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Traditional business models of the creative industries are built on the protection of content. With the advent of an Internet culture where content is ‘sold’ at a price of zero and sharing is a key paradigm, that model seems not to be fully adequate any longer, even more, there might be a time when content alone won’t pay anymore. This chapter, published in early 2009 in Supporting Service Innovation through Knowledge Management, I propose that service innovation on top of and around open content could be the answer to that challenge.The chapter then presents five examples from the creative industries that have successfully embraced open content and developed and implemented a business model that is sustainable: VEB Film Leipzig, Al Jazeera, Nine Inch Nails, Prelinger Archives, and FabLab.Far from claiming that these five examples would present five archetypal template solutions, they however explain how businesses arrived at these models, what the reasons were to choose one or another solution. The chapter concludes with some roughly sketched general impacts of embracing open content in the creative industries and postulates that service innovation may never stop as customers themselves and their needs evolve.
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Open Content in the Creative Industries - A Source for Service Innovation?
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Traditional business models of the creative industries are built on the protection of content. With the advent of an Internet culture where content is ‘sold’ at a price of zero and sharing is a key paradigm, that model seems not to be fully adequate any longer, even more, there might be a time when content alone won’t pay anymore. The chapter proposes that service innovation on top of and around open content could be the answer to that challenge. The chapter then presents five examples from the creative industries that have successfully embraced open content and developed and implemented a business model that is sustainable: VEB Film Leipzig, Al Jazeera, Nine Inch Nails, Prelinger Archives, and FabLab. Far from claiming that these five examples would present five archetypal template solutions, they however explain how businesses arrived at these models, what the reasons were to choose one or another solution. The chapter concludes with some roughly sketched general impacts of embracing open content in the creative industries and postulates that service innovation may never stop as customers themselves and their needs evolve.
Open Content, Creative Industries, Intellectual Property, Creative Commons, FabLab
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The turn of the 21st century has seen a shift in public interest from knowledge to creativity and a growing focus on creative industries from an economic and wider social perspective (see e.g. Scott 1999, DCMS 2001, Florida 2002, Steenhoven, Stikker et al. 2005). Creative industries typically include advertising, architecture, art and antiques markets, crafts, design, designer fashion, film & video, interactive leisure software, music, performing arts, publishing, software & computer services, television & radio (DCMS 2001, see also Fronville 2003, Wiesand & Söndermann 2005). Those industries have their origin in individual creativity, skill and talent and are seen to have a potential for wealth and job creation through the generation and exploitation of content (DCMS 2001, p.4). Exploitation of content—or ‘intellectual property’ (IP)—traditionally means creating content once, cashing in on its reuse many times. ‘Creative industries are today firmly established as a vital component of our lives, substantially contributing to economic, social and cultural development. Deeply rooted in copyright protection, these industries have demonstrated growing importance worldwide.’ (WIPO 2006). Innovation in the creative industries is—so far—largely dominated by legal protection of content through copyright, trade mark registration and similar mechanisms. Their enforcement is believed to be vital for business; ‘lack of effective enforcement of copyright threatens industries, such as the motion picture and publication industries, manufacturers of computers, computer programs and communication systems, and the broadcasting and music and recording industries’ (IPC p.64.)
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The availability of digital tools for creative expression and distribution certainly helps these promises of a society turning creative come true. Yet, this might not be happening exactly in the way expected by the governments’ and industries’ policy writers. Consumers have started to become producers of content themselves as well—conveniently labelled as prosumers. It is only logical that in prosumer communities—which often claim to be themselves the real source of creative innovation—the free sharing of otherwise copyrighted content has proliferated. Allegedly with no intention to, or more accurately without the need to generate
Open Content in the Creative Industries - A Source for Service Innovation?
financial revenue the (free of charge) sharing of what would conventionally be copyrighted content has proliferated. Coincidentally, an economy has developed online where the default price is zero, as Chris Anderson notices: ‘Digital goods—from music and video to Wikipedia—can be produced and distributed at virtually no marginal cost, and so, by the laws of economics, price has gone the same way, to $0.00. For the Google Generation, the Internet is the land of the free’ (Anderson 2009). Consequently, creating revenue from content only has become difficult—the music industry deploring shrinking CD sales being the most vocal representative of that fading business model of create once, cash in many times. Kendall Whitehouse, senior director of IT at Wharton, puts it that way: ‘What funded the traditional content model is falling apart. Ideally, I see Internet content being a blend of professional and amateur content, but how do we develop an economic model that supports both?’ (Knowledge@Wharton 2008). The Controller of the European Patent Office, Ciaràn McGinley, publicly asked the provocative question: ‘Do we still need patents?’ speculating on a phenomenon he chooses to call ‘global patent warming’, the overzealous IP protection and its potential conflict with competition law (McGinley, 2008). Vijay Viatheeswaran and Iain Carson noted earlier that ‘patents are becoming much less important nowadays than brands and the speed at which products can go to market’ (Viatheeswaran & Carson, 2007). The Dutch think tank iip/create recognizes a trend of fading classic intellectual property rights (iip/create 2007, p. 45) or rather their importance for doing business. A recent European Commission Staff Working Document reported some interesting discoveries: ‘Approximately twice as many industrial than service firms applied for a patent and more industrial than service firms applied for a trademark. A much lower percentage of firms in KIBS [Knowledge Intense Business Services] apply for a patent than industrial firms (12.0 % versus 20.1 %) and KIBS firms are also less likely to apply for a trademark.’ (EU 2008, p. 17). The study then comes to the conclusion ‘that service firms use more often than manufacturing firms informal methods of protection to protect their innovations’ (p. 18), such as publishing, making tacit knowledge explicit, etc. The authors hence advocate the combination of traditional and informal IP protection. The challenge for the creative industries, so it seems, is to overcome the traditional understanding of creative services as repeatedly providing canned content (the ‘create once, cash in many times’ paradigm) and innovate in a business environment that operates beyond traditional copyright protection.
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‘How to make money with free?’ asks Gerd Leonhard, and goes on to recommend open licensing as a basis for a new content business: ‘The greatest thing that happened with the raise of Creative Commmons is that we’ve taken this idea that has been around pretty much for ever which basically says “I’m giving something for free in return for attention” and then finding a mechanism to get attribution and make money that way. And this has been around forever. That’s the way that musicians used to make money’ (Troxler 2008). Chris Anderson (2009) concludes that ‘free is not enough. It also has to be matched with Paid. Just as King Gillette’s free razors only made business sense paired with expensive blades, so will today’s Web entrepreneurs have to not just invent products that people love, but also those that they will pay for. Not all of the people or even most of them—free is still great marketing and bits are still too cheap to meter—but enough to pay the bills. Free may be the best price, but it can’t be the only one.’
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It is suggested that there could exist some analogy to business models common in the context of open source software—programmers (i.e. creators) distributing a basic package for free and aiming to earn money through customisations of this basic software and other added services for paying customers (Culture and Economy, p. 29). In ‘Better than Free’, Kevin Kelly (2008) postulates a number of generatives that add value to the freely available material and hence are suited to generate payment. ‘A generative value is a quality or attribute that must be generated, grown, cultivated, nurtured. A generative thing can not be copied, cloned, faked, replicated, counterfeited, or reproduced. It is generated uniquely, in place, over time.’ Generatives, according to Kelly, are immediacy, personalization, interpretation, authenticity, accessibility, embodyment, patronage, and findability. Similarly, Alex Osterwalder (2009) lists a number of ‘value propositions’ with price being the first one, followed by newness, accessibility, ‘getting the job done’, convenience and usability, brand or status, performance, risk reduction, customization, and cost reduction. For the creative industries, the solution to the challenge of obsolete business models is service innovation. The driver behind this need for service innovation is to embrace open
Open Content in the Creative Industries - A Source for Service Innovation?
content as a given and to use its inherent potential to re-invent sustainable businesses. In an economy where content per se is free, money can still be made.
