FOE: Free? Contemporary Media Business Models

WARNING: Liveblogged and not checked

While the industry discussion has meandered from questions surrounding the validity of the ‘Long Tail’ to a debate about the notion of “free” and the generation of value itself – viable business models have begun to emerge. In these models, fan communities continue to figure prominently, as do monetized value networks and innovative advertising exchanges. Questions remain: How are these models different for the artist, band, brand, media text or transmedia property (print, film, tv, music, etc.)? How are meaningful relationships forged in an online culture that values non-monetary exchanges? How do these relationships benefit people and how do they benefit brands? How have fan communities responded when companies and brands try to participate in their communities? What is being sold? Content? Access? Authenticity? Notions of community itself? And how are fans and audiences being engaged to conceive of, launch, and contribute to the growth of these new business models?

Moderator: Nancy Baym– University of Kansas; Panelists include: Lara Lee – Principal, Jump Associates; Mark Zagorski – Chief Revenue Officer, eXelate Media; Seth Arenstein – Editorial Director/Assistant Vice President, Cable Fax; Paul Dalen – Owner, Reverse Thread; David Spitz, WPP

• NB: our mandate was to think about business models. We have people who are cultural studies people who are suspicious of making money as a goal, of companies, creative people who want to be paid but don’t want to be boxed in and then in business who want to pay their employees.  In listening to what has been happening, we have heard about disruption to business models…all over..there’s no model that worked in 75 that is just great.
• PD: a manager in the music business, a boutique firm, with 5 solo artists, plus a few record producers.  There have been profound changes, particularly on the recording side. The only thing my artists have in common is that they are unique voices. I offered to come on the place of one of my clients, who is touring..she launched a plan on the web to raise for money raised $89k to make her next record (Jill…) she would point out that this is not a new model, but as she is good on camera, she is articulate, she is fun, the mainstream media latched on to this. On this we made the decision to use a third party to help distribute – Red – but part of Sony. Jill has an older demographic so we needed the record to be available in physical form in shops.
• DS: I work in Strategy in WPP, ads is less than a quarter that we do. 50% is in consumer insight, the rest is digital. My job is to expand the digital space.   If you are an aggregator that needs large audience, then it is difficult. for us, free represents a huge opportunity on the demand side. There are free and low cost alternatives across all our areas.  We are not just responsible for ads on tv, we have to work on earned and owned media, huge complexity for clients to that creates a role for us Also natural search. there are free models for consumer insight. There are also premium produts, such as Omniture, which we have an investment. But why pay when you have Google analytics, but people do use it.
• MZ: a start up in the targeting space, looking at market place for online targeting data. creating extensions for publishers that go beyond traditional advertising. we have to get down to the reality in the market place. the concept of free online is rapidly using relevance, especially with content being created.  So traditional media companies that fund free online are collapsing, you cannot do funding if no revenues. There is a credit crisis, so ability to fund content has dried up. VCs has become extremely aggressive, they are not waiting for start-ups to make money, you need to have a plan to make money tomorrow.   they are all coming together, there is perfect storm to create a really bland, corporate funded environment without innovation. I look at ways for publishers to take audience interactions and use them to sell online. There are two main models – advertising and subscriptions. Ads are still sold as content as proxy for audience, but we’re talking about audience as proxy for audience.  We look at finding other indicators on users, so advertisors can reach the users beyond content.
• SA: i’m a trade journalist. I have two strikes…I write abut the cable tv industry and I write for a publication that costs a lot of money to get.   We have not changed our model, the daily I write for costs about $1000/yr, they are still buying. Showing highly specialised content is king. we are not growing much  but we have a good base. Cable is the bad guy and does not want to give away programmes for free and worried about the next gens used to getting content for free.  the cable industry is working on a model where you could get programming on your laptop and trial of that tech and use are going on, it is the business model that will reward the cable co and the creators..eg TV anywhere -if I buy cable I can get it on any device.
• LL: I work in a growth and innovation strategy firm, we work with companies (Nike, GE, HP ) connect their capabilities with unmet needs with people in the world. We bring together social science, design and strategy.  Eg you are a tech co and want to own digital entertainment, or you want to know how to create content that connects with a new audience etc. we develop strat, new business models, products, platforms etc.  I used to work at Harley Davidson, where I built a division based on experiences. think a lot about fandom, about passion . I look at brands and their communities, plus business models and using cultural change to make them sustainable.
• SA: can you tell us what Jill did?
• PD: there was a multilevel donations. $10 got a copy the month before, there were tshirts, you could sing on the record, get a free concert etc. There were many models. About 50% were in the 15-20$ range.  It engaged the core fan base but brought in other people. Someone did take up the $10k offer (to sing on the record), form the UK, she came and sang on the song. 
