I used to get many questions on why I created New Internet Media. As the need from the rights-holders and the value for the whole ecosystem is getting increasingly clear to all, the question is now usually how instead of why.
In the pre-internet area, the idea was whoever generated the demand also captured the value, and middlemen got commoditized as markets became more efficient.
In the news, the newspapers controlled publishing, and in music, the record labels controlled distribution. In that world, newspapers and record labels were kingmakers because, without them as middlemen, consumers wouldn’t have access to the content. Middlemen enabled producers to reach their customers and often even to create the product in the first place.
The Internet changed all that and provided, at least a possibility, to create and distribute its own products and content while circumventing middlemen altogether.
The Internet made distribution almost free, and transaction costs zero. The Internet allowed digital content to be aggregated & delivered directly to the end-user.
When the cost of distribution is close to zero and customers are rows in a database — it’s all about consumer experience!
Something I learned early in the first launch of music to the mobile phone in June 2004.
Whoever generates the demand should capture the value!
When I launched my first company in 1988, the constraint was capital. I had to talk to investors because investors were the kingmakers. This all changed in the late 90s with AWS and internet native growth channels that enabled me to build and distribute products efficiently and cheaply, and when I saw the future of music streamed to mobile phones in 2000, I was hooked.
The Music Industry has always been about trying to capture that value. However, the Internet turned the “old” music business model upside down, and the industry has not fully recovered.
“In the good old days” (pre-2000), record labels created stars. I remembered a discussion in 2003 at Sony Music, everybody, was over the moon about MySpace where they could pick a potential artist at will.
In the area of Spotify and YouTube, that has become mainstream. Artists already have a large fan-base before they get signed. However, the deal structure hasn’t changed. Huge upfront advances make sure the majority of royalties stays with the labels.
Artists are starting to fight back. Taylor Swift is creating new covers of her “old” hits and tells her fans to “only” listen to the new ones…
If you click on the button below, you can check it out for yourself on NIM’s own streaming service (you can also see how much User-centric would have paid versus Spotify and Youtube via menu choice Realtime Report and choose More details)
A flawed business model
I started New Internet Media (NIM) because I believe that whoever creates the value should capture the value proportionate to the value created. Because it’s fair, but also because it’s a good sustainable business.
Through NIM, starting with music and user-centric licensing, we will disintermediate, increase the profit margins and, with higher market transparency getting both ends of the value-chain supporting us. The creators and the consumers.
The current business model is seriously flawed, and I would know since I was the one negotiating the first streaming deals with Sony Music (then BMG) in December 2003.
I agreed to pay 90% in royalties split as long as I kept the adverting income. Nice deal for me and BMG, but not so nice for the songwriters and artists that created the content (the essence of service licensing).
The business model pre-internet was to charge for content. In 2003 my thinking was — give away the base layer, supercharging viral marketing to monetize the content –
And it worked (for a while) when we launched in June 2004 we got 85000 new subscribers a month IN NORWAY a country with 5 million citizens. However, it’s wrong!
This is why I (and Björn Ulvaeus 😊 among others) is a committed fan of user licensing (see earlier emails and newsletters)
What I discovered early is that the music industry is under-monetized. The whole music industry is something like $20B. Compare it to video games, a $140B market.
Music has probably much more fans and engagement than video games, so why is there a huge difference in market size — if not for the business model.
Maybe it will be NFT’s?
I believe it will be NFT technology and have implemented that in NIM services for two years already based upon the implementation of blockchain technology.
Blockchain technology and crypto
In 2006 I discussed the copyright clearinghouse with Guy Fletcher, OBE (ex-chairman of PRS for music and songwriter). Back then, there was no technology that existed to implement it, so the project was deferred.
In 2013 I discovered blockchain technology, and the copyright clearinghouse was made possible by offering a couple of new ways for musicians (and other creators) to directly capture the value they create.
It allows fans to be investors, sharing in the financial upside of their favourite creator. Instead of just getting the song, you also get financial upside in the song’s success (true for every creator category).
The discrepancy between value capture and creation isn’t unique to the music industry. In every network or marketplace, users/customers create value, rarely gets any financial incentive back.
Facebook and Twitter would not be worth a dime if it weren’t for the unique data that we, the users, have provided. Yet we see nothing from it.
Limited Liability Corporations (LLCs)
The LLC as we know it is starting to be a business organization of the past, especially on the Internet. A new organizational form, the Decentralized autonomous organization (DAO), is emerging as a better form of business designed for the Internet and the future (aka Web 3.0), a decentralized organization form resembling a bit the old co-ops.
The Co-Op (NIMs Series LLC)
The New Internet Media (NIM) network(s) will be as big of a step function improvement over corporations who expanded the group of people who had financial upside from just founders to founders and employees. NIM will expand this further, from founders and employees to founders, employees, and users.
NIM services make it easier to raise money and get customers by making those same people investors.
At the same time, every copyright holder that has registered with NIM has done so under the same laws that regulate Limited Liability Companies (Llc) in the USA.
A Regulated Copyright that has the same rights under the law as a company makes it easier to raise capital for the next music project…
The ownership economy
In the early days of blockchain technology, “everybody” got involved and participated in the success of chains like Bitcoin and Ethereum, laying the foundation for Web 3.0, the decentralized Internet. This same economic model is how NIM crossing the chasm from developers to creators by helping creators and collectors realize they can own a piece of the internet value they created.
I am NOT on a social mission for inclusion, as valuable as that is in its own right — is necessary to disrupt the centralized Web 2.0 platforms where there’s high switching cost? (Not to mention the outage that Facebook had this week, something that would NEVER happen with the decentralized architecture of NIM)
The ownership economy is a far better business model than LLC, reviving the concept of co-ops and making it sustainable.
What I do love is that it does mean that community ownership and network alignment enables NIM to transfer royalties in the same way we distribute music — instantly, to anyone, anywhere in the world.
The ownership economy sustains a world in where those who create the value also captures the value.
Some of this text is inspired by Erik Torenberg articles.