Paul Stacey


Imagining a Commons Based Music Industry

These past few weeks I’ve been heads down writing up case studies of organizations and businesses across all sectors who have Creative Commons based open business models.

One of the great things about working at Creative Commons is the way my colleagues track and share news related to the work we do. Over the past few weeks music industry news and events have been most thought provoking. I thought I’d use this post to essentially think out loud about how music might work in a commons-based model.

Let me say up front that this is exploratory, out-of-the-box thinking. The start of taking learnings and approaches from the case studies I’m writing about and imagining how they might apply to the music industry. This is not some carefully thought through magic solution but rather an effort at using a few news stories to describe the current state of music as a business and then break free of the current industry model and define how a commons-based alternative might start from with a different set of principles while still generating a livelihood for musicians. Here are recent news items, stories, and initiatives I’m going to draw on:

This past week 160 artists and record labels signed a petition calling for a reform of the Digital Millennium Copyright Act (DMCA).

Here’s a copy of the actual petition:

DMCA Petitiion

Its a bit hard to read the small print so I’ve transcribed:

Dear Congress:

The Digital Millennium Copyright Act is broken and no longer works for creators.

As songwriters and artists who are a vital contributing force to the U.S. and to American exports around the world, we are writing to express our concern about the ability of the next generation of creators to earn a living. The existing laws threaten the continued viability of songwriters and recording artists to survive from the creation of music. Aspiring creators shouldn’t have to decide between making music and making a living. Please protect them.

One of the biggest problems confronting songwriters and recording artists today is the Digital Millennium Copyright Act (DMCA). This law was written and passed in an era that is technologically out-of-date compared to the era in which we live. It has allowed tech companies to grow and generate huge profits by creating ease of use for consumers to carry almost every recorded song in history in their pocket via a smartphone, while songwriters’ and artists’ earnings continue to diminish. Music consumption has skyrocketed, but the monies earned by individual writers and artists for that consumption has plummeted.

The DMCA simply doesn’t work. It’s impossible for tens of thousands of individual songwriters and artists to muster the resources necessary to comply with its application. The tech companies who benefit from the DMCA today were not the intended protectorate when it was signed into law nearly two decades ago. We ask you to enact sensible reform that balances the interests with creators with the interests of the companies who exploit music for their financial enrichment. Its only then consumers will truly benefit.

This has been precipitated by the musicians and their representative labels and societies doing battle with the likes of YouTube and Apple. If you want to read more start with: http://www.rollingstone.com/music/news/taylor-swift-mccartney-sign-petition-for-digital-copyright-reform-20160620#ixzz4ChmHb9OW

In my work at Creative Commons and the work around open business models I’m very much interested in seeing business models and economic approaches that reward creators. Earning a livelihood as a musician or creator of any type has gotten more difficult. In a digital age where copying is near $0 I’m looking for the artist to get a very large percent of every sale.

Musician stories in Cash Music’s online publication Watt aptly illustrate the challenge musicians face. Stories like Why Am I Doing This to Myself?, Open is Hope, The Career of Being Myself, and many others.

Historically creators have relied on intermediaries to represent them and distribute/sell their creations. These middle intermediary organizations (labels, collecting societies, and now tech companies) have often made riches off the work of creators sometimes at the expense of creators themselves. So I’m all for the artists calling this out and pushing for DMCA Reform that better protects their ability to have a livelihood. Artists themselves ought to be the primary beneficiaries of their work.

In March 2016 SoundCloud, where a sizeable portion of the audio commons lives (they have lots of Creative Commons licensed music), announced their streaming service SoundCloud Go followed by a Twitter investment in June 2016. When it comes to this kind of business model I ask myself the following questions:

  • how is revenue split between the platform and the artist? I’m looking for higher splits to artists.
  • how is the split calculated? I’m looking for a deal that fairly acknowledges the value platform, artists, and users generate.
  • how does the platform factor Creative Commons into their business model? I’m looking for a key differentiation strategy.
  • how much is this about platform valuation and monetization, vs. advancement of creative culture, artists, public access, and the music community? I’m looking for the latter.

The details are so sparse with SoundCloud Go that I don’t get a sense of any answers.

I’m also interested in how SoundCloud Go compares with Spotify, Apple, Google, Tidal, Rhapsody, and other music subscription services on the basis of those questions. One of the things most frustrating is how opaque the actual business models are. There is very little transparency.

In terms of percent split of revenues associated with music streaming it seems the Copyright Royalty Board has been weighing in.

“How does the money get paid to labels and artists?
If the licensee has not cut a direct deal with the copyright owners, it can get a compulsory licenses which comes with a statutory rate as determined by the CRB judges and is paid to SoundExchange, an agency set up to administer payments. Those payments are split as follows: 50 percent to the master rights owner, which are typically record labels; 45 percent to the artist that recorded the music; and 5 percent to musicians, via their unions.”

Notice how 50 percent typically goes to the record label and how labels are typically the rights owner — not the artist.

I find it a bit hypocritical that labels, who have a long history of exploiting creators, are also signatories to this DMCA Reform petition. It seems to me they themselves are examples of “companies who exploit music for financial enrichment.”

I’ve been reading with great interest about British singer and songwriter Imogen Heap who as described here “is building what she calls a “fair trade” music industry that aims to sidestep middlemen like iTunes and Spotify and give musicians more ownership over the money and data produced by their work.”

I like the way her system makes the distribution of revenue completely transparent. Click on the Licensing tab on the site where her song Tiny Human is made available and view the Policies. Splits are transparent and the system flows the revenue directly through to all the musicians involved. I’m especially interested in the way she’s using blockchain to enhance creator autonomy and control over her works, including financial compensation, without the current reliance on third party intermediaries.

As I read all these stories I find myself thinking that everyone is still very much bought in to the idea that music is a commodity, a form of property, consumed by music listeners. This is how our current economy works, but as we’ve seen it results in inequity and siloed distribution of wealth. It anonymizes the relationship between creator and consumer. Rather than tweak this model I find myself wondering, “What might a commons-based solution to the current music industry might look like?”

Here’s a few thoughts on how commons-based thinking might change the model.

The second last sentence in the DMCA petition says, “We ask you to enact sensible reform that balances the interests of creators with the interests of companies who exploit music for their financial enrichment.” Notice how the interests of the public and music listeners are excluded. A commons based model would actually seek to balance the needs of the creators with the needs of listeners and the public.

I know in theory that government and copyright law is intended to act on the publics behalf while ensuring appropriate means of livelihood for the creator. But as this petition so aptly points out the current copyright law fails to do so and copyright legislation and its reform have increasingly been in the interests of “companies who exploit music for their financial enrichment” not in the interests of the creator or the public.

Copyright is based on the idea of personal ownership and property rather than communal shared resources. A commons based approach would see music not as the unilateral fixed work of a single artist but rather as a collaborative work that draws on all music that came before it and evolves through public use, enhancement, and innovation. More listeners, more use, more derivative works, these would not be seen as piracy but as positives.

A commons based approach is reciprocal. While others may use your works the same is true for you — you are free to build your music by innovating and making derivatives of others music. It’s a two-way street.

I really like the way theatre group Howlround, a knowledge commons by and for the theatre community expresses it. “A commons is a place to share the resources you have and take the resources you need. We believe that making art is more than a money game, that ticket sales for a live performance are just one piece of what it takes to claim success in our art form. Access and engagement are our highest values, and everyone, yes everyone, has something to contribute to the learning, the making, and the sharing of art.” Similar to Howlround a commons based approach to music would aim for access, engagement, and mass participation.

A commons based model would embrace the benefits of network effects where every use of the resource generates value not just for the creator but for everyone. A commons-based model would enable and celebrate remix as an integral form of creative expression and innovation, something that generates value to the original creator as well as the public.

A commons-based model for music would fully utilize digital affordances in a fair way. Today music exists in digital form. It is non-rivalrous and non-depletable. If I give you a digital copy of a song I have I still have the song. Digital based resources can be copied, shared, distributed and used at costs which approach zero dollars and at a scale that makes them increasingly accessible to the entire world. Rather than creating artificial scarcity by applying property and copyright law, a commons-based model would accept and build on digital attributes as strengths not weaknesses. The aim is not to curb abundance but to enable abundance.

The DMCA petition treats music as a commodity — an “export” as it says in the opening sentence. In a commons based model music would be seen as more than a commercial transaction. It would be seen as a social interaction involving the artist building community and working together to ensure livelihood and communal use. The public isn’t just a consumer of music — a passive music listener. Music is integral to our lives — we sing along with songs, we learn to play them ourselves, songs get associated with key life events, … Songs quickly enter personal and societal culture where they evolve in ways that advance the field of music. A commons based model would acknowledge and recognize this value. In a commons based model music is a shared resource managed by a community.

A commons based approach to music emphasizes relationship. The current music industry largely severs that relationship. In the current model music is a commodity purchased anonymously. But fans know that a digital copy of the song costs the industry close to $0. They also know that the majority of whatever they pay for a song does not go to the artist but to third party intermediaries. These two factors combined with the lack of any kind of relationship lead to free riding. A commons based approach would focus on music not as a commodity but as a relationship and community. A commons based approach would offer fans a means to pay artists directly and know that their support was going directly to the artist.

