Nina Paley Releases Some Data On 'Sita Sings The Blues': The More She Shared, The More She Made

from the funny-how-that-works dept

Earlier this year, we wrote about the ridiculous situation that Nina Paley faced in trying to release an amazing film, Sita Sings the Blues. Basically, some copyright holders of the music used in the film put positively insane terms on the use of their music. This made no sense, considering that the music (from the 1920s) was mostly unlistened to these days -- and the only thing the movie would likely do is increase demand for people to get legitimate versions of the music. Eventually, Paley worked out a plan to release the film under a Creative Commons license and put in place a business model like the ones we've talked about for years: give away the infinite, sell the scarce.

And apparently, it's working. Pistol points us to a talk that Nina Paley just gave revealing some of the results. You can see the video here (it's a bit over 20 minutes):

The key quote, on how she describes the business model sounds pretty much exactly like what we talk about here:

The business model -- and I do want to make money -- I very much want to make money, and I chose this because I felt I'd make more money doing this than with a conventional distribution deal. What I'm doing is that I'm not selling the content. The content is free. The content is Sita Sings The Blues. It's digital. It's made of 0s and 1s and 0s and 1s can be copied freely and easily by lots of people.... Containers are not free. And where the money comes from is the containers. And the containers, for example, are DVDs, merchandise, t-shirts, 35 mm film prints, physical screenings. The film is free, but the container of that film is not free. And that's what we're selling...

The more the content flows freely, the more demand there is for those containers. So I want as many people as possible to share Sita Sings the Blues because that drives up the demand for the containers... That was the theory when we started this, and so far it has proven correct. Yes, I love money.

So, how much money? Well, she details all the different areas of where the money came from, and it comes out as follows:

• $21,000 in donations (most at the very beginning)
• $25,100 from the store for merchandise (which cost $8,500). So, net: $16,600
• $3,000 from Channel 13 for broadcasting it (even though they didn't have to pay)

And that's not all. She also talks about a theater that downloaded her film online to show it and then sent her a check for $1,900 (as she said "the dream scenario"), and the fact that her success with the model has created all sorts of paid speaking gigs as well. Oh, and there's other things as well.

She's done some commercial distribution deals in a variety of different regions (and admits that she'd love it if she didn't have to handle all the distribution). So even though anyone can download the content online, actually distributing a 35mm print of the film (the container) uses a full distribution deal -- and, in fact, they've found that many people who downloaded and watched the film, still go and see it in the theater, because it's a different experience to go see it in the theater. Most of those deals are new, so she didn't have data on sales from that yet.

On top of that, she's done deals with DVD distributors. She offers up a special edition (signed) DVD that she distributes herself for $100. Or there's the regular version (sold via Question Copyright) for $20. This is being done to basically prove that you can sell DVDs of content that can be downloaded. In 2 months, they've sold 700 of them -- with no marketing. Then they signed a professional DVD distributor, who put it on Amazon, Netflix and stores... and they were able to sell way more than Nina or Question Copyright -- as you'd expect (though, the distributor got a bit confused and asked about trying to take the film down from YouTube, and had to be told not to do that -- old habits die hard, perhaps). Once again, this shows that having good partners helps, but also shows that just because something is available free (even from "competitors") it doesn't mean someone with a strong marketing effort can't seriously outsell the others.

Finally, there's another interesting element which is worth discussing. For the goods sold directly from Nina's site, they're using a special Creator-Endorsed Mark, so that buyer's know some money is going back to the creator. This is the sort of thing that always freaks people out when we talk about this stuff. They insist that others will make t-shirts and things and who will want to buy the official versions then? Well, it turns out lots of people. Because they want to support the artist, and having the Creator Endorsed mark does that. As Nina says:

It is entirely legal for others to sell unendorsed products. It is entirely legal to sell Sita Sings the Blues t-shirts or sippy cups or whatever, but they cannot claim that the money goes to me, unless they work out a revenue share with me first, they cannot display the creator endorsed mark. We believe that this mark increases the value of the merchandise, because people want to support the artist.