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Research on the nature and effects of the shift from the ‘create once, cash in many times’ paradigm to the ‘Internet as the land of free’ where money needs to be made through additional, generative value propositions is scarce. However, there are a number of well and less well known cases illustrating how individual entrepreneurs or companies have approached the challenge and found an business model that appears to work for them. The most obvious, most conventional and most ubiquitous model is the combination of (free) content and advertising; it uses the potential of content to attract attention. Since this model is so widespread I shall not discuss it any further. A second model is to use (free) content to advertise, promote and eventually sell the creativity and skills required to create it in the first place. Below, I present one example. Business models built around attracting third party sponsorship are somewhat related to that approach, and I also describe one example. A third group of models comes in various shapes and colors, they add packaging, distribution and other attributes to the (pure) content, creating premium (paid-for) or hybrid ‘freemium’ offers that combine free and paid-for content (Wilson 2006). Two examples shall illustrate this group. Finally, I present an example of a service innovation for which the principle of open content is one of its core ingredients.
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Below I am going to present 5 example case studies of how such open content business models have evolved. They all have two things in common: they are based on the notion of open content, and they show some sort of development—how businesses started to experiment with open content and gradually are moving to embrace it as a fundamental principle once they have experienced how to achieve the paradox of making money with free. The case studies also differ in that they talk about newcomers and well-established businesses, they talk about ventures that need to make money to survive and others that use open content to build a base to stay in business long-term. The five examples are: VEB Film Leipzig Al Jazeera’s Creative Content Repository Nine Inch Nails The Prelinger Archives
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FabLab
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VEB Film Leipzig is a Movie Net Label and a group of independent film producers, Stefan Kluge, Mathias Eimann and Gerald Menzel, from Germany. They are primarily known for producing straight to Internet movies. In 2004, they released their first production, Route 66, which was the first Open Source movie in Germany. VEB Film Leipzig released the movie under the second most restrictive Creative Commons license, requiring attribution (the ‘by’ requirement), allowing reuse only in a non-commercial context (the non-commercial or ‘nc’ requirement) and requiring derivative works to be issued under the same license (the sharealike, ‘sa’, requirement; the license is therefore known as the BY-NC-SA-license). Their reasoning was pragmatic. The only online platform they could find at the time to distribute the film free of cost was the Internet archive (archive.org). And archive.org requires material to be in the public domain or licensed under one of the Creative Commons licenses. As Stefan Kluge admits him self (Lévy 2008), choosing a restrictive license is ‘what creators tend to do, since it resembles most closely the conservatieve ideas of copyright, which are common with creators above the age of 20.’
Figure 1: ‘Broken down’ film still from Route66 by VEB Film Leipzig.
VEB Film Leipzig chose the open content route despite an offering from a German broadcaster, MDR, over EUR 30.000. In the mean time they have earned more money than that by attracting sponsorship and donations, through DVD sales and service contracts, as Kluge confirms in an interview (Lévy 2008). The most positive effects of releasing the film as ‘open source’ according to Kluge were public attention and feedback on the movie, which motivated the producers to re-invest the money into their next production ‘Die letzte Droge’ (the last drug). This next production will be released under a much more liberal Creative Commons license, requiring only attribution (the by requirement) and the release of derivatives under the same license (the share-alike requirement; the license is therefore known as the BY-SA-license). For Stefan Kluge, the Creative Commons BY-SA-license is the political and economic consequence from what he has learnt about Netpolitics and Internet culture: ‘It is high time for net artists to part themselves from the disproportionate, radical restrictions of the Generation Copyright and to thrive on the possibilities of the medium Internet. And this only
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works if we don’t get into our own way restricting us from making money with our art. Once at this point one can start to think about alternative business models, which are not based on the sale of licences, but rather on services and promotion.’ (Kluge 2008).
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On the 13th of January 2009, the Doha-based news network Al Jazeera announced that it would release broadcast video footage online under the most persmissive Creative Commons license ‘attribution only’ (CC-BY), only days after the Herald Tribune carried an analysis of Al Jazeera’s role in reporting from the Gaza (Cohen 2009). Al Jazeera was the only broadcasting station that was able to keep their journalists on location in Gaza. The problem was for them to get their reports to their audience. Particularly the situation in the United States of America is radically different to Europe and the rest of the world. According to their own figures Al Jazeera reaches some 130 million homes in over 100 countries with their English language channel (Al Jazeera 2007). In the US there are only three local cable carriers that broadcast Al Jazeera: in Burlington, Vermont; Toledo, Ohio; and Washington, D.C., according to Cohen (2009), while wikipedia names a few different carriers (Al Jazeera 2009a).
Figure 2: Video still from Al Jazeera’s clip ‘Gaza Attack’, 12 December 2008.
Cohen (2009) concludes: ‘Recognizing that its material from Gaza will have influence in the United States only if it is highly accessible online, Al Jazeera has aggressively experimented with using the Internet to distribute its reports.’ Obviously, Al Jazeera added another step of service innovation to their accessibility strategy. Their head of New Media, Mohamed Nanabhay, is cited in the press release: ‘As one of the only international broadcasters in Gaza, our coverage of the war has been unsurpassed. The launch of Al Jazeera’s Creative Commons Repository means that our Gaza footage will be
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made available under the most permissive Creative Commons license (CC-BY). With the flexibility of the license we expect to introduce our outstanding coverage to an even wider audience across the world. This means that news outlets, filmmakers and bloggers will be able to easily share, remix and reuse our footage’ (Al Jazeera 2009). At the time of writing, there are no usage statistics of the archive readily available, and digg figures indicate a relatively low spread of the news in the blogosphere. Noam Cohem cites Mohamed Nanabhay saying: ‘Part of our mission, our mandate, is to get our news out.’ In that way, the move of Al Jazeera has been hailed as ‘an important lesson about how free speech gets built and supported’ by Larry Lessig (Al Jazeera, 2009) and ‘an attempt to help get the truth of the situation out—a tacit criticism of other mainstream media’ (Miriam 2009). And Mohamed Nanabhay adds: ‘We don’t have the direct commercial pressures that others have. If we can make some money that is great’ (Cohen 2009). The motivation behind Al Jazeera’s Creative Commons Repository is certainly building the brand; and one is free to read it as a contribution to attract sponsorship in the long run.
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Trent Reznor (born Michael Trent Reznor on May 17, 1965) is an American musician, singersongwriter, producer, and multi-instrumentalist. He operates under the studio name Nine Inch Nails. As of 2007, Reznor split his ties with Interscope Records, and is now an independent, unsigned musician (Trent Reznor, 2008).
Figure 3: Trent Reznor, photo by Rob Sheridan.
He preceded his departure from Interscope Record with some quite unique promotional activities, including giving hints to fans which lead them to an online treasure hunt via
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various websites to find hidden mp3-files with new songs (for details see Reuters, 2007), and planting USB sticks with pre-releases of certain songs at concert venues in Lisbon, Barcelona and Manchester. As Reznor explained to The Guardian: ‘The USB drive was simply a mechanism of leaking the music and data we wanted out there. The medium of the CD is outdated and irrelevant. It’s really painfully obvious what people want—DRM-free music they can do what they want with. If the greedy record industry would embrace that concept I truly think people would pay for music and consume more of it’ (Mackintosh, 2007). These activities, needless to say, upset the record label and the record industry. After leaving the label, Reznor started various experiments of giving new albums away for free, along the lines of what other musicians such as Radiohead, Kristin Hersh, Jill Sobule and others did earlier. His latest release, The Slip, is released under a creative commons attribution non-commercial share alike (BY-NC-SA) license, and the free download contains 10 of the 36 songs that actually are on the album. The full nearly two and a half hours of music are available in various paid-for options; a full download is $5, and there are a variety of physically packaged editions, including an ‘individually numbered 2 disc, 6 panel digipak’ and a ‘gatefold vinyl release [that] contains 1 LP (180 gram vinyl) and a 24-page booklet’ (Nine Inch Nails, 2008). Mike Masnick (2009) took to analyse Trent Reznor’s business model and came up with an interesting formula he suggests ‘is the basis for making money in the music business (and, I’d argue, many other businesses) in the digital era’. Connect With Fans (CwF) + Reason To Buy (RtB) = The Business Model ($$$$) As Masnick (2009) points out, ‘many artists—famous and not so famous—(...) have been making use (on purpose, or not) of this formula to create successful strategies for building up a stronger fan base, creating wonderful new works of art, distributing them out to the community and getting paid for it at the same time.’ Trent Reznor’s case is interesting since it has been widely discussed in the media and because Reznor himself has been experimenting with connecting with fans and giving them a reason to buy in quite varied ways—treasure hunt, USB-sticks, free downloads, premium packaged editions, to name a few. Masnick points out, that the model, while simple, actually needs to be implemented in ways that suit the particular skills and needs of any single artist. Further, he makes a point in saying that ‘a true reason to buy (RtB) is a voluntary transaction’. This relates to and is based on the aspect of authenticity mentioned earlier. Lastly, he argues that artists themselves need to be involved, not only the music business: ‘You cannot connect with fans if you’re in seclusion’ (Masnick 2009).
