Business Models Providing Incentives to Open Content Roger

Business Models Providing Incentives to Open Content Roger Clarke Xamax Consultancy Pty Ltd, Canberra Visiting Professor in Cyberspace Law & Policy, U. N. S. W. and in e. Commerce, Uni. of Hong Kong; and Dept of Computer Science, ANU http: //www. anu. edu. au/people/Roger. Clarke/EC/. . . BMIOC-0607 {. html, . ppt} Unlocking IP Conf. – U. N. S. W. – 11 July 2006 Copyright 2005 -06 1

Business Models / Incentives / Open Content Themes • • Old Wine, New Bottles

THE CHALLENGE • • • The Digital Era • Atoms ==>> Bits Internet • Bits can go anywhere Powerful User Devices • Bits do go anywhere Peer-to-Peer (P 2 P) • Bits go everywhere Interactive Publishing • Bits get used Copyright 2005 -06 • • Whether content wanted to be liberated or not, the digital era has liberated it Appropriation of digital content is easy, cheap, largely untraceable Technological protections are seriously problematical, even for the powerful Sony, EMI and Disney need Open Content Business Models as badly as you and I do 3

What’s a Business Model? It’s an Answer to the Question: Who Pays? For What?

OLD WINE Conventional Proprietary Approaches Exploit the Monopoly through High Prices Leverage the Monopoly • Extend the Brand • Cross-Promote Sustain the Monopoly • Lock-in through Switching Costs • Very Tight Licence-Terms • Technological Protections Copyright 2005 -06 Lawsuits to stop behaviour and to chill behaviour: • Commercial Violations • Single-Purpose Technologies • Incitement (‘Authorisation’) • Multiply-Usable Technologies • Consumption 5

OLD WINE, NEW BOTTLES • • Give Away (a little of) your content, and charge for: • convenient access • repeat access • other-party access • enhanced versions • searchability/navigation • timely access • archival access • . . . But recognise when to let the market grow itself Copyright 2005 -06 Shapiro & Varian – ‘Information Rules’, 1999 Ch. 4 pp. 83 -102: ‘Rights Management’ 6

A Sustainable Proprietary Approach • • Identify customers’ price The Evidence resistance-point (by finding out • Since 2003, Apple ‘what the market will bear’) i. Tunes charges Set prices accordingly (and thereby $US 0. 99/track !? sustain payment morality) and now $A 1. 69 !!? ? • Copyright-Owners get Discourage and prosecute breaches 70% of the fee where the purpose is commercial • In 2005 -06 they’ve Take no action over breaches by been asking for: consumers (time-shifting and • more money format-change; but even sharing? ) • more flexibility Copyright 2005 -06 7

Publishers Need to Re-Discover Confidence in Their Ability to Value-Add • • • Contingent Liabilities, in any Conception jurisdiction whose courts deem Pre-Promotion publication to have occurred: • Copyright Infringement Expression • Breach of Confidence Copyright Clearance • Defamation Preparation for Publication • Negligence • Negligent Misstatement Quality Assurance Misleading or Deceptive Conduct Promotion and Marketing • • Contempt of Court Logistics • Breach of Laws relating to: • Censorship Payment Collection • • • Copyright 2005 -06 • Discrimination Racial Vilification Harassment Privacy 8

NEW WINE A Catalogue of ‘Business Models on the Web’ • Brokerage • Marketplace Exchange, Buy/Sell Fulfilment, Demand Collection, Auction Broker, Transaction Broker, Distributor, • Search Agent, Virtual Marketplace • Advertising Portal, Classifieds, User Registration, Query-based Paid Placement, Contextual Advertising, Content-Targeted Advertising, Intromercials, Ultramercials • • Infomediary • Advertising Networks, Audience Measurement Services, Incentive Marketing, Metamediary • Merchant Copyright 2005 -06 Purchase, Lease, Licence, Brand Integrated Content Affiliate Banner Exchange, Pay-per-click, Revenue Sharing Community Open Source, Public Broadcasting, Knowledge Networks • Virtual Catalogue, Click&Mortar, Bit Vendor Manufacturer (Direct) Subscription Content Services, Person-to-Person Networking Services, Trust Services, Internet Services Providers Utility Metered Usage, Metered Subscriptions Rappa (digitalenterprise. org/models. html) 9

