Spotify, Netflix, and the collaborative economy

What do you want to own? That is a fundamental question that has been challenged more and more in the recent years. Is being able to access the things you want when you want enough, or do you actually need to own something?

The value is in the experience, not in the item

Digital content has been the spearhead of renting instead of owning. Whether it is music (Spotify) or video (Netflix, HBO), the on-demand services in these fields have blossomed in the past few years.

Spotify’s mission statement is the perfect embodiment of providing the best possible user experience: “Give people access to all the music they want all the time – in a completely legal & acces[s]ible way”

It is the perfect rental model:

  • Everything you want
  • Whenever you want
  • However you want

There are lots of challenges on Spotify’s way (such as profitability, quality, comprehensiveness – for example, at the moment 28 of the 295 albums I own are not available on Spotify), but its mission is perfectly aligned with what customers seek, and the rest is just a matter of implementation.

Interestingly enough, the movie business has not embraced a similar business model based on providing the best possible customer experience, but has instead stuck with its model that is based on limiting the availability of experiences in order to get the best possible price from various customer segments, depending on how much each segment values the experience. The model is called release windowing:

1. Film Released in Theaters

2. Film Released later on Video on Demand (Rental)

3. Film Released later on Cable and/or Broadcast

3. Film Released Later on Home Video (Rental and Purchase)

4. Film Released Later on Netflix (Subscription)

(From the Trichordist article Why Spotify is not Netflix (But Maybe It Should Be) – I fully appreciate the irony given that this article could be called the exact reverse)

From a customer experience point of view, this business model is decidedly inferior, because the customer does not have a free choice of time, place, or way of experiencing the content. Only a tiny fraction of content can be experienced more freely, such as Netflix original programming and HBO original programming on HBO Nordic (which has been a near-disaster when it comes to implementation). This suggests that there is plenty of room for innovation in the movie industry business models.

Then again, sometimes the value can be in the item

The above discussion has concerned digital goods. Things change when we come to the realm of physical goods – or do they? Jeremiah Owyang has provided plenty of examples on how people share all sorts of things, and this includes items that have often been viewed as highly personal, such as cars. As new ways to share physical goods are invented, the sphere of items considered personal is bound to keep diminishing.

As I try to imagine a world full of sharing, I can only imagine two items that set the line for me: my guitar, and my underwear. Those I will never share. My guitar is the more interesting of the two: people do become attached to items, such as cars, and because these preferences vary between individuals, there will be plenty of possibilities to sell items in the future as well, regardless of the advances in sharing.

The collaborative economy is just getting started

The struggles of obsolete business models and new business models and all the innovation taking place around them makes for exciting times. There is still plenty to see!

For example, where is the Spotify of books? Amazon’s Kindle Owners’ Lending Library is a fledgling step to that direction (not to forget that there are also physical libraries), but there is no service where authors would get paid based on how much their books are read.

The collaborative economy is not limited to consumers. From co-working to collaborative manufacturing, sharing is making headway in the business to business market as well. Sharing is everywhere.

Photo: Some potentially obsolete physical goods and a Kindle (photo by me)

Author: Ville Kilkku

I run my own consultancy business, so if you find the ideas on this blog intriguing, contact me at consulting@kilkku.com or call me at +358 50 588 5043 and we can discuss how I can help you solve your business problems. I am currently based in Tornio, Finland, but work globally. Google+