People Who Pay For A Service Are A Lot Nicer Than Those Who Don't

Business Models

from the meeting-expectations dept

Dealing with customers can quite often be a pain for many companies and other people who offer goods and services that require some support from time to time. When offering a free service, the barrier for new customers is eliminated and you can get a whole lot of cranky people when the service is down or not operating to expectations. So what happens when a free user turns into a paid user? Will those people become even more entitled and become even more upset when downtime happens? Actually, it could very well be the opposite.

Over at the Agile League, one software developer, Micah, shares his experience with offering a paid subscription for a free service.

When I finally flipped the switch to add paid subscriptions to Obsidian Portal, I was terrified of the coming support nightmare. I reasoned that if people were angry and demanding when it was free, they would be infinitely more angry and demanding after they had paid. Instead, what I quickly learned was that the paying subscribers were vastly more polite, understanding, and patient than the free users.

So why exactly did this happen? Why did these customers, who decided to pay money, suddenly become more polite in their interactions with this developer? Micah offers what he feels is the best explanation for this change.

My customers don’t pay me in order to buy the right to yell at me. Most of them don’t care at all who I am. They pay money because my service addresses a pain point in their lives. They’re so happy at how well it addresses the pain point that they gladly get out their wallets and fork over payment. If there’s an interruption in the service, they aren’t interested in pointing fingers and assigning blame. They just want the service back. If service interruptions or bugs are the norm, they may get angry, but the point is that they don’t get extra angry just because they paid.

When people find software or any other service that addresses their needs, they will gladly pay for it and be happy about it. This is something we have addressed in the past on numerous occasions. This is what makes Valve's Steam platform so successful in the games industry. This idea is what leads us to shake our heads at the boondoggles that the movie and music industries throw out there. It is all about identifying a need in the marketplace and offering a service that is convenient and actually meets that need.

Of course this is not going to be true for 100% of users who do pay. There are still plenty of people out there who seek an opportunity to complain. The key is to not be afraid of putting yourself out there.

What I am suggesting is that you relax any fear you have about being beholden to them because they paid you. Asking for payment does not fundamentally change your relationship with your users. Some will love you, others won’t. But, there’s a good chance that the ones who love you will match up to the ones paying you.

So while there may be some paying users who do complain, there is still a large group who will not because they actually love your service enough to have paid. These customers feel that the service offered at the time of payment was worth the money. As long as the service meets those expectations, they are happy. When your customers are happy, you could make a lot more money in the process.

Filed Under: business models, paying

Part Of Being More Open And Human Is Actually Holding Conversations With Fans

Culture

from the we're-all-connected dept

There is a lot that can be said about being open and honest with your fans. Sure those fans can be pushy and complain a lot, but amongst all that, there is a real opportunity to connect with your fans and help them build up greater love and respect for you and your brand. We have seen many cases in which doing so has helped build a stronger following and bring in a lot more revenue in the process.

Despite this strong evidence for the power of being open and honest, there are still some companies that feel the need to avoid talking to the public. Any time a fan asks a question about anything, most often the responses are either silence or some form of “No Comment.” When fans hit that kind of brick wall, they feel as if the company doesn't care about them and are less likely to be engaged in the future. Such responses can also lead to further complaints from the community as well as lost sales.

When the complaints reach a certain threshold, then it reaches the ears of those who have a platform in which to speak and reach a large group of listeners. So when a site like Kotaku gets on its soap box to complain about game publishers who will not engage with the community, then you know a lot of people are listening. The whole article is worth the read but I want to highlight a couple of the suggestions that Kotaku gives at the end.

• Answer questions. As many as you can. Questions are not your enemy. We're all here because we all love video games.
• Don't be afraid to tease games that are coming in the far future. We love teases. And we won't even mind if those games get cancelled, as long as you don't lie or pretend they're not.
• Just talk to us. Explain the logic behind your decisions. Help us understand you. Help us relate. Help us empathize.

