how can content businesses succeed online? by clive rich

Clive Rich

How Can Content BusinessesSucceed Online?

Intellectual property online; Economic Models and Legal Aspects Russian and Global Experience

April 17, 2012

How Can Content BusinessesSucceed Online?

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How can content businesses succeed online?Intellectual Property Online – Russian and Global Experience, April 17, 2012

Background

Professional Negotiator, Mediator and Arbitrator

Ran Legal departments for Warner and BMG

Ran Digital Divisions for BMG and Sony BMG

Runs digital law firm

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Can Content Businesses Succeed Online?

• Content can succeed online

• Legal regime is only part of the picture

• Content needs to deliver value

• Content needs to be readily available legitimately

• Content needs to be tracked

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How can content create value online?

• Bargain price

• High Luxury price

• Authority

• Expertise

• Brand recognition

• New product excitement

• Clear product offering

• Social recommendation

• Social conformity

• Community

• Expert recommendation

• Individualised experience

• Saves time

• Makes life easier

• Try before you buy

• Ubiquity

• Bundled/Ease of purchase

• Niche sector

• Scarcity/Variety of offering

• Associate with another desirable product

• Micro Charging

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Successful Case Studiesfor Online Content Businesses

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RadioheadIn Rainbows Experiment

Bargain Price/High Luxury Price

• 1.2 million downloads – price set by user

• Average ‘voluntary’ price £4

• Pre-release sales more profitable than total sales of previous album “Hail to the Thief”

• Disc box (selling at £40) sold 100,000 copies

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FT.com

Expertise/Authority

• 4 million registered users

• 250,000 digital subscribers

• 585,000 paying users

• 3 subscription options (paid weekly):

- $6.69: Newspaper only - $8.59: FT.com only - $11.49 Newspaper & FT.com

• 4 week FREE trial available for each option

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American Idol

Brand Recognition

• Made an estimated $6.4 billion from the first 8 seasons

• American Idol artists have amassed (in the US): - Over 57 million album sales - 104 million singles and digital track downloads

• Digital download figures alone total 99.96 million

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Spotify

New Product Excitement/Clear Product Offering

• Streaming service with easy interface: - Easy sharing - Use on mobile online or offline - Facebook connectivity

• 3 clear price tiers: - Free (with advertising) - £4.99 (Unlimited streaming /no advertising)- £9.99 (as £4.99 + mobile use & offline playlists)

• By June 2011, 10 million users in Europe – 15% paid

• By April 2012, 3 million US users - 20% paid

• Revenues of US$99 million by 2010

• Anticipated Revenues of US$900 million in 2012

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Angry Birds

Social Recommendation

• Released December 2009

• 700 million downloads

• 25% paid downloads

• iPhone/iPad version $0.99, Android version free with advertising

• Merch, TV shows and Movie to come

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Farmville

Social Conformity

• Zynga’s games (including Farmville and Cityville) have 240 million active users

• Valued at US$10 billion in May 2011

• Revenue of US$311 million for quarter ending Dec 2011

• Game accessed for free

• Once users are ‘drawn in’, they are temped to pay real-world cash in exchange for virtual items and in-game advancements

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Club Penguin

Community

• Avatar-based virtual games world for 6-14 year olds

• 30 million users

• Bought by Disney for US$350 million

• Subscription options:

- US$3.95 for 1 month - US$19.95 for 6 months - US$37.95 for 12 months

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Pandora

Expert Recommendation

• Streaming internet radio with stations based on Music Genome project

• Revenues of US$274 million in March 2012

• 1 billion listener hours in March 2012

• 51 million active users in March 2012

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Last FM

Individualised Experience

• Music Recommendation service which builds a detailed profile of user’s musical taste by recording details of the songs the user listens to (via Internet radio stations, user's computer or portable music devices).

• 30 million users (March 2009)

• Acquired for £140 million in May 2007 by CBS Interactive

• Free for users in the UK, US, and Germany (with advertising).

• Users in other countries require a subscription of €3.00 per month after a 50 track free trial.

