Free and freemium in the music business session outline

Free and Freemium Stefan Peter Roos twitter.com/spr2

Stefan Peter Roos twitter.com/spr2 economist, web strategist, online business consultant, proud music, entrepreneur, speaker, music publisher, brainfood specialist...whatever

Please note: These slides were used in my talk at All2gether Now conference, Berlin 2010 as outline, so the explanation/context is unfortunately missing, if you did not attend! www.a-2-n.de

Why Freemium? Why giving away your product FOR FREE?

Digital Goods: Only First Copy Cost Marginal Cost=0 No Rivalry in consumption Exclusion of free riders difficult

From Scarcity Economy to Abundance Economy

Attention Economy: Wealth of Information = Poverty of Attention (and a need to allocate that attention)

Attention Economy: Money follows Attention

Digital Goods: Value determined AFTER consumption!

Assumption 1: You can only sell to people who see your value!

Assumption 2: more new content than ever The largest back catalogue in history Just one click away! (illegally&legally)

This is a permanent change! I'm sorry ;)

Well, not really sorry!

Still true: Lowest possible price = Marginal Cost of an additional unit

Free = Maximum Reach

Assumption 3: If something can be provided for free someone will do it!

Information wants to be free => there will be free copies anyway

Music Industry was the Canary in the coal mine => video, news, books etc. will be next

This is not a problem, if you sell something, that cannot be copied!

Simple Model: x*C*S=Revenue x=Reach/Attention C=Conversion Rate S=Average Revenue/Fan

x*C*S=Revenue Attention  you generate (paid)  through sharing (free)  Social Recommendation (free)  Derived (fan) Content (free)

x*C*S=Revenue Conversion Rate  Brand  Emotion  Loyalty  Artist History  ...

x*C*S=Revenue Average Revenue/Fan  Direct Relationship  1000 Fan Model  Product Diversity  Recurring Payments  Royalties through Fan Activity

Mike Masnick: Connect with Fans + Reason to Buy = Artist Revenue

What are the building blocks for a business model?

Sunscreen Song... (Baz Luhrmann) If I could offer you only one tip for the future, freemium would be it. The long term benefits of freemium have been proved by scientists, whereas the rest of my advice has no basis more reliable than my own meandering Experience… I will dispense this advice now.

Use many different blocks to a well- balanced mix!

Free is giving you reach!

Being a Brand gives you Monopolistic Competition

Stop thinking Files/Units! Stop thinking Records!

Become an IT company! Access to Music is a software service

Be the center of a Community! Let fans interact through your service!

Embrace Read/Write Culture! Everything will be Read/Write from now on!

Create positive Attention & Viral Loops!

Create frequent Touch Points for Fans (not just a release)

Learn to connect with your fans! Practise!

Have a product on every price level!

casual flattr Live events NIN-Boxsets Fan-Meet&Greet- Weekends Crowd Funding

Be damn good at what you do! Stand up to the plethora of world class entertainment one click away!

Music itself is hard to innovate nowadays

Better innovate in Image, Show, Packaging, Intimacy, Channel

Recorded Music is just the beginning, not the end

Get used to new thinking: Audio Only might (eventually) die. Fotos may die too!

Keep the mystery! Do not twitter like your buddy next door!

Be better than free! (Kevin Kelly): 1. Immediacy 5. Accessibility 2. Personalization 6. Embodiment 3. Interpretation 7. Patronage 4. Authenticity 8. Findability

Sell something that cannot be copied

Uniqueness – or Keep fan switch cost in mind

Everything atomizes => Forget Album => Track => Elements

Most want access, hardcore fans might want to own sth. of emotional value

Different levels of involvedness: It's about emotion

More Music Business – less Music Industry

The Time is now – Music for the People, not Records!

Markets are Conversions! Read the Cluetrain Manifesto (again)!

What to take home?

Most ideas have been tried out before but:

without easy payment

with strings attached (DRM)

without instant mobile access

not yet in a lean- back situation

without bandwith for HD Video & great sound

without social recommendation / sharing culture

without the internet usage / number of pot. Fans of today

The original Napster may have been the greatest music loving community - remember browsing everyones harddrive - nice instant illegal access - pure music, no strings attached - state of bliss => let's try again, but this time legally, with payment for artists involved

Thank you! Get in touch: www.proudmusiclibrary.com www.proudsourcing.de Stefan Peter Roos twitter.com/spr2

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