The relevance of business models dependent on profit from duplication has eroded, due to the ease that digital mediums provide for duplication, at almost no extra cost, by anyone. It does not mean that this business model will disappear, but it will mean that anyone doing this type of business model must be smarter in creating the product and planning the distribution.
Some have tried control systems such as DRM, and others have developed exclusive physical products in limited numbers. But slowly, many companies are leaving behind their ‘dependence’ on duplication. Some music services monetize on access control rather than offering downloads, like Spotify, Deezer and Rdio. Another way to develop alternative income for IPR-based companies is bundling.
Bundling literally means selling a product with another product, for instance: buy a handphone and get music, buy coffee to get a music download code, buy fried chicken to get a CD, and so on. This strategy is already used by some recording companies, although we don’t see something like this from the book and movie industries. Usually in this type of deal, there is a profit share done by the product seller to the IPR product owner, so that the IPR product ‘feels free’ for buyers, when actually the price has been included with the bundled product.
This type of bundling does not necessarily need to be done with retail products like food or soap – it can also be done with services. Long-haul airlines usually provide an entertainment center in the passenger seats, which can be uses to access various entertainment products like movies, TV series, music and games.
The cost of providing these entertainment products is done directly between the airline to the IPR product owner, so that actually the cost to enjoy all those entertainment products is subsidised by the airfare price. Some others also do bundling with distribution channels, by selling exclusively through gas stations, minimarkets and so on.
An entertainment product does not need to be sold at retail, or even through the various subscription services. With good planning and selection of a suitable partner, a bundling strategy can be a good alternate revenue driver for IPR product owners.
Ario is a co-founder of Ohdio, an Indonesian music streaming service. He worked in the digital music industry in Indonesia from 2003 to 2010, and recently worked in the movie and TV industry in Vietnam. Keep up with him on Twitter at @barijoe or his blog at http://barijoe.wordpress.com.
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