You Can't Wait For The Perfect Business Model
from the what-comes-next:-everything-and-everyone dept
Markets change. Businesses — and business models — die. That’s often what we’re talking about here, with a focus on all of the good (sometimes wonderful) things that come about in their place. But, the process of creative destruction is a messy one at times, and every time we write about an industry going through upheaval, be it the recording industry or the newspaper industry, someone angrily demands in the comments for us to explain “what will replace it.” I’ve spent over a decade trying to answer those questions pretty much every day here — showing example after example of things that are actually replacing those old models, but they’re all experiments. They’re new, they’re different and they all start small. People always look to explain why that’s the exception rather than the rule. People insist that no record label can offer music for free until a new models’ been “proven.” They insist that newspapers shouldn’t adapt until someone explains how they can make the same revenue and the same margins they used to make.
That’s not how it works.
Clay Shirky has written up a wonderful and compelling response, to all those people, that should be read in its entirety, over and over again by pretty much everyone, whether you believe in the new models or if you are the skeptic, demanding “proof” before you’ll jump off the ledge. Shirky’s piece focuses on the newspaper industry (really, the journalism industry), but it applies to pretty much any industry going through a bout of massive creative destruction.
During the wrenching transition to print, experiments were only revealed in retrospect to be turning points. Aldus Manutius, the Venetian printer and publisher, invented the smaller octavo volume along with italic type. What seemed like a minor change — take a book and shrink it — was in retrospect a key innovation in the democratization of the printed word, as books became cheaper, more portable, and therefore more desirable, expanding the market for all publishers, which heightened the value of literacy still further.
That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place. The importance of any given experiment isn’t apparent at the moment it appears; big changes stall, small changes spread. Even the revolutionaries can’t predict what will happen. Agreements on all sides that core institutions must be protected are rendered meaningless by the very people doing the agreeing. (Luther and the Church both insisted, for years, that whatever else happened, no one was talking about a schism.) Ancient social bargains, once disrupted, can neither be mended nor quickly replaced, since any such bargain takes decades to solidify.
And so it is today. When someone demands to know how we are going to replace newspapers, they are really demanding to be told that we are not living through a revolution. They are demanding to be told that old systems won’t break before new systems are in place. They are demanding to be told that ancient social bargains aren’t in peril, that core institutions will be spared, that new methods of spreading information will improve previous practice rather than upending it. They are demanding to be lied to.
The point is that there isn’t necessarily one model that works. And there isn’t necesarily a single answer, but what we do know is the economics at play, and the massive changes that will bring to an industry. You can’t pretend that a “newspaper” is a scarce resource any more, just as you can’t pretend that a song, a movie or even a piece of software is a scarce resource. You can erect new barriers, call for new legislation, initiate lawsuits and call those who love your work the most “thieves,” but it doesn’t change reality.
But one thing that has been true throughout history, is that even as new technologies come about, and old business models die out, what comes next is better. It’s more powerful, more compelling, more efficient and more wonderful than what was in the past — even if those who came before can’t necessarily see the business models that will dominate. We talk here about basic economic principles, and show those who are applying them to new business models (successfully!). I talk about “connecting with fans” and giving them a “reason to buy,” while admitting that everyone who does so currently needs to do so in a slightly different way. And we keep seeing that work, and we have faith that the economics at work hold true, and that the new opportunities that we see every day only increase and expand, just as the old models falter and collapse.
The newspaper people often note that newspapers benefit society as a whole. This is true, but irrelevant to the problem at hand; “You’re gonna miss us when we’re gone!” has never been much of a business model. So who covers all that news if some significant fraction of the currently employed newspaper people lose their jobs?
I don’t know. Nobody knows. We’re collectively living through 1500, when it’s easier to see what’s broken than what will replace it. The internet turns 40 this fall. Access by the general public is less than half that age. Web use, as a normal part of life for a majority of the developed world, is less than half that age. We just got here. Even the revolutionaries can’t predict what will happen.
Imagine, in 1996, asking some net-savvy soul to expound on the potential of craigslist, then a year old and not yet incorporated. The answer you’d almost certainly have gotten would be extrapolation: “Mailing lists can be powerful tools”, “Social effects are intertwining with digital networks”, “This points to future ways of managing local information”, and so on. What no one would have told you, could have told you, was what actually happened: craiglist became a critical piece of infrastructure. Not the idea of craigslist, or the business model, or even the software driving it. Craigslist itself spread to cover hundreds of cities and has become a part of public consciousness about what is now possible. Experiments are only revealed in retrospect to be turning points.
Everything is an extrapolation at this point. Even the most visionary folks out there can only see so far, and can only build on what they’ve experienced so far and where they believe things are going. No one knows what will be the exact end result, but many of us know that the end result will be more powerful and, indeed, more wonderful than what came before.
Society doesn’t need newspapers. What we need is journalism. For a century, the imperatives to strengthen journalism and to strengthen newspapers have been so tightly wound as to be indistinguishable. That’s been a fine accident to have, but when that accident stops, as it is stopping before our eyes, we’re going to need lots of other ways to strengthen journalism instead.
When we shift our attention from ‘save newspapers’ to ‘save society’, the imperative changes from ‘preserve the current institutions’ to ‘do whatever works.’ And what works today isn’t the same as what used to work.
We don’t know who the Aldus Manutius of the current age is. It could be Craig Newmark, or Caterina Fake. It could be Martin Nisenholtz, or Emily Bell. It could be some 19 year old kid few of us have heard of, working on something we won’t recognize as vital until a decade hence. Any experiment, though, designed to provide new models for journalism is going to be an improvement over hiding from the real, especially in a year when, for many papers, the unthinkable future is already in the past.
This is not just true of newspapers. It’s certainly true for music (which may even be ahead of newspapers in some regards). It will be true for all forms of entertainment soon enough. We’re seeing the beginnings of it in software as well. But that’s just the beginning. It’s going to happen soon in energy and healthcare, and potentially in many other industries as well.
Sometimes people complain that we focus too much on the music industry or copyright or patents around here. But, from my perspective, that’s because those are the leading indicators today of what’s about to happen in many different industries that are being fundamentally disrupted from the inside — as the very fundamental facts on which they based their models are being upended, as what used to be scarce is suddenly infinite (or, at the least, massively abundant). New scarcities are always created along with new abundance, but it’s incredibly difficult to see at the time. When people say things like the fact that “music has always been paid for” or that we need to pay for music because “that’s what’s valuable,” they’re not just missing the point, they’re missing the opportunity.
The economics of the old model have changed in fundamental ways. There is no way to go back, nor any desire to go back. What comes next is exciting and wonderful — but it will always be fought by those who lived off of the old inefficiencies and hope that they can continue to do so. But for everyone else, we should be embracing the experiments. We should be embracing what’s new and marvelling at the innovation and creativitiy we witness everyday that goes beyond just an extrapolation of what happened before, but is an actual embodiment of what comes next.
Shirky started his piece off by noting a story in the 90s from a newspaper guy who discovered that kids were reposting (“pirating”) Dave Barry columns on Usenet, where the guy said:
“When a 14 year old kid can blow up your business in his spare time, not because he hates you but because he loves you, then you got a problem.”
Yes, you do have a problem, if you’re running that old business. But for the rest of the world, you don’t have a problem. You have a revolution and a tremendous opportunity.
Filed Under: business models, clay shirky, creative destruction, newspapers
Comments on “You Can't Wait For The Perfect Business Model”
This is a good article and I especially like the quote at the end.
I hope the idea sinks in. Distribution of media has changed for the better. Old distribution channels will suffer. Why not embrace the change and figure out how to profit before someone else does?
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This assumes, of course, that the new distribution channels aren’t being artificially strangled, as some ISPs seem to be trying to do. Then again, looking at what most of these ISPs also do (they’re mostly cable companies), they have a vested interest in trying to preserve the old models.
Good article Mike 🙂
brilliant writing
I had Shirky’s essay linked to my blog by Saturday – and today I linked a very different essay by Michael Scherer at Time Magazine to my blog post. Scherer touches on the shrinking size of news nuggets to make them digestible for the web, and the implications of this on journalism business models.
Thanks, Mike, for moving forward this discussion.
One more thing!
One more thing… I don’t know what will replace the current news and music and movie industries. And I don’t care either. Something will spring up to fill any gaps in our needs. That something will have less overhead, and will be just as good as we need it to be.
All I know is it’s going to be better than what we have today. The sooner society accepts the fall of the old industries, the sooner we can move on.
and I forgot the point I really wanted to make
Another fairly different industry where exactly the same thing (that Shirky is talking about) is happening is the textbook publishing industry.
They have a fairly stupid business model that contains both high fixed costs (they ship heavy free copies to thousands of professors, many of whom sell the books into the used book market) and high variable costs (each text costs in double figures to publish and weighs several pounds to ship). They are under pressure from shortening life cycles and lots of free Internet material.
But they don’t understand what business they are really in. They come from book publishing and all they can see if book publishing (with lots of expensive digital embellishments).
Anyway, it is fairly structurally similar to the newspaper conundrum.