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On 19 August 2002, the Library of Congress announced the acquisition of the Prelinger Collection, a collection of more than 48.000 historical ‘ephemeral’ movies, from its owner, Prelinger Archives of San Francisco. This collection of advertising, educational, industrial, amateur, and documentary films had been started some 20 years earlier by Rick Prelinger
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when he was working on an all-archival documentary. The particularity about all these films is that most of them are in the public domain, i.e. their copyright has expired or they have never been registered for copyright (for works created in the US by US citizens, a registration is required before an infringement suit may be filed before a US court). In the late 80ies, Rick Prelinger started to produce and sell videodisks with selected films and so turned a hobby into a business. When the Prelinger Archives started, they used traditional physical and contractual control over the material to prevent unauthorized copying. Already in 1994, when producing an anthology of 10 CD-ROMs with historical films from the collection, they did not prohibit users from copying and repurposing the material (Prelinger, 2002). In 1999, Rick Prelinger was confronted with the idea to move his whole collection on to the Internet:
‘I moved to California and called Brewster Kahle, founder of the Internet Archive on the telephone and in about three seconds, he said to me, “Do you want to put your archives online for free?” This is the kind of question that is very difficult to answer when you’re out walking the dog, if you’ve never thought about it before and you’re operating from a model of scarcity. But in about three months when I’d learned a little bit about what people were doing in the software industry and how there was a functioning gift economy, at least in California, I’d come to agree with him. I saw how it was possible to adapt some of the paradigms of the IT world to the world of content distribution that it came in. So at the beginning of 2001 we made a page with links to 270 films which has now grown so that now there are about 2000 films available online for free viewing, downloading and reuse. It would be more, we just need to get the money to do some more film to tape work’ (Prelinger, 2005).
This did not prevent the Prelinger Archives to elect Getty Images as their exclusive representative for stock footage, a quite successful partnership:
‘Getty Images doesn’t like me to talk specific money figures, but if we earned ‘x’ in the year 2000, in 2004 we earned ‘x’ plus 62 per cent—and this in a period where the price of stock footage has gone down, where there’s been a great deal of competition and where there’s also been a tremendous slump—between 2001 and 2002 a lot of people left the business’ (Prelinger, 2005).
The difference between the Internet Archive and Getty Images is a difference in service. While the Internet Archive does not provide written license agreements or make any other representations or warranties other than the Creative Commons License, Getty Images furnishes written agreement. The Internet Archive does not provide physical copies, the material is digitally available in the standard MPEG-2 broadcasting quality. Getty Images does provide online and physical material.
Open Content in the Creative Industries - A Source for Service Innovation?
Figure 4: Still from Getty Images Clip 83547542 ‘Dog eagerly awaits being fed.’
Further, the material on the Internet Archive is typically complete films that are commented on, and indexed by users of the archive, such as the 9 minutes long promotional newsreel from 1937, ‘Chevrolet Leader News (Vol. 3, No. 1)’ (Handy 1937), featuring a number of Chevrolet-centric stories. Getty Images footage, to the contrary, is accessible as short clips of the type ‘Dog eagerly awaits being fed. He sits up and begs’ with a length of 8 seconds and 11 frames, for example (Getty Images, 1937), which is actually a sequence from the above newsreel, starting at around 8 minutes 38 into the Chevrolet newsreel. The free-to-download footage give the Prelinger collection accessibility and visibility, as did the earlier releases on video discs and CD-ROMs. The additional service of Getty Images consists in providing the material in a format (clips), package (license), findability and speedy delivery that suits the needs of the movie industry.
‘Anecdotally we know that a tremendous number of people come to us and then go on to Getty afterwards. And Getty actually points people to the Internet Archive now promotionally which is very interesting. They publish that little magazine for creators—you probably get it for free if you’re a producer or an art director – and they have these historical pages and they point to the Internet Archives. So, we’re not actually competing, I think, in their view’ (Prelinger, 2005).
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Interestingly, the world of open content is not restricted to the digital field. Under the namer ‘FabLab’, short for fabrication laboratory, a movement has silently begun to conquer the world of personal, physical fabrication. In analogy to personal computers and desktop
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printers, Neil Gershenfeld has not only produced the vision of ‘how to make (almost) anything yourself’ (Gershenfeld 2005), he has been able to start that ‘revolution on your desktop’. Today, the FabLab network counts over 35 laboratories from Jalalabad in Afghanistan to San Diego, California, from Lyngen in Norway to Soshanguve in South Africa, from Amsterdam, the Netherlands, to Pune in western India (FabLab 2008). A FabLab, almost independent from its location, consists of a standard set of basic machines: a tabletop mill, a sign cutter, and a small laser cutter. Standard software is supposed to be used to draw the blueprints for the products.
Figure 5: FabLab Amsterdam, photo by Ton Zijlstra.
According to location and socio-economic context, the contribution of a FabLab can be quite diverse, ranging ‘from addressing the most basic human needs (creating jobs) to the most refined (creating art), from whimsical inventions to ones that are needed for survival’ (Gershenfeld 2005, p. 55). Any activity in a FabLab is, according to the FabLab charter, based on the global network of labs situated in a local context, the provision of access, a learning and teaching contribution to education, and the personal responsibility. Particularly interesting in the context of open content and service innovation are the charter clauses on secrecy and business.
‘Secrecy: designs and processes developed in fab labs must remain available for individual use although intellectual property can be protected however you choose;
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Business: commercial activities can be incubated in fab labs but they must not conflict with open access, they should grow beyond rather than within the lab, and they are expected to benefit the inventors, labs, and networks that contribute to their success’ (FabCharter 2007).
The FabLab charter postulates that any designs and processes must be made available for individual use within the lab. This clause also opens the content produced in a FabLab to any other FabLab user. It does not introduce artificial scarcity to digital assets that can be copied easily. Even further, the aspirations of a FabLab to be a place for mutual learning on-site and in the network actually depend on designs and processes being open. The service innovation of empowering people anywhere to produce anything with the help of a local set of machines and a global network of people and experience is fundamentally built on the openness of content within the network. Yet the FabCharter limits openness to the personal sphere, be it enjoyment or education. Doing so, it keeps intact the inherent scarcity of the physical product and the labour put into its fabrication, thus allowing businesses to grow from a FabLab. And the clause on business adds another aspect to the innovation model of the FabLab. While a FabLab is supposed to be a place to innovate, it is not the place to exploit this innovation. Commercial activities are expected to develop beyond the lab. One most recent and maybe slightly amusing result of such a venture that initially started in a FabLab is the ‘chocolate letter Pi’, combining the fascination of mathematicians with the constant ! and the Dutch tradition of chocolate letters which are traditional gifts for St. Nicholas day. Dutch natural scientist Hans Wisbrun made his very first steps to produce these letters at the Amsterdam FabLab (Wisbrun 2009). In March 2009, coinciding with the international !-day (March 14), they are made available to the readers of one of the country’s major newspapers, NRC (2009). Chocolate letter Pi is not yet a fully commercial proposal that would pay money back to the FabLab where it initiated. However it demonstrates the value of the service offered at a FabLab.