This is really great info, and she notes that within a few months, she'll have a lot more info on the theatrical distribution revenue as well. But, all in all, it looks like she'll easily be able to pay off the $50,000 it cost to officially license the music (no matter how ridiculous it was that she needed to do that), and should be able to earn a nice profit from it. And... I'll bet that her next movie (or whatever she does next) will have a nice built-in audience as well.

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History Lesson: Newspapers Haven't Charged For News In 180 Years

from the get-it-straight dept

It's been said here before, but Jay Rosen points us to a post at NewsFuturist that points out that newspapers haven't charged for content in 180 years. Before that, subscribers paid the full freight -- but since then, subscriptions have always been less than the cost of producing the physical paper and the cost of delivery. The actual reporting has been paid for by advertising, not subscriptions, for nearly two centuries. And there's a pretty basic economic reason for this, and it's the same one we've been making for years, but is nicely summed up here:

The price of a product in a competitive market falls to the marginal cost of creating and delivering one more unit.

For printed newspapers, the marginal cost was a little more paper and ink, maybe an extra block on the delivery route. Subscription fees never accounted for the fixed costs of producing the content: the building, staff, printing press, etc. That share of costs has long been paid by advertising and diluted by economies of scale.

The same economic forces apply online. And because the marginal cost of bits is nearly zero, the appropriate price becomes too small to bother tracking. Free is the result.

In fact, the principle of marginal-cost pricing is even stronger in the Internet economy because there are very low barriers to entry and nowhere near the startup costs of print. And the marginal costs such as bandwidth and storage decline every month.

Those who ignore the rule of marginal-cost pricing and try to charge users for content in a competitive market will be undercut by more efficient competitors who stick with free. They'll also face an endless fight against piracy, because economics says the product should be free and technology makes it easy to duplicate and spread.

The thing that seems the most difficult for some to get is that last paragraph. When we talk about the reasons why it doesn't make sense to charge for the content itself, all we're pointing out is that if you do it, you'll fail. All you've done is open up an opportunity for someone else. We're not saying "information should be free." Should has nothing to do with it. It's will be free, because the economics drive it there, and as much as you don't like it, or don't like the implications of it, it doesn't change that it's what is happening. So, you either learn how to embrace it (as many are doing, quite successfully) or you die.

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Pirate Bay's Plans Too Clever By Half: Arbitrage Consumer Bandwidth

from the this-looks-like-a-mess dept

There's a bunch of news coming out about the sale of The Pirate Bay to GGF, though it's still not making very much sense, I'm still wondering if the deal will really happen. However, it appears that GGF has started working with Wayne Ross, who ran Grokster and Mashboxx, in an attempt to get him to negotiate with the labels. In an interview, he more or less reveals GGF's plans for The Pirate Bay.

Basically, you'll have to pay to leech, but the more resources you "contribute" to the system, the less you'll have to pay, and if you contribute enough resources/bandwidth, then you might actually make some money. Then, on top of that, they believe that some content providers/ISPs will pay for offloading their bandwidth. That explains some of the earlier statements made by GGF. In theory, the idea is that it makes everyone happy. Those who pay for bandwidth on hosting content can pay a lot less. Users who contribute bandwidth end up getting free content (or potentially even making some money). And, of course, the content owners get paid.

Except... that idyllic picture starts to break down when you start to run through the details. The second the paywall goes up, an awful lot of users will abandon The Pirate Bay for friendlier non-barrier-happy sites. That takes away pretty much the entire advantage of The Pirate Bay to make this work. Even the appeal of potentially making money probably won't attract enough users. Second problem? There's no way the economics works out nicely on this one. We've already seen the sort of ridiculous rates that the RIAA wants to charge for individual streams/downloads of music. Put those numbers into this model and start doing the math... and start laughing. There's no way that much money comes into the system. None.

Finally, it leaves out an important party who clearly will not like this setup at all -- even if all the rest of it works: consumer ISPs. The real "ingenious" part of the plan appears to be that some content hosters/service providers are effectively pushing bandwidth costs away from themselves, and dumping them on retail ISPs, who offer flat-rate connections. So the real "costs" are hidden in the typical flat-rate plans of ISPs.

