Why Trent Reznor’s Business Model Works So Well

Got to share this talk by Mike Masnick, who analyzes in depth the methods used by Trent Reznor to “connect with fans” and give them “reason to buy” and create a very well functioning business model :

Among other creative initiatives to connect with fans, earlier this year Reznor released 400 GB worth of HD video footage recorded at his concert tour, which supposedly could be put to use by “some enterprising fans”.

What I really like about Trent Reznor’s style is that he hasn’t “worked it out”. He hasn’t discovered some magic formula for how to make money selling his music using the internet, and then simply lean back, enjoy the money and not care about developing his business model anymore. There’s no autopilot. He seems to genuinely want to connect and seems to enjoy the work involved in connecting, sharing music and creating new intriguing ideas for how to get his music out – and make a decent income in the process. That’s also why it works so well. He really do connect with fans, he really do give them value for their money. And he enjoys it too.

What Trent Reznor does so remarkably well may also serve as an example for all those engaged in promoting or selling a product online, to quit the thinking that they simply need to “work out” a method, which will instantly make them “connect” with thousands of people and let them become rich and successful overnight. That well will run dry for them sooner or later.

Make real connections. Engage others. Give them something of real value. And have fun!

(via Digital Waveriding)

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Free Software And Proprietary Dead-ends

Stumbled over this interesting discussion about WordPress “premium” plugins and themes, i.e. plugins or themes which are sold at a price, just like any other piece of proprietary software. WordPress Premium Themes have been around for a while, and they recently spawned quite a discussion on the WP-hackers mailing list, when over 200 themes was removed from the WordPress.com selection of themes.

The focus of the discussion is the Free Software Foundation’s General Public License (GPL), and whether plugins or themes based on a GPL’ed piece of software such as WordPress can be sold for profit.

There are several voices in this broad discussion, and to characterize some of the perspectives :

  • Commercial developers and start-ups, who need a way to make a living from what they do : create WordPress plugins and themes
  • WordPress users who demand more features and ever more clever ways to personalize and customize the software they use
  • Open source developers who feel cheated when what they’ve spent hours and hours developing is “sold” by others
  • Purists who feel that since WordPress is free (GPL’ed as well as free of charge) every component based on or rooted in WordPress ought also to be free
  • Pragmatics who tend to say that as long as the GPL is respected, developers may do anything with the code, and that plugins which are developed from scratch are not necessarily born GPL’ed

I think this is a crucial discussion for the future of open source and “free” software.

As far as my understanding of the GPL goes there’s nothing wrong with redistributing GPL’ed software, in fact this is the point of the license. The only condition is the software remains licensed under GPL or a similar license. That receivers in your end receive the same benefits that you had, is a key component of what is usually referred to as copyleft.

There’s nothing wrong with charging money for the redistribution of this code either. Noone says anybody should provide stuff for free, just because it is GPL’ed “free” software. What the freedom in “free software” means is that anyone who obtains the code also remains at liberty to redistribute the GPL’ed code and charge for it too, if he or she wishes to do so. We all have expenses, and there are all kinds of good reasons to ask money for the time and work we put into providing a service or a product to someone else.

The tricky thing is, that since users who buy a piece of GPL’ed software also has the full right to redistribute that software, the business model appears to be broken. It may not actually be broken, since there are many good reasons to pay to receive benefits with the software “purchased”. Someone who obtains a piece of GPL’ed software via a bittorrent network, won’t get the support and imminent future updates that someone who “bought” the software from the developer does. But if we toss this aside, that the business model appears broken is probably what leads some developers to pursue proprietary business models.

Now, there’s a perfect match between supply and demand in the users who wants new features and are willing to pay for them too, and the developers ready to supply new features. It appears pretty straightforward. It’s good for users and it’s good for developers, who make a living from what they do. Right? Wrong.

The advantage of using GPL or any other copyleft strategy is that the process of redistribution and refinement can easily be facilitated. If or when a useful feature is included in a version of the code, it can be adopted by the source developer or anybody else involved, so that everybody gains, whether they charge for it to others or not. It can facilitate the creation of a community around “the project”. The software is improved by community developers, and eventually the code or project may leverage much more than any individual developer is capable of.