The cost of implementing and enforcing the current laws as expressed in things like the DMCA are huge. Digital rights management, content ID systems, digital locks, take down notices, suing fans, and gazillions of lawyers have not been enough. Instead of incentivizing creative works these laws and technology practices curb innovation, creativity, and freedom of expression. What if the money currently spent trying to enforce DMCA was instead spent on commons based models that help artists earn a livelihood?

But just how would a commons-based model provide a livelihood for artists? There are many ways and I urge more serious experimentation and thought around this. I acknowledge it’s not simple as the commons operates in a way distinctly different from the current free market approach. So focusing solely on sales and revenue forces a round commons based approach to fit into a square hole.

The open business models case studies I’ve been working on include three case studies related to music — Amanda Palmer, Jonathan Mann, and Tribe of Noise. All three have created a commons-based model that makes extensive use of Creative Commons while still generating a means of livelihood.

Amanda Palmer has mastered the Art of Asking. She releases all her music and writing under Creative Commons is a model for how commons based music involves community engagement. She’s blazed a trail exploring alternative means of earning a livelihood including passing a hat, crowdfunding through Kickstarter, and Patreon. She has over 7,000 patrons on Patreon who are willing to fund her creation of new songs, film clips/music videos, long-form writing, and more random, unpredictable art-things at over $30,000 per “thing”. She creates about one “thing” per month.

Jonathan Mann built his reputation by writing and Creative Commons licensing a song a day. One of the ways he earns revenue is by writing custom acoustic or produced songs for a fee.

Tribe of Noise is a music platform that bridges both the commons and the commercial. Tribe of Noise helps musicians generate awareness and interest in their music by providing a community platform where they can upload their Creative Commons licensed music. Their platform also includes Noise PRO where musicians can upload music that could lead to a music deal secured by Tribe of Noise.

These are but a few examples. There isn’t just one model for earning a livelihood in a commons based approach there are many models. For more on ways to generate revenue from commons based business models across all sectors see What is an Open Business Model and How Can You Generate Revenue?

Let me also say that I’m not the only one imagining commons-based models for music.

The Berklee Institute for Creative Entrepreneurship recently launched the Open Music Initiative with a mission to: “Promote and advance the development of open source standards and innovation related to music to help assure proper compensation for all creators, performers and rights holders of music.”

Open Music Initiative

In June 2016 Hank Green wrote about his experience and decision to take action by creating the Internet Creators Guild.

 Internet Directors Guild Screenshot

And this past week I spoke with Milosz Miszczynski who is working on business models for Audio Commons.

 audio commons screenshot

While not explicitly just for music I also am deeply interested in the work being done around Commons Collaborative Economies. I think the initial thinking they’ve done to define Policies for Commons Collaborative Economies at European level a great start on something that could benefit musicians and other creators.

 Commons Collaborative Economies

I’m heartened to see the breadth of engagement underway by so many seeking to come up with a new model for the music industry. I’m hopeful that some of these efforts will arrive at a commons-based model for music that acts in the collective interests of the artist, the music community, and the public. I think everyone wants musicians to earn a livelihood.

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A Larger Context & Bigger Transformation

Creative Commons based open business models are part of something larger, a bigger transformation taking place in society and the economy.

This really struck home for me when, in response to our open call for nominations on who we should interview for our book on Creative Commons based open business models, we received tons of suggestions — many of which didn’t use Creative Commons at all.

In checking out all the suggestions we receive it quickly became apparent that “open business models” is a large context within which Creative Commons based open business models are a subset. While all of our interviews have focused on organizations and businesses that use Creative Commons I‘ve really enjoyed getting a deeper sense of this larger context. Understanding the big picture within which Creative Commons based open business models sit is helping me see the bigger transformation unfolding.

I want to share in this post some of things people recommend we explore and the non-Creative Commons based examples of open business models that are part of this larger context. Lets start with a few fun examples.

Jan Gondol suggested I might find BrewDog of interest. Thanks Jan! I do really like this example.

BrewDog215

https://www.brewdog.com

Calling themselves the first crowdfunded brewery BrewDog decided to do something breweries just don’t do — openly release all their recipes. Here’s what they say about their DIY Dog initiative:

“With DIY Dog we wanted to do something that has never been done before as well as paying tribute to our home-brewing roots. We wanted to take all of our recipes, every single last one, and give them all away for free, to the amazing global home-brewing community.

We have always loved the sharing of knowledge, expertise and passion in the craft beer community and we wanted to take that spirit of collaboration to the next level.

So here it is. The keys to our kingdom. Every single BrewDog recipe, ever. So copy them, tear them to pieces, bastardise them, adapt them, but most of all, enjoy them. They are well travelled but with plenty of miles still left on the clock. Just remember to share your brews, and share your results. Sharing is caring.

This is anti-corporate beer writ large; a new way of doing business. For generations, companies have fiercely protected their ‘secret’ recipes — clinging to a classified ideal, yellowing documents nervously hidden away by the founders, keys to the safe around their necks. Is it co-incidental that these same companies are the plodding remnants of another age; desperately clinging to their foundations?

For businesses born in the 21st Century it is all about sharing. Who cares about 11 herbs and spices? Here are 234 beers; our entire back catalogue and those yet to be released.”

From an open business model point of view not only do they give away all their craft beer recipes they’ve also devised a unique way to attract investors with their Equity for Punks Own a Piece of BrewDog pitch. Here’s what it says:

“Brewdog is an alternative small business owned by thousands of people who love craft beer. They are our shareholders, our friends, our community and the heart and soul of our business.

We have a community of over 14,500 equity punk investors, and this is your chance to join them.

In 2010, we tore up convention, turned the traditional business model on its head and launched Equity for Punks giving thousands of people a front row seat to the craft beer revolution.

And now it’s back. Bigger and better than ever.

You can find out more about investing in BrewDog by downloading the prospectus here.”

Unfortunately they don’t have a prospectus for Canada. :(

But I want to try all the BrewDog beers. :)

I like BrewDog’s openness, playfulness, and inventiveness. The benefits for shareholders in the prospectus are especially fun. They don’t use Creative Commons (recipes aren’t copyrightable) but they’ve embraced open sharing as a means of building community and understand the benefits that come with that.

Monique Belair at the Washington State Board for Community and Technical Colleges sent me this amazing story on underwater vertical farming.

Greewave

http://greenwave.org/

Winner of the 2015 Fuller Challenge Bren Smith’s TEDTalk tells his amazing personal story. In his Medium article Bren has this to say about the bigger transformation context.

“Our goal is to build a just foundation for the blue-green economy. Saving the seas is not enough. There is 40 percent unemployment in my hometown. I wouldn’t be doing this work unless it created jobs for my people, unless it opened up new opportunities for the 3 billion folks who depend on our oceans to make a living.

For the first time in generations, we have an opportunity to grow food the right way, provide good middle-class jobs, restore ecosystem, and feed the planet.

Our old economy is crumbling. The old economy is built on the arrogance of growth at all costs, profiting from pollution, and the refusal to share economic gains with 99 percent of Americans. But out of the ashes of the old economy, together we are building something new based on new-economy principles of collaboration, community-driven innovation, shared profits, and meeting social needs. Because ocean agriculture is still in its infancy, we have the unprecedented opportunity to build a model from scratch, to build from the bottom up an economy that works for everyone, not just a few. We have the opportunity to learn from the mistakes of industrial agriculture and aquaculture. This is our chance to do food right.

We addressed the first question of farm replication and scale, not by patenting or franchising — those are tools of the old economy — but by open-sourcing our farming model so that anybody with 20 acres and a boat and $30,000 can start his or her own farm.”

Bren Smith’s identification of the new-economy principles as being about collaboration, community-driven innovation, shared profits, and meeting social needs is very much part of what we are finding with Creative Commons open business models.

We’ve received tons of suggestions that we interview companies that have a open business model based on free and open source software. I’ve really enjoyed seeing how hugely important, popular, and influential free and open source software has become.

We’ve received suggestions that we look at Gimp, Audacity, Synfig, Inkscape, VLC, Joomla, Ubuntu, and many more. As fascinating as these are free and open source software have their own special non-Creative Commons licenses. Given our open business models work is focused on Creative Commons use we’ve not interviewed them. However, I do want to acknowledge that there are many diverse and compelling open business models based on free and open source software and the suggestions we’ve received are great examples of another piece of the larger open context.

I’ve always admired the work of Eric Raymond who defined a taxonomy of open source software business models in his essay The Magic Cauldron (also included in his book The Cathedral and the Bazaar). If you have any interest in open business models I highly encourage you to read Raymond’s work.

MagicCauldron

The Magic Cauldron uses clever and memorable descriptors like, “Widget Frosting”, “Give Away the Recipe Open a Restaurant”, and “Accessorizing” to define categories of businesses and the ways they generate revenue. There are lots of commonalities between open source software business models and those based on use of Creative Commons so the reading is well worth your time.

