WE KNOW that if we want to download music, we can do it for free from the Internet. But a question that often arises is: if all of us download music for free, how does an artist benefit? Hard as it may be to believe, often, singers release their music for free on YouTube and still make a lot of money. Lady Gaga, for instance, earned $130 million in 2011 and just 24% of this came from record sales. The rest came from endorsements, sponsorships, touring and merchandise. This is the theme that author Nicholas Lovell develops in his book, The Curve.
With the Internet becoming almost a household appliance, says Lovell, one has to give away a lot of things free of cost to stay on top. This is not just an option, but an inevitable compulsion. The only way forward is to change track and get on to the ‘curve’. A pop star who keeps a listener hooked on to his music can draw him to his live show, making him pay a high price for the ticket. Also, once the listener is committed to his music, he will pay multiple times the cost of a music CD if it comes with special incentives like a personal signature or a unique pack. Thus, by giving free stuff, one can start building a relationship with a potential customer or audience. Interestingly, Lovell points out that the era of mass market has come to an end and the tyranny of the physical is eroding. Therefore, while the idea of giving anything free of cost could terrorise a company, it needs to think beyond it. In fact, Lovell points out that the concept of mass market was driven not by the desires of customers, but by those created by advertising and marketing processes, which worked on cost-efficiency. This, however, is changing. There are three aspects to the curve: first, people value products at different price points and the theoretical concept of a single price doesn’t work any more. Today, if we look at differential pricing in various industries in India, like airlines or hotels, this makes a lot of sense. Second, value is complex and is driven by the utility it gives. This is divorced from the cost and is often linked with concepts such as status or self-expression—the Veblen effect, where we prefer high-value items only because they make us look good. The last aspect is that there is no point in fighting against ‘free’ and firms need to focus on customers who will pay for the product or service when they see value in it. The theme all through Lovell’s narrative is about harnessing the power of ‘free’ to make money through viable business models. It does not involve the requirement to be ‘free forever’, but says one should build upwards from whatever base we have by finding and satisfying customers who love what we do and make them spend money. By making them pay from the beginning, a barrier is created automatically. This is what happens in case of the many coffee shops that we see opening in India. At the start, they offer discounts and freebies, but once people get used to the concept, they go back to the regular menu. In fact, we can also take the example of McDonald’s in India, which has some products that are cheap and are retained at the entry level, while prices for other products scale up subsequently. To put his theory into practice, Lovell shows how to be on the ‘curve’ in various fields. When it comes to music, giving free is necessary to create customer relationships, so that people come for shows, etc. Lovell gives several examples of singers who have not released a single album or video, and yet are rages when they perform live on stage. Here, he links human response to scarcity. Just as people over-react to threats and danger, they do to the risk of diminishing supplies. For instance, we don’t want to miss a show, thinking it may not come back to town anytime soon. Therefore, we end up buying that expensive ticket. Lovell also talks about self-publishing, which is replacing the process of going to a publisher and working out a deal. In the world of the Internet, there are unlimited possibilities. For fiction, self-publishing is a way out; one can get rid of the gatekeeper and an e-book can become a physical book once the idea catches on. For children’s books, one should let out one book free, so that when parents get bored of reading the same book to their child, they will go and buy the new ones. Even in the legal profession, the ‘curve’ argues that standard wills, employment contracts and non-disclosure agreements can be offered free or at minimum cost, which is done by many firms. But once a person is hooked on to the firm and needs advice, then the money meter can move. The same holds for accountancy firms. Movies are tricky. You can get a pirated version or have what he calls a middling price, which is the ticket price or legal rental. Movies typically start from movie theatres and then move to DVDs, TV and free-to-air. They also exploit ancillary rights like books, merchandise, etc, which is how money can be made. Lovell’s suggestion is also one of crowdfunding, where the producer can sell other options such as getting to be in the film or be invited to attend the premiere, etc. Hence the revenue model goes beyond the conventional theatre ticket or DVD. In case of sports, one has the choice to watch a match live or on TV. Being on the curve means that you have paid for the rights and to get the money, the ancillaries matter, as well as the sponsors. The customer may not finally pay much individually, but the ‘curve’ is already at work, as the sponsor gets your attention. Suppliers of services use YouTube videos to get customers into their shops. A flour producer could offer free recipes to get customers to buy his product. By offering free information and intent, one can target customers and turn those just ‘passing by’ into people who engage with your brand. In case of newspapers, it is a challenge. Having a hard pay wall will deter a customer when it comes to an online publication. The curve aims to have an audience, which loves what you do to pay more. So you give a fixed set of stories free for a pre-specified period after which a customer starts paying. Restaurants can have events, which create interest; artists could connect through the Web, essays and other products to get one to buy art. Low-cost airlines have defined the curve in the aviation industry already. The author is convinced that with the growth of the Internet, a lot of things will be available free to the public. The new business models should not sit back and lament, but frame strategies that become pro-active with the changes taking place, so that they can get people to spend more than they would otherwise on the product. It happens in all fields and, therefore, we should keep the scepticism aside and join the bandwagon.
