I've heard this many times before, but it is largely irrelevant. Consumers believe they are paying for the content. They pay $30 a year and get 12 issues. It's like saying the shopper doesn't pay for the lettuce, she's paying for the transportation of the lettuce. All the costs and all the revenue ultimately go on the same side of the line -- either you are profitable or you aren't.
Which makes me wonder if the HuffPost is profitable. I think they aren't:
"While traffic is surging at the HuffPo," Hippeau told
an audience at the OMMA conference earlier this week that
rates for CPM-based advertising are nearing "zero."
I wonder how all of a sudden, the HuffPost, which is living on a $25 Million investment is the expert on how to be a profitable online distributor and creator of content. They are struggling too and thumbing their nose at the traditional establishments. Before I take their side, I'd like to see some evidence that they know what they are talking about. I'm not sure they do and I'm not sure they will outlive the nytimes who trounces them in the online content space.
The NYTimes gets online more than any other publication I have seen and they seem to understand the web as a delivery mechanism way more than the huffpost.
You haven't taken the analogy far enough. The shopper isn't paying for lettuce because it's lettuce, they're paying for it because of the nutrients it provides. Just as I don't pay $30 a year for the shipping costs of the subscription, I (at least I believe) pay for the information it contains.
The disconnect here is the use of a traditionally free (as in beer) medium as a replacement for the use of a real, valuable commodity.
Others here might have heard this many times before, but this is first time I've heard of it. It clears up a lot of confusion I'd have in thinking about this. I think one of the commenters is right in that people believe they are paying for a content. I think what's going on is a sort of a leaky abstraction -- what consumers believe they are paying for (content) is different from what how they actually act. Or put in another way, the features (the content) differs from the benefits (the distribution).
I don't think the follow-up conclusion -- that this represents an opportunity to get consumers to pay for content -- is the way to go forward. It sounds almost apologetic. Sunk cost fallacy.
I'm mulling over extrapolations of this, applied to SAAS, cloud computing, and fremium web apps. I'm thinking of the telco's resistance to being relegated to what they actually are -- a dumb pipe -- and using lobbying pressure. I'm thinking of how much I'm sold on Steam (mainly because, I don't have to keep track of all those CDs/DVDs anymore). I'm thinking of Kevin Kelly's idea on the "Technium". Like many models, there are limits to this one, but right now, it seems the possibilities are wide open.
Well, it's free to read the website and they haven't quite figured out how to make much on the ads. It's extremely difficult to make enough money off ads to support a world-class team of reporters (or even just a world-class web team!)
People have written many books on this stuff, but I personally don't think it's even possible to make as much off ads online as they used to make off print a few decades. On top of that, the NYTimes biggest advertisers used to be national retailers, auto retailers, real estate, and finance companies. Those also happen to be the sectors hardest hit by the current recession.
Great insights except for: "...digital technologies may actually be the opportunity to get the consumer to pay for content when they were never willing to do so before". Or as Homer Simpson put it, "After years of failed get-rich-quick schemes, here's a scheme that'll really get me rich. And quick!"
What people actually pay for (content or distribution) is largely irrelevant (IMO). The news business was only about connecting advertisers with an audience. As soon as advertisers found a better (and more measurable) way to connect with their target audience, they simply moved on.
Absolutely correct. Drilling it down to the logical nth degree you are effectively paying to be part of a defined marketing demographic that can then be sold to advertisers. The reality of course is there is a more symbiotic relationship going on as if people did not percieve value then the circulation would drop off.
Glossy magazines like Wallpaper are the most stark example of this where it's often a case of flicking through 4 pages of watches before getting to the next article about italian leather day bags, but news media run on the same model.
Isn't it interesting that while we're always debating "ad-supported" vs "paid content", magazine publishers were getting away with murder by getting both for decades???
Advertisers are paying us loads of cash! And guess what? People are paying us to see them too!
What people paid for was for the businesses to pay for their own costs and make enough of a profit to keep going. What people got in return was content.
However, why they paid was because their was no good, free alternative. When people are offered a product that very closely replicates their current experience, but at a largely reduced price point, they switch.
Case in point 1 - the good replacement: digital downloading of music. People are willing to download from iTunes because the cost is less than that of a CD, and they don't listen to music on CD players anymore. As such, it reduces cost to them, both in terms of financial cost and in terms of time expenditure (don't have to go to the store, and don't have to rip it to their computer).
