Board of Innovation » Entertainment & tourism

A Visual Map of the Music Sector Ecosystem (version 1)

Philippe — Mon, 04 Oct 2010 16:56:10 +0000

What entertainment would you miss most on a deserted island? When people are asked this question, music is seen as most essential (80%), significantly more than the internet, books or mobile phones (research by BPI Statistical Handbook 2010). Young people even listen to music up to 6 hours a day; yet they only spend about $80 per annum on music, a figure that is declining year on year. Also check out the great infographic How Much Do Music Artists Earn Online. In summary: despite the huge value people attribute to music, the music sector is struggling to get paid for the value they offer. In the search for new business models that better capture this value, we do see a lot of (successful) experiments: pay-what-you-want concepts like Radiohead‘s, social capital exchange markets like Headliner.fm, music streaming/subscription services like Spotify, crowdfunding concepts like Sellaband and KissKissBankBank, Get one-Give one initiatives like Fairsharemusic.com, and many others.

Ecosystem music industry

We need your input! In light of this (r)evolution, we set ourselves an ambitious target of visualizing the whole sector business model, as a basis for future innovations. Explore this first/beta version of the Visual Map of the Music Ecosystem. The ecosystem is represented using the new Business Model Blocks. This is an (incomplete) version 1, open to all your suggestions and improvements for the next iteration! What have we missed? Which transactions or exact figures would make the visual map more complete? Download the pdf version or have a look at the full picture. Thanks for your suggestions; all contributors will be mentioned on the next version.

Pay-what-you-want for gaming & charity

Nick — Mon, 10 May 2010 13:59:58 +0000

In the growing series of pay-what-you-want concepts we can now add the Wolfire Indie gaming bundle. Gamers come to their webshop and decide for themselves what the bundle of 6 indie games is worth to them. Not only do they decide how much they are willing to pay, they also decide where their money goes to. By using simple sliders they divide their payment between three parties: Electronic Frontier Foundation, the actual game developers, and the Child’s Play charity organization. It’s by the creation of such a personal connection between buyer and seller that the perceived value of products can be increased. And it works, at least in this case.
Being transparent is another way to add value. Wolfire’s revenue communication for instance is very open. Looking at their figures we can learn that an average user today is willing to pay $8,41. Linux users pay remarkably more ($13,96) than their Windows counterparts ($7,21). A Linux user probably feels a closer connection with software developers, resulting in higher payments. Wolfire even communicates the total revenue ($621.112). I personally bought the bundle a few days ago and looking at the pace of their revenue growth since then, it seems that it can’t take long before they will breach the 1 million dollar barrier. This is again another good example that people can make money without a traditional, fixed pricing strategy.

Wraply, a hassle free gift service

Nick — Thu, 22 Oct 2009 19:43:36 +0000

After several very basic business models, it is time for a more advanced example. The problem it focuses on is rather straightforward. When buying a gift for somebody together with some friends, you might run into the hassle of collection money. The start-up Wraply.com will try to solve this with a simple and convenient online service. The person that initiates this group buying process is the main client of Wraply. At first he will have to choose a gift from any e-commerce site. Affiliate shop partners can benefit from extra exposure but will off course need to pay Wraply a fee for this. From that point on more friends can be invited to donate a contribution for the gift. In the future Wraply could take a tiny percentage as commission on these contributions, which could generate a reasonable secondary revenue stream. Once all the money has been collected, the sale will be closed. The webshop sends the product on behalf of this group of friends to the lucky one. In the end all these friends will hopefully give this person a ‘happy feeling’ experience.

Similar business systems can be found in some gift certificate models. As always many players are involved which could make it hard to manage. But in this case, everything is fully automated. This makes a huge difference. Wraply didn’t only take away the hassle for its clients, but also for itself by using this model. Hooray!

