As the Internet dismantles one business after another, it's surprising how fungible the responses to the Web have become.
Reading a recent Economist description of the changing newspaper business, for example, I was surprised by how much its transformation mirrors the software business. The Economist suggests a change to the economics of news businesses:
(T)he plight of the news business does not presage the end of news. As large branches of the industry wither, new shoots are rising. The result is a business that is smaller and less profitable, but also more efficient and innovative.
This is almost certainly what open-source software is doing to the traditional develop-a-product-and-license-a-million-copies proprietary software business. Open source is not a monastic pledge to poverty; instead, it's an alternative way to wring profits from a bloated industry that has gotten away with monopoly rents for far too long.
Intriguingly, though, even the business models that appear to be working for News 2.0 are the very same models being deployed by budding open-source software companies. The Wall Street Journal's bifurcated content model sounds suspiciously like open-source software's Open Core model and our attempts to create hybrid-source business models:
The Wall Street Journal takes a shrewd route to a similar destination. Rather than charging certain types of user, it charges for certain types of news. Earlier this week, it offered for nothing a story about swine flu, a review of the new "Star Trek" film and a report on looming cuts at car dealerships. It charged for pieces on Cigna Corporation's pension plan, Lockheed Martin's quarterly lobbying expenditures and a lawsuit against a bottling company which alleges that a board meeting was held improperly. In short, the fun articles are free. The dry, obscure stuff costs money.
The open-source analog is Zimbra giving away its standard e-mail software but charging for the "boring" (but necessary to enterprise roll-outs) bits like multi-domain support and Outlook/MAPI sync.
This is why I often talk about the entertainment industry, newspapers, etc. in the midst of an open-source software column.
The solution to the music industry's P2P woes should provide significant insight into the business models that will fuel open-source software for the decades to come. The best models for open-source software will almost certainly suggest clues for monetizing Twitter, online video, and more.
Indeed, Twitter's founders on Tuesday told CNET that they're focused on building a great product first, and fixating on profits second, which sounds a lot like Red Hat's model over the past few years of growing revenue slowly, but customer value quickly.
We're all in this Internet thing together.
Follow me on Twitter @mjasay.
Ars Technica has the dirt on an admission from Vivendi CEO Jean-Bernard Levy: digital music downloads might not be evil, after all.
Just in case you don't know, Universal Music Group--one of the Big Four record labels--is a wholly owned subsidiary of Vivendi. So this is a big deal.
As Ars Technica reports, Universal's music business is up 3 percent, halting a long-term slide toward oblivion:
Digital, of course, is the big driver of better economic performance. At Warner, for instance, it made up 20 percent of total revenues in the second quarter and generated 39 percent more income that it had a year before. Universal notes that its growth is fueled, in part, by "the momentum of digital sales growth."
Imagine that. Studies have shown that peer-to-peer downloaders tend to pay more for music, but I think the larger trend is that many of us simply want easy ways to consume digital goods and that forcing us into an offline purchase was a losing strategy.
Apple has made it easy to buy music online and has an 85 percent market share as thanks.
Clay Shirky, a new media professor at New York University, recently noted that the music industry is the "skull on a pikestaff as a warning to others about how not to deal with the Internet." Finally, however, things may be changing.
The music industry now needs to continue its experimentation with digital downloads, making it ever easier to discover and consume online media. That's the future.
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