After Hours

Peter Cochrane's Blog: Customer needs, part 2

Everything breaks - including business models!

Customer needs - anticipating change and fixing problems
28.04.05, 22.00 GMT, Leicester, UK

I am writing in response to the many emails and inputs I have received following my original post on customer needs.

If you had been a music industry executive when Napster burst onto the scene, what would you have thought and done? Let's see!

At that time a CD on the shelf in a box with all the pics, posters and music was selling at around $20 when it only cost around $1 to produce. Hmm, free MP3s versus $20 - looks like it is time to do something different! How about changing the business model? Buy Napster, sell ring tones, link sales to posters, magazines, t-shirts, calendars, clothing etc. In fact, anything the audience might value.

MP3 heralded the likely change from massive profit margins, with the artists receiving a very small proportion, to very small margins with the potential for the artists to take control and publish their own music. The really big questions are: how do you replace the lost value and how do you get the customers to maintain their spend?

Obviously, if customers no longer value music bits, then you either have to add extra bits in the form of video and or games. But you can also link to the sales of atoms and services and other goods. Interestingly, such developments are gaining ground really fast but the old music industry ain't involved, they are far too busy trying to protect their copyright. Might it just be that that is also a broken concept too?

What happens next do you suppose? The latest recording studios are on laptops in garages and bedrooms. And the new-wave tech-savvy artists are adopting a DIY mode with everything published directly on their websites.

It strikes me that MP3 and Napster were only the start. Unfortunately, the music industry still doesn't seem to be looking and listening... the audience, artists, technology and business model are all moving on!

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Peter Cochrane is an engineer, scientist, entrepreneur, futurist and consultant. He is the former CTO and head of research at BT, with a career in telecoms and IT spanning more than 40 years.

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