Re: and I forgot the point I really wanted to make
Ok, two things:
1) I’m not going to reply to you directly, but Harold, are you incapable of simply admitting when Mike is right? I mean, I think he’s right the vast majority of the time, but you can’t seriously sit here and try to make a valid point against Mike, The New York Times, and The Washington Post all at once, can you? At some point you need to learn when to pick your battles and when to concede defeat, man. Your credibility here is about negative 100% at this point and not much can help that, but we might at least seriously consider what you have to say if you didn’t constantly make one nothing-but-opinions counterpoint after another against Mike just to spite Mike. Argue when you’re right and drop it when you’re wrong, and no, nobody, you OR Mike, is always right.
2) Three letters: PDF. I would be TOTALLY HAPPY to pay the cost of a physical textbook minus printing cost for text books in a completely unprotected PDF file. I take notes on my laptop in class already (as well as the occasional game of Mahjong Titans – it’s unobtrusive enough I can still listen) so why clutter up my already full tiny Student-sized desk with a big lump of paper? The textbook publishers already have this stuff in a program where they can go to “File > Print” so why don’t they just get CutePDF writer and make a PDF version they can sell without ANY costs at all? Bandwidth for a 25MB PDF file is a LOT cheaper than shipping for a 500 page book, and they’d make every bit as much profit, so what’s the problem? Students are happier, they make more money, what’s not to love?
Hmm…not much else to say on this one. Good article mike, and good articles noted by Danny too. I’ll read your blog some time.
Amen, brother
OK, overtly religious, I’m not, but dammit Mike, you’re on. And you’re right. What an awesomely exciting time to experiment.
It’s terrifying too – I arrived in the entertainment business just early enough to still believe massive paydays were in my own future, but late enough to watch the (traditional) opportunities for such dwindle from a roaring river of money, to a babbling brook.
There’s a LOT of people still believing, still fighting for that old world. Interestingly, a vast majority of producers NEVER made it to that promised land under the old system – they just believed they could. So take away the only promise they might have had, and what’s left?
Lots of room to do better.
I’m excited about finding new ways of making and distributing content that might mean I don’t have answer to 10 “creative” execs, and phalanx’s of Standards & Practices lawyers. Instead, I could invest that time in making what I want to make, and conversing with fans who will help make our entertainment better. Hell, they’ll probably make some of it themselves.
It may not be the bazillion dollar payday (that never really existed for most producers anyway), or, it might be even better. We’ll never know but for the experiments.
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“It may not be the bazillion dollar payday (that never really existed for most producers anyway), or, it might be even better. We’ll never know but for the experiments.”
That I think is the core of the grief that this revolution is causing. It’s not that the industries “are being killed”, but that the wealth that they generate is no longer going to be concentrated into the hands of just few people, and those people are fighting tooth and nail to hang on to their golden geese. Rather than a handful of folks getting astonishingly rich, we’re going to have tens, or hundreds, making a good living doing something they love. That feels like progress to me. But what do I know, I don’t make my money creating artificial scarcities so I can make disproportionately large profits off the work of others.
someone angrily demands in the comments for us to explain “what will replace it.” I’ve spent over a decade trying to answer those questions pretty much every day here — showing example after example of things that are actually replacing those old models, but they’re all experiments.
So far the experiments are mostly in the category of “if we give enough stuff away, how big of a crowd can we get?”. Most online services don’t even start with a business plan, just an idea of something that would be cool. You end up with a collection of sites like facebook, twitter, youtube, and many others that effectively have no true business plans, no paths to profitably, and no real long term futures without sugar daddies to pay the bills. Experiments indeed.
The downside is that some of these experiments end up killing off existing business models and replace them with the dreaded “FREE!”. The loss of newspapers, example, replacing them with opinion packed blogs isn’t exactly a fair trade. The loss of in depth fact based coverage, replaced by opinion, talking heads, slanted blogs, and one paragraph news summaries leaves us all a little less informed.
So the question of “replace it with what” is very critical here. it is easy as pie to drag down another business and empty out it’s market value by giving the products away for free. When the money is gone and people are no longer providing that service, then what comes? Replace newspapers with online op-ed sites. Replace radio stations with mp3s of garage bands you never heard of. Replace TV with 10,000 online sites filled with shaky hand held cam shots of guys taking it in the nuts.
“FREE!” is the simplistic marketing approach used by people who cannot create value. Business creates value for it’s customers and it’s shareholders / owners. If you aren’t doing that, it isn’t business – just a 14 year old kid blowing up your business in his spare time.
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So far the experiments are mostly in the category of “if we give enough stuff away, how big of a crowd can we get?”. Most online services don’t even start with a business plan, just an idea of something that would be cool. You end up with a collection of sites like facebook, twitter, youtube, and many others that effectively have no true business plans, no paths to profitably, and no real long term futures without sugar daddies to pay the bills. Experiments indeed.
You left out Google. And Craigslist.
The downside is that some of these experiments end up killing off existing business models and replace them with the dreaded “FREE!”. The loss of newspapers, example, replacing them with opinion packed blogs isn’t exactly a fair trade. The loss of in depth fact based coverage, replaced by opinion, talking heads, slanted blogs, and one paragraph news summaries leaves us all a little less informed.
You mean the gain of things like Google and Craigslist and the overall internet aren’t good things?
“FREE!” is the simplistic marketing approach used by people who cannot create value. Business creates value for it’s customers and it’s shareholders / owners. If you aren’t doing that, it isn’t business – just a 14 year old kid blowing up your business in his spare time.
Yes, that’s right. Google and Craigslist added no value to the world whatsoever.
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Google and Craigslist. let’s see: What do they both have in common that most websites don’t have?
A FREAKING BUSINESS PLAN!
Both of these companies are profitable because they have a business plan that works. Without it, both of them would long since be gone. They also do something that few other sites do: They make their money by continuing to do what they set out to do to start with. There is no long connection where you give away “FREE!” something that has massive value and then try to get people to buy something else.
Google offers search, filtered results, and filtered advertising possiblities as a result. Those ads are in harmony with their original search intention. They profit not by razzle dazzling people into doing something that didn’t intend to do, but by helping them do what they want to do.
Craiglist is exactly the same thing, getting the commercial posters to pay for their ads. Again, it is in harmony with the original intent of the site, not against it or in spite of it.
In neither case did they destroy anyone’s business model to get there. They didn’t have to “FREE!” something that had huge value (there were plenty of free ad classified papers around long before CL came around). There were plenty of free search engines before Google. The only differences in the end is that both of these companies have BUSINESS MODELS THAT WORK, a goal from the outset that makes it work. They don’t have to steal from anyone to make those models work.
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Harold,
I wanted to share something with you during the exchange this weekend, but it fits better here. You mentioned a need for a business plan. However, a B-Plan is difficult to put together when you understand the business needs to continually evolve. Terry McBride understands that, and that’s why his model is so interesting, at least to me.
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Google and Craigslist. let’s see: What do they both have in common that most websites don’t have?
A FREAKING BUSINESS PLAN!
Actually, when both started they did NOT have a business plan. In fact, both fit into exactly the same description that you gave:
“So far the experiments are mostly in the category of “if we give enough stuff away, how big of a crowd can we get?”. Most online services don’t even start with a business plan, just an idea of something that would be cool.”
That was true of both Google and Craigslist. And you know what happened? Both found massive business plans that not only helped themselves, but tons of others.
So I wouldn’t be so quick to toss out those “experiments” if I were you.
Both of these companies are profitable because they have a business plan that works. Without it, both of them would long since be gone. They also do something that few other sites do: They make their money by continuing to do what they set out to do to start with. There is no long connection where you give away “FREE!” something that has massive value and then try to get people to buy something else.
Um, that’s exactly what both Google and Craigslist have done. I’m not sure how you can possibly claim otherwise.
Google offers search, filtered results, and filtered advertising possiblities as a result. Those ads are in harmony with their original search intention. They profit not by razzle dazzling people into doing something that didn’t intend to do, but by helping them do what they want to do.
Craiglist is exactly the same thing, getting the commercial posters to pay for their ads. Again, it is in harmony with the original intent of the site, not against it or in spite of it.
Indeed. I’m not sure what point you think you’re proving. This supports the point we’ve been making here all along. There are tons of business models where you can be in harmony with the intent of the site.
In neither case did they destroy anyone’s business model to get there.
Uh, really? Have you not seen all the newspapers bitching about both sites?
They didn’t have to “FREE!” something that had huge value
I give up. If you really think that, then you have no clue.
The only differences in the end is that both of these companies have BUSINESS MODELS THAT WORK, a goal from the outset that makes it work.
But neither company had a business model at the outset. Both were just focused on giving stuff away for free — stuff that had plenty of value and that absolutely disrupted other industries.
Hell, I was among those who thought that Google was a dumb business because it had no business model at all. I couldn’t believe that KP and Sequoia dumped $25 million into the business, when the company had no revenue at all, and was antagonistic towards advertising (and had even claimed it would not put ads on the site… )
It’s really funny the cognitive dissonance you go through WH. It’s the point of this article. In retrospect, people look at business models like Google’s and Craigslists’ and assume they were obvious all along. They were not. Google had no business model at all. At best, they claimed they could make money selling search appliances. Craigslist was a fun side project. It had no business model at all.
But now that both have tremendously successful business models, you falsely assume it was always that way. You’re rewriting history.
