Marketing & Strategy Innovation Blog

I read this page top to bottom and enjoyed the comments at least as much as the original article.... and pretty much agree with most points made.

I just wanted to reiterate and clarify a point that many have begun to make but not really hammered home:
This new distribution model of ISPs and search engines is GREAT for the artist... much better than the previous system.
Why? Because if you sell your content digitally online you're getting the distribution free. It's not free of course, but you're not really paying for it. Your reader is, but less than they paid under the old model so they're happy. You're also not beholden to a publisher and distributor... only to your audience... and isn't that what we said is the artist's natural target?

Same target, just a new (and more direct) way to hit it!

PS: It's at this point where the innovation comes... because as mentioned before, the artist doesn't want to have to be business saavy... a new kind of "representation" will emerge and the cycle begins anew...

Every time this tired subject gets trotted out, the same arguments are made. Is there nothing new to say about this?

The same tired examples are given. "Bands make money through tours. Blah blah blah. Authors could make money from personal appearances. Blah blah blah. Look at what some already famous band was able to do when their die-hard fanboys were willing to give them money even after the music was passed out free of charge. Blah blah BLAH!"

Yeesh. Come up with some new stuff, ok?

If you create content, you alone should be able to determine whether you wish to give it away or charge for it. If you decide to charge for it, the "all this crap should be free" crowd OUGHT to either pay the price or do without the content. They won't, of course, because that would prevent them from eating the cake they just pilfered.

Look, I'd be a lot more impressed if we had ACTUAL content creators discussing what has worked or not worked for them. I'm sick and tired of the magic eight ball approach where comments build up a straw man and with a hearty "this is where the MAGIC happens", pretend they can tell others how things should be.

If sponsorship is so easy to find, then go find some. You'll be in for a rude awakening. Corporate sponsors want return on investment. They want to sponsor entities and events that are ALREADY popular, with a reasonable guarantee of an audience.

When some famous band puts their new song on the web site for free, and fans pay the 99 cents anyway, that has no bearing at all on what an up-and-coming artist needs to do. That band has a built in audience, and an audience of FANS at that. Fans who think nothing of throwing a bit of money towards their musical heroes.

When one of these articles has something new to say, instead of just posing the same questions over and over again, I'll break out my snow shoes and head for hell. Because something will have just frozen over.

And who CARES what Esther Dyson said in the 1980s? I sure as hell don't. Is she even still alive? The late 20th century is so foreign to our 21st century hangover. I blame the economy. Or warming Arabs around the globe, something like that. No wait, I REALLY blame the subprime tech stock venture boom.

I miss the Y2K problem. I made a lot of money certifying what people already new about their equipment. Ah, good times...GOOD times.

I suggest that authors like David Pogue view their readers in much the same way that public radio regards its audience. Public radio, like all non-satellite programming, is free to anyone with a receiver, and anyone can listen to it. A typical ratio of listeners to paying public broadcasting subscribers is ten to one. So if a station averages 100,000 listeners, then it can expect to have about 10,000 paid members. So if through some well orchestrated viral marketing campaign, the number of listeners of a given station doubles to 200,000, the result of this increase in audience reach could be expected to yield a doubling of dues paying members during the next membership campaign. (It would also have ancillary benefits to the station, if it charges its underwriters fees based on audience size.) Most stations would regard this outcome as a good thing, and would expend considerable effort to double their audience size.
On the print side, O'Reilly Media conducted an experiment "to understand the impact on book sales of the availability of free downloads. The quick answer from this experiment is that we saw no definitive correlation, but there is little sign that the free downloads hurt sales. More than 180,000 copies were downloaded yet the book has still been quite successful, selling almost 19,000 copies in a year and a half. "
(http://radar.oreilly.com/archives/2007/06/free-downloads-vs-sales-a-publ.html)
So here we see a similar, approximately ten to one ratio of free-riders to paying customers.
This approach actually yields additional benefits to the author who is willing to emulate the public broadcasting underwriting model. If the “free” (pirated?) downloads included the name of the underwriter (”this free e-book is brought to you by Ford”), the sponsorship method could generate substantial income to the author based on the number of downloads - which can be accurately tracked via the file-sharing sites. This is the great thing about the web, even the illegal file sharing sites have more precise metrics than Arbitron and Nielsen.

So if sales of Mr. Pogue’s book, “Windows Vista, the Missing Manual” track much higher than his other titles, he can probably attribute at least some of the incremental volume to its availability in a digital format, even if some copies are pirated. Of course, if sales are much lower than all his other books, that can only be due to poor customer acceptance of Windows Vista!

