I’ve been reading Larry Lessig‘s book Remix over the last few days, and one thing which struck me is his comparison of sharing economies against commercial economies. A sharing economy is something such as friendship, love, Wikipedia, or Linux, where no money is exchanged; A commercial economy is where money is exchanged.
Lessig notes, with lots of examples, that even attempting to compare a sharing economy with a commercial economy will end up in trouble. In sharing economies, “price is poisonous”:
You have, or have had, or will have, lovers. That relationship exists within a complex, sharing economy. The statement “Wow, that was great. Have $500” isn’t gratitude in such relationships. It might be perversion, but if not matched by perversion on the other side, it will likely be terminal to the relationship. […] Prostitution is sex within a commercial economy. Both sides seek the simplicity of cash.
At this point, something rang true for me. Way back in 2004, RJ and I were working on Audioscrobbler, while Martin and Felix were working on Last.fm.
Audioscrobbler was naturally a sharing economy: you contributed your listening data, and in return you received recommendations for new music and people who shared your taste. Last.fm’s premise was to make a personalized radio station. This unashamedly exists in a commercial economy, even if the price was free for several years.
In 2005 we merged these two sites – both sites were doing almost the same thing – and last month the shit hit the fan. We had created some kind of hybrid commercial/sharing monster, supported for the time being by investment and ads. Now nobody has any money to throw at anything, so we have to ask for money in an economical way: only asking for money in places where it makes up for our ads shortfall.
Sure enough, when we went from apparently being a sharing economy to charging for the bits which cost us the money, all hell broke loose. Despite this, in the countries we are charging, we’re running the equivalent of the good old Audioscrobbler service, plus a music streaming service with an identical, country-specific, business model to Spotify.
I wonder how many other startups which seem like sharing economies are going to have the same problem as Last.fm: staying true to their users’ impressions of the service and going under, or being forced to charge and potentially losing their users’ trust.
You can’t win, sometimes.