Content’s Value is Over-Estimated by Producers
There is no secret in the publishing industry that newspapers are against the wall. Several large US city based papers went to the wall last year with multi-billion dollar debts. The problem is fundamentally that the web makes information freely available… so why aren’t we willing to pay for it?
Rupert Murdoch has decided that from June 2010 the Times and Sunday Times websites will cost the consumer one pound per day or two pounds per week to access. He optimistically predicts a 5% conversion rate into that business model.
Jeffrey Zeldman supports a rational argument in Content Wants to be Paid for stating that content costs money to produce and that content should exist either as a money generating feature, or at the least as a secondary feature that generates money. On the surface it sounds like a plausible argument… but like all states of an answer I would say ‘it depends’.
First, apples and oranges are not easy to compare so content on my website, content on Zeldman’s website and content on the Sunday Times website in the UK are three entirely different things. Which, of those three, is the content that wants to be paid for? Because content is either produced for money or its not produced for money… and it is not the producer who ultimately determines the value of the content.
The value of content is determined by the market forces… the price consumers of the content are willing to pay for it.
As I wrote in Zeldman’s comments:
In short… something is only worth what the other party is willing to pay for it. Not what we value it at ourselves. I can go dig a hole, for example, and send a bill for 2 hours labour but if nobody is willing to pay for that hole then the value of the hole is zero dollars, not $80… Realistically you have to assess your individual information’s value to a specific market segment willing to pay for it. Somebody has to value your $1 of information at greater than $1 or equal to $1. That’s basic business…. No producer of any product in the world is entitled to be paid for any effort. Its the market that decides your value to them – they have the cash and they must be willing to make a transaction.Steven Clark
The basic problem for content is that even quality content nearly always fails the test of being rare. We have an abundance of quality content on the web and an abundance of crap content. Very rarely would it be rare content. It is also not difficult to replicate online because its cheap to produce. It therefore fails the valuable-to-customers test… and is easily substitutable. What that means is that content, even high quality expensive to produce content, is nearly always going to provide you below average returns.
This is because the World Wide Web changed our ability to share content and to publish content and rather than being a mere technology change it was a fundamental shift in the way we function as a society – a sentence roughly taken from Clay Shirky. We have to change our idea of content away from the newspaper paradigm of multi-million dollar presses… to the new publishing paradigm of cheaply produced and freely available content.
Will 5% of readers of the Times pay up to 104 to 365 pound for access to their website? No. Again we pull out another business theory – price elasticity of demand tells us that if you pump that price up from FREE to those figures then very few will make the jump. Add to that the need for registration and credit card negotiation… tell me where you think that is going to turn out to make abundant streams of money in the order required to save the publishing business model?
The Times paywall is trying to implement the Micro-Payment business model for web content but even 104 pounds for a yearly fee by the week is far from realistic for the average Joe coming through the back-end of a world recession.
What we have to do is to rethink our perspective of content as being valuable, unique, non-substitutable and costly to imitate – because it definitely is not in almost every single case.
I do not claim to have the answer either, its going to take experimentation and time. Its going to take us to accept that the consumer drives the value of our product… not the producer. And that content, on its own, will no longer provide a sustainable competitive advantage in the age of the World Wide Web.
March 29th, 2010 at 3:13 pm
In contrast, historically content has been rare, valuable, non-substitutable and costly to imitate – it required large printing presses worth millions of dollars, established distribution channels and market share.
That is where the feeling of entitlement is coming from in producers of content. The feeling that content must be valuable because it always has been valuable.
Clay Shirky is exactly right, the World Wide Web changed everything. Content has a new value, we just need to experiment and discover what that value actually is – and therefore what we need to be selling instead.
It may be that the new paradigm of publishing does not provide multi-billion dollar revenues to Murdoch. Such is life. Find another business model, make money some other way. Let go of false attachment to what “used to” make money.
These four attributes provide businesses with sustainable competitive advantage. Content now has zero of those four attributes.
March 31st, 2010 at 7:40 am
Murdoch also has to ask himself the question whether 10 cents per day would get more eyeballs and greater profits than his greedy 1 pound a day access to the Times website.
1 pound a day is a number that someone without any logical connection to real life money issues would find a pittance… 1 pound a day to the average poverty liner is huge.
Price elasticity of demand… interesting to play with. If you’re going to impose micro-payments them make the friggen’ things MICRO…