And, I imagine you’ll do the same when the next experiments go from “if we give enough stuff away, how big of a crowd can we get?” find their business models and become huge success stories.
WH, you have a way of being wrong almost every time you open your mouth, but this time you’ve taken it to new levels. Not only are you wrong, but you seem to be denying actual reality.
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Mike, sorry, but you are again going a very long way to miss the point.
Google, CL, and all of that would not exist today without business plans. But neither of them were predicated on theft of content, misuse of intellectual property, or making someone else’s profitable business into something “FREE!”.
There were plenty of free classified ad papers before CL, there were plenty of free search engines before google. Neither of them stole anything from anyone to entice people in the door.
They give away the small case free, not the “FREE!” that requires ripping down copyrights, sharing infinite copies of songs, or anything else like that. They provide a service that in and of itself has value, and can be turned into a business.
“And, I imagine you’ll do the same when the next experiments go from “if we give enough stuff away, how big of a crowd can we get?” find their business models and become huge success stories.”
I can get a huge crowd on the street by giving away free food or clothes. I can fill a bar with free beer, and I can be the most popular guy on campus by giving away copies of movies for free. None of those have long term value, once I stop being free, I would have no business. I have established only that I am able to give stuff away. now, if I stole all that from someone else and added in a little card to encourage people to eat dinner at my restaurant, I might actually make some money. But it isn’t a business model, just dressed up thieving. So yeah, you can get a big crowd by giving it all away, but what is left in the end?
Call me when Youtube makes a profit and no longer has any lawsuits in front of it. I suspect that will be about a quarter past never.
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Google, CL, and all of that would not exist today without business plans. But neither of them were predicated on theft of content, misuse of intellectual property, or making someone else’s profitable business into something “FREE!”.
Again, newspapers would disagree with you about Google/Craigslist making their business free.
But, I’m curious, how you seem to think this whole discussion is about “free” in the first place. None of what we’ve been talking about in this post has revolved around taking anyone’s intellectual property. It’s all been about business models.
You were making fun of Twitter/Facebook others — saying they had no business model at all. But, those aren’t about making someone else’s business free either.
Or, did you forget what we were talking about again?
There were plenty of free classified ad papers before CL, there were plenty of free search engines before google. Neither of them stole anything from anyone to entice people in the door.
And the fact that you think Google and CL didn’t do anything new says tons about why you misunderstand this issue so fundamentally.
They give away the small case free, not the “FREE!” that requires ripping down copyrights, sharing infinite copies of songs, or anything else like that. They provide a service that in and of itself has value, and can be turned into a business.
I’m not sure what this distinction is between free and FREE. It seems like no distinction at all. You seem to be making something up where “free” is ok, but “FREE” is something WH dislikes. Economics doesn’t work that way.
And you have yet to explain why everything else we describe isn’t also a service that, in and of itself, has value and can be turned into a business. That’s what we describe every day here: people providing valuable services that they turn into businesses.
I can get a huge crowd on the street by giving away free food or clothes. I can fill a bar with free beer, and I can be the most popular guy on campus by giving away copies of movies for free. None of those have long term value, once I stop being free, I would have no business. I have established only that I am able to give stuff away.
Just as Google did a great job attracting a crowd by giving away free better sorting of information, and CL attracted a crowd by giving away free classifieds. But both found businesses. Why you continue to assume that others can’t find such businesses is beyond me. I mean, you’re obviously not stupid. Why do you think that it only works for Google and CL, but can’t for others?
I have established only that I am able to give stuff away.
Just as both Google and CL did for years before creating their business model.
now, if I stole all that from someone else and added in a little card to encourage people to eat dinner at my restaurant, I might actually make some money. But it isn’t a business model, just dressed up thieving.
But that involves theft. None of the models we talk about involve theft at all.
Call me when Youtube makes a profit and no longer has any lawsuits in front of it. I suspect that will be about a quarter past never.
Heh. You really are the epitome of the people Shirky was discussing.
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I mean, you’re obviously not stupid.
Man, talk about wild, unfounded speculation. Try to back up your claims with facts, OK Mike? 😉
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The labels, writers’ guilds, publishers and a host of other do claim the exact opposite. We’ve been reading about it for years.
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@ #7:
Quote: “FREE!” is the simplistic marketing approach used by people who cannot create value.
To which I say:
1. It seems to be working OK for Google. And Yahoo!. And Craigslist. And lots and lots of forums.
2. It seems to have worked OK for the last 50 years for broadcast television.
3. Almost every vendor who’s wanted my business in the last 25 years has given me free stuff: lunches, coffee cups, sports tickets, etc. I’m pretty sure that’s standard practice in almost every business.
4. I get more “free” than I can stand in my mailbox (physical and electronic) every day, and have for years.
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Again, you miss the point (I think Mike smiles when he reads comments like yours).
There is free and then there is “FREE!”.
1. What Google, CL, and others do is free. They give something that they make themselves, with no true market value for free. Then just like TV, radio, and all those other nasty things that you guys all despise, they add commercials to it, add a pay per view option, or add infomercials to it.
2. What TV and radio does is the same – they BUY something, and give it to you for free in return for your eyeballs and time. They also sell airtime, etc. Their free product (the shows or music played) costs them significantly to put on the air. They didn’t steal it from anyone.
3. That sort of free stuff again is only free, not “FREE!” because it was all paid for. They didn’t make you dine and dash for lunch, they didn’t help you climb the fence to sneak into the ball game, and they didn’t steal the coffee cups from starbucks.
4. That free in your mailbox isn’t free either. The ads roll up into the cost of the products, and whatever they may offer you for free comes either as sample to encourage future purchase, or as a “free when you buy this” (please see free credit reports dot com, the ultimate not free site.
“FREE!” is when you take someone else’s product, give it away for nothing (regardless of value) without paying them to do it. “FREE!” is giving away dollars in the hope of making pennies, mostly because they were someone else’s dollars to start with.
If you want to make #3 really “FREE!”, the company giving you, say, tickets to a baseball game would get them for free from the ballpark, as they are hoping you MIGHT buy something from the concession stands, while the company giving them to you hopes to profit off that free stuff and talk you into buying their software or whatever. Where it falls down is that the prices at the concession stands are 20% higher than they should be, to cover the costs of the free tickets. So your “FREE!” tickets aren’t free, just paid for by all the people around you who eat popcorn that day. The company pushing the software gets something for nothing, good for them but again their marketing has been paid for by the popcorn buyers (they didn’t realize it). It all works until people stop buying so much from the concession stands because they are overpriced, then suddenly “FREE!” doesn’t work anymore.
Ever wonder why your plane ticket is cheap but a coffee at the airport is $7? Think about it.
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There is free and then there is “FREE!”.
Um. Only according to you. You seem to make this bizarre distinction that no one else is making. We’ve never said that everything needs to be free. We’ve always said that you use free as a part of the business model — which is exactly what Google, Craigslist, TV, radio and others have always done.
I don’t see how you make a distinction between them and others, who are trying to do exactly the same thing.
In fact, we’ve quite clearly said that what we’re talking about isn’t that everything is free, but how free is a part of the business model:
http://www.techdirt.com/articles/20071214/034002.shtml
If you want to make #3 really “FREE!”, the company giving you, say, tickets to a baseball game would get them for free from the ballpark, as they are hoping you MIGHT buy something from the concession stands, while the company giving them to you hopes to profit off that free stuff and talk you into buying their software or whatever.
No, again, that’s a dumb business model. In fact, we’ve said exactly that:
http://www.techdirt.com/articles/20080522/1545021204.shtml
Give it away and pray is not a good business model, but that’s different than a business model that involves “free.”
Harold, for the last few weeks that you’ve been here, we’ve asked you, repeatedly, to maybe take some time and try to understand the fundamental issues here, because you have consistently gotten the very fundamentals of basic economics, law and culture incorrect. You have obviously chosen to ignore those suggestions. I would suggest, once again, that you rethink this strategy. Sooner or later, someone might figure out who you really are, and your reputation will suffer greatly.
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I understand the the fundamental business model, literally I have been there and done that (both in reading the supporting material and operating businesses predicated on it).
http://www.techdirt.com/articles/20080522/1545021204.shtml
This one makes me laugh, because you are trying to cover up the major flaw of free. What is your suggestion for the music business? Give away the music for free, and hope enough people buy concert tickets (or you raise the price of concert tickets enough) to cover the lost revenue from no longer selling albums. That to me is “FREE!” because it takes a previously profitable business and tosses it in the trash, for the hopes of making money elsewhere.
For things like the radiohead limited set or NIN doing similar, there is no proof that these sets would have sold anyway without the free. In fact, without the free and only selling those sets, they might have even sold more, who knows?
it is also not really proving anything by using hugely popular long time music acts to suggest something would work for other people. Would an unknown be able to sell $300 box sets or double the price of their concert tickets under normal circumstances? Will the general public going to a bar like Whiskey a go-go be willing to pay $50 cover charge to get in to see a band? $20 for a beer?
I get the drift though. If you mix enough business models together in a blender, people might make the mistake of confusing free and “FREE!” as the same thing.