The story of VEB Film Leipzig is an example how creators might stumble upon open content and the licensing of it when exploring new territories, in this case the area of straight to Internet movies. While working VEB discovered the promotional effects open content and
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open content licensing had for their product and, even more so, for their work. This eventually convinced them to continue the way of ‘going open’ with their content. In the Al Jazeera example, the decision is a much more deliberate one. While certainly motivated by expanding viewership and brand visibility, creating a Creative Commons Repository not only does that on a pure quantitative basis, the effects of which are so far hard to estimate, it also adds a qualitative notion of ‘free speech’ and ‘accuracy of reporting’ to the brand image. The path Trent Reznor chose for Nine Inch Nails is one coming from and leading to a sustainable business model while changing the reasoning why people would pay him money. He superseded the old paradigm of closed content—at least partly—with an open content model while still giving his fans a ‘reason to buy’. Rick Prelinger developed a unique dual channel strategy to serve the same content to different audiences, differently packaged and delivered, taking into account findability and timeliness of the offer. On top of that, the two channels appear to be influencing each other positively. The FabLab example finally demonstrates how certain aims are best achieved by incorporating open content principles into the core of an innovative service offering. It shall be interesting to see if the FabLab can spin the idea of ‘sharing’ into businesses that grow from a FabLab, similar to the aims of the share-alike requirement of the Gnu Public License (GPL) and some Creative Commons licenses.
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The business impacts of building on and around open content in service innovation are threefold. One, with digitally born and digitally available content, one has to recognize that the traditional models built around scarcity of a resource don’t hold any more. Two, and that follows from one, service innovators are forced to think harder about what their customers really need so a new service will add such value that the customers are actually willing to pay for, the reason to buy. Three, it might well be, and the examples of Al Jazeera and Nine Inch Nails suggest it, that service innovation around open content actually has to become a continuous process that unfolds as the customer base evolves so the service provider stays in contact with the customers.
Open Content in the Creative Industries - A Source for Service Innovation?
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There are numerous additional cases that could have been added to the list but have been left out on purpose. The aim of this chapter was not to provide a complete overview of open content applications in service innovation in the creative industries. Rather it aimed to provide some insight into a still rapidly evolving theme within the industry. One whole complex of open content models is worth mentioning as a small appendix— models building on user generated content. Two basic principles are behind involving users in the generation of content. Firstly, they are often the ones who really know. And secondly, they are often more than willing to contribute. The most famous examples are sites such as YouTube, Flickr or Wikipedia—each following their own business model. But there are much more nimble uses of user generated content, such as musea and archives opening up their collections to amateur historians who then contribute in depth knowledge and research to make a collection actually much more valuable to everyone while typically getting more specific recognition for their work as ‘amateurs’. The issue of open content is certainly here to stay, therefore also the need of the creative industry (and other industries as well) to develop new ways of presenting service around and on top of open content, if they don’t want to hit the wall. Or to put it the other way round: The acceleration of the spread, popularity and intensity of Internet use will only speed up the disruption of the established creative industries and their business models which rely on copyright protection and licensing modeled after physical distribution and are supported by mass market advertising. Significant disruption to established business models, however, often has led to innovation; and accepting the disruption might well be the first step needed.
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Embrace open content wholeheartedly. Don’t stay in denial of its potential disruptive consequences. Use it as a springboard for innovation rather than seeing it as a threat. ‘Connect with your fans’ (i.e. your customers) so you better understand them and they better understand you. Develop services that align with your customers’ lives, needs, and activities. Make yourself and your services accessible, findable, immediate. Give them a ‘reason to buy’ by tailoring the services to what they really want and that align it with their buying style. Be authentic, offer interpretation, personalization, think of the right packaging and delivery. Finally, continue to innovate your services.
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Al Jazeera (2007, 27 September). Release: We break 100million barrier. Press release. Avaliable online at http://english.aljazeera.net/aboutus/2007/10/2008525184830438575.html, accessed 13 January 2009 Al Jazeera (2009, 13 January). Al Jazeera Announces Launch of Free Footage under Creative Commons License. Launch Press release. Available online at http://cc.aljazeera.net/content/launch-press-release, accessed 13 January 2009. Al Jazeera (2009a, 13 January). In: Wikipedia, the free encyclopedia. Available onl ine at http://en.wikipedia.org/wiki/Al_Jazeera, accessed 13 January 2009. Anderson, Chris (2009). The Economics of Giving It Away. In: The Wall Street Journal, 2 Feb. 2009 Ciaràn McGinley (2008). Do we still need patents? Presentatio to the 4th European Futurists Conference, Luzern, 28 October 2008 Cohen, Noam (2009, 11 January). Al Jazeera provides an inside look at Gaza conflict. The Herald Tribune. Available online at http://www.iht.com/articles/2009/01/11/technology/jazeera.php, accessed 12 January 2009. Culture and Economy, 2006, Our Creative Potential. Paper on Culture and Economy. DCMS (2001), Creative Industries Mapping Document 2001 (2 ed.), Department of Culture, Media and Sport. Available online at
Open Content in the Creative Industries - A Source for Service Innovation?
http://www.culture.gov.uk/reference_library/publications/4632.aspx, accessed 5 September 2008. DCMS (2006). Creative Industries Economic Estimates Statistical Bulletin. Department of Culture, Media and Sport. Available online at http://www.scribd.com/doc/322287/creativeindustrieseconomicestimates2006, accessed 5 September 2008. European Union: European Commission, Commission Staff Working Document (2008). Towards a European Strategy in Support of Innovation in Services. Challenges and Key Issues for Future Action. Europe INNOVA paper nr. 4, available online at http://www.europeinnova.org/servlet/Doc?cid=8975&lg=EN, accessed 5 September 2008. FabCharter (2007, 30 August). The Fab Charter. Available http://fab.cba.mit.edu/about/charter/, accessed 5 September 2008. online at
FabLab (2008). Fablab Network Worldwide. Post on fablab Amsterdam, online available at http://fablab.waag.org/content/fablab-network-worldwide, accessed 5 September 2008. Florida, R. (2002) The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community and Everyday Life, New York: Basic Books. Fronville, Claire L. (2003). The International Creative Sector: Its Dimension, Dynamics, and Audience Development. UNESCO. Available online at http://www.culturalpolicy.org/pdf/UNESCO2003.pdf, accessed 5 September 2008. Gershenfeld, Neil (2005). Fab. The Coming Revolution on Your Desktop—from Personal Computers to Personal Fabrication. Basic Books, New York. Getty Images (1937). Dog eagerly awaits being fed. He sits up and begs. Available online at http://www.gettyimages.com/detail/83547542, accessed 5 September 2008. Handy, Jam (Producer) (1937). Chevrolet Leader News, Vol. 3, No. 1. Available online at http://www.archive.org/details/Chevrole1937, accessed 5 September 2008. iip/create, 2007, Research Agenda. Available online at http://83.98.156.43/~iipcreate/wpcontent/uploads/2008/05/iip_create_book_sra.pdf, accessed 5 September 2008. Kelly, Kevin (2008). Better than Free. Available online: http://www.kk.org/thetechnium/archives/2008/01/better_than_fre.php, accessed 12 December 2008.
Kluge, Stefan (19 September 2008). Interview: Freie Lizenzen werden vor allem die Postproduktion demokratisieren. VEB Film Leipzig, Open Source Film Label. Blogpost retrieved from http://www.vebfilm.net/content/view/446/1/, accessed 23 September 2008. KPMG (2008). Venture Capitalists Expect Increased Investment in Content Creation for Digital Entertainment Sector, KMPG Study Finds. Press release, available online at http://www.us.kpmg.com/microsite/Attachments/2008/Venture_Capitalists.pdf, acessed 5 September 2008. Lévy, Roger (Producer) (22 September 2008). Stefan Kluge über Creative Commons und einen neuen Film. kulturTV.ch. Podcast retrieved from http://www.kultpavillon.ch/stefanundbernhard.htm, accessed 23 September 2008. Mackintosh, Hamish (2007). Stars compose new ways to use music. Do you want to write music, or remix a band’s tunes and then find similar stuff? Three top rock stars are eager to help. The Guardian, 29 March 2007. Available online at http://www.guardian.co.uk/technology/2007/mar/29/pop.guardianweeklytechnologysection , accessed 5 September 2008.
