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SXSW 2009 Interactive – Day 4 & 5 – March 16 and 17

The first night in Austin, I attended a party that was outside at Emo’s. Typically it’s fairly warm in Austin during this time of year, but not this night. And I was ill prepared (pun intended). Freezing in fact.

That next morning I felt a cold coming on, and as the days wore on, between the minimal sleep and the constant on-the-go schedule my body’s immune system gave up on me by the time Monday morning came around. Plus, a client project, which I hoped to finish prior to boarding the plane to Austin, was still in the final stages.

Holed up in my hotel all day, writing and overdosing on vitamin C, I finally emerged (post-shower, of course) to meet the gang at the Mashable party.

It was much warmer this evening and the place was packed, as expected. The free drinks ran out right after I arrived, which was no big deal, considering my state of recovery. I could have done without the burlesque show, since it’s quite popular in Denver so I’m really over it by now, but otherwise the entertainment flowed pretty damn well.

The DJ didn’t suck, which says a lot for most tech-related parties. And as a veteran of these affairs, I am speaking from experience here. They’re typically one notch up from wedding DJ, through no fault of their own. It’s those blasted playlists the party-throwers insist on that have music snobs like me running for the door.

By Tuesday, my brain was overflowing with facts and trends and buzzwords, even after taking a sick day. Not wanting to relapse, I laid low in the morning and set my sights on the keynote speaking event where two very hefty men in the market, Chris Anderson from Wired Magazine and (you’ve heard of Long Tail, right? If not, um, well, never mind) and Mr. Guy Kawasaki.

I’ve been following Kawasaki since I worked for an Apple training company and he was still a Macintosh evangelist, so I am dating myself a bit here. Amazingly enough, this dude has not aged a bit. Good skin.

The topic of discussion, which got heated at times (in a “friendly way), between the two was the tug and pull of monetization and pay-for-play versus FREE, which was also the title of Anderson’s newest book title, which also included the subtitle of “The Future of A Radical Price.”

Anderson’s point was you and or your business needs to give something away instead of charging for everything while seeing the potential for sales in a bigger picture format. Free, along with marketing and business development, is a business strategy that is essential for survival, especially in our digital world where many things are assumed by the public at large to be available for free. So you might as well be in charge of and take advantage of it. Use it to your advantage to pull in your target with the potential for future business and eventually, those sales to keep you in business.

Kawasaki threw the first spear by asking what he would advise Twitter to do to eventually make money. This is the question of the year, that will most likely still be hanging in 2010.

It was also the question the Anderson was dreading, in addition to how the New York Times could survive. Didn’t mean he didn’t have an answer – it’s the selling of two products, one free and one premium. But it’s not that easy, because you don’t want to burn the loyalty bridge by turning something that’s been free into something requiring payment; enabling a person to use it for free but charging companies like Pepsi a premium.

While this works for services like et tal, but who’s to say how and if this could work for Twitter unless they added a lot more value to a premium user. And the conversation regarding Twitter stopped there.

“Everybody’s goal in the room is to add value to the internet,” Anderson said, but at the same time, we can’t discount what people are used to in terms of format, i.e. the paper that Wired is printed on; the paper that FREE is printed on.

Arrow number two from Kawasaki to Anderson was, if there’s not a free version of “FREE” than the Wired editor could be seen as a hypocrite. While Anderson didn’t want to piss off his publisher, he did acknowledge that an abridged version will be available.

If Kawasaki were to do this with one of his books, it would benefit him helping to secure some speaking gigs. Since the publisher doesn’t get a cut of that money, they lose. Anderson used this as an opportunity to bring in the music business, since the music biz portion of SXSW was soon to follow.

“Everyone says the music industry is in collapse. It’s not. The music industry is fine, except for one single part of it, which is publishing,” said Anderson. Most of you reading this already know what comes next. That while money being made off the sales of CD is on thin ice, bands are making their real money with tours, merch and licensing (for commercials, movies, television).

