Love is free, free is love

Chris Anderson, in his new book Free: The Future of a Radical Price, argues that people under the age of 30 no longer expect to pay for news, music, TV, films or social networking. He suggests two models for digital media businesses to adopt if they are targeting this age group: 'freeconomy' and 'freemium'.

Businesses operating the freeconomy model, such as Google, provide content for free and generate revenue from advertising on the site. However, Anderson acknowledges that this model has lost its appeal since the onse of the credit crunch. He states "From the middle of 2008, it became clear that advertising was going to be limited. It was not going away, but it was not going to float all boats."

The other 'free' business model is freemium, in which the basic service is free and subscibers are encouraged to upgrade and pay for additional services. Fickr, the photo sharing site, adopts this model. Basic subscribers can upload images for free, but they are restricted to 100mb storage a month and access to smaller-sized images. Premium (pro-account) subscribers pay approx £17 per annum to store an unlimited amount of photos and are able to download images in their original resolution.

Spotify, which has been discussed in this blog twice previously, is an interesting case as it mixes both models. Subscribers can stream music for free, with ocassional adverts between tracks. But, by paying £10 per month, they gain access to the premium service and can listen to the music uninterupted by adverts and can also use Spotify on mobile devices.

Of course, the major battle that has raged over recent years, as a result of this changing social demand for free digital media, has been between the companies who own the rights to popular music and the generation which is using BitTorrant sites to share free copies of the music. Pirate Bay, with 20 million users, has been at the forefront in this battle. In April this year, its founders were jailed for breaking the music copyright law. Would this event signal defeat for free file sharing? It appears not. Pirate Bay has just been bought by Global Gaming Comapny for £4.7 million and has devised a new free business model. More of that next time.

Note:

The title is a line from the John Lennon song Love from the Plastic Ono Band LP (1970)

Spotify - You don't know what you've got til it's gone

I only registered with Spotify on Monday.  Since then I've become hooked.  Records that have been boxed under the stairs for a couple of decades are being played again courtesy of this virtual jukebox. How could I live without the Faces' A nod is as good as a wink to a blind horse or Joni Mitchell's Ladies of the canyon?

Then today it was reported this record streaming site had been hacked, with personal data of thousands of its users being stolen.

A Spotify spokesman explained the extent of the data taken.

"Along with passwords, registration information such as your email address, birth date, gender, postal code and billing receipt details were potentially exposed," Spotify said. "Credit card numbers are not stored by us and were not at risk."

According to John Lister:

"The attack affects the estimated 10,000 accounts which were created on or before December 19 last year. Spotify found and fixed a security bug on that date, but has only just discovered people were able to exploit it."

This story highlights the importance of website users being aware of the potential for hacking of their data and the need for them to avoid using the same password on every site they use.  However, we should also expect companies, and particularly those that only operate online, to make appropriate information security arrangements.

According to the latest UK Government Information Security Breaches Survey (2008), companies still have a way to go in taking information security seriously. For instance, 52% do not undertake formal security risk assessments; 48% of disaster recovery plans are not regularly tested and 21% of companies spend less that 1% of their IT budget on information security.

Of course, users should be careful in their selection of usernames and passwords, but we should be able to expect better than this from digital media companies.

A few years ago now, the UK bank Smile was able to boast that it was "the first UK online bank to be accredited with the ISO27001 Information Security certification. That means we have an extremely secure Internet Banking service."  

It is about time that all online businesses woke up to the importance of information security and put in place the safeguards required to gain ISO27001 accreditation.

Spotify - the business model for recorded music?

Once upon a time, computer software companies developed software packages (such as Microsoft Word) and made their money be selling copies of their software to users to run on their own computers.  Then along came companies like Google who changed the underlying business model.  As we are all aware, Google doesn't charge for use of its products.  And users don't download them to their personal machines.  The applications (such as the Google search engine and Google docs) are run on Google servers.  Google's income comes from the selling of advertising space to organisations.  In 2008 quarter 4, it reported income of approximately $6 billion, up 18% on the previous year.

The music industry has been in need of a new business model for some time.  The British Phonograph Industry (BPI) and the major record labels have suffered loss of income in recent years as many music consumers have used peer-to-peer networks to obtain copies of songs rather than purchase them from record shops. The BPI estimates the industry has lost £1 billion of income in the past three years.  The online record stores, such as i-tunes, have had some success but these are still based upon the 'outdated' business model.

Now we are starting to see in the music industry a similar development to that which occurred in the software industry several years ago.  Sites such as LastFM and Spotify are streaming music for free and making money from onsite advertising.  A proportion of Spotify's income is distributed to the music companies.  It is currently experiencing a dramatic growth.  In just six months since it launched, Spotify now has more than one million users.

Will this new model work?  Will it provide sufficient income for the music providers and will it tempt customers to convert from illegal downloading to streaming instead?