Results From Our CwF+RtB Business Model Experiment

from the cwf+rtb dept

Before getting into the "meat" of this post about how our CwF+RtB experiment worked out, I want to announce that we've "replenished" the store with some new t-shirts and hoodies. These are brand new -- not the same t-shirts and hoodies we had before, which are sold out. You have a choice of either a t-shirt or a hoodie with the full Techdirt logo, or my personal favorite DMCA takedown t-shirt which says on the front:

The content of this t-shirt has been removed due to a DMCA takedown notice.

Consider the message on the shirt a good way to engage people in a conversation about the abuses of copyright law and the DMCA. The hoodies come with a copy of my Approaching Infinity book, while you can get the t-shirts without the book or with the book.

Also, we are doing one thing differently this time around. Rather than just waiting until we sell out to stop selling these shirts, we're taking open orders for two weeks only and then will make the shirts and send them out. So if you want this shirt from us, you have two weeks to order. And that's it. On to the post itself...

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After seeing many musicians setting up various interesting/amusing "tiers" of scarce value worth buying, while also working to connect with fans, we decided to launch our own CwF+RtB tiers, at the end of July, as an experiment to see what we might learn. We knew that this sort of thing worked for music, but had no idea if it would work elsewhere -- say, for a blog. It wasn't designed to replace our existing business model, but just as an experiment to see what would happen -- and what we could learn that might help others implementing similar business models.

I should apologize, as this post detailing the results is way, way, way overdue. We had most of the results and lessons within about a month, but this is a big post to write up and I kept procrastinating. No good reason why: there was just always something going on in the news that seemed more urgent and every so often I do like to catch up on sleep.

The quick summary: we consider the experiment to have been a huge success.

• We brought in approximately $37,000 total due to this experiment, mostly in the course of that first month.
• Nearly $12,000 came from direct sales to individuals of the tiers between $5 and $150.
• As was revealed in an article at Wired, another $5,000 came from an individual, Didier Mary, who was working on a business plan and bought the Techdirt Reviews Your Business Plan package. The package included an Insight Community conversation, which recently concluded, about his business model idea. Didier has told us that "it was a great experience" and very useful to him in moving forward with his plans.
• Another $20,000 came from larger companies, which purchased Insight Community packages after learning about them through this effort.
• The effort also resulted in potential future deals, as it led many more companies to contact us to learn more about the Insight Community.
• Other companies, with whom we were already talking about the Insight Community, contacted us after we launched this, with one noting that if what his company had been discussing with us was on the list, he probably would have just "clicked buy" right away (though, with that company, we're still discussing a deal and have not yet completed it).
• Ignoring the higher end Insight Community deals, the average amount paid by users was over $70. This was significantly higher than expected.
• Sales came from 15 different countries around the globe. North America and Europe were obviously the biggest, but we also got sales from Asia, South America and Australia (no Africa). The international sales might have been bigger if we had launched international sales the same day we launched the overall effort. Unfortunately, we didn't have all the details on that sorted out until a week later, and I think we probably lost some international sales that way. The US Postal Service does make international sales much easier these days -- especially with its "one rate" boxes, but shipping is still really expensive, and many countries then add annoying tariffs on top of everything. This was annoying, but (unfortunately) unavoidable.
• Our highest selling item was not the cheapest, second cheapest or third cheapest offering (contrary to the claims that people just want the cheapest item). Instead, the biggest seller -- by a pretty wide margin -- was the Approaching Infinity package, that included both a copy of my book and a t-shirt.
• For quite a while, the hoodies (which we almost didn't offer) outsold the t-shirts... but in the end the t-shirts barely passed the hoodies.
• The Techdirt Book Club outsold the Techdirt Music Club by a factor of three.
• No one bought the Day with Techdirt package, though we actually got a lot of inquiries about that, with multiple people who don't live in California saying that if they were closer, they would have bought it. This is still available, though.
• And, fear not, no one bought the $100 Million Silence Techdirt offer (still available as well!), though we did get a few people who were worried that someone would actually take us up on this -- and one satirical offer from someone claiming to be from the RIAA, which made me laugh, saying the RIAA would pay up, but wanted to guarantee "exclusive rights" to the RIAA, such that it would be able to "pursue appropriate legal action against any and all 3rd parties that make use of this silence purposely or inadvertently" including, of course "the right to pursue similar action against any individuals who are also not reading Techdirt and therefore infringing on our own licensed agreement to be the sole recipient of a Techdirt-free world." Brilliant.
• However, the $100 Million Silence Techdirt offer did get the most traffic of any of the tiers, by a factor of three -- though, it also drove many people to check out the other tiers.

