Thursday, June 09, 2011

Making Sense of Media and the Cloud

Apple’s announcement of its iCloud service has long been predictable since Apple purchased in 2009 and promptly closed it down. Lala was a clever web site that allowed you to upload your music to the Internet. In an intelligent move, Lala saved you the trouble of uploading if they already had a copy of the specific piece music in their site (after all, bits are bits). Many people may not understand the advantage of this approach, but in a word it boils down to asymmetry. Broadband connections are faster downloading than uploading. In my personal case, It would take several weeks to upload my digital music with a slow upload connection.

Apple is of course, not alone in using the cloud to sync content across multiple devices. Industry titans, Amazon and Google have as slightly different strategy of using the cloud to store files, back up your digital music and play music from the cloud. Google’s service, combined with its Android operating system is attempting to compete with Apple’s offering but with less emphasis upon syncing. Amazon is attempting to compete with the iTunes store. And there are many more ways of storing your vital assets in the cloud. Evernote is popular for notes that you can access from different devices. Dropbox is useful for sharing files with clients or different computers.

But the more general question is: “What is the future of digital media in the cloud?” Back in 2007, I wrote that a new framework for understanding the evolution of digital media would help predict the evolution of the market. Historically, when you bought a book, a magazine or a piece of music, the relationship of the buyer to the content was pretty well understood. If you owned a book, you could read it, keep it and lend it to friends. You could not make a copy of it with a copier and give it or sell it to other people. If you bought music, you could play it or lend it to friends. You could make a copy for personal use, but not redistribute it.

The digital revolution changed everything. All the legal rights attached to the digital content could in theory be unbundled and repackaged in different ways. offered the innovative approach of allowing you to buy the right to stream music from the Internet for 10 cents a song, much less than the then conventional price of roughly $1 a song. Legal subscription services such or the reconstructed and now legal Napster offered programs where, for a monthly fee you could stream music from a library of millions of pieces of music.

But these examples don’t illustrate yet, the richness of marketing approaches now available. Consider for example the difference between the original digital music model and Audible, the well known audiobook seller now purchased by Amazon. Historically, prior to the emergence of cloud based music services, when you bought a piece of music, you typically had no right to re-download it if your hard drive crashed. Audible took a different approach. Its service was more like an online personal library. If you bought an audio book, you kept a copy in your online cloud library and you could download it any time you needed to. Amazon’s Kindle books have the same feature. Unlike music, you could download a book you owned many times from your on line Kindle library, as you now can with Amazon’s cloud service.

In the future, the purchase, rental or use of content will offer far more variety than we have been accustomed to in the past. Consider movies. Today, you can purchase a movie in various types of quality (DVD, Blu-Ray, 3D). You can download the movie for purchase or with varying time periods for usage. You can rent the movie from a store or Kiosk. You can also subscribe to a service like Amazon Prime, Hulu Prime or Netflix and pay for a subscription to a library of movies. You can also use the on-demand feature on cable to see some moves whenever you want. Or you can watch movies with commercial interruption on the Internet or cable.

In this new world of more complicated content marketing, content owners have more choice. They can choose some combination of five different ways of earning money from their content, what strategist call business models. They include:

1. Sale of content
2. Rental of content
3. Rental of subscriptions
4. Advertising supported content
5. Sponsored content

And for each of these business models, a content owner can choose to bundle different legal rights with the use of the content. Rights could, for example, include:

1. Ability to lend the content (e.g. Kindle book lending)
2. Ability to resell the content (common with physical media, less common with digital media today)
3. Ability to upgrade the quality of the content e.g. changing from a regular DVD to a Blu-Ray version.
4. Ability to re-download the content
5. Ability to play the content on multiple devices
6. Ability to share content with friends and family
7. The right to get paid a sales commission if the user triggers a sale to a third party
8. The right to reuse the content in a new work in exchange for defined payment.
9. Number of devices or type of devices on which the content may be used.
10. Number of simultaneous uses.

The recent decline in DVD sales shows how important this new choice has become. Many consumers now realize that they don’t need to purchase movies that they may only watch once. Once you subscribe to an online music service, you quickly realize that most music is not to your taste and not worth buying. The big savings from a subscription service is avoiding purchasing music you don’t play. It’s only worth buying music you care about for the purpose of being able to play it more conveniently on more devices (assuming of course, you have not made provision for some type of cloud streaming or access).

Perhaps the biggest surprise for most people is the role of sponsorship. Honda recently sponsored the Wall Street Journal for a day, making the subscription portions of the Wall Street Journal available to non-subscribers. The New York Times cut a deal with Ford’s Lincoln division to sponsor a subscription to readers deemed likely to buy Lincolns. It’s an example of how changing business models and unbundled legal rights are changing the rule of the game in content marketing.