• NB: one of the things that got people excited was the cleverness…the words used were creative…why did she decide to take this approach?
• PD: she had been dropped 4 times over the years, there were power shifts, her advocate was fired and left at  labels who did not care.  lables were happy ot give you money in advance, but then drop it. not do any more.  She had enough at that, she is a career artist and looked for a better way.   for a long time Jill had been communicating directly with her fans. She was putting up mixes, getting opinions.
• SA: she could not have done this if she had signed to a label (put up rough cut)
• PD; some of the smaller ones are OK, most of the larger aren’t. The artist now has many different ways to make a living, but a label can only do it by selling records.
• NB: the labels are not as necessary anymore, so that is the crisis. Is that the same for cable channels?
• SA: you made a statement and that is correct.  Looking at the experiment of TV anywhere, a conumdrum is that if stream Mad Men to my computer how do I keep my brand (AMC) in front of you..it is a marketing question. But read tht if they do not get their act together in 18mnths it will fall apart.  
• MZ: they do play a role. They are aggregators, filters and distribution. The web takes away distribution, but there is lots of stuff out there, to filter and aggregate. For Jill to make a living, she still needs to aggregate an audience and that could be the role for these companies. Now they are just a part of that, but it is a smaller piece of the business.
• LL: this links back..previous panel asking about if you have the guts to re-invent, before that it was about leveraging your assets, so how can they repurpose their assets. So HD had factory tours, it was a gift before.. If you start changing money for it, then it makes them angry, but they love to buy things, so if you offer them merchandise, or offer them space to get married, if you offer them value added opps you take assets that are costs and creating values. So instead of cliging to old models how can they repurpose.
• DS: if I wanted to create something cool, I could hire someone here who would be cheaper…so agencies need to remodel – new cost models, agencies need to get out the way, so can produce at lower cost. Let agencies programme manage, creates the whole thing, not just the app etc. Agencies take a wider role, instead of creating and building.
• MZ: media has thrived on fat and inefficiency, either in ratings (which are mushy) or how media is transacted, which has been by handshakes and now we have exchanged. tech has started to eliminate the fat and it scares them.
• DS: it is a spectrum, none of the stuff is free. If you want it to stand out in the pack you need to invest in marketing. So we take a model, gave 2 directors their own shop. They create YouTube videos, it stands out on YT as high production value. but lower cost to produce.
• NB: so this term free?  You said it was really free, it was ad supported…
• LL: it is back to changing business models, where is the value delivered. A lot of what we talk about free it is marketing, it could be content, entertainment, experience. you don’t monetise by charging..so if you read the book free you would be hard pressed to find something that is free, even Google…
• MZ: the concept only works for the person getting it, not the producer. The artists don’t want to give away stuff as they need to eat. They may do some as marketing and promotion, but access for free does not work, there needs to be some exchange of something. it can be knowledge, services. We live in a society where everything has a value, the web you can see it instantly, value stuff gets traffic.  Someone has to pay somewhere. 
• LL you pay somewhere, taxes, a markup etc
• SA:  I play trumpet, in cafes etc, and I pay for free. or do i? i get tips, I can take an opportunity away from someone.
• NB: but you are receiving some kind of reward, so not all rewards are monetary.  there are other kinds of rewards. Sometimes I get worried that the feeling that anything other than money is not a model….
• SA: but if i needed that job to pay be bills then I could not do it…
• PD: but aren’t you playing because you are compelled to play music….
• SA: but the small cafe was called by the BMI wanting payment for the band playing in the cafe…
• PD: the people I work with, free is a promotional device not a business model. The audiences I work with are in the position that they own everything (or they will be shortly) so we can collectively do what we want. free is a component of a larger business plan. Yo give me your email address, age and zipcode and that is a great tool for use. We are trying to build genuine and authentic relationships with fans,…but there is a pushback on the 1000 true fans so you can’t ignore the casual fans.
• DS: sometimes the exchange is explicit…Facebook is not free etc.it is abut content and distribution…we are launching the Ford Fiesta..we gave cars out to 100 people, who were creating content around it. they rewarded with vehicle, but we get the content. There is 60% awareness with no advertising and it does not launch until next week.  
• MZ: the assumption that content is free, an assumption that everyone is writing on blogs because they are interested in them, but there is a lot of product placement out there and now the FTC is changing this. It has not been free and it will ot so lets get the rules out there.
• LL: we do not live entirely   in the world in economics, but we have been so long a consumer we are expected to put things through economics, but it is not always this, we are not always looking for a transaction. But if you are a visit there is a problem unless you can make money
• NB: what is the role in the audience/fan/customer in new business models, how do you work that line between validating them as humans and using them to make money.