It's effectively a sneaky arbitrage play, whereby The Pirate Bay tries to aggregate all the unused flat-rate ISP bandwidth, and wholesale it to others, paying copyright holders in cash, and downloaders in free/cheap content. But the ISPs whose bandwidth is getting used don't get paid, meaning they're more likely to push back even more against unlimited connection plans. I just can't see how this works.

Oh, right, in the meantime, it's not clear the recording industry has any interest in playing along. They're already demanding that cash from the sale go to them, rather than the founders. Of course, that's a bit misguided, since the founders no longer own The Pirate Bay, having handed the ownership over to others in 2006. So they won't be getting any of the money from the sale. The recording industry basically says it doesn't believe that to be true, and will use the sale as evidence that the founders should pay up. Thus, it's difficult to see them rushing out to embrace this already questionable arbitrage play.

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Norway Decides Privacy Is More Important Than Protecting The Entertainment Industry's Business Model

from the good-for-them dept

It appears that Norway has decided that it's sick of passing laws designed to prop up obsolete industry business models at the expense of individual privacy. First, the country started telling ISPs to delete log files after just three weeks (making it pretty hard to identify individual filesharers), and now it's refused to renew the license given to the one law firm allowed to sniff IP addresses in trying to seek out unauthorized file sharing. Apparently there's been a bit of a debate about the license, with concerns about potential privacy violations. I have to admit that I'm not sure this makes much sense to me. I still have trouble understanding the European point of view that an IP address -- which your computer more or less needs to share publicly with other computers is somehow "private information." However, that's the way many European countries view it, and so such snooping is a potential privacy violation. Effectively, the country has decided that privacy rights are more important than the entertainment industry's old business model.

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Bilski Continues To Cause Software Patents To Get Rejected

from the some-good-news... dept

Right after the Bilski ruling that greatly limited software and business method patents, lawyers who were in favor of such patents held a conference call, where they basically said the ruling wouldn't change anything. They claimed that the only patent that would be impacted would be Bilski's, and that everything else would be just like normal. It seems they forgot to tell the Patent Office, which has continued to reject patents based on this new ruling that, in all likelihood, would have made it through prior to the ruling. That's not to say that all of the problems associated with such patents are now done with -- but it does seem like the lawyers on that conference call were doing a bit more wishful thinking than honest assessment of the situation.

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Is There Still A Big Loophole For Software And Business Method Patents?

from the just-add- dept

I've been talking to plenty of people (mostly lawyers) about the Bilski ruling on software and business method patents while also having more time to reread the discussion in detail, and I'm going to backtrack on my original assessment. I should have known something was wrong when I wrote that CAFC may have gotten something right. They so rarely get it right, that I should have known better.

Some of the good news, I still stand by. The court clearly limited the scope of software and business method patents. It rejected using the standard set forth in State Street in most cases. Some people are saying that since the court didn't completely reject State Street that this is not the victory I thought it was. On that, I disagree. As I said in my long post about the filings in the case, I thought an outright rejection of State Street that carves out a special exemption for software and business method patents is a bad idea. Instead, I'm in favor of a much more stringent standard for anything to be patentable. So, I don't have a problem with the court keeping State Street, but establishing a more stringent standard -- exactly what it did. I recognize that many folks who are focused on software patents really wanted a carveout exemption, and to them, this is a loss -- but I'd argue that it's better to have a more general standard than trying to carve out exceptions.

The part that I'm a little more concerned about is the loopholes that appear to have been left by CAFC in the decision. I was on a conference call with some of the lawyers who filed briefs (in favor of stronger patent protection), and they were spinning the ruling to be in their favor as much as possible -- but it became clear they were only doing so via loopholes. Specifically, they seem to think that as long as the software works on any device it qualifies for patent protection under the new test. In other words, they seem to be saying that so long as you add the words "on a computer" to a claim, then you're all good. In fact, when one reporter on the call (Joe Mullin) asked what sorts of patents this would impact, and after a moment of silence one of the lawyers blurted out that it invalidated Bilski's patent (the patent at the heart of this case) and that would be about it. Other lawyers basically said that it would only eliminate poorly written patents, which they seemed to define as those that failed to include that sort of "on a computer" language.

