WILL PEOPLE PAY FOR DIGITAL CONTENT?
Last month Clay Shirky (NYU) and Stephen Brill (Journalism Online) participated in a McKinsey Online debate about whether or not people will pay for digital content.
Whilst I generally agree with most of Clay Shirky’s writing I couldn’t agree with him on his argument that absolutely no people will pay. In my opinion Brill’s argument that a mix of paid and free systems, even on single websites, is more likely to be sustainable. I think some people will pay for content, and some wont. Like with all media, there is equilibrium between the two (i.e. 1/3rd of Australian households have Pay TV and 2/3rds have only free to air TV).
Shirky argues that sites already successfully charging access in the finance industry (FT.com, Economist.com and WSJ.com) are not sustainable. This is because pay-walls stop syndication of content and there are less opportunites to create ‘media cartels’ he argues. This is a very short term view, and one that mirrors the old attitude of major recording companies now ruing Apple’s iTunes innovative music store which has put them in an enviable bargaining position as the one dominant music purchase point in the world (and sharing only 30% of revenue with record companies). Record companies didn’t see it coming because they couldn’t conceive a digital experience that users would be willing to pay for.
If you’re first to market with an innovative digital experience, you can quickly monopolise it and charge for it. Just ask Apple (iTunes), Activision (Guitar Hero) or Amazon (Kindle) who all dominate their respective medium.
Which leads me to my main point: the bigger picture is the evolution already in place where clever publishers change their models to be more profitable.
Here are some broad areas this is already happening:
* experiences (i.e. a free blog about the travel industry could derive its income from organising events its loyal readers pay to attend – this is similar to how the music industry has evolved)
* education (i.e. free digital publication selling long form content in form of education or reference material)
* hardware (i.e. free blogs and PDFs read on a paid-for Kindle from Amazon, or discounted through an Amazon affiliate program)
* platforms (i.e. free to consume directly, but micro-charges others who remix or redistribute parts of it – like software API charges)
* gaming – which actually charges for all aspects at present: multi-player subscriptions, hardware and the games themselves.
People might be less willing to pay for content, but I believe they are more willing than ever to pay for experiences instead. The challenge for large incumbent media companies is to evolve their businesses to derive more income from experiences, and learn to leverage the audiences they attract with free content more effectively.