The problem here is that you need something that people are still willing to pay for. Which means something they think they'll use more than once. That's why people still buy books and periodicals. Because they're building librarys, not reading something for one-time consumption.
Case in point 2: Linux. Linux does not yet closely enough replicate the experience of Windows for people to be able to switch. "Where's the exe file for me to click to install something?" "Why isn't their a download button on Apple for iTunes on Linux?" "What does compile from source mean?" "Why can't it install the driver automatically?"
The problem here is that it's very hard to make Windows again without getting your ass sued off, and it's even harder to do it for free. Also the myth that anyone anywhere can fix a problem found in the codebase is a myth. Most people can't (lack of knowhow), and there's no guarentee that their fix wouldn't break something for other users, or that it'd be safe and not introduce security issues.
Case in point 3: real estate. The housing market collapsed because people were given access to morgages they couldn't repay, by people who couldn't afford to take the hit if they didn't. Of course if you offer people more money, for the same or lower levels of repayment they're going to take it. In this case, it was perceived immediate value, against long term reward that brought the problem, but the underlying mental process is much the same.
The problem is, how do you differentiate yourself in a market, where you can only offer a sensible product that matches the needs of your consumer, when every competitor can match you exactly? That's where market research and common sense need to come in, to find better ways of meeting your consumers needs, and balancing what the consumer desires against what you can offer as a responsible business.
Takeaways:
* Consumers pay for the value they perceive their getting
* Businesses set the prices based on the maximum ROI they can get based on their marketing efficacy
* Everyone trys to find ways to cut costs whilst maintaining the ROI, to attract more customers or increase ROI whilst maintaining price points
> What people paid for was for the businesses to pay for their own costs and make enough of a profit to keep going
Huh? What are you talking about?
People don't pay for online publishing because it mostly sucks, and you can get the same quality from shitty blogs. If anything, people stopped paying only because they now feel they've got screwed multiple times over.
For instance ... I'm paying for my cable TV and for my newspaper, not to mention a national tax for public radio ... and yet commercials are being shoved down my throat constantly, not to mention the mediocre content being offered.
True journalism is dead ... mass-media intentionally focused on quick-sells like scandals, shock and awe campaigns or celebs news (like Paris Hilton's latest fart).
They've also trained their customers to look for such subjects ... because frivolous subjects are cheaper to write and easier to find.
Now who's to blame that they've got themselves into a corner because a wet-behind-the-ears teenager with a shitty blog can deliver the same poor quality?
It's also too late to change course because the average attention span of a reader has only gotten worse and now people can't stand reading thoughtful articles.
Regarding the quote you referenced, that's just a fact of business. What consumers pay for is the cost and profit margins of the company in question. What they receive in exchange is content.
So you're saying that you honestly, in your heart of hearts believe that the BBC, Times Online, Telegraph, and Guardian have the same quality of journalism as a bad blog?
I find that hard to believe. I think if that's really your stance, you're more likely reciting the platitudes of the day.
Now there are publications that focus on things like that, and that should die. For instance, the Sun, Daily Mail and so on. The sooner they die off the better. But that doesn't mean that there's not still good journalism out there. It's just a smaller ratio of the total content in the public domain, as the amount of really bad stuff has swelled.
Think of the beer market if you'd like another example. There's a shitload of really crap "beer" out there. On the other hand, there's a smaller number of really good beers. However, you have to ignore the stuff that's appealing to the lowest common denominator (the Sun and Daily Mail and crappy blogs) to be able to find the real gems (the BBC etc...)
Which makes me wonder if the HuffPost is profitable. I think they aren't:
http://www.beet.tv/2009/09/huffington-post-ceo-revenue-must-... The HuffPo is not immune to the problems facing the industry and they don't also distribute via print. How are they going to survive.I wonder how all of a sudden, the HuffPost, which is living on a $25 Million investment is the expert on how to be a profitable online distributor and creator of content. They are struggling too and thumbing their nose at the traditional establishments. Before I take their side, I'd like to see some evidence that they know what they are talking about. I'm not sure they do and I'm not sure they will outlive the nytimes who trounces them in the online content space.
The NYTimes gets online more than any other publication I have seen and they seem to understand the web as a delivery mechanism way more than the huffpost.