Saturday, June 20, 2009

Charging for media online

Wired editor-in chief-Chris Anderson kicked off his magazine’s Disruptive By Design
conference today in New York City with a speech about how the Internet
makes everything free, which is the topic of his latest book, Free: The Future of A Radical Price He 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.”

When he addressed how this is affecting media and whether or not
traditional media organizations should charge for their content online,
he draws a number of conclusions from what the Wall Street Journal
is doing. The tension is not so much free versus paid, but free versus
freemium. In one slide, Anderson comes up with the following rules for
media companies trying to figure out how to make money online:

  1. The best model is a mix of free and paid
  2. You can’t charge for an exclusive that will be repeated elsewhere,
  3. Don’t charge for the most popular content on your site,
  4. Content behind a pay wall should appeal to niches, the narrower the niche the better

This is somewhat counterintuitive because it means media sites that
want to charge for content should charge for their niche stuff instead
of their most popular content. But that is exactly the right way to
look at it if you want to maximize your advertising revenues. Let the
popular content be paid for by advertising, and the niche, exclusive
content can be sold to fewer people at a higher price. Anderson, whose
last book was the Long Tail, predicts in media: “The head of the
curve will be free and the tail of the curve will be paid.”

Article Link (TechCrunch)

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