I have no business background. I am a college professor. Still, I believe in funding models and I distrust situations in which I cannot figure out what the funding model is. Often, the funding model is there but not apparent. Some web companies offer content or a service in hopes you will click on ad links that generate some money for the owner of the content or provider of the service. Providers must weigh the cost of creating the content/services against the ad revenue they generate. Some companies offer free services just so web users will spend more time with other revenue generating web services. Maybe the only benefit is reputation that generates a payoff in another area – call this the college athletics model. The model also works quite well for Google. I see today that the founders are buying a fighter jet. In my way of interpreting the world, the reputation model explains the efforts of some who create web content/services and then make a living speaking about their experiences. The web resources are basically advertising.
The music distribution “industry” is fertile ground for exploring competing funding models. There is file sharing, but I don’t count illegal ways of making money as funding. iTunes is clearly the leader – if I remember correctly Mr. Jobs claims the iTunes store now sells more music than any other outlet. Apple has now forged ahead of Walmart.
For a couple of years, I have been following (and paying a small monthly fee) to use LastFM. This company is more of a social site focused on music. If you are into the social thing, you can interact with others and learn about music in the process. This following/friending thing gets a little weird when you are sometimes 3 times the age of a potential friend. Perhaps classical rock, blues, and jazz works something like classical classical – good music is simply good music. Anyway, you can “discover” music that may interest you by noting the gaps in the overlap with others who have similar tastes. It works much like exploring the social bookmarking sites of others with similar interests and finding new sites you have yet to explore. You pay a little for this service and you contribute by simply using the site and sharing your own preferences. You do end up purchasing music, but not from last.fm.
I mostly pay the last.fm fee because last.fm keeps track of the music I listen to online and from my ipods. I am interested in these data (nearly 60,000 plays now) and in the “online radio” station I can access based on my preferences. They can’t play specifically what I request, but the “mix” is so heavily saturated with my favorites that it does not really matter. Not sure how this is legal. I assume there is an ASCAP fee. I guess my $4 a month must cover the cost. Beats me.
My new experiment is LaLa. You can pay to download MP3s (without DRM) for .89. You can also pay .10 per song to create an online library you can continually access from any computer. In addition, you can upload the music you own (the site went through the 4000+ songs I have in my two computers with iTunes accounts) and play this music online just like the .10 songs you purchase. I sit at a computer the great majority of my waking hours so this seems like a steal. I will likely invest $10 a month in this site, but I could easily play 20-30 hours of exactly the music I feel like listening to from this site each week. I understand they are generating some money, but I am not certain they will make much money on me. The bandwidth costs must be immense. The cost for perpetual online access to the music I purchase is low, but there seems some possibility this company may not make it and then all that dime music is gone. We will see. Go slow.
What about Pandora and PandoraFM? Free music as in FM radio. There are some ads on the sites. The Music Genome project which selects the playlist based on preferred artists and then songs you like and dislike first interested me (for those interested in the latest from Apple – this is very similar to Genius). I am not sure how these sites make it. They offer a great service to those who purchase music and I feel certain they encourage the sale of music, but they pay to stream nonetheless and face serious challenges.
I read a blog post today from Rheingold’s SmartMobs blog describing the FlatWorld Knowledge project. I have commented on this venture previously because the idea is to offer online textbooks for the college market at no cost (you might pay for ancillaries). The blog post indicates the company “announced the completion of a $700,000 round of funding“. Talk about an angel investor.
The Flat World Knowledge Business Model
Flat World Knowledge publishes professionally-produced, peer-reviewed college textbooks from leading educational experts. The company offers the textbooks as free web-hosted textbooks to students, and earns its revenue by providing students the option to purchase print-on-demand textbooks, audio textbooks, and digital study aids.
I would love to meet the folks who sold this model. I have been in the higher education setting for 30+ years and my experience has been that it works in the opposite way. You can give away ancillaries to instructors and students for using your book. I would be very skeptical that you can get enough students (and instructors) to fund the costs of free books by purchasing supplements. There is plenty of supplemental material already available at no cost (e.g., Merlot, search for instructor generated content in about any area of interest using Google). The effort and expertise to generate 300-400 pages of content requires an entirely different level of commitment. Perhaps states should commit funds to a grant program to support authors. Perhaps professional societies could generate resources (wait they are selling their products and clearly do not see themselves offering educational resources at no cost). I am certain that many universities are interested in this project (at least according to the press release). I wonder if these universities would be interested enough to fund summer writing projects or do they believe in the “free” business model too.
