Exerting Control At Your Customers Expense Will Not Save Your Business Model

The goal of a business is to make money. No disputes there. The best way to make money is to meet a market need. Sometimes that can be by first creating the need but that’s not enough.

In order to continue to meet that need you have to do a better job than any conceivable option. Things change, sometimes violently so.

The minute your business has to create new rules (or lobby to create laws) or enforce rules (or those laws) because you’re afraid you’re losing control, you already lost. Over the last 50 years businesses could *extract* value instead of add value. Some companies still do this today but they only succeed where the barrier to entry is so high consumers hardly have any other choice. The insurance industry is one example.

Look around at companies trying to win through restrictions. They hire armies of lobbyists and patent attorneys instead of trying to figure out what the customer wants and how to provide it to them while still achieving a profit. The cable companies are a great example of this.

Fred Wilson wrote earlier this week a post, titled #scewcable, which details his frustration with cable companies. In the post Fred had this to say:

I’ve long believed that piracy is largely a business model problem not a human behavior problem. If you give people a legal way to consume the content they want, they will pay for it. But when you make it impossible to legally consume the content they want, they will pirate it.

This quote rang a bell for me so I dug through the archives to find this old post quoting Eric Schmidt when he was addressing the news industry: Google’s Schmidt: ‘We Have A Business Model Problem, Not A News Problem’:

Schmidt told members of the American Society of News Editors, with newspapers responsible for more than half of all original news coverage by his calculations: “We have a business model problem, we don’t have a news problem.”

One reason, says Schmidt, the internet “replaced the economics of scarcity with economics of abundance and all of us are dealing with the consequences of that.”

I love what Eric and Fred are saying here. Basically, make it easy for people to pay for content and they will.

But I have little faith that the cable providers are going to change anything soon. Again going back to the archives we can see that companies like Comcast don’t like to change. I find this Comcast example so interesting because these comments by their leadership seem to run counter to what we’ve seen them do in the social space lately (open vs. closed)

Comcast Exec: We Need To Change Customer Behavior, Not Our Business Model 

“An entire generation is growing up, if we don’t figure out how to change that behavior so it respects copyright and subscription revenue on the part of distributors, we’re going to wake up and see cord cutting.”

That’s just sad. I realize that these companies have provided a huge service by building out the infrastructure to provide the content  they now want to charge us for but like Eric points out, the dynamics have changed and their business models need to change with it.

We’re seeing an exponential growth of cord cutters and the cable companies don’t know how to deal with it. Try calling up your cable company and requesting a cable only option with no TV or phone. They don’t know how to respond.

Cable companies may lock up the content for a long time to come but if they do, I believe consumers will start more aggressively seeking out alternative media and entertainment. I enjoy TV and movies as much as the next person, but I’m also happy to live off a healthy diet of amateur and independent produced content.

I’m a proud cord cutter and have been for years. #screwcable

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About Tac Anderson

Social media anthropologist. Communications strategist. Business model junkie. Chief blogger here at New Comm Biz.
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  • http://www.newcommbiz.com/ tacanderson

    Thanks @facebook-721356038:disqus and thanks for the link to the Shirky article. On one hand it is amazing but on the other it’s understandable when you consider that these managers were brought in to manage the existing model. It’s what they’re comfortable with. I think it’s a big reason why separate leaders are brought in when change is needed. 

    BTW, sorry for the late comment approval, you got caught in the spam filter for some reason but I have you white listed now, so it shouldn’t happen again. 

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