Posts from License

MBA Mondays: Revenue Models - Licensing

Licensing, according to wikipedia, is an authorization (by the licensor) to use the licensed material (by the licensee). Of all the business models listed on the revenue model hackpad, licensing is the least net native business model. There is very little about the internet that makes licensing work better and there is a lot that makes it work worse.

Here are some of the ways licensing can be used to build a business:

View Licensing on Hackpad.

The first five items in that list are related to the software business and reflect the dominant business model for software before the internet came along. Software used to be sold (licensed) with maintenance as the recurring revenue item. The internet has largely changed that with software moving to a subscription model (SAAS) as we discussed in the subscription post. Software is still sold with a license, in fact the SAAS model doesn't change the provision of a license, but the idea that you will pay up front for a license has largely gone away in favor of the subscription.

An important and growing form of license is the open source license. There are a number of variants on the open source license but the basic idea is the licensor makes a license of the software avaialable for free for anyone to use, modify, and share. The benefits of this model is that the software is maintained and improved by a group of developers working together with no economic model around their collaboration.

The last two items are forms of intellectual property licensing where an owner of a patent or a brand will license it to someone else to use in return for a monetary payment. These revenue models can work online but they don't take advantage of the scalability of the internet. In fact intellectual property and the internet are in many ways in tension with each other.

The only form of licensing that USV is actively investing around is the open source model. We think open source is an attractive form of licensing that creates network effects in the developer and user community and we have had success investing in the open source model.

That said, licensing is probably the least interesting business model to me of all the ones we are covering in this series. It is possible that entrepreneurs will invent new ways of licensing that take advantage of the scale and reach of the global internet, in the way that open source does, and that could produce some interesting opportunities.

#MBA Mondays

Fast, Fair, and Frictionless Content Licensing On The Internet (continued)

Last month I posted two back to back suggestions for industry self regulation on the issue of copyrights and the Internet. The first was a competitive market for third party whitelist and blacklists. The second was "fast, fair, and frictionless content licensing on the Internet."

I am seeing signs that both models are emerging, slowly, but surely.

In the case of frictionless content licensing, I wrote:

I think it will be even harder to get the content industry to build instantaneous real-time self service licensing systems for their content.

But happily, the photography industry is proving me wrong. Yesterday, Getty Images announced something they call PicScout Image IRC. Not the most memorable name. But it is "instantaneous real-time self service licensing on the Internet."

Here's how it works. When an image is posted to your service, you send the image to them via their API, they fingerprint it in real time, check the fingerprint against their database of rights managed photographs that are out there, and then tell you if the image is licensable, must be taken down because its not licensable for the Internet, or if they don't have it in their database, then you keep it up under DMCA. And they handle all the billing for the licensable content. If you don't want to pay licenses for images posted to your service, you can use their service just to take down all images that are under license.

It is a lot like what Audible Magic does for the music industry or what Content ID does for YouTube, in terms of rapidly identifying the content and determining if it is infringing on a license or not. But PicScout goes one step further and provides an instant license to the content if the application wants one. That's a big deal and is the very step I think the content industry needs to take to tackle copyright infringement on the Internet. It is not enough to say something is infringing. The right thing is to say, "that is infringing, but here is a license" and to do that in real-time.

Any developer can use this PicScout Image IRC API. No meetings required. No lawyers required. Fast frictionless licensing on the Internet. I really like it.