I don't think this is the actual intention of the ruling, and it will be interesting to see this tested -- but it's troublesome that already there's this huge loophole that many lawyers see. It means the court didn't do a very good job in actually establishing what the rules are for patents, and that's a problem. It will also be interesting to see if the "and on a computer" claims still get thrown out thanks to the earlier Supreme Court KSR ruling which limited patent claims that simply combined two obvious things.

Still, in the short term, I stand by my assessment that this is a ruling in the right direction. It's not a full rejection of software or business model patents, but I think that's for the best in the long run. It's better to create proper overall rules, rather than trying to carve out exemptions and creating a patchwork of rules. However, I'm still worried about the loopholes, and how quickly lawyers with tons of patents seem ready to leap through those loopholes.

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Court Greatly Limits Software And Business Method Patents

from the huge-victory-for-innovation dept

I don't say this often, but it looks like the Court of Appeals for the Federal Circuit (CAFC) -- or "the patent court" -- got a big one mostly right. In the rehearing of the Bilski case concerning the patentability of software and business method patents, CAFC just came out with its ruling that will significantly limit software and business method patents, bringing the rules way back towards what they were years ago, and effectively rolling back some of the earlier, dreadful, CAFC decisions that opened the barn doors towards tons and tons of software and business method patents.

The summary is that the court has said that there's a two-pronged test to determine whether a software of business method process patent is valid: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In other words, pure software or business method patents that are neither tied to a specific machine nor change something into a different state are not patentable. That means a significant number of software and business method patents are about to disappear, freeing up many industries to be much more innovative -- at a time when that's desperately needed.

Earlier this year, I laid out the arguments on both sides of the case, surprising some by pointing out that I did not think it was right for the courts to carve out a special "exemption" for software or business model patents, but that a single standard should be applied across all patents. From my first read of the ruling, it looks like CAFC may have gotten this right. It doesn't carve out an exception, but makes it clear what the rules are for patents, based on earlier Supreme Court rulings, and makes sure the same rules are applied across the board. Specifically, CAFC recognizes that without that two-pronged test, the patent system effectively allows the patenting of overall concepts, rather than specific applications. While patent system defenders always claim that "ideas are not patentable," in practice, that was not true over the past decade. This ruling brings things back into line.

The ruling does note that such rules may be changed in the future, as necessitated by changes in technology, but "we see no need for such a departure." This statement strikes me as a bit odd -- as it shouldn't be the court's determination for when there should be such a "departure," but that of the legislative body (and you can bet lobbyists are rushing to Capitol Hill with new legislation to expand the scope of the patent system as we speak).

The ruling specifically addresses the State Street ruling that opened the doors to the widespread patenting of software and business methods and found that the earlier ruling erred, somewhat, in creating an improper standard for determining patentability that did not agree with Supreme Court precedent.

There are some dissenting opinions, with one that freaks out and claims that the court is usurping the legislative role, in changing what is patentable based on their own beliefs rather than what the law says. But, in a separate concurring opinion, two of the judges rightly point out that this is incorrect, show how their ruling is consistent with the law, and suggest that the only ones going beyond what the law says are those who are aggressively trying to expand what is patentable.

However, there's another dissenting opinion, well worth reading, that goes even further and argues that the CAFC ruling doesn't go far enough in repudiating the State Street ruling, and even points out why the courts are wrong to claim that "anything under the sun invented by man" is patentable. This dissent, written by Judge Mayer, is highly worth reading, showing all of the unintended consequences and harm done by the vast expansion of patentable materials -- mainly focusing on the evils of business method patents. "Methods of doing business do not apply 'the law of nature to a new and useful end.' Because the innovative aspect of such methods is an entrepreneurial rather than a technological one, they should be deemed ineligible for patent protection." Mayer points out, as we have noted repeatedly, that the clause in the Constitution that allows patents does "not grant Congress unfettered authority to issue patents," but rather, only to issue patents that effectively promote the progress. The dissent goes on to show how so many patents do exactly the opposite. It's really a fantastic read.

