Open source hasn't traditionally been thought of as an innovative force, but based on suggestions that the media industry is borrowing its leading business model, perhaps open source is at least the sexiest nun in the convent.
Whether you're selling software or newspapers, it's tough to get paid in the digital age. This is due, in part, to shifting value.
As Arnon Mishkin, a media consultant with Mitchell Madison Group, suggests, "The vast majority of the value [in news media] gets captured by aggregators linking and scraping rather than by the news organizations that get linked and scraped." According to Mishkin, this sets up an untenable situation where the Googles of the world get rich on the work of organizations like The New York Times...which ultimately can't afford to be "scraped" anymore.
Rather than rage against the digital machine, however, some organizations are fighting back, and doing so with one of the open-source industry's preferred tools: open core.
The Financial Times, for example, is looking for ways to balance free use of its news assets while charging for premium content through micropayments (for individual articles) and subscriptions. The idea is to give away the core of its product to casual readers and charge for more "professional" interest.
It's Zimbra's business model, but for newspapers.
This is the right approach to digital commoditization, rather than the sue-them-until-they-pay approach that the music industry has taken (and which the U.S. Department of Justice appears to condone). Users of digital goods, as Linus Torvalds will tell you, are not parasites or thieves: they're customers waiting to be converted.
The Open Core approach is working very well for the companies that employ it (Disclosure: Alfresco, my employer, increasingly uses this model), and sees various permutations even outside digital goods. The airline industry, for example, is being turned on its head by the discount carriers, which have discovered all sorts of innovative ways to make big business on low prices.
If there's sufficient value, users can be converted to customers. The question is 'how?' Open Core, with its emphasis on both adoption and monetization, seems to offer a compelling answer, whether you're an open-source project or a global media brand.
Follow me on Twitter @mjasay.
Just as Amazon and Google are obliterating profit margins for old-school publishers, so, too, is open source putting the squeeze on them, whether in cloud computing or in search or...you name it. As the world digitizes, there's a mad rush to commoditize everyone else's business. This is good for consumers (low prices!) but not so good for vendors (low margins!).
The problem (and promise) of digitization is, of course, "free." Everyone loves to pay "free," but few really enjoy selling it. Or competing with it.
As Bill Gurley suggests: "The key question for anyone in business is, 'Can someone do what you do for free?' If the answer is 'yes' you have a problem." In a digital world, that "problem" is wreaking havoc on an increasing array of industries.
The problem, however, isn't "free.'" It's that old businesses persist in trying to charge for goods that others give away.
Twitter, for example, may not be making much money from its service, but a host of companies are starting to derive considerable cash from the sale of ancillary software or services, as TechCrunch points out.
Or take the media industry. As Andrew Savikas persuasively argues, media continues to think it's a content business, while the world believes it's a services business.
JP Rangaswami illustrates why:
What if the troglodytes finally began to realise that customers were scarce and digital music was abundant? What if they finally began to realise that downloads were an excellent way to advertise scarce things like concerts and physical memorabilia, as Prince figured out?
And what if the customers have given up and moved on, from the download to the stream?
It was never about owning content. It was always about listening to music.
It was never about product. It was always about service.
The customer is the scarcity.
That scarcity only appears to grow as digital goods proliferate. So much content seeking audience with comparatively few consumers. Something has to give.
That something is, first of all, old business models premised on selling an abundantly available good as if it were scarce. The real model is to foster abundance while selling the scarcity that naturally accompanies it. Google gives away search so that it can help you narrow that search with ads; Red Hat encourages open-source development so that it can boil down that teeming mass of uncertainty to a certified, stable build of Linux; and so on.
Some in the software world don't get this. Microsoft CEO Steve Ballmer can repeat ad infinitum that "We just keep coming and coming and coming" with the same strategy, the same software, the same everything.
But eventually it won't, because even Microsoft's bank balance and "Tenacious. Tenacious. Tenacious" approach can't withstand a perennial battle with 'free' (or enterprise customers' apparent indifference to more of the same). Not unless it can re-learn how to make 'free' work for it, as it has with SharePoint.
The same is true for the media industries as well as new-school software companies like Google. Today's profit center is almost certainly going to be given away by one's competitor.
That's why creative destruction must be creative to pay off. It's what drives innovation. No one is entitled to its business model forever, for which consumers should be very, very grateful.
Follow me on Twitter @mjasay.
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