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Free and Freemium

Stefan Peter Roos
 twitter.com/spr2
Stefan Peter Roos
   twitter.com/spr2

economist, web strategist, online business
  consultant, proud music, entrepreneur,
   speaker, music publisher, brainfood
          specialist...whatever
Please note: These slides were used in my
 talk at All2gether Now conference, Berlin
2010 as outline, so the explanation/context
   is unfortunately missing, if you did not
                   attend!

              www.a-2-n.de
Why Freemium?

Why giving away
 your product
  FOR FREE?
Digital Goods:

  Only First Copy Cost
    Marginal Cost=0
No Rivalry in consumption
Exclusion of free riders difficult
From
 Scarcity Economy
         to
Abundance Economy
Attention Economy:

 Wealth of Information
         =
Poverty of Attention

   (and a need to allocate that attention)
Attention Economy:

  Money follows
    Attention
Digital Goods:

 Value determined
AFTER consumption!
Assumption 1:
You can only sell to
people who see your
       value!
Assumption 2:
more new content than ever
The largest back catalogue
         in history
   Just one click away!
    (illegally&legally)
This is a permanent
      change!
    I'm sorry ;)
Well,
not really sorry!
Still true:
 Lowest possible
      price
         =
Marginal Cost of an
  additional unit
Free
       =
Maximum Reach
Assumption 3:

If something can be
  provided for free
 someone will do it!
Information wants to
      be free

=> there will be free
  copies anyway
Music Industry was
 the Canary in the
    coal mine
  => video, news,
 books etc. will be
        next
This is not a
       problem,
if you sell something,
    that cannot be
        copied!
Simple Model:
x*C*S=Revenue

  x=Reach/Attention
  C=Conversion Rate
S=Average Revenue/Fan
x*C*S=Revenue

         Attention
     
        you generate (paid)
      
       through sharing (free)

 Social Recommendation (free)
  
    Derived (fan) Content (free)
x*C*S=Revenue

Conversion Rate
       
         Brand
      
       Emotion
       
        Loyalty
   
    Artist History
          
           ...
x*C*S=Revenue

    Average Revenue/Fan
      
       Direct Relationship
          
            1000 Fan Model
        
         Product Diversity
     
       Recurring Payments

 Royalties through Fan Activity
Mike Masnick:
Connect with Fans
 + Reason to Buy
 = Artist Revenue
What are the
building blocks
 for a business
     model?
Sunscreen Song...
     (Baz Luhrmann)

       If I could offer you only one tip for the future,
 freemium would be it. The long term benefits of freemium
   have been proved by scientists, whereas the rest of my
advice has no basis more reliable than my own meandering
                          Experience…
               I will dispense this advice now.
Use many different
 blocks to a well-
  balanced mix!
Free is giving you
      reach!
Being a Brand
  gives you
 Monopolistic
 Competition
Stop thinking
 Files/Units!
Stop thinking
  Records!
Become an IT
     company!
Access to Music is a
 software service
Be the center of a
     Community!
  Let fans interact
through your service!
Embrace Read/Write
     Culture!

   Everything will be
      Read/Write
     from now on!
Create positive
Attention & Viral
     Loops!
Create frequent
Touch Points for
     Fans
 (not just a release)
Learn to connect
 with your fans!

   Practise!
Have a product on
every price level!
casual flattr
   Live events
  NIN-Boxsets
Fan-Meet&Greet-
   Weekends
 Crowd Funding
Be damn good at
   what you do!

Stand up to the plethora of
world class entertainment
     one click away!
Music itself is hard
   to innovate
    nowadays
Better innovate in
   Image, Show,
Packaging, Intimacy,
      Channel
Recorded Music is
just the beginning,
    not the end
Get used to new thinking:



 Audio Only might
 (eventually) die.
Fotos may die too!
Keep the mystery!

Do not twitter like your
   buddy next door!
Be better than free!
  (Kevin Kelly):
1. Immediacy         5. Accessibility

2. Personalization   6. Embodiment

3. Interpretation    7. Patronage

4. Authenticity      8. Findability
Sell something that
 cannot be copied
Uniqueness – or
Keep fan switch cost
      in mind
Everything atomizes
 => Forget Album
     => Track
   => Elements
Most want access,
hardcore fans might
want to own sth. of
  emotional value
Different levels of
involvedness: It's
 about emotion
More Music Business
– less Music Industry
The Time is now –
Music for the People,
   not Records!
Markets are
   Conversions!

Read the Cluetrain Manifesto
          (again)!
What to take
  home?
Most ideas have
been tried out before
       but:
without easy
  payment
with strings
 attached
   (DRM)
without instant
mobile access
not yet in a lean-
 back situation
without bandwith
 for HD Video &
   great sound
without social
recommendation /
  sharing culture
without the
internet usage /
 number of pot.
 Fans of today
The original Napster may have been the
greatest music loving community
- remember browsing everyones harddrive
- nice instant illegal access
- pure music, no strings attached
- state of bliss


=> let's try again, but this
time legally, with payment
for artists involved
Thank you!
   Get in touch:
 www.proudmusiclibrary.com   www.proudsourcing.de



Stefan Peter Roos
 twitter.com/spr2

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Free and freemium in the music business session outline