Today’s dotcoms start with what consumers might actually really like / want and then work back; they don’t start with how to sustain an ancient and creaking business model and then try to continue to foist this upon unwilling and suspicious consumers. Then we, the ancient and creaking old world businesses, have to scramble to work out how to react.

So, what is Spotify? Well, it might just be the service that creates the tipping point at which consumers of music decide that online streaming is the best way to access the tunes they want to listen to. Forget downloads, forget which format / device to adopt, forget DRM… most importantly, forget paying for it. It’s just a huge online database of tunes (for which Spotify have cleared the rights through licensing deals with the labels) into which consumers can plug and play (via online streaming) any tune they want, any time, any place, via their computer or mobile phone.  For free. It looks and feels a bit like iTunes, with the ability to create playlists and share tastes with friends. But – did I mention? – it’s free. And legal. It’s amazing.

How does Spotify’s business model work? It’s advertising funded. This is the only catch from a consumer perspective, but Spotify has an answer to that, too. if you don’t like the sound of advertising interrupting your listening every 20 minutes or so, you can pay a low monthly subscription (£9.99) to access the service advertising-free.

The central question it poses and which publishers need to be considering now before the same business model is applied to books, is, how much does ownership matter when it comes to content? And what will the commercial shape of the deal between a Spotify-for-books and publishers need to be to sustain such a model? For the music labels, I can imagine there is a sense that artists need to be represented in Spotify, just as they need to be represented on the radio; if the revenue from the Spotify deal doesn’t cover the lost revenue on downloads this is something they must live with to ensure their artists get ‘airtime’, that their music gets promoted and shared, that the buzz gets generated and that hopefully, just hopefully, some people will still want to download and ‘own’ the single or the album, and, if not, that the artist might still be able to make a living from touring or merchandise.

But how would this translate to books? I don’t know that we have the answer to that right now, but we better start thinking about it, pronto.

You can download the ebook from Scribd

Since yesterday it’s been downloaded over 3000 times. The ebook will cease to be available as a free download after October 15th, 2008. Kudos to David and good luck to him!

The premise of the day was simple. In the digital era information and hence media (and the creative industries) exist in a frictionless environment where data can be copied and disseminated with ease, moving outside the traditional revenue earning channels and fundamentally threatening the business models of publishers, record companies and film studios, amongst others, not to mention artists, retailers and all the other subsidiary industries dependent on the sector. How, in this situation, to make money?

Rather than going into detail about the proposed models- there is an excellent wiki explaining many of the ideas floated in depth- I will sketch an outline of the day and offer some thoughts on what was discussed.

Our host for the day was the affable and acutely knowledgeable Suw Charman, a director of ORG, who spoke about some of the models creative business might consider, the impact of social media and the difference between a product, a complement and a substitute. This was fascinating: companies produce products e.g. an MP3 player, which can be substituted, e.g. by another, rival, MP3 player, but a product also comes with complements, e.g. an MP3 player sock. The crucial economics here is that when the cost of a product falls demand for the complements increases.

So if MP3 players are going for a song demand for MP3 socks will skyrocket. The ramifications for the creative industries are clear: if your product is being consumed more, an increase in this case facilitated by internet piracy, demand for products and services around that product will increase and by getting involved with those complements the initial loss incurred can be made good. This is the thinking behind record companies eager to get in on merchandising and touring. Its quite difficult to apply the thinking to books in that books don’t have obvious complements. In the discussion it was interesting to see that many other industries- from gaming to photography- had many monetisable complements while book complements were mainly intangibles. At any rate its a challenge for publishers and something we could do with thinking about.
Over the course of the day we did some roleplay style workshops. The first was centred around the great Radiohead In Rainbows experiment (no longer running, alas), where small groups were assigned a role in the process and asked to work out a strategy around what amounted to the band giving away free albums. In the second exercise groups were given a product, my group was given a children’s TV show, which we had to launch in the new media space. After half an hour of intense discussion we had come up with a killer strategy that would maximize audience engagement (having games and clips on Bebo and mobile, a second showing in Habbo Hotel etc) while attempting to safeguard DVD sales.

In the Radiohead game earlier in the day I was on a team faced with some difficult choices. We were the record company. Taking it back to before Radiohead left EMI rather than the current outfit, we decided that keeping bands on board in the digital era was paramount, and so decided to go all in the on the experiment, bringing our marketing and publicity apparatus to bear and improving the experience of a site which many found overly difficult. While acknowledging the risk we argued that without headline acts like Radiohead we would ultimately be in trouble.

Three case studies presented through the course of the afternoon. There was Tom Reynolds, ambulance medic and author of the blog Random Acts of Reality and its print complement, Blood, Sweat and Tea. Tom spoke about the positive experience of releasing his book under a Creative Commons license and discussed his varying experiences of blogging and publishing, advocating a position that writers and publishers had little to lose by using CC and much to gain, echoing Tim O’Reilly’s comment that its obscurity not piracy that is dangerous.

Second up was John Buckman who runs a truly extraordinary online music store/record company called Magnatune, a company with more wildly experimental, seriously cool business models than I can remember or explain. Suffice to say it holds numerous lessons for more conventional retailers. Buckman takes a refreshing attitude to sales, never thinking in terms of possible sales lost, only in keeping revenue coming in. It gets over a target driven mentality being a kind of zen business that must take some balls.

Last up were David Bausola and Rob Myers, talking about the transmedia narrative they created in partnership with Ford last year, Where are the Joneses? Working from communications agency Imagination with TV production company Baby Cow they used web services, primarily Youtube and the blog but also Twitter, Facebook etc, they provided daily updates of a Europe wide search for twenty seven lost siblings. In an interesting blend of comedy TV and ARG they had a great success and pushed the boundaries of narrative, particularly TV narrative, on the web. To give a sense of the story, it all starts with a sperm donor…

Overall it was a great day and I left feeling full of confidence after hearing numerous brilliant ideas, many generated off the cuff in the informal discussions, of how artists and businesses can not only survive but really go forward in the digital era. As an industry we are often prone to introspective gloom about future prospects. With a little creativity, a little bravery and a lot of listening to people like the attendees of CBDE things might work out.

Photo: 17/08/06 Creative Space by Karsoe