Reversible business models
In China, some doctors are paid monthly when you are healthy. If you are sick, it’s their fault, so you don’t have to pay that month. It’s their goal to get you healthy and keep you healthy so they can get paid.
Better Place designed a business model for electric cars where the car is given away for free because the company makes its profit on the electricity and battery maintenance.
Services like Spotify aim to let you listen to any song ever recorded, any time you want, on any device anywhere in the world, for free — as long as you pay their small monthly subscription fee. This challenges the whole assumption that we need to own copies of recordings at all.
FreeConferenceCall gets their income from the phone companies instead of their customers, because they know which phone company each person is using to call them. So they negotiated an affiliate payment for generating more long-distance calls for each phone company.
In the 70s, IBM let Microsoft make the operating system for their computers because software was just the free stuff that came on the expensive hardware. In the 90s, it looked like the hardware was going to become free because all the money was in the expensive software. Now Google is making the software free, too, just to get you into their advertising network.
Professor Dan Ariely told his class that he would be doing a reading of poetry, but didn’t know what it should cost. He handed out a price survey to all students, but secretly half of the surveys asked if they’d be willing to pay $10 to hear him read, and the other half asked if they’d be willing to hear him read if he paid them $10!
Those who got the question about paying him were willing to pay. They offered to pay, on average, $1, $2, $3 for short, medium, long readings.
Those who got the question about being paid demanded payment. They wanted to be paid, on average, $1.30, $2.70, $4.80 for short, medium, long readings.
An entire business model flipped upside down just by starting with an opposite assumption. I love it.
What assumptions are you running on?
Are there things you assume you have to pay for, that might instead be willing to pay you?
What current business models might as well be flipped around, or get their income from a different source?
Did you know printer ink is more expensive per ounce than the priciest champagne, while the machine costs less than $100? Same principle, I suppose.
This goes right into what I've been trying to talk to a team i work with about...let's not adopt all the "old school" business methods we've tried before. The web requires a different mindset.
Thanks - very nice post,
tom
As technology becomes more readily available and people become more accostomed to using these technologies, businesses will have to adjust. There is also always going to be the guys who think outside the box and make their revenue by providing a better service at little or no cost to the users in exchange for revenue on the backend.
The Chinese doctor theory is very exciting to hear, although I do not think the U.S. would ever go for it. Too many egos.
I'm not sure paying DJ's legally would work. In principle I like the idea but It's still a money situation. There would have to be some kind of control to keep it fair. I'd probably pay for some kind of guaranteed radio exposure to the right audience but I couldn't possibly compete with labels and artists who have a lot of money.
And as the post mentions Google ads I worry that this kind of model might end up with a world of content who's sole purpose is to draw you in for targeted advertising.
I do have radio and internet radio outlets for my music now, but its the same as its always been. How do you drive the listeners to find you? How do you stand out from the crowd? No matter your business model you still have to answer those questions.
Oh, sometimes it's all so confusing. But out of confusion, new directions open up.
Still, there is a balance between giving and taking. What can I contribute, what have I to give? And what is it worth to others?
Shure, there is more music than ever. But this is only statistical. It says nothing about a certain piece of music or an artist.
It helps to trust oneself, being playful and in the moment.
There is not one key, maybe there never has been one.
Doctor example is interesting. If people would actually do what doctors say, such as eat a low-fat diet and exercise, maybe that would work. But they don't... So why should a doctor not be paid when the reason for failure is (most of the time) due to what his clients are doing?
With that said, this is why I agree with pay-for-play deals. SOMEBODY has to pay the rent on the place. Too often, bands expect show promotion to be somebody elses job...and it never gets done.
Things always work better when you have a dog in the fight. If CD Baby didn't charge people to setup a CD, you'd have a warehouse full of crap from musicians just waiting to see if it magically sold.
Wow! You really keep us on our toes, Derek.
This reminds me: I just heard that some dog (or maybe the dog's owner) was getting paid to wear a collar that says "John Deer" as in the tractor people. I think that brings in 10 bucks a month. In the west village that would buy a coffee and a dog biscuit. Anyway, I argued that it would be effective advertising because people get all warm & fuzzy about dogs, so they'll associate that with Deer's brand too.
P.S. I'm adoring & appreciating your free pdf book "how to call attention to your music" Everyone read that.
Kathena Bryant (the hippy nuts)
Oh let's not forget Reverse Graffiti, where artists find very dirty places (especially tunnels blackened by years of grime) and clean them in a pattern to make graffiti that can only be removed by cleaning the whole area. Brilliant!
