Everything Old is New Again: Recycling Business Models
“Sooner or later, everything old is new again” - Stephen King
Have you ever heard the saying that every new movie rips off Shakespeare in one form or another? Or, more likely, that into one of several generic story archetypes?
This is how I try to think about technology sometimes.
Growing up, most interactions fell into the ‘commerce’ or, as time went on, the ‘eCommerce’ bucket, where you would pay money and receive a product or service. If you’ve gone shopping, this is what I mean. Even early examples of Paul Graham’s ‘digital mall,’ which was acquired by Yahoo fit examples of this.
Then, in my tween years (early 1990s), I heard about Columbia House, which was the evolution of commerce/eCommerce through a subscription service. They, along BMG Music Service, were famous for pioneering a mail order CD deals like “12 for the price of one.” The catch was that you were then supposed to buy more CDs from them at their regular price.
If you were crafty, or like me, just poor and adolescent - you could register your house like an apartment building with artificial suites and apartment numbers, and the mail would still get delivered to you and you could rack up hundreds of CDs for a fraction of the cost. The downside was that every month, you’d spend a lot of money on stamps mailing back their newsletters with your “Not Interested” reply.
This form of subscription service isn’t as applicable anymore because few online businesses ship physical products, but if you look at how a typical SaaS product is sold, it’s basically the same. The only difference is that the cost of a digital product is so much lower that it’s easier to just offer a 30-day free trial and collect someone’s credit card information for the second month.
So the business model proven by BMG back in the mid 1990s, has been used as the stepping stone for large online businesses, such as Netflix and Spotify.
To take this example to an extreme…
In ancient Rome, there used to exist a business model of patronage, where a patron was the sponsor and benefactor of a client. This was often used for legal obligations, but the most illustrative example is probably in commissioning artwork, where the wealthy supported musicians, painters, and sculptors.
Today, I think this business model lives on through companies like [Twitch](twitch.tv) or [Patreon](patreon.com).
For Twitch, the streaming site known for video game streaming, viewers are given the option to subscribe to a channel for $5 a month or on some channels to donate money directly to the content creator. As for Patreon, it’s more of a recurring-Kickstarter for users to support the artists that they enjoy.
In both examples, giving money to support a content creator confers special benefits to the user, whether that’s special communication privileges or just the right to post fun emotes in chat. And the nature of the internet enables not only the media created to be enjoyed by more people but also allows the crowdfunding of these artists, so the burden of patronage no longer falls on any one particular person but on a larger group. In turn, with a larger pool of patrons to draw from, many of these content creators are able to turn their passion into a full-time profession.
What are some other examples out there? I can think of several, such as Max Levchin’s [Affirm](affirm.com), which offers flexible payments (financing) for online purchases, but I’m secretly sure that if I traced the lineage of any one particular company, it would break down into one classic archetype or another.