Successful models
From CreativeBusiness
These are the overarching business model types we have so far identified. Some case studies will use more than one model, e.g. they may start off doing market development, then move to the loss leader model before finally engaging in promotion of same. Or they may run a loss leader and promotion of same strategy simultaneously, giving away works to both promote other goods, e.g. T-shirts, whilst also selling a copy of the work itself.
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The Loss Leader
You give away a creative work in order to earn money from a related good. The goods given away are non-substitutable for the goods sold, i.e. one is not the direct equivalent of the other. For example an ebook isn't substitutable for a printed book, because at the moment, ebook readers are, for most, not an equivalent experience to reading a paper book.
Examples in practice include:
- Giving away electronic copies of books in order to sell copies of printed books
- Friday publishing / Tom Reynolds / O'Reilly / Doctorow
- Giving away access to a web comic in order to sell T-shirts
- Giving away streams or low-grade downloads of music in order to sell CDs, live tickets, merch, syncs or high-grade downloads
Promotion of Same
You give away a creative work in order to sell more of that same creative work. The goods given away are directly substitutable for the goods you are selling, for example, music in digital format is substitutable for music on a CD, because music is often digitised from CD in order to be played on a digital music player, and if the fan wants a physical copy of the music on CD, then it is easy to burn one onto a writable CD.
Examples include:
- Giving away a digital version of an album and allowing fans to decide how much money they will pay for it, if any, and selling the CD.
- Giving away a digital version of a film whilst also selling the DVD.
Market Development
You provide free materials in order to develop the market to a point where your goods become in demand. You may be developing a niche market, e.g., for the music of your band, or a much broader market, e.g. interest in a new type of business consulting.
Examples include:
- A new band giving away live and recorded tracks to encourage interest, even before they have anything to sell.
- The classic examples here are bands now-popular, such as the Libertines and Arctic Monkeys, who offered recordings to free to their fanbase before they scored a record deal. Now, and despite continued free distribution of the same recordings, they are able to sell the recordings with the help of marketing muscle,
- A consultant giving away thought leadership articles to seed an idea, even before the market is ready to hire them.
Competitive Warfare
Giving away goods that your competitors sell, in order to undermine their business strategy. This certainly has and is done in the software world. In the creative industries, one could interpret giving away ebooks as a way to undermine other authors, but it's unclear that that is a valid interpretation. More thought and discussion needed on this model as it works in the creative world.
- This practice emerged with open source software, and continues in Google's battle with Microsoft for the hearts and wallets of global computer users, as the search giant offers consumers a free substitute for Microsoft's lucrative Office package. Google's 'documents' web app may not have all Office's functions, but has other features and does not cost hundreds of pounds for a licence.
Commons-based Peer Production
A group of people come together to produce a work collectively, sharing responsibility and workload, and producing an end product that could not have been created by one person alone.
- This refers to a new model of economic production in which the creative energy of large numbers of people is coordinated (usually with the aid of the internet) into large, meaningful projects, mostly without traditional hierarchical organization or financial compensation. Benkler, who first defined the concept, compares it to firm production (where a centralized decision process decides what has to be done and by whom) and market-based production (when tagging different prices to different jobs serves as an attractor to anyone interested in doing the job). (link)
Examples include:
- Peer-produced films.