We’ve also received suggestions that we interview businesses that are based on open hardware. Companies like littleBits for example. littleBits mission is “to democratize hardware by empowering everyone to create inventions, large and small, with our platform of easy-to-use electronic building blocks.” This kind of mission which talks about democratizing and empowering everyone is very much in line with Creative Commons based open business models. It’s a theme that is central to the larger context and bigger transformation I’m seeing. While littleBits licenses its web site with a Creative Commons license the core of their business makes the circuit designs for its modules available via the CERN Hardware License.

One of the signals that a bigger transformation is taking place are the many different licenses in play for making things open. While Creative Commons has become the de facto standard for licensing content to be open others have created licenses for making software and hardware open.

Some licenses attempt to mitigate the traditional economies tendency to extract and exploit. While most of these licenses are not yet in use they are nonetheless fascinating to look at in the larger context. The CopyFair license and the Peer Production License are good examples of licenses in development that try to instil more reciprocity. The Commons Transition organization is developing projects and featuring stories that map out the potential for commons-based reciprocity licenses. All these licenses share a common belief that value and innovation are maximized through open sharing rather than closed hoarding. The larger context includes harmonious use of these licenses to change the default way of operating from closed to open and engage in business in such a way that the benefits of sharing are reciprocal.

The larger context also includes some aspects of the sharing economy. Shareable is doing the best job I know of making evident the social and economic transformations being generated by the sharing economy. And I should be clear upfront I’m not talking about Uber and AirBnB who in my view co-opted the sharing economy term but in fact are examples of traditional approaches that try to maximize extraction value for themselves.

http://www.shareable.net/

Shareable’s list of the Top 10 Sharing Economy Predictions for 2016 are full of examples of the larger context I’m exploring. Everything from platform cooperatives, sharing cities, and combining global open design communities with local production all are part of this larger context and bigger transformation. They all advocate for a shift of value distribution to address economic inequality.

Finally I want to hint at something even bigger that this work has led me to explore — economic transformation. Books like What Then Must We Do, The Ecology of Law, and Postcapitalism all do a great job of describing the historical context of how we came to choose free market capitalism as the ideal form of economy. They describe the social and ecological problems it has produced, and the transformation needed to improve global well-being. As Paul Mason says in Postcapitalism, “The main contradiction today is between the possibility of free, abundant goods and information and a system of monopolies, banks and governments trying to keep things private, scarce and commercial. Everything comes down to the struggle between the network and the hierarchy, between old forms of society moulded around capitalism and new forms of society that prefigure what comes next.”

Creative Commons open business models are part of this larger context, this bigger transformation prefiguring what comes next.

Originally published April 18, 2016 on Medium as part of Creative Commons open business models work.

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What is an Open Business Model and How Can You Generate Revenue?

What is an Open Business Model and How Can You Generate Revenue?

4622769282_03b9ffa37f_m
Money by Xavier Vergés CC BY

In this post I describe what an open business model is and some of the many ways to generate revenue while still licensing things to be free and open using Creative Commons. My goal is to help you find ways to build sustainable and thriving open business models.

We’re discovering a rich diversity of open business models that use Creative Commons. There isn’t one model, there are many.

We set out with the goal of depicting open business models across different sectors and from different parts of the world. To business sector and geographic diversity we’ve added model diversity. With our interviews we’re aiming to show as many types of Creative Commons based open business models as possible.

I’ve been especially impressed at how many different types of businesses are using Creative Commons licenses. Writers, musicians, furniture designers and manufacturers, visual symbol creators and distributors, educators, games developers, hardware manufacturers, publishers, researchers, art museums, journalists, technology platforms… The list goes on. Use of Creative Commons by business is not niche.

It’s been even more interesting to discover a diverse range of business models being used across these different sectors. With each new interview we hear different ideas on how Creative Commons is being used as part of a successful model. I feel a kind of unexpected wonder and delight with each new model. Like receiving a gift and glimpse of an alternative kind of economy just emerging.

What is a business model?

The phrase business model conjures up different things to different people. For some of our interviewees the very idea of a business model is dissonant with how they think about what they do. Others are very much aligned with the concept of a business model, have thought deeply about it, and speak eloquently about its many dimensions.

Everyone we interviewed can describe what they do and how it has evolved over time. But not everyone uses business speak and for some the process has been experimental, emergent, and organic rather than carefully planned and following some pre-defined model.

Entering into this work Sarah and I drew on the Business Model Generation handbook as a frame of reference for defining a business model.

business model generation book

Developed using an open process over 9 years, involving 470 co-authors from 45 countries the business model canvas described in the Business Model Generation handbook establishes a common framework for understanding the core building blocks of a business model.

The canvas is used to design business models by answering a set of questions in each of the nine core building blocks. Its an interactive process that allows for rapid prototyping and careful consideration. It’s useful for establishing a common reference for what we mean by the phrase “business model” and providing a framework for talking about it and thinking about it more strategically.

The authors of the Business Model Generation handbook licensed the business model canvas with a CC BY-SA Creative Commons license. This allowed us to adapt it, adding in additional building blocks, Social Good, CC License, and Overall Environment Open Business Fits In, as additional components “open” businesses explicitly need to define as part of their open business model.

We created a GoogleDoc open business model canvas template with associated questions as a useful tool for creating your own open business model. Open the open business model canvas template in Google Docs, then from the File Menu choose Save a copy …, give it a name and you’ll have your own editable version. Into each building block enter your answers to the questions. Once complete you have a one page depiction of your open business model that can be used for discussion, planning, and communicating.

We’ve used these tools a lot ourselves in open business model workshops we’ve conducted and in analyzing and providing advice and feedback on others existing or newly designed open business models.

Revenue Generation +

Many people equate a business model to one thing — revenue generation. “Just tell me how I can make money?” I get asked. Open business models are not for those who just want to get rich and if that’s your only interest an open business model may not be for you. As the open business model canvas shows, a business model is more multi-faceted than simply making money and to fully understand it mapping out all the building blocks is essential. Most organizations and businesses using Creative Commons are in business for reasons other than money.

However, given the overwhelming interest in understanding how revenue generation works when Creative Commons licensing works I thought I’d focus this post on that topic and use real examples from the interviews we’ve done to illustrate a range of possibilities.

Revenue Generation

Method #1: Digital to Physical

Many of the businesses and organizations we’ve interviewed operate at the interface between digital goods and physical goods. In this model digital goods are openly licensed with Creative Commons and made available online for free.

This generates all kinds of value for both the creator and society including:

  • access
  • participation
  • innovation
  • reputation

… to name but a few. These open benefits are generalizable to all the open business models but worth stating here upfront.

When a digital good is converted into a physical good costs are incurred. Money is required for the raw physical resources themselves and for the production of the physical output. Then there are the significant additional costs associated with physical good storage, replication, and distribution.

Digital to physical can also apply to digital works available online under a free open license but in person performances, appearances, or services costing money.

The conversion of bits to atoms is a point of transaction where revenue generation for many of the businesses we interviewed happens.

Example #1: OpenDesk has curated a collection of digital designs for furniture from a range of international designers. Designs are Creative Commons licensed and can be downloaded and customized by users to fit their specific needs. Users can make furniture themselves from the design for non-commercial use in a do-it-yourself fashion. However conversion of a digital design into physical pieces of wood usually requires specialized milling tools controlled by computers.

opendesk
https://www.opendesk.cc/

OpenDesk has partnered with maker businesses all over the world that have such tools. A special part of OpenDesks business model is enabling localized manufacturing close to where you live. Localized manufacturing generates a huge range of benefits including increased business for small local businesses and a more eco-friendly method of manufacturing that dramatically reduces things like storage and transportation costs. OpenDesk and their designers make revenue when a user wants a local maker to do the cutting for them.

When customers buy an OpenDesk product directly from a registered maker they pay:
1. the manufacturing cost as set by the maker
2. a design fee for the designer
3. a percentage fee to the OpenDesk platform

Conversion of digital to physical is an important part of the OpenDesk model.

Example #2: Cards Against Humanity one of the most popular table-top games of all times started out as a game Max Temkin and friends put together to play at a New Year’s Eve party. The game generated huge laughs and they decided to work on it some more, refining the writing to make it better. They created a .pdf of the cards that make up the game and a set of descriptions for printing it out and playing it and posted it online under a Creative Commons Attribution BY NC-SA license.

Thousands of people downloaded and played it generating a lot of positive word of mouth and interest. They began to receive requests from people who wanted to simply purchase the boxed Cards Against Humanity set directly from them rather than printing it out and making it themselves. This led them to run a Kickstarter campaign to raise funds to manufacture the game. The initial print run sold out quickly and led to ongoing growth and diversification into custom card packs and many other spin-offs.