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I don’t care how big of a brand you are; if you double the price I’ve been happily paying, you’ve lost a customer. $300 box sets, only for the truly dedicated fans. $50 cover charge, again only for the core fans. $20 for a beer, someone might get jumped!
Harold, you keep trying to make a point and you have been going about it in such a combative way. You remind me of some people that I despise from college. I think we all understand that just because something is given away free doesn’t mean we won’t pay for it somewhere down the line. Sure, the cost gets worked into some other product or service; but the value for that product should still meet or exceed the cost anyway (otherwise it wouldn’t sell). Stop trying to fit things into such a small box, and look at how it could fit into the ever-expanding economic ecosystem. Also, learn to play well with others.
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You understand it, but I think Mike doesn’t want anyone else to understand it. He has yet to truly explain how the loss of the 10 billion dollars the music industry generates in sales can be tossed out to zero and replaced in a manner that doesn’t lose those 10 billion dollars.
You and I agree, and I thank you for that – that money will come from somewhere else.
My main point in the end is that “FREE!” fails to address that magic point you touch on: “if you double the price I’ve been happily paying, you’ve lost a customer”. In order to make the money back up, the price goes up somewhere. No free lunches, no matter what the sign says, no free credit reports either (no matter how nice their songs are).
I am suspecting in the end Mike’s real goal is this: the music / software / movie business is full of middlemen making money. If we kill their businesses dead and remove all their copyright / trademark / patent rights, we can then turn around and scoop up the cash. He won’t say it, but I am starting to think it is the point.
I am trying hard not to be combative, but things like “I would suggest, once again, that you rethink this strategy. Sooner or later, someone might figure out who you really are, and your reputation will suffer greatly.” sort of sound like fighting words to me.
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You understand it, but I think Mike doesn’t want anyone else to understand it. He has yet to truly explain how the loss of the 10 billion dollars the music industry generates in sales can be tossed out to zero and replaced in a manner that doesn’t lose those 10 billion dollars.
There has never been a true market in history that has become more efficient that hasn’t become a LARGER market by what comes next.
The horse and buggy market got wiped out, but the TRANSPORTATION market got much bigger.
The telegraph market got wiped out, but the COMMUNICATION market got much bigger.
The same thing will happen here. For every new efficiency, the REAL MARKET becomes much larger. It’s only those, like WH, who looks only at the specific PRODUCTS, rather than the actual MARKETS, who think that the new efficiencies create smaller markets. They do not.
My main point in the end is that “FREE!” fails to address that magic point you touch on: “if you double the price I’ve been happily paying, you’ve lost a customer”. In order to make the money back up, the price goes up somewhere. No free lunches, no matter what the sign says, no free credit reports either (no matter how nice their songs are).
Indeed. No free lunches, but if you understood the fundamentals of economic growth, you would understand how all of this works. Instead, you choose not to.
If you would like to understand, I’d suggest reading your Romer.
I am suspecting in the end Mike’s real goal is this: the music / software / movie business is full of middlemen making money. If we kill their businesses dead and remove all their copyright / trademark / patent rights, we can then turn around and scoop up the cash. He won’t say it, but I am starting to think it is the point.
Odd. If that were the case, then why would we keep advising those guys how to make more money? Very odd.
I am trying hard not to be combative, but things like “I would suggest, once again, that you rethink this strategy. Sooner or later, someone might figure out who you really are, and your reputation will suffer greatly.” sort of sound like fighting words to me.
They’re not fighting words. It was just a clear suggestion. You are posting deliberately incorrect things here on a regular basis. I’m trying to help you by suggesting that being willfully ignorant may hurt your reputation in the long run. I know you are posting anonymously here, but eventually people may figure out who you really are, and it would hurt your reputation. It is for that reason I suggest that you might take some time to actually understand the fundamentals. Otherwise, your reputation (a very important scarce good) may be significantly damaged. I was trying to help.
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Deliberately incorrect? Mike, I post my opinion, based on the facts I have. I don’t self quote, I don’t point to my own writings to justify myself, I post based on what I know, what I see, what I read. You might not agree with the things I say, but that in and of itself doesn’t make them wrong.
How about this?
http://techdirt.com/articles/20090312/0729224090.shtml
Artists are learning to be scalpers to get their income back. Nice. Good to see that Trent gets it, right?
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Ha! Harold, you really are amazing.
I like how you totally ignore the points we caught you on.
You claimed that the business model of Google and CL were totally different than the situations of Facebook and Twitter. We proved they weren’t… so you just started arguing something entirely different.
Funny stuff. You make me laugh.
This one makes me laugh, because you are trying to cover up the major flaw of free. What is your suggestion for the music business? Give away the music for free, and hope enough people buy concert tickets (or you raise the price of concert tickets enough) to cover the lost revenue from no longer selling albums.
Nope, wrong again. As per usual. Never said the concert business makes up the difference, but thanks for setting up a new strawman. I suggested you learn some economics. Apparently you don’t want to learn anything.
That to me is “FREE!” because it takes a previously profitable business and tosses it in the trash, for the hopes of making money elsewhere.
You know what was a previously profitable business? Selling buggy whips? But that became obsolete.
Same with selling printing presses.
Telegraph machines.
Steam engines.
New technologies come along all the time and wipe out the old.
it is also not really proving anything by using hugely popular long time music acts to suggest something would work for other people. Would an unknown be able to sell $300 box sets or double the price of their concert tickets under normal circumstances?
Strawman again… no one ever said the model was to sell $300 box sets or double the price of concerts.
You’re really reaching here…
I get the drift though. If you mix enough business models together in a blender, people might make the mistake of confusing free and “FREE!” as the same thing.
You still haven’t explained what the difference is, other than the fact that if WH likes your business model it’s “free” and if he doesn’t, it’s “FREE!”.
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Hey Mike,
Please quote so more of your own crappy blogs as evidence you are right. We already know you think you are right. I know how about you quote some wikipedia, because that is always 100% correct. I know just continue to ignore the very points that you have been caught on.
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Please quote so more of your own crappy blogs as evidence you are right.
I did not quote myself to prove I was right. I quoted myself to show that what Harold attributed to me I never said.
I would have thought the difference was obvious.
Harold claimed I said something when I had actually said the opposite. So I pointed out where I said the opposite. That has nothing to do with quoting myself to show that I was right.
Why would you think otherwise?
I know just continue to ignore the very points that you have been caught on.
Which points, specifically, have I been “caught on”? I’m willing to discuss anything, and when I am wrong, I am more than willing to admit so.
Yet, you haven’t provided any such points.
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The loss of newspapers, example, replacing them with opinion packed blogs isn’t exactly a fair trade. The loss of in depth fact based coverage, replaced by opinion, talking heads, slanted blogs, and one paragraph news summaries leaves us all a little less informed.
“In depth,” really? “Fact based,” only if you count word-of-mouth, “coverage,” barely. I’m just curious what fantasy newspaper you read. From what I’ve read, newspaper journalists report on happenings and take their “facts” from mostly secondhand and rarely firsthand accounts. I don’t know the last time a news reporter was directly involved in what resulted in an article; more than likely due to increased bias. Also, who decides what information to supply? Is it the witness, publicist, reporter, executive or publisher? All of these project their own agenda/bias into the article.
Also, I’ve seen many single paragraph articles in the newspaper about things that truly interest me and had to go searching elsewhere to find the story. Newspapers have been falling behind for quite some time, I dropped my subscription well over ten years ago and only picked it back up when they offered me a year’s subscription for $12. My wife reads it, but I still toss most of it and just look at the sale papers and comics. The sad part is, their on-line offerings are a joke and I still have to go elsewhere for the content.
Great Posts
Two great posts from Clay and Mike. Nothing like some good reads with sound analysis about a live revolution. 🙂
Fav Quote
My favorite quote from Shirky’s side:
With the old economics destroyed, organizational forms perfected for industrial production have to be replaced with structures optimized for digital data. It makes increasingly less sense even to talk about a publishing industry, because the core problem publishing solves — the incredible difficulty, complexity, and expense of making something available to the public — has stopped being a problem.
It makes me wonder exactly what problem we’re trying to solve now that that one’s rapidly being patched up?
Re: Fav Quote
“he incredible difficulty, complexity, and expense of making something available to the public — has stopped being a problem”
It’s a fallacy. In most cases, the costs of distribution are not as high, but those costs are still there, just now hidden from the public’s prying eyes. Instead of charging $14.95 for a CD with 10 songs on it, we charge 99 cents per song to download it and pile on advertising, popups, spam mail, associated marketing offers, and all sorts of other tricks to recoup the same money. In some cases, P2P is used to move that cost off to the end users (and their ISPs).
Hiding the costs don’t make them go away, just makes it sneakier.
Re: Fav Quote
Check the newspaper carefully. Read the words closely. “Police have stated that” “eye witness bob said that he saw” “the report goes on to site 3 examples of how”.
Print media has rules – either back the facts up with multiple sources, or clearly identify the material as opinion, eye witness accounts, or attribute the comments to the right people.
A blog report of the same things would read like “those pigs lied about” “I saw some stuff” and “the biased reports are meaningless and full of lies”. You only have to read this site to understand what “news” looks like when it is couched against an agenda.
