A few observations about your comments:
The record labels have not 'discovered' merchandising as a major
source of income __after the start of "internet piracy".
Merchandising, especially when it goes hand in hand with concerts, has
been a bigger source of income than the sales of records even for the
biggest of bands for a very, very long time. The famous example is the
Grateful Dead, who allowed bootlegging of their concerts as a way to
market their music in order to get more public to their concerts and
sell more t-shirts as well as official records. It is worth noting
that they started doing this __after they already had established a
relatively large following.
Also, record companies have not in any way given up on fighting what
they see as "piracy" or "theft". This is not greed, they are simply
hanging on to a business model that once worked but is severely broken
Secondly, about the whole idea of giving things away to drive sales of
what you call derivative products.
While I do agree that this can be a good strategy to drive sales in
certain cases, there are a number of variables in the equation that
are often overlooked or underestimated.
The Freemium model in the software world - you mention Google and
Facebook as examples, although they earn from advertising, not or
hardly from users paying to use their services. This model only works
really well on a massive scale. Generally a very small percentage of
free users become paying users, often just single digits. These few
sales have to support all the costs that need to be made to generate
the free users. This only works if the real costs you incur for the
free users (production + distribution) is relatively negligible (the
mythological near-zero costs of today's online economy) and paying
users can be charged a high-margin fee that is still perceived as
reasonable for the product they receive.
The question is; if 'intellectual products' as you call them are given
away for free, what is it that can be sold at a premium?
The only (limited) succes-stories I've heard is of writers who gave
away older books for free in digital format to generate interest in
new works. This may or may not work for film and video, but would be
hard to implement for most other types of works. Ubu.com distributes
low-quality copies of films that can be rented or bought through
Here, IMHO, any effectiveness of this strategy is likely to go down as
more institutions start doing the same, thus driving down overall
sales. There's a famous experiment in marketing that involves 2 tables
with jars of jam. On one table, only a few different types of jam are
offered, the other offers a much wider selection. Though the second
table has more people stopping to tast (free users), overal sales are
lower than at the first table.
A few artists, mostly designers, have been able to come up with a new
product that can be sold at a profit, but this is hardly a feasible
strategy for most other artists or even cultural institutions.
As for selling advertising while giving away art or other
'intellectual products'; I'm afraid that model will fall flat on its
face once you approach advertisers. Advertising is by now a low-margin
industry that relies on scale and the ability to reach well-defined,
targeted audiences. The Googles and Facebooks of this world have been
really good at both, but I still have to see the first cultural
institution that knows as much about its audience as systematically as
these companies do.
Despite all that, I do agree that we should investigate alternative
business models and that locking works up in media that artificially
prevent reproduction is not a valid road.
But these business models need to be developed with a full
understanding of the facts.
> Date: Mon, 24 Oct 2011 17:05:50 +0100
> From: Paolo Cirio <[log in to unmask]>
> Subject: Re: October Theme: Copyright
> hi fred,
>> about "Paolo's observation below, about digitization being a one new way to increase revenues, when seen with "business eyes." I can tell you that from the perspective of one non-profit organization in the United States"
> well, it seems to me that the question is not if the free sharing of cultural products damage not-profit organizations, but the point is actually about funding cultural organizations, public institutions, artists, and so why there aren't even funds for normal public libraries anymore. there are many ways to sustain art and culture and the political and economic climate of today is not really helpful and creative about that.
> i think that the free sharing of digital content increases the popularity of intellectual products, and so also the effective derivative revenues. in fact in my email i was speaking about devices, advertising, etc. big money that Google and Facebook know how to make out of free services and content.
> another example can be pop music, which is the most pirated ever, but it's still the one that dominates the music business. this because the majors learned about not getting revenues by selling supports of the digital content (cd-rom, mp3, etc) anymore, they shifted in charging more on the derivatives works, like merchandising and live performances, which in fact they recently became very expensive, but at list we don't pay for the supports, and we get used to have the digital files for free, or just through the streaming of Youtube and other online platforms.
> if the majors still aggressively condemn piracy is just for greed, not because they did't manage to move on with other business models that the contemporary technology requires.
> so i suppose that there is a shift going on about business models and we are just try to understand them and catch up the right model. i think we shouldn't lock all the digital cultural products in not replicable media, or licensing it with strict policies, that is really a conservative and unworkable way to cope with digital content.
> i know that my considerations seem oversimplifications, but i look at the macro systemic schemes, which sometime are forgotten.
> all the best,