How to Save the Online Economy



this extra video was made possible by set app one low price for over a hundred great Mac apps okay so you're scrolling through reddit because what else does one do during the tired hours of 9:00 a.m. to 5:00 p.m. just minding your own business when you click on a link and this happens nothing is more frustrating than a paywall being told that you have to buy an entire subscription to read this one article sometimes they wait until you're halfway through oh want to know what Snape does next that'll be ten dollars well this one's free Snape kills Dumbledore don't say this channel isn't a good value but when I think about it for half a second of course they ask for money writing and editing and publishing require labor you know the thing you're supposed to be doing right now but instead opened this video and if there wasn't a paywall I'd be complaining about how many ads there were the same goes for music videos apps and so on long ago deep water navigation freed merchants from making only what their town wanted to buy now they had access to the world's markets as long as someone somewhere wanted their custom engraved potatoes they could sell them today you can specialize even further make a living say selling homemade glitter that's pretty cool but when there are no barriers to entry supply is unlimited and the value of everything trends to zero so here we are nobody wants to pay for music or news or apps and yet musicians and writers and developers need to get paid the question is how preferably in a way that doesn't suck Spotify Netflix the New York Times and the App Store are all attempts to answer that question some of which are thriving others you might be surprised to learn are failing so what works and maybe more importantly what doesn't the iTunes music store opened in 2003 the App Store in 2008 in other words the music industry has a head start this graph of music revenue over time adjusted for inflation tells the story pretty well earnings peaked in 1999 and they've been down ever since like really really down now I'd argue this period was somewhat artificially high if we zoom out a little it looks more like an anomaly a 10 year spike in the long history of recorded music people spent so much because they had to their choices were by music a whole album at a time or don't listen at all but then the numbers just start falling if we break it down by format first LPS EPS and 8 tracks then cassettes CDs and later digital you can see this time is different nothing replaces the CD at least not immediately you'd think people just stopped listening busy wondering why the world didn't end or something but really of course they just stopped paying in favor of sites like Napster iTunes tried to fight piracy by breaking up the album but nothing really changed until a Swedish programmer no the other one realized something the problem with the music industry is piracy but you can't beat technology technology always wins but what if you could make a better product than piracy it took a few minutes to download a song it was kind of cumbersome you had to worry about viruses it's not like people want to be pirates they just want a great experience and that's how Spotify was born the lesson is companies can fight change lobby for new laws burden everyone with annoying restrictions even more annoying ads and sooo twelve-year-old girls for sharing songs or they can adapt see it as an opportunity because most of us are lazy if we can pay a little more for a lot more convenience we usually will that's why streaming wins today people listen to more music than ever before an average of 32 hours a week that's a lot and revenue is actually growing for the first time since the 90s now Netflix seems to be in the same position both are $10 all-you-can-eat streaming subscriptions an answer to piracy and in this case blockbuster making a killing on late fees before Netflix the idea of letting users watch any movie from any device at any time was ridiculous what if people share their password Netflix was like ah good point we should make that easier they don't just accept it they embrace it letting you make separate profiles on the same account but then you look at money and suddenly the two companies couldn't be more different one has been profitable for 15 years making half a billion dollars last year alone the other reported almost the same number a year earlier except its number was negative why is that in a word scalability Spotify only takes a small cut of your $10 a month the rest is distributed among the songs you listen to in other words no matter how many people sign up the economics never improve more users more costs Netflix on the other hand licenses shows for a set period of time seven or ten ninety-nine a month isn't a lot of money but after they've paid for content every additional user is pure profit more users more money so why doesn't Spotify just raise prices well competition every company and their mother sells a music service just pick your favorite color there's also plenty of video sites Netflix prime Hulu Showtime HBO soon even more the difference is customers can and do pay for several at a time music is winner-take-all we expect every song to be available on every service they just aren't unique they also can't really take a bigger cut because artists barely survive as it is when Taylor Swift complains about money you can only imagine what it's like for the average musician for many streaming is really just an ad for their concerts where they make almost all their money the problem is musicians share their revenue with producers writers and record labels just three of which Sony Universal and Warner control most of the industry Spotify for example pays between six and eight tenths of a penny per stream but after everyone takes their cut artists are left with just over an estimated one tenth of a penny so here's my prediction sites like Netflix will focus almost entirely on exclusives the stranger things and the West world's that make their service a unique there won't just be one winner but several for music the future may not be so bright unless something drastic changes like cutting out the labels services will land in one of two categories those owned by a bigger company like Apple or Google who use them as a loss leader not to make profit directly but to sell more phones and everyone else left with no way to make money this is already starting to happen it's just not obvious unless you're looking a movie pass user can feel the business model fail underneath them unlimited movies turns into most movies turns into some movies turns into only black comedy westerns starring Adam Sandler only between the hours of 4:00 and 5:00 a.m. in select Wyoming theaters but a Spotify user can just keep happily listening away for now every song ever written for less than the price of a single album works only because investors pay for it but that won't last forever the industry may look healthy in aggregate but it's mostly the top 1% inflating the average it's not that I don't think developers or musicians or journalists will survive I worry which ones survive there are three kinds of companies those that make money honestly those that make money dishonestly and those that don't when nobody pays for music or software independent musicians and developers lose but there are still ways to make money they just aren't good ones journalism won't die but the good kind very well could some would say largely has if you think there's a problem with freemium apps and in-app purchases today just wait until that's the only thing that works the good news is that these industries have an advantage they don't have record labels and Spotify offers them a few free lessons first people will pay for content but it's on the company to make it cheap and convenient to adapt not to fight second services have to be unique and finally for it to be sustainable it can't just be good for you and me it has to work for the musician the writer the developer the companies that apply these lessons will determine which industries thrive and which just survive today's sponsor set app is a response to the app side of this problem it's a $10 a month subscription to over a hundred and twenty of the best Mac apps it's good for you because it's a great value use as many apps as you want no ads or in app purchases and every update to every app is included for free again full disclosure this is a sponsor but what they can't pay me to say is I've been using set app since February long before they reached out I use Ulysses to write these scripts CleanMyMac to manage storage and timing to track my time new apps are added all the time it's this quick to install and try one out I'm not speeding this up and importantly it's good for developers because they get an extra predictable and fair stream of revenue they're incentivized to make great apps not charge you for an upgrade every year I especially recommend that app if you're a student or do creative work they have some of the best apps for studying writing photography and programming if you use a Mac there's no reason not to go to set app calm and try it free for seven days thanks to set app for making this extra video possible and to you for listening