CardsAgainstHumanity
https://www.cardsagainsthumanity.com/

The Creative Commons license let people make a fan based version of the game and remix. A search on YouTube for Cards Against Humanity generates hundreds of thousands of videos with fans sharing remixes, humorous game play, and expansions. As Max Temkin put it to us “the license sanctioned this and became a fantastic form of marketing.”

The Cards Against Humanity team use quirky irreverent humour and candor to further differentiate themselves and establish a unique brand. For example check out the way they engage with Black Friday:

2015 Black Friday

2014 Black Friday

Conversion of digital to physical is where Cards Against Humanity generates money. The business formula is simple. Max describes it as, “Make product, sell product, make it for less than you sell.”

Method #2: Direct Connect

In the past musicians, writers, artists and other creators had to first find an agent, record label, publisher, or other third party to represent them. This intermediary sat between the creator and their hoped for fans and played three roles — 1. judged whether their work was worthy of publishing 2. invested in supporting creation of the work, and 3. acted as the representative and distributor of the work to the public.

The “direct connect” open business model eliminates creator reliance on such middle man intermediaries. Instead, creators use the Internet to go direct to fans, readers, and their audience. They openly license their work using Creative Commons licenses, put it up online and invite everyone to listen, read, use, and distribute it.

Rather than restricting access to the work until payment is received, it is freely given away with an explicit invitation to copy it and share it with others. Fans and audience are the ones who, through word of mouth, have a promotion and distribution role. This leverages the unique social affordances of the web.

Going direct to your audience is only one part of this model. The creators we’ve interviewed also make an extensive effort to “connect” with their fans. They post images, they tweet, they Facebook, they blog, and use other forms of social media to represent themselves directly to fans. Sharing daily lives, experiences, and insights is a form of open transparency that deepens fans understanding, interest, and trust. It invites connection, dialogue, and a bond. It creates relationship and establishes a channel for reciprocal exchange. It makes people interested in the work you do and want to support you in doing it.

A kind of reciprocity emerges with creators when they celebrate and promote derivative works their audience creates including things like fan fiction, music remixes, and video .

Direct connect revenue methods include:

Donations — this method appeals to users, fans, and audience for a small donation that goes toward costs. The donation model tries to spread costs across a large number of small personal donations.

Example: Wikipedia is one of the world’s top ten most popular web sites viewed more than 15 billion times every month. Wikipedia text content is licensed Creative Commons Attribution Share Alike CC BY-SA. Wikipedia runs an annual donation fundraising campaign. A small donation from a percentage of users can actually fulfill revenue needs. In 2014 over 2.5 million users made an average donation of $15.

wikipedia
https://www.wikipedia.org/

Pay-what-you-can — this method asks fans when they download a work to pay an amount of their own choosing.

Example: The song-a-day musician Jonathan Mann licenses his songs CC BY-NC and offers them for download with a Buy Now — name your price option. See his Every Day EP for example.

jonathanmann
http://jonathanmann.net/

Free and for sale — This method makes works available as both a free openly licensed download and a for sale item through traditional channels.

Example: Author Cory Doctorow licenses his books CC BY-NC-SA making them available as a free openly licensed download but also selling them through booksellers. See his book Down and Out in the Magic Kingdom for example.

corydoctorow
http://craphound.com/

Crowdfunding — this direct connect method is a direct appeal to fans for upfront funds to create a work with the promise of making it available to them on completion, open licensing it for further distribution, and providing other rewards.

Example: Sarah and I used Kickstarter to crowdfund the writing of this book on open business models.

kickstarter
https://www.kickstarter.com/projects/creativecommons/made-with-creative-commons-a-book-on-open-business/description

Unlatching — this method, a variant of crowdfunding, appeals not to the “crowd” but to a specific group to aggregate upfront funding to make a resource open.

Example: Knowledge Unlatched forms coalitions of libraries to underwrite the publishing of monographs under a Creative Commons license. Funds provided by each library are pooled to pay for the commissioning, proofreading, design, and everything you have to do in advance to get to first digital copy. In exchange for this fixed amount title fee publishers make the book available to anyone, anywhere to read or download for free under a Creative Commons license. With the title fee a fixed amount the greater the number of libraries participating the lower the cost per library.

KU_UnlatchesAgain (1)
http://www.knowledgeunlatched.org/

Patrons — this direct connect method asks fans to commit to providing an amount of money for each work you create on an ongoing per item or monthly basis.

Example: Amanda Palmer has over 7,000 patrons on Patreon who are willing to fund her creation of new songs, film clips/music videos, long-form writing, and more random, unpredictable art-things at $33,840 per “thing”. She creates about one “thing” per month.

amandapalmerpatreon
https://www.patreon.com/amandapalmer

Method #3: Matchmaking

Technology platforms play a unique role acting as a bridge matchmaking creators of openly licensed goods with those who need those goods. In a sense, platforms play the third party intermediary role eliminated in the “direct connect” model. They are the new web based intermediaries representing creators and matchmaking supply and demand.

Platforms offer creators of Creative Commons licensed goods a place to upload and store their work. Platforms provide functionality enabling creators to establish an online presence and identity which serves as a means of online promotion and marketing building a creator’s reputation over time. That’s the supply side.

On the demand side, platforms provide users seeking specific types of openly licensed works a one-stop shop destination for finding resources they may be interested in. Platforms usually support search, browse, and download.

Many platforms create value for themselves by becoming the destination for openly licensed works. However, platforms do not always provide reciprocal value (beyond reputation) for the creators who are putting their openly licensed works on the platform. For our interviews, we focused on platforms who go beyond merely hosting openly licensed content by offering creators additional matchmaking support.

Example #1: The Noun Project is a platform for visual symbols and icons. The Noun Project aggregates and curates symbols and icons from a global network and profiles the designers of each work. Icons and symbols are licensed Attribution CC BY. There are currently over 150,000 icons available.

nounproject
https://thenounproject.com/

Users can download and use the icons and symbols for free as long as they abide by the CC BY license and give attribution to the original creator. Revenue is generated when users do not want to give attribution. Using the symbols without attribution requires users to pay. In addition the Noun Project has built out a range of additional tools and services to support bulk use for a fee, integration of symbols and icons to apps using an API, and is about to release a new Lingo app for organizing collections. All these additional tools generate revenue. Revenue is split between designers and the Noun Project.

Example #2: Tribe of Noise is a fast-growing online community which represents over 20.000 artists from 170 countries and supplies music (licenses) to the film, TV, video production, gaming, and in-store media industry.

tribeofnoise
https://www.tribeofnoise.com/

Tribe of Noise offers musicians two options. To generate awareness and interest in your music, you can upload music to your profile in the community (under a CC 4.0 BY-ShareAlike license) which allows others to share and remix your song free of charge — even for commercial projects — as long as they attribute the work and license their project under the same license.

The second option is to upload music to the Tribe of Noise PRO licensing platform (under a non-exclusive exploitation contract). Tribe of Noise curates what music is posted on the PRO platform and also helps those musicians secure music deals. Revenue generated through those deals is split between Tribe of Noise and the artist.

Method #4: Value-Add Services

In this method services are built on top of a resource that is free and open. Revenue is generated through sale of premium services rather than sale of the resource itself.

There are lots of different value-add service model types:

Customization — this value-add service type charges for customization services.

Example #1: Figshare is a repository where academics and other users can make all of their research outputs available in a citable, shareable, and discoverable manner. Figshare offers a free service for academics to upload, store, and share their research as openly licensed CC BY resources, and their data as CC0 (note: CC0 is not a license per se but a Creative Commons no rights reserved way of putting works into the public domain.)

figshare
https://figshare.com

Figshare offers paid customized services for publishers and institutions. Institutions can get their own custom branded implementation of Figshare along with data metrics, data management (public or private storage), data dissemination, and user group administration. Publishers get to upload data and resources associated with their research articles which generates click through to the journals themselves and are provided with data visualization tools.

These custom paid services by institutions and publishers fund the free Figshare service to academics.

Example #2: Musician Jonathan Mann builds reputation by licensing his songs CC BY-NC but will write a custom acoustic or produced song for a fee. He says this about this custom service “My superpower is that I can take any idea, no matter how complex, and distill it down into a short, catchy, memorable song.”

jonathanmann2
https://jonathanmann.bandcamp.com/merch

Hosted Supported Service — this value-add service type charges a fee for hosted and supported access and use of openly licensed resources.

Example: Lumen Learning curates Creative Commons licensed education content into Candela courses which provide a set of low cost e-textbook alternative to expensive commercial textbook high enrolment college courses. These courses can be accessed for free off Lumen’s site. Or, alternatively, for a fee, these courses can be integrated into a college learning management system with additional faculty and technical support services.

Lumen-200x92
http://lumenlearning.com/

Lumen courseware places no paywall between students and the materials they need to succeed in their courses, so every student enjoys day one digital access to course content through the LMS. Instead of a student paywall, Lumen contracts with institutions for a low-cost $10 per student fee based on the number of students enrolled in Lumen-supported courses. Many Lumen clients recoup this cost with a course materials fee.

Supplemental Resources — This value-add service type charges a fee for resources that supplement a core Creative Commons licensed resource.