They have a couple others that are a bit more specific, but these three cut to the heart. Answer questions, don't be afraid to tease, and just talk. All these things are important to fans and potential customers. These are all part of that process in getting people to not just like what you do produce, but like you as a person or a company. How can they like you if you don't engage with them? It is this engagement that promotes the transparency needed to increase sales, too.

On the other hand, by ignoring your fans you lose the power to control the conversation as well. We highlighted a story last year in which Nintendo made a very weak gesture at engaging with fans. Unfortunately, there was no such engagement and the fans took control of the conversation. Since Nintendo failed to control the conversation by being engaged, the fans began to complain about policy decisions they felt were not ideal. By not engaging, Nintendo lost a lot of good will that day. Had Nintendo actually taken the time to answer and ask questions as Kotaku recommends, they would have had a far better promotion at the time.

As more and more companies learn how to be properly engaged with their respective communities, we should see a lot more successes like those we highlight on a regular basis, such as Louis CK, Amanda Palmer and Double Fine. These people have taken the time to really build a relationship with their fans. A relationship that leads to those fans parting with their money to see more art created. Isn't that what is important?

Filed Under: awesome, connect with fans, honest, human, open

Hard Rock Cafe Announces Boutique Label: Four Lucky Bands To Receive $25,000 And All The Money They Can Earn

Music Industry

from the philanthropy-and-overpriced-drink-'specials'-FTW dept

Of all the places you might expect philanthropy to flow to unknown musicians, the Hard Rock Cafe would seem to be one of the unlikeliest. Despite its name, the Hard Rock Cafe is known best for being a t-shirt an upscale chain restaurant whose hook is music memorabilia, rather than a forward-thinking music-inclined entity with a constant eye on the cutting edge . While plenty of artists have played their venues over the years, the chain seemed to be happier catering to the fans of music's past, rather than actively promoting new music.

Word comes via the Daily Swarm that the Hard Rock brand is now affixing itself to a boutique label. But this is a label without multi-page contracts or onerous royalty demands. Hard Rock Records is set up to lose money from day one, all in the interest of giving bands that catch its ear a leg up.

The brainchild of CMO John Galloway and A&R co-heads Blake Smith and James Buell, Hard Rock Records is only in its first year and thus far has just one act signed to its roster – the Gulfport, Mississippi roots-rock act Rosco Bandana. More interesting than its late entrance into the record label game is that Hard Rock Records is marking itself as an “altruistic” label, or a non-profit, so to speak.

“We had discussed different variations of a label a few years ago,” Buell explains to Rolling Stone. “Everything was netting back to how were we going to make money. After we did our research, it just never seemed like a good idea.”

Last year during Lollapalooza, where Chicago's Hard Rock Hotel is the annual ground zero for the fest's biggest after-parties, Galloway approached the two and told them to move forward with the label. “He said, 'No, that's the thing, that's the catch – we're NOT going to make any money,” explains Buell.

This is another example of content as advertising. There's little doubt the Hard Rock logo will be displayed prominently wherever these bands play, but in exchange, they'll get tour support and be able to take advantage of Hard Rock's promotional skills and reach. And since there's no catch, each of the four bands signed will be able to keep all the money they've earned and walk away free and clear after 12 months. Not a bad deal at all.

“It's kind of like music philanthropy,” adds Smith. “We want to find bands that need a leg up. We take them for a year, make a record with them, give them video money, give them a van, get a booking agent to help them get on the road, and hopefully find them another label that is going to house and better build them for the long-term. We do all this with them, and they keep every penny of everything and they walk after 12 months.”

Hard Rock has this built into its advertising budget, which is probably the best P&L line to put it on. A band receiving $25,000 with no strings attached and nothing to recoup is going to find it very hard not to talk up the Hard Rock brand. If nothing else, it will be mentioned every time someone asks the band, well, pretty much anything, really. It might be tough to gauge the ROI from this, but as it's set up now, no one seems to be too concerned. It certainly generates a ton of goodwill for Hard Rock, which usually translates to brand loyalty. 