A Free Disney experience in exchange for volunteer work

Nick — Sat, 10 Oct 2009 12:07:37 +0000

Many free business models are based upon advertising while others are based on direct exchange of services. You do something for me and in return I’ll do something for you. Everybody happy! This new approach by Disney combines both methods. In order to get free publicity they are encouraging people to do volunteer work with the Handson Network. When someone gives a few hours of his precious time to such a good cause, Disney will give that volunteer a free visit at on of its theme parks. Visitors of Disney Land or Walt Disney World will admit that this is truly a unique experience. The return Disney receives is off course a better reputation and that without the need to spend big advertising budgets.While more and more charity based business concepts do pop-up, we see that only few of them use it in this fundamental new way. Most of the time a company only promises to donate a part of the profit to charity. By doing this they hope to convince people to buy more goods. All the ‘RED’ products use this method: Charity as a sticker. But in this Disney case there is no direct money involved and that is not a problem at all! Disney is a marketing company, one that sells brand reputation. So anything that can strengthen their reputation will be directly linked to higher profits elsewhere. If you’re a simple product seller you can’t rely directly on such a concept since you don’t have other revenue streams. Maybe in that case a ‘Buy one, give one’-concept will be a more sustainable way of using ‘charity’.

Rancho Bernardo Inn, an un-experience in practice

Nick — Wed, 29 Jul 2009 19:59:06 +0000

In a sector where everybody is fighting to offer the most positive experience as possible, the Rancho Bernardo Inn in San Diego tries to compete by offering just the opposite. Instead of luxury retreats, customers can choose the ‘survivor package‘. For only 19 dollar a night one can sleep in a room without a bed. By doing this they offer some type of un-experience where a company just tries to solve a customers problem without extras. Hereby they strip the normal hotel experience down to a basic service. Many companies already showed that there is money to make on bad or negative experiences. Recently we gave 10 other examples of initiatives that are doing just that. Ryanair for instance tries to focus solely on getting you from A to B without the expectation of any positive experience. Often a business model can arise out the inversion of the so called differentiating aspects or USP’s of a competitor. What could you invert of your competition to boost your own business?

Will EA embrace the Free Pirate game Business model – iPhone like?

Nick — Wed, 24 Jun 2009 22:29:11 +0000

For years game publishers could rely on the sales of relative expansive game discs to gain their profits. But then together with internet the peer-to-peer networks came up which made it easier for consumers to find cheap alternative solutions to play their most favorite games. After years of fighting against this change in consumers behavior EA now tries to find a new business concept where they could actually make use of this new network possibilities. Buying a disc (or downloading the game) is only a one-time transaction. Once games are connected to the EA server network then extra recurrent micro-transactions are possible. Extra levels, game add-ons or even third party sales could take place inside the game in order to expand the game experience. Possibly this second transaction could become so large that in the end the first transaction would become insignificant. In that case pirated versions of game are just a part of a demo program of a game publisher.

Once you understand that revenue could come from these kind of transactions then you know why Apple for instance doesn’t force old iPhone user to buy new iPhones in order to make use their new software updates. Apple will earn the biggest amount of money with the sales inside the different apps. So when more users have access to the iTunes iPhone store, the more revenue can come in. Then you also know why Apple doesn’t focus on a broad range of iPhones. Nokia on the other hand does and by doing this they still are trying to make their money on the margins of actual cell phone sales like EA did with the actual sales of game discs.

Taatu and Virtua Gym on Pitcharena.com

Nick — Fri, 05 Jun 2009 15:43:37 +0000

Following our previous post on wantz.it and tweetag, two other social applications that presented during Pitch Arena were Taatu and Virtua Gym. For these two ventures we also briefly described their business model. We didn’t go in depth, but mapping out the four social applications gaves us the possibility to quickly compare them with each other. Taatu is already active for several years and relies on a more complex business model than Virtua Gym.

Taatu

Taatu relies on two big revenue loops in their business system. First of all they offer a 3D chat experience to their user base, an active crowd of youngsters. The attention of this group is sold to advertisers who can create branded content and events inside the 3D world of Taatu. Another stream of revenue comes from many small micro-payments inside their virtual world. Users can buy virtual items that will extend their community experience. Also, the users of taatu can create goods that others can buy, which leads to a virtual economy. Different to other virtual economies, the virtual currency can’t be exchanged to dollars. Money can therefore only be transferred from the users to Taatu company.

