A Philanthropic Business Model For Digital

In Consumers, Technology on December 6, 2010 at 8:10 am
This is a simple diagram known as a Business O...

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During the lecture series that I ran at UoW during the spring semester 2010, I gave one lecture that seemed to resonate with students more than any other.

This was the one about a new model for content distribution based on Philanthropy. I have now developed my thinking on this somewhat, and have written a paper entitled Rewarding Creativity Through Philanthropy – still in draft form mind you – and still requiring critique and additional thought. I am posting it here to initiate debate and feedback from you.

There is one key premise for this discussion in my opinion. It is that the monetization of digital content of any kind requires multi-party commercial relationships where the minimum number of connections in the commercial network is three and the maximum number is infinite. Its quite possible that two or more of the connections are provided by one party of course. Take Apple and its business model for the iPod, which is possibly the classic exemplar of this concept.

The iPod is a hardware device. It is valueless without content – songs. It is also valueless without the enabling software – iTunes. There are plenty of mp3 players out there, but the iPod is by far the most successful of all. The reason is that Apple has built an architecture for the product in which it gives away the enabling software, iTunes. Apple knows that the consumers of the product have on their devices the capability of holding many thousands of songs. In order to keep the content companies feeling that they are in control, Apple makes downloads to consumers available for a fee. The truth is that most of the content on any given iPod has not been purchased, of course. So there are multiple components to the iPod. There is the device, the content, the enabling software, and the iTunes store.

The iTunes store creates the window dressing to keep the content companies happy. The iTunes software makes the consumer experience painless and convenient with the ability to rip mp3’s and store them on the device meaning that it is also very cost-effective for the consumer. The consumer then feels quite happy to shell out the several hundreds of dollars required to buy the device.

This is a classic model that the content industry has ignored totally – other than wringing their hands and wondering why Apple has now not only become the most valuable technology company on the planet, but it has also enabled Steve Jobs to control one of the largest content libraries on the planet – that of Disney.

The point is that you have to figure out how to be able to give the most valuable part of the equation away – that which is digital – because the consumer can and will share it with others in any event. So unless you can figure out how to get on the consumer side of the equation, you are done for.

The model that I put forward here is one that I believe addresses this issue.


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