I don't imagine this experiment will find itself leading a bandwagon, though. There aren't many companies willing to invest $100K into something as ethereal as “karma.” But it does add another wrinkle to the music business, bringing back the concept of patronage and treating your artistic investment as some sort of loss leader. Hard Rock does have itself set up to take advantage of any additional business this might drum up. Syncing up new bands and a promotional tour will be frictionless with its existing venues and sponsored festivals. The question isn't how much money the band might make, but how much Hard Rock will see added to its bottom line from dipping its toe into the music industry. Setting the expectation at $0 for the trial run is probably wise, as it makes it nearly impossible to undershoot the goal, as it were.

It's not a business plan by any stretch of the imagination and it's certainly not going to bring about a brave new world of artistic patronage, but it's hard to knock a bit of altruism for its own sake (corporate advertising opportunities, notwithstanding). It's also great news for four bands, who'll get a $25K kickstart and year of worry-free money making. 

Filed Under: advertising, artist friendly, boutique labels
Companies: hard rock cafe

Indie Musician Zoe Keating Defines Transparency; Breaks Down Exactly How She Makes A Living

Business Models

from the can-i-get-a-matching-offer-from-any-major-label? dept

We're used to hearing broad statements about the income of major labels, mostly about how little it is and why that needs to be “fixed.” We've also shown how any disclosure about income from the labels is less than a one-way street (more of a cul-de-sac filled with vacant lots) when it comes to their own artists. When it comes to making a living by making music, it often seems that beyond very public Kickstarter campaigns, not many people actually know how much money is flowing to artists and from where.

Zoe Keating, who's been featured on Techdirt before, mainly due to run-ins with ASCAP and Universal, has opted to go fully transparent. She's uploaded a Google Doc, breaking down every source of income in detail. Hypebot breaks down the breakdown: 
 

Clearly, the best way to support Zoe (and other independent artists like her) is to purchases directly from the artist. Just by taking a look at the pie chart, it is evident that the vast majority (nearly 97%) of her recorded music revenue comes from fans purchasing her music as opposed to streaming it. Less than $300 came from Spotify, while more than $45,000 came from iTunes.

“Music sales have been a consistent 60-70% of my total income,” Zoe told Hypebot. “The rest comes from concert fees and film/commercial licensing.”

Perhaps an unsurprising number, it nonetheless is a great reminder of why connecting with your fans is so important. If you can make that connection, it makes selling infinite items that much easier. As is pointed out by Hypebot, Spotify accounted for only $300 of Keating's income. This could be construed as being precisely what's wrong with Spotify, but Keating's take on this low number doesn't reflect that:

“The income of a non-mainstream artist like me is a patchwork quilt and streaming is currently one tiny square in that quilt,” Zoe said in her Google Doc. 

She also doesn't seem to be concerned, as others are, that Spotify and other streaming services will supplant tracks sales and reduce her income. 

Streaming is not yet a replacement for digital sales, and to conflate the two is a mistake. I do not see streaming as a threat to my income, just like I've never regarded file sharing as a threat but as a convenient way to hear music. If people really like my music, I still believe they'll support it somewhere, somehow.

This isn't to say she doesn't have any reservations about the streaming service. In her Google Doc notes, she points out that, at this point, she feels artists should view it more as “a discovery service rather than a source of income.” This could change, though, if Spotify makes a few alterations. First of all, Keating would like to see it open its availability:

I've said multiple times what my issue with Spotify is: fairness. I care about making the playing field level for all recording artists: signed or unsigned. Let it be a meritocracy.

At this point, Keating is still unable to get one of her albums (“Into the Trees”) onto Spotify due to the lack of a digital distributor who won't take a cut of her iTunes sales. In order to get her music on Spotify, she has had to run her albums through an aggregator (CDBaby, TuneCore, etc.) in order to make them available. As it stands now, her latest solo album isn't generating any Spotify income.

She also feels Spotify could turn itself into a better platform for musicians:

I wish Spotify would do more to facilitate the connection between listeners and artists – i.e. show that the artists is playing nearby, or add links to buy music. It's early days, so maybe this will happen eventually.