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Masnick, Mike (2003, 12 Sept). A Business Model Involving Free File Sharing. Techdirt. Blogpost available at http://www.techdirt.com/articles/20030912/1032238.shtml, accessed 5 September 2008. Masnick, Mike (2009, 5 February). My MidemNet Presentation: Trent Reznor And The Formula For Future Music Business Models. Techdirt. Blogpost available at http://www.techdirt.com/articles/20090201/1408273588.shtml, accessed 6 February 2009. Miriam (2009, 15 January). Al Jazeera Creative Commons Repository for Gaza. Post at Indimedia Ireland, avaliable online at http://www.indymedia.ie/article/90624, accessed 15 Janary 2009. Nine Inch Nails (2008). The Slip Limited Edition CD/DVD and Deluxe Vynil. Available online at http://theslip.nin.com/physical/, accessed 5 September 2008. NRC (2009). Chocoladeletter. Available online at http://selectie.nrc.nl/product.php?productid=709, accessed 20 February 2009. Osterwalder, Alex (2009, forthcoming). Business Model Innovation (preliminary title). Prelinger, Rick (2001). An Informal History of Prelinger Archives. Available online at http://www.panix.com/~footage/shorthistory1.html, accessed 5 September 2008. Prelinger, Rick (2002). Declaration of Richard Prelinger in Support of Musiccity.com, Inc.’s and Musiccity Networks, Inc.’s Motion for Partial Summary Judgment. United States District Court, Central District of California, Western division, Case No.: 01-08541 SVW (PJWx), Metro-Goldwyn-Mayer et al. v. Grokster Ltd. et al. 22 January 2002. Available online at http://w2.eff.org/IP/P2P/MGM_v_Grokster/20020122_prelinger_decl.html, accessed 5 September 2008. Prelinger, Rick (2005). The Use of Open Licensing of Content to Drive Business Growth. Speech at the seminar Creative Fuel for the Nation: Unlocking Television, Film and Radio for the Public. Creative Archive Licence Group, London, 13 April 2005. Transcript available online at http://creativearchive.bbc.co.uk/news/archives/2005/05/transcript_rick_1.html, accessed 5 September 2008. Reuters (2007, 2 April). Reznor adopts unusual Web campaign for new album. Available online at http://www.reuters.com/article/idUSN0233620220070402, accessed 5 September 2008. Scott, A. J. (1999) The cultural economy: geography and the creative field. Media, Culture & Society, 21: 807-817. Steenhoven, van den, Joeri, Stikker, Marleen, Schwarz, Michiel, Groeneveld, Syb, Keller, Paul, Lange, de, Michiel (2005). Creative capital conference, Amsterdam : final report. Amsterdam : Knowledgeland thinktank and Waag Society. Available online at http://www.creativecapital.nl/reports/pdf/CreativeCapitalConference2005_finalreport.pdf, accessed 5 September 2008. The Intellectual Property Committee (USA), Keidanren (Japan), UNICE (Europe). (1988). Framework on Intellectual Property: Statement of Views of the European, Japanese and United States Business Communities. Trent Reznor (2008, 5 September). In: Wikipedia, the free encyclopedia. Available onl ine at http://en.wikipedia.org/wiki/Trent_Reznor, accessed 5 September 2008. Troxler, Peter (producer) (3 October 2008). Status, Use and Trends of Open Content Models in the New Media Industry. A World of Open. Podcast retrieved from http://aworldofopen.cc/podcast/status_of_open_content_in_new_media_picnic_2008, accessed 3 October 2008.
Open Content in the Creative Industries - A Source for Service Innovation?
Vijay Viatheeswaran and Iain Carson (2007). Something new under the sun. In: Economist, 11 October 2007. http://www.economist.com/specialreports/displaystory.cfm?story_id=9928227, accessed 5 September 2008. Wharton (2008). The Experts vs. the Amateurs: A Tug of War over the Future of Media. Knowledge@Wharton. Available online at http://knowledge.wharton.upenn.edu/article.cfm?articleid=1921, accessed 5 September 2008. Wiesand, Andreas. Söndermann, Michael (2005). The ‘Creative Sector’ – An Engine For Diversity, Growth and Jobs in Europe. European Cultural Founation. Available online at http://www.institutumeni.cz/res/data/002/000304.pdf, accessed 5 September 2008. Wilson, Fred (2006, 23 March). My Favorite Business Model. In: A VC. Musings of a VC in NYC. Blogpost available online at http://www.avc.com/a_vc/2006/03/my_favorite_bus.html, accessed 5 September 2008. WIPO (2006). National Studies on Assessing the Economic Contribution of the Copyright-Based Industries. Available online at http://www.wipo.int/sme/en/documents/guides/copyright_industries.htm, accessed 5 September 2008. Wisbrun, Hans (2009, 12 February). ChocoPI: Mathematical Symbols In Chocolate. Available online at http://amsterdam.fablab.nl/node/1719, accessed 15 February 2009.
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Peter Troxler develops and realizes trans- and interdisciplinary work including and integrating arts, academia, media and public involvement. He works as a Senior Project Manager at Waag Society in Amsterdam, is president of UnBla.org and occasionally takes management consultancy assignments in the area of cluster management, strategy development and implementation, and integrated management. Peter has worked in academia as a researcher at ETH Zurich and as a research manager at the University of Aberdeen. He holds a Dr. sc. techn. in Industrial Management (PhD) and a MSc in Operations Management from ETH Zurich, Switzerland.
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Supporting Service Innovation Through Knowledge Management
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Open Content in the Creative Industries - A Source for Service Innovation?
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Traditional business models of the creative industries are built on the protection of content. With the advent of an Internet culture where content is ‘sold’ at a price of zero and sharing is a key paradigm, that model seems not to be fully adequate any longer, even more, there might be a time when content alone won’t pay anymore. The chapter proposes that service innovation on top of and around open content could be the answer to that challenge. The chapter then presents five examples from the creative industries that have successfully embraced open content and developed and implemented a business model that is sustainable: VEB Film Leipzig, Al Jazeera, Nine Inch Nails, Prelinger Archives, and FabLab. Far from claiming that these five examples would present five archetypal template solutions, they however explain how businesses arrived at these models, what the reasons were to choose one or another solution. The chapter concludes with some roughly sketched general impacts of embracing open content in the creative industries and postulates that service innovation may never stop as customers themselves and their needs evolve.
Open Content, Creative Industries, Intellectual Property, Creative Commons, FabLab
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The turn of the 21st century has seen a shift in public interest from knowledge to creativity and a growing focus on creative industries from an economic and wider social perspective (see e.g. Scott 1999, DCMS 2001, Florida 2002, Steenhoven, Stikker et al. 2005). Creative industries typically include advertising, architecture, art and antiques markets, crafts, design, designer fashion, film & video, interactive leisure software, music, performing arts, publishing, software & computer services, television & radio (DCMS 2001, see also Fronville 2003, Wiesand & Söndermann 2005). Those industries have their origin in individual creativity, skill and talent and are seen to have a potential for wealth and job creation through the generation and exploitation of content (DCMS 2001, p.4). Exploitation of content—or ‘intellectual property’ (IP)—traditionally means creating content once, cashing in on its reuse many times. ‘Creative industries are today firmly established as a vital component of our lives, substantially contributing to economic, social and cultural development. Deeply rooted in copyright protection, these industries have demonstrated growing importance worldwide.’ (WIPO 2006). Innovation in the creative industries is—so far—largely dominated by legal protection of content through copyright, trade mark registration and similar mechanisms. Their enforcement is believed to be vital for business; ‘lack of effective enforcement of copyright threatens industries, such as the motion picture and publication industries, manufacturers of computers, computer programs and communication systems, and the broadcasting and music and recording industries’ (IPC p.64.)
