There is No Business Model on the Internet
There have been two noteworthy content additions to the internet yesterday that portray a story that I have been battling with for the last year and a bit. The big question these days for numerous people and whole industries is: How do you make money by creating novel content for the internet?
There is the newspaper industry mentioned in the last blog post, there is the tv industry, the bloggers, the musicians, the online-vjs, the painters, the photographers, the illustrators - about each and every person in the creative business has this big question mark over their head. For me I always thought that at least some have no big problem because they have big enough a brand that money just flows in no matter what they do. Such was my thinking with the NineInchNails (NIN) who have had such a huge meme going by untether
them-self from the grasp of a big music company and self publish their heralded music under a creative common license with a "pay what you want" model that included "pay nothing". As far as I heard they had millions of downloads and the whole thing was a huge success. Now I hear this really long substantial indepth interview with Trent Reznor - lead of NIN in the Digg Dialog Series (Digg users ask questions).
I encourage anyone making content on the internet and trying to make money to watch it. He explains a lot of the inside of the grant experiment with the internet and while he is - like many of us - absolutely enthralled by the possibilities of reaching out to millions of people and spreading his art to places that a generation before us could have never dreamed of - he makes it very clear - not even for a big brand like his is it possible to easily generate money and they barely made a profit with merchandise - donation and pay what you like has in his eyes completely failed - that means the 1000 fans rule that has been talked about is really not that true because NIN has definately more then 1000 fans. (yes they scrape by and probably better then most other musicians on the net judging from the massive amount of hardware in the background but he says twice that they are barely making a profit and I believe it 100%). Now he is reiterating what I thought when it comes to advertisement - there is so many and its not really that usefull for generating money and you loose people who are just sick and tired of seeing pages full of ads with a tiny bit of content in the middle - I will get back to that point in a second.
The most revealing thing he said for musicians out there is that its simply almost impossible to try to sell the music itself as music is comprised of bits and bytes there is certainly always a copy floating around the net for free and people prefer free over anything - the iTunes store does not help this situation at all - contrary to what the big press tries to spread. Very insightful interview an absolute must watch.
Some now might say "oh there are so many sites that are advertisment supported and seem to make a good living". I thought so too but another article from yesterday seems to absolutely ridicule that line of thought and makes you wonder if money and the net goes together in any kind of form or shape. The same article also supports another theory of mine - namely that you shouldnīt spend hours on for profit social media sites because they can go boom any minute and then all your content goes boom with it - all the time spend is then lost - you get nothing and you didnīt even do anything wrong (other then giving your time to a big company that is).
I am talking of nothing smaller then YouTube. The article in question is called "YouTube is Doomed". First I wanted to shrug it off as somebody seeking attention with such a headline but the reasoning is sound as it is scary, clear and probably quite right.
YouTube - and I hope you are tied to your seat - made a loss in revenue of roughly $500 million. That is after 3 years in googles hand. Not even Google can sustain such a lossleader for a very long time - no matter how much they paid for it in the first place. I completely agree with the article on that. Then the article does some real good investigative reporting by trying to see if YouTube could ever be profitable - and the clear answer is no. There is no math that would support this even if Google would plaster adverts over any and all videos and charge 3 times as much as they do today they would still loose money - especially with their operating costs multiplying as their catalog of dogs on skateboard movies grows.
Now if Google canīt make money on the internet with content that they donīt even need to pay for - how in the world would a content creator earn any money?
I mean its probably possible to survive but these two anecdotes by what is perceived the most successful in their niche on the net just show to me that there is no sound business model. Still all content comes to the net with full force. I would conclude that the internet and capitalism as it is right now just donīt go together and probably never will. Bits are free. You canīt cage them because then nobody sees them and then nobody knows that they exist. If you send them around with a cage around them somebody will find a way to help them be free - that is their nature and there is nothing that can be done about it except for caging the people them self.
YouTube is doomed @ business insider
Digg Dialogg with Trent Reznor