The Open Road

(Credit: Doigy Media)

For those who have yet to grok the Open Core business model, Trent Reznor of Nine Inch Nails fame will sing it to you. In a series of forum entries, Reznor explains exactly how to build a music business on the Web and, in the process, classically defines Open Core, the primary business model for open-source software, too.

Reznor writes:

Forget thinking you are going to make any real money from record sales. Make your record cheaply (but great) and GIVE IT AWAY. As an artist you want as many people as possible to hear your work. Word of mouth is the only true marketing that matters. To clarify:

Parter with a TopSpin or similar or build your own Web site, but what you NEED to do is this--give your music away as high-quality DRM-free MP3s. Collect people's e-mail info in exchange (which means having the infrastructure to do so) and start building your database of potential customers.

Then, offer a variety of premium packages for sale and make them limited editions/scarce goods. Base the price and amount available on what you think you can sell. Make the packages special--make them by hand, sign them, make them unique, make them something YOU would want to have as a fan. Make a premium download available that includes high-resolution versions (for sale at a reasonable price) and include the download as something immediately available with any physical purchase. Sell T-shirts. Sell buttons, posters...whatever.

Having trouble following that? Well, the excellent TechDirt simplifies it:

Connect with Fans (CwF) + Reason to Buy (RtB) = The Business Model

In the software world, "Connect with Fans" is the community download. It's the software made freely available for anyone to download, tinker with, and share (if they wish). As noted in a recent MindTouch post, word of mouth is an open-source project's best friend, and word of mouth depends upon giving people something to talk about.

Unfettered discussion. Highly usable code. These are the key ingredients to driving word of mouth.

As for Reznor's "Reason to Buy," that is the enterprise version. Importantly, it's not really about lock-in so much as it is about (temporary) lock-out: Open Core, just as with Red Hat's licensing model, isn't about forcing customers to stay so much as giving a convenient, compelling reason to buy. Once the customer is in the door, every open-source company I know makes it easy to leave and depends upon a subscription offering that forces the vendor to deliver continuous value to earn the customer's loyalty.

Community is for the geeks: it's all about code, code that average consumers could not possibly care any less about ("I thought that obsessing about an OS in 1993 was depressing; why are we still doing it in 2009?").

Enterprise is for users who just want to get on with their day, and want software to be part of that day without consuming the day.

You need both but, as Reznor accurately describes, you must have a compelling reason to buy. Charitable urges don't count.