A new digital business model that works

 

 

 

 

 

 

 

 

 

 

We all just love to be helpful and share. In social media today people are sharing everything and feel great about it. We tend to share knowledge, ideas and emotional experiences.  I found something very interesting that’s going on in Norway these days. I got to know this, by “accident”, some weeks ago, and I’ve thought about it, looked at it and wondered if this is just another idea, or if it is an idea that could move business models in the digital area one step further. And I think it might!

It’s called musicnodes.com . Still in an early stage of developement and it looks very promising. To get to the point of what this is: It’s a embedded player, where you can listen to a tune. There’s nothing new in that.
You can buy the tune as well and you can share the tune with your friends and network, nothing new in that either. 
The new is that the content is placed contextual. Another aspect is that it’s not a website, where you go to and find your music and then buy what you want. 
Musicnodes is a play bar that can be located on any website with relevant content. Since this is music, the daily news article, about music is a great place, the online music sites is also a great place to share music. The spread happens when people start sharing the play bar in their respective networks.(e mail, Twitter, Facebook and so on)

Business model
The business model is very interesting. As we know; creators of content holds copyrights. As far as I know all countries have organizations that take care of the business aspect of using someone’s music. Radio/TV, film and others are using music produced by others and have to pay for the usage. On the internet this is also the case, but has become very difficult to manage, since people love to share.  This have created a problem for musicians, for record companies and so on.  Revenues are dropping dramatically in the business as a consequence. 
Musicnodes have set up a model where the musician gets a large part of the revenue created. The publisher also gets a large part. The least part of the income goes to musicnodes. Furthermore when people listen to the tune, and want to share it, the embedded tune is sent by e.g. e-mail, “share on Facebook” and so on – the revenues split follow the tune and the all involved continue to earn on the sale of this tune, each time!
Online publishers will just love this model, and so will the musicians, and other copyright holders. This might provide the music business with a sustainable business model that take care of all involved parties in a manner no one have done up till now.

Contextual advertisement
When is it most likely that you will be the most interested in listening to a tune? Isn’t that when you are in the mindset, like when you’re  reading an editorial story about the genre, the artist or a news article about the music you love? And then, there it is.
For the publisher, it’s not even an advert, it’s just added value for the reader. The best part is that the publishers earn money sharing this added value. For the reader it’s not a “banner ad up in the face”, it’s a neat way to get the tune there and then, no hassle finding a music store (down town, or online), searching for the right tune. It’s right there, easy accessible.
The motivation for the reader, to convert into a buyer is very high, just in that moment. This is in fact a real and functioning example of the semantic web, and behavioral advertisement!  A very strong concept indeed. I’ve written about this in a former posting; HERE.

Network sharing
We are social, this idea appeals to our pattern of behavior. To give someone something makes us feel well and sharing makes us connected with others. Creating a business that “run” by the natural rules of human behavior is very likely to be a strong business model. I believe that this is the case with musicnodes.com .
It’s the same principles that’s behind “six degrees of separation”, viral marketing and whom we trust the most. Social media and networking arenas has grown immensely the last few years and there is no doubt that conducting business are about to get new rules to play by.
I’m looking very much forward to see what happens next, and in which ways this innovative concept will spread. The concept, is as lot’s of you already have started thinking is that it’s not limited to music. There is a whole range of products and services where this will apply.

While waiting for the script (to embedd on my blog) to be approved by www.wordpress.com you may have a look at the new concept HERE 
The tune is by Ingrid Olava, won’t be silenced – catchy title?

Update: I did some statistics: in one hour I had 51 unique visitors on my page. That created 90 Clicks on the node, and 62 that downloaded the tune for free (payed by sponsor) Ingrid Olava earned cash on this, and so did I. Amazing, the network sharing effect really works. Remember this test is with no player (just a primitive link) and I’m not running a music blog, nor is the content relevant for the player/tune

What’s to do for the media business in turbulent times?

 The media business has struggled greatly, worldwide. Advertising and circulation revenue have dropped greatly. Throughout 2009 we heard weekly about the problems, cutbacks, reductions and layoffs. Are we looking at a dying industry, or at best, a sharp change of the industry? 

 

 

There is an ongoing change, a paradigm shift between print media/ digital media. Traditional media houses have still not managed to sort out how to transform themselves, which last year’s poor results confirms. 

The real challenge is to manage the existing business model, and at the same time to build sustainable business models for the digital markets. 

It is important to be realistic, but realism has to be based on future expectations, not the history of a great past. Organizations that manage through tough times do not focus only on the problems they have with the existing business model. Successful businesses are able to focus on innovation and re-structuring as well. The winners are those who are able to position themselves in a favorable spot – quickly. 

Increased demand and a lack of willingness to pay at the same time?
There is no evidence to suggest that that the demand for knowledge and stories will drop – – in fact, we need easier access to more information.  At the same time media companies do not get paid for content in the digital world. Isn’t that a paradox? 

To answer this we must look at what customers traditionally feel that they have already paid for. Is it the content itself, or is it a combination of delivery media (paper), the transport of the content (to the news stand or at the door) and the trust of the supplier (that you can trust that the content is of quality) In the traditional business models, where these elements have been “inseparable”, the question has merely been of academic interest. On the other hand, digital consumers experience that they have already paid for digital services such as the news online by having paid for the PC, software, Internet subscriptions, etc. At the same time consumers are willing to pay for the ability to send SMS, to download “apps”, games and music to their PC and mobile. The point is that the willingness to pay for services online is there, consumers just don’t want to pay for the content itself. 

