Wednesday, February 11, 2009

Is Content Still King In A Bad Economy?

In this week's Time Magazine, they wonder if content has dropped from its lofty perch and is no longer king of the hill. Relegated to "pauper" status, content is now available for free on the web, without subscription, admission, or incremental cost to the consumer. Who needs to buy Time Magazine when it's articles, like this one, can be read for free on the web; the same holds true for newspapers. No need to buy music CDs or DVDs, Apple sells songs for under a $1 and some sites are capable of sharing these same songs as well as movies and other videos for free. Some folks are even stopping their cable subscription to get their content streamed through Hulu and other sites instead. They are indeed paying less.

While the internet has brought great convenience and speed to the consumer; it also let the proverbial cat out of the bag when it enabled free content to rule. It will become much harder to retrain the public to pay for content looking ahead. Need an example, look at Sirius. On the verge of bankruptcy, Sirius has had trouble growing fast enough to make a profit. Who wants to pay for music content when free radio, ipods, and even HD and wireless choices are more preferable. Sirius' exclusive content was not enough to build a sustainable business.

Perhaps the economy is also partly to blame for this downgrade in content value. As consumers find ways to cut back, non-essential purchases stop. People make due with less and rely on what is most valuable to them. Content may still be king, it just may not be worth as much. "No one knows to what extent content will be "re-valued" as the economy improves. The newspaper industry may not be able to get any of its value back. Magazines may face the same problem. To the surprise of many, some of the more valuable content, like expensive feature films, may only make a great deal of money in theaters. The yield from VOD on the internet sales and syndication on the Apple (AAPL) iPod may turn out to be extremely modest. The largest media companies are making the case that the only reason their asset values have dropped is the economy. That case may not hold up."

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