So What Happens Now?

Well, it may take some time to digest, but it's likely this will be appealed to the Supreme Court, so that process may take a while. Given the Supreme Court's recent rulings on patents, however, if I had to take a guess, I think they would support this ruling. But, you never know until it's decided.

This ruling will, however, send serious shockwaves through pretty much every industry -- because software and business method patents are found just about everywhere. Companies that rely on such patents (such as patent hoarding companies) may have just found out their current business model is about to go away. An awful lot of patents are now about to be invalidated, and a lot of patent lawsuits may get thrown out as the patents do not meet the criteria set forth in this decision.

You can bet, however, that the supporters of widespread software and business method patents will not go down without quite a fight. Beyond appealing the decision, it's likely there will be a push for a different type of patent reform in Congress that will expand the patent system to allow software and business method patents. There will be ridiculous announcements from companies that have chosen to litigate rather than innovate, claiming that they cannot innovate (even though they weren't) without much broader patents that they were actually using to hinder innovation.

So, while this is a huge victory for freeing up the ability to innovate, those who have used bogus patents to profit for years cannot be expected to go along quietly.

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Another Filmmaker Purposely Releases Film Online For Free

from the getting-there dept

Michael Moore made some news by releasing his latest movie for free online, but some brushed aside that idea, since Moore is an activist and his message is more important than the business side of things. But it appears that other popular filmmakers are diving into free internet distribution as well. Wayne Wang, who has directed such well known movies as The Joy Luck Club, Smoke and Maid in Manhattan is releasing his entire latest feature-length film online for free. It's not downloadable, but the entire movie is available at YouTube and embeddable. So grab some popcorn and watch it here:

Admittedly, this was an independent production done quickly on something of a whim, and Wang was worried about being able to get it going through normal distribution channels -- but it's yet another experiment to watch, as more movie makers realize that there's more to making successful, money-making movies than getting people to pay for every single viewing.

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Can You Patent Scamming Energy Customers?

from the we-may-find-out dept

Back in February, we pointed out that the US Court of Appeals for the Federal Circuit (CAFC) is gearing up to hear a very important case, In re Bilski, that could change the patentability of software and patents. There's likely to be a flurry of news about this case in the near future, as lots of folks are expected to file their own briefs in the case. However, Joe Mullin has turned up a separate, but somewhat related story that shows how the "business model" in question may have been about bilking customers. The patent application that's being discussed has to do with a method for trading weather risk, which the company put into practice by offering billing solutions for various energy companies. Unfortunately for the company, the state of Minnesota discovered that those billing solutions seriously overcharged customers who were convinced to sign up. In the case of one energy company, customers who signed up for this "service" ended up paying almost $700 extra.

The link above has the whole convoluted story, but basically, Bilski's company, Weatherwise, would set up call centers for energy companies and then promote special "fixed price" plans, though the methodology for setting those prices is kept a secret (even from the energy companies). Weatherwise itself isn't actually being investigated, as it's not regulated by the state, but the Attorney General of Minnesota is exploring whether or not energy companies basically outsourced to Weatherwise in order to boost rates outside of the state's regulations. Either way, the two separate issues probably won't overlap much, other than that Weatherwise's CEO is complaining about how both cases represent attempts to stifle the firms' "creativity."

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If Consumers Will Pay $50 To Remove It, What's It Doing There In The First Place?

from the penny-wise-pound-foolish dept

That didn't take long. On Friday morning, PC World reported that that it would offer a "Fresh Start" option on certain of its laptops: for an extra $50, Sony would remove all the annoying "trial software" that apparently infests a lot of PC laptops these days (as a smug Mac user, I can't say I've experienced this firsthand). Not surprisingly, the announcement generated a firestorm of controversy, and within hours, Sony's PR reps rushed out to reassure people that it was all a big misunderstanding. Sony won't charge for "Fresh Start" after all, and will instead offer it as a free option. But only on certain laptops and only for customers who upgrade to the business version of Vista.

