The Search For The Mythological Magical Business Model Bullet

from the give-it-up,-it-doesn't-exist dept

One of the things I've noticed over the past few years, in discussing the various business models that are working for content creators, is that one of the regular criticisms we get is that "this won't work for 'x'." Or something along those lines. Basically, they want to write off any success story as an exception, and yet they like to use any "failure" of a business model experiment as proof that innovative business models can't work. That all seems backwards to me (after all, if a single failure disproves a business model, then we can conclude that the business of selling CDs or movies "failed" the first time one of those offerings flopped).

I was thinking about this a bit more after reading Mathew Ingram's take on Paul Biggar's long post mortem on why his greatly hyped NewsTilt collapsed and shut down after just a few months. That post is interesting, though not surprising if you've ever worked in a startup (especially one that's failed). NewsTilt was trying to "solve" the "problems" facing the journalism business, but the founders admitted they didn't really care about journalism that much -- which was a pretty big problem. Still, what caught my attention at the end of Ingram's post, was where he notes (paraphrasing David Cohn of the journalism startup spot.us):
There is no magic bullet that will suddenly save the media industry, or transform ordinary journalists into independent-thinking online media businesses.
I'd expand on that, and note that there is no "magic bullet" that will suddenly save any content industry that's in a state of disruption today. And that's okay. But it's part of the problem. The folks who were used to being able to rely on artificial scarcities had a crutch for a business model. It let them lean on that artificial backstop, rather than really think about more creative (and, potentially, better) business models. But, just as relying too much on crutches without exercising your legs can make those muscles atrophy, those who rely too much on artificial scarcity let their creative business modeling ability atrophy as well. So they all want to know what the "magic bullet" is, and have trouble accepting any answer that doesn't involve a magic bullet. If it's not a magic bullet, it's an "exception" or it "won't scale," and thus, it doesn't matter.

But that's a huge mistake. Because one way or another, all of these industries are changing rapidly. And while certain models will become more standard, none will be a magic bullet. It's always going to involve experimenting and adjusting as the world changes. Those who are waiting for the magic bullet seem to think that if they just keep asking for a magic bullet, the old models crumbling around them will stay up. That's not how it works. The old models are crumbling, whether or not there's a magic bullet. So rather than complaining about the lack of a magic bullet, isn't it about time you started experimenting with what is out there?


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  1.  
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    Dark Helmet (profile), Oct 4th, 2010 @ 9:26am

    Optimism...

    "The Search For The Mythological Magical Business Model Bullet"

    Watch as major media profits go back...and to the left. Back...and to the left. Back...and to the left....

    Kidding aside, isn't this ultimately a good thing? I know it can look frightening for businesses as a group to think about doing global business in a nuanced, differentiated way. It's complicated.

    But doesn't it open more doors than it closes? Doesn't the fact that we can have a fractal marketplace filled with all kinds of marginally differentiated business models mean that there will be global business just as varied? And doesn't a marketplace that allows for multiple ways of approaching its business (and equally varied customers) mean a greater gross production for everyone?

    This, actually, is why I'm not on board with the total dismantling of copyright. Scale it back to its original state, loosen some of the more antiquated requirements on it, and let more people have more choices. I think business attrition would be a far better way to free up copyright than mere legislation....

     

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    fogbugzd (profile), Oct 4th, 2010 @ 10:01am

    Moving targets

    One reason it is impossible to find a magic bullet in most industries is that you have moving targets. Any magic bullet you managed to find would no longer be a magic bullet as soon as the market shifted or a disruptive technology came along.

    There are some industries that come pretty close to having a magic bullet. I would argue that the CD industry was a magic bullet for the record labels. The problem they have is that the target did start moving. The industry has gotten some legislation that attempts to keep the target from moving. They want more legislation in the hope that they can move the target back to where it used to be. However, markets move no matter what legislation is passed, and they can never be made to flow backwards.

     

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  3.  
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    Ima Fish (profile), Oct 4th, 2010 @ 10:02am

    As I've written about before, the copyright industry does not operate in a free market. They do not understand how to create and run businesses. They don't understand how to experiment with varying business models.

    Their entire "business" is the collection of government imposed rents.

    Their "magic bullet" is to have the government enact more mandatory rents to collect.

     

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  4.  
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    Hephaestus (profile), Oct 4th, 2010 @ 10:06am

    Magic Bullet and the cookie cutter business model ...

    What every single content creation company wants is a cookie cutter approach. One single business model to cover their industry.

    "If it's not a magic bullet, it's an "exception" or it "won't scale," and thus, it doesn't matter."

    That is the main problem facing the content industry. They can not or will not use multiple business models. It is why they are lobbying for all these laws (ACTA, C-32, COICA, DEA, etc) to restrict use of content and turn back the hands of time. So they dont need to change. Copyright should be turned back to pre 1976 standards or earlier. This will in effect shake up the content companies and remove the ones that are being held afloat artificially. It would also allow for new companies to form without the threat of lawsuit.

