1. Copyright 2005-06 1 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 eCommerce, 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

2. Copyright 2005-06 2 Business Models / Incentives / Open Content Themes The Challenge Old Wine Old Wine, New Bottles New Wine

3. Copyright 2005-06 3 THE CHALLENGE The Digital Era Atoms ==>> Bits Internet Bits can go anywhere Powerful User Devices Bits do go anywhere Peer-to-Peer (P2P) Bits go everywhere Interactive Publishing Bits get used 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

4. Copyright 2005-06 4 Whats a Business Model? Its an Answer to the Question: Who Pays? For What? To Whom? And Why?

5. Copyright 2005-06 5 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 Lawsuits to stop behaviour and to chill behaviour: Commercial Violations Single-Purpose Technologies Incitement (Authorisation) Multiply-Usable Technologies Consumption

6. Copyright 2005-06 6 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 Shapiro & Varian – Information Rules, 1999 Ch. 4 pp. 83-102: Rights Management

7. Copyright 2005-06 7 A Sustainable Proprietary Approach Identify customers price resistance-point (by finding out what the market will bear) Set prices accordingly (and thereby sustain payment morality) Discourage and prosecute breaches where the purpose is commercial Take no action over breaches by consumers (time-shifting and format-change; but even sharing?) The Evidence Since 2003, Apple iTunes charges $US 0.99/track !? and now $A 1.69 !!?? Copyright-Owners get 70% of the fee In 2005-06 theyve been asking for: more money more flexibility

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

9. Copyright 2005-06 9 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 Virtual Catalogue, Click&Mortar, Bit Vendor Manufacturer (Direct) Purchase, Lease, Licence, Brand Integrated Content Affiliate Banner Exchange, Pay-per-click, Revenue Sharing Community Open Source, Public Broadcasting, Knowledge Networks Subscription Content Services, Person-to-Person Networking Services, Trust Services, Internet Services Providers Utility Metered Usage, Metered Subscriptions Rappa (digitalenterprise.org/models/models.html)

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

11. Copyright 2005-06 11 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) A Fairy Godmother

12. Copyright 2005-06 12 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 its distortive Portfolio Approach Mutual Cross-Funding from internal sources Thats how business works – cash cows fund the rest

13. Copyright 2005-06 13 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 Data Information Expertise / Knowledge An Idea in Good Standing Timeliness Quality

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

15. Copyright 2005-06 15 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) The Positive Perceived Value (the genuine article) Cost Advantage (incl. Time) Quality Advantage (incl. accuracy, security, timeliness, completeness, complementary services)

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

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

18. Copyright 2005-06 18 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 (P2P shifts transmission costs away from the corporate server, to the operators of participating client-servers)

19. Copyright 2005-06 19 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 eCommerce, 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