The fact that it thought of offering such a service at all -- for a fee or otherwise -- suggests that Sony has a rather short-sighted attitude toward its business. PC manufacturers reportedly get as much as $60 per PC in kickbacks from software vendors to put trial software on their customers' computers. Apparently, in the low-margin PC business, that's too much cash to pass up. But putting bloatware on PCs is a bad strategy for precisely the same reason that filling your website with intrusive ads is a bad strategy. It might make more money in the short run, but it ruins your brand and reduces the chances you'll get repeat customers. The reason that customers choose a name-brand PC over a dirt-cheap white-label one is that they want to minimize hassles. A good name-brand manufacturer carefully chooses components that will ensure a hassle-free experience. It would be stupid to pick a flaky graphics card because it's five bucks cheaper: the angry customers would cost a lot more than five bucks in the long run. By the same token, forcing customers to take software they don't want is going to cost a lot more in customer satisfaction than it's going to gain in revenue. Manufacturers should only bundle third-party software that enhances (or at least doesn't diminish) the value of the product to the end user. (Dell's contract with Google is a good example of how to do this right.) In the long run, firms that zealously protect the quality of their user experience will do better than those that allow the customer experience to be undermined in order to make a quick buck.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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Nine Inch Nails Sells Out Of $300 Deluxe Edition In Under Two Days

from the that-was-fast dept

Yesterday we wrote about Trent Reznor launching his new Nine Inch Nails album online with a variety of interesting options that people could choose to buy. The top of the list, for $300, was a "Ultra-Deluxe Limited Edition Package" that included all the high quality downloads, two CDs, a data DVD, a Blu-ray high def DVD and assorted extras, all in a nice package signed by Reznor. This was only limited to the first 2,500 people. While some scoffed at the price of this package, it was clearly designed for NIN's biggest fans -- and they ate it up. Mike Linksvayer points out that this option is now sold out, meaning that Reznor grossed $750,000 in just a couple of days on that package alone, not taking into account any of the other packages that many more people likely bought into.

Now, before some people start complaining that this will only work for big name bands, there's an easy response to that: these days, the way to become a big band is to get your music out there. Newer bands can easily give away music as a promotion to get attention, build up a following, and throw in these types of options as they get bigger. Besides, smaller, less-well-known acts still have plenty of other offerings they can use to make money, even as a smaller band.

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Is The Post Office About To Kill Netflix's Business Model?

from the ouch dept

While Netflix has done a great job building up its business and competing with players who were much bigger and more well established, could it be the US Postal Service that finally does the company in? It turns out that those patented funky red DVD mailer envelopes are a pain for the postal service. They "sustain damage, jam equipment and cause mis-sorts during automated processing," and the postal service has had enough. The Inspector General is asking to charge an extra $0.17 per DVD mailer if adjustments aren't made to make the envelopes more "machinable." While $0.17 may not sound like a lot, a research analyst at Citibank cranked the numbers and found that it would likely cut Netflix's monthly margin per customer from $1.05 to $0.35 -- basically killing 67% of its margin (ouch). Now here's where the situation gets fun. It turns out that Netflix's main competitor, Blockbuster, does not have this problem with its DVD mailers. Remember that Netflix sued Blockbuster over its patents last year. The two firms reached a settlement earlier this year, but could this be a chance for Blockbuster to strike back at Netflix? Anyone know if Blockbuster patented its "working" design for the DVD mailers? I'm sure it would be thrilled to license it to Netflix... at a reasonable fee.

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EA Boss Recognizes The Economic Trends Of Infinite Goods

from the don't-hear-that-every-day dept

At this point, we're so used to execs from big entertainment firms denying the existence of the inevitable trends impacting their industry, that it's truly a surprise when someone appears to clearly understand what's happening. Slashdot points us to the shocking news that EA's CEO knows that the business model for his industry is changing, and that the current one is becoming obsolete:

"In the next five years, we're all going to have to deal with this. In China, they're giving games away for free. People who benefit from the current model will need to embrace a new revenue model, or wait for others to disrupt."

Can you imagine hearing the same thing from the head of a movie studio or record label? It's nice to finally see a CEO who recognizes the economics at hand -- even if it means his former cash cow will be obsolete and his company will need to embrace entirely new business models.

