Principal Consultant, The Sound Horizon. Dominic founded The Sound
Horizon in 2009 to serve the growing number of companies wishing to create and maintain digital
strategies, successfully manage innovation and create new service concepts. Key clients for The Sound
Horizon include Nokia Media & Games and City Showcase. Prior to The Sound Horizon, Dominic was
Product Marketing Director for Shazam, where he spearheaded the company’s expansion into branded,
application-based services on iPhone, Android, Blackberry, Windows and Nokia platforms, and helped to
position the company as one of the planet’s prime music discovery brands. At Orange / France Telecom
Group, he drove the international market development of mobile and convergent music services and
played a key role in DRM-free music.
» www.thesoundhorizon.com
» www.twitter.com/thesoundhorizon
Clive Rich: Principal, Rich Futures and Consultant to Olswang. At Olswang, Clive works closely with
the Firm's music and new media practices. Clive has a 25 year history of excellence in the Music
business as a lawyer, Board Director and Strategic Director. At Sony BMG Music UK Clive created and
ran the “Futures Division”, responsible for all Sony BMG’s new and developing business - including its
digital music business, TV programming and brand partnerships. This included developing the business
interests of Syco, SonyBMG's TV joint venture with Simon Cowell. Prior to that he held senior business
affairs positions with BMG, and chaired PPL and the BPI Rights Committee. Through Rich Futures he has
since provided business affairs services to, among others, the Royal Opera House, MySpace, SanDisk and
the UK Government’s Technology Strategy Board. He also assists in the business development of a
number of emerging digital media companies in which he is a shareholder.
» www.richfutures.co.uk
Olswang London is generously hosting this event; registration is free-of-charge but invitation-only, and limited to senior execs from the book publishing business. If you are interested in participating please contact me directly (and soon - space is limited).
Where: Olswang LLP, 90 High Holborn, London, WC1V 6XX (click here for a map)
Below is our 'official' video trailer for this event, with all 3 speakers commenting on what we will talk about.
A conversation with Dominic Pride and myself can be viewed below, as well. More videos are available on our Youtube channel.
Fueled by the music industry's ongoing turmoils and, finally, books going digital at a very rapid pace, there is a lot of debate on how to deal with the fact that many people habitually share i.e. redistribute digital content without any of the upstream users making their own payment. How can you monetize content when the copy is free?
This question is a key issue across the board, whether it's in music, eBooks, news, publishing, TV or movies. The fear is, of course, that once a digital item has been purchased by one person it can be easily forwarded to anyone else if it is in an open format, thus seriously reducing the possibility that someone else will actually pay real $ for it, as well (of course, the same is true for supposedly locked or protected digital content as well - it just takes a bit longer). No more control over distribution = no more money. Right?
Despite the plain fact that DRM has proven disastrous in digital music (and now is pretty much history), technical protection measures are still being investigated as a plausible method of securing payment, especially in the exploding eBook sector. This worries me greatly because technical protection measure are expensive, hinder or prevent mass-scale adoption,
curtail or kill social sharing which defeats user-to-user marketing, often drastically limit fair
use, and are by and large useless when trying to thwart the real pirates i.e. those that have malicious, criminal intentions of stealing content in order to sell it to others.
Not just content - Context! In my view, the thinking that the distribution of content must be controlled to achieve any kind of reasonable payment is fundamentally flawed because of this not-so-futuristic realization: in an open, digitally networked economy (note: I am talking about today, not tomorrow!) content publishers need to offer their goods in a way that no longer centers on distribution being the key factor. It should not (only) be the content that is sold (i.e. the mere 0s and 1s) but the context, the added values, the many others items around the content. Sell what can't be copied.
The irrefutable trend is that the window of opportunity of 'selling copies' (i.e. iTunes, eMusic, Kindle etc) is rapidly closing, at least in most developed countries. The next, and very much already-present opportunity is in selling access and added-value services, and in providing content-related experiences.