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The availability of digital tools for creative expression and distribution certainly helps these promises of a society turning creative come true. Yet, this might not be happening exactly in the way expected by the governments’ and industries’ policy writers. Consumers have started to become producers of content themselves as well—conveniently labelled as prosumers. It is only logical that in prosumer communities—which often claim to be themselves the real source of creative innovation—the free sharing of otherwise copyrighted content has proliferated. Allegedly with no intention to, or more accurately without the need to generate
Open Content in the Creative Industries - A Source for Service Innovation?
financial revenue the (free of charge) sharing of what would conventionally be copyrighted content has proliferated. Coincidentally, an economy has developed online where the default price is zero, as Chris Anderson notices: ‘Digital goods—from music and video to Wikipedia—can be produced and distributed at virtually no marginal cost, and so, by the laws of economics, price has gone the same way, to $0.00. For the Google Generation, the Internet is the land of the free’ (Anderson 2009). Consequently, creating revenue from content only has become difficult—the music industry deploring shrinking CD sales being the most vocal representative of that fading business model of create once, cash in many times. Kendall Whitehouse, senior director of IT at Wharton, puts it that way: ‘What funded the traditional content model is falling apart. Ideally, I see Internet content being a blend of professional and amateur content, but how do we develop an economic model that supports both?’ (Knowledge@Wharton 2008). The Controller of the European Patent Office, Ciaràn McGinley, publicly asked the provocative question: ‘Do we still need patents?’ speculating on a phenomenon he chooses to call ‘global patent warming’, the overzealous IP protection and its potential conflict with competition law (McGinley, 2008). Vijay Viatheeswaran and Iain Carson noted earlier that ‘patents are becoming much less important nowadays than brands and the speed at which products can go to market’ (Viatheeswaran & Carson, 2007). The Dutch think tank iip/create recognizes a trend of fading classic intellectual property rights (iip/create 2007, p. 45) or rather their importance for doing business. A recent European Commission Staff Working Document reported some interesting discoveries: ‘Approximately twice as many industrial than service firms applied for a patent and more industrial than service firms applied for a trademark. A much lower percentage of firms in KIBS [Knowledge Intense Business Services] apply for a patent than industrial firms (12.0 % versus 20.1 %) and KIBS firms are also less likely to apply for a trademark.’ (EU 2008, p. 17). The study then comes to the conclusion ‘that service firms use more often than manufacturing firms informal methods of protection to protect their innovations’ (p. 18), such as publishing, making tacit knowledge explicit, etc. The authors hence advocate the combination of traditional and informal IP protection. The challenge for the creative industries, so it seems, is to overcome the traditional understanding of creative services as repeatedly providing canned content (the ‘create once, cash in many times’ paradigm) and innovate in a business environment that operates beyond traditional copyright protection.
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‘How to make money with free?’ asks Gerd Leonhard, and goes on to recommend open licensing as a basis for a new content business: ‘The greatest thing that happened with the raise of Creative Commmons is that we’ve taken this idea that has been around pretty much for ever which basically says “I’m giving something for free in return for attention” and then finding a mechanism to get attribution and make money that way. And this has been around forever. That’s the way that musicians used to make money’ (Troxler 2008). Chris Anderson (2009) concludes that ‘free is not enough. It also has to be matched with Paid. Just as King Gillette’s free razors only made business sense paired with expensive blades, so will today’s Web entrepreneurs have to not just invent products that people love, but also those that they will pay for. Not all of the people or even most of them—free is still great marketing and bits are still too cheap to meter—but enough to pay the bills. Free may be the best price, but it can’t be the only one.’
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It is suggested that there could exist some analogy to business models common in the context of open source software—programmers (i.e. creators) distributing a basic package for free and aiming to earn money through customisations of this basic software and other added services for paying customers (Culture and Economy, p. 29). In ‘Better than Free’, Kevin Kelly (2008) postulates a number of generatives that add value to the freely available material and hence are suited to generate payment. ‘A generative value is a quality or attribute that must be generated, grown, cultivated, nurtured. A generative thing can not be copied, cloned, faked, replicated, counterfeited, or reproduced. It is generated uniquely, in place, over time.’ Generatives, according to Kelly, are immediacy, personalization, interpretation, authenticity, accessibility, embodyment, patronage, and findability. Similarly, Alex Osterwalder (2009) lists a number of ‘value propositions’ with price being the first one, followed by newness, accessibility, ‘getting the job done’, convenience and usability, brand or status, performance, risk reduction, customization, and cost reduction. For the creative industries, the solution to the challenge of obsolete business models is service innovation. The driver behind this need for service innovation is to embrace open
Open Content in the Creative Industries - A Source for Service Innovation?
content as a given and to use its inherent potential to re-invent sustainable businesses. In an economy where content per se is free, money can still be made.
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Research on the nature and effects of the shift from the ‘create once, cash in many times’ paradigm to the ‘Internet as the land of free’ where money needs to be made through additional, generative value propositions is scarce. However, there are a number of well and less well known cases illustrating how individual entrepreneurs or companies have approached the challenge and found an business model that appears to work for them. The most obvious, most conventional and most ubiquitous model is the combination of (free) content and advertising; it uses the potential of content to attract attention. Since this model is so widespread I shall not discuss it any further. A second model is to use (free) content to advertise, promote and eventually sell the creativity and skills required to create it in the first place. Below, I present one example. Business models built around attracting third party sponsorship are somewhat related to that approach, and I also describe one example. A third group of models comes in various shapes and colors, they add packaging, distribution and other attributes to the (pure) content, creating premium (paid-for) or hybrid ‘freemium’ offers that combine free and paid-for content (Wilson 2006). Two examples shall illustrate this group. Finally, I present an example of a service innovation for which the principle of open content is one of its core ingredients.
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Below I am going to present 5 example case studies of how such open content business models have evolved. They all have two things in common: they are based on the notion of open content, and they show some sort of development—how businesses started to experiment with open content and gradually are moving to embrace it as a fundamental principle once they have experienced how to achieve the paradox of making money with free. The case studies also differ in that they talk about newcomers and well-established businesses, they talk about ventures that need to make money to survive and others that use open content to build a base to stay in business long-term. The five examples are: VEB Film Leipzig Al Jazeera’s Creative Content Repository Nine Inch Nails The Prelinger Archives
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FabLab
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VEB Film Leipzig is a Movie Net Label and a group of independent film producers, Stefan Kluge, Mathias Eimann and Gerald Menzel, from Germany. They are primarily known for producing straight to Internet movies. In 2004, they released their first production, Route 66, which was the first Open Source movie in Germany. VEB Film Leipzig released the movie under the second most restrictive Creative Commons license, requiring attribution (the ‘by’ requirement), allowing reuse only in a non-commercial context (the non-commercial or ‘nc’ requirement) and requiring derivative works to be issued under the same license (the sharealike, ‘sa’, requirement; the license is therefore known as the BY-NC-SA-license). Their reasoning was pragmatic. The only online platform they could find at the time to distribute the film free of cost was the Internet archive (archive.org). And archive.org requires material to be in the public domain or licensed under one of the Creative Commons licenses. As Stefan Kluge admits him self (Lévy 2008), choosing a restrictive license is ‘what creators tend to do, since it resembles most closely the conservatieve ideas of copyright, which are common with creators above the age of 20.’
Figure 1: ‘Broken down’ film still from Route66 by VEB Film Leipzig.
VEB Film Leipzig chose the open content route despite an offering from a German broadcaster, MDR, over EUR 30.000. In the mean time they have earned more money than that by attracting sponsorship and donations, through DVD sales and service contracts, as Kluge confirms in an interview (Lévy 2008). The most positive effects of releasing the film as ‘open source’ according to Kluge were public attention and feedback on the movie, which motivated the producers to re-invest the money into their next production ‘Die letzte Droge’ (the last drug). This next production will be released under a much more liberal Creative Commons license, requiring only attribution (the by requirement) and the release of derivatives under the same license (the share-alike requirement; the license is therefore known as the BY-SA-license). For Stefan Kluge, the Creative Commons BY-SA-license is the political and economic consequence from what he has learnt about Netpolitics and Internet culture: ‘It is high time for net artists to part themselves from the disproportionate, radical restrictions of the Generation Copyright and to thrive on the possibilities of the medium Internet. And this only
Open Content in the Creative Industries - A Source for Service Innovation?
works if we don’t get into our own way restricting us from making money with our art. Once at this point one can start to think about alternative business models, which are not based on the sale of licences, but rather on services and promotion.’ (Kluge 2008).
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On the 13th of January 2009, the Doha-based news network Al Jazeera announced that it would release broadcast video footage online under the most persmissive Creative Commons license ‘attribution only’ (CC-BY), only days after the Herald Tribune carried an analysis of Al Jazeera’s role in reporting from the Gaza (Cohen 2009). Al Jazeera was the only broadcasting station that was able to keep their journalists on location in Gaza. The problem was for them to get their reports to their audience. Particularly the situation in the United States of America is radically different to Europe and the rest of the world. According to their own figures Al Jazeera reaches some 130 million homes in over 100 countries with their English language channel (Al Jazeera 2007). In the US there are only three local cable carriers that broadcast Al Jazeera: in Burlington, Vermont; Toledo, Ohio; and Washington, D.C., according to Cohen (2009), while wikipedia names a few different carriers (Al Jazeera 2009a).
