Open Business Models

At first sight the penultimate Introduction to Openness in Education #ioe12 module on Open Business Models looks like one of the drearier ones, no videos to kick off with and just a long list of papers written by John Wiley and friends.

Business isn’t really my thing but I am generally interested in ‘how stuff gets paid for’, from the Internet and public services, to shops and music festivals. If ‘how it gets paid for’ make sense then it is more likely that it is sustainable and will be around for a while. I’ve tried to stop myself betting on ‘how long it will last??’ every time a new shop opens up in town – recession bingo? Anyway I’m sure that one of the first questions asked whenever the ‘open’ word is used is “so if it’s ‘free’ who pays for it?”.

The answer is naturally very complex but some key points are worth noting:

Firstly, there are many business reasons for making products (e.g. resources, courses, books, software etc.) open and freely available.

Giving away ebooks gives me artistic, moral and commercial satisfaction” Cory Doctorow

  • Making courses available online can increase the number of students registering at an institution.
  • OpenCourseWare programmes can be conducted in a financially self-sustaining manner.
  • Authors can find that book sales increase when books are available as free downloads.
  • Free access can have a positive effect on a nation’s economy through scientific progress.
  • Online texts are often have reduced overheads.

However for all these points one could also add “but it is not always the case”.

One not so positive example given is that of Scott Adams, author of the Dilbert cartoon strip. Adams, wrote of his disappointment with readers after he released one of his older books for free online:

My hope was that the people who liked the free e-book would buy the sequel [which was newly available in hard copy]. According to my fan mail, people loved the free book. I know they loved it because they e-mailed to ask when the sequel would also be available for free. For readers of my non-Dilbert books, I inadvertently set the market value for my work at zero. Oops.” Rich, M. (2010, Jan. 22). With Kindle, the Best Sellers Don‘t Need to Sell. The New York Times.

The key seems to be both audience and timing of release.

Secondly, licences have a key role to play in ensuring that the ‘right people’ have free access to resources. For example we are a lot happier about students having free access to e-books than we are about companies taking free e-books and publishing them for commercial profit. Licences help with mixed market approaches in which companies publish free e–textbooks or resources and supporting then with commercial initiatives. Also many companies are utilising the “fermium” pricing strategy in which some goods are given away for free, while premium services are available for a price.

So these points are interesting but don’t necessarily explain the business model for ‘open’. It seems to me that many companies take the loss leader or freemium approach and hope that money can be made elsewhere. Some use advertising to support products while public sector institutions receive public funding which allows them to share resources. However as Anderson, 2008 puts it in the Wired article Free! Why $0.00 is the future of business although ‘free’ is an alluring adjective, it is not always a good business model“. There are many risks involved and those after sustainable models need to continue to think in an innovative way about approaches. Whatever the situation it is clear that the Internet has allowed people to be more open about business models and create ‘open business models’.