• LL" from the world of Harley, peopel are passionate about brand, it is central part of lives.  the relationship was nurtured with a deep sense of respect. if you think about this as relationships, over a long time, how to understand signals. eg they had an open house and hot dogs were free. at one point in time, the dealers wanted to run this and the dealers decided to charge for the hot dogs…the riders now had to pay for this..it changed the relationship. you have to think it as a relationship..with mutual respect, people know you are a business, Harley riders know they pay a premium but they know they get listened to,
• SA: I’m torn. we are all in the business world, we have gone through a recession, You see people laid off, it hardens you quickly, it makes you realise that brand loyalty and respect, it sounds really good but i feel at the end of the day, even with journalism, it is a bottom line business and if you look at the channels, that carry news, it was supposed to be a public service, but I would say that beyond Jim Lehrer every news operation is ruled by ratings. and ratings equals dollars.
• MZ: if you start talking a out community and fan bases and the line between exploiting and engagement. A lot has to do with communication.   There are lots of comms  and great ways to connect, but you have to respect the,. Beacon was a failure as it did not respect their users. You have to communicate… if there had been a sign explaining why they were charging for hotdogs, then it would have gone better.  You have to be transparent in what you are doing. 
•  DS: facebook is no 1 site by time spent, their revenue is <25 of googles. they do not monetise as aggressively as they Google. Google are not linking as much as their data as they could be..people are learning lesson about how to treat audiences.
• AUDQ: often face the problem of distributing public media, public networks. It is easy to go to the question about should content be free or not. I’d like to hear about the process models…if everyone agrees that creators should be renumerated, then what are the areas of friction that could be looked at. Also rights, what if people did not challenge the rights to get compensated, may be the rules are so onerous that the payment can not be done easily.
• PD: I would like to answer his..the people I work with, they own everything, It is about art meets commerce. Part of my job is to help them understand the financial implications, it becomes a non issue when you are the owner.
• LL: there is not one answer. it is who are you, what are your assets, what is your value.  So about moving Monday night football to Sunday night, we looked at new audience, a different set of behaviours. We turned it in to an event, it was more accessible for a wider audience, more accessible for more casual users, they cross promoted on Bravo, Top Chef…they took the same property and did more with it. they thought about value, but still an ad supported model.
• MZ:  a major friction point, beyond the laws. It is truely bout tracking a piece of content and where it goes. So if you could fully trackable and then there’s micropayments, how many people would give stuff away to this
• NB: but as a consumer I’m giving up a lot of data..as some point people figure out about this., why should you monitor my use of it. Isn’t there pushback
• DS:  it cuts both ways, on FB, it is a platform, there is a lot of money on this, a closed architecture etc. But the same value equation can be captured by content creator, you can use tools to monetise that audience, more and more tools to track influence etc. If your audience is connected and a content creator you can track this and that gives you value.
• SA: going back to the question; one of the things my company does is give out awards. We were going to have a big lunch, we were going to give out an award. We wanted to use a clip of the show, you would not believe how many lawyers i needed to deal with to get a 30′ clip
• AUDQ: the key question is not a out becoming free or not..but which types of content is suitable for free? So advertising is one model, the gift economy is another, and a third is a benefit relationship – give away one and money from another. Do you have a theory of which content most suitable for different models.?
• SA: You see that all the time. less valuable content is free. eg the older stuff is free on site, there are things you can pay for on the site
• MZ: in the Office, wikipedia – "anything can write anything they want and it is all true"..so what is information and what is opinion. Factual stuff is being seen as the commodity, you can get any where. The opinion stuff is what you pay for. You can charge for opinion, not for fact. I think that is scary.
• LL: to me, I find the idea of content somewhat problematic. But if you think as it all as experience, then the lines blur.
• MZ: so what is content, if I write a book on my friends facebook content, where is the value,. what is content and who owns. it
• PD ;it can be dynamic and changes over time.  Artists are free, they are no longer bound by construct of a record, artists can release in many forms.  even the same content can change costs. Custom bundling is a big thing for music at the moment.
• AUDQ: people who provide content for free have been demonised…can you address this tension?
• SA: I don’t agree with it. If you can put your product on line for free and it ‘sells’ better then more power to you.  In the cafe, it is unlikely to be able to pay for a band, I play for free.
• MZ: an area where this is being done..design and graphics, eg a company asking their fans to design a logo, no longer paying companies… it undermines designers.
• DS: we own companies that do both…the value in the logo contest is all the checking and everything…
• SA: what about quiznos…they are getting commercial from fans…why wouldn’t they vet?
• NB: we also have writers giving away stuff for free and still selling loads of stuff…