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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Chris Anderson Talks About a Radical Price

Please enjoy this recent video with Chris Anderson, introducing the ideas of his forthcoming book FREE: The past and future of a radical price, at Nokia World 2007 in Amsterdam :

Thanks for the tip to Guy Kawasaki. You can find the video in a slightly better quality here (where you may be better able to pick out Anderson’s slides).

I venture to say, that the ideas of Anderson’s next book at a first glance seem a lot less radical than those of his first (The Long Tail (2006)). By giving something away for free, which is abundant, you can sell something else, which is scarce. This is not a new business model, but just one, which can help create interesting and astonishing things, when used cleverly in combination with the internet. According to Anderson, technology have opened this model up to a wide range of industries – this is what makes it interesting. Nokia and the rest of the mobile phone industry can give away their phones, because there’s money to be made on talk rates and services connected to the phones.

Anderson’s model on the scarcities of the economy on the internet seems, however, too simplistic. He divides these into four broad categories : time, money, attention and reputation, in which the attention and reputation (hyperlinks + PageRank) converts into traffic and money to be earned on advertisments. True, this is the ‘conversion mechanism’ used by Google and others today. But I’m not sure I buy that attention and reputation are really scarce ressources, independently of the technological architectures, which shape attention and reputation on the internet now or in the future.

The attention span of any individual may be limited, but then we may be attentive towards very different things. This is a central point of Anderson’s first book. And reputation may simply, also according to The Long Tail, be a question of technological architecture, of ‘bringing customers down the tail’, as Anderson puts it, in the way Amazon recommends titles ‘other users also bought’. Attention and reputation on the internet are artificial constructs. Our current architectures make something more visibile to someone, than something else. This is only a problem, in so far, that the someone wants the something else before the something.

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