Intellectual capital -- trusting our customers

Katie Possum asks a question in her post, 'How to Approach e-Commerce', about how to protect downloads from being copied once someone has bought them.

This is my reply to her:

Hiya Katie...

I strongly recommend you look at http://magnatune.com.

Their model works in tandem with Creative Commons, and is very powerfully based on trust.

Here's the deal in a nutshell...

1. Listen to ANY of the albums on their site for free, via streaming.
2. If you wanna buy one, you choose the price -- from US$4 to US$18. And you get the album in any quality format you like.
3. Whatever album you've bought, you have the right (and almost obligation) to make three free copies to hand on to your buddies.

Their approach is basically this...

• Our customers are NOT criminals.
• They are NOT thieves or pirates or outlaws.
• If they copy a cd for their friends, it's because they're acolytes, advocates, lovers of the particular band.
• We trust our customers to do the right thing. And the right thing INCLUDES paying for the music where appropriate, telling their friends about Magnatune.com, evangelising a new way of doing business.

As a result of this philosophy (and their approach to sales-split -- 50% to themselves, and 50% to the artist, non-exclusive distribution contract), their content is viral.

Add to this the fact that they allow podcasts to use their music for free, with attribution, and you've got one seriously potent business model.

I've bought several albums from them. And I love them all.

The key is that while SOME people might be idiots, and abuse your trust, they're a miniscule minority. And you should NOT punish your honest 95% to 98% of customers just cos these dudes exist.