Exploding business models

It’s fascinating to watch the process of business models exploding.

What apple did yesterday in announcing free OSX and free iWork apps is a great example of that.  MS has traded on license fees for Windows and Office forever, and for a long time, Apple has followed suit, charging reasonably high (although continuously declining) prices for each.

Now, with outrageous revenues from hardware and the app store, they don’t need to do that anymore.  In fact, free distribution of OSX and iWork will just expand the ecosystem and grow those revenues.

In most cases, it takes some kind of end-run and a lot of scale to make this kind of thing possible.  Apple can do it now because they created a brand new channel & model with the app store, and built a monster hardware business.  If they had tried, before doing that, to “reinvent” the OS business, they wouldn’t have had the leverage.  It’s interesting to look at other sectors where this is happening:

* Music: Soundcloud is letting artists distribute direct-to-fans, end-running the labels and the traditional pricing and distribution model.  At some point, they will reach a tipping point that will force the old model to change.

* Education: textbook publishing and open source.  I don’t have examples on the tip of my tongue but I can’t wait for this one to happen.

* Law: lexis nexis & westlaw vs new platforms like Casetext.

Now that I look at these examples, they’re all cases where distribution has been expensive, and intermediaries monetized the IP directly.  What we’re seeing more and more of are models where distribution is cheap/free and IP is monetized indirectly.

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