Away from the streaming front, Keating also addresses those who have suggested she leverage her success and sign with a major label to “extend her reach:”

My financial picture would be worse if I was on a record label. Some people say that if I was on a record label, I'd have a larger reach and therefore would be making more money. To this I'd like to point out that I make instrumental cello music. There is about as much chance of my music becoming mainstream as there is of me being elected President of the USA (hint: not possible, I was born in Canada and there are naked pictures of me at Burning Man). While it is probably true that the right label could help with the reach part, I don't think they could help me enough to offset their cut, and you know what….no label has ever approached me and the ones I've approached said no, so I'm guessing they think the same thing.

There's sure to be more discussions springing from this data and her comments. Having turned herself into a “data point,” Keating is now encouraging all artists to do the same. As she points out, if we're ever going to figure out where the music industry's headed, we need to collect as much information as possible from where it is now. Hopefully, Keating's transparency will result in many more “data points” offering up detailed pictures of how they're making money by making music. 
 

Filed Under: indie musicians, itunes, revenue, streaming, zoe keating
Companies: apple, spotify

How Having A Good Sense Of Humor Helps Cope With Piracy And Succeed Despite It

Business Models

from the survive-the-nuclear-winter dept

Piracy is one of those things that is pervasive throughout video gaming. It has become a force of nature, a fact of life. While many companies attempt to fight piracy of their works through DRM or complaining loudly, others are taking a very different approach. Last year we posted a story about a company called tinyBuild that decided to embrace piracy rather than fight it. It released a special pirate themed version of its game on the Pirate Bay and saw a positive response from it. When discussing the move, tinyBuild stated, “I mean, some people are going to torrent it either way, we might as well make something funny out of it.” By having a positive sense of humor in the face of piracy, one indie game developer was able to cope with it and succeed despite it.

This sense of humor is catching on too. Gamasutra highlights another indie dev, Paul Greasley, that, when faced with the realities of piracy, decided to approach it with a bit of tongue in cheek. The developers of the game Under the Ocean released the game under three different options. The first was early, cheap access to the game for $7. The second was a more feature rich and personalized version for $25. The third was a hat tip to piracy.

The Cockroach edition was actually not an attempt to cut down on piracy. It was just one of the liberties of being an indie developer, with nobody to answer to. The elephant in the room is that 90 percent+ of people are going to pirate your game on the PC (and ours is no exception, based on the traffic logs). We just thought it would be fun, and frankly honest, to point that out!

To further seal the deal, Paul had originally included a link to the Pirate Bay. Unfortunately, some wet blankets in the indie scene overreacted to the inclusion of the link. Those developers had claimed that the inclusion of the link was Paul condoning piracy, something he denies. So, to put out the fires and save his cred with those developers, he removed the link while leaving the rest of the option on the site.

It is quite interesting that he even included the link to begin with. Most developers, especially those from large studios, try to do their best to pretend that such sites don't exist in the off chance they accidentally convert a potential customer into a pirate. Including the link was a massive show of openness with fans. By showing that he knows what the competition is, he was showing fans that he understands what it takes to build up a loyal following.

We're going to be releasing a whole bunch of frequent updates, with lots of feature additions. If you want to stay up to date, buying it is much easier than pirating it. The users win, because it's DRM free and they get a bunch of cool new updates for Under the Ocean, and we win, because the updates get us new ways to promote the game outside our game forums.

Make a product people want and will talk about, make that product as good as you possibly can, and treat your customer base with respect.

By recognizing the reality of piracy, Paul was able to identify features and services that will build loyal fans, things like avoiding DRM and providing frequent updates, not just for the game but from himself. What this means for Paul and his game is that players get a great experience from someone who is open, human and honest and in return they will spend more money on his game.

Filed Under: cockroach edition, competing, humor, paul greasley, piracy, video games
Companies: tinybuild

Traditional Publisher Ebook Pricing Harming Authors' Careers

Business Models

from the the-industry's-'get-broke-quick'-scheme dept

We've covered a number of stories dealing with ebooks and their disruption of normal publishing. There have been a lot of growing pains in the industry as the ebook market continues to expand, replacing physical sales (and their associated margins and intentional bottlenecks) and knocking down a healthy number of barriers to entry.