With the Internet becoming almost a household appliance, says Lovell, one has to give away a lot of things free of cost to stay on top. This is not just an option, but an inevitable compulsion. The only way forward is to change track and get on to the ‘curve’. A pop star who keeps a listener hooked on to his music can draw him to his live show, making him pay a high price for the ticket. Also, once the listener is committed to his music, he will pay multiple times the cost of a music CD if it comes with special incentives like a personal signature or a unique pack. Thus, by giving free stuff, one can start building a relationship with a potential customer or audience. Interestingly, Lovell points out that the era of mass market has come to an end and the tyranny of the physical is eroding. Therefore, while the idea of giving anything free of cost could terrorise a company, it needs to think beyond it. In fact, Lovell points out that the concept of mass market was driven not by the desires of customers, but by those created by advertising and marketing processes, which worked on cost-efficiency. This, however, is changing. There are three aspects to the curve: first, people value products at different price points and the theoretical concept of a single price doesn’t work any more. Today, if we look at differential pricing in various industries in India, like airlines or hotels, this makes a lot of sense. Second, value is complex and is driven by the utility it gives. This is divorced from the cost and is often linked with concepts such as status or self-expression—the Veblen effect, where we prefer high-value items only because they make us look good. The last aspect is that there is no point in fighting against ‘free’ and firms need to focus on customers who will pay for the product or service when they see value in it. The theme all through Lovell’s narrative is about harnessing the power of ‘free’ to make money through viable business models. It does not involve the requirement to be ‘free forever’, but says one should build upwards from whatever base we have by finding and satisfying customers who love what we do and make them spend money. By making them pay from the beginning, a barrier is created automatically. This is what happens in case of the many coffee shops that we see opening in India. At the start, they offer discounts and freebies, but once people get used to the concept, they go back to the regular menu. In fact, we can also take the example of McDonald’s in India, which has some products that are cheap and are retained at the entry level, while prices for other products scale up subsequently. To put his theory into practice, Lovell shows how to be on the ‘curve’ in various fields. When it comes to music, giving free is necessary to create customer relationships, so that people come for shows, etc. Lovell gives several examples of singers who have not released a single album or video, and yet are rages when they perform live on stage. Here, he links human response to scarcity. Just as people over-react to threats and danger, they do to the risk of diminishing supplies. For instance, we don’t want to miss a show, thinking it may not come back to town anytime soon. Therefore, we end up buying that expensive ticket. Lovell also talks about self-publishing, which is replacing the process of going to a publisher and working out a deal. In the world of the Internet, there are unlimited possibilities. For fiction, self-publishing is a way out; one can get rid of the gatekeeper and an e-book can become a physical book once the idea catches on. For children’s books, one should let out one book free, so that when parents get bored of reading the same book to their child, they will go and buy the new ones. Even in the legal profession, the ‘curve’ argues that standard wills, employment contracts and non-disclosure agreements can be offered free or at minimum cost, which is done by many firms. But once a person is hooked on to the firm and needs advice, then the money meter can move. The same holds for accountancy firms. Movies are tricky. You can get a pirated version or have what he calls a middling price, which is the ticket price or legal rental. Movies typically start from movie theatres and then move to DVDs, TV and free-to-air. They also exploit ancillary rights like books, merchandise, etc, which is how money can be made. Lovell’s suggestion is also one of crowdfunding, where the producer can sell other options such as getting to be in the film or be invited to attend the premiere, etc. Hence the revenue model goes beyond the conventional theatre ticket or DVD. In case of sports, one has the choice to watch a match live or on TV. Being on the curve means that you have paid for the rights and to get the money, the ancillaries matter, as well as the sponsors. The customer may not finally pay much individually, but the ‘curve’ is already at work, as the sponsor gets your attention. Suppliers of services use YouTube videos to get customers into their shops. A flour producer could offer free recipes to get customers to buy his product. By offering free information and intent, one can target customers and turn those just ‘passing by’ into people who engage with your brand. In case of newspapers, it is a challenge. Having a hard pay wall will deter a customer when it comes to an online publication. The curve aims to have an audience, which loves what you do to pay more. So you give a fixed set of stories free for a pre-specified period after which a customer starts paying. Restaurants can have events, which create interest; artists could connect through the Web, essays and other products to get one to buy art. Low-cost airlines have defined the curve in the aviation industry already. The author is convinced that with the growth of the Internet, a lot of things will be available free to the public. The new business models should not sit back and lament, but frame strategies that become pro-active with the changes taking place, so that they can get people to spend more than they would otherwise on the product. It happens in all fields and, therefore, we should keep the scepticism aside and join the bandwagon.
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