Lessons Learned

So, what did we learn? Lots of things:

1. This works! These sorts of models can absolutely work in connecting with fans and in making money.
2. All of you, in our community, are awesome. Not just for buying, obviously, but because the overall response we got was incredible. This included many really, really nice emails that made us feel great, along with happy emails and Twitter messages from people receiving their packages, and telling us stories about wearing the clothes, reading the books, etc.
3. It's fun making people happy. Really. It really gave all of us here at Floor64 a great feeling every time we heard back from happy community members.
4. Logistics and inventory management are more complicated than you expect. We sort of knew this ahead of time, but you realize it first-hand when somehow, somewhere copies of signed books go missing, and you suddenly need to ask for an author to send extras. Also, dealing with sourcing inventory from so many different people for the Book and Music club is doable, but takes a lot of time to manage. Though, I have to say, every one we worked with -- from authors and musicians to publishers, agents and record labels really were fantastic. We didn't have even the slightest trouble from any of our partners in this endeavor. Shipping out the products definitely was an effort, but we tried to make it fun, with a group of us working together to package up and ship stuff (and on this one, the team here, lead by Gretchen, did a fantastic job, going above and beyond to get everything organized and shipped).
5. Having lots of options was a good thing because we weren't very accurate in predicting what would sell. We came close to not offering the hoodies at all, but those were incredibly popular.
6. You can't keep everybody happy, but you should try! We had to set up a better process for "customer support" as we launched this (nice job, Dennis!) and then work with and respond to customers who had questions or (in a few cases) problems. A few times the problem was that we did not explain things clearly enough, and sometimes there were problems with shipments (or, in one case, a hoodie that was frayed). But we tried our best to make sure everyone was happy and hopefully succeeded (mostly).
7. What you're selling should match your audience. The Book Club sold really well. The Music Club, not as much -- despite being awesome (seriously, the combined Music Club items are really, really cool, and the music is great as well). But, in retrospect perhaps that made sense, as the books in the Book Club directly related to everything we talk about here. The Music Club, while supporting artists who did things that we talked about here, was a bit different, and required people to like the music as well, which is a lot more subjective. Bundling together four separate musicians with different styles was, perhaps, not a great idea. On top of that, we perhaps did not do enough to promote the music itself to get more people to enjoy the work of those musicians. Finally, while some of the offerings were "unique," others could be purchased elsewhere, which limited the "scarcity" of the overall package.
8. Some promotions worked really well. The first promotion we did was offering anyone who bought both the music and book clubs together a choice of either lunch with me or a free hoodie. This helped motivate a bunch of folks to step up and buy -- and resulted in a handful of lunches.
9. Having lunch with people was really, really cool. I have to admit that I was a bit nervous going into the lunches from the above promotion, but they were all really amazing, often in very different ways. Each individual was really interesting and the conversations were quite engaging and thought provoking and fun. I'm pretty sure every lunch ended up lasting well over the allotted hour. I ended up learning a lot and had a great time at every one. I'm hoping to set up more ways to do things like that, if not the same thing.
10. Even the tiers that didn't sell, still generated interest in other things we were doing. A bunch of people contacted us about the Day With Techdirt package, and while no one bought it, many of them bought other packages instead.
11. Not everyone who says they will buy will buy, but that's okay. It was interesting to note that some people who told us they would buy (or even announced it on their Twitter/Facebook feeds) never actually did buy for whatever reason. That's fine, of course. Everyone is free to do what they want, but it was interesting to note. Just because someone says they'll buy, it doesn't mean they will.
12. Communicating directly with everyone can be difficult. While others here handled customer service requests, I started getting a bunch of emails personally from people who participated, sometimes with long and detailed questions. I tried to reply to most of these, but it was difficult, and I'm sure I missed a few.

Anyway, that's the basic summary. This really has been a lot of fun and quite educational at the same time. We've still got lots of things planned and will be trying a few new things as well, but thanks to everyone who participated and a big thanks to all the authors and musicians who partnered with us, along with the team here at Floor64 for helping to make this all work.

