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
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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Filed Under: business models, magic bullet

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  1. icon
    Greevar (profile), 4 Oct 2010 @ 12:48pm

    Fund and Release

    I had an interesting discussion on the virtues of the "fund and release" business model on 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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