Example: OpenStax provides free, Creative Commons CC BY licensed, peer-reviewed, high quality textbooks for college courses. OpenStax partners with with third party companies that provide, for a fee, high quality online homework tools that supplement those books. A portion of the fee generated from these supplemental resources goes back to OpenStax as a way of sustaining their business model.

openstax
https://openstaxcollege.org/books

Training and Education — this value-add service type charges a fee for training and education related to Creative Commons licensed resources.

Example: The Open Data Institute connects, equips and inspires people around the world to innovate with open data. Open data is data that anyone can access, use or share. When big companies or governments release non-personal data, it enables small businesses, citizens and medical researchers to develop resources which make crucial improvements to their communities. Data is usually made open through Creative Commons CC0.

http://opendata.institute/

Open data is free and open but the Open Data Institute offers courses and training for a fee on the benefits, opportunities and practices associated with open data.

Method #5: Members

One of the surprising results of our work so far is the absence of advertising as a revenue generation component of open business models. There seems to be a general abhorrence of advertising and a sense that it conflicts with mission and adversely affects business perception.

Instead of advertising some rely on members, sponsors or partners to directly fund creation and availability of Creative Commons openly licensed content.

Example: The Conversation is a reliable source of high quality, evidence-based information and news. It aims to promote better understanding of current affairs and complex issues and allow for a better quality of public discourse and conversation. The Conversation licenses its content Attribution CC BY-ND.

https://theconversation.com

The Conversation ensures its integrity by only obtaining non-partisan sponsorship from education, government, and private partners. To avoid commercial conflict it takes no advertising and doesn’t carry advertising pop-ups or annoying autoplay.

The Conversation information and news is generated through partnerships with scholars at universities. Professional editors at The Conversation work with academics to convert their expertise into something understandable and readable by the public.

The Conversation generates revenue through a university membership model. Universities are massively deep repositories of research, knowledge and expertise but a lot of that stays behind the paywall of their own walled garden or ivory tower. Being part of The Conversation helps universities get good at presenting their knowledge and information to the general public and increase the reputation of their scholars.

Mix and Match

Open business models use diverse means to generate revenue. Many of the businesses and organizations we interviewed make use of more than one method mixing and matching them together.

The integration of different methods is an area of open business model innovation. Combinations can be devised to custom-fit a particular business purpose and generate unique value and differentiation. Diversification of revenue methods mitigates risk and provides multiple paths to sustainability.

Revenue = a means to an end

The initial draft of this post aimed to define a taxonomy of open business model types. Based on feedback from Sarah and our co-creators (thank you co-creators) I decided to shift it to simply depicting methods of open business model revenue generation. It became clear to me that an open business model taxonomy cannot be based solely on revenue and that more work was needed to ensure an open business taxonomy was based on facets other than money.

For open business models revenue generation is a means to an end, not the end itself. The end game for everyone we’ve spoken to is not profit but impact.

Traditional business models start with exclusivity, denying access to a good until money is paid. There is no impact without first a financial transaction.

Open business models start with inclusivity, participation, and universal access. Impact is enabled up front and revenue generation follows.

I hope this post helps you see this difference and realize that just because a business is open doesn’t mean it can’t generate revenue. In many ways I think open business models are more sustainable and beneficial to the world than closed ones.

Go open and prosper.

Originally published on Medium March 6, 2016. Special thanks to Sarah Pearson and co-creators Bernd Numberger, Benedikt Foit, and Jason Blasso for their many suggestions and improvements to this post.

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Open Business Models – Recommended Reading
January 9, 2016, 9:22 am
Filed under: Creative Commons, open business models, Uncategorized
Originally published on Medium 7-Jan-2016.
Paul’s open business models reading library from 2015

Sarah and I read a ton of books related to open business models in 2015. We’ve referenced a few of them in our writings. The picture above shows most of the books I read in 2015. They are all interesting in their own way (and I encourage you to read them all) but I thought I’d create a 2015 top 10 recommended book reading list from the collection along with a few notes on why each book is of interest. If you have recommendations for books we should read in 2016 leave a note with your suggestion.

1. The Art of Asking
http://amandapalmer.net
by Amanda Palmer

The best open business model related book I read in 2015. Amanda Palmer’s personal account of her evolution as an artist and the methods she uses toconnect with and get financial support from her fans and followers shows what is truly possible. This is a must read book for anyone trying to transition to an open business model that relies on community engagement.

2. Business Model Generation Handbookhttp://www.businessmodelgeneration.com/book
by Alexander Osterwalder and Yves Pigneur

This book establishes a common framework for understanding what makes up a business model. It provides a business model canvas with nine core building blocks and corresponding set of questions as a tool for designing and prototyping business models. In 2015 our Creative Commons open business model initiative remixed and modified this canvas into an open business model canvas and associated questions. We used this for everything from analyzing how open companies are, to designing open business models for startups, and as a hands on activity in workshops helping people create their own open business model. Try it out for yourself!

3. Crises of Imagination, Crises of Power: Capitalism, Creativity, and the Commons
http://maxhaiven.com/2013/09/26/crises-of-imagination/
by Max Haiven

Suggests capitalism encloses time, communities, resources, the environment and even our imagination creating a kind of futility and cynicism. Calls for a radical re-imagining of value and taking back collective creative cooperative action separate from the market and government. Promotes the creation of a new commons of social reproduction outside the command and control of capital, including new and rekindled forms of community care, horizontal and grassroots democratic decision-making and local production. Also calls for reclaiming public institutions (schools, hospitals, public works) from the market in the name of the public and increasingly democratizing and rendering these institutions common, so as to “avoid the enclosure of public bodies by bureaucracy and crypto-capitalist models of ‘efficiency.’”

4. Free Knowledge — Confronting the Commodification of Knowledge
http://www.uofrpress.ca/publications/Free-Knowledge
Edited by Patricia W. Elliott and Daryl H. Hepting

This book is a wonderful collection of essays exploring how knowledge is generated and shared, and to what purpose. It pays particular attention to the rapid appropriation of public knowledge for private benefit around the globe and across multiple sectors and disciplines. Specific examples in education, the pharmaceutical industry, biomedical research, and even seeds are explored. Alternatives to this commodification of knowledge are described including indigenous and traditional knowledge and open access research publishing. Some pretty profound emerging ideas reframing the future are put forward including the economics of information in a post-carbon economy and the study of abundance. An a-ha book for me as referenced in earlier Medium writings.

5. The Zero Marginal Cost Society: The Internet of Things, The Collaborative Commons, and The Eclipse of Capitalism
http://www.thezeromarginalcostsociety.com/
by Jeremy Rifkin

This book describes how the capitalist era is passing and being replaced with a new economic paradigm it calls the “collaborative commons”. It documents how the collaborative commons is changing a wide range of fields from renewable energy, to marketing, logistics, transport, education, manufacturing and health care. It explores how the two economic systems currently work in tandem and sometimes compete. However it argues that technologies impact on the economy has already created a marginal cost of zero model that wreaks havoc with the capitalist model and new forms of sharing and collaboration are further leading to its decline. A fascinating depiction of an emerging new economy.

6. Governing Knowledge Commons
http://knowledge-commons.net/publications/gkc/
Edited by: Brett Frischmann, Michael Madison, and Katherine Strandberg

This book contributes to evidence-based policy making about innovation and creative production in the knowledge commons. It draws on Elinor Ostrom’s Nobel prize winning work around natural resource based commons and adapts that work to the knowledge and information commons. It’s an important book for the way it adds a third approach to traditional views of methods for promoting innovation and creativity. The two traditional approaches are, 1. innovation systems organized around markets, supported by intellectual property rights directed to exclusivity and ownership, and 2. innovation systems organized around governments, which intervene in markets in various ways to sponsor and subsidize innovation. The third approach explored in this book is commons-based sharing of knowledge and information to produce innovation and creativity.

7. Society 3.0
http://www.society30.com/
by Ronald van den Hoff

Written by one of our Kickstarter backers this book describes society in transition. It documents how the web, social capital, and value networks, are creating an interdependent economy and new ways of not only doing business but functioning as a society. It shows how this transition is playing out in the environment, work, money, democracy, education, health and even the organization of businesses. Written with a particular critical eye on the state of affairs in Europe this book describes and advocates for new ways of governing and functioning as a society. It provides some good insights on social, co-creation, and transactional business concepts with specific suggestions and examples of how to set up and operate a new kind of business.

8. Think Like a Commoner
http://www.thinklikeacommoner.com/
by David Bollier

This book traces the history of the commons and dispels the myth of the “tragedy of the commons”. It presents the commons as an ageless paradigm of cooperation and fairness and suggests that it is re-emerging as a practical new form of self-governance and production controlled by people themselves. A key aspect of this book is helping us all think differently and seeing the commons as a framework for social action and value production. Does a good job of exploring the logic of the market and the commons.