Internet-Era Business Models Lessons from Open Source and Content Who Pays? For What? TO WHOM? And Why? Direct Copyright 2005 -06 Intermediated • Retailer • Franchisee • Value-Adder • Bundler • Transaction Aggregator 10

Internet-Era Business Models Lessons from Open Source and Content WHO PAYS? For What? To Whom? And Why? • Customers • Providers • Third Parties (ads and sponsorship) • Copyright 2005 -06 ‘A Fairy Godmother’ 11

Who Pays? A Fairy Godmother • • • Subsidy / Patronage Funding from ‘external’ sources Deprecated as a gift, unless ‘market failure’ Cross-Subsidy Funding from ‘internal’ sources Deprecated (but less so), because it’s ‘distortive’ Portfolio Approach Mutual Cross-Funding from ‘internal’ sources That’s how business works – ‘cash cows’ fund the rest Copyright 2005 -06 12

Internet-Era Business Models Lessons from Open Source and Content Who Pays? FOR WHAT? To Whom? And Why? • • • Goods & Services Value-Added Goods & Services Complementary Goods & Services • • • Copyright 2005 -06 Data Information Expertise / Knowledge An Idea in Good Standing Timeliness Quality 13

Revenue from Complementary Services • • Copyright 2005 -06 Installation Infrastructure Customisation Education and Training Consultancy Network-building Search for Network Effects Viral Marketing ‘The After-Market’ • Accessories • Upgrades • Enhancements • Extensions • Replacements 14

Internet-Era Business Models Lessons from Open Source and Content Who Pays? For What? To Whom? AND WHY? The Negative • Resource Control • Switching Costs (capture, lock-in) • Grief Avoidance (no lawsuits or guilty conscience) Copyright 2005 -06 The Positive • Perceived Value (‘the genuine article’) • Cost Advantage (incl. Time) • Quality Advantage (incl. accuracy, security, timeliness, completeness, complementary services) 15

Open Content Business Models Strategic Opportunities 1. Reputation • Reputation-Establishment, -Building, -Maintenance • Collateral, Visibility, Discovery: • Papers / Postings / Blogs (cf. CV, Ads) • Hence Brand Sub-Brand Value, which enable Network-Building, Network Effects, Viral Marketing Copyright 2005 -06 16

Open Content Business Models Strategic Opportunities 2. • ‘Freeware’ – use it now, become habituated, and buy something later – to build a future market 3. • Market Building Customer Engagement Engage Toffler’s ‘prosumers’, who will provide: • feedback to enable quality assurance • feedback to enable product refinement (market research and focus groups for free) • enhancements and extensions Copyright 2005 -06 17

Strategic Opportunities – 4. • • Costs Cost-Reduction: Reproduction and Transmission are hugely less expensive for Digital cf. Physical Media Cost-Transfer to Consumers: • Product Conception (‘prosumer participation’) • Pre-Promotion (e. g. fan-zines) • Production (e. g. prosumer mixing) • Promotion (e. g. ‘viral marketing’) • Distribution (P 2 P shifts transmission costs away from the corporate server, to the operators of participating client-servers) Copyright 2005 -06 18

Business Models Providing Incentives to Open Content Roger Clarke Xamax Consultancy Pty Ltd, Canberra Visiting Professor in Cyberspace Law & Policy, U. N. S. W. and in e. Commerce, Uni. of Hong Kong; and Dept of Computer Science, ANU http: //www. anu. edu. au/people/Roger. Clarke/EC/. . . BMIOC-0607 {. html, . ppt} Unlocking IP Conf. – U. N. S. W. – 11 July 2006 Copyright 2005 -06 19