kidmercury

Marketer Seth Godin and music business guy Bob Lefsetz recently blogged about the issue of digital content (i.e. mp3s, downloadable movies) and pricing. Here's Seth's take; here's Bob's take. Both are essentially arguing that low prices are the key to stopping piracy and enabling a new source of profits via digitial distribution. Seth writes:

At fifty cents a rental, all desire for piracy goes out the window, replaced by convenience, ease of use and a clear conscience. More important, entire new services show up, habits are built and the studios end up with a direct relationship with consumers who want to hear from them. If they don't get greedy at the start.

I tend to disagree.

From a business strategy/theory perspective, digital content is fundamentally disruptive. Disruptive stuff tends to (1) commoditize something and (2) use whatever is being commoditized to create new value.

This is why mass-produced, non-personalized digital content needs to be free. Such content is commoditized, and value is shifting to monetizing influence and creating a community. We talked about this recently when we discussed the marketing strategy for the new Guns n' Roses album. This is also why I believe influencers -- and musicians, for better or worse, are naturally influencers -- will end up having their own social networks, and why "record label 2.0" will be partially about creating and managing social networks for artists. For these reasons, musicians are definitely a target demographic I have in mind for marketing ActoWorlds, when we are ready for it.

Related to the idea of free content, building a community, and disruptive strategy is the notion of property rights. When you charge something, you are essentially implying a somewhat standard copyright model; you're not explicitly encouraging sharing and remixing, because that cuts into sales. Of course, the publishing model of the future is to encourage remixing, and use it to build a passionate community -- one that does marketing for you, and helps to co-create your brand and even your products. This is also how production and development costs can be reduced significantly -- something critical to the economics underlying digital production and distribution. In fact, I would argue that the cost savings opportunity afforded by freely distributing content is greater than the profit opportunity in selling that content. Understanding and leveraging this point is critical to new media publishing revolution.