Bleeding Edge
Part of the problem is that this new mode of operation is so new and woefully undocumented that it scares most established businesses.
Mike, you caught me on nothing, except maybe in your own preconceived notions.
Google and GL both don’t steal anything from anyone and give it away for free. Show me where they do. Their basic site premise does not generate lawsuits (although Google since has started to stand in some pretty big piles of dung over time on the issue)
Youtube? Napster? Oink? Need I go on?
ou know what was a previously profitable business? Selling buggy whips? But that became obsolete.
Same with selling printing presses.
Telegraph machines.
Steam engines.
New technologies come along all the time and wipe out the old.
Yes, and in each of these cases they were wiped out by a valid business model, not just a product or idea. Nobody pushed the buggy whip people out of business by giving away free cars. Nobody wiped out the telegraph machine by giving away free phones. Nobody wiped out steam engines by giving away a gas powered replacement.
In each of those cases, advancement was made because not only was a random product created, but a business was created for it.
Now, mass shoplifting (say a riot) is a good way to put plenty of businesses out of business, but it doesn’t replace them with anything.
it is also not really proving anything by using hugely popular long time music acts to suggest something would work for other people. Would an unknown be able to sell $300 box sets or double the price of their concert tickets under normal circumstances?
Strawman again… no one ever said the model was to sell $300 box sets or double the price of concerts.
Sorry, it is exactly your point, no strawman here. Let me explain:
BigBand normally sells 3 million copies of their albums, and embarks on a year long concert tour with 250 dates, 20,000 seats per date. They have always sold out their concerts.
New model says they give away 6 million copies of their album, embark on a year long concert tour with 250 dates, 20,000 seats per date, which they again sell out.
At even $5 per album net for the artist, $15,000,000 just disappeared (the $5 net before management fees, and would include song writer residuals and so on). In a concert where often less than 20% of the gross comes to an artist, that means that $75,000,000 more ticket sales much be generated. The shows are sold out, and there are only so many days in the year. So instead, ticket prices go up.
Correct me where I am wrong here, unless you are suggesting that musicians should just ignore the lost money and eat it.
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Google and GL both don’t steal anything from anyone and give it away for free. Show me where they do.
Indeed. And none of the businesses we’ve talked about steal anything from anyone and give it away for free.
You’re setting up a strawman.
Youtube? Napster? Oink? Need I go on?
Each provided a service for distribution of content. None stole anything. Some of the USERS of each site may have INFRINGED on content, but that’s quite different than claiming the site’s STOLE.
In fact, many have accused Google of doing the same thing in searching and indexing their content — which they feel (incorrectly) infringes on their content.
Yes, and in each of these cases they were wiped out by a valid business model, not just a product or idea.
Huh? Each started out as a product or an idea. The business model came later. That’s the whole freaking point that you seem unable to recognize.
The business model comes later.
Nobody pushed the buggy whip people out of business by giving away free cars. Nobody wiped out the telegraph machine by giving away free phones. Nobody wiped out steam engines by giving away a gas powered replacement.
Man. Stop focusing on $0. It’s no different than $100. All of the businesses above lost a lot of money before they made money. There’s no difference here. $0 is just a price. Just like $100 is just a price. The business model comes later.
In each of those cases, advancement was made because not only was a random product created, but a business was created for it.
The business came later. The product came first.
Now, mass shoplifting (say a riot) is a good way to put plenty of businesses out of business, but it doesn’t replace them with anything.
You keep saying that, but you’ve yet to show of any mass shoplifting.
BigBand normally sells 3 million copies of their albums, and embarks on a year long concert tour with 250 dates, 20,000 seats per date. They have always sold out their concerts.
New model says they give away 6 million copies of their album, embark on a year long concert tour with 250 dates, 20,000 seats per date, which they again sell out.
At even $5 per album net for the artist, $15,000,000 just disappeared (the $5 net before management fees, and would include song writer residuals and so on). In a concert where often less than 20% of the gross comes to an artist, that means that $75,000,000 more ticket sales much be generated. The shows are sold out, and there are only so many days in the year. So instead, ticket prices go up.
Correct me where I am wrong here, unless you are suggesting that musicians should just ignore the lost money and eat it.
You’re making up a fake scenario that assumes, incorrectly, that concerts are where all the money comes from.
I’m not going to go over this again. You have clearly decided that you don’t want to learn, but want to troll. That’s fine. If that’s what gets you up in the morning. Enjoy.
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Mike:
Business models: they develop over time, but you have to start with a marketable product that doesn’t require X number of other business to change their ways to let you make money (example youtube or web radio for pay per play fees)
$0: It’s just a price – but try to buy lunch with it.
Torrents / P2P: Mass shoplifting.
fake scenerios: Show me a REAL scenerio that gets the money back.
Oh and please, can you do it without just pointing back at your own blog posts?
Re: Re: Re: Re:
Business models: they develop over time, but you have to start with a marketable product that doesn’t require X number of other business to change their ways to let you make money (example youtube or web radio for pay per play fees)
The best business models actually do require X number of other businesses to change their ways. Automobiles. Trains. Airplanes. Steam engine. Telephone. All of them created massive changes to industrial sectors.
To suggest otherwise is to ignore history… again.
$0: It’s just a price – but try to buy lunch with it.
Whoever said otherwise?
Torrents / P2P: Mass shoplifting.
Not even close, but if you want to keep pretending it is, have fun.
Individuals may be involved in infringement, but the only times I’ve used BitTorrent was to download perfectly legitimate software. How is that mass shoplifting?
fake scenerios: Show me a REAL scenerio that gets the money back.
What do you think we’ve been doing for the past 10 years? Showing you business model after business model after business model PLUS the underlying economics of why it works PLUS economic history to explain why it works.
Oh and please, can you do it without just pointing back at your own blog posts?
If you want to pay me, I’ll rewrite it all for you. Until then, check it out, because we’ve got 30,000 posts that answer your question for free… despite some guy named Weird Harold suggesting there’s no business model for us to have done so.
Re: Re: Re:2 Re:
Business models: “change” as it play by different rules to make this business world. Webradio wants to pay less than regular radio because they can’t afford to pay. Why should the existing business change?
There is no ignoring history, I just don’t rewrite it to support my views. Telegraph existed well into the 80s. The overlap of automobiles and buggies was pretty long as well. Airplanes too years before they could replace the steam ship (and yet cruise ships still sail today). What do all of these have in common? The product was developed and a valid business model discovered BEFORE the existing industry was ripped apart. When the Wright brothers made their first flight, the steam ships weren’t immediately parked. It was 60 years before intercontinental flying was commercially possible. The same goes for those darn horseless carriages, and telegraph was still the best way to send a long distance message for years. Again, if you want to use history, don’t re-write it to suit your needs.
Torrents / P2P: last time I looked at Piratebay a couple of weeks ago, the top 100 files were all stolen, borrowed, keygened or ripped. That you are the one guy in the store getting the free weekly newspaper while everyone else is shoplifting doesn’t mean the shoplifting isn’t happening.
Scenerios: If the last 10 years is anything like the last few months, you have been piling supposition upon rose colored glass views of the world for a long time.
I thought you would do the work for “FREE!” because it would help to promote you other businesses and your self worth, after all, that’s the point, isn’t it? 😉
Re: Re: Re:3 Re:
There is no ignoring history, I just don’t rewrite it to support my views.
Heh. Actually, that’s about all you’ve done, repeatedly.
I’m really beginning to wonder who you are, because I don’t think anyone who is serious can be so wrong, so often. I’m curious if you might like to share with the folks here a little more about yourself…. Like, what do you do for a living?
Telegraph existed well into the 80s. The overlap of automobiles and buggies was pretty long as well. Airplanes too years before they could replace the steam ship (and yet cruise ships still sail today).
Yup. And newspapers and CD sales are still big businesses today. I’m not sure what your point is… other than showing you’ve never read Clayton Christensen.
The product was developed and a valid business model discovered BEFORE the existing industry was ripped apart.
Uh, not really, but nice try. The fact that all of them “hung on” for ages isn’t because that new valid business model was clear before. This is rewriting history at its finest. There were plenty of tumultuous times before anyone was clear what the successful new business model really would be, and plenty of people freaking out about dying industries. But it all worked out in the end — which is the very point of this post… which you still don’t appear to have actually read.
It was 60 years before intercontinental flying was commercially possible. The same goes for those darn horseless carriages, and telegraph was still the best way to send a long distance message for years. Again, if you want to use history, don’t re-write it to suit your needs.
And for many CDs are still preferred, as are newspapers. What’s your point again?
Torrents / P2P: last time I looked at Piratebay a couple of weeks ago, the top 100 files were all stolen, borrowed, keygened or ripped.
Ah… I see. You seem to be confusing a few things here and it makes your argument difficult to follow.
So, let’s try this out:
1. Theft is different from infringement.
2. The people infringing are different from a service used for infringing.
What you actually MEAN to say, rather than claiming that a business model is built on theft is that some popular services today are used by many people to infringe in addition to the legitimate activities they allow.
You know another business that was built in the same way? The VCR. It was called “the Boston strangler” of the movie industry, and it helped to save that industry. Funny, that.
You know another business that was built in the same way? Radio. It was as “pirate” technology for a long time, and it helped to grow tremendous new industries. Funny, that.
