If Your Business Model Requires An Overly Restrictive Contracts... You Have No Real Business Model

from the that's-not-satisfying-customers dept

We've discussed in the past how consumers are gaining more power over companies these days (and how that's a good thing), and that leads to a separate, but also interesting observation: if your business model relies on denying customers what they want -- such as through the use of overly restrictive contracts -- your business model is in trouble. Thomas O'Toole has a good discussion about some recent lawsuits involving overly restrictive contracts that try (and usually fail) to prevent customers from doing what they really want to do. First, it discusses the recent attempt by MediaFire to stop the distribution of a Firefox extension that routes around MediaFire's ad-driven business model. Second, it discusses a legal fight between Virgin Mobile and MetroPCS over whether or not MetroPCS can legally reprogram Virgin Mobile phones to work on its network.

The thing that shines through in both instances, however, is that they involved companies who didn't rely on providing the best product for consumers, enabling them to do what they wanted -- but instead, relied on contracts with overly restrictive terms designed to prevent customers from doing what they want. As far as I'm concerned, in most cases, business models like that won't be long for this world. Consumers are increasingly fed up with bogus legal restrictions that try to prevent what the technology clearly allows. If you're trying to create a business model, the second you consider putting in ideas that inherently limit your consumers from doing what they want, you're asking for trouble. A smart business model enables more customers to do what they want, and does so in a way that makes everyone better off. While there are still companies who can get away with anti-consumer business models enforced by overly restrict contracts, it's not a long term strategy for success.
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Filed Under: business models, restrictions

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  1. icon
    elpookie (profile), 21 Oct 2009 @ 4:19am

    Contract restriction and expected consumer use

    Have to agree with the basic premise: overly restrictive conditions on the use of a product will either result in its non use or use in "violation " of the terms of the agreement. The problem arises not only from what is construed to be restrictive covenants on the use of the product but on the fact that attempting to read and comprehend the terms of most of the boilerplate defies most any English speaker's intelligence (or at least this one--but then, I do have my own problems in that regard). The evolution of the Terms and Conditions in most Use agreements is by what I call Frankendrafting, that is, the compilation (mashing?) of various prior Terms of Use terminology and language into one basically incomprihensible document--except when it comes to restrictions beneficial to the seller (sorry, licensor); restrictions of which there are many. Compare the "Terms of Use" agreements in most web sites with the Terms of Use in most product use agreements and you will see what I mean. My question is from J Lewis: "Why dont you say what you mean or mean what you say?" (sorry if I am misquoting.) If possible, and I mean it without laughing too much, a law should be drafted which requires the use of plain English terms and conditions on the use of the product. And yes, I recognize the inherent problems in such a proposal. But you have to start somewhere.

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