Once we embrace that the users -the people formerly known as consumers- can't be reduced to just being 'buyers of copies' we can investigate how they would want to pay for everything else, as well. For example, when buying an eBook users shouldn't merely pay for the authorized distribution i.e. the legitimate copy of the words but they could also gain access to highly curated commentary, known peers and friends that may also read this book, ratings, explanations, slide-shows, images, links, videos, cross-references, direct connections with the author or the publisher and so on. Yes: connect with fans + reasons to buy (as Mike Masnick of Techdirt has succinctly summarized many times before).
In this model, as a legitimate user, I would also get valuable context when I pay. I would get engagement, conversation, relevance, personalization, meaning... i.e. really valuable benefits to me as a person, not just a dumb, anonymous recipient of free zeros and ones. I don't get these benefits just because I get a free copy via email, Rapidshare, BitTorrent or some drop-box on the Net, because it is stripped bare of everything that really matters to me. This is the key to the future of monetizing content, and it will take many different shapes and forms depending on the content, and the culture that surrounds it.
For example, in music, it is very likely that streaming-on-demand (and the temporary buffering i.e. offline playing of those streams) will be 'free' i.e. bundled and packaged by 3rd parties, while the context and those many added values will not. If I want a high-definition version of my favorite opera or that Blue Note Jazz Club concert from last night I can buy a premium package that provides it. If I want to share my personal play-lists, ratings and comments with my Facebook friends, and get access to their content, I can add the 'social network option' to my package. If the price is right, I'll buy (btw: this relates directly to why people buy virtual items - perception of value, and purchase after deep engagement - see my Farmville/Facebook example: they sell 800.000 virtual tractors per day;).
As to pricing and making 'buying' irresistible: imagine if a download of a song would cost only $ 0.10 - would anyone
still bother to scour the web to find badly ripped, virus-laced tracks for free? Yes, I know, that price point sounds ridiculous if you used to sell CDs for 20 Euros a pop but the argument
for much cheaper access to digital content that is offered in open
(i.e. copy-able) formats is really quite simple: if you can get 95% of the users to buy at a
much lower price, and make them so happy they will do the marketing for you
(i.e. share links;), instead of getting 5% of the market to buy an
expensive product that they can't really share with anyone (i.e. iTunes
music or Kindle eBooks), then you should be doing just fine. This has been my chief argument for proposing the music flat rate during the past 10+ years, and I think it still holds water (in fact, it seems to be proving itself with the recent developments at Spotify, MOG etc).
And yes: selling at a much lower price but much higher volume only makes sense if
the low-priced (or flat-rated), access-based offerings actually connect directly to a multitude of up-selling possibilities, such as multimedia versions of
eBooks, high-definition versions of radio shows, albums or concerts, in-depth
analysis and audio/video commentary for news etc.
In most content industries, I think the key is to
offer a wipe-out, ueber-attractive way to get started at an
irresistible price-point, and then convert most of those happy users to other
offerings at a much higher price.
Pricing and value: getting the new formulas right. It all comes down to pricing and values - and many decision makers in the incumbent content industry will need to accept who will set those prices i.e. who will be in charge of value perceptions: not them, but the users. Hard stop. Reality check.
If you agree that the sharing of content cannot really be stopped, and that therefore the value of a mere digital copy of content will invariably decline, we must urgently re-think how we address the issue monetizing sharing, and what we can do to create and nurture those new values - the New Generatives - that will replenish those that used to be derived from being able to control distribution.
Added values, all the time. The metrics of the content industries need to shift from getting a copy to rewarding engagement. As an example, let's assume I have just purchased and downloaded a movie in an open file format, and I have a hunch that 50 of my close friends would also enjoy it. I post the movie on my iDisk shared files folder (anyone on .mac can do this) and send the link to everyone. Now, if the only value of the movie is in having received a 'copy without paying', then my friends have received the movie's entire value 'for free'. But if the value of this movie is also in the user / viewer being part of something much larger than mere 0s and 1s, i.e. a conversation or another environment of added values that are available to each individual viewer because they actually purchased access to the movie, then the mere sharing of the file is not going to be very attractive, for the upstream users will not have access to all these other values.