I thought you would do the work for “FREE!” because it would help to promote you other businesses and your self worth, after all, that’s the point, isn’t it? 😉
Apparently you’ve never bothered to understand anything I’ve said here. Your loss.
Question: how can a business model be “proven” if nobody actually tries it? If nobody has the guts to try it, you end up with the chicken and the egg (nobody tries it because it’s not proven, and it can’t be proven because nobody will try it).
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By Mike’s own admission, business models come later. Right now is the flailing about causing much pain and suffering phase, where everyone else is suppose to bleed cash to let someone play.
BigBand normally sells 3 million copies of their albums, and embarks on a year long concert tour with 250 dates, 20,000 seats per date. They have always sold out their concerts.
New model says they give away 6 million copies of their album, embark on a year long concert tour with 250 dates, 20,000 seats per date, which they again sell out.
At even $5 per album net for the artist, $15,000,000 just disappeared (the $5 net before management fees, and would include song writer residuals and so on). In a concert where often less than 20% of the gross comes to an artist, that means that $75,000,000 more ticket sales much be generated. The shows are sold out, and there are only so many days in the year. So instead, ticket prices go up.
I am going to ignore the revenue since I have very little knowledge of the income per album or concert ticket. However, consider the situation where BigBand has been selling out their 20,000 seat venues and chooses to move to a 30,000 seat venue. Maybe they only have 25,000 fans in that location willing to pay $50 for a seat and $15 for each album.
Now, what might happen if they give away their electronic albums for free? Would it be possible for them to drop below 25,000 fans in the one location? Or is it more likely that their fan base increases. The cost for being a fan has dropped from a minimum of $65 to $50 and BigBand has maybe gained another 7,500 or so fans in that location. They have increased their fan base, lowered the entry cost and can now sell out that 30,000 seat venue.
You might also notice that the $15 price gap was filled by the addition of those 7,500 extra fans. Imagine if there were other things those new fans might buy, or how many more fans they might bring in.
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JB, in the music business, 20,000 seats is typical “big” venue. The next step up from that usually is stadiums, which most bands tend to avoid for various reasons from sonic quality to the time required to set up and tear down the show on that scale. There aren’t 250 venues in the world that can soft seat 30,000 people. the numbers are typically 20k or 50k, not much in the middle.
In reality, arena tours (the most common north american big tour) runs about 15-17k a show, because of losses behind the stage and obstructed seats. London’s O2 arena is 15k seats, plus or minus.
When you hit this level, it is almost impossible for a band to increase their attendance figures wihout stepping the whole deal up to the 50k stadium shows, which are not really as economical to do, plus there is a lack of venues.
So your numbers are good in theory (which is what most of this site is about) but the reality is that most BigBand type acts sell out the venues they are going to and don’t need to give away product for free to have more fans that they cannot sell anything to.
Re: Re: Re:
Okay, so BigBand (BB) is at the top of their game. They can now take over production, distribution and advertisement of their own music. Their costs are cut and they can still charge the same $15 for their album. May as well charge for the album since there is no room left to grow.
Let’s switch to LittleBand (LB) who is opening for MediumBand (MB) at a respectable 2,000 seat venue. LittleBand has been with EvilLabel01 (EL1) for a few years and has taken the promotional back seat to BB who was also with EL1. LB’s contract is about to run out and they think they might be able to handle things themselves. They offer up their new music for free and endear themselves to the fans of MB who in turn tell their friends and about half end up liking LB’s music. LB is now able to perform as the premium act at 2,000 seat venues.
MB sees the success of LB and decides to do the same thing. Unknowingly they are competing for the same audience. Now the free market system rears its head. LB and MB have to differentiate themselves and both have dropped their album prices to $0. They begin experimenting with different revenue streams. LB goes to some advertising agents and asks about tour sponsorships in return for songwriting/performance in their ads.
MB goes to their fans and engages them, bringing the fans into a closer community with the band. MB sets up a marketplace where fans can hear demo tracks and collectively participate in the writing of future songs. MB also lets the community see the cost of production and offers up a donation page. As the MB fans see value in the works, they begin donating their time and money to help grow the band. In return, MB stays in touch with the community and offers (not promises) varying scarcities to those who actively assist the band.
As time goes on, both LB and MB have found ways to thrive.
To paraphrase this old meme:
1. Destroy old business model forever.
2. ???
3. Profit!
lol
Mike vs WH, fight!
Mike, WH, haven’t you two had enough already? Isn’t it time that you two resort to violence?
Weird Harold.
Shut the fuck up and get a dictionary!
Stealing != Copyright infringement.
A Download != a lost sale.
Actually Mike, I understand EVERYTHING you say, which is actually the problem. I am not as likely as some to fall for word games or shading of situations to make them look more like what you want.
Let’s start with infringement / theft – your issue with the term theft is that the original isn’t stolen, only a copy. It’s an “angels on head of pins” type debate, because it isn’t in the taking, it’s in the possessing. You didn’t have something, now you have something you didn’t pay for, didn’t buy, and were not given. Alas, the only choice left is either it materialized out of thin air, or you stole it. (definition of steal: to appropriate (ideas, credit, words, etc.) without right or acknowledgment. ).
You got something for nothing that you should have paid for. I don’t know about your grandma, but mine would call that stealing. Then again, the one thing I learned about life online is that there are very, very few morals.
You shade the overlap of things (buggy to automobile, telegraph to phone) in a way that makes your opinion look right, but I think you are pulling on it too hard. The time it took for those changes to happen wasn’t just a quesiton of time, but a question of business model. The phone guys didn’t suddenly get use of the telegraph lines for free. The car guys didn’t go around stealing buggies to convert (they paid for them). Under those circumstances, it took a long time for these companies to not only perfect their products and business models, but to build an infrastructure that made their products compelling to a BUYING public.
For the VCR and radio, well, again, shading to your advantage. What kept VCRs from sinking the movie business was the simple fact that copies were not duplicates, and that a copy of a copy was effectively unwatchable. We also didn’t have high speed digital distribution. With the VCR, over time it’s negative uses proved to be too expensive and too low quality for the average user and instead they became movie players (spawning video rental stores, most of which are gone now).
So perhaps there wasn’t a perfect storm 30 years ago that is there now. Obviously being able to make perfect bit for bit copies of a DVD or Blu-ray, share it online with millions of strangers… it changes so much.
Getting to the top of your post, Clayton Christensen. Well, yes, I have read some of his material. For the most part, his single theory of disruptive innovation is interesting, but in a sense describes mostly successful processes. It doesn’t handle failure quite as well. his concepts are very interesting and do provoke thought, that is for sure.
However, I don’t think he is really suggesting that the current destructive flailing and pandering to what a mob wants is useful. Mob herding ( http://www.wired.com/wired/archive/15.03/herding_pr.html ) isn’t exactly improving anything, except maybe making average web users look more and more like suckers.
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Actually Mike, I understand EVERYTHING you say, which is actually the problem. I am not as likely as some to fall for word games or shading of situations to make them look more like what you want.
Odd then that you’ve misquoted me almost every time you’ve tried to put words in my mouth, gotten the economic aspects entirely backwards, misunderstood the business models we suggest, and seem genuinely confused about reality.
I find it difficult to see how this shows you understand what I say here. To date, you’ve only shown that you understand very little.
Amusingly, you still refuse to address any of the direct points we showed you were wrong on. Funny how that works.
Let’s try again… since you insisted that Twitter and Facebook were dumb for building up community instead of creating a business model, but Google and Craigslist were brilliant for doing the same… can you explain the difference?
You’ve gone on to talk about “theft,” but have yet to explain what Twitter or Facebook stole.
Let’s start with infringement / theft – your issue with the term theft is that the original isn’t stolen, only a copy. It’s an “angels on head of pins” type debate, because it isn’t in the taking, it’s in the possessing.
Ah, interesting. But, by that logic, it’s still not theft, because if by posessing something the creator did not allow you to have is theft, then we’ve got a HUGE problem. I did not allow you to possess a copy of this website, yet it landed on your hard drive. Have you stolen from me? By your definition, you have.
Ok, you may say that by putting this website up, I have authorized your usage. But I now revoke it. I am telling you that, personally, you Weird Harold are forbidden from visiting this website — other than to read this notice. If you come here again, have you stolen from me?
Have you ever bought a used piece of furniture? The guy who built that furniture didn’t give you permission, thus you stole it.
You seem to be equating creation with universal control. But that’s not how economics works.
So, no, there is no theft.
You got something for nothing that you should have paid for.
Should is a moral argument, not a legal one. It’s not theft. It may break the law — as infringement — but it’s not theft in any way.
You shade the overlap of things (buggy to automobile, telegraph to phone) in a way that makes your opinion look right, but I think you are pulling on it too hard.
Nope. It’s because I actually understand the history — while you seem to have an idealized version of it. You might want to hit the history books — but since we’ve suggested you hit the law books, the economics books and the business books in the past, all of which you’ve chosen not to do, I’m going to assume that you will again not bother to learn a damn thing. Too bad. Your loss again.
For the VCR and radio, well, again, shading to your advantage. What kept VCRs from sinking the movie business was the simple fact that copies were not duplicates, and that a copy of a copy was effectively unwatchable.
