Tomorrow I’m off for Malmö and Media Evolution 2009 to listen to some excellent speakers. And I am honored to have been invited to contribute in a Blog Race leading up to the event. A blog race where we are discussing main speaker Chris Anderson’s thoughts on the economics of free.
Thoughts that are utterly scary for anyone making their living producing content. And for some parts of the media industry this is truly disruptive. I mostly agree with Mr. Anderson, but now when I have the possibility of raising some questions I’ll try to do so, and hopefully manage to start a discussion.
Let’s have a look at some of the most important parts of the media industry.
The cost of production decrease, but it’s not free. Back in 1990 when I started studying television engineering it was a huge advantage for me that I got access to professional production equipment. Now the visual language of 35 mm film is available to anyone affording a Canon 5D Mark II and some lenses. And editing? Free with any Mac.
But production in total is not free. Not at all.
Where the industry meets the most disruptive changes. Internet distribution is very cheap compared to the cost of moving plastic around in big trucks or paper around with an advanced system of paper boys. But it’s not free. You need servers and bandwidth.
How about filesharing and BitTorrent? That’s close to free? Yes, I should know. At the NRK we distributed one of our most popular television shows thorugh BitTorrent. Roughly 105 TB of data for a total cost of about $200,-
BitTorrent is effective use of bandwidth, but you still have to pay for your internet connection. So it’s not free distribution. It’s getting cheaper for the content provider because the end user shares his or her bandwidth.
Getting cheaper because of the low cost of distribution, but getting more expensive because of the abundance of content. Joi Ito mentioned something that describes this problem in his presentation at DLD last week:
“What used to be a distribution problem has become a discovery problem.”
Getting attention is harder than ever. But when you finally get it it’s easier and cheaper than ever to utilize it.
And the cost of creativity? Maybe you would say that the cost of creativity is constant. It’s still difficult to make truly original, high quality, provoking, emotional and popular content. Still, I would argue that even the cost of creativity is going down. By sharing ideas, learning from others, communicating and cooperating we have better possibilities than ever.
And I have experienced all of this. Through this blog, videos and images I’ve put up there for free. Most recently a certain video currently at more than 3 million views. Views demanding bandwidth that Google pays for through ads. A video that already gives me secondary income through presentations and business-to-business deals with television stations and ad agencies.
But let’s have a look at the bigger picture. Making content is cheaper. But it’s not free. Of course Mr. Anderson knows that. And he argues that parts of the business is getting so cheap that we can start making money on something else.
For some parts of the business that will work. You can find what Kevin Kelly calls “Better than free“. Music, television and movies? Anything in there that’s better than free?
The cost of production, distribution and marketing is lower. No doubt about that. And if we don’t want to pay for the copy. What would we want to pay for? Over at Amie Street I pay for music. Because they help me with the discovery problem. And they keep my music so that I can download what I have purchased as many times I want. They deal with the metadata and the backup problem. So, call it what you want: me paying for music, or music for free but discovery and backup at a fee.
And then you have the concerts, merchandise, business-to-business etc. We’ll probably loose Britney Spears, a couple of boy bands, Bono’s million dollar yacht and some other creations from the big labels. But people will keep making high quality music. And they’ll make enough money to make a decent living. Magnatune and Pump Audio are on to something.
And that very same Kevin Kelly is on to something as well. In his article about the fact that there’s something “Better Than Owning“. If the labels had decided to be brave they wouldn’t kill Spotify but helped it into a wonderful service that a lot of people would pay for. Either by cash or by listening to ads.
And my question to Mr. Anderson? The numbers! I’m only assuming stuff here. The record execs do the math and tell us that music will die. That my assumptions are wrong. Have you done some research on those numbers? The actual production cost. The possible income on the combination of concerts, merchandise and business-to-business through services like Pump Audio? Any current success stories?
Yes, a couple of bands that already got famous through the aid of a record company can give their music away. But how about that example of a new artist doing fine, producing high quality music, feeding his family. By providing music to the people for free?
That’s easier. They’ve been in the business of free for decades: Find quality content, combine it with ads and reach as many people as possible. Eventually they’ll get it. The fact that the traditional model of free TV will work on the web as well. The biggest problem? Media agencies and marketing execs. They need to think different. Beyond the 30 second spot, beyond the banner ad and beyond the boards by the highway. That seems to be the difficult part. Hulu seems to work pretty well, but they need to understand that the world is global now.
And the question? We’re here in scandinavia now. A place where the license funded public broadcasters are very strong. Will this future of free content kill the license funded broadcaster because it will be out competed by free high quality content? Financed by all sorts of strange new business models?
Will these new models be good enough to finance true public service content?
The good old days where you could charge several times for the same content will soon be over. First cinema, then DVD, then pay-TV and finally free-TV. No more. Driving trucks of DVDs around must stop. It’s not environmentally friendly. Distributing through the internet makes sense. But so far it makes no business model good enough to replace the old one. Not even close.
The movie industry is different. The production cost is higher. Much higher. Okay, we can still make movies, even if Tom Cruise gets slightly less for his next movie. But making a block buster is expensive. And according to a movie exec I spoke to recently about 60-75% of the income on an average movie is DVD sales. You know, that stuff that is going to be free now.
I have problems understanding how the movie industry will fit into that $0 future of business. By making the cinema a better experience?
Some bonus questions:
Not so free transistors?
Quoting “Free! Why $0.00 Is the Future of Business“:
“That meant software writers, liberated from worrying about scarce computational resources like memory and CPU cycles, could become more and more ambitious, focusing on higher-order functions such as user interfaces and new markets such as entertainment.”
Right now it seems like the biggest problem is performance. Seems like that transistor wasn’t that cheap after all. Lets make Google Chrome. Performance, not function. And the focus of WIndows 7 and Snow Leopard? Pretty high focus on performance… It went too far?
“The huge psychological gap between “almost zero” and “zero” is why micropayments failed.”
Yes, there is a huge gap. But I still think bad usability is why micropayments failed. I understood that when I met my new friend called AppStore in my iPhone. When it’s instant entertainment for $1 micropayments work. Or what?
And the obvious question that Chris Anderson must have got hundreds of times:
If your last book, “The Long Tail” was free. Would you have increased your speaking gigs to a level that could pay for the potential income the direct sales of the book gave you?
The other parts of this blog race:
Soon off for Malmö. Getting answers…