I would go even further. The notion that content 'should' be free can hurt the very basis of the free market, or capitalism.

See my recent post, "Wrong - Paul Krugman, Chris Anderson, Lawrence Lessig, Mike Arrington. Contents should not always be free."

Excellently put, Doug.

I think we need to make even a further distinction though, especially in the current situation. Where fiction authors still had some recourse to direct reader interaction on the lecture circuit a hundred years ago, I honestly dont think this is a sustainable platform nowadays - as you already point out.
Non-fiction, on the other hand, still has that link very strongly. Think of businessbooks, which for most of their authors are simply promotion tools for their seminars, lectures and other services such as consultancy. Even non-business non-fiction can still access this - think the polar explorer presenting his personal stories and pictures etc.

One crucial issue in all of this is how many artist are trying to tap the pool of funds available - through whichever means they are available. There have always been more people able to live of their musical performance then off writing - and even less from, say, painting. Over the past 50 years or so there has been a huge proliferation of the number of people being able to live of their artistic talents - and maybe there will now be a correction in that number. Is that a good or a bad thing? I'm not sure. I think you are right that we will see a reversal of the quantity vs quality equation.
Will we miss out on some outstanding work because the financial means are less readily available? Possibly. But we are missing out on some great work today as well, as after all not everybody who has the talent decides to take the hard road to monetize it. I have a certain hope that the best will still come through.

FInally, what most participants in the discussion are neglecting is the imbalance towards the distribution chain at the moment. With distribution eating up to 97% of the proceeds of any artistic work, this temporary business model (after all, it has only been around a relatively short time) is doomed. Direct to patron distribution will take over in the end. And even though a lot of people will not pay - I am pretty sure that we will all be suprised how many WILL - ONCE the direct distribution system has established itself. And what is preferable to an author - 500.000 people buying his paperback, on which he receives 20cts per copy, or 1 million downloads with 10% giving a voluntary donation of $1?

As a Marketing and Strategy Blog it is remarkable that you have missed the entire value chain analysis pertinent to this issue.

The core value creation activity of an artist is in the interface between original art and the patron. (Not Waren Buffet, that's a silly argument, but the average consumer) For plays, this is the theater, for movies it is the cinema, for music is is the concert. Electronic distribution of these performances has distracted artists, and created a proliferation of not very good artists, because of the profits derived from distribution extension. But anyone who has studied the strategic forces of the creative industry has seen this issue for at least a decade, if not more.

Profits from creativity will gravitate back to creative origination (ie in the hands of the artist, not the distributor or the industrial overhead of distribution) And because there will be much competition for an unleashed pool of profits - which are today locked up in massively mismanaged production and distribution companies - some very creative results will be invented by artists to build their pool of profits.

I'm not sure what the final result will be, no one does, but I suspect that this will lead to a shake out of poor quality artists in favor of the truly remarkable. In a more technical formulation: Quality will increase dramatically as effort concentrates around value creation from creativity, and moves away from away from attempting to gain profits from distribution.

Books, however poses a greater challenge, because there is no natural venue for artist to patron interaction. (Even Samual Clemins/Mark Twain had to go on European lecture tour to rebuild the fortune he lost from a failed linotype investment. Note that he didn't try and get more imprints out to the market) And I think it is safe to say, as per Pogue, that derivative income is not the answer. Unlike Mr. Pogue who is very witty and entertaining, most authors are, well, not Mark Twain or David Pogue. And I don't see the T-Shirt strategy working either.

At the end of the day I think that the profit nexus for an author is, as it has been since Guttenburg, author to reader. The technological trick is going to be to find a way to manage the primacy of that connection (think the fence around the concert, or the walls of the theater) and, put down the rocks you web 2.0 people, that will probably mean long term copy protection, perhaps made palatable by a very low copy price of say $2-$5 per copy.

The defense I put forward for this different strategy for print vs performance is that print has not been subjected to the distribution extension that has dominated performance in the post War period. Sadly print marketing has been a failure while performance marketing has been a wild success. The ratio of millionaire musicians/actors vs authors tells that tale of that sad story. In short, authors will reap gains from distribution development, while performers already have gotten all there is to get from that part of the value chain.

There are further arguments about the quality of electronic technology for performance (good) vs print (horrible) but that is for another post.

Most bands I know make most of their touring income by selling CDs at their shows.

If the material were available for free, and therefore no one at the concert bought any CDs, then the touring would be a monetary loss.

