June 8, 2009

Knowing when to pull back

Sometimes the hardest thing for me, and I’m sure for many others, is to pull back cold turkey on a business which I have become emotionally or financially invested in. Thankfully that is exactly what I managed to do just a few days ago.

I was planning on purchasing a music portal. Music is a logical business extension for me and the portal was an easy start. One of my long time business partners, Aron Kerr, would also be involved. Sure we were going to spend around double the asking price to renovate the site, bring it back up to our standards, add some features and encourage the current user base (with less than 7% of it being active) to return to the website. Still, we liked the company, the script and connections were a good start and we figured that bringing back just 20% of the users would make the investment worthwhile.

Sadly, the asking price then doubled. A new buyer had joined the bidding process. Quickly we clamored back together to increase our bid – but before submitting it I decided to take advantage of the 8 hour window and sleep on it. After the heat of the moment was gone we changed strategy and ended our bidding. A small increase in price was acceptable for our plans but doubling meant that the entire nature of our strategy had changed. It was hard – we were both very emotionally invested in the company and knew we could do well with it. But with the upfront cost doubling, and us still needing to pitch in another 50% to change the site fundamentally, the company no longer held a value for us. Yes, there are still sore spots but ultimately we made the right call, buying a business while on an emotional high is never a solid idea.

Just remember, every time something changes don’t immediately adapt. Sit back and think ‘is this now something I want to be involved in?’.

What has happened on our end? We had the connections and a solid business plan, coupled with a passion. For the price we were going to spend on a poor design and an inactive user base we are now able to:

  • Get our own custom portal developed, with all of the changes we wanted
  • Have the Iphone and Facebook applications we wanted developed
  • Design the logo and website
  • Incorporate the new company
  • Make contact with the people we need to contact
  • Place 30 classified ads to attract those who read newspapers
  • Place a full colour, half page ad in Guitar World (US)
  • Run Google Adwords and Facebook Ads for a month to continue attracting customers

For the same money beforehand, we were buying 400-500 active users, a renovated website and a half built facebook application. All in all I say stepping back was well worth it.

May 21, 2009

A little rant on Piracy

This blog is way overdue; sadly I have been a little busy. Better late than never eh?

Several weeks ago now we all heard about The Pirate Bay founders being found guilty of copyright infringement and sent to prison. For those who don’t know, The Pirate Bay is a website where users share torrent files; while the site does not encourage illegal file sharing it is certainly not prevented and is in fact where most of the traffic comes from. Who were the biggest pushers of the verdict? The music and film industries.

Upon reading comments and the commentaries on blogs and in the media I noticed a resounding message ‘they should not have gone to prison’ or ‘I will never pay for music again’. I find that pretty ironic – most of the people who use the website don’t pay anyway – that is it’s purpose. If you want to ‘try before you buy’ there are many free and legal services out there!

Yes, I know the music industries business model is outdated and becoming obsolete. Personally I also think that, considering the costs and profits, music is terribly overpriced and major labels are facing a slide into obsoleteness. Yes they need a new business model.

But, the bottom line is for now, that material is copyrighted. These labels own that music. Accessing it is not a right, it is a privilege. If we choose to access that music we do so on their terms – if they feel that buying a $30 CD is the way, that is what you do to access the music. If you think a t-shirt is too expensive you don’t just steal it, you don’t buy it. Same applies with music – if you disagree with the model buy elsewhere. I just get a little frustrated with these people who feel it is their god given right to listen to music which these companies create. If I create a product I expect to be compensated at what I think is fair. If people buy at that price, even while complaining, it is priced well. However, if it is not priced well, or the method of distribution is poor, people will simply not buy it and I will either re-evaluate my model or lose all of the profits. That would be my choice – it is not the consumers right to access my product. Same applies for music.

Should these guys have gone to goal? Yeah. They did break the law and steal a companies product. They got what they deserved. Like everybody else, if you don’t like it, switch to a competitor (there are plenty of nimble, smaller labels) and consume their products. Music is a business, not a right.

If you really want to make a statement begin supporting all of the bands trying these new methods of distribution. If labels see it working they are likely to try it. That might make an interesting blog post for next week – where else the music industry should go. But for now we are using their tools and their product, if you don’t want to play by their rules simply don’t use it.