Comments
  1. Thanks to Setapp ( https://stpp.co/polymatter ), this is an extra video. Look for the the next one on the following Friday.

  2. Why isn't Spotify buying music content like Netflix is: buy contents for a time period, so that the more users you have, the more money you get. Of course if Spotify pays the record labels for each stream, they will never make profit

  3. Spotify? What did they actually bring to the table? Subscription services have been around forever.
    Making a better product than piracy is LITERALLY a line stolen from Steve Jobs, that was his whole pitch for the iTunes Music Store. Do you actually follow the tech industry?

  4. I’m new to this channel and I gotta say I’m really enjoying your content. I’d like to see a video on how Apple Music is holding up is that possible?

  5. Got me subscribed with your synthetic analyses of situations, but materials like this where you add value with deep understanding and formulating predictions are the most enjoyable. Keep up the good work!

  6. the way you present your information, which is obviously the result of a lot of research and thinking, is astounding. Your channel is what Youtube was made for. Please keep it up mate

  7. 7:10 This is why I use YouTube Music. People can upload anything and I listen to a lot of indie music.

  8. Can you do something about Patreon or GoFundMe, their pros and cons, if they're actually an effective business model in the long run (particularly for paying for things like medical bills)?

  9. why not google buys spotify? google play music failed just about as hard as google plus, and spotify is a well established name in the streaming industry. like a leading loss service, but far better than their current service,

  10. Money that musicians make from studio recordings has ALWAYS been so low, due to record contracts and how they distribute the money made. It's really a bummer, but there's no other way about it. Even The Beatles, who were making the most widely-bought music in the world, made hardly anything off their recorded music. Any money they had was due to live performances. It's not very surprising, then, that there are so many independent artists these days. Spotify is used by artists much more as a popularity spreader than any money source, and it definitely excels at that.

  11. Another option for developers is open-source code. For end-user stuff, you can have people who want things to develop them (and for some you can offer money to add a feature to the maintainer). The other major job-source is major companies paying for developers to contribute to open-source projects that their businesses require.

  12. Oh dang… “this one’s free – Snape kills Dumbledore”…no warning ⚠️ – wonder how many people just threw their phone across the room.

  13. This is an excellent template for writing an ad. It is extremely well researched, interesting and doesn't get in your face. And best of all, it doesn't feel like an ad because it is not annoying.

  14. Unless Uber and Lyft adapts, they too will die from hemorrhaging profit losses, overly cheap rides, and constant investment into the sinking systems.

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