Monday, June 29, 2009

Selling Digital Content in The 21st Century (Fans are key)

Below is one of the most astute lectures I've ever seen on how content providers can make money in the changing economy. It's a keynote speech by Mike Masnick on Trent Raznor's (from Nine Inch Nails) creative approaches to making money by simply connecting with his fans... and then giving them a damned good reason to buy from him.

As I've said before, piracy is not a technological problem, and thus cannot be stopped in the long-term by making it illegal. Pirates will always outnumber policing agencies and the swiftness of digital transfers will always favor pirates over content providers. No amount of locks will keep someone from breaking into your house if they want to. Piracy is really a social problem—people pirate because they're frustrated with being gouged by $30 DVDs or $20 CDs (just to buy 1 song), or the content can't be seen or heard yet because the movie or song is (pick one: still in theatres, still on pay-per-view, not being broadcast locally, too old to find on DVD, only on a non-US region DVD, being sold for outrageous prices on Amazon due to it not being a US region DVD, not something you would usually see or listen to but are curious to sample it, etc.) Ultimately, piracy is simply a free market force in the hands of pro-active consumers. Consumers want the content and if it's easier to get that content from a pirated copy, they'll do it.

However, if you give consumers a true reason to buy your product (e.g., DVDs specifically made to glow when they spin, treasure hunts & Alternative Reality Games found on T-shirts sold at your concerts), piracy quickly becomes moot. Consumers want to experience creativity from their artists and they'll gladly reward the most creative artists with cashey money if given a chance.

Embedded here is the 15 minute (trust me, it goes by quickly) presentation I did at MidemNet on January 17th in Cannes, France. If you're reading via RSS or another site like iGoogle, click through to see the full presentation. Sorry it took so long to get the video up. There were a few minor technical difficulties. Anyway, the presentation garnered an interesting reaction and a whole series of fascinating discussions over email, in person and over the phone since I presented it, and while I don't want to repeat what's in the video, I did want to discuss a few points raised by the presentation. The core of the presentation is the following simple "formula" that is the basis for making money in the music business (and, I'd argue, many other businesses) in the digital era:

Connect With Fans (CwF) + Reason To Buy (RtB) = The Business Model ($$$$)

There are many artists—famous and not so famous—who have been making use (on purpose, or not) of this formula to create successful strategies for building up a stronger fan base, creating wonderful new works of art, distributing them out to the community and getting paid for it at the same time. What made Reznor so interesting as a case study was the fact that he's done it so many times in so many different ways that he, by himself, represents a great example of how you can approach this simple formula in an infinite variety of creative ways.

One of the issues I've had in discussing recording industry business models is that we always hear excuses for why a, b or c won't work. "Well, that guy can make money selling t-shirts, but this guy's fans aren't t-shirt types." "That guy will sell concert tickets, but this guy doesn't like to perform." "Maybe some fans will pay upfront, but people are so greedy that most will just free-ride." It's all excuses. They all want a simple model that everyone can follow, but the point here is that while the model itself is simple, executing on any business model is difficult.

It's about applying that "simple model" in a variety of different creative ways—which Reznor has done time and time and time again. Hell, I couldn't even include all of the examples of Reznor's successes in this single presentation, let alone successes by other musicians who have executed differently—but all of whom connected with fans (CwF) and then gave them a real reason to buy (RtB).

A second point that needs to be discussed is that a true reason to buy (RtB) is a voluntary transaction. Too often we've seen musicians or other content creators think that there is some sort of obligation to buy. And, so they put something out with a price tag, but without doing a very good job convincing fans why they should buy. There was no real reason—and then they seem to lash out at their fans for hurting them. The fault, however, lies with the musician (like any business) who failed to give a proper reason to buy, and falsely assumed that fans had some sort of obligation to buy. If an artist believes there's an obligation to buy, fans will often educate the artist very quickly.

One final point on this is the last question that people often raise: why should the musician be involved in any of this? Shouldn't they just be creating music. There are two answers to this. First, this is exactly where a smart record label, agent or manager can come in and be quite helpful. Let the musician create the music and let the "business guys" focus on applying this business model. Second, however, is that due to the way the industry is these days, the musician does need to be somewhat involved. You cannot connect with fans if you're in seclusion. If you don't want to make the effort to connect with fans, then that's fine: you won't have that many fans. It's a choice you make.

That said, there are tremendous opportunities allowed by new technologies, new communities and new methods of communicating today. They all enable better ways to connect with fans, and better ways to offer real reasons to buy. Those who look at the past and complain about what's been lost need to turn around and look at the vast open fields of opportunity in front of them. There's a lot more music to be made, a ton of new fans to make very, very happy—and, yes, through it all, an awful lot of money that can be made as well. You just need to stop worrying about what was lost and recognize all there is to be gained. Link.

Wednesday, June 17, 2009

Anatomy of a Sale (or Lack Thereof)

Yesterday I was doing research on a TV series from the 1970s called Survivors. It took me a little time to suss out what the name of the series was called, by I remember catching glimpses of it during my childhood on WPBS in New York. Since I was developing a very similar series, I wanted to know more about the one I had faint memories of. In fact, I wanted to know everything I could: series story arcs, episode story arcs, number and types of characters, practical and budget considerations when creating episodes, etc.