Allegations of ebook price fixing are still in the air, pending the Department of Justice's investigation. No matter the final decision, publishers will still be free to set ebook prices as high or low as they want to. But if they insist on pricing themselves out of the market, they'll be seeing an increasing number of their authors decide to write their own tickets, as others have done with great success.

Mark Coker, founder of Smashwords, breaks down exactly how traditional publishing houses are shooting their own authors in the foot with pricing “strategies” that run in direct opposition to how people purchase ebooks. With ebooks expected to compose nearly 30% of trade book sales (in total dollars) in 2012, authors may be doing serious damage to their careers by selling their ebooks through traditional publishers.

Coker quotes from his RT Booklovers convention presentation, showing that there are certain “sweet spots” in ebook pricing—ones that show marked sales increases and, sometimes counterintuitively, higher author earnings than others.

One surprise, however, was that we found $2.99 books, on average, netted the authors more earnings (profit per unit, multiplied by units sold) than books priced at $6.99 and above. When we look at the $2.99 price point compared to $9.99, $2.99 earns the author slightly more, yet gains the author about four times as many readers. $2.99 ebooks earned the authors six times as many readers than books priced over $10.

If an author can earn the same or greater income selling lower cost books, yet reach significantly more readers, then, drum roll please, it means the authors who are selling higher priced books through traditional publishers are at an extreme disadvantage to indie authors in terms of long term platform building. The lower-priced books are building author brand faster. Never mind that an indie author earns more per $2.99 unit sold ($1.80-$2.10) than a traditionally published author earns at $9.99 ($1.25-$1.75).

This isn't news to anyone following along here at Techdirt. For some reason, though, many traditional publishers still feel that higher prices equal higher profits and fail to see that lowering prices will increase their sales and profits over and above what they can expect at their normal price points.

Certain members of the traditional publishing crowd argue that lower prices are unsustainable given built-in costs and that pursuing these price points will somehow “devalue” the written word. First of all, selling your product for more than the public is willing to pay is what's actually “unsustainable.” And any explanations involving fixed costs will fall on deaf ears because consumers don't make purchases based on what they think the product is worth to the company selling it. They purchase based on what they feel the product is worth to them.

Secondly, if people aren't buying at $9.99 but they are at $2.99, then the product isn't “devalued.” If you're selling many more units at a lower price, then your price point is closer to “dead on” than “undervalued.”

The picture painted augurs well for indie ebook authors, but indicates that authors who continue to publish with traditional publishers might actually be damaging their careers. Look no further than the bestseller lists at Apple, Amazon or Barnes & Noble to see that indie ebook authors are taking eyeballs from the authors of NY publishers. As I write this, seven of the top 30 bestsellers in the Apple iBookstore are distributed there by Smashwords.

In the short term, existing publishers would do well to follow Coker's advice and start maximizing sales by lowering prices. Most publishing houses have already had the term “price fixing” pointed at them, and thinking that you can somehow outlast the consumers in a price war is just going to shove you to non-existence that much faster. Exclusive deals with authors won't mean much when no one's buying, and those authors are going to swiftly tire of minimal sales and miniscule royalties, especially when they can plainly see better opportunities outside the gates.

Filed Under: business models, ebooks, publishing

Zach Anner Uses Reddit To Connect With Fans And Resurrect His Show

Culture

from the rollin'-with-reddit dept

As more and more artists and entertainers come to understand that the old gatekeepers of culture are finding themselves without any gates to keep, the opportunities continue to expand. Such is the story of Zach Anner, a comedian who briefly had a show on Oprah's OWN network. Anner was born with cerebral palsy and uses a wheelchair to get around. His show, which involved him traveling around the country experiencing different locations and interacting with people, won an OWN network contest largely due to the Reddit community's votes. Where the story used to end was in the show's cancellation after only six episodes.

But that's not how it works anymore. Good News has the story of Anner's using the same Reddit community that voted for him the first time around to resurrect his show for release on YouTube.

What's more, Anner is going in hard connecting with his fans. The show's tagline is “Do you have an Internet? Then you can be part of it!” 