Figure 2: Video still from Al Jazeera’s clip ‘Gaza Attack’, 12 December 2008.
Cohen (2009) concludes: ‘Recognizing that its material from Gaza will have influence in the United States only if it is highly accessible online, Al Jazeera has aggressively experimented with using the Internet to distribute its reports.’ Obviously, Al Jazeera added another step of service innovation to their accessibility strategy. Their head of New Media, Mohamed Nanabhay, is cited in the press release: ‘As one of the only international broadcasters in Gaza, our coverage of the war has been unsurpassed. The launch of Al Jazeera’s Creative Commons Repository means that our Gaza footage will be
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made available under the most permissive Creative Commons license (CC-BY). With the flexibility of the license we expect to introduce our outstanding coverage to an even wider audience across the world. This means that news outlets, filmmakers and bloggers will be able to easily share, remix and reuse our footage’ (Al Jazeera 2009). At the time of writing, there are no usage statistics of the archive readily available, and digg figures indicate a relatively low spread of the news in the blogosphere. Noam Cohem cites Mohamed Nanabhay saying: ‘Part of our mission, our mandate, is to get our news out.’ In that way, the move of Al Jazeera has been hailed as ‘an important lesson about how free speech gets built and supported’ by Larry Lessig (Al Jazeera, 2009) and ‘an attempt to help get the truth of the situation out—a tacit criticism of other mainstream media’ (Miriam 2009). And Mohamed Nanabhay adds: ‘We don’t have the direct commercial pressures that others have. If we can make some money that is great’ (Cohen 2009). The motivation behind Al Jazeera’s Creative Commons Repository is certainly building the brand; and one is free to read it as a contribution to attract sponsorship in the long run.
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Trent Reznor (born Michael Trent Reznor on May 17, 1965) is an American musician, singersongwriter, producer, and multi-instrumentalist. He operates under the studio name Nine Inch Nails. As of 2007, Reznor split his ties with Interscope Records, and is now an independent, unsigned musician (Trent Reznor, 2008).
Figure 3: Trent Reznor, photo by Rob Sheridan.
He preceded his departure from Interscope Record with some quite unique promotional activities, including giving hints to fans which lead them to an online treasure hunt via
Open Content in the Creative Industries - A Source for Service Innovation?
various websites to find hidden mp3-files with new songs (for details see Reuters, 2007), and planting USB sticks with pre-releases of certain songs at concert venues in Lisbon, Barcelona and Manchester. As Reznor explained to The Guardian: ‘The USB drive was simply a mechanism of leaking the music and data we wanted out there. The medium of the CD is outdated and irrelevant. It’s really painfully obvious what people want—DRM-free music they can do what they want with. If the greedy record industry would embrace that concept I truly think people would pay for music and consume more of it’ (Mackintosh, 2007). These activities, needless to say, upset the record label and the record industry. After leaving the label, Reznor started various experiments of giving new albums away for free, along the lines of what other musicians such as Radiohead, Kristin Hersh, Jill Sobule and others did earlier. His latest release, The Slip, is released under a creative commons attribution non-commercial share alike (BY-NC-SA) license, and the free download contains 10 of the 36 songs that actually are on the album. The full nearly two and a half hours of music are available in various paid-for options; a full download is $5, and there are a variety of physically packaged editions, including an ‘individually numbered 2 disc, 6 panel digipak’ and a ‘gatefold vinyl release [that] contains 1 LP (180 gram vinyl) and a 24-page booklet’ (Nine Inch Nails, 2008). Mike Masnick (2009) took to analyse Trent Reznor’s business model and came up with an interesting formula he suggests ‘is the basis for making money in the music business (and, I’d argue, many other businesses) in the digital era’. Connect With Fans (CwF) + Reason To Buy (RtB) = The Business Model ($$$$) As Masnick (2009) points out, ‘many artists—famous and not so famous—(...) have been making use (on purpose, or not) of this formula to create successful strategies for building up a stronger fan base, creating wonderful new works of art, distributing them out to the community and getting paid for it at the same time.’ Trent Reznor’s case is interesting since it has been widely discussed in the media and because Reznor himself has been experimenting with connecting with fans and giving them a reason to buy in quite varied ways—treasure hunt, USB-sticks, free downloads, premium packaged editions, to name a few. Masnick points out, that the model, while simple, actually needs to be implemented in ways that suit the particular skills and needs of any single artist. Further, he makes a point in saying that ‘a true reason to buy (RtB) is a voluntary transaction’. This relates to and is based on the aspect of authenticity mentioned earlier. Lastly, he argues that artists themselves need to be involved, not only the music business: ‘You cannot connect with fans if you’re in seclusion’ (Masnick 2009).
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On 19 August 2002, the Library of Congress announced the acquisition of the Prelinger Collection, a collection of more than 48.000 historical ‘ephemeral’ movies, from its owner, Prelinger Archives of San Francisco. This collection of advertising, educational, industrial, amateur, and documentary films had been started some 20 years earlier by Rick Prelinger
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when he was working on an all-archival documentary. The particularity about all these films is that most of them are in the public domain, i.e. their copyright has expired or they have never been registered for copyright (for works created in the US by US citizens, a registration is required before an infringement suit may be filed before a US court). In the late 80ies, Rick Prelinger started to produce and sell videodisks with selected films and so turned a hobby into a business. When the Prelinger Archives started, they used traditional physical and contractual control over the material to prevent unauthorized copying. Already in 1994, when producing an anthology of 10 CD-ROMs with historical films from the collection, they did not prohibit users from copying and repurposing the material (Prelinger, 2002). In 1999, Rick Prelinger was confronted with the idea to move his whole collection on to the Internet:
‘I moved to California and called Brewster Kahle, founder of the Internet Archive on the telephone and in about three seconds, he said to me, “Do you want to put your archives online for free?” This is the kind of question that is very difficult to answer when you’re out walking the dog, if you’ve never thought about it before and you’re operating from a model of scarcity. But in about three months when I’d learned a little bit about what people were doing in the software industry and how there was a functioning gift economy, at least in California, I’d come to agree with him. I saw how it was possible to adapt some of the paradigms of the IT world to the world of content distribution that it came in. So at the beginning of 2001 we made a page with links to 270 films which has now grown so that now there are about 2000 films available online for free viewing, downloading and reuse. It would be more, we just need to get the money to do some more film to tape work’ (Prelinger, 2005).
This did not prevent the Prelinger Archives to elect Getty Images as their exclusive representative for stock footage, a quite successful partnership:
‘Getty Images doesn’t like me to talk specific money figures, but if we earned ‘x’ in the year 2000, in 2004 we earned ‘x’ plus 62 per cent—and this in a period where the price of stock footage has gone down, where there’s been a great deal of competition and where there’s also been a tremendous slump—between 2001 and 2002 a lot of people left the business’ (Prelinger, 2005).
The difference between the Internet Archive and Getty Images is a difference in service. While the Internet Archive does not provide written license agreements or make any other representations or warranties other than the Creative Commons License, Getty Images furnishes written agreement. The Internet Archive does not provide physical copies, the material is digitally available in the standard MPEG-2 broadcasting quality. Getty Images does provide online and physical material.
Open Content in the Creative Industries - A Source for Service Innovation?
Figure 4: Still from Getty Images Clip 83547542 ‘Dog eagerly awaits being fed.’
Further, the material on the Internet Archive is typically complete films that are commented on, and indexed by users of the archive, such as the 9 minutes long promotional newsreel from 1937, ‘Chevrolet Leader News (Vol. 3, No. 1)’ (Handy 1937), featuring a number of Chevrolet-centric stories. Getty Images footage, to the contrary, is accessible as short clips of the type ‘Dog eagerly awaits being fed. He sits up and begs’ with a length of 8 seconds and 11 frames, for example (Getty Images, 1937), which is actually a sequence from the above newsreel, starting at around 8 minutes 38 into the Chevrolet newsreel. The free-to-download footage give the Prelinger collection accessibility and visibility, as did the earlier releases on video discs and CD-ROMs. The additional service of Getty Images consists in providing the material in a format (clips), package (license), findability and speedy delivery that suits the needs of the movie industry.