Tell that to the guys selling copies on the streets… No, what kept VCRs from sinking the movie business was the eventual realization that, even with piracy, there were plenty of great business models to be built on the technology.
We also didn’t have high speed digital distribution. With the VCR, over time it’s negative uses proved to be too expensive and too low quality for the average user and instead they became movie players (spawning video rental stores, most of which are gone now).
Indeed. So, why do you assume that the negative uses of modern technology won’t eventually prove to be greatly outweighed by the positive opportunities? If that were true it would be the first time in history that it would be. I’m on the right side of history on this one… you seem to be betting against it.
Getting to the top of your post, Clayton Christensen. Well, yes, I have read some of his material. For the most part, his single theory of disruptive innovation is interesting, but in a sense describes mostly successful processes. It doesn’t handle failure quite as well. his concepts are very interesting and do provoke thought, that is for sure.
I’m afraid I don’t understand what this means.
We’re talking about massively successful new processes that lead to old businesses getting wiped out. That’s exactly what Christensen is talking about.
However, I don’t think he is really suggesting that the current destructive flailing and pandering to what a mob wants is useful. Mob herding ( http://www.wired.com/wired/archive/15.03/herding_pr.html ) isn’t exactly improving anything, except maybe making average web users look more and more like suckers.
Huh. Wow. You do realize that this has nothing to do with “mob herding” or some lame catch phrase. The internet is about a more efficient distribution system. That’s all. It’s not about theft. It’s not about stealing. It’s not about pirates. It’s not about mob behavior. It’s not even about free, or FREE!, if you prefer.
It’s just a more efficient mechanism for reproduction, promotion and distribution. All of the battles that are being fought are because some people (yourself among them, apparently) seem unwilling to recognize the benefits these more efficient systems bring to the table.
The record labels were never in “the music business.” They were in the music distribution, music promotion and plastic disc making business. The problem with the new technology is that it has made all of those things more efficiently done elsewhere and in other ways.
That’s the same thing that automobiles did. It’s the same thing that airplanes did. It’s the same thing the telephone did. It’s the same thing that radio did. It’s the same thing that any disruptive new technology does. It makes some old process more efficient.
That’s all.
Mike, you did it again. I have addressed all your points, but because you personally don’t agree with my answers,I am wrong and not in touch with reality.
I didn’t suggest for a minute that facebook or twitter stolen anything (except perhaps investor money, but that will be seen later). I suggest that neither of them have a true path to profitability buisness model, that is a different story.
Your point about used furniture is freaking laughable. You bought the furniture, you can turn around and sell it – but the trick is that you can’t keep it as well. If you want to buy and sell music, go ahead – but you can’t keep copies. Anther shaed red herring move. Bravo!
The internet isn’t about efficient distribution, at least not in reality. P2P is one of the most inefficient distribution models possible, entirely convoluted and split up with the very specific intentions of avoiding having to pay for bandwidth and avoiding being the one distributing ALL of a stolen / purloined / illegally duplicated piece of software or music. There is no effeciency in a system that can take days to move a single disk of information. Direct download would be effecient, and it is what most normal companies use. Then again, they have nothing to hide.
The mod idea is because people want “FREE!”. Mob herding people to “FREE!” with the hope they do something in the future (whatever your desired result) is a very common business model right now. Double that because the one thing the mob wants is free. See some of the posters here pretty much ready to “stick it to the man”. They are the looters in a virtual riot, leading the mob down the path.
For Christensen, he is describing what happens more or less when it works out. He isn’t describing failure, which most new ideas are. There are plenty of new processes that never make it anywhere. Just having a new process in hand doesn’t specifically outdate the previous process. So while his work is spectacular and very informative, it doesn’t say that all new processs or ideas are good.
As for record labels, well, *sigh*. What the new technology has done really is made it entirely possible for everyone on the planet to steal (sorry, gain use of without license) huge catalogs of music and share that with all their friends in a format that makes the 100th copy of a copy just as good as the first one. People have tons more music in their possession, but people haven’t bought tons more music. Draw your own conclusions. Are the dinosaurs? On the distribution end, BIG TIME. On the creation side, on the artist management side, on the building of nobodies into stars… they are still right there. Now that you can get almost everything on Itunes and similar, you would have to agree that there is no need for P2P, right?
perhaps you should take a break and sit on your virtual sofa and think about it. You know, the one you downloaded from your friend.
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I didn’t suggest for a minute that facebook or twitter stolen anything (except perhaps investor money, but that will be seen later). I suggest that neither of them have a true path to profitability buisness model, that is a different story.
Hmm. I’m reading the thread and it seems you did. Or at least when I called you on your claim of their business model, you suddenly switched and started talking about theft. So… I think you’re rather confused… as usual.
Your point about used furniture is freaking laughable. You bought the furniture, you can turn around and sell it – but the trick is that you can’t keep it as well. If you want to buy and sell music, go ahead – but you can’t keep copies. Anther shaed red herring move. Bravo!
Hmm. Wrong again, boyo. If you bought the furniture, and made a copy of that piece of furniture, you absolutely can sell it and keep the original. All that’s happened here is the “making a copy” part has become cheaper. So cheap, in fact, that it’s free… and thus no surprise that people then “sell it” for free as well.
Oops. Another thing wrong by Weird Harold, who has yet to get anything right, as far as I can tell.
The internet isn’t about efficient distribution, at least not in reality. P2P is one of the most inefficient distribution models possible, entirely convoluted and split up with the very specific intentions of avoiding having to pay for bandwidth and avoiding being the one distributing ALL of a stolen / purloined / illegally duplicated piece of software or music. There is no effeciency in a system that can take days to move a single disk of information. Direct download would be effecient, and it is what most normal companies use. Then again, they have nothing to hide.
Wow. Talk about getting it wrong. You honestly think the internet is less efficient than making CDs, shipping them to stores and selling them? Yikes.
And, you are also wrong about BitTorrent. It’s quite efficient in that it finds UNUSED bandwidth. It’s much more efficient than direct download.
The mod idea is because people want “FREE!”. Mob herding people to “FREE!” with the hope they do something in the future (whatever your desired result) is a very common business model right now. Double that because the one thing the mob wants is free. See some of the posters here pretty much ready to “stick it to the man”. They are the looters in a virtual riot, leading the mob down the path.
Um. You seem to be confused (again!) about efficient markets and market-clearing prices and something (not sure what) that you think is going on.
The fact that some folks want to stick it to the man is rather meaningless. It’s a red herring tossed up by you to pretend like you’re being moral.
I’ve never said anything about sticking it to the man. So I’m not sure what you think you’re arguing against. Because it’s not me.
For Christensen, he is describing what happens more or less when it works out. He isn’t describing failure, which most new ideas are. There are plenty of new processes that never make it anywhere. Just having a new process in hand doesn’t specifically outdate the previous process. So while his work is spectacular and very informative, it doesn’t say that all new processs or ideas are good.
Indeed. No one said that all new processes or ideas are good (strawman!). But, you seem to keep insisting that none of the new processes could possibly surpass the old ones, and that’s the classic mistake Christensen points out. And you’re making it. Stunning that you could miss that.
As for record labels, well, *sigh*. What the new technology has done really is made it entirely possible for everyone on the planet to steal (sorry, gain use of without license) huge catalogs of music and share that with all their friends in a format that makes the 100th copy of a copy just as good as the first one. People have tons more music in their possession, but people haven’t bought tons more music. Draw your own conclusions.
Yup. Conclusions are obvious to me:
1. Wow, that’s a lot of music out there that is a tremendous opportunity for folks to make more money with.
2. Man, that’s a much more efficient distribution system, with much cheaper marketing and productions costs. HUGE win for everyone. Costs are lower, promotions are greater. If you can’t make more money with that, you’re a moron.
On the creation side, on the artist management side, on the building of nobodies into stars… they are still right there
So why aren’t they charging for that? They’re stupidly basing their entire business models on the distribution side. That’s just dumb.
Now that you can get almost everything on Itunes and similar, you would have to agree that there is no need for P2P, right?
Um, why? Why would I think a more inefficient solution is better? That makes no sense.
perhaps you should take a break and sit on your virtual sofa and think about it. You know, the one you downloaded from your friend.
Again, I’d suggest you learn some economics. I’m not sure why you seem so against it.
Your point about used furniture is freaking laughable. You bought the furniture, you can turn around and sell it – but the trick is that you can’t keep it as well. If you want to buy and sell music, go ahead – but you can’t keep copies. Anther shaed red herring move. Bravo!
Hmm. Wrong again, boyo. If you bought the furniture, and made a copy of that piece of furniture, you absolutely can sell it and keep the original. All that’s happened here is the “making a copy” part has become cheaper. So cheap, in fact, that it’s free… and thus no surprise that people then “sell it” for free as well.
Oops. Another thing wrong by Weird Harold, who has yet to get anything right, as far as I can tell.
OMG. That is the most convoluted line of thought I have ever read.
If you made a copy of the furniture, you made something. You didn’t copy it, unless you have a star trek style replicator you aren’t telling anyone about. So yeah, you could sell it, provided of course that the design itself isn’t copyright or that you didn’t represent it as an original by an artist or company.
