Charging Backward by Charging for Content
October 25, 2009
In my years in the commercial online business, I learned a few things the hard way. When I got rolling in the commercial database business, there were few examples of proven money making methods from digital content. As a result, one had to do some thinking, devise tests, and then go forward. Today there are some models to examine. For example, the idea of the third party payer is a useful one. Originated by GoTo.com (I think), Google looked at the model and used it as the lifeblood of its revenue approach. Another model is what’s called “must have” information. A lawyer engaged in patent litigation knows the USPTO system is less than perfect. Commercial services such as those available from Derwent and Questel provide an alternative but an expensive one. In fact, these services are sufficiently costly to keep most online users in the dark about what the services contain and how they work.
This is an image of Stephen E Arnold when he worked at a traditional publishing company. The environment and the business processes created a case study in the nature vs nurture debate.
One lesson I learned was that an online company has to find a mix of business methods that produce revenue. There is no one size that fits all. Even the Google is pursuing subscriptions, license fees, and partner upfront payments as ways to keep the money pumping.
This is a picture of Stephen E. Arnold when he focused exclusively on electronic publishing. His Neanderthal characteristics have become less evident.
It is, therefore, not surprising that publishing companies want to charge for content. What I find interesting is that some of the publishers are taking a somewhat war like stance to what is little more than a business problem. For example, read “WSJ Editor: Those Who Believe Content Should Be Free Are Neanderthals”. The idea that I took away from this article is that ad hominen arguments are in vogue. I am not sure that I am upset with the possibility that I am prehistoric.
The question I had when reading the article was, “Why are publishers so late to the pay for content party?”
I know that publishers have been trying to crack the online revenue code for a long time. I was a beta tester of the original Dow Jones desktop software. The idea was that I could use the software to search for content on the fledgling Dow Jones service in the 1990s. The Wall Street Journal is still trying. In fact, a person with whom I spoke last week told me, “Dow Jones is the only publisher making money from its online service.” That’s not true. One of the most successful online publishing companies is Thomson Reuters. Others include Reed Elsevier and Consumer Reports.
The problem is very tricky. In my experience with publishing clients, there are some assumptions that color the way in which online revenue is approached. Let me highlight a handful and then point out that the specific notion of charging for news is going to be tough to make pay off in a handsome fashion.
First, publishing companies are trapped by their work processes and that paradigm. The traditional approach has a hierarchy of folks and an assembly line type of system to produce a book, magazine, or newspaper in print. This serialized, top down approach is powerful but it is slow, inefficient, and really expensive. Not surprisingly, publishers want to keep doing what’s comfortable. As one publishing company president told me last week, “We want to develop our own software because we know exactly what we want.” Okay. Just wrong because making software is different from making a printed book.
Second, publishing companies invest in technology. The problem, as I have pointed out in my articles and lectures, is that it is technology that makes efficient certain traditional work processes. For example, instead of manual steps to print a page, the technology-adept publisher uses digital presses. Other types of technology are not included in the definition of technology that some publishers use for their business analyses. If you don’t know about a solution, it is hard to build a business and a revenue stream upon that technology in my opinion.
Third, publishing companies have persisted in thinking about making money using methods that are anchored in their old, familiar models. Subscriptions make it easy to do a revenue forecast. Online ads, publishers quickly discover, do not pay back in the same metrics that a print ad did in the salad days of Life Magazine. The newer business models, therefore, are examined and then rejected. These are rational decisions like those documented in John Ralston Saul’s Voltaire’s Bastards. Nevertheless, these decisions continue to flow from publishing companies.
To close, the notion of charging users to read news is an interesting one. In my experience, monetizing news was easy as long as the person with the information acted like a gatekeeper. The problem today is that news is everywhere. I can sit in rural Kentucky or in a taxi in Baltimore and watch news items flow across my mobile device. I can log into services that show me what’s happening in blogs, tweets, and streams generated by outfits like Yahoo. If one stream goes dark, I just poke around for another one. In short, I don’t seek news. News seeks me. If I think I need information, I run a query across tweets or some other content service and I get what I want. In Heathrow Airport last week, I could follow the trials and tribulations of the hapless Chicago Bears without a hitch and for free. My source? The Chicago Bears’ Web site.
Traditional publishers point their fingers at anyone who is not in their mind space. The only problem is that the Neanderthals are the publishers’ children, former and present advertisers like the Chicago Bears, and co workers who post information on Facebook.com and Twitter.com.
The problem, then, is that the world has moved on, but the traditional publishing business models have been unable to adapt. Just as the Neanderthals were unable to survive, today’s Neanderthals are doomed. The premise about extinction is a valid one. Now, here’s the key question: “Are the Neanderthals the traditional publishers?”
Stephen Arnold, October 25, 2009
Words for nada, buba.
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