Put the tunes out under a creative commons BY license that allows commercial use.
http://creativecommons.org/licenses/by/2.5/au/legalcode
As rights organizations issue blanket licenses, no holes in warm blanket and publishers don't want to get cold.
Artists not based in the US can join transfer to ASCAP.
keep in mind:
all artists not based in the US are not able to license what they create for free. So free business models for music are only rellivant to the US market.
Even CDbaby technically best be paying for the use of all music that it streams via artists not based in the US, that are not members of ASCAP.
Consider how the music world works outside the US, when thinking about free-music.
This business model has been going on for a while now. You have to be very creative to survive as a full time musician/artist now. Marketing online now is way more important building a local following.
Derek,
Marketing has become the biggest challenge for musicians these days.
Thanks for your help in breaking down many of the old precepts.
Kam
Falkreations Music (BMI)
http://www.nativetongue.com
Hey Derek,
Thanks for the information and the opportunity to get involoved in some great ideas....there has got to be a better way for struggling, less affluent, but creative artists....to get a break in their careers.
Too many artist's/people's livelihoods and future's are in the hands of too few......
Extraordinarily thought provoking. I have watched the "industry" turn it around to the point where the artists pay to play or pay their agents upfront, BEFORE a gig (as opposed to the buyer paying the agent AFTER). So it obviously works. So NOW let's take it back!! Must meditate on the endless possibilities...
If I could come up with any other models than the ones that are already in progress: "pay to play" and "get paid to play" (as it used to be in the old days), I would let you know. But no matter how hard I think, I can´t come up with anything else than what´s already been said below.
Derek,
I make music because it's therapy for me. When I gave up drugs and alcohol almost 20 years ago.. I was a DJ. I had gigs as a DJ to lean on and being on stage and entertaining people was always a joy for me, so i could substitute that while changing my life and withdrawing from the drug scene.
Today, I create music as an outlet for anger, sadness, happiness, pleasure, confusion, and a bunch of other emotions felt when going through life on a day to day basis.
I have a day job, but it's very limited and I usually only work between six and twelve hours a week. Of course, I live like a college student and pay very little for expenses to afford all of this time off.
I look at my music as a business, always trying new ideas and always hoping for new rewards. A few dollars for my efforts are greatly appreciated, but I would do it anyway, because it's my therapy.
I am lucky to be able to do a day job that I love, teaching people beneficial trade oriented work and then come home to create music, hang out with friends and make music whenever I want.
Evidentally someone besides me thinks my music is good, because I do make an income from licensing and CD Baby. I am grateful for all that is good in my life and if I were to boil it down to one phrase, I guess I'd say: Never give up! Never give up on your dream and live to learn everything you can to make your situation better.
I have no idea what I'm doing on the business side... lol, but at the same time I know that my efforts have paid off, financially.. so I am grateful! and will continue to invest in my favorite artist.. me.. until I win or lose.. and I do feel that I am winning!
Thanks for all of the wonderful insight and information! You have been a great influence in my creative direction for my music and my thinking!
:) ozone333
I have done better with getting paid to have people listen to my music on websites and live than I have making CDs and tryilng to sell them, so I give them out for free for a loss in hope that people will want to pay me to play and gain the attention of more lucrative music opportunities from the marketing generanted from demand and a name brand.
My photography model started with doing photos for free, galleries for free, and then people started handing me more money to do their portraits and parties despite my willingness to work for free or low cost. I get paid to learn photography! Once I develop enough clients, get better at my craft, and obtain better equipment, I will raise the price slightly each time. My prices are so low that people feel like they are robbing me, so I must be doing well. ;)
PS: I have been in photography for a year since I started my CD project and wanted to save money on a photographer by buying my own camera.
Sometimes I think people are more excited for my photography than my music and I don't have to spend so much money to get a return on my investment.
http://www.flickr.com/jamminjamesgeo
This is an interesting topic to me, about three months ago I was talking with a doctor, he asked me if I had to pay to sell my music on the internet, he said I should be cautious in paying to put my music out there, but maybe if they were paying me it would be different, this got me thinking, maybe I could get opportunities to get paid for my music. :) Does this get you thinking? Can you relate?