     

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  5.  
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    Hephaestus (profile), Oct 4th, 2010 @ 10:09am

    Re: Moving targets

    You said that far better than I did ... thanks :)

     

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  6.  
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    FreemonSandlewould, Oct 4th, 2010 @ 10:25am

    magic bullets for sale

    I have magic bullets for sale but ebay / craigslist will not let me list them and a Federal Firearms License is required to ship them. This is because Dear Leader Obama abhors anyone but big business getting the purchase order.

     

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  7.  
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    FreemonSandlewould (profile), Oct 4th, 2010 @ 10:27am

    magic bullets for sale

    I have magic bullets for sale but ebay / craigslist will not let me list them and a Federal Firearms License is required to ship them. This is because Dear Leader Obama abhors anyone but big business getting the purchase order.

     

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  8.  
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    Hulser (profile), Oct 4th, 2010 @ 10:27am

    Re: Optimism...

    Watch as major media profits go back...and to the left. Back...and to the left. Back...and to the left....

    Nice. Yeah, there's a bit of a difference between a magic bullet (JFK assassination conspiracy theory) and a silver bullet (the one thing that will solve your problem).

     

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  9.  
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    Richard (profile), Oct 4th, 2010 @ 10:28am

    The magic bullet is...

    The if you follow the following three rules

    1) Don't suck.

    2) Don't try to rip people off.

    3) Get your message out.

    then I guarantee success.

    Most of the "business model variation" lies in how you achieve number 3 - and of course number 1 is very non-trivial.

     

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  10.  
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    FreemonSandlewould (profile), Oct 4th, 2010 @ 10:32am

    Sales of magic beans

    I subsequently inquired about selling magic beans but Obumbles T. Clown mumbled something about a big contributor named Jack owning the national concession for that.

     

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    Hephaestus (profile), Oct 4th, 2010 @ 10:33am

    Re: The magic bullet is...

    "3) Get your message out." - Promotion :) yeah thats all they still have going for them.

     

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  12.  
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    FreemonSandlewould (profile), Oct 4th, 2010 @ 10:34am

    Re: magic bullets for sale

    I subsequently inquired about selling magic beans but Obumbles T. Clown mumbled something about a big contributor named Jack owning the national concession for that.

     

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  13.  
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    Ima Fish (profile), Oct 4th, 2010 @ 10:42am

    Re: Sales of magic beans

    Monsanto probably had a patent on those beans too.

     

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  14.  
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    Anonymous Coward, Oct 4th, 2010 @ 10:43am

    Re: Re: The magic bullet is...

    That's the ONLY reason they still exist. Most of them suck, and all of them rip everyone off (employees, customers, and anyone within 5 degrees of separation).

    That's probably why they hate the internet so much.

    "WHAT?! Promotion that isn't dependent on millions of dollars?! KILL IT WITH FIRE!"

     

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  15.  
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    JoeNYC, Oct 4th, 2010 @ 10:44am

    Re: Re: The magic bullet is...

    "3) Get your message out." - Promotion :) yeah thats all they still have going for them.

    Seems way too many content providers focus on #3 to the exclusion of #1 & #2.

     

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  16.  
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    Chuck Norris' Enemy (deceased) (profile), Oct 4th, 2010 @ 11:02am

    Re: Re: Optimism...

    a silver bullet (the one thing that will solve your problem

    Wasn't Coors the silver bullet for a while in commercials?

     

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  17.  
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    Dark Helmet (profile), Oct 4th, 2010 @ 11:07am

    Re: Re: Re: Optimism...

    Therefore, Coors will solve all of your problems....

    C'mon, it's better logic than Hollywood accounting....

     

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  18.  
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    out_of_the_blue, Oct 4th, 2010 @ 11:22am

    Hasn't been a crutch so much as a feather bed.

    I don't think you consistently or sufficiently factor in that "content creation" relies on *limited* acts that can be sold an *unlimited* number of times. That automatically moves the setting from reality to nearly literally fantasy: "money for nothin'", as Dire Straits said. Because "content creation" actually produces *nothing*, certainly nothing *necessary*, it only works with a sort of faith and when there's no other choice.

    Taking that as so, and applying it to "news": turns out that valuable social services are difficult to glean income from, and increasingly so with lots of competition. Advertising is just not going to work in diffuse outlets; all present funding mechanisms only work when focused into a few channels. To me, that argues for social subsidies to people whom we all agree perform valuable services -- paid for by taxing the hell out of those whom we all agree are *not* contributing to society. Otherwise, we end up in the dark for news, under a plutocracy that fosters a police state, because that's the "business model" currently succeeding.

     

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  19.  
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    Greevar (profile), Oct 4th, 2010 @ 11:39am

    Re: Magic Bullet and the cookie cutter business model ...