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How The Record Labels Are Only Ten Years Behind In Their Thinking About Business Models

from the eventually-they'll-get-there dept

The NY Times Magazine is running an interesting profile of Rick Rubin, the well-known producer who had tremendous success over the past twenty years producing all sorts of successful musical acts -- from the Beastie Boys to Slayer to Johnny Cash -- and who took over as the co-head of Columbia Records back in May. While the story itself is interesting and focused on some of Rubin's peculiarities and his key focus on finding and producing good music -- there are a few other interesting tidbits that come out. The first is how Rubin was completely pissed off at Columbia prior to joining the company because the Sony rootkit debacle hit just as a Neil Diamond album Rubin produced had come out to great fanfare. It was apparently number 4 on the charts -- the highest ever for a Diamond opening. Except, Columbia is a subsidiary of Sony BMG and so the Neil Diamond album was included among those that had the rootkit -- and the furor over that got it pulled from the shelves, and that basically killed its commercial prospects. So, at least we know that Rubin won't be a fan of such things.

However, the article suggests that Rubin and others in the industry are much more interested in setting up some sort of universal subscription system that would allow any subscribers access to any music on any platform. What's most amusing about this is that this is exactly the proposal the EFF suggested many, many years ago, which recording industry executives insisted would never work. What's even funnier is they might be right now, after managing to screw up all sorts of goodwill from customers. Back when the EFF suggested it, it probably still could have worked. However, Rubin is exactly right on where the industry is headed if it doesn't figure out these new business models quickly: "The future technology companies will either wait for the record companies to smarten up, or they'll let them sink until they can buy them for 10 cents on the dollar and own the whole thing." That's why I've always figured that things would work out in the end. If the RIAA members keep shooting themselves in their collective feet, then the problem will eventually take care of itself. Of course, the labels could avoid a lot of the problems if they learned how to actually embrace certain aspects of file sharing. It's not clear that Rubin (or anyone else in the industry) has gone that far yet. They're just still working through the ancient EFF plan they derided when it first came out. In fact, one of Rubin's other questionable ideas is setting up a fake word-of-mouth marketing organization, where Columbia has hired a bunch of young adults to promote their music online on blogs and in forums and such. Hasn't anyone explained to them that word-of-mouth is about people who legitimately enjoy the music -- not those who are paid to promote it? File sharing was legitimate word-of-mouth marketing. Hiring young adults to spam forums is not.

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Hip Hop Stars Understand The Real Business Models For The Music Industry

from the making-all-the-scarce-goods-valuable dept

It's funny every time we hear someone say that the music industry is in trouble. There's very little evidence that's true. More music is being produced today than ever before -- and plenty of people are still making a ton of money in the music business. What's actually in trouble is the traditional recording industry, which is quite different than the music industry. When we point out business models for musicians, we seem to get a lot of pushback, but there's more and more evidence that artists are successfully embracing the model we've put forth -- and they're raking in the cash doing so. Forbes just came out with a report about how much money the top hip hop artists are making, and they're doing quite well. However, it's not because of just the music, but how they've used the music to sell all sorts of other things.

It's exactly the model we described (though, many could probably do even better if they further embraced freeing their music). The music itself is an infinite good and can be used to the musician's advantage to make scarce goods much more valuable. As Lea Goldman, the associate editor at Forbes who put together the story notes: "they are smart enough to know that it's not just about selling albums. That'll keep you going for maybe two, three years tops. It's about building an empire and plowing those earnings into lasting businesses that will generate income long after the music stops selling." For some artists, that means branching out into totally different businesses. When people attack the business model we've described, they snicker at "selling t-shirts." However, the article notes that hip hop artists are creating full lines of clothing that sell well and sell for a premium because of their association with the artist. Also, the successful hiphop stars all seem to recognize one of the key "scarce" resources they can sell: an association with themselves. Many of these musicians took in millions by doing sponsorships, by producing other musicians albums or simply by appearing on other musicians' recordings. So, can we now set aside the myth that the music industry is in trouble? It's only in trouble if you're solely in the business of selling plastic discs -- and that's because those discs are increasingly obsolete.

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