But you are playing a game or “not equal”. When you buy a sofa, you have one. When you buy a CD, you have one – but you can reproduce it at no cost. So if you sell it, you sell the CD but retain it as well. If you sell the sofa, the sofa is GONE. So yes, you can resell your CDs if you want, but when you sell it you also lose the rights to keep duplicates. Your purchase of the CD granted you rights, and your sale or transfer of it sold those rights to someone else.
I guess if you can’t understand that simple concept, the rest of your post is similar nonsense.
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Heh. Notice that Harold still refuses to learn any economics. You can lead a Weird Harold to water, but I guess you can’t make him drink.
If you can’t understand the difference between a product and making a copy of the product, no wonder you’re pretty much wrong about everything else.
It’s basic logic. Maybe you should pick up a textbook on that too.
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Mike, I understand fine, you are the one being massively obtuse in your thinking. Your playing a game where you ignore the rights you are granted with a music purchase, You are attempting to entirely ignore copyright, artists rights, and all that comes with it only because you don’t like it. You want to enforce your personal beliefs that music has no value onto others.
Trust me, I understand you very well.
There is no difference between the original and the copy, because copying the music didn’t suddenly grant you rights you didn’t have before. You can spin it all you like, but it still didn’t happen. The cost of the copy isn’t even relevant.
It’s why this sort of discussion with you is so fun. You act as if your opinions are reality, and the rest of us that live in reality are wrong. I figure if you think I am wrong, then I am probably on the right track.
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Mike, I understand fine, you are the one being massively obtuse in your thinking. Your playing a game where you ignore the rights you are granted with a music purchase, You are attempting to entirely ignore copyright, artists rights, and all that comes with it only because you don’t like it. You want to enforce your personal beliefs that music has no value onto others.
Actually, you got every aspect of that wrong.
I do not ignore the rights that are granted with music purchases. I do not file share, nor do I encourage anyone to do so.
I am talking about it from the aspect of the content creator, and explaining how they can be better off by deciding not to use those “rights”.
Finally, I believe music has TREMENDOUS value. I believe it’s the core element in a number of fantastic business models.
It really does amaze me how continuously wrong you are.
Trust me, I understand you very well.
Then why is almost every statement you state 100% backwards?
The cost of the copy isn’t even relevant.
Again, an economics book is highly recommended. I mean this is like the sort of stuff you learn the second week…
It’s why this sort of discussion with you is so fun. You act as if your opinions are reality, and the rest of us that live in reality are wrong. I figure if you think I am wrong, then I am probably on the right track.
Honestly. Pick up an economics book.
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Mike, lets address the economics of it all.
“The cost of the copy isn’t even relevant.”
“I mean this is like the sort of stuff you learn the second week…”
I can take the deed to my house, make a photocopy and give it to you. The photocopy was effectively free. But in giving it to you, I don’t grant you the rights to the house, I just give you a piece of paper.
When you buy a song / cd / disc, the method of delivery isn’t important, nor does it have any real value in and of itself. A random collection of zeros and ones has no value. What has value in the end is the rights granted to you by the owner of the music, which has effectively granted you a perpetual license for your own use, nothing more.
So you copy the music (which costs nothing to do, really) and give it to someone else. Here’s the rub: a) You didn’t have the rights to redistribute, and b) the person you gave it to didn’t pay for the rights to have the product.
Okay you say, I will sell him my original. That’s fine, except a) you just sold / transferred your rights to that music to him, and b) you no longer have the rights to enjoy that music yourself.
Which part of this aren’t you understanding? What it means is that it isn’t important if your copy cost nothing or a million dollars to make, it doesn’t have rights so it in fact has no value. The value isn’t in the physical item, it’s in the rights granted.
Effectively, you are against copyright in almost any form, and you are trying to divorce the artists rights from their product, and then in copying the product, claim that they have no rights on the copy.
I know, it’s all suppose to be marketing, give it all away and get rich. But that choice is up to the artist and the various rights holders, and not you to make.
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I can take the deed to my house, make a photocopy and give it to you. The photocopy was effectively free. But in giving it to you, I don’t grant you the rights to the house, I just give you a piece of paper.
Right. But that’s because we’re dealing with a scarce good, not an infinite one.
When you buy a song / cd / disc, the method of delivery isn’t important, nor does it have any real value in and of itself. A random collection of zeros and ones has no value. What has value in the end is the rights granted to you by the owner of the music, which has effectively granted you a perpetual license for your own use, nothing more.
That’s an artificial scarcity, and economics simply bulldozes over artificial scarcities.
So you copy the music (which costs nothing to do, really) and give it to someone else. Here’s the rub: a) You didn’t have the rights to redistribute, and b) the person you gave it to didn’t pay for the rights to have the product.
Yes. I’m not sure what that has to do with anything, but yes, that’s true.
Which part of this aren’t you understanding? What it means is that it isn’t important if your copy cost nothing or a million dollars to make, it doesn’t have rights so it in fact has no value. The value isn’t in the physical item, it’s in the rights granted.
I understand you just fine. I agree that you don’t have the right to do so, and never said otherwise. I’ve never defended the practice of file sharing. I’ve just pointed out that it can’t be stopped AND you’re better off as a content producer creating business models that embrace that fact.
Part of the problem, then is in thinking about it incorrectly as “THEFT” when it is not. Because no one wants to create a business model based around “THEFT.” So when they realize it’s not theft, that’s the first step to recognizing real business model opportunity.
I’m not sure why you keep throwing up these strawmen.
The value isn’t in the physical item, it’s in the rights granted.
You don’t build value via protectionism. You only limit it.
I know, it’s all suppose to be marketing, give it all away and get rich. But that choice is up to the artist and the various rights holders, and not you to make
And I’ve never said that it was my choice to make, either. Straw man again. You’re really amazing at doing that.
But, the very point I’ve been making from the beginning, which you seem to be unable to comprehend, is that IT’S THE MARKET THAT DECIDES, and THE MARKET prices things based on fundamental economics, not fake scarcities. Thus THE MARKET is saying, QUITE CLEARLY that it will price these goods at $0, which makes perfect economic sense.
So, from the standpoint of the creator, there are ways to embrace that and profit greatly from it — by simply understanding these basic economics that you seem to deny.
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In the end, it all comes from the supposition that music owners have no rights, and that copyright holders should have no rights over their products. You can go on and on about how I need a lesson in economics, but that is a total misdirection.
From what I can see, everything stands on the simple trio: /music is infinite /copyright sucks /the market says it is worthless get a new business model. What you are not grasping is that by supporting the first two, people such as yourself are causing the third part to happen. With support for artists rights, the market would still value music because they wouldn’t have it all for free.
When everyone else is shoplifting, do you think anyone else is going to pay? When the fences got pushed down a Woodstock, did anyone else line up to buy tickets? That was a perfect example of conversion from scarce to infinite, leaving financial ruin behind and making it all but impossible after to do festival concerts in anything less than a secured venue.
Your ideas and opinions are supporting the shoplifters and the pilferers that take your words that copies of music have no value and thus no repercussions on the amount of music that will be produced. But too many people now know how to shoplift. The money goes out of the same, and jsut about everyone heads for the exits.
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Harold, one last time: you are confusing value and price. You keep saying that music is worthless, but that’s not what we are saying at all. We are saying the opposite. The music is incredibly valuable, which is why we’re focusing on business models that help capture that value.
This conversation is over. As others have pointed out, you are clearly trolling rather than trying to understand anything.
Incredible article
Mr. Masnick, great work! I never read the comments section, primarily because I receive your blog via RSS feed but when I do choose to seek out the comments, it’s either to get a laugh out of the short-sighted rantings from people like WH or it’s to leave you a compliment. Today it’s both. Great insight and analysis Mr. Masnick. I look forward to reading the Techdirt blog every day. Thank you for your time, your hard work and common sense analysis!
MM v WH
i’m certain mike you’ve heard the phrase “don’t feed the troll”.
it matters not one wit what you say, reason, research, explain, plead, cajole, mock, reprimand, etc etc. the troll will just spout anything in opposition, needing as he does, the attention to have engaged someone who is successful at what they do.
furthermore, techdirt’s commented discussions are more informative than your average resource out there, and i look forward to them.
honestly, the extended engagement with WH above pretty much ruined this discussion around a really cool subject: so welcome to the revolution!
continued success.
Newspapers and music
I agree, but I do think sometimes the emphasis is wrong.
Some things are vital to life (or, at least, the quality of life, such as being informed).
Some things improve our quality of life, but are not vital to it, rather, they simply please the ego (I paid THIS much!) or improve our sense of well-being temporarily.
The first category is important.
The second category is important, but less so – and that includes current music!
Obtuse Harold
I agree with Robin. I think next time WH posts, just reply and say, “You know what Harold, you’re right! I can’t believe I didn’t see it before. You win!” He is so dense he won’t see the sarcasm, and the rest of us can snicker behind his back. Everyone’s happy!
lolwut?
Just a quick edit for you…
There’s a homonym error near the end of your article: “innovation and creativitiy we witness everyday that goes beyond”.
Everyday is an adjective, every day is the noun form. Shove a space in that sucker!