    I'd prefer them to be at pre-Statute of Ann standards. If you leave any form of protection in place, they will simply try to increase its potency again. The people that benefit from these laws aren't those that they were intended to protect. The people that create works (musicians, movie studios, game studios) never needed these laws. It's the publishers, the leeching middlemen, that need these laws because their model isn't about selling their ability to create, it's about selling an infinite good that can't be locked down while still being able to be distributed. Since they can't turn an abundant good to a scarce good naturally, they use laws to make it so unnaturally.

     

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  20.  
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    Chronno S. Trigger (profile), Oct 4th, 2010 @ 12:06pm

    There is no silver bullet... for anything (outside of beer)

    With as many things starting and failing and so few things starting and succeeding, there's only one logical conclusion; The default setting for anything is failure, it takes work, skill, and dedication to flip that switch.

     

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  21.  
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    Mike, Oct 4th, 2010 @ 12:06pm

    An Olde Timey Game...

    When faced with an evolving technological marketplace, they do what all buggy-whip makers do: they implore the legislators to enact laws that say that all motorcars must follow behind them as they wave their red flags which proclaim their irrelevancy.

     

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  22.  
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    Greevar (profile), Oct 4th, 2010 @ 12:48pm

    Fund and Release

    I had an interesting discussion on the virtues of the "fund and release" business model on gamasutra.com and this other fellow believed it to be infeasible to apply such a model to something as big as the AAA game companies. I realize now that what he was arguing for was a "magic bullet" model that would be universally applicable to all levels of the industry. Such a thing would be impossible because the financial need would be different for large companies such as EA or Activision than it would be for a smaller indie studio.

    But it just occurred to me that you can't have a universal model, you need to fine tune that model to fit your business which requires experimentation and risk. The version of "fund and release" that works for small projects won't be the same as the version of the model that applies to the big corporate projects. One of the arguments was how the company pays salaries and operational costs while waiting for the threshold to be met. The second was about what happens to the pledged funding if the studio doesn't deliver.

    The other commenter seems to see the model as a donation model, but it is not that at all. Just like TechDirt uses tiered support perks that they sell on the site, those that fund the threshold will get their own perks in return. The thing this model needs is something that will motivate people to pledge funding to a project. The point of this model is to encourage payment whereas the old model deals with forcing payment.

    Like Mike has been preaching for what seems like a millennium now, they need to sell scarce goods that are connected to the abundant goods. They can also follow the CTW portion of Mike's favorite model. Creating a community that allows the fans to provide input on the type of game they want made would give them incentive to provide financial contribution to the project. Sell them a visit to their studio, early access to the game, or a "host your own release party" option where they throw a launch party for you and your friends when the game releases if you make a considerably large contribution.

    So, what if they don't get the game done or not enough money is pledged to the project? Well, I think if the second problem is solved, it also solves the first. As long as they have enough money to continue to make the game, it will get done. That is assuming they did their budgeting correctly. If not, the nobody has to pay anything and they don't start the project.

    So what's to be done in the mean time while they wait for the threshold to be met? I would think they would need some sort of auxiliary revenue stream from another product/service they provide. They could over-estimate how much they need to cover unforeseen complications or provide residual funding to cover the costs of the next project. The issue is the initial funding to launch the company to begin with.

    I can see this is running awfully long, but I guess the overall point I'm trying to convey here is that there is no magic bullet solution, but there is basic framework laid down for us. It just needs someone that can flesh it out to work for their own business.

     

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  23.  
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    Snicker, Oct 4th, 2010 @ 2:16pm

    No Easy Media Pay Dirt?

    Sure there's an easy way to make money on the interwebs' tubes. And when I figure it out I am going to trademark, copyright and patent my intellectual work product invention. You'll all have to pay ME ME ME ME ME ME ME. Whee that was fun :)

     

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  24.  
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    Chris Eastvedt (profile), Oct 4th, 2010 @ 4:25pm

    Re: Hasn't been a crutch so much as a feather bed.

    "Content creation actually produces 'nothing', certainly nothing necessary..."

    Really? So things like entertainment and culture are meaningless extras? What a sad, colorless box you must live in...

    Yes, industry dinosaurs are completely out of touch with consumers, which is why I, as a content creator, have chosen to take them out of the equation and play my own game. I'm actually happy dinosaurs exist because 1) they piss people off, pushing them towards independents who appreciate them and 2)they teach me what not to do.

    Again as you say, maybe industry dinosaurs rely on selling content in limited ways, but as Mike keeps pointing out, smart innovators can do more. You can sell more than a book, translations, movie rights... why not develop a toy version of the story for collectors, or offer an exclusive, real-life reenactment of a pivotal scene in the story? Anything can be a potential moneymaker, depending on how relevant your offerings are to your audience. The only limitation here is lack of imagination.

    I think the biggest mistake industry players make is treating people as potential one-time customers rather than lifelong fans. Smart creators appreciate the difference and respect their part of that relationship.

     

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