9. The Gift: Creativity and the Artist in the Modern World
http://lewishyde.com/publications/the-gift
by Lewis Hyde

Not a new book but an important one for the way it explores the artist’s dilemma. At its core this book investigates the way that “every modern artist who has chosen to labor with a gift must sooner or later wonder how he or she is to survive in a society dominated by market exchange.” Examines the anthropology of gifts as a kind of property and gift exchange as a kind of commerce. Important for the way it delineates the differences between a gift and a commodity and for describing the human aspects of gift giving and sharing.

10. Information Doesn’t Want to be Free — Laws for the Internet Age
http://craphound.com/category/idwtbf/
by Cory Doctorow

Quoting the promotional blurb “Can small artists still thrive in the Internet era? Can giant record labels avoid alienating their audiences? This is a book about the pitfalls and the opportunities that creative industries (and individuals) are confronting today — about how the old models have failed or found new footing, and about what might soon replace them.” As others have done it emphasizes the importance of building an audience through open sharing. It also examines past business strategies of creative industries and shows how they have been adapted to the Internet. Most provocative of all it looks at how ever increasing copyright laws mess up artists and endanger privacy, freedom and our digital lives.

A short summary of what I have learned from this collection of books goes like this:

  • The commons has been increasingly enclosed and commoditized by government and market forces for decades.
  • Technology and the Internet have generated a distributed and participatory means of production and can store and distribute goods at near zero cost.
  • Zero marginal cost creates abundance (or the potential for abundance) which traditional market economics has no model for.
  • The commons has new relevance, particularly the digital commons, and is re-emerging as an important alternate means of achieving social and economic aims.
  • The commons is not just a place with content and resources but a social process, enabled by technology, that involves people participating, co-operating, sharing, and collaborating.
  • The social process of commons practice is affecting all sectors of society including education, manufacturing, health, energy, work, and even money itself.
  • The re-emerging commons does not mean the elimination of business or work but does mean business and work are done differently.
  • Commons-based ways of working and doing business are being invented right now and must co-exist and sometimes compete with existing models.
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Maximize Abundance

Maximize Abundance

Originally published on Medium 15-Dec-2015. This is the second in a series of six Medium articles connected to the research underway by Creative Commons for its Kickstarter-funded book about open business models to be published summer 2016. This work has three parts. Part 1 explores how open businesses models are based more on abundance than scarcity. Part 2 continues that exploration with an eye to how abundance affects design and development of open business model strategies. And finally, in Part 3 we get down into specifics around how open business model organizations generate revenue to sustain and thrive.

Part 1: A dialogue between abundance and scarcity.

Conversation by Michael Rojas from the Noun Project CC BY

Imagining a post-scarcity world has long been the domain of science fiction writers and futurists. Replicators producing goods in great abundance. Societies where basic human needs are fulfilled cheaply or even freely. People freed from the need to work or earn money. The activities and lives of humans living in abundance. These are the realm of Star Trek or books like Culture and Down and Out in the Magic Kingdom.

These ideas have no relation to the here and now.

Or do they?

No, no, no, the here and now is governed by scarcity based economics. We all know about the shortage of water, food, energy, clothing, education, medicine, and other goods. Too much demand and not enough supply. Scarcity, that’s the here and now. That’s what drives the market. Supply and demand determining prices. And price determining who has access and who gets what goods.

But wait — aren’t digital goods different?

In the digital world the incremental cost of storing, copying, and distributing digital goods is next to zero. And Creative Commons licenses on digital goods make explicit permission to replicate, share, and reuse. This creates the possibility for abundance. And we certainly are seeing a growing abundance of works in the Commons. Over 1 billion according to the latest Creative Commons State of the Commons report.

No, no, no, to prevent abundance we’ll create artificial scarcity through “digital rights management”. We’ll put locks, passwords, and controls on digital goods to prevent them from being accessed, changed, or replicated. That way we can control digital goods the same way as physical resources and existing economic models and revenue streams are maintained.

Do we really need to hobble technology for economic gain? Do we really need to rely on artificial scarcity to prop up society and its scarcity-based economic model? What are the implications for the economy and society if we go with an abundance model?

Can we even imagine it?

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Part 2: Abundance Based Design of Open Business Models

Abundance by Luis Prado from the Noun Project CC BY

Jeremy Rifkin in his book The Zero Marginal Cost Society says, “The notion of organizing economic life around abundance and use and share value is so alien to the way we conceive of economic theory and practice that we are unable to envision it.” (bold added by me)

Rifkin introduced me to abundance, but Free Knowledge was the a-ha moment book where the limitations of scarcity-based economics were made evident. Ever since then I’ve been having thought experiment dialogues in my head like the one at the start of this post. Mental conversations between scarcity and abundance.

Trying to imagine abundance.

I’ve been noticing the vision and mission statements of the open businesses and organizations Sarah and I are speaking to are about abundance.

Wikimedia imagines “ a world in which every single human being can freely share in the sum of all knowledge.”

The Noun Project is “creating, sharing, and celebrating the world’s visual language.”

Thingiverse “is a thriving design community for discovering, making, and sharing 3D printable things. As the world’s largest 3D printing community, we believe that everyone should be encouraged to create and remix 3D things, no matter their technical expertise or previous experience. In the spirit of maintaining an open platform, all designs are encouraged to be licensed under a Creative Commons license, meaning that anyone can use or alter any design.”

I began thinking about open business models as being abundance-based. I began wondering …

What if, to generate your own open business model, you flip the traditional economic scarcity-based model on its head and focus on abundance? What if, as an open business, you focus on what is it you have that you can strategically make freely and openly available to everyone?

I began seeing maximizing abundance as a key open business model strategy.

I quickly saw how open businesses leverage the permissions Creative Commons licenses provide to put assets out in the world in a way that encourages use, participation, contribution, and enhancement. The Noun Project, Wikimedia, and Thingiverse all do that. They make digital assets abundant and invite everyone around the world to use, contribute to, and enhance that abundance.

I also began seeing how abundance isn’t just about maximizing availability of open digital assets but also about maximizing abundance of participation. Open business vision and mission statements couple an aim for abundance of resources with a recognition that getting there is a collective group activity. Abundance isn’t solely created by a single open business or organization. It is collectively created by a global network of people who affiliate themselves with the open business and collectively worked toward a shared goal.

Edward Boatman, co-founder of the Noun Project, may have created the original set of icons and symbols that got the Noun Project’s visual dictionary going but he didn’t conceive of a business where he’d author the entire world’s visual dictionary himself or bring on Noun Project employees to do so. Instead maximizing icon and symbol abundance is collectively being done by over 7,000 designers from all over the world contributing their work to the Noun Project.

Globe by Jon Prepeluh from the Noun Project CC BY

In creating your own open business model think about how you will engage the world in adding to, improving, and expanding use of what you’re making freely and openly available to everyone. “Build a community around your content” as my colleague Sarah Pearson says.

Opendesk’s Open Making Manifesto includes a principle that says:

“Open Making can democratize not only the design and manufacturing of artefacts, but also the design of processes and organizations, which should also be documented, visualized and shared. Designing, sharing and manufacturing in a collaborative way can enable us to learn how to build global and local networks that are more sustainable thanks to the fact that anybody could improve them. Building a new economy is not an easy task, but it’s easier if we test it in a distributed way and share the results. Designing and making together can enable us to learn the social, political and economic dimensions of Design and Manufacturing.”

Sustainability is based on the ability for anybody to improve and share. And you can also see I’m not the only one who thinks this work is helping us learn new processes, new kinds of organizations, and yes even a new form of economics.

These ideas about abundance are all a bit raw for me still. I’m still thinking it through, but seeing open business models as being about maximizing abundance of digital assets and abundance of human participation has been really useful. It’s helped me frame how I think about open business models, generated a couple of strategies for creating your own open business model, and provided a lens through which to look at and analyze existing open businesses.

These aren’t the only ways open business models maximize abundance. I bet you have many ideas about this too. Welcome your comments. Here’s one more I’ve been thinking about in my latest thought experiments …

Abundance of value.

Scarcity based economics seeks only to maximize monetary value, abundance-based economics and open business models seek to maximize a more diverse set of values. The degree to which an open business can engage participation in what it does is dependent on the extent to which others buy in to the value the business seeks to achieve.

I think the reason Wikimedia has 26,884,090 registered editors (seehttps://en.wikipedia.org/wiki/Wikimedia_Foundation, as of 3-Dec-2015) is because that many people around the world agree with and want to participate in making possible the value Wikimedia seeks to create “a world in which every single human being can freely share in the sum of all knowledge.”

Open businesses generate value for others, not just themselves, and that value can take many forms — knowledge, culture, relationship, livelihood, well-being … Open businesses aren’t blind to money, but what drives them, what motivates them, the values they operate by and the value they seek to create is more diverse than just monetary value for themselves.

As an open business how will you maximize the abundance of value you create?

*********************************

Part 3: Generating Open Business Model Revenue to Sustain and Thrive

All this abundance-based economics talk is well and good but you’re probably saying to yourself, today, right now, most of the world is operating on the basis of scarcity-based economics. How do abundance-based open businesses survive in such a world? Just how does the money part work in an open business model anyway? How can open businesses not only survive but thrive?