If you use a proprietary model as a developer you’re shutting others out. As a proprietary developer you have to build your entire organization around the fact that all problems must be solved in-house or paid for. You’re in the business of constructing a costly operation, which must be paid for. In contrast, the free software developer may not have a great income from his work (someone in the linked discussion said he had received 50$ in donations at 20.000 downloads), but also has few expenses and obligations. Once a website has been set up, he can begin to facilitate the distribution and development of his project because it is GPL’ed. This of course doesn’t do it alone, but if it isn’t out there, it won’t be used and improved upon (for free) at all. If an open source developer has 20.000 downloads, it means his work is popular and things are working out. He ought to wake up and find a way to leverage all that traffic and interest to create even better software, which will attract even more users and reach even greater markets. I find open source developers are typically not very good at this, and there are no easy recipes for how to make it work.

My point is, however, that even while it may not seem so at the surface level, you’re in a much worse position as a proprietary developer, than the open source and free software hobbyist, who is capable of inviting global input and value to his work by using the GPL and has very few expenses doing so.

Now, what about the user? At a first glance, users get what they want, a theme or plugin of their choice and style. But the price they pay is not simply the money changing hands. They also become dependant on a company or a particular developer to provide for them the code and support they want. If the user becomes dissatisfied with the company’s service or the company goes bankrupt, or if the developer decides to go his own way leaving the product and it’s users behind, few will relate enough to the product to be able to pick up where he left. If a piece of code has had 20.000 downloads globally, it becomes a lot easier to find someone, for whom this piece of work is not just a strange mess. But it is also possible, for a user who can’t find somebody to help him, to dive into the code himself and learn to solve problems and create new features, and then redistribute his work.

I’m really great with developers selling their work, but I believe they’re shooting themselves in their feet, if they use GPL’ed software in the first place as a platform or market, and then do not use the powerful legal tools at their disposal in the GPL and other free licenses, to leverage the reach and further refinement of what they do. And I believe users who are too impatient with open source communities and hobbyist free software developers and pay for themes and plugins help trap themselves and their developers in closed circles, which will lead them nowhere while the open communities grow stronger. There’s a real danger however, that great developer talent will wind up in these kinds of dead-end relationships, which doesn’t expose their projects to the open scrutiny of global free software communities. There’s also a real danger that open source software projects won’t spawn the businesses and startups they need, in order to create thriving communities and cultivate collaborative efforts to create even better architectures for facilitating the development of great free software. This may happen if developers and startups decline from using the GPL or other copyleft strategies, out of the misunderstanding and fear that they can’t make money on something which is “free”.

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How Kaplak Stream Creates New Value for Web Publishers and Niche Contexts

Sometimes I prefer to visualize an idea using nothing else but notepad – or preferably just pen and paper, whatever I have in front of me. The ‘back of the napkin‘ philosophy fits well with me. In fact when I tidy up old stacks of paper once in a while, I always find sketched down ideas on the back of envelopes and in impossible places such as the backside of letters from the tax office. Do I archive it under that particular idea and project – or does it go into the tax papers stack?

The Kaplak Stream napkin model

Here’s an updated napkin model for Kaplak Stream which I recently created in Notepad :

This model shows the very basic idea of Kaplak Stream. The Arts and History websites are different sites, but have some tags or categories in common, such as ‘knights’ and ‘romantic’. But each site has no way of knowing about this; they may not even be aware of the other site’s existance. They’re separate systems, islands of information. A visitor clicking on a tag on the Arts site won’t see the items tagged the same on the History site. Now, when the feeds of both sites are fed into the Kaplak Stream, it allows new types of long tail sites to be created.

By pooling our feeds, we allow new contexts to be created. This can happen when feeds are extracted from the stream for particular tags or categories. When feeds are pooled, even tags and categories that are not used a lot on an individual website, may spawn new rich web contexts, which are capable of sending traffic back to the original publishers, but, what is more important, enable the distribution of products (via affiliate models) which are otherwise hard to sell in a mainstream context.

In this case a Knights site and a Romantic site can be easily created. Neither of these new sites could exist within the History or the Arts sites, but because we pool and channel the information from a wider range of sources, they can now.

Here’s the expanded version of the above model (which is also an improvement over the model, I previously posted on Kaplak Blog) :

As this model shows, linking back to feed publishers for increased visibility of their sites and contexts is a key feature of the network. Submit your feed and gain greater visibility, because more sites “on the way” will link back to your site. This is key for publishers to actually want in and be part of what we’re doing. However, this is just the short-term benefits.