Imagine, then, if a legitimate movie buyer (or more likely, bundled-access-user) would also receive access to a select group of fellow users - and, crucially, representatives of the creators, producers or distributors - that would provide a myriad of additional values such as viewing exclusive, movie-related pictures, slideshows and short clips with the actors, locations or props used in the film, or getting special offers for related products such as books, games, merchandise or even HD versions of the same film, or unlocking new features within the very same file that are otherwise hidden (something that could easily be done within a mobile application, for example)... that is where it starts getting interesting.
Combined with a no-brainer price point, having a constant flow of added values available to legitimate customers would turn file-sharing into a marketing vehicle, i.e. surely I could somehow watch the movie 'for free' but would be barred from all that other cool stuff that I would have access to if I only paid my $2, myself.
The crowd and the cloud: new monetization possibilities not based on Control. Content hosting is moving from my own computer and my hard-drives to the cloud - and indeed, this is very good news for content creators, publishers and rights-holders because if makes it easy to engage and up-sell to the new generatives. In addition, it is reasonable to expect that content files will get larger and larger over the next few years, since many devices are now capable to handle much better resolutions and many users are tiring of bad audio, video and image quality. The age of squashed-sounding MP3s is ending as high-end audio is becoming a reality even in the smallest devices. Assuming those 2 trends (people receiving bigger and better files as well as accessing those files in the cloud rather than storing it on any specific piece of hardware), the key question is what 'sharing' will look like in the near future and what can be done to monetize it rather than try to curtail it.
The answer is in the cloud: I think many people will soon stop sharing the actual media files (since they are getting larger and larger, and therefore more unwieldy) and will share only the links, the bookmarks, the metadata or the tags, if the result is the same, i.e. if the shared content is made fully available to the recipient, without further ado or unwieldy registration procedures, buy-now pitches etc. How could this work?
Imagine you have purchased an ebook for 10 Euros and you want to share it with your wife so that she can read it to you while you drive, or with your son because he really should know about this great book. With a good, old-fashioned printed, dead-tree book, this is certainly not an issue, so why should it be such a problem for the electronic version? Why not create and deploy many extra values around this book (such as video, audio, images, slideshows, dictionaries etc), make the file a lot larger, and then still allow a buyer to share the book via a simple link or bookmark that provides all recipients with the basic, 'words-only' version of the book but withholds the added values until they purchase it for a very low and attractive price, themselves? Once those added values become a significant part of the user experience most users will not want to miss them - protection will be in the business model, not the software!
The perfect testing scenario may unfold soon, exemplified by Apple's new iPad. Extending the concept mentioned above, rather than blocking my wife from sharing an eBook it would be much more reasonable if I could still read the book, 'for free', but all else would not be available without a micro-transaction on my end, i.e. I would not have instant access to videos, links, ratings... i.e. that valuable context. This would clearly drive me to purchase a 'copy' myself - if indeed I like the book enough - sounds like a fair deal to me.
Engagement, interactivity, conversation and a constant stream of added values that can be produced at very low cost is what will give content owners 'protection' from rampant free-loading - not DRM, region-coding or HADOPI laws.
Sharism and Money. When thinking about digital music (my original, futurist starting point), imagine an unlimited music service at a feels-like-free price, supported by advertising, brand sponsorships, ISPs / Telecoms and mobile operators. A service that allows me to stream or download the music, and enjoy it online or offline (pretty soon, a rather pointless distinction, anyway). A service that is basically cloud-based but that allows me to make temporary sub-clouds on my personal device so that I can always get to what I like the most, much like the gMail offline reader, mobile RSS readers, the Instapaper iPhone app etc. While I may be inclined to share some of the music files with my friends, I would be highly unlikely to publish the complete access details to my personal cloud via, say, Twitter - I would risk watering down my profile and messing up my entire personalization efforts. Avoiding profile and account 'pollution' can be a major driver of payment adoption, I think.
