Product vision and economic innovation

Do I believe in Daisy?

I’m willing to give Daisy the benefit of the doubt on growth. I think they could succeed at getting big.

But what I don’t see in their vision is an economic innovation. And the really hard problems for on-demand services are economics.

Songza, for example, is an economic innovation. Playlists have always been an on-demand product, hence one that is unaffordable to provide. Songza’s product innovation was to make playlists work under the rules for non-interactive webcasts. This allows them to pay much lower royalties, and so to have a fighting chance of making a profit.

Sites that aggregate music blogs are an economic innovation. These sites have no royalty bills at all, like a filesharing vendor, but they also have little fear of being sued to death.

YouTube, as a music vendor, is an economic innovation. It serves on-demand music and pays royalties, but pays royalties based on a share of revenue, which frees it from the crippling per-user minimums that services like Daisy must pay. It did this via the product innovation of tying the DMCA process to an opt-in advertising business.

So the question about Daisy is about the business insight behind the product vision. Iovine’s vision for the company is that there is a way to sell more subscriptions. However volume doesn’t change the economics, and if it does then more established vendors like Spotify will use it for competitive advantage.

Maybe there is an economic insight that hasn't been shared. There's no reason for the company to tell the world. But with the information we have, we don't have reason to see Daisy's chances as any better than MOG, Rdio, Deezer, Rhapsody, Spotify, Yahoo! Music Unlimited, or Napster 2.

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One Response to “Product vision and economic innovation”

  1. gurdonark

    I see all of these services as at a cross-roads:
    either one will cross the critical mass of getting enough paid subscribers to make up for tiny margins or one will change its model to percentage royalties by convincing the payees that it will attract enough subscribers to make this worthwhile.

    The two cross-roads intersect after they split by the tree of basic survival, because the achievement of the critical subscriber base, as yet unaccomplished by any, will make both models sustainable.

    I am not clear if either model could succeed. I am fairly clear that the efforts by current payees to try to get raises in both direct and radio-type streaming royalties will be likely to kill both the services, the Pandora-style services and whatever is golden about the streaming egg.
    But we’ll see.

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