Lets set aside thought experiments and get down to the money.

It’s true, during this transition time while inventing a new abundance-based economic model open businesses must include monetary value in the mix of value they create.

Lets look at the money part of how the open businesses work. Lets look at a real examples from open organizations and businesses already mentioned in this post. Lets start with the simplest one first.

Wikimedia is a 501(c)(3) charitable organization. More than 4 million donors around the world donated $75 million USD to Wikimedia last year. Here’s a link to their 2014–15 Fundraising Report. This is yet another way Wikimedia makes it possible to participate. Donating money for their operation is an expression of support for the value they are creating.

Donation by Aha-Soft from the Noun Project CC BY

It’s worth pointing out that the actual content Wikimedia has on its sites like Wikipedia are created by volunteers. Editors do not get paid (in general). Wikimedia aspires to be an unbiased, accurate and trusted resource which can be undermined when entries are created through paid advocacy — seehere for example.

The Noun Project has a very unique business model. It’s also one of the few examples where Creative Commons licenses are at the very core of the model. Co-founder Edward Boatman spoke wonderfully eloquently about it during our interview. Here’s my simplified version of how it works.

Icons and symbols on the Noun Project are Creative Commons CC BY licensed. Free membership entitles you to download and freely use those icons at no cost — as long as you give attribution and credit to the creator as specified by the terms of the Creative Commons license. To provide proper credit, you can use the embedded credit already in the icon you download, or you can copy the credit line they provide and add it to your citations, about page, or place in which you credit work you did not create.

In the Free Membership model, if you don’t want to give credit and attribution to the creator you can purchase the symbol or icon for $1.99. The Noun Project splits this revenue roughly 70% to creator and 30% to Noun Project.

When you purchase an icon you see a thumbnail image of the creator, their name, and a message saying: “You can use this icon for unlimited use on any project, forever. Your purchase directly supports the creator.”

If you don’t want to purchase a la carte through the Free Membership plan you can go with the premium NounPro unlimited plan where $9.99/month gets unlimited downloads and no requirement to attribute/credit the creator. Revenue from this is shared roughly 40% to creator and 60% to the Noun Project. Operating the premium NounPro plan requires the Noun Project to offer a lot of services, outside of the icon itself. This additional effort results in a higher revenue percentage going to the Noun Project.

The Noun Project also has an API option that lets you get a direct feed of Noun Project icons and symbols into a your application or service. They have a Playground and API Pro version. Royalty payments to creators are now calculated by adding revenue from the API project to revenue from premium NounPro subscriptions and dividing that total revenue by number of downloads. Numerator and denominator fluctuate on a monthly basis, which means royalty payments fluctuate too.

I really like the way the Noun Project values its creator community and shares revenue with them. However, when we spoke with Edward Boatman he told us that based on feedback from their creators the #1 reason they participate in the Noun Project is its mission. They really like the idea of putting their work out there and helping others. Money is the #3 reason. #2 is promoting their own personal brand. This is a good example of value abundance.

The model of free use as long as credit and attribution are given and requiring payment if users don’t want to give credit is a novel idea. All Creative Commons licenses require attribution be given to the creator so this model really draws on the way Creative Commons works. I’ll be very interested in seeing whether any other open businesses replicate this model for themselves.

Lets look at one last one — Opendesk.

Here’s how Opendesk describes what they do:

“Opendesk is a global platform for local making. You can use it to download, make and buy work space furniture.

Opendesk has a global network of makers and a collection of furniture by a range of international designers. Because that furniture is designed for digital fabrication, it can be downloaded as a digital file and made locally — on demand, anywhere in the world.

We call this “Open Making”:

  • Designers get a global distribution channel
  • Makers get profitable jobs and new customers
  • You get designer products without the designer price tag, a more social, eco-friendly alternative to mass-production and an affordable way to buy custom made products”
Share by Jamison Wieser from the Noun Project CC BY

I really like the way the Opendesk global platform is making furniture designs abundant. I’m especially intrigued by the way Opendesk converts a global digital abundance into a local produced physical good. I like the idea of being able to tell a story about workspace furniture where the design came from around the world but was made just around the corner.

Of all the open business model organizations I’ve spoken to so far Joni Steiner and Nick Ierodiaconou, co-founders of Opendesk have been the most open about commercial intent and our conversation around their business model ranged wide and deep about how to design one that works.

When they first started designing the Opendesk system, they had two goals, “We wanted anyone, anywhere in the world, to be able to download designs for local making and we wanted to reward designers financially when their designs were used commercially.”

In designing a business model to achieve those goals they gave a lot of thought to three angles – 1) social sharing potential, (2) support for license choice, (3) impact of license choice on business model.

In support of social sharing Opendesk actively advocates for open licensing. However, designers have choice. They can be proprietary or choose from the full suite of Creative Commons licenses deciding for themselves how open or closed they want to be.

For the most part designers love the idea of sharing content. They understand that you get positive feedback of attribution and what Nick and Joni called “reputational glow”. And Opendesk does an awesome job profiling the designers on the platform. I especially like seeing furniture designers, not often recognized for their work, be so highly profiled.

While designers are largely OK with personal sharing they do have a concern that someone will take the design and manufacture the furniture in bulk without the designer getting any benefits. This has led most Opendesk designers to choose Creative Commons Non-commercial licenses.

So users can download the design and make it themselves for non-commercial use — and there have been many many downloads. (There are always lots of questions about just what constitutes non-commercial. See Opendesk’s response here.)

Or, users can buy the product from Opendesk or a registered maker in Opendesk’s network. You might think of this as on-demand personal fabrication. The Opendesk maker network is currently focused on makers who do digital fabrication via a computer controlled CNC machining device that cuts shapes out of wooden sheets according to design file specifications on the computer.

Makers benefit from being part of OpenDesk’s network by getting paid work making furniture for local customers. Opendesk generates business for makers. Nick and Joni said “Finding a whole network and community of makers was pretty easy because we built a site where people could write in about their capabilities. Building the community by learning from the maker community is how we have moved forward.” Opendesk now has relationships with hundreds of makers in countries all around the world.

Makers are a critical part of the Opendesk business model. The model hangs off the maker quote. Here’s how its expressed on Opendesks own business model page:

“When customers buy an OpenDesk product directly from a registered maker they pay:

  1. the manufacturing cost as set by the maker
  2. a design fee for the designer
  3. a percentage fee to the OpenDesk platform”

They go on to openly share their model by detailing how Maker Quotes are created:

“Maker Quotes

When a customer wants to buy an OpenDesk through our Marketplace model (or by just getting in touch directly with a maker), the maker is responsible for managing customer communication and providing a quote for the product.

The price quoted by the maker must include the design fee and the Opendesk platform percentage fee. Specifically, quotes should be constructed as follows:

  1. manufacturing cost: fabrication, finishing and any other costs as set by the maker (excluding any services like delivery or assembly)
  2. design fee: as 8% percent of the manufacturing cost
  3. platform fee: as 12% percent of the manufacturing cost
  4. sales tax: as applicable (depending on product and location)”

Like the Noun Project Opendesk shares revenue with their community of designers. According to Nick and Joni a typical designer fee is around 2.5% so Opendesk is being more generous, with 8%, and providing a higher value to the designer.

Moving forward Opendesk is looking to recast the whole idea of openness. To them the sharing economy has shown how you can disruptively scale an idea. Instead of building a business model around IP or design exclusivity Opendesk is starting with openness, sharing, and abundance. Their model focuses on value-added services and experiences for which a fee can be charged — similar to models used in the open source software world.

Even more fascinating is the way Opendesk is working openly to engage everyone in helping define how this model should work. OpenMaking is a public domain resource developing open standards in keeping with new and social forms of design and manufacturing, working with a community of thought leaders and practitioners to define this new movement and discuss how we will produce and consume in the 21st Century.

I’m only skimming the surface of the broad and deep conversation we had but this gives you the gist of Opendesk’s business model.

It’s clear that openness and revenue generation aren’t mutually excludable. There are many ways to earn revenue based on abundance — these three examples show what’s possible with some creative thinking.

*********************************

Growing Mind by Francielly Costantin Senra from the Noun Project CC BY

Open business models start with abundance, a spirit of generosity, an act of sharing.

Success and sustainability of open business models depends on the extent to which assets, participation, and value is made abundant.

Open business models generate value in many forms — one of which is financial.

This isn’t science fiction. Abundance is a generating a new kind of economy right now. Special thanks to the organizations profiled in this post for showing how this is possible. And to the many millions of people who share using Creative Commons, thank you for creating abundance.

End Notes and Participation Invitations:

As I engage in this work. I’ve decided to do more than just write about it. I’ve decided to directly experience it, to experiment with it. To not just observe and analyze but to actively participate in it. Try it out myself. Even invest in it. Here’s a few of the ways I’m doing that with invitations for you to join me.