The problem is that what we're facing on all fronts is what Clay Shirky calls the "mass amateurization" of media, because the cost of publishing and distribution has fallen so low that anyone can do it.

Instead of creating a really really big "professional" class (which is essentially oxymoronic by definition), we have created a really large amateur class of content producer. Unfortunately, value is created by scarcity (we need air to live, but air is cheaper than hard drives, because there's so much of it), which means that pubslished content is no longer worth paying for simply because it's published.

My roommate is currently putting together a solo album with about $600 worth of equipment he bought from Guitar Center, and it's hard to tell the difference between what he's doing and what you get from a studio. So if you can do that for $600, who needs a studio anymore?

And for that matter, do you need to make more than a couple thousand bucks on the album to be happy about it?

I think your argument ignores a huge amount of the theory involved in offering free product.

First and foremost there will never be copy protection that cannot be removed so piracy will exist regardless of what anyone does to prevent it. This alone is reason enough to explore alternative methods of making money through your work.

Secondly you ignore the value add prospects. Look at Radiohead and NIN's recent free offerings. Trent (NIN) offered a hugely overpriced box set and it sold out in less than 24 hours.

You ignore the completed expirements of the likes of Cory Doctorow or like others write them off as specific to a science fiction market.

While I don't have a complete solution for making money on digital content, if I did I would be rich, your arguments frankly don't hold water. They appear to have been written in a vacuum with no knowledge of anything going on in the real world.

Author based distribution is one method by which the authors can make money. Charge less than the print book and sell your work on your website. Digital distribution costs less than printing so charging less makes sense. Self distribution costs less so charging less makes sense.

Those who cling to the expired models of distributing content that are prevalent in the marketplace today and try to fight against innovation will find themselves in history alongside the dodo and the passenger pigeon. A relic to be remembered with fondness and little else.

As for the arguments themselves:

Carriers, such as Comcast, will make money regardless of whether or not your work is on their wire. The same argument goes for the aggregators and directories. They will make money regardless or in spite of your digital content being listed or aggregated. This argument is specious at best and easily proven wrong. Whether or not you make money on your work has no bearing the money making ability of the industries you mention.

The argument using musicians as an example has already had holes poked directly through it.

The argument involving Hollywood is proven wrong by the sheer numbers. More movies are available before theatrical release than even before and Hollywood had a record year in 2007. Movie theaters offer extra value and do a decent job even if they are generally overpriced. But digital content being available, much to Hollywood's chagrin, hasn't slowed the movie industry but instead it had a record year in a sinking economy.

Microsoft freely admits piracy is one of the reasons they are number one everywhere.

Exposure, value add, and much more can make free digital goods profitable. History proves that if you don't offer a digital version someone will do it for you. Regardless of the morality of piracy the fact is that it's not going away and it will never be stopped even with dead tree editions. If you can't figure out how to make money with a digital edition then don't publish one and let the pirates take care of it for you and QQ moar noob.

Holland Heese wrote:

"Patronage will likely be the path in the future for authors, playwrights, screenwriters and actors like it was in the past."

That's one of the things that bugs me about the way things are headed. Will authors have to kiss
Warren Buffett's backside in order to receive his patronage and afford to write a book?

Is that something to look forward to? Is that progress?

"If a band can make money touring but not through selling CDs, they will be unlikely to spend much time in the recording studio, or to spend money on studio effects or gear. Perhaps they will instead simply tape their concerts and compile albums from the live sessions."

Yet that is how bands make their money today. The vast majority of bands lose money on their albums and only make money through touring. Yet they don't simply tape their concerts. Rather the smart bands see those albums as being great promotional pieces to get new fans and old fans to come see their concerts where they make the money.

"I remember Esther Dyson's original suggestion about authors being compensated through personal appearances. Spoken like a marketing consultant. People are not going to pay to see novelists read their work aloud. That's not where the value in a novel lies. Perhaps some won't weep to see this important part of our culture wither away, but it will be a tragedy all the same, yet another example of commerce crushing art."

Errrr... actually they would. I've paid very good money to see David Sedaris read his essays out loud. I would pay good money to see a Gibson or Gaiman, or Stephenson novel performed or read over a series of shows.

Frankly silent reading itself has only existed since the 10th century in the West. The reading of scripture or of other works was commonly done in a group setting before that.

All the digital age does to creative works is eliminate the artificial monopoly that has only existed since the Industrial Revolution. Creative works were done before that, and most would say some of the greatest works were and they faced many of the same problems that future writers will face in the future. Patronage will likely be the path in the future for authors, playwrights, screenwriters and actors like it was in the past.

