How unlikely is this? I was in the midst of brainstorming this article, looking for examples that demonstrated the business sense of opening up new markets — inspired by the Bottom of the Pyramid, but not necessarily the poorest of the poor. Completely by accident, I stumbled across a presentation by Amazon.com on self-publishing. Specifically, an explanation of ACX, their entity that facilitates turning books – mostly from independent/self published authors – into audiobooks.
In essence, ACX is a matchmaking service between writers and actors. Writers choose actors through online auditions and, within weeks, the books are made available in this additional format. And the design is a clever adaptation of frugal innovation.
Platforms – This process takes advantage of existing infrastructure. Obviously, the Web and digitized content (text and audio) are essential elements. Writers have word processing software and actors have recording/editing equipment and software. Simple forms and a search engine match writers and actors.
And, of course, once the audiobooks are produced, they become available on the full Amazon.com site, with its known, tested and familiar mechanisms for sales and promotion. On the other side of the transactions, writers and actors get payments and market data.
Clients – Here’s what most excited me: Amazon.com has identified a “poor” group and developed a business model that brings them into the marketplace. Most audiobooks have been produced by traditional publishers, and it’s a good market. People like to listen to mp3s on smartphones and in their cars, and sales are exploding.
Unfortunately for those who want to take advantage of this market, most books are not available in audio. Worse, for those who are independent/self publishers, the usual cost for creating an audiobook – which include hiring an actor and renting a studio for many hours – makes independent production too expensive.
The genius of ACX is providing the choice a straight payment scheme (actors get paid on delivery) and the opportunity for shared risk and equity (actors get royalties). All of this occurs within the comfort of a known entity (Amazon.com), with the assurance and dispute resolution built in.
So, whether writers and actors/producers choose a simple one-time payoff or choose to split profits from audiobook sales 50/50, standard contracts are available and everyone gets paid. For actors who have production studios, the investment is in time – reading and editing. For the writer, future revenue for many more hours of work is put at risk. If the book is a big success as an audiobook, the actor can win big relative to investment while the writer will not see much of the income that would come from those sales.
On the other hand, 50% of something is better than 100% of nothing. The choice between having no audiobook (the usual circumstance) and having one produced and made available with very little effort is obvious.
Benefits – Amazon.com gets new content, enhances the value proposition for a sale, draws more buyers to their site (with collateral and ancillary sales), gets a piece of everything. And most of their work is already done. Incremental costs are minimal. Writers get a second revenue stream and an inducement for more people to buy their books. Actors get paying gigs, and maybe a steady income if they choose the right books.
Business model creativity – The genius here was identifying new clients (writers and actors) who, while they do not have cash, do have “sweat equity.” They just need help bringing their talents together and making the business piece work. Amazon.com knows business, has the tools, and has the marketplace.
Some might argue that the ACX model drifts away from the original concept of frugal innovation. The clients in this case are not being provided with services that feed, clothe, or heal them. In most cases, they are not providing the only option available to their clients to rise up from poverty. Most writers and actors are not in desperate circumstances (although I could name more than a few who are working two jobs or living in their parents’ basements).
I agree that ACX, as opposed to Husk Power Systems, is not satisfying the need at the bottom of Maslow’s hierarchy. But fulfilling needs above survival is still worth celebrating. Writers and actors with limited resources (and their equivalent) achieve their dreams more easily. Society gets their stories, their know-how, and their perspectives.
Frugal innovation from a US$60 billion (revenue) company — I like it.