Labels have gotten wise and created 360 contracts so they no longer just get a piece of the publishing pie, they want to manage and make money off of the whole pie. Problem is, “Labels are bad managers.” It’s a general opinion, but one that can be true or not, depending on the label. But in the end, it’s not always in the best interest, in my humble opinion, for the bands who’ve now given away all opportunities for revenue as opposed to contacts strictly tied to publishing.

This is also something that I’ve discussed personally with musicians and others in relation to “free.” If musicians stay independent, reverse the old business model from using a tour as a marketing tool to sell their CDs or albums, and in turn, use the CD to market and make money off of tours and merchandise, they wouldn’t need to hope for a record label to provide that distribution channel for the sale of their CD. They would control their revenue, using the various internet channels to distribute their music for free, getting the word out and people out to see their shows. The challenge is musicians then need to become knowledgeable and savvy small business managers, and that’s often, and unfortunately, not always the case.

Going back to Anderson’s “Freemium” business model, the 21st century version of free is very different from the “BOGO” version of free in the 20th century. You don’t give away 1% of your product in order to sell 99%. You reduce the cost of goods to a point that you can give away 99% in order to make money off of 1% and still make a profit. Anything over 1% is more money in the bank.

This model may work for books, music, or online games, but many would be hard pressed to have it work across the board, especially with hard goods. And Kawasaki, as a venture capitalist who funds entrepreneurs, also pointed out that businesses don’t realize just how hard it is to get 1% to 5% of people to pay.

There’s also 1 penny difference, having something being priced at $13.99 versus $14.00 and the psychological flag it raises, either consciously or unconsciously.

On the flip side, Kawasaki has James Higa, what he called an “unsung hero” from Apple stand up. Higa was responsible for negotiating with the six major labels to negotiate songs for $0.99 cents. Kawasaki cited the example of Apple’s iTunes as proof that given the opportunity and breadth of choice, consumers ARE willing to pay for music when they could just as easily go to their Lime account and get music for free.

In the midst of the keynote, a cell phone rang. Typically this is just annoying, but Kawasaki’s response was priceless, “That’s definitely not mine. AT&T doesn’t work at SXSW.” Immediately, there was an eruption of laughter, since many of us have wanted to throw our iPhones off the Congress Street Bridge in anger at the inoperable AT&T service.

All the while, as each of them spoke, an artist was in the background creating not only a caricature of each keynote rock star, but the points they were arguing. It was a first for me and definitely added something different to the event.

One of Anderson’s key arguments for free was the difference between the digital and the non-digital world. Everything in the physical world costs something. In the digital world, repetitive use doesn’t cost (typically), using the example of a Google search. What this allows companies to do is to enable their potential customers to take an endless test drive of a product through the “Freemium” version, and if they like it, they can pay for the Premium version.

Kawasaki laughed after looking at his computer screen, “This is why I love Twitter. Somebody @kbc wrote, ‘I hoping this would like the Oprah show and we get a free copy of “Free” under our seats.”

Anderson laughed as well, letting people know that, “The book will be published on July 6th. On July 6th you can all have a free copy of “Free” under mouse button.”

Later I met up with friends to get in the last of Interactive happy hour sessions on the rooftop at Roy’s, near the convention center. Margaritas were in order, and I finally got to eat something besides a hardened fruit bar from the bottom of my bag.

Although I’m not one to venture into what are known as “amateur” celebrations like St. Patrick’s Day, this day is a SXSW tradition as a pre-party to the start of the music program. Like we need a pre-party for an all-day, all-night, 4-day party, but whatever.

We decided to head to the British Music Embassy Bash to check out The Proclaimers, and another act that was already on my hot list, Post War Years, who killed it. The surprise was the beautiful voice of Alice Russell, and the fact that one of my favorite bands, Datarock, were playing for another party in another part of the building. Bonus!

A great way to end one part of the week and begin the other.



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