Category Archives: Blog

If you’re a casual gamer on phone or tablet (and 46% of you are, according to Forrester), you likely have a few free-to-play (F2P) games kicking around. You may have even spent a buck or two on in-app purchases for the games that you really enjoy. (It’s ok. There’s no shame in needing the Mighty Eagle to get through that level in Angry Birds.)

Whether or not you’ve voted for F2P with your wallet, it and freemium, in general, are all around us. As a pricing and business model, F2P has become a major force in games, and large swaths of the software business have embraced freemium. Nicholas Lovell and Rob Fahey have written an excellent ebook, Design Rules for Free to Play Games, if you want to quickly come up the F2P learning curve.

The principles behind F2P make a lot of sense in a lot of ways for the music business. Those selling to-fan and even to-band should take note.

Here are a few of the lessons the music business can learn from free-to-play games:

1. One size does not fit all. Segment or perish.

   F2P breaks users/consumers into three segments, at minimum, based on revenue: Minnows, Dolphins and Whales. You can guess which pay the least and the most. The kinder, gentler term for a Whale is a Super Fan.

2. Raise the ceiling on what a Super Fan can pay.

   Rather than $9.99 for an iTunes album or a subscription to Rdio or Spotify, why not let your biggest supporters pay you more for what they love? Crowdfunding embraces this with a variety of price points and perks, and pay-what-you-want experiments have shown that you’ll want to set a minimum, but there’s much more to be done and learned.

3. Don’t dismiss the Minnows. You paid to acquire them, now work to convert them.

   One of the tenets of F2P advocates is “Free-to-play forever,” which is to say once acquired, never kick a user out. A large portion will not convert and pay, but you won’t know which will unless you give them sufficient time and value.

4. Don’t be greedy. Extortion isn’t a sustainable business model.

   While the game business is still working out some kinks, it’s rapidly iterating and finding ways to balance value delivered with price paid. Scammy F2P plays are sniffed out fast and word travels faster. Damage to brand and bottom line follows.

5. Give away what’s cheapest to distribute, even if it’s what you value most.

   For most, this is the hardest pill to swallow. Content may be king, but its kingdom is shrinking fast.

6. Sell what can’t be (readily) copied.

   Emotion, elation, great experiences and memories. Merchandise, social capital. The list is long. These things are now what fans value most. Yes, live event ticket sales are where most artists’ eyes are focused, but the machinary of the business is still tuned for record sales.

7. Production costs and values have to fit free.

   In the games industry, AAA is the equivalent of the music industry’s “major label”. $10MM+ budgets used to be the norm for AAA games. Those days are over, in large part because of free-to-play alternatives from smaller studios and the rise of mobile. Sound familiar?

Is there still a place for premium? Absolutely, just as there is in games, but finding and serving customers who’ll pay a premium out of the gate is increasingly hard to do. Is free-to-play still in its infancy and finding its legs? You bet. There are many mistakes still to be made and problems yet to be solved. If I just ignore it for long enough will it go away? Not a chance.

The music industry has forever lost the ability to force a customer to purchase, but it has not lost the ability to ask a fan to buy.

I’m a devout streaming media user. I cut cable almost a year ago. I don’t buy music anymore, with the exception of vinyl, which I mostly buy as a keepsake, a way to physically interact with the music I most care about. Instead I stream via Rdio. Religiously.

I spent the better part of this past weekend watching Hemlock Grove, Netflix’s new original series about a town ransacked by werewolves and other supernatural phenomena. It’s not a phenomenal show (see what I did there?). And it’s not nearly as good as House of Cards, Netflix’s last original series release. Hemlock Grove is passable entertainment, fun to watch, mysterious enough to keep you engaged, but so laughably acted and directed that you have to wonder just exactly how it got greenlit. But one thing is for sure: I seriously got my $7.99 worth this month.

In a normal transaction of goods, the value equation is simple: cost < benefit. If this is equation is lopsided, the transaction rarely happens. But in digital goods, and streaming media as a subset, the cost/benefit relationship is a much more complicated one.

Depth of content

It’s all about selection, or what I like to call “the infinite jukebox” (watch out for another blog on this in the near future). Netflix has an adequate selection, but far from hitting the infinite capabilities. Compare to Vudu, Amazon Video on Demand, or any of the a la carte services and you’ll paint a rather sad picture of Netflix.

And that’s exactly why Netflix is in the original content game now. Unable to compete in a long tail market, Netflix has turned to the other end of the graph, aiming for quality over quantity.

Its worth pointing out that the value of this particular content lies in its exclusivity. And Amazon is now playing this game too, with it’s own Amazon Original Pilots.

Quality of content

As I mentioned, Hemlock Grove isn’t great TV, but it’s better than a whole lot of the other crap that passes on the networks. House of Cards was absolutely fantastic. And the upcoming Arrested Development season is probably my single most anticipated piece of television in, well, ever. As Netflix Chief Content Officer Ted Sarandos says, “The goal is to become HBO faster than HBO can become us.”

Ease of access

This one is more complicated than it sounds. It’s not just a matter of press-play-watch-TV, but a deep psychological shift in our understanding of what television is. Cable is a wasteland – an infinite jukebox with a broken needle – 1000 channels of stuff you don’t want, filtered by DVRs, overpriced thanks to the wonders of bundling, and ultimately the least satisfying service I’ve ever used. Ever. I’d rather deal with my cell phone provider than my cable company. That’s saying something.

The importance of the unique release structure of Netflix Original Series cannot be overstated. Full seasons at a time is the way we’ve consumed television since the early days of DVD, and it’s a truly amazing way to experience episodic content. I’m not saying weekly content releases are bad, but I think it works much better for programming that doesn’t fit into seasons. YouTube shows are a great example, as are daytime soap operas. But single-season episodic television shows just work better when you can binge on them. (Probably worth a separate discussion of how the proverbial water cooler has been affected by this shift.)

Pricing

And in the end, it still comes down to this: is it worth $7.99 a month?

Wait, what? Is that even a question? How can we actually ask ourselves something like that? Isn’t it obvious?

Unfortunately it’s not obvious at all. We make ridiculous choices based on price every day, and we have a truly astonishing ability to neglect very simple price comparisons on nearly everything.

Netflix is 8 bucks a month. Cup of Starbucks is 3 bucks. Gas is 3-5 dollars per gallon. Milk is 3 dollars per gallon too. A bottle of water is a buck twenty-nine, which makes it actually about 8.25 a gallon (insane!). Monthly cable bills are somewhere around $60 for internet, and another $75 for television (even more for phone service, or the cable companies’ new product scam, home security systems). An Amazon Prime membership comes with most of the same programming as Netflix, and runs $79/year, which makes it $6.58/month. That’s right, it’s cheaper than Netflix, and gives you all the benefits of Prime shipping too. I spend ten bucks a month on my Rdio subscription. I used to spend $300 a month on music, back in the CD era, and I was perfectly happy doing so.

All this to say that price is relative, but every time we press the play button on our connected devices, we’re comparing the costs against a hundred other apples-to-oranges items that typically fall into our disposable income budgets.

For some, this decision isn’t so cut and dry. But in my opinion, Netflix is worth every penny.