‘Anecdotally we know that a tremendous number of people come to us and then go on to Getty afterwards. And Getty actually points people to the Internet Archive now promotionally which is very interesting. They publish that little magazine for creators—you probably get it for free if you’re a producer or an art director – and they have these historical pages and they point to the Internet Archives. So, we’re not actually competing, I think, in their view’ (Prelinger, 2005).
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Interestingly, the world of open content is not restricted to the digital field. Under the namer ‘FabLab’, short for fabrication laboratory, a movement has silently begun to conquer the world of personal, physical fabrication. In analogy to personal computers and desktop
Supporting Service Innovation Through Knowledge Management
printers, Neil Gershenfeld has not only produced the vision of ‘how to make (almost) anything yourself’ (Gershenfeld 2005), he has been able to start that ‘revolution on your desktop’. Today, the FabLab network counts over 35 laboratories from Jalalabad in Afghanistan to San Diego, California, from Lyngen in Norway to Soshanguve in South Africa, from Amsterdam, the Netherlands, to Pune in western India (FabLab 2008). A FabLab, almost independent from its location, consists of a standard set of basic machines: a tabletop mill, a sign cutter, and a small laser cutter. Standard software is supposed to be used to draw the blueprints for the products.
Figure 5: FabLab Amsterdam, photo by Ton Zijlstra.
According to location and socio-economic context, the contribution of a FabLab can be quite diverse, ranging ‘from addressing the most basic human needs (creating jobs) to the most refined (creating art), from whimsical inventions to ones that are needed for survival’ (Gershenfeld 2005, p. 55). Any activity in a FabLab is, according to the FabLab charter, based on the global network of labs situated in a local context, the provision of access, a learning and teaching contribution to education, and the personal responsibility. Particularly interesting in the context of open content and service innovation are the charter clauses on secrecy and business.
‘Secrecy: designs and processes developed in fab labs must remain available for individual use although intellectual property can be protected however you choose;
Open Content in the Creative Industries - A Source for Service Innovation?
Business: commercial activities can be incubated in fab labs but they must not conflict with open access, they should grow beyond rather than within the lab, and they are expected to benefit the inventors, labs, and networks that contribute to their success’ (FabCharter 2007).
The FabLab charter postulates that any designs and processes must be made available for individual use within the lab. This clause also opens the content produced in a FabLab to any other FabLab user. It does not introduce artificial scarcity to digital assets that can be copied easily. Even further, the aspirations of a FabLab to be a place for mutual learning on-site and in the network actually depend on designs and processes being open. The service innovation of empowering people anywhere to produce anything with the help of a local set of machines and a global network of people and experience is fundamentally built on the openness of content within the network. Yet the FabCharter limits openness to the personal sphere, be it enjoyment or education. Doing so, it keeps intact the inherent scarcity of the physical product and the labour put into its fabrication, thus allowing businesses to grow from a FabLab. And the clause on business adds another aspect to the innovation model of the FabLab. While a FabLab is supposed to be a place to innovate, it is not the place to exploit this innovation. Commercial activities are expected to develop beyond the lab. One most recent and maybe slightly amusing result of such a venture that initially started in a FabLab is the ‘chocolate letter Pi’, combining the fascination of mathematicians with the constant ! and the Dutch tradition of chocolate letters which are traditional gifts for St. Nicholas day. Dutch natural scientist Hans Wisbrun made his very first steps to produce these letters at the Amsterdam FabLab (Wisbrun 2009). In March 2009, coinciding with the international !-day (March 14), they are made available to the readers of one of the country’s major newspapers, NRC (2009). Chocolate letter Pi is not yet a fully commercial proposal that would pay money back to the FabLab where it initiated. However it demonstrates the value of the service offered at a FabLab.
The story of VEB Film Leipzig is an example how creators might stumble upon open content and the licensing of it when exploring new territories, in this case the area of straight to Internet movies. While working VEB discovered the promotional effects open content and
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open content licensing had for their product and, even more so, for their work. This eventually convinced them to continue the way of ‘going open’ with their content. In the Al Jazeera example, the decision is a much more deliberate one. While certainly motivated by expanding viewership and brand visibility, creating a Creative Commons Repository not only does that on a pure quantitative basis, the effects of which are so far hard to estimate, it also adds a qualitative notion of ‘free speech’ and ‘accuracy of reporting’ to the brand image. The path Trent Reznor chose for Nine Inch Nails is one coming from and leading to a sustainable business model while changing the reasoning why people would pay him money. He superseded the old paradigm of closed content—at least partly—with an open content model while still giving his fans a ‘reason to buy’. Rick Prelinger developed a unique dual channel strategy to serve the same content to different audiences, differently packaged and delivered, taking into account findability and timeliness of the offer. On top of that, the two channels appear to be influencing each other positively. The FabLab example finally demonstrates how certain aims are best achieved by incorporating open content principles into the core of an innovative service offering. It shall be interesting to see if the FabLab can spin the idea of ‘sharing’ into businesses that grow from a FabLab, similar to the aims of the share-alike requirement of the Gnu Public License (GPL) and some Creative Commons licenses.
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The business impacts of building on and around open content in service innovation are threefold. One, with digitally born and digitally available content, one has to recognize that the traditional models built around scarcity of a resource don’t hold any more. Two, and that follows from one, service innovators are forced to think harder about what their customers really need so a new service will add such value that the customers are actually willing to pay for, the reason to buy. Three, it might well be, and the examples of Al Jazeera and Nine Inch Nails suggest it, that service innovation around open content actually has to become a continuous process that unfolds as the customer base evolves so the service provider stays in contact with the customers.
Open Content in the Creative Industries - A Source for Service Innovation?
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There are numerous additional cases that could have been added to the list but have been left out on purpose. The aim of this chapter was not to provide a complete overview of open content applications in service innovation in the creative industries. Rather it aimed to provide some insight into a still rapidly evolving theme within the industry. One whole complex of open content models is worth mentioning as a small appendix— models building on user generated content. Two basic principles are behind involving users in the generation of content. Firstly, they are often the ones who really know. And secondly, they are often more than willing to contribute. The most famous examples are sites such as YouTube, Flickr or Wikipedia—each following their own business model. But there are much more nimble uses of user generated content, such as musea and archives opening up their collections to amateur historians who then contribute in depth knowledge and research to make a collection actually much more valuable to everyone while typically getting more specific recognition for their work as ‘amateurs’. The issue of open content is certainly here to stay, therefore also the need of the creative industry (and other industries as well) to develop new ways of presenting service around and on top of open content, if they don’t want to hit the wall. Or to put it the other way round: The acceleration of the spread, popularity and intensity of Internet use will only speed up the disruption of the established creative industries and their business models which rely on copyright protection and licensing modeled after physical distribution and are supported by mass market advertising. Significant disruption to established business models, however, often has led to innovation; and accepting the disruption might well be the first step needed.
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Embrace open content wholeheartedly. Don’t stay in denial of its potential disruptive consequences. Use it as a springboard for innovation rather than seeing it as a threat. ‘Connect with your fans’ (i.e. your customers) so you better understand them and they better understand you. Develop services that align with your customers’ lives, needs, and activities. Make yourself and your services accessible, findable, immediate. Give them a ‘reason to buy’ by tailoring the services to what they really want and that align it with their buying style. Be authentic, offer interpretation, personalization, think of the right packaging and delivery. Finally, continue to innovate your services.
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Open Content in the Creative Industries - A Source for Service Innovation?
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Open Content in the Creative Industries - A Source for Service Innovation?
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Peter Troxler develops and realizes trans- and interdisciplinary work including and integrating arts, academia, media and public involvement. He works as a Senior Project Manager at Waag Society in Amsterdam, is president of UnBla.org and occasionally takes management consultancy assignments in the area of cluster management, strategy development and implementation, and integrated management. Peter has worked in academia as a researcher at ETH Zurich and as a research manager at the University of Aberdeen. He holds a Dr. sc. techn. in Industrial Management (PhD) and a MSc in Operations Management from ETH Zurich, Switzerland.