Connecting the disconnected

When feeds are extracted from Kaplak Stream and into other niche contexts, publishers will connect more easily with these contexts and communities, empowering both publishers and communities, who would otherwise not know each other. Anything may arise from these new connections : meetups, exchange of ideas, products, etc. It is in this new context, that the sales of niche products are more easily arranged, probably most likely and easily via the use of affiliate programs.

As we have previously learned, attributing value to the context of finding information, rather than to any particular piece of information, is the more effective route to Kaplak’s goal, in an environment such as the web which literally explodes with new information every day. Creating very finely segmented sites will enable passionate users to more easily reference interesting niche material, i.e. create recommendations socially for interesting information items as well as products sold in these niche domains. Simply because there are now rich niche domains and contexts, which will be worthwhile the link, contrary to the situation before the aggregation and filtering, where the niche items were spread out all over the web – and very difficult and timeconsuming to find using search, bookmarking services, Wikipedia, StumbleUpon or Digg-type sites.

With time, some of these new niche sites and contexts may connect otherwise disconnected communities with each other and possibly even grow their own small communities, which will enrich those contexts even further with valuable context. The value of these new contexts do not depend on the short-term Google juice of linking back to sources I mentioned earlier. Instead, it thrives and builds on the social connections and recommendations, which now can rest on increasingly more bonified points of reference – and (probably with time) even greater tools for sharing than what we have right now.

What’s important for this project to succeed is to tag/categorize incoming items conveniently and precisely. We’ll continue to work and experiment with autotagging, but the best bet is (with time) to make tagging a social proces which can take place for each item all the way of it’s ‘journey’. For the time being however, we rely heavily on feed items being richly tagged by their source publishers. This is one challenge, we face right now.

Any ideas?

Because it’s so critical to what we do to thoroughly understand what’s at stake, it’s also vital that we invite input every step of the way. If nothing else we want to give you the opportunity to read, think and absorb our ideas, and go out and implement your own tools and architectures – for every step of our way. And when you’ve done that – come back and tell us about it. We’d love to learn more.

We have yet to setup proper forms for receiving feed submissions, but we’ve begun to receive them anyway. For the time being, please submit your feeds to The Kaplak Team or directly to me via Twitter or Identi.ca. Remember to give us a few keywords on the contents of your feed (just the most important ones).

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The LEGO niche community

I have been looking around for a way to start Kaplak’s looking into the workings of online niche communities. We have some great examples in our own local backyard, but I wanted something, which showed how the internet has come along and changed things.

Looking around I stumbled upon this video by Jake McKee on what we may simply term the “LEGO community”. Everybody knows LEGO, but few know that LEGO is not just a children’s toy. LEGO has a large following of playful adults around the world. See the video and judge for yourself.

One of the interesting points of the video is that all these scattered individuals passionate about LEGO have been connected with the internet. Where many of these people were isolated before, the internet has made them aware of each other’s existance, globally. One gets the impression that this has helped spur a new vitalization and outburst of their creativity. New possibilities to show off creative endeavours (like this video, shared with YouTube, is an example of) and get inputs back, has caused something we may term an “awakening”, with an expression borrowed from Lawrence Lessig.

Personally, I’ve recently refound a lot of joy myself in my old LEGO’s and have been surfing around on sites such as Brickset, which offers an online database on most of the LEGO models ever produced. I’ve also played around with LEGO’s official Digital Designer. This program engages LEGO fans to help design new models, which can also be “uploaded” and sold via an online marketplace. The LEGO Digital Designer and marketplace is one of Chris Anderson’s examples of how a company can utilize the long tail of interests in different LEGO models. If, that is, the program was not artificially limited to a specific range of bricks, which it is, for industrial reasons… In order for LEGO to be able to sell the models you build with the Digital Designer, you have to use bricks currently in production. You can’t use ‘outdated’ bricks. It seems odd to me, that one should re-experience that old problem one always had building things with LEGO, that you always missed a particular piece, in a 100% digital product.

What’s more interesting to Kaplak, though, is the exchanges taking place between LEGO fans themselves, and the eventual capabilities of fans to share and eventually sell their creative endeavours to other LEGO fans. There’s nothing more than trademark issues (i.e. the protectionism of a traditional business model scared of copying, which we’ve touched upon before) to prevent users from creating their own models, trade in bricks on eBay, and share or sell their construction instructions, in spite of anything LEGO has to say. And maybe even issues like these won’t stand in the way. The awakening of this niche community is in many ways also an empowering of individual fans and entrepreneurs, who is so far perfectly capable of building their own databases and wikis.

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