update 4 03 10 : This post is turning into a thread of links on the issue of fractionalization of demand and the market's current refusal to accommodate it. Links added at end. Dave
Paying media companies to produce high quality content is an idea that feels reasonable to everyone. As we collectively move through this period of changing technology and shared values toward them we will also have to decide the many nuances surrounding this issue. It is not all so straight forward. On the surface, however, a larger issue is being tested right now. Kind of.
Just about anyone weighing in on the issue of effectively monetizing content knows that the market for content has changed and that is why we find ourselves and our media companies where we are today. The psychology has changed along with the structure of the market,altering the fundamentals and the larger business trends. Yet even though dramatic change in the market for content is acknowledged, it is not being acted upon in a manner that seems to really address the changes. Like an endless one-sided conversation in the headlines where management and unions negotiate during a strike, fairness and balanced perspectives are skipped in favor of grabbing an opportunity to make a soundbite that will be repeated endlessly.
Let's try for some balanced market perspective here:
In his own "Network"-like moment Rupert Murdoch opened up the window and yelled I'm mad as hell and I'm not going to take it anymore!' (Did he really do that? No.) But by adopting a total pay wall strategy that is targeted toward an audience that largely writes off the subscription expense of the WSJ, he is trying to justify paying so much for it two years ago. Because of the WSJ's unique audience, he may succeed in saving that over-leveraged investment, for now. That option will fail with most other newspapers, and has already, spectacularly in some cases (like Cablevision's Long Island Newsday).
It was newspaper companies that first adopted the internet strategies that led us to this moment. So it might also seem reasonable that the newspaper companies now are erecting barriers that ask to be paid for the same content provided seemingly free for years. Of course, you and I still see ads when we read content on the web but because they do not get paid as much for those ads and we are led to believe that our end (as consumers) is somehow not being held up. Make no mistake; the story is being skewed in favor of why consumers should replace lost revenues of the traditional media companies as they struggle to adapt to our changing habits using technology. The companies that exist today want you to believe that we must all pay to make them profitable or we won't get high quality content. We will. Just not from them, unless they can adapt.
This is the key point in the discussion. Who must adapt and how? The media companies serving us our content needs must adapt. It is common for dying companies (that were previously successful) lash out as if their plight was the product of some nefarious forces in the market that must be defeated. (see this post on business models from The Root Trend)
Newspapers are not the only place we are seeing this battle right now. If you live in the US you are probably aware of how cable TV bills have been going up and how TV production companies are asking for more money from cable companies and still running as many commercials. Cable companies are distributors that have little competition so prices are not yet checked like the are in almost all other realms of monetizing content. The consumer has no appreciation for why this is happening unless they really dig to understand the deflationary forces at work. I am guessing most of the execs in charge of pricing do not fully understand the deflationary forces either. Cable just happens to be the one market unchecked by competition as yet.(see link at end of post) The record label business was the first to see deflation happen. Radio and magazines too, have been hit hard by deflationary forces. Deflation in any industry that is leveraged is a nasty combination. We just saw this in the banking industry and we all paid to bail them out. I really doubt the US electorate will tolerate a bailout of the media companies that have leverage hangovers from the 1996 Telecommunications Act (consolidation era). This time, those that survive the revolution will be smarter about how to make and sell content (or which to do).
With the launch of the iPad days away, we see a new channel for content about to come on-line and more than ever it seems like an easy answer to old profitability problems may be in sight. No matter how successful (or not) this launch is during the first few months, no one will deny how technology has changed how everyone gets content, uses content, and what kinds of content we increasingly spend our time with every week. In just the past few years, Americans now dedicate substantial time to user generated content that does not cost anything. You cannot dismiss this important dynamic as part of the overall answer.
I suspect the iPad will be an important disruptor even if it is destined to be a narrow market that is defined by Apple's proprietary software that deceptively limits Choices.
