The Long Snout Business Model [Updated]

Good post over at O’Reilly Radar on the “Long Snout”. Don’t know what that is yet? Well, get ready for the onslaught of Long Snout graphs…

I had mentioned a model similar to O’Reilly’s “Rough Cuts” to my friend C.K., author of the O’Reilly hacks book “PSP Hacks” (free hacks available here). However, the good part of the discussion is about the business model:

“In short, you can buy online-only access to the Rough Cuts directly from us for about 50% off the expected list price of the final book; you can pre-order the print book for about 35% off the list price; and you can buy both together for only about 10% more than the list price.

What’s so important about this business model is that it puts a significant price on online access. One of our biggest concerns as we move to an online information economy is the development of business models that cover the cost of content development. Models that treat print as primary and assign small value to an online copy, or give it away for free (as some publishers have done over the years) will end up on the trash heap once online access becomes the preferred mode (as it already is for many people.) While we also need to reduce the cost of developing content, quality doesn’t come for free.”

Cross reference this with the fact that NBC shows on iTunes have increased ratings and “drive new viewers” – and you might begin to think that digital distribution is good for business…

[Update] Further cross reference. The Wall Street Journal reports (sub. req.) this morning on Madonna’s hit “Hung Up”:

The song achieved the No. 1 spot in 29 countries simultaneously in 2005 with 40% less radio airplay in the U.S. than the average No. 1 hit, Warner Music said.

“I think it’s not inaccurate to say that the mobile campaign, and the ring tone in particular, was more effective in launching the single than radio airplay,” said Michael Nash, a senior vice president at Warner Music

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