Which Part of Your Business Model is Creating Value?

Andrew Keen posted a fascinating interview with Jeff Jarvis yesterday. All of the interview clips are worth watching – they touch on a number of interesting topics, including the relative benefits of publicness and privacy, the future of news and how to best develop new business models for journalism, why google struggles with social applications, and the changing nature of internet-based business models. The latter is included in this clip:

One of the really interesting points here is that the economics of media has changed dramatically. Jarvis points out that with 30% of internet users creating content now, there is no longer economic value in acting as a gatekeeper – which is the way that many media firms have tended to view themselves. Instead, value is created through curating, which I think of as depending on filtering methods.

This is a critical issue in looking at topics like building a new business model for news. One of the reasons that the established media companies are struggling right now is that they are not coming to grips with these important economic changes and the implications that they have for which business models work and which ones don’t.

The problem here may actually be that the current business models are actually still ok, but that the firms have been protecting the wrong part of them. Mike Masnick made this argument a couple of years ago, saying:

You can actually be succeeding in a market you don’t think you’re in.

When it comes to the entertainment industry, that may be exactly the case. We’ve been arguing that there are plenty of business models that don’t involve actually selling the content, but involve selling other, related products that are made valuable by the content. In fact, that’s what both the music and the movie industry already do. Everyone may think that you’re buying “music” or “movies” but that’s very rarely what you’re actually buying. You’re buying the experience of going to the movies. Or the ability to have the convenience of a DVD. Or the convenience of being able to listen to a song on your iPod. And, in many cases, it’s not just one thing, but a bundle of things: the convenience of being able to hear a song in any CD player, combined with a nice set of liner notes and the opportunity to hear a set of songs the way a band wants you to hear. It can be any number of different “benefits” that people are buying, but it’s not the “movie” or the “music” itself that anyone is buying.

So maybe the impact of the changing economics that Jarvis points out is really on the perception of business models more than on the business models themselves. I think that Masnick has hit on an interesting point – and as I’ve been arguing for a while, I agree with him that the main reason media companies are in trouble is that they haven’t been protecting the right parts of their business.

This is why it is so critical to analyse your business model now, so that you understand why it works (or doesn’t), and so you know which parts are essential, and which can be changed more easily.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

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