Shifting the media business away from the free economy

02 Aug 2013  |  Ryan Garner 
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Moving on from the free economy is essential if we still want artists to produce high quality content. However, there is no one easy solution, instead, utilising a number of different approaches that complement the power of the internet are likely to have the largest impact says GfK's Ryan Garner.

Following Thom Yorke's withdrawal of Atoms for Peace from Spotify (and other music streaming sites), the question of monetising media content re-surfaced. Yorke's argument is that music streaming platforms are not paying new artists a fair share for using their music. In fact, many reports suggest that the current licensing terms barely provide a living for artists who have built up a decent fan base.

Yorke's argument that the current licensing agreements simply don't favour artists is compelling, yet his damnation of the validity of music streaming services is questionable. As a platform for music, Spotify et al offer a great social user experience whilst also combating piracy.

The problem is the share of the revenue in the value chain. If the problem is that there is not enough value in the advertising and subscription model, there are additional models that could be used to help support artists make the shift from the free economy.

Monetising music in the internet age seems to be a perennial headache for those involved. However, it's not just music that is facing disruption; journalism has been struggling for just as long and the publishing industry is currently re-thinking its business model.

It is also inevitable that disruption in the gaming, TV programming and the film industry will ramp up in the next few years. Each type of media has its own unique set of issues, but the common factor is that there will be no one over-arching model.

Monetisation will be multifaceted and provide different or multiple options for consumers to pay for different types of media content. Here are some examples that can sit alongside downloads, subscriptions and ad-funded models:

Crowdfunding: This was discussed at GfK's latest event as a way to combat piracy by getting the consumer to pay up front before the content is produced. Whilst this is a great idea it's not going to work for all media types and all artists.

Crowdfunding media content is likely to be an effective solution for artists who are already well-known but crowdfunding on its own is unlikely to kick-start (pun intended) the career of a new band or writer.

Bundling and exclusives: One of the great aspects of crowdfunding is the different packages it offers early investors. Exclusive, limited or signed content can be bundled into the early investment packages aimed at driving interest early on.

This has been an effective marketing tactic for music albums and books for a long time and is easily transferable to the digital world. Ultraviolet is trying a similar tactic by bundling digital copies of films with physical versions of the product. The aim is to retain a high value on the physical product by giving the digital copy away for free.

This is a compelling concept as the consumer buys the film not the format. Indeed, it has even more potential in the publishing world as a Blu-ray or DVD is still a digital format, whereas books can still be read if the energy crisis comes to a crunch and our smart connected homes power down.

Micropayments: Sometimes great experiences compel us to pay more for a product or service, commonly known in restaurants as tipping. Tipping is not just an emotional act of gratitude but has also become a societal norm and there's no reason why this cannot happen in a digital environment.

Services like Flattr are looking to facilitate this behaviour digitally. Once they reach critical mass and dovetail with social networks, societal norms are likely to kick in driving a network effect of paying for content, one small donation at a time.

Pay What You Want (PWYW): A recent article by GfK's Colin Strong contends that the media industry is well suited to a PWYW model with great examples of this in action, such as the Humble Bundle for games and books.

There is an interesting behavioural economics angle to this model as average donations are displayed and extra content can be unlocked by paying a bit extra. This original model works well among certain groups, but it is not a mass market approach.

The critical point about these different models is that they will appeal to different consumers. Some like to carefully curate media libraries whereas others prefer to move from one interest to the next with wanting the hassle of storing and organising the content they consume.

Providing flexibility and choice rather than imposing one method to financially support your preferred artist is likely to generate higher levels of contributions for fans. Success will follow those that adapt their business model to take full advantage of the internet.

Failure will follow those trying to shoehorn their offline business model into a digital space where there are a no synergies between the two.

The strength of the Internet is about the networks it facilitates. Connecting people, ideas and content is what it does best. The monetisation methods discussed in this article harness the power of the internet and its networks whilst at the same time aiming to support content creators. If, like Thom Yorke, you want to support your favourite artists, look up the following services:

  • Bandcamp helps you discover great new bands and stream their music for free. Support them by paying what you want to download their music
  • Soundcloud, YouTube, Vimeo and Grooveshark all support Flattr micropayments. Watch and listen with no restrictions whilst leaving little tips for the content your enjoyed most

Having used both of these services it certainly feels like a more intimate way to engage with people creating the music you love. This is an outcome that artists and fans can never put a value on.

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