A Google search turned up an in-depth review of the series with this disheartening addendum:

If you want to buy Survivors on DVD today then you’ve got a problem. Originally Survivors was released in three DVD box-sets: one for each series, which sensibly were available separately. Meaning that you could just buy the first series and forget the rest unless your are a fanatic or have no critical faculties. However, since last year, those individual box-sets are no longer available and all three series have been made into one huge box-set: not the most convenient of ways to attract new fans and obviously quite expensive. Of course there is still the second-hand market, but—as always happens—greedy sellers used the ‘deleted’ status of the individual box-sets to crank up the prices. I’m glad to say that the prices seem to be setling again to more realistic levels and careful browsing of eBay and amazon MarketPlace should yield reasonable results for the Series 1 box-set. Series 2 is still expensive, which isn’t a problem because its rubbish, and Series 3 is comming down in rice. Alternatively you could just suck-it-up and buy the Series 1-3 box-set and be done with it. Link.

Hmmm, maybe I could rent it on Netflix instead? I do a quick search and turn up zilch. Okay...

If I couldn't rent the series (just one episode was really all I needed), I could buy one of the DVDs. Next stop, Amazon. I clicked on the article's links only to find the DVDs were on Amazon's UK site for £28.19. Money exchange problems aside, UK DVDs won't work on US DVD players due to piracy restrictions—UK DVDs are Region 2 and US DVDs are Region 1. Fine, whatever. I'll just look up the first season on Amazon's US site and buy it in Region 1.

Not so fast. Amazon's US site was charging $169... for a Region 2 DVD. So I'd fare better by buying the bloody thing via their UK site and having it shipped to me internationally, if they'd permit it. Amazon also had this warning on the page:
This DVD will not play on most DVD players sold in the US or Canada [Region 1]. This item requires a region specific or multi-region DVD player and compatible TV.

Now I'm seriously ticked off. I'm staring at the screen, a furrow on my brow. Have I not been the good consumer? Did I not try to do everything possible to find the content and offer my money for it? My credit card is at the ready... I'm willing to exchange my hard-earned money for content already distributed in the market, but that content is frustratingly out of reach due to the market's outrageous prices and stupid piracy restrictions (stupid from my perspective). I'm not a pirate—I want to pay the series' producers money for their product—and they're not letting me. All they've done is throw obstacles in my way to an honest sale.

Rather than accept my fate and turn tail defeated, I now decide to pursue the matter unconventionally. I'm no longer interested in rewarding the producers and distributors with my money, and opt to ignore their dictatorial pay structure to get what I want regardless. First I turn to Wikipedia to look up their show and there I find a detailed episode guide which turns out to be extremely informative, even mentioning similar shows I might be interested in. Finally, I do a Google video search and find a couple of episodes online. After watching a few minutes of one episode, I've gathered everything I wanted to know about the look and tone of the series. The window where I was willing to spend money has been closed—forever. Too bad for them.

Let's review the stages from product interest to a (potential) sale... and then to piracy:
  1. Childhood memory of old TV show
  2. Google search
  3. Fan web site
  4. Netflix search
  5. Amazon (UK) search <— window opens to pay money
  6. Amazon (USA) search <— too expensive & too inconvenient: window closes to pay money
  7. Wikipedia search <— online synopsis available
  8. Google Video search <— piracy begins; consumer gets content anyway

The bottom line is, I don't feel bad watching pirated content when that content is outside my reach anyway. (If you think it's my obligation to buy a multi-region DVD as a workaround to see a single Region 2 DVD, that's crazy talk.) If the producers of Survivors had just make their content more conveniently available (non-region DVDs, Video On Demand, iTunes, Netflix Watch Instantly) or at a lower and more reasonable price ($169? Seriously? How about $69?), then I'd gladly have forked over the dosh. But why reward stupidity, lack of foresight, and greed?

By way of epilog, it appears the only watchable episodes of Survivors are listed through, which offers 5 minutes of a free preview and to watch the whole episode, you have to download their personal video player where they use ads to pay for the site. Maybe the producers weren't quite so stupid after all.

Friday, June 05, 2009

+7.2 (∆ -1.4)

It's official—I finally dipped below my lowest recorded weight in five years. Woot!

Wednesday, June 03, 2009

+8.6 (∆ -2.2)

Nothing since April 18th and a loss of only 2.2 pounds? WTF, right?

May was rough. I caught some kind of weird virus that made all my muscles furiously ache for about two weeks. When I went back to the gym because (I thought) I was feeling better, my ass got kicked again. So, basically, three weeks were shot right there.

Having said that, I did go to Reno last week with the fam and went to three all-you-can-eat buffets and still managed to lose weight! No matter how you slice it, that's a huge win. Anytime you escape a den of sin like Reno and at least break even—either financially or gastronomically—you're ahead of the game.

79 more days until my birthday, the self-imposed deadline. Do you think I can get to +0 by then?

Also: I'm only 0.6 away from dipping below my lowest recorded weight in four years!