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The business of making money from IP

I wrote about IP business models 13 years ago in IP stategy and the rise and rise of Bill Gates. It was published in The Australian's computer section. It tracked key IP strategy decisions which either created or destroyed wealth in the intellectual property history up to 1994 of these IT organisations - IBM, the Palo Alto Research Centre (PARC), Apple and Microsoft.

In 2007 it is time to look ahead again. Our focus here is on IP strategy issues for the music industry. The topic affects all copyright-based industries.

This post sets out six general postulations. They reflect recent reading, research, Lightbulb posts and work for clients involving copyright law, Internet technologies and emerging new business models.

  1. We are in a digital media world where "open and free" are increasingly pervasive "standards". Legal battles over use of P2P technology, with the music recording industry establishment on one side and new technology promoters on the other (eg Napster, Grokster, and Kazaa), were the digital first world war.
  2. Today MP3 is a broadly adopted standard, and there is a between the wars mood. The widespread adoption of the MP3 format has added pressure on digital rights management (DRM) approaches taken by Sony, Apple, Microsoft and others. The MP3 format is subject to some proprietary rights by Alcatel-Lucent and Fraunhofer - see Grappling with fallacies: music formats and DRM.
  3. Music recording and distribution companies are at the battlefront of DRM. They are having to re-think their core business model as content owners, producers, publishers and distributors. Among the copyright-based industries they've been at the forefront of issues in the analogue to digital change over. It began when decades ago they adopted digital CDs as their delivery format of choice replacing such analogue formats as vinyl records and cassette tapes. Now the industry establishment is challenged by the widespread adoption of the MP3 format, rapidly evolving consumer technologies out of their control, and consumer perceptions that CDs are overpriced relative to their functionality.
  4. How the music recording companies deal with such issues may show the way to the television, film, book, magazine and other copyright content industries. For the health or survival of these industries it is wise to closely monitor developments
  5. Creators, such as musicians, whose revenue streams include copyright legal rights and copyright-secured revenue streams from their work have to:
    • evaluate, re-value , re-price or re-model things they sell (eg accept low pay for recorded songs and just re-price video performances, concert tickets and merchandising); and
    • work with new revenue-generating possibility including advertising-based models, Web promotions and product placement.
  6. As argued in Perceptions of value on 42nd Street, everyone has to learn to work with new or hybrid approaches, be they traditional copyright licences, trade mark licences, Creative Commons licences, a hybrid of these or something else.

One of the conclusions in the 1994 article was: "To survive, companies must get the right mix between what they should own, control, sell, share or give away."

The article also noted that IT companies must adopt a "three part strategy of creation, diffusion and licensing" following the then emerging "Silicon Valley business model" involving "relationships with customers and alliances between competitors."

A stream of Lightbulb blog posts in recent months have sought to update thinking on the subject of wealth and IP. What worked legally, commercially and techologically in 1994 is not the same as what works in 2007.

I'm pleased to note that nothing in recent research has invalidated the above quoted conclusions in the 1994 article. On the contrary developments in the 13 years since 1994 have supported those conclusions.

The purpose of the above six postulations is to inspire comments and to debate developments of legal, commercial or technological significance to the business of making money from intellectual property.

I invite you to join in the board game with Achilles and Ajax (as illustrated in the accompanying ceramic pot from Ancient Greece). They played a board game while the Trojan War raged, oblivious to the surrounding battles. Make your move, respond to the postulations with a comment, privately if you prefer.


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