But in the digital world well functioning business models already exist — just look at what Google, Facebook, YouTube and Twitter have established. What scale of users they have gathered and the value this represents in ad revenue alone. If we look at Amazon, Barnes & Noble, Kelkoo, Restplass.no to name a few, we notice that the business models are based on interaction, behavior analysis, profiles and user statistics in order to maximize sales. The business models vary, but one common feature is often “split revenue models”, where several players sharing knowledge and parts of the value chain.

Our recommendation would be learn from this, and evaluate what is the real value of the media business at hand. We believe that it is essential to connect traditional instruments with new ways to manage content. There are great opportunities to establish commercial services and products towards both advertisers and users.  

Perhaps content isn’t the future value for the media business. Perhaps the real value is the knowledge and management of users / participants and their behavior.  We believe the media industry as a whole has already been subjected to “Disruptive Innovation” and the only way to survive in the industry is to adapt very quickly. The main point is to create added value for the sum of buyers in the digital universe, through business models that also provide revenue to media houses. The most important prerequisite for success in this is to have the right combination of business strategy, organization, competence, and not least technology platforms, that can realize the goals 

Technology is part of the product
 Products like Apple’s new iPad will be a very important force to change the way we use PCs, Internet and handheld devices. When the major players (Apple, Microsoft, Amazon, Sony, etc.) facilitate easy deployment and use of digital content, it is obvious that the demand is increasing dramatically – and fast. 

Technology is the most visible instrument of the business model that until now has succeeded. Pervasive and holistic thinking assumes that the technological platform is part of the product being sold, and includes suppliers, distributors and consumer’s own infrastructure. The most important change is that technology is no longer just a tool to produce the goods, but an important part of the product itself. The development of consumer technology has both driven and been a part of the new successful business strategies, and has – in our opinion – matured the digital media market. At the core the major players have a complete set of technology platforms that implement the business model’s financial structure, production and distribution lines in a holistic strategy. 

The development of mobile phone and laptop computers are the consumer technologies that have contributed the most visible for the consumer for this development. Now, these devices meld together, and become smart-phones and reading lists that give users a unique experience. At the same time the digital distribution channel – the Internet – both increases their availability and opens the opportunity to deliver better quality, and ease of access, to the consumer. The development of broadband and mobile broadband will continue to contribute to increased quality of the services. 

The digital distribution has created many questions about the copyrights that both the business and organizations have tried to answer. Due to the fact that the internet characteristics are ‘open and free’, this will be a continuous discussion that will ultimately lead to answers. 

Our conclusion is that the willingness to invest in technology and include technology in hardware/ software/ infrastructure as a part of the business model is an important success factor in the development of new media products and services.  

Change Management
When the technology and framework conditions change, when value chains change and new players arrive and threaten the industry’s traditional players the only way to survive will be to defend their position by being willing to change the way the organization works, the processes of workflow and the perspective of how the market functions. The digital world is in its nature interactive. “Readers”, “listeners” and “viewers” are descriptions of users who will vanish from our vocabulary in a digital environment. We see a huge, rapid growth in use of social media that turn “users” into “participants” and “co-producers” of content and discourse. 

By this, the media businesses have gotten a new set of challenges in terms of how content is established, produced, presented and managed. In addition to completely new ways of defining products and services, media organizations have to change the production lines and workflow. As the manufacturing process to produce a book, news story or a magazine, has become irrelevant in the future digital media world it will affect, workflow and requirements of professional competences and organizational conditions. It will also be necessary to break down the strict distinctions (silos) that have been in different companies within a media group. 

It’s needed to establish a close relationship between the various divisions, products and services, in order to cultivate and manage the knowledge about user patterns, and transform that into added value towards the market of advertisement, subscriptions and services provided. 

Next step
We believe that quite a few media houses will need external expertise in business strategy, change management and technology. We know that coming from the outside of the organization and facilitating processes that help media corporations discover new perspectives will enable them to create profitable solutions. To make the move from “traditional” to “new” reality is a mission where a holistic perspective is one of the needed assets to ensure a strong strategic foundation to make such a transformational step. Media houses must implement innovation processes, replace business models, develop new concepts for products and services, invest in appropriate technology, ensure smooth organizational processes and implementation, and simultaneously develop criteria for success and value propositions. Establishment of  new, digital value chains and multi-channel strategies are essential elements in future business models for all media houses. Some newspaper has taken some steps along the road, while parts of the publishing industry (book / textbook / magazine) still have some distance to go before the necessary technological elements are in place

There must be a sharp distinction between content on the one hand, and the products and services on the other. This is the only way to profit by what structured data provides in the way of opportunities. There is no other way to take advantages of the semantic options in the triangle of editorial content, profile and participant’s content and commercial content.  A key point is to “Produce once- and deliver it on as many surfaces and channels possible”. This will be eReading lists, mobile devices, web, PC desktop applications, etc. It includes the ability to integrate content of various formats merged into a total user experience of text, sound, image and video.

Some tips concerning the mix of business models we would be able to help establish:

•           Behavioral & profile targeted advertising
•           Contextual marketing
•           Product/ service and contextual advertisement
•           Classified/ Community/ social media advertisement
•           Demographic, Geo – demographic, Techno graphic
•           Subscriptions mobile/ desktop/ ’apps’ prod and services
•           Traditional DM activities, banner ads, campaigns, branding
•           Multichannel & SCRM  action
•           SEO & SEM, Conversion rates

In combination with the knowledge of these business models the media industry needs to keep a strong focus on where they come from, and what is valuable in today’s experience. They need new sets of competence in new areas, such as change processes, digital value chains and multi-channel strategy.

By Geir Stene, Bjørn Hole
This article is written on our own initiative.