TechCrunch summarizes Wired Editor-in-Chief Chris Anderson’s rules for pricing on online media by calling them “counterintuitive.” Author Erick Schoenfeld, writes that Mr. Anderson “articulated something that is now increasingly becoming obvious: As products go digital, their marginal cost goes to zero.”
“This is the law of gravity online,” says Anderson. “Everything that becomes digital will become free. There will be a free version, either you will be competing with free or giving it away for free and selling something else. If it is not zero today, it will be zero tomorrow.”
He then goes on to summarize Anderson’s new “rules”, which appear to be:
- The best model is a mix of free and paid
- You can’t charge for an exclusive that will be repeated elsewhere,
- Don’t charge for the most popular content on your site,
- Content behind a pay wall should appeal to niches, the narrower the niche the better
I’m scratching my head a bit here, and I’d love to have read more evidence of this actually working at mass scale. There are a bunch of counter-examples that a hard-headed business guy like me might push back on here with a hearty WTF. First off, some counterexamples.
The best model is a mix of 100% pay / 0% free, like World of Warcraft. It’s media IMHO, you want onto their servers, you pay to be there.
Any packaged software (or pharmaceutical for that matter) has a marginal cost of zero, it is still for pay. I reject the idea that media–becuase its marginal cost is zero–cannot be for pay. Plenty of other high-value products have zero marginal costs and extract high prices. Linux and Windows have been two versions of digital OSs for more than 10 years. Windows still has the vast, vast majority of revenue and unit share.
Plenty of authors are finding opportunities to charge for their content–especially in the financial sector. Jeremy Siegel for example.
Finally, nowhere do I hear that the core model of big media brand (e.g., WSJ) and all its writers are needed to do what they do. I love the WSJ, and this stinks to write. But the net net is that most news will be covered by more citizen-oriented news outlets by citizen journalists and niches that are running around snapping Twitpics and posting to blogs. This will mean that vastly smaller newsrooms are going to be needed to do what they do today. Some will be needed and some are crucial. But many will be continuing to compete with free. Very hard to deal with. This needs to get teed up and discussed. Openly.
With that out of the way, now I want to explain why I think this talk is off base with respect to big media. Brands such as the WSJ, Wired, Time, Newsweek do have a well-known problem–they’ve got a bunch of folks in a priesthood of journalism competing with their congregation of citizen bloggers, twitterers and so forth who are happily, ignobly disrupting the stuffing out of them.
Anderson’s prescription may work for them, but I’m extremely dubious. I think that the congregation of citizens is going to disrupt all the slices of profit from the priesthood of jounralists. While I might pay a few bucks for virtual currency on Zynga or a special hat on WeeWorld, I’m not going to pay $0.99 for an article that I can just read somewhere else.
I really think that we’re watching in journalism what we saw in the auto makers a few years ago. We are looking at an industry that doesn’t realize its dead yet. The business model needs far more dramatic reinvention in terms of what we’ll consume. That debate ain’t happening though. Instead, what we’re hearing is that the pricing model needs to go this long tail route, which is a baby step. They’re using a pea shooter against an elephant on this.
As an example of how radical things need to get, here’s Jon Stewart talking to Katie Couric about what the TV news should do. His ideas are closer to what I think needs to happen than working on a long-tail price model.
Here Stewart gives Couric all kinds of crazy suggestions–“free colonoscopy for viewers,” etc. These get laughs, but he’s basically right. Old media is going to need things like cage-matched talking heads debating health care pay-per-view, manage Wolf Blitzer’s as a multi-medai franchise similar to Tom Petty, and a bunch of other completely crazy ideas.
The idea that a pricing model as suggested is going to do the trick is in my mind, extremely short-sighted and likely to fail. Media franchises will need to think radically about trying vastly new and different things, else they’ll be in the same spot GM / Chrysler are in now.
Jon Stewart’s become one of the most trusted ‘newsmen’ in the US, crazily. His ideas on how to fix big media may make him the smartest business person too!