The collapse of complex business models?

Read Clay Shirky’s latest epistle on the ‘collapse of complex business models’, here. Are the parallels between Tainter’s comments on complex societies and businesses compelling? How would you critique this analogy?

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News on news

We discuss the case of the Guardian Media Group’s foray into e-business in Long Case 6.2. The past few weeks have seen an enormous amount of attention and angst devoted to News International’s proposals – about to be implemented – to put a paywall around the UK Times and Sunday Times websites. £1 a day or £2 a week, after a free trial period. As someone remarked, that’s not far off the price of the BBC license fee in a year. I’m sure that I’ll be writing more about this as the evidence builds up one way or the other about the viability of this model for anything other than niche publications. That aside, a fascinating internal memo has been leaked from the desk of Guardian Editor Alan Rusbridger, setting out his take on the situation – and no doubt seeking to reassure those working on the paper that the correct decisions have been made! You’ll find it below.

Rusbridger Email

The end of the world as we’ve known it … but not just yet

January saw the publication of consultancy firm Deloitte’s annual TMT (Technology, Media and Telecommunications) predictions. Three publications are available for free download in each of the three component areas of the firm’s practice. Whilst generally long on assertion and anecdote and somewhat shorter on detailed evidence, the reports are aimed at ‘starting or stoking a particular conversation’ rather than stopping it, according to lead TMT Partner Jolyon Barker. Of particular interest for me in the Media Predictions report is the more measured approach Deloitte is taking to some of the hyperbolic debates over trends and business models in this area: for example, online vs TV advertising; prospects for e-readers; buzz over 3D TV; the reality of TV/web integration. This is refreshing. It’s not a wholesale ‘out with the old and in with the new’ conclusion, but a recognition that the future of media business models and promotional mechanisms is much more complex and nuanced. The notion that ‘linear’s got legs’ (linear watching of TV according to schedules, rather than wholesale on demand through such vehicles as the BBC iPlayer) is an especially interesting discussion. And the fightback of publishing through the introduction of pay walls and micropayments (although the jury is still out on their acceptability) is also an analysis worth reading.

1984 and all that

One of the retail stories you may have missed late last year was the mysterious overnight disappearance of George Orwell’s 1984 from thousands of Kindle e-book readers. For one US schoolboy who had been working on the novel as part of a homework assignment, it must have come as an excuse from heaven: “Kindle ate my homework”.   But, as you might imagine, the issue has wider ramifications. Kindle has been one of Amazon’s success stories, exceeding the company’s expectations. Device and book download sales combined could, analysts estimate, generate between $1.2-1.4bn by 2010. Kindle can store up to 1,500 titles, which retail for around $10 apiece. A larger, faster DX version was launched in the US in February 2009.

The issue arose when Amazon discovered that the supplier of the Orwell classic did not have the rights to distribute the text electronically and remotely deleted the title. Users hurriedly consulted the terms and conditions of service, only to discover that they had fewer rights over their purchases than perhaps they had anticipated – ‘rented, rather than owned’ was one view. Users also discovered that “the device software will provide Amazon with data about your device and its interaction with the service … and information related to the content on your device and your use of it (such as automatic bookmarking of the last page read and content deletions from the device). Annotations, bookmarks, notes, highlights, or similar markings you make in your device are backed up through the service.”  Journalists were quick to point out the irony that it was 1984 which was the victim of remote deletion: after all, the book deals with the putative ability Oceania’s Big Brother has to re-write history . (‘Amazon is at war with Barnes & Noble; Amazon has always been at war with Barnes & Noble…’)

Amazon was quick to recant: ‘Our “solution” to the problem was stupid, thoughtless, and painfully out of line with our principles. It is wholly self-inflicted, and we deserve the criticism we’ve received. We will use the scar tissue from this painful mistake to help make better decisions going forward, ones that match our mission.’  But, of course, finding out that what we have bought is no longer broadly free for us to do as we want with, and further that it is also trackable by retailers and publishers, is an uncomfortable discovery which raises not just ownership but privacy issues. The rental model for goods and services – other than for the obvious categories such as cars or residential property – is one which is becoming fashionable. (See for example Flexpetz, www.flexpetz.com, Avelle, www.bagborroworsteal.com,  and Erento.co.uk, www.erento.co.uk.) But books are somehow different. Our choice of books and books themselves carry with them an indefinable character which makes them somehow more intimate possessions than most, more expressive of our values and attitudes and indeed of our personal identity. Think how much we can tell about the people we visit from a cursory inspection of their domestic bookshelves! On the other hand, in some respects how is Kindle different from a fee-based version of the lending library model?

Location, location, location

Two developments in the market now mean that location-based e-business services are now ripe for development. These are the growth of GPS capability in handsets and the exponential growth of free of cheap downloadable third party applications and mobile web interfaces being designed increasingly as part of an integrated go-to-market package, rather than as an afterthought or experiment by firms. Analysts Gartner estimate that some 29% of new phone handsets will include GPS in 2009. And at the time of writing, some 100,000 applications have been developed in the iPhone App Store with over 2bn total downloads.

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The real story on newspaper circulation

The conventional wisdom has it that newspaper circulation is in terminal decline, thanks to the Internet. There is considerable debate about possible business models, ranging from free online/charge for hard copy, to charge online/free hard copy to everything in between, including micropayments. It’s always useful to go back and look at the data. Here’s a link to a blog entry which graphs the Audit data for US newspaper circulation since 1990. It makes for fascinating reading. Look at the Wall Street Journal. And the New York Post. What do you take from this ‘longer term’ view?