Similarly, in books: let's assume, as a publisher, you'd
allow people to log-in and get digital access to 10s of 1000s of books,
at a low price (such as O'Reilly's Safari Books already does, for all those hardcore programmers and geeks around the world) - what
would keep people from just sharing the log-in details and only pay for one
account but have 2000 people getting everything for free? The answer:
once I am really involved with a platform I like, and use every day, I am not very likely to
share the account details with everyone, because I don't want my
profile to be polluted, and my own experience to be negatively
effected.
This is similar to having your family members use your eBay
account for bidding on stuff they want to buy: not a good idea, since it will
be your rating (which is the real currency of eBay) that will be
negatively effected if your 15 year old son does not live up to the
buyer's expectation on his last transaction. The same is true for
Amazon: share your log-in details with your 12 year old daughter and
you will make a mess out of your recommendations - she may love SuBo
(Susan Boyle) but you don't want to keep seeing pitches for stuff she may want,
for the next 9 months.
The bottom line: content sharing isn't the real problem: high price points, outmoded toll-booth strategies, broken relationships and processes, low values, bad technology and service, and lack of conversation and engagement are.
Here is my message to publishers and content owners: lower the prices to the point of unanimous excitement, use open standards that work for everyone, everywhere; bundle and package as attractively as you can (then: repeat). Remove all reasons that your users may have to avoid the toll-booth, and thereby side-step the conversion to 'paid'. The lower the hurdle for legitimate usage and paid engagement, the less you will have to worry about 'competing with free free'.
And do it now so you don't have to win people back from routing around you.
If you are interested in attending please contact me (eMail, Twitter); they have very few places left. It's a free event but reserved for senior executives in the TMT sectors.
We would like to invite you to The New Year Revolution: an insight into what's on the horizon in the technology, media and telecoms sector in 2010 (and beyond!)
We are delighted to welcome Gerd Leonhard, TMT futurist as our keynote speaker.
Gerd is renowned for his presentations and think-tank appearances, which are hard-hitting and provocative yet inspiring and motivational. His clients include Nokia, Google, Sony-BMG, Siemens, ITV, the BBC, The Financial Times and many others.
Following Gerd's keynote there will be a session bringing you up to date on important law changes for 2010.
Date: Wednesday 13 January 2010
Time: Registration, breakfast and networking at 8.30am. Seminar 9.00am to 11.00am, including time for questions. There will be more time to network when the seminar has concluded.
Venue: Berwin Leighton Paisner Adelaide House, London Bridge, London EC4R 9HA.
I just read this very interesting piece in PaidContent.org (one of my favorite sites): "Steve Haber, president of Sony’s Digital Reading Business Division... at the MediaBistro eBook Summit... decried the emphasis on the $9.99 price point for e-books. “The $9.99 price point is not a money-maker,” he said. “Certain bestsellers are sold at that price for retail, competitive reasons. But you need to have a range. You could go from $10 to $20 even to $100 for an e-book. There’s no sweet spot and it’s certainly not $9.99. When you walk into a bookstore and there are a range of prices. It should be the same for an e-book store.” Haber went on to defend the use of DRM, which he doesn’t see going away for awhile. “You need an orderly process to sell books and DRM makes that possible, mainly because it allows content creators and distributors to make money from that content"
Ouch. Have you not learned anything from happened in digital music during the past 10 years - where have you been hiding?Let me summarize it for you:
DRM is a total - and much discussed - nuisance and significant deterrent to legal consumer behavior, and it does ZERO to prevent sharing of copyrighted content online. DRM just turns users that have legal, fair and honest intentions into guinea pigs for digital rights protection schemes thought up by people who still have their emails printed for them. Wake up: protection is in the business model - not in technology. I may even concede that DRM may work in some (but increasingly rare) cases, but for books and for music...? No chance. Imho, you have to be kidding if you think these kinds of remote-controlled-rights schemes will make you any money in the future. In my opinion, anyone that still talks about DRM being a chief part of their eBook strategy should consider taking a longer vacation, and do some serious reading and thinking (sure... you could start with my own new book "Friction is Fiction" -ask me for the free PDF if needed; )
Face it: the price point for digital books has to be lower - much lower - than the price point for a real i.e. dead-tree, printed, shipped, physical book. Just because you can't seem to figure out how to reduce your costs across the board, start to add significant value in new areas and still turn a profit, that does not mean consumers will massively adopt eBook-reading at those price points (Kindle etc) or even above (as seems to be suggested above).
