1st maj, 2009

Ip value is 1% of the offline value on the Internet

This week one of my newsletters proved to be a fantastic read. An internal Deloitte newsletter wrote about web 2.0 business models and was in some ways interesting IP wise too.

One of the articles in the newsletter by a guy called Paul Lee was about what the current money conscious agenda has meant to web 2.0. One of the results is that investors and advertisers are more reluctant to use money on new media, since the average revenue per user for cable and newspaper subscribers is in the tens of dollars where web 2.0 media is in cents. This leads to Youtube costs of 700 million $ and revenues of only 240 million $.

Paul continues to tell that although you are popular in web 2.0 this may not lead to direct money, and gives Rick Astley as an example. In 2008 Rick´s hit “Never gonna give you up” was a smash hit again, this time on the net. It generated 154 million plays online. The result of this was 11£ to one of the co-writers (and yes the collecting society and Youtube is still fighting over this). The reason for the low figure is probably that the costs of the popularity are higher online than offline. The broadcasters costs are not tied to the number of viewers, but Youtubes are. The more successful a clip becomes, the greater the costs incurred. So your IP is simply less worth online than offline, maybe at a ratio of 1 : 100. This of course should be reflected in the collection society fees.

So the question is what business model for online content is viable? Paul predicts that Free uploads could  be replaced with subscriptions; restrictions on the use of space and traffic and amateur content may need to be dropped. These are the crown jewels of web 2.0, so my guess that they will be hard to get rid of – unless you introduce payments. Payments will limit your willingness to upload or see crazy movieclips. “Is this really worth 2$” you ask yourself when wanting to upload your cousin getting in the boat at the lake.

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