Business Models That Will Always Work
When considering how to make money from your new startup or division
I. Top Business Models
It’s been written that an entrepreneurs only job is to “derisk your business model”, which means you have to keep evolving it until it’s working. Said differently, product-market fit that also makes money. Google may have had product-market fit, but they didn’t have a business model until they threw ads in between the search results page and the user.
- Low Price Monthly Subscription with Outsized Value: Netflix, cell phone plan, cable subscription, home, car
- Premium Product, Low Price: IKEA furniture, iPhone at $29/month
- Physical Objects That Are Tools: iPhone, MacBook, Drill, Shoes
- Things That Make People Look Better: Starbucks, Instagram, Platinum Airline Luggage Tags
II. MCN Business Model for Creators
In terms of video, below is an MCN (multi-channel network) business model. An example of this is Maker Studios, which was purchased by Disney for nearly $1B with earn-outs.
Standard Video Business
- YouTube: 45% revenue for hosting, CDN, audience
- MCN: 15% revenue for legal, sponsorship management, cross-promotion of talent
- Talent: 40% revenue for content creation
75% revenue share for Anchor Talent (like an anchor store in a mall, a few individuals who drive 50% of traffic)
Get Sean Everett’s stories in your inbox
Join Medium for free to get updates from this writer.
Best Business Model for Split
- 20% The creators
- 60% Your aggregation brand
- 20% Underlying technology platform provider (e.g., Piksel)
Netflix is trying to do all three. The video platform, the brand that aggregates all the content, and the people who create and own the content.
Creators: Offer a Revenue Multiplier
- Incentivize a revenue multiplier for content creators who drive the most virality and engagement
- Multiplier between 1x and 2x
- Potentially create a leaderboard concept (be careful here, only works for the very top of the charts)
Jobs Done By Each
- Content Creators: create video, written or other artistic content
- Aggregator Brand: talent agency, source and negotiate sponsorship and writing opportunities (Fortune, TechCrunch, YC, etc); create O&O (owned and operated portal as quickly as possible)
- Tech Platform: tech for distribution and syndication to other social / media properties
You’ll want something that people can interact with all the time (VOD in the video world), something to get the entire audience together at once (Live in the video world), and something that the audience can just turn on for extended periods of time (linear TV channel with an EPG layout in the video world).
For the writing world, you could use the same analogy as above. Imagine what a linear reading experience would look like. It’s not just a book, it’s a never ending stream of articles one after the other, almost a choose your own adventure book where as you choose you get deeper into the content of your choosing.
— Sean
