Internet Business Models
Companies have been so accustom to their business models that when the Internet really exploded, people were forced to decide which way to go. Companies either jumped on the band wagon and tried to radically change their business models to accommodate the Internet or, they tried to completely pass on the “fad.” Companies that took the initial leap were susceptible to the dot-com boom and burst so holding out was a legitimate move.
Failing Business Model Evolution
Now that Internet business models have stabilized and it’s rather common knowledge which work and which do not, it’s business suicide not to make an attempt at the Internet market. This is what happened to record distribution (what we call record companies) and film companies. Business models must be agreed on by both consumer and producer and are not just whatever companies chooses to do. Clearly, few agree that record companies should be making 99% of the profit from record sales when the artists make fractions per album (most artist profit comes from touring).
Film companies, on the other hand, aren’t at fault for poor business models as the record companies are. Instead, rental companies, such as Block Buster and Movie Gallery, were using the “late fee” model. Movie rental consumers hated this model and Netflix is stealing the industry. Record companies should have moved to an Internet model for music sales. Instead, Apple with iTunes and Amazon took over the market way after the market should have been occupied. Record companies are wasting their resources trying to force people to use their deprecated business model while new players take over.
Successful Business Model Evolution
Newspapers and periodicals could have easily been gobbled up by blogging and Internet news, just as record companies are, but publishing companies were already used to the ad driven revenue model. The New York Times and Wired, for example, both have excellent and highly successful websites that compliment and facilitate their periodical sales.
Television companies are also catching on with their on-demand sites. CBS just announced the acquisition of Last.FM (I’m a huge fan by the way) and plans to monetize music as well. With so many non-record distribution companies saturating the online music distribution market, record companies really have nowhere else to go but down.
Full Circle
Other industries have been torn apart and rebuilt by the Internet. Customers hated going to travel agencies and having people be completely condescending towards them and now people plan all their trips online. Sites like Travelocity, Orbitz, and Priceline have completely commoditized and revolutionized travel.
The recording industry seems to be the biggest (and perhaps the only) industry stuck in limbo. This war on music will likely last for a long time with so much record industry money to burn and so many people to burn (people who are “stealing” music).
- None Found