Well Derek,
You are traveling all over the world and still have time to write all this stuff. That I find amazing.I can hardly keep up with my two partime jobs, running my kids to and from school, going to football games, finding quality time with both my boys who have very different enterests, and trying to set up a group of great players and a studio to finish my CD production. Things just must come easy for you Derek! :}
The first thing to spring to mind for me is the ridiculous pattern (as one other poster mentioned) of charging bands to play at a venue. For all the reasons the venues have to do this, it still stings my music-supporting heart, knowing that there are bands who will dish out the cash to these venues just to have a place to play their music. While other venues will happily pay the band, offer them food and drinks, and be gratefull to have them play. I encourage everyone I know to search out these former venues - go where you're appriciated, they do exist.
This is very thought provoking! And I aggree with Savannah. Still can't believe that you have to spend money to play at clubs here in LA. Gotto flip that around:)
We are so fortunate in this day and age that through the power of technology, the power has been returned to the individual. As a musician I feel that finally I am back in charge of my own destiny and it has to do with exactly this point of business model reversal.
We no longer really NEED to spend a great deal of time, money and energy collecting our rejections from the "industry" because we can now effectively market ourselves directly. And by doing so, certainly we generate much less gross income and maybe less net income than with a major label deal, but, the difference is that at least we CAN sell ourlselves. And our self produced project returns a much higher profit margin with a much lower production cost.
It was not so very long ago that a self produced record was truly nothing more than a Vanity Press.
And by learning from the "Google Method" of giving away something that everybody wants, let the crowd gather as the vendors hawk their wares on the sidelines for a pay per click fee. Pretty cheap and effective advertising for them, I get a nice free service and I can apply the same principle to my own endeavors.
For example, I upload my music to as many websites as possible and let them listen. More people get to know me and come to my shows. Most Indie artists sell most of their CDs at their live shows anyway. If the listeners want to download a tune or all of them they have the choice. And when they do I get paid. And the latest statistic I read says that 42% of all the Internet listeners and downloaders also buy a CD....a lovely arrangement.
And all of this is purported to be the "new" way of doing business but really it's just a new twist on one of oldest advertising methods... the free sample. Or like the old days when the record shops all had either listening rooms or headsets so that potential customers could preview an album before they bought it.
Hello, I wonder where you have the information from about the doctors paying you when you're sick. I hever heard of that and I'd like to know more about that issue. Is it only in certain regions/cities, is it a (local) government rule or is this a individual discission by certain doctors?
Tnx.
Another reversible business model I can think of: toilet users being paid for using a public toilet since they're leaving valuable nutrients behind.
Mathieu Fiset - maybe the opposite - give away your CD's for free or really low price, so that people come to your performances and pay for that.
nice 1, that made me think
it is a nice shipp
You are all drifting away from the reason music exists in the first place. Money? Profit? Sales?
The real music that people actually flock towards comes from those who have a passion for it for the feeling it gives them to play it and share it.
There are many avenues in todays world to make a profit if that is why you do it in the first place but anything done for profit becomes work and you would find just as much enjoyment shoveling sand as playing music if it is done just for profit.
Great article, thanks
I was always curious about the secret shopper jobs. Although they look like a scam, it would be feasible for companies to pay people to shop their stores and give an unbiased opinion on what they are doing right and what they are doing wrong.
Great article. The mirror of value. Perception. Why not create live streaming concert video on YouTube, then give the attendees free mp3s so that the passion will continue onto gathering Mp3 music after the live stream. When they touch "Click" they will understand that they are buying what they already love and makes the feel loved as well. win win.
Wow, I could brainstorm on this, and maybe that would loosen up my brain to have a profitable idea. Such fun:
I pay for my energy, but some people get wind or solar on their roof, then charge the utility company to put their unused electricity onto the grid.
I only pay half my car energy costs, because my braking system puts energy back into a big batter running under the passenger back seats.
Perhaps I could get oil or sports companies to pay me to put their logo on my clothing, as their advertising. Then again, they might want me to take up a sport like jogging or race car driving.
I like to eat. During summer a child who licks his ice cream cone gets paid in fee cones to go down the sidewalk with it. Then again, at my age I might look too sexually seductive if I tried that.
I like dogs. Instead of paying a. dog walker, when I take Fido out, I might get paid to walk other dogs at the same time. Say, I never thought Fido would be a money-maker, covering the cost of his food and sheltering doghouse.
I listen to music. Derek knew someone paid listen to music all the time, to rate it.
I like reading. A friend who ran for parliament had a brother who was paid to read interesting business stuff to give a handle on a nation's credit rating.
I like breathing. Then again, I might have to buy a canary and bring it with me to the coal mine.