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Nina Paley Releases Some Data On 'Sita Sings The Blues': The More She Shared, The More She Made

from the funny-how-that-works dept

Earlier this year, we wrote about the ridiculous situation that Nina Paley faced in trying to release an amazing film, Sita Sings the Blues. Basically, some copyright holders of the music used in the film put positively insane terms on the use of their music. This made no sense, considering that the music (from the 1920s) was mostly unlistened to these days -- and the only thing the movie would likely do is increase demand for people to get legitimate versions of the music. Eventually, Paley worked out a plan to release the film under a Creative Commons license and put in place a business model like the ones we've talked about for years: give away the infinite, sell the scarce.

And apparently, it's working. Pistol points us to a talk that Nina Paley just gave revealing some of the results. You can see the video here (it's a bit over 20 minutes):

The key quote, on how she describes the business model sounds pretty much exactly like what we talk about here:

The business model -- and I do want to make money -- I very much want to make money, and I chose this because I felt I'd make more money doing this than with a conventional distribution deal. What I'm doing is that I'm not selling the content. The content is free. The content is Sita Sings The Blues. It's digital. It's made of 0s and 1s and 0s and 1s can be copied freely and easily by lots of people.... Containers are not free. And where the money comes from is the containers. And the containers, for example, are DVDs, merchandise, t-shirts, 35 mm film prints, physical screenings. The film is free, but the container of that film is not free. And that's what we're selling...

The more the content flows freely, the more demand there is for those containers. So I want as many people as possible to share Sita Sings the Blues because that drives up the demand for the containers... That was the theory when we started this, and so far it has proven correct. Yes, I love money.

So, how much money? Well, she details all the different areas of where the money came from, and it comes out as follows:

• $21,000 in donations (most at the very beginning)
• $25,100 from the store for merchandise (which cost $8,500). So, net: $16,600
• $3,000 from Channel 13 for broadcasting it (even though they didn't have to pay)

And that's not all. She also talks about a theater that downloaded her film online to show it and then sent her a check for $1,900 (as she said "the dream scenario"), and the fact that her success with the model has created all sorts of paid speaking gigs as well. Oh, and there's other things as well.

She's done some commercial distribution deals in a variety of different regions (and admits that she'd love it if she didn't have to handle all the distribution). So even though anyone can download the content online, actually distributing a 35mm print of the film (the container) uses a full distribution deal -- and, in fact, they've found that many people who downloaded and watched the film, still go and see it in the theater, because it's a different experience to go see it in the theater. Most of those deals are new, so she didn't have data on sales from that yet.

On top of that, she's done deals with DVD distributors. She offers up a special edition (signed) DVD that she distributes herself for $100. Or there's the regular version (sold via Question Copyright) for $20. This is being done to basically prove that you can sell DVDs of content that can be downloaded. In 2 months, they've sold 700 of them -- with no marketing. Then they signed a professional DVD distributor, who put it on Amazon, Netflix and stores... and they were able to sell way more than Nina or Question Copyright -- as you'd expect (though, the distributor got a bit confused and asked about trying to take the film down from YouTube, and had to be told not to do that -- old habits die hard, perhaps). Once again, this shows that having good partners helps, but also shows that just because something is available free (even from "competitors") it doesn't mean someone with a strong marketing effort can't seriously outsell the others.

Finally, there's another interesting element which is worth discussing. For the goods sold directly from Nina's site, they're using a special Creator-Endorsed Mark, so that buyer's know some money is going back to the creator. This is the sort of thing that always freaks people out when we talk about this stuff. They insist that others will make t-shirts and things and who will want to buy the official versions then? Well, it turns out lots of people. Because they want to support the artist, and having the Creator Endorsed mark does that. As Nina says:

It is entirely legal for others to sell unendorsed products. It is entirely legal to sell Sita Sings the Blues t-shirts or sippy cups or whatever, but they cannot claim that the money goes to me, unless they work out a revenue share with me first, they cannot display the creator endorsed mark. We believe that this mark increases the value of the merchandise, because people want to support the artist.

This is really great info, and she notes that within a few months, she'll have a lot more info on the theatrical distribution revenue as well. But, all in all, it looks like she'll easily be able to pay off the $50,000 it cost to officially license the music (no matter how ridiculous it was that she needed to do that), and should be able to earn a nice profit from it. And... I'll bet that her next movie (or whatever she does next) will have a nice built-in audience as well.

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