This is the time of year when the Wikimedia Foundation runs its fund raising campaign. I donated. I received an e-mail in response which says in part: ‘Everyone is a potential Wikipedian. If you don’t find what you’re looking for on Wikipedia, you can start creating it yourself. The articles, words, pictures and data are created by a diverse community of people who volunteer to share their knowledge with the world.’ One thing I’m noticing in these open business models that make them different from the more closed traditional models is that they invite me to participate in making abundance. Want to join me? Make a donation too? Edit a Wikipedia entry on a topic of mutual interest? Leave me a note. (highlight any text in this article and click on the dialog bubble that appears in the black pop-up bar.)

Images in this post are all from the Noun Project. I’ve given attribution for each and technically, as per the Noun Project’s business model, am allowed to use them for free. However, I chose to pay for them too. Thought I’d experiment with the business model and give extra thanks to the creators. I encourage you to use Noun Project images yourself. I’m also interested in using Noun Project images in the book we are writing. What Noun Project images do you recommend we consider using? Leave me a note with your suggestions.

I’m interested in getting an Opendesk Edie table and I was excited to see Opendesk has a fabrication partner called Makerlabs in Vancouver. However, ordering notifies me the Edie table is fabricated in quantities of 2 — and I only want 1 (costs about $330 CAD for one). I asked Joni and Nick at Opendesk “Is there some way to team up with someone else in Vancouver to make such a purchase with each of us getting 1 table?” They replied, “We aren’t at the scale yet to have frequent enough orders all around the world to combine them — but when we do we will look to bring in a ‘group-making’ feature where we can team up smaller orders — I think this will be really powerful in serving smaller orders and items, but it’s not something we have up and running quite yet.” They also super helpfully linked me up to Kirsty at Makerlabs in Vancouver to help take me through the quoting / ordering / getting made locally in Vancouver process. Thought I’d see if there is anyone else locally in Vancouver interested in an Edie table who wants to join forces with me and place an order? Leave me a note.

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Converging Forces

The open business models work I wrote about in my previous Edtech Frontier post generated high interest. Turns out there are lots of people and businesses trying to figure out how to use Creative Commons to openly share while at the same time operating and sustaining a business.

Early work responding to that interest revolved around using the open business model canvas and questions as a tool for depicting and designing open business models. This helps establish a common framework for what a business model is and how to think about it. It also creates a means of dissecting and analyzing an existing business.

open business model canvas

I found it really interesting to autonomously fill out an open business model canvas from what a business says about itself on its web site. I liked to then broaden out and find stories others have written about them as a means of finding interview material, filling in gaps, and getting an outside view. Through these activities you can use the open business model canvas to research and analyze existing businesses.

An initial focus on four business model building blocks – 1. customers, 2. value propositions, 3. social good, and 4. revenue streams, generate the best results. But it’s also really helpful to fill out and think through every building block element in the canvas. We did this for platforms and with startups, non-profits, and existing businesses.

Colleagues at Creative Commons and I did this for various online platforms that use Creative Commons licenses or have integrated them right into their platform as a service for end users. Doing this independently is a means of better understanding just what a business or platform does and how important Creative Commons licenses are (or could be) to them.

It’s always fascinating to compare canvases multiple people create independently for the same business. Having each person share with others what they come up with inevitably reveals facets of the business others didn’t see. Sharing canvases with each other stimulates conversation and dialogue around how an open business works and leads to a common understanding of the organization. It’s useful to create a single new canvas combining the findings and insights from all into one shared depiction.

We also did open business model workshops with groups of people. Some workshops were done for participants who were all from the same organization, others for consortia of partners working together on a shared initiative, and still others for mixed groups of people from different businesses. Workshops explored themes and concepts associated sharing, open innovation, open source software, and open business models. Real world examples were used to show how others are doing it. Hands-on activities put things into practice.

As we dug deeper into these activities there was a growing realization that this work is really important and part of something bigger than initially conceived.

This realization led my colleague Sarah Pearson and I, with the support of all our Creative Commons colleagues, to do a Kickstarter campaign in the summer seeking to raise additional funds and write a book profiling businesses who use Creative Commons licenses as an integral part of their business model. We were thrilled to meet and exceed out campaign goals. Thank you backers!

open business models kickstarter campaign

As part of our Kickstarter campaign we made a commitment to regularly write about what we were learning and key insights we were gaining. I’ve been doing that writing over on Medium here.

I really feel fortunate to be doing this open business models work – it’s fascinating. I’ve come to see it as being part of what I’m now calling the “abundance economy”. Doing this work I get the wonder and excitement that comes with new discoveries.

I was thankful to receive this fall an invitation from David Porter and Mary Burgess to provide some video material for their keynote address “Supporting Open Textbook Adoption in British Columbia” at the recent Open Education Conference in Vancouver. They asked me to provide a short video detailing my start in Open Educational Resources (OER) in BC, how I see the current situation, and what I think BCcampus should do next.

I’m super proud of the work BCcampus did and continues to do today.
Really enjoyed David and Mary’s retrospective.

Here’s the full length video I sent of my thoughts:

My interest in understanding and fostering the Commons continues. And I have been reading widely and deeply about it.

Today Creative Commons released the 2015 State of the Commons report:

  • 1 billion CC licensed works in the Commons in 2015
  • CC licensed works have nearly tripled in the last 5 years
  • More people are choosing to share with “Free Culture” licenses
  • The CC marked public domain has nearly doubled in size over the last 12 months
  • In 2015, CC licensed works were viewed online 136 billion times

State of the Commons > 1 biilion chart

Wow, those are some big numbers.
Seems there is a growing interest in the Commons, not just by me, but many other millions.
Thrilled to have been part of making that happen with an amazing team of CC’ers at HQ and around the world.

Open business models and the growth of the Commons.
Two converging forces.

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Open Business Models – Call For Participation

In our capitalistic world competition for limited resources and profits are the driving forces of business. Social value, environmental value, and other non-monetary forms of ROI are rarely factored in to the bottom line.

But some businesses are incorporating social goals into their operations and adopting triple bottom line frameworks. Some are becoming B Corporations. TedX talks like this one from Jay Coen Gilbert are influencing the thinking of entrepreneurs. And still others businesses are eager to create a business that is not only socially responsible but also modern in its use of digital, and open licensing strategies where the aim is to maximize access, use, and distribution. For many entrepreneurs use of Creative Commons is a key enabler of both social goals and financial success. Startups and existing businesses are exploring new alternative business models using Creative Commons licenses as either an enabler or core component of their business – see the many examples at TeamOpen.

Screen shot of TeamOpen web site.

For every one of those examples there are many others who want to move in that direction but don’t know how. It’s not easy to figure out how to run a business that is both financially sound and socially responsible. It’s not easy to transition business models from strategies that are focused on locking customers in and producing products and services that are not easily copied, to one where you give customers choice and encourage them to copy, modify, and freely distribute your products and services. It’s a big change.

One of the most frequent questions I get in my Creative Commons work is “How do I earn a living, pay the bills, and keep the lights on if I openly license my work and give it away for free?” Underlying this question are deep seated needs to a) be financially compensated for the work we do, b) manage costs and revenue responsibly, and c) not have others unfairly earn income off your work. These needs are matters of survival and social norms we operate under in a society based on capitalism.

This question and others like it come not just from people in the private sector but the public sector too. Here are a few variants of the question.

One public sector variant pertains to sustaining open initiatives that receive special grants or startup funding. When the one-time special funding runs out how does the open initiative sustain itself? What are the models for sustainability?

In the private sector, startups are designing businesses around openly sharing as much of their product and service as possible for free, while at the same time generating enough revenue to operate a business. What are the business models for that?

This is something that really interests me and I’ve written about the economics of open and open business models before – see here and here.

This year, through gracious funding from the Hewlett Foundation, my Creative Commons colleague Sarah Pearson and I, are leading an open business models initiative that aims itself squarely at answering questions like these. We aim to make visible how open business models work and provide tools and strategies for designing and developing your own.

Open for business sign
Building an open source business by Libby Levi licensed CC BY-SA

We want to do this work in a community-based way with all of you. We published a Creative Commons Open Business Models Call For Participation blog post today.

We’re inviting participation in these open business model activities:

  1. Join us in designing, developing, and iterating a set of interactive Creative Commons open business model tools that anyone can use to design an open business model.
  2. Use these open business model tools yourself to generate your own open business model(s).
  3. Share the results of your participation including the open business models you generate.
  4. Provide feedback and recommendations for improving the Creative Commons open business model tools and process.
  5. Partner directly with Creative Commons on developing an open business model for your specific initiative.
  6. Participate in a Creative Commons workshop on generating open business models.
  7. Contribute to a Creative Commons open business models report.

See our Creative Commons Open Business Models Participation Activities document for further details on each of these activities, including specifics for participation, and links to the tools.

As you’ll see in the Open Business Models Participation Activities document we’ve also created a Creative Commons Open Business Models Google+ community as a forum for sharing, participation, and interaction.

We’re just getting started but I’m totally excited about doing this work.
I think its potentially a really big thing and hope you’ll all consider participating in this work to grow the commons through open business models.




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