Your comment form ate my comment, so you get no cookie (my cut-n-paste attempt to preserve it failed)

Interesting note. I'm sure you'll be getting a lot of traffic thanks to the link from Pogue today.

As a consumer of media, it's hard to beat the price point of zero. But a few things about the "you'll make up the money in other ways" argument have always bothered me.

First, being paid only through personal appearances doesn't 'scale well', as we say in the tech world. Sure, if you get more popular, you may be able to charge more for an appearance, but ultimately, you will be limited by the number of times you are able to appear somewhere and once you stop, your revenue stream is done as well. A written work is a gift that keeps on giving...and if you get really lucky, some professor will assign your work in a college course.

Second, suppose you are just...shy? Obviously the world is full of self-promoters who enjoy it whenever anyone listens to them speak, but it seems odd to compel someone to engage in one career when they really prefer to do another. As a successful author, you should probably expect to have to do a book tour after you've written something (usually not a profitable enterprise btw), but do you have to be out on the road continuously?

As an author I am seriously worried about the direction we're heading in.
I don't really doubt that once e-readers become really good - and cheap - the mass market printed novel is doomed.

After all, the onward march of technology means that e-devices become ever more sophisticated and ever cheaper in real terms, while commodities (paper, ink, fuel to deliver physical items) become ever more expensive. At some point a line will be crossed and after that, physical books will increasingly become a minority interest.

At that point, or before, the printed book business will be subject to the same benefits/problems already besetting the music industry. Information is information whether it be printed characters or pits in a laser-scanned disk surface.

I think the first signs will be when the obsolete, environmentally hostile and totally stupid system of selling books on consigment is consigned to the rubbish bin.

The question of whether I would still actually create novels and poetry in a fully digital print world, is moot. Logically, I would say not. Actually, writers are driven to write by personal forces rather than for profit. Hardly any writers actually make a living at writing, already - so not much change there then. Sometimes I wish I had been born 100 years ago ...

You are perfectly right. It can't be that artists don't get money for their work.

But to me it seems more like eventually the distributors will become unnecessary. Because of the Internet distribution has become so much easier.

And if the artists sell their work directly, the profits should actually be higher. That's what I hope for. Only that artists have so far been timid in that direction. But I believe that currently way too much money is lost on the way to the artists.

I like some songs so well, I(after having bought the album) would love to donate to that particular song, to show it. But these things are unfortunately not yet possible...

Hi, Alexander,

I wasn't trying to make the case that distributors and aggregators should not be paid, but instead why should the creator be the ONLY party who isn't paid in that value chain?

That's what a lot of "free content" people are effectively advocating.

They all bring value, as you state, so they should ALL be paid.

My bigger point is that lots of parts of Google--in particular Google News and YouTube--rely on copyrighted content created by others. If those others are forced to supplement their income by doing other things besides making content, then there'll be less content for Google to find, index and present to their customers.

Which is bad for Google, as well as the creators.

I remember Esther Dyson's original suggestion about authors being compensated through personal appearances. Spoken like a marketing consultant. People are not going to pay to see novelists read their work aloud. That's not where the value in a novel lies. Perhaps some won't weep to see this important part of our culture wither away, but it will be a tragedy all the same, yet another example of commerce crushing art.

Very well said!

There's a vital connection between the distributors/aggregators and the "content creators."

The distributors are doing work to get me the whatever when I get it. The aggregators are giving me my answer when I want it, even if the answer has changed since last week. (i.e. if Google stopped updating it's indices for a month, I'd switch to Yahoo.)

But the content creators? Well, s/he did the work once, and then the distributors and the aggregators are doing the new work.

So, the question is whether one should be paid when one does work, or when the product of one's work is enjoyed? I don't think that there is obviously a correct answer to the question.

The problem with "content" is that while I might use a newspaper or even a book approximately once, there is other content I use many times. I only pay for a song once, even though I enjoy it many times.

I do not get to go back into the theater to see the movie again, just having paid once. But I get to watch the DVD many times, only having paid once, and others can watch with me, even if they haven't paid. I can even load the DVD to friends who haven't paid, and then get it back.

And so, the fact that others in the "simplified digital media value chain" charge recurring fees or make money is not a decisive argument. There's a reason to support why they would.

Mind you, I don't post this as proof that content creators should not get paid. I think that they should, and even think that they should in something very much like our current system and our current laws. I merely wish to point out this part of the argument is not really that convincing.