All media today share the same problem, a business model problem.
- Writers are pushed to books because they have a business model. Nothing else works.
- Musicians produce CDs because they have a business model.
- TV exists only because it has a business model.
- Producers like movie theaters because they have a business model. Note that the move to DVDs cuts their potential returns dramatically.
The advertising business model has limited utility. The value you get is limited by the amount of intrusion readers (listeners, viewers) are willing to put up with. And advertising revenue must be shared, with the agency delivering the ad.
That’s the truth behind Steve Ballmer’s latest nonsense. In a traditional advertising model, this premium is taken by the TV network or the publisher, what Ballmer calls the "rights holder." This company puts up the front-end money needed to produce a complex good, it generally holds the copyright, and it expects compensation in all media, forever, as the cost of taking this risk.
Again, this is a business model problem. There’s no threat that artists will disappear. The threat is that the intermediaries will lose their control, that new companies will emerge to front the cash, take the risk, and expect the reward.
The opportunity here is to get the artists involved a better deal. For the last century writers, musicians, actors and other artists have usually gotten a pittance, compared to the capitalists. Movie studios fake the books, music producers write one-sided contracts, and as for writers — well if you don’t have a book contract you don’t exist, and the value of the contract is determined entirely by the advance.
For most of the last decade the "rights-holders" have tried to avoid
this day of reckoning by using DRM technology, forced onto players by
the DMCA. But now these same companies are learning (as I and others
had warned) that DRM was a trap. Some music labels are ditching it in order to compete with Apple’s iTunes, but their business model problem remains.
And, in a way, it’s what Ballmer is warning them about. In terms of
music Apple is just a retailer. Yet it has gained enormous control over
the market. It has re-defined music from an "album" format into a
"singles" format, and redefined all the business relationships leading
to the production of a hit product. Ballmer thinks that Google, through
YouTube, is threatening to do the same thing for video.
But even if Google succeeds, it will have won only a portion of the
advertising streams. The paid tier, the one occupied by Apple, has yet
to be defined. If it isn’t defined, a lot of money goes out of the
content system. And it can only be defined through a negotiation with
the market.
This, then, is the key business model of our time. Who defines the
"ad-supported" and "paid" tier for all media, and how will the
resulting money be apportioned among artists, producers, and others?
Stay tuned. Or offer your own solution. Not here. Offer it where it should go, in the market.