“Anner and Reddit co-founder Alexis Ohanian developed a plan to use the site to make Riding Shotgun a much more participatory endeavor than other shows. Last month, Reddit users helped Anner select the cities the series will visit. Now Anner’s using his official Subreddit to collect ideas of what to do in each city. He’s even using Reddit to crowdfund gas for the road.”

The end result is Riding Shotgun will continue to be made and his fans will get to be directly involved and invested. So, we have an example of the old gatekeepers failing to keep a show available, while a new model for the business of a television show is succeeding. We'll have to see how this works out long term, but it's heartening when the internet helps culture win out in the end.

Filed Under: connecting with fans, crowd, gatekeepers, zach anner

No, 99% Of All Filmmakers Shouldn't Crowdfund… But An Awful Lot Should Be Testing It Out

Business Models

from the don't-go-too-far dept

I’m an unabashed supporter of crowdfunding platforms like Kickstarter and IndieGoGo for certain things (in fact, many things), but I still worry that the early success of some such campaigns has people thinking that those platforms are the solution, rather than one possible solution in a sea of opportunities. Ross Pruden points us to an interesting article by Chris Dorr, in which he suggests that 99% of all filmmakers should crowdfund. Perhaps this is just hyperbole — and the overall article is a decent one explaining some of the benefits of crowdfunding — but I want to remind people that just because crowdfunding is a good way for some artists to make money, it doesn’t mean that it’s the only way to do so. We’ve been saying for a while that content creators should be prepared to improvise with a variety of business models. There’s no one business model that works for all artists all the time. So I get worried when people suggest there’s a “single” solution for everyone. Content creators shouldn’t get too hung up on thinking they have to crowdfund when it might not be the right way for them to connect to their audience, even if it is a good idea for many artists.

Filed Under: crowdfunding, filmmaking

The Indie Ebook Scene Is Growing: Here's Over 170 Authors Who've Sold More Than 50,000 Copies

Business Models

from the success-stories dept

We’ve written a lot about the incredible new ecosystem of independent, self-published ebooks, which in a few short years (with the help of huge success stories like Amanda Hocking and Joe Konrath) has largely eliminated the stigma of what we once called “vanity publishing”, to the point that even traditionally published authors are deciding to go it alone.

Though Hocking and Konrath were some of the first names to get some serious attention with their impressive ebook sales, today there are lots of other examples. An anonymous submission points us to a blog dedicated to tracking self-published ebook success stories, which has put together a list of over 170 independent authors who have sold more than 50,000 ebooks, including 33 who have sold more than 200,000. Hocking and Konrath still make the top ten, but they have plenty of company:

Barbara Freethy – over 2 million ebooks sold (April 2012)
Amanda Hocking – 1,500,000 ebooks sold (December 2011)
John Locke- more than 1,100,000 eBooks sold in five months
Gemma Halliday – over 1 million self-published ebooks sold (March 2012)
Michael Prescott – more than 800,000 self-published ebooks sold (Dec 2011)
J.A. Konrath – more than 800,000 ebooks sold (April 2012)
Bella Andre – more than 700,000 books sold (May 2012)
Darcie Chan – 641,000 ebooks sold (May 2012)
Chris Culver – over 550,000 (Dec 2011)
Heather Killough-Walden – over 500,000 books sold (Dec 2011)

The post also points out some encouraging statistics from Amazon:

Kindle Direct Publishing has quickly taken on astonishing scale – more than a thousand KDP authors now each sell more than a thousand copies a month, some have already reached hundreds of thousands of sales, and two have already joined the Kindle Million Club.

Under the old system, many of these authors would likely still be sending out manuscripts, hoping for the lucky convergence of circumstances that puts it in the right pile in front of the right reader when they’re in the right mood. There’s still some disdain for self-publishing in some circles—but with the open playing field that has been created, the increasing number of authors flocking to it, and a growing roster of success stories, it won’t be long before that too starts to change.

Filed Under: amanda hocking, ebooks, joe konrath, kindle, publishing
Companies: amazon