This looks like a very lame rerun of the classic and most disturbing mistakes of the music industry: the incumbent market leaders really thought they could actually increase their margin as well as their ability to control the usage (!) when selling music online, i.e. have much lower distribution and marketing costs, keep the artists down to the same old, tiny percentage, and - yes ! - increase the prices on a per-track basis.
Ask yourself this simple question: what would have happened if a download had been priced at $0.20 or even 10 cents per track (or even, yes, a flat-rate), instead of $1 - would anyone still have bothered to try and download it for free, somewhere else? Could the value of those active, engaged and happy buyers be captured, and then be extended to other things you can sell them? Clearly, the answer is YES.
This is my message to the eBook industry and the publishers: do not head into the ill-fated direction of wanting to sell digital content for the same price as the physical content (or even above...ouch) - it is a pipe-dream!
Instead, make eBooks drastically cheaper, offer unique bundles and compilations, add new values all the time (cross-media anyone?), invent new packages (think mobile), and stop focusing on just selling UNITS. Flip the pricing logic before it flips you: lower prices, infinitely more engaged and legal users, and new Generatives on top!
Finally, here is something that wasn't touched on at Paid Content but that is crucial: If you think that the traditional deals with the authors will carry over into the eBook environment you are deeply mistaken. Witness what happened with Random House's eBook initiative, here.The authors (and their agents!) will need to be brought in as PARTNERS not minor players, as they have been in the past. Accept, adapt and move forward.
Keynote Speaker, Think-Tank Leader, Futurist, Author & Strategist, Idea Curator, some say Iconoclast | Heretic, CEO TheFuturesAgency, Visiting Prof FDC Brazil, Green Futurist
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Dominic Pride: Founder and Principal Consultant, The Sound Horizon. Dominic founded The Sound
Horizon in 2009 to serve the growing number of companies wishing to create and maintain digital
strategies, successfully manage innovation and create new service concepts. Key clients for The Sound
Horizon include Nokia Media & Games and City Showcase. Prior to The Sound Horizon, Dominic was
Product Marketing Director for Shazam, where he spearheaded the company’s expansion into branded,
application-based services on iPhone, Android, Blackberry, Windows and Nokia platforms, and helped to
position the company as one of the planet’s prime music discovery brands. At Orange / France Telecom
Group, he drove the international market development of mobile and convergent music services and
played a key role in DRM-free music. 
Clive Rich: Principal, Rich Futures and Consultant to Olswang. At Olswang, Clive works closely with
the Firm's music and new media practices. Clive has a 25 year history of excellence in the Music
business as a lawyer, Board Director and Strategic Director. At Sony BMG Music UK Clive created and
ran the “Futures Division”, responsible for all Sony BMG’s new and developing business - including its
digital music business, TV programming and brand partnerships. This included developing the business
interests of Syco, SonyBMG's TV joint venture with Simon Cowell. Prior to that he held senior business
affairs positions with BMG, and chaired PPL and the BPI Rights Committee. Through Rich Futures he has
since provided business affairs services to, among others, the Royal Opera House, MySpace, SanDisk and
the UK Government’s Technology Strategy Board. He also assists in the business development of a
number of emerging digital media companies in which he is a shareholder.
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We are delighted to welcome Gerd Leonhard, TMT futurist as our keynote speaker.![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=283400e5-7604-4a93-a3f1-553e1cde0e3e)
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