-- AlexeySokolin - 14 Oct 2011

My notes below, which will morph into a paper. FYI would be helpful to have a WYSIWYG plugin to build lists.

Ethical Business Models / Or, What are the choices for business models under MC=0

What has been done: creating barriers to entry, limiting access to platforms, bidding

Sources

• http://www.baekdal.com/insights/infinite-choices-and-a-world-abundance-vs-supply-and-demand

  Main point is that people have discretionary budget that they set. So say $10 for music per month. Then they choose to allocate that based on qualitative factors (e.g., emotional, design, marketing) rather than on the quantitative factors (how much does this cost, what did it cost to produce and how it is now priced). So someone may get $8 for a song and another $2 for another because of, what is essentially, love. Interesting idea but may be wrong in that this is a non-equilibrium position. This is for people with money to waste. Or for people who have been convinced/brainwasted/affected that they need to spend extra for something that has no cost. Echoes though the radiohead album sales.

• Radiohead's free and nonfree album http://www.time.com/time/arts/article/0,8599,1666973,00.html ; http://techland.time.com/2011/02/14/radiohead-release-new-album-online-but-not-for-free/ ; http://www.breitbart.com/article.php?id=D8SOC7200 ;

  RH released In Rainbows for free (auction style), next album was $9 in mp3 format. Band wants to make money, capitalizing on people's learned behavior of paying $1 per song on iTunes. 40% paid ($8 on average), 60% didn't.

• Nine Inch Nails version of the same: http://news.cnet.com/8301-10784_3-9936210-7.html

  Trent made good money (options: free for the first nine tracks, $5 for the whole digital album, $10-$300 for disc sets. Ghosts, according to Reznor, netted $1.6 million in just over a week.) The next one "Slip" was completely free. Also happened to be terrible [look at Metacritic data]. Also, what does it say that only successful artists make real money on this stuff? Did Bjork do it too?

• Is there anything to say old mp3.com? Did people make money on it. http://en.wikipedia.org/wiki/MP3.com TBD

  Interesting tidbit: At its peak, MP3.com delivered over 4 million MP3 formatted audio files per day to over 800,000 unique users on a customer base of 25 million registered users. This was about 4 terabytes of data delivery per month from three data centers. Engineers at MP3.com designed and built the Pressplay infrastructure, eventually purchased by Roxio and renamed Napster.

• A meaningless article on branding as a way to pump up price. Hello AAPL. http://www.techdirt.com/articles/20070215/002923.shtml
• http://roepermccullough.blogspot.com/2007/12/when-marginal-cost-equals-zero.html

  If there was some way of figuring out exactly how much each person valued particular television content everyone would have access to it at a price that is worth it for them. But there isn't, so channels have to charge a uniform fee.

• Chris Anderson on Free. http://www.wired.com/epicenter/2009/06/disruptive-by-design-wired-editor-in-chief-chris-anderson-discusses-the-future-of-free/ ; better discussed here http://www.david-campbell.org/2010/05/13/thinking-freely/ and here http://www.techdirt.com/articles/20091119/1634117011.shtml which provides a summary with stats

  Takeaway is ConnectwithFans? +Reasontobuy = win. Create artificial scarcity on goods that sit on top of free. Limited sets or prints. Basically a fremium model. Think kickstarter? What's the problem -- the problem is that everyone becomes a marketing/sales person. We all have to be marketing and sales gurus with a need to be heard. It is the attention economy so the person that is loudest will get the most attention--is this an optimal outcome? Thus we see all these companies popping up about connecting with fans and marketing to fans. Are these a potential replacement to old school labels. Yes they are.

• A musician changing his mind about free and regretting it http://www.chicagoreader.com/chicago/mp3-file-sharing-music-revenue-models-tiny-mix-tapes-freeloading/Content?oid=1361486 . Ruen proposes that independent record labels borrow some tactics from companies that sell fair-trade coffee—he's betting that many file sharers have ethical qualms and can be lured away from BitTorrent? by a guarantee that their money is going to a label that does its business in a transparent, artist-friendly fashion.

  Conventional wisdom amongst my peers," Shadow writes, "has been remarkably short-sided [sic] over the last decade: 'Yeah, CD sales are down, but all the money is in licensing.' Not anymore. 'Yeah, licensing money is down, but the video game industry is killing it.' Less so these days, according to recent data. 'Well, the real money is in touring.' Really? When was the last time you saw a 'new,' post-record company artist headline a major music festival? At this rate, we'll be stuck with Coldplay for decades (no offense intended)."

• Hey there actual academic research http://www.mendeley.com/research/business-models-for-internetbased-ecommerce-an-anatomy/
• So are all digital goods then public goods? http://en.wikipedia.org/wiki/Public_good Solutions OTHER than club goods (you can't have it) include (1) serious subsidy and (2) pooling of resources by users to generate funds for the FC + some profit, (3) some fancy taxation scheme. People would pay if they are coerced or out of the goodness of their hearts. What's the % conversion on both of these (can look up charitable giving statistics).

  Yes. In economics, a public good is a good that is nonrival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability means that no one can be effectively excluded from using the good.[1] In the real world, there may be no such thing as an absolutely non-rivaled and non-excludable good; but economists think that some goods approximate the concept closely enough for the analysis to be economically useful.

  These problems with the club-good mechanism arise because the underlying marginal cost of giving the good to more people is low or zero, but, because of the limits of price discrimination those who are unwilling or unable to pay a profit-maximizing price do not gain access to the good.

• good stuff a couple of pages in http://www.docstoc.com/docs/81250205/new-Internet-Business-Models

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