Reversal Points

One of the things I’ve learned to appreciate in business are the reversal points that come along as things evolve.

A good example of what I mean by that is what Bob Pittman did to AOL.

For many years, AOL (and CompuServe) paid content providers to provide useful content to their online services. AOL and CompuServe sold memberships that generated revenues primarily based upon connect time. The more you were online, the larger your bill.

When Pittman arrived at AOL, a couple of things happened. First, AOL went to an “all you can drink” membership fee model. Remember the busy signals that resulted? But, more importantly, remember the huge uptick in membership numbers that resulted? Indeed.

Of course the old business model of sharing connect time revenues with content providers just didn’t work in this new world of flat fee memberships. Something had to change.

What Pittman did was brilliant — he decided he could actually charge content providers to put their content on AOL — rather than paying them a revenue share! With that stroke, a host of smaller content providers fell by the wayside and the big media companies became the major players on AOL — writing AOL big checks in the process.

Now we see that CNET is going to begin charging software companies fees at the end of the month for uploading their software to downloads.com. 15 years ago, CompuServe actually eliminated connect time charges for file uploads — knowing that the gold was in all the connect time associated with file downloads!

So, we’re at one of those reversal points. Downloads.com has developed to the point where it thinks it has become such an important hub for downloadable software that it can charge the providers of that software a fee just for making it available.

Isn’t it fascinating how the world works?