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Shazam

Try Before You Buy & Saves Time

• Free-to-try programme (5 ‘tags’ per month)

• Pay to play programme (Shazam Encore) is US$5.99 per month

• 3 million tracks ‘tagged’ a day

• Facilitates over 250,000 purchases a day (conversion rate of 8-10%)

• As of June 2011: £16 million in revenues from 80 million users

• Estimated that Shazam earns almost US$6 million a year from track referrals

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Hulu

Ubiquity

• Profitable within 2 quarters of launch based on advertising around free usage

• Second only to YouTube in video streams – well over 1 billion monthly

• 1.5 million paying subscribers

• Revenues of US$420 million in 2011

Netflix• 24.4 million subscribers (Jan 2012)

• By 2011, total digital revenue reached $1.5 billion

• Two subscription plans in US: Streaming and DVD rental (both charged at $7.99 per month)

• Launched as a streaming-only service in the UK and Ireland in January 2012 (£5.99 & €6.99 per month)

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Deezer

Bundled/Ease-of-Purchase

• 20 million registered users with 1.4 million paying subscribers

• August 2010 – partners with Orange to bring their unlimited music service to a broader audience in France.

• December 2011 – launches in the UK. No free ad-funded model. 2 subscription options: - Premium £4.99/month – unlimited streaming on PC/mac - Premium+ £9.99/month – as above but also for mobile devices (online and offline)

• Deezer partners with Orange for UK launch: Premium+ offering is bundled into the price of Orange’s Panther pay-monthly tariff.

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Bookboon

Niche Sector

• Publishes textbooks focused on specific areas (e.g. accounting and economics, IT and management)

• Business model - provide free eBooks but embed advertising every three to five pages in each book.

• Over ten million downloads over the course of 2011 - 500% growth of the eBook publisher’s download numbers.

• By the end of 2012, Bookboon is expected to own a 10 % market share of the eBook publishing industry in the US, with 50 million eBook downloads.

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Trent Reznor (Nine Inch Nails)

Scarcity/Variety of Offering

• “As the climate grows more and more desperate for record labels, their answer to their mostly self inflicted wounds seems to be to screw the consumer even more”

• March 2008: ‘Ghosts I–IV’ (first release on Null Corporation label), became available via the band's official website in a number of different formats, including: - Free download of the first volume - $300 Ultra-Deluxe limited edition package – all 2,500 sold

• May 2008: Nine Inch Nails released ‘The Slip’ via their website without any advertisement or promotion. The album was made available for download free of charge with a message from Reznor "this one's on me."

• Individual downloads of ‘The Slip surpass 1.4 million. It has since been released on CD as a limited edition set of 250,000.

http://en.wikipedia.org/wiki/Ghosts_I%E2%80%93IV

http://en.wikipedia.org/wiki/The_Null_Corporation

http://en.wikipedia.org/wiki/The_Slip_(album)

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IamPlayr

Associate with Another Desirable Product

• Social game that gives users the chance to play the life of a professional footballer

• Players must make the choices that real footballers make

• “Coin” based economy

• 2.4 million installs

• 800,000 monthly active users

• 400,000 Nike boots sold

• 2 million Red Bull cans sold

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Getty Images

Micro-charging

• Supplier of stock images for business and consumers

• Archive of 80 million still images and illustrations and more than 50,000 hours of stock film footage

• Net worth $2.4 billion in 2008

• Micro charges of a few pounds to a few hundred pounds

• Price dependent on usage – company corporate/web/advertising/marketing/film/tv

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Can Content Businesses Succeed Online?

• Content can succeed online

• Legal regime is only part of the picture

• Content needs to deliver value

• Content needs to be readily available legitimately

• Content needs to be tracked

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Musixmatch

Content needs to be readily available legitimately

• “Lyrics” is the most searched for word on the Internet – even more than “sex”

• Lyrics licensing API

• Users: More than 2,6 Million users

• Tracks: More than 1Million matched lyrics per day

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Criteria Media Exchange

Automating availability and tracking of content

• World’s first digital media exchange

• Automating availability and tracking of content

• Retailers can plug and play

• Content delivered directly to consumer by the exchange

• This ensures perfect reporting record

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Conclusions

There are plenty of successful value propositions for value added services for content already operating online

Copyright legislation should support collaborative availability of content, rather than just focusing on the “balance of power” between rights holders and distributors in relation to restricting copying

Equally, legal support for collaborative systems of tracking usage is more important than legal regimes just based on restriction/infringement and takedown

Hargreaves Review of UK Copyright legislation is a good example of this

A combination of enabling access and tracking usage is good for users, good for distributors and good for rights holders

This is a modern approach to the definition of copyright

This enables more of those copyright businesses which provide value to users to thrive

how can content businesses succeed online? by clive rich

Technology