Virtua Gym

During their 8 minute pitch shown below, the two brothers behind Virtua Gym describe the different business models that they are using. Since they are still in a very early stage, it difficult to determine which part of their business concept will become their most important revenue stream. Once they have built up their service towards gym users, they will have an interesting user base to sell to niche advertisers.

This leads to a typical free advertising based business model where the basic service is offered for free in exchange for advertising. Many online services try to rely on this business concept but only a few of them manage to become sustainable. A large user base, even in a niche topic is vital to attract large advertisers. Therefor Virtua Gym is working to add an experience on top of their service where users can have an off-line but real-time sport competition against other people.

From In-Game Advertising to In-Game Selling: The Next Big Thing?

Philippe — Tue, 17 Mar 2009 18:37:28 +0000

While In-Game Advertising is growing to $2 billion in 2012, In-Game Selling has all the ingredients to become the next big business model innovation in the gaming industry. Our analysis of the business model behind in-game advertising discussed how game publishers sell the ‘attention’ of their audience to advertisers. The next step now is to go from ‘attention’ to ‘buying’, or from in-game advertising to in-game selling:

In-Game Advertising: gamers will see in-game references to a Pizza fast food chain, but still need to pick up the phone or surf to the website in order to order pizza delivery.
In-Game Selling: there is a Pizza delivery icon, shortcut or location in the game environment, where you can order a pizza just by a click of the button. Example: While playing EverQuest II just type /pizza and a web browser will launch the online ordering section of pizzahut.com. Fill in your info and just kick back until fresh pizza is delivered straight to your door. Domino’s Pizza announced similar ambitions.

In-Game Selling business model

Where previously the game was just a standard product or experience, it is upgraded with a sales channel for other products and services (f.e. pizza delivery). The game actually offers a platform to bring together buyer and sellers, and brings benefits to both, which we know as a brokerage service. Similar to other brokers, game publishers can charge a listing fee to the seller, and/or a commission per transaction. The generic principle here is very valuable: could your existing product or service offer a channel to facilitate specific buy/sell transactions? Which goods or services are your users interested in? Which sellers are interested in your users?

In-Game Selling is a specific example. Any suggestions for a good generic name for this new business model? In-Product Selling, Free+Reseller = Freeseller, In-App Commerce…?

The Business Model behind In-Game Advertising

Philippe — Sun, 15 Mar 2009 11:39:45 +0000

Traditionally game publishers like Electronic Arts, Nintendo, and Ubisoft, sell their games for a fixed price including profit. This is known as the basic Product Sales business model or Experience Sales business model. From this basic transaction, a lot of companies look for new value propositions and revenue streams to add. In-Game Advertising is a very strong example of a revenue stream that has been (increasingly) added over the last years. Think of virtual billboards, branded drinks or stores, or a branded Soccer League name – all within the gaming environment.

How to apply the in-game advertising business model?

From the initial transaction on the top (experience for money), a new flow is added with attention going from the gamers to the advertiser, compensated by a cash flow from advertiser to game publisher. Attention is the new currency! This is a straightforward example of an advertising model in which you sell the attention of your audience to an advertiser. Important to note is that the advertising is integrated into the user’s gaming experience, which makes it less offensive and more effective compared to TV commercials for example.

For the game publishers, in-game advertising offers an important new revenue stream that covers for part of the game development cost (which is expected to grow to $20M per title for a 7th generation console game). Pricing can vary from up-front flat fees, conditioned to sales volumes, to cost per unit settings. Industry reports suggest that in-game advertisement can increase profits by an extra $1 to $2 per game unit sold, which is an important increase over the current $5 to $6 profit per unit. The total income from in-game advertising is expected to top $2 billion in 2012. In-game advertising can also completely replace the purchase price to an extent where the game becomes free for the user (more on that later).

Which audience do YOU reach at this moment? Who would be interested in their attention? Could you sell the audience’s attention to them (integrated in the current experience)?