The most common discussion I have with non-media people (over the years) is the perception how the industry is like a monolithic entity that hides in the dark shadows of government protection. Nothing could be further from the truth. Sure, lots of media companies try to use Congress to do their bidding but the only reason that exists is because substantial barriers to entry in the business existed for many decades and that concentrated the power of select companies. That advantage is rapidly disappearing as content producers are no longer protected from competition and competitive advantage is based on product quality (and not infrastructure or licenses) these days. For instance, the cool market dashboards that the WSJ web site offers can be replaced, if you go looking, on other free sites (and those sites are glad to have the targeted traffic).
I call this the era of Choice because with the advent of search and ubiquitous internet connections we consumers of content are now in control of our own destiny. Tune in Sunday at 9pm is no longer relevant if we choose not to set our schedule by a company's. This may seem simplistic but the change it represents to a large and complex industry is very dramatic and brought us to this moment. Newspapers feel as if offering a web based option is allowing Choice but here's the thing: Until a new kind of content company is built and accepted, Price will be the issue that seems most important. Remember the 4 P's of marketing? Product, Price, Place (channels), and Promotion. The way to a more profitable media industry is to specialize in specific functions, just like factories did with labor to become more efficient. Each of these specialties will have a very different mix of the 4P's. And since the world is consuming more content and not less, this idea is for a growth business born from a mature industry. Only right now, many highly leveraged companies cannot see past next quarter and even though the digital world is moving at warp speed. These older, leveraged, media companies are struggling for every breath. These are the symptoms of deflation, and correction in a market, and not an industry that is about to die off and send us into information blackness. Why? Again, we are consuming more and more content, not less.
I am skeptical of the iPad's potential because of how I expect media companies to limit Choice through the device. For instance:
50 cents a day for the WSJ on the iPad would be a step in the right direction though I am sure that idea will be resisted, until someone else does it, of course.That is not likely to happen if Apple is allowed to build a monopoly in the distribution market similar to cable companies with no competition. Why? Because the market is all of us and represents our collective shared values for things and ideas.This includes content, how we get it, how much we pay, and how it is packaged.
If the iPad is really to serve Choice, it will sell content more like a news stand and not like a Publisher's Clearinghouse subscription center. By only providing those Choices of long term sign up's, broad consumer appeal will be diverted elsewhere or they may even stop using it. So the news stand $1.25 daily copy of the WSJ should be .40, .50 or .75 cents on the iPad, right? How much is an article in Time worth; one you could scan while standing in line at the checkout? Choice requires that companies selling content make these decisions. Fractionalization of demand is an important part of packaging Choice, like it or not.
Once you dive into this mindset of change you can begin to appreciate the discussions I began previously about much needed better quality metrics for media companies. For now, serving Choice means accepting fractionalization of demand and lowering operating costs by reducing leverage. That's a tough recipe to achieve but we are going there one way or another.
also worth reading:
iPad makes cover of Time and Newsweek WP 4 03 10 (article includes iPad cost for various pubs)
NYT's Jacks Kindle E-edition to $19.99/mo (wishful thinking) 4 02 10
Getting Media Companies to adopt Better Metrics requires honest discussion (part 3)
Google suggest micropayments for online media consumption (previois iroM post with link)
Will the iPad unintentionally pierce the Cable TV Bubble? iroM post
added 3 30 10:
Why the future of Good news is not Free London Times (another Murdoch asset) (blurb below)..."Ultimately we think that other newspapers will follow, and that the only free content online will be of inferior quality or supplied by the BBC. Even that organisation is finally beginning to realise it should stop trying to become a publisher online, and is cutting back on its massive internet spending.We are in the midst of a publishing revolution, and if we get our finances right, you, our valued readers, will benefit from a new golden age in which we can devote more time and money to bringing you the very best journalism in the finest traditions of The Sunday Times."
What is rarely admitted by leveraged companies is how "getting our finances right" is being made the consumer's problem and used as an excuse to limit Choice. There are thousands of blogs and companies with web sites providing high quality, current, content for free now that somehow enhances the business' mission. Sure you have to go find it but that is exactly why Google, Yahoo, Bing and others are successful enterprises. Failure to admit this fact and attributing it to some form of malfeasance on the part of their customers is blatant, even if remaining unspoken...and terribly obvious.
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