This article originally appeared on GigaOM.
A week ago Netflix released all 13 episodes of House of Cards, allowing subscribers to watch the series in marathon sessions. Variety noted ”the efficiency that makes binge viewing so compelling also accelerates the time a consumer spends with Netflix.” This novel release schedule highlights the question of how consumers value paid content relative to consumption time.
The time spent consuming information and entertainment goods is an important element of the overall satisfaction (or, as economists call it, utility) they provide. So while consumers may not use a calculator each time they go to the movies, buy a book, or subscribe to a magazine, the calculation of utility is implicit in every transaction, despite any obstacles in comparing media across platforms.
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Our analog past is growing smaller in the rearview mirror. Subscribers to newspapers and magazines are losing print favorites with each passing month. After 175 years, the Times Picayune stopped daily print distribution in September, making it the largest U.S. metro area without a daily newspaper. In October, Newsweek announced it will stop publishing in print at year’s end.
And it’s easy to picture our digital future featuring the Four As: any content, any time, on any device, any where. Digital content in the cloud, paid on a subscription basis, and available on demand. Hulu+, Amazon Prime, and Netflix already offer deep video catalogs for $7.99/month and Spotify makes unlimited music available for $9.99/month.
What’s now coming into focus is the bridge between our analog past and digital future. There’s a growing trend among magazine, newspaper and pay tv providers to price analog and digital service bundles more favorably than digital only. read more…
Digital content providers are experiencing increasing success charging consumers. Examples extend from music and news to movies and mobile. Advertising, however, remains the dominant source of online revenue for content providers. In their quest to maximize profits, content providers constantly seek the optimum balance of the two revenue streams.
The symbiotic relationship between charging consumers and advertising revenue was vividly illustrated in late 2007 when Rupert Murdoch acquired The Wall Street Journal. He considered razing the successful wsj.com paywall to take fuller advantage of the strong advertising market.
As the digital advertising market continues to evolve, content providers will need to reconsider periodically if, what, and how to charge consumers to optimize total profit. Three emerging advertising trends – Viewable Impressions, Programmatic Buying, and Native Advertising – should spur content providers to re-evaluate content presentation, packaging, and pricing. read more…
The Pew Research Center’s annual State of the News Media report, issued this week, features survey results showing that only a third of U.S. adult digital news consumers go directly to news Web sites or apps. The rest rely on aggregators and curators: key word search, news organizing sites or apps, or Facebook and Twitter.
What does this mean for news providers who hope to charge for content?
Placing all content under lock and key is a losing strategy. As GigaOM’s Matthew Ingram puts it, news providers must optimize their content for aggregators and curators or risk “missing a larger and larger portion of the audience.”
For news providers who wish to benefit from aggregators and curators, yet still charge for content, here are three factors to consider. read more…
Content is a great gift. It’s especially true at Christmas time, when books, CDs or DVDs for music or movies, and computer and video games are among the most popular choices for gift givers, according to Deloitte’s 2011 Annual Holiday Survey.
The evolution of content distribution from analog to digital will upend the sizable market for content gift giving. The changes will take place over two phases and will extend across books, music, movies and games.
(Newspaper and magazines are largely immune to these changes as their gift subscriptions operate basically the same in analog and digital forms.)
The first shift in content gift giving will result from the move from analog to digital products. Print books, CDs, DVDs, and video games make for ideal presents. They’re portable, priced in the gift sweet spot of $10 to $50, simple to return, and are easily matched to the recipient’s tastes. read more…
A walk through a living room ten years ago displayed signage worthy of Times Square. Content brands blasted messages about the consumer’s politics, preferences, and profession: The Wall Street Journals piled in the corner, the latest issue of GQ on the coffee table, the complete collection of Marx Brothers DVDs, Puccini operas on CD, and Ayn Rand titles on the bookshelf.
Those content brands are disappearing from the living room. The content is now housed on iPads, streamed through PlayStations, and stored on Dell PCs.
Content badges are vanishing from public spaces, too. At Starbucks and subway stations smart phones and tablets, like the Kindle Fire Amazon released last week, are replacing newspapers, magazines and books. read more…
A recent installment in The New York Times’ “Room for Debate” series asks “Have We Become More Willing to Pay for Content?” Debaters cited the drivers commonly believed to influence content purchases: preference by demographics, quality of content, and ease of access.
This is how the discussion about charging consumers for professionally produced content is typically framed. Consumers, however, also pay for content indirectly. These indirect forms of payment greatly influence consumer perceptions about content value.
Access Subsidy. MVPDs pay $32 billion a year in affiliate fees for programming. This is the portion of your monthly television bill that help funds shows, news, and sports on cable. The affiliate subsidy amounts to around 40% of subscriber fees generated for video services by cable, satellite, and phone companies. Because the content is bundled into a package that includes access, subscribers don’t know what they pay for each channel. It’s probably better this way, given how much money some channels receive in affiliate fees. According to SNL Kagan, each year, the NFL Network receives $6,642 and ESPN Classic receives $3,781 per household viewer. read more…
Two weeks ago Apple released Lion OS X and Ars Technica ran a 27,000-word review. Site visitors can read the story for free, as is common for news and information sites. Or they can purchase a Kindle edition of the same story for $4.99. It’s one of the various experiments publishers are conducting in their ongoing efforts to monetize noteworthy articles.
When newspapers and magazines solely distributed content in print, a blockbuster article was a sure-fire way to increase newsstand sales. Other media outlets picked up the story, lending PR support to the sales effort.
Today most newspapers and magazines place their content online for free. And media outlets that pick up the story include those, like The Huffington Post, that abstract portions sufficient to satisfy at least some readers’ interest.
Rolling Stone offers a textbook example of why not to apply print-promotion strategies to a blockbuster article in a digital world. In June 2010, Rolling Stone published a profile on General Stanley McChrystal that was so significant that it led to his resignation as commander of U.S. and NATO forces in Afghanistan. Rolling Stone distributed copies to news outlets for the purpose of drumming up support of the print publication. Only after Politico posted the entire article, and other sites covered the news, did Rolling Stone publish the article to its Web site. By then it was too late, as Rolling Stone was just one of several sources and lost the viral benefits of being first. read more…
Critics responded to Pandora’s IPO earlier this month with questions about the company’s business model. For free, listeners can use the service for 40 hours per month. They hear and see ads that account for 90% of Pandora sales. Subscribers pay $36 per year for unlimited listening, no advertising, no daily skip limit, and higher audio quality.
Pandora and other sites that charge for advanced functionality or access for otherwise free products have been given the freemium label.
The freemium approach appears to be working for SaaS providers, like Evernote, Dropbox, and Remember the Milk. But the formula of mixing free and paid tiers is unproven for content sites ranging from Pandora to Hulu and The New York Times.
Given that content providers generate advertising revenue from free users, who are just an expense to SaaS providers, freemium would appear to be well suited to content sites. read more…
Consumers who once purchased highly-branded products with great loyalty are changing habits. In increasing numbers they’re selecting competing products that offer the same general benefits, but without the same brand recognition or premium price. The incumbents are searching for strategies to maintain their market share and pricing power.
These trends are playing out for canned corn, toothpaste, and paper towels, as well as digital news, information, and entertainment. The issue, for digital content, is perhaps best illustrated by the public feud between the editors of The New York Times and The Huffington Post. The Times’ Bill Keller compared aggregators, like the Huffington Post, to pirates. In the latest volley, last week Arianna Huffington poked holes in the Times’ new paywall.
There are key differences between consumer packaged goods and digital content market structures. Stores offer limited shelf space but the number of digital properties is limitless. Retailers offer private label goods but digital competition comes from all directions. Nonetheless, CPG makers offer